September 18, 2009

The next stupid management fad -- tapping online social networks

If you've stepped into a Barnes & Noble within the past six months or so, you've no doubt seen these books. Written by modern medicine men, they offer our dopey managerial class the secrets on how to profit from dumping a bunch of money into the sinkhole of online social networks. And they all have the same overblown titles:

The Facebook Era: Tapping Online Social Networks to Build Better Products, Reach New Audiences, and Sell More Stuff

Smart Start-Ups: How Entrepreneurs and Corporations Can Profit by Starting Online Communities


Twitter Power: How to Hemorrhage Your Capital One Tweet at a Time

Facebook has been popular forever in internet years and surpassed MySpace quite awhile ago. Twitter has also been around long enough that its alleged ability to hike or hinder sales should now be evident. It won't come as any surprise to those who remember how retarded the dot-com incarnation of this nonsense was, but here's a clear hint that its mostly fluff: how video game players get information about what to buy (from NPD):

41 percent of all gamers report that they rely on word of mouth to obtain information on video games.

While this varies from one platform to another, all current generation platforms, including portables, rely on word of mouth above all other information sources, followed by hands-on play at friends' and/or relatives' homes at 31 percent. Magazine and online ads, as well as incentives/coupons and social networking sites are the least influential to gamers, with as little as five percent of all gamers using the latter for information.

So, here is a dream opportunity for businesses hoping to profit from social network sites -- a huge and pretty mature industry, consumers rely heavily on word-of-mouth that spreads throughout social networks, the users of both video games and online social network sites are likely similar in how savvy and enthusiastic they are about new technologies, and they're in pretty much the same demographic groups. If anywhere, the effect of using online social networks should show up here.

And yet -- nada. The reason is simple: the people who you would spread word-of-mouth about a video game to within your online social network are the exact same people who you will already be spreading it to in real life, only more vividly. Facebook just pools a bunch of functions into one place -- email, texting, and photo-sharing.

Before, you might have used a landline or cell phone, email client, etc., to send and receive this information with your social circle. Now, you do it all in one place, but that doesn't mean you're connected to more people than before, nor that the weights of the connections that already existed are going to ramp up or dip down. (If anything, it's the latter, since speech and face-to-face encounters are more bond-forming than sentence fragments left on your Wall.)

And Twitter is basically Facebook if it only had status updates with comments. The main difference is Twitter's target audience -- the middle-aged with even shorter attention spans than teenagers.

Because there is no qualitative difference between online and offline social networks, we might instead look at the quantitative differences. Surely you can send and receive information much more quickly online. Spreading information this way could speed up the process that would have occurred anyway without the internet -- say, if movies soon have a shelf-life in theaters of 3 weeks instead of 4.

Of course, qualitative changes can result given a large enough quantitative change. If we think of fads as social epidemics, the infection rate is higher with the internet, which would appear to make an epidemic more likely than if it were too slow to gain traction. However, the recovery rate -- the rate that you get bored of the fad and are no longer infected by it, indeed are immune to re-infection -- is also sped up with the internet. Just look at any indie rock blog: they all complain about how they've been listening to the same mp3s for the entire past 18 hours, and they desperately need something new to get them fired up again.

If people ditch the fad once it becomes "too popular," then the more quickly you can get information about how popular something is, the more quickly you’ll go through the cycle and be, like, so totally over it. And of course, the more quickly people recover from an infection, the less likely an epidemic is to occur. (It'll infect some people but will die off early instead of spiking up and then dropping off).

Thus, even if the internet has a big effect on two key parameters in the social spread of information, it may not affect their ratio very much, leaving the real world possibilities largely unchanged. Same overall pattern as before, just some pieces going a little faster. Because this is all that the internet changes -- the speed of information transfer -- we shouldn't expect it to radically alter our social world, whether that's interactions between friends, between politicians and citizens, or between buyers and sellers. That was a painful lesson of the dot-com crash, but as with many diseases, over time we may lose our immunity and become infected once again.

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