Andres Hervas-Drane
Begins by noting the long tail in the market share of products. There’s empirical evidence that this is happening online. Why there? Standard answer: Supply side. But he wants to look at factors on the demand side that can affect this distribution.

He sets up a case where consumers have difference preferences and come to the market uninformed. In the offline world, search happens through word of mouth. They can search with evaluations or with recommendations. Recommendations come from consumers who searched with evaluations. Word of mouth results in a high concentration of sales.

Almost a third of Amazon’s sales are generated by recommendations. These are generated by users as meta-content, finding consumers who have similar preferences. This is taste-matching and it reduces sales concentration.

Then there are “artistic markets”: that increase the demand for niche producers and results in long term cultural variety.

Peyman Faratin talks about a case study of prediction markets. His main point: Scarcity is at play even in the UGC system. The new scarcity is of attention.

An incentive engineering problem is at foot in prediction markets. When you can’t bet real money, the incentives go down. The reward streams are delayed. You have to search for the market. There are significant transaction costs [which he goes over in some detail, but too hard to capture briefly...sorry]. That’s why prediction markets aren’t going very well; they’re lonely.

Solution: Reward the big hitters. Let them transfer their reputations. Give them content management rights. Rank markets and reputations. “Invisible hand of the algorithm: Recommendations.” Use widgets to let the market come to the user. [I missed the end of this. Sorry!]

Chris Derllarocas talksabout “Your Operations hvae become your New Marketing.” “Every customer is a potential brand ambassador or a lethal bran assassin.” E.g., in 2006, Comcast spent $100 M in advertising, wiped out by the youtube of a sleeping technician. UGC can make or break your business.

Most influential UGC occurs spontaneously and represents non-representative experiences. Companies need to take preventive measures. Consumers use UGC to decide if they should consume a product. Once they have, they decide what to report. Companies need to “Strategically re-engineer the consumption experience to spontaneously provoke the right mix of consumer content.”

Rules: Pay attention to extreme events. Move towards a culture that pays attention to outliers, positive and negative. “Redesign your monitoring practices and career incentives to accentuate the positive and eliminate the negative.” Also, “reasses yesterday’s yield management practices.” That is, make sure you do not systematically produce a small number of unhappy customers” (e.g., but routinely overbooking, or by routinely selling undesirable hotel rooms at very low rates). Also, get to know your power customers, i.e., the ones more likely to be vocal. They should receive “the special teratment that loyal big spenders used to receive ten years ago.” Also, not sock puppetry. Also, maybe have a Chief Perception Officer.

Q: You’re proposing an operational hit since we won’t be selling all the seats or rooms.
A: Yes. That’s the decision to be made. We need to make these decisions holistically. We don’t have the complete answer, There’s room for innovation.

Q: [me] This morning we heard that the population is not nearly as adept at using these tools as some of us (= me) would like to believe. This afternoon we hear about markets that are adept. How did you hear this morning’s research?
A: It varies by market. And consumers aren’t necessarily savvy. The UGC has effect even when they’re not savvy. You need to tier your efforts, taking account of the consumers’ Web savviness.

Q: How’s it work in other countries?
A: We haven’t done that research. Happy collaborate…

Q: How does this apply to B2B?
A: More limited.

Anindya Ghose will talk about combining textmining with econometrics. Firms want to know if there’s any economic value to social networks and UGC. How can they monetize UGC?

There’s economic value embedded in the content. E.g., product reviews, geo locations, online purchase behavior. His software mines the text and assesses the economic value of, say, a positive review and even more particular comments. E.g., “good packaging” lowers the value by $0.56 because customers expect superlatives. Particular keywords have particular monetary effects.

Hypothesis: The increasing availability of UGC is reflected in sponsored search metrics. And, yes, he found a correlation between the frequency with which key words are used in blogs and their cost-per-click on search sites. He’s researching whether there’s some sort of causal effect, but it’s not an easy problem. Hence, UGC can be monetized through sponsored search.

[Posted without re-reading. I have to prepare for my unprepared comments. I'm on a panel that's supposed to be reflecting on the day.] [Tags: ugc ugc3 marketing cluetrain advertising textmining advertising prediction_markets everything_is_miscellaneous ]

1 Comment »

Scott McDonald of Conde Nast gives the lunchtime talk. He reminds us of how big CN is: magazines, websites, events, digital apps.

His numbers show that lots of people are creating content.

UGC issues for “traditional” [the quotes are on Scott's slide] media: Brand compatitiblity (vs. “snark/coarsening”. Commoditization of content (all gets treated the same). Value as “listening post” (media can hear their readers). DRM when everyone is an aggregator. Monetization.

Advertisers are reluctant to jump in, Scott says. They worry about brand. UGC video is cheap and plentifu. but it’s not selling. The CPMs are deeply discounted. Ad revenues are not going to UGC and marketing execs are pessimistic about this; only 22% think UGC is a “high-growth opportunity.” 73% of advertisers say they definitely will not run ads on UGC.

So, what are the other models? You can incorporate UGC on a site as a “retention device.” [CNN's turn-the-channel "iReports"?] Authentication fees on microblogging sites? E.g., Twitter charges DominosPizza to assure that it in fact represents Dominos Pizza. How about sponsorships on crowdsourcing sites such as Digg? E.g., at Reddit, maybe a sponsor could be an “amplifier” that announces that each thumbs up counts 5x. [Wha??? Wouldn't that destroy Reddit's credibility?] Finally, there’s cross-platform marketing. Only 10% of visitors to a mag’s site are subscribers. So, cannibalization isn’t a worry. But how do you make money on the web site? Ads only work for very big sites. But,” online subscriptions sales are sweet.” People who subscribe that way have higher value than subscribers through other means: They’ve sought out the mag, they pay with a credit card, they are more likely to take an automatic renewal contract, they get added to the email list, etc.

He points to Conde Nast examples of UGC. Contests for designs, NYer caption contest, GQ tips on good grooming. [These are as much UGC as a man-in-the-street interview.]

He points to Reddit, a CN site. He acknowledges the bad language on the page. It produces no subscription revenues. They’re starting to have sponsored posts that still can be voted up or down.

Q: Are people dropping subscriptions because they can get the content for free online?
Scott: In general, no. The conditions for reading mags are special, e.g., reading one on the subway to create zone of privacy. [A good e-reader will destroy this.] For news mags, that’s more of an issue.

[Tags: ugc ugc3 conde_nast media mainstream_media advertising marketing ]

Be the first to comment »