The rain dancers

Riporto un intéressante articolo di Thomas Vasek, gentilmente fornito da Roland Berger & Partner, sullo sviluppo dei social e della “cloud economy”.

Over the years, the Internet has lurched from one over-hyped “next big thing” to another. Is the cloud economy anything more than a nebulous catchphrase?

SINCE THE DAWN of humanity, people have danced around fires muttering incantations to the gods, trying to summon dark clouds, soft rain and rich harvests. Today’s data cloud serves a similar purpose. 1lany people expect it to bring pennies cascading from heaven, making them and their businesses rich- preferably overnight and with minimum effort. They are the rain dancers of the cloud economy; people who put their trust in miracles and technological mantras rather than in economic common sense
and sound business models. When everyone else is running in the same direction, it’s
‘NOrth pausing for a moment to ask why.
The dotcom crash of ten years ago was caused by the herd instinct. The rain dancers of the time offered airy-fairy business models with little basis in reality, fueling expectations that drove share prices sky-high. The clouds disgorged not wealth but disappointment. Similarly, in 2008, blind faith in derivatives based on subprime loans sparked a global financial crisis.
This teaches us a very simple lesson: the more virtual a business is, the more searching our questions must be regarding its products, its customers, and how much value it adds.
Anyone who believes that social netvvorks are the future should remember the burst bubbles of the recent past. Just a few years ago, the rain dancers said MySpace was a license to print money, claimed Second Life represented the marketplace of the future, and assured us that blogging was the new media revolution. one of their forecasts has come to pass. MySpace ended up as an entertainment ite, Second Life is suffering from a bad case of waning popularity, and while blogs have their uses, they don’t often create millionaires.
“There will be those who their trust in miracles and mantras rather than in economic common sense and sound business models”
Today, suddenly, we’re told that it’s all going to be dif­ ferent. The rain dancers insist that the cloud economy will revolutionize business and society. Information technology is going virtual, \vith hard-disk space, computing pmver and softv,rare all migrating to the Internet. We have no idea where in the world these services are, and we don’t care as long as they’re available when we need them. We add new droplets to the cloud, telling the world more about ourselves every time we save data, do a Google search, or interact on Facebook or Twitter.
It sounds like an attractive prospect. Businesses can suck data from the cloud whenever they need it, and if they steer it in the right direction, it will rain profits on their heads.
The trouble is, it’s not going to be like this.
The rain dancers confuse opportunities with solutions and new technology with new business models. We know from past experience that bubbles burst when they’re over­ valued. These services are realistically wortlw,rhile, but many people ascribe more value to them than they actually de­ serve. For example, Facebook’s meteoric rise would appear to imply that social networks are vmrth their weight in gold
– but what if this value is an illusion?
Facebook, Twritter et al. let you stay in touch with hun­ dreds of people, find out what makes them tick, what kind of things they’re into, and whether they’re single or spoken for. They foster the illusion of real, meaningful friendships, but in truth these superficial connections come together and drift apart like cumulonimbus on a summer day. Our at­ tention is a limited resource, and simultaneously keeping up with hundreds of Facebook friends, reading tweets and emails and watching videos is a very limited form of interaction with the outside world. Endlessly checking others’ updates, listening to their unremitting vacillation and turning down friend requests from total strangers can be stressful.
The old web has devalued digital content, which has had dramatic consequences for the media sector. The new Web could erode the value of social relationships. Brand-strategy guru Umair Haque has vnitten in his blog on the Harvard Business Reviev,r website that just as banks traded in subprime loans before the recession, so social websites are trading in subprime relationships today.
This is just one person’s opinion; however, if relationships on Facebook et al. are as valuable as they’re made out to be, users and advertisers should be v,rilling to shell out good money for them, and they are not. In theory, social media should have made advertising obsolete, because people can find out which products are the best by tapping into the hive intelligence, but they haven’t. Social media agencies are mushrooming, but for all their rapid growth, the networks still have difficulty selling advertising – which means their entire survival is at stake.
While Facebook has sold over USD 1 bn worth of advertising in the past year, this is still only a fraction of what Google earns from its precision-targeted search-based ads. Facebook is being forced to develop a steady stream of new tools and advertising formats to make more effective use of “social
graphs”, the networks of relationships between its users.
However, this is causing a dilemma. On the one hand, Facebook needs to earn more money from advertising. On the other, it risks being regarded increasingly as a market­ ing platform, rather than a place to forge new relationships. Rampant commercialism was one of the reasons for My­ Space’s decline, and Facebook attracted users’ wrath in 2007 by introducing its notorious Beacon function. If a user made an online purchase, details were automatically sent to their Facebook friends without said user’s consent. The commu­ nity sav,r this as an abuse, and the ensuing storm of protest led the company to withdraw the feature days later.
In the long term, such blunders could damage trust among the Facebook community, as well as causing largescale data leaks. Social networks bring people together, but they are not marketplaces or marketing tools in the tradi­ tional sense. Of course, they have been used for successful marketing campaigns; Starbucks, for example, gave vouchers for cups of coffee to its Facebook friends, and many other companies schmooze fans with promotional gifts, but if you use the site solely as a form of cheap advertising, you are really missing the point.
Social media provides a new forum for talking to people, identifying their needs and getting your message across. This should not be a top-down, I-talk-you-listen process as it was with the old web; rather, it should be a partnership of equals, with the primary focus being genuine dialog rather than simply achieving a return on your investment. If you just try to sell things to your Facebook fans, you’re doomed to fail and could even damage your brand by devaluing your posts and turning your customer relationships into a virtual Tup­ penvare party. If there is a social media bubble, and it bursts, the fault will lie not with new technology, but with companies that confuse Facebook with customer-relationship management software.
The influential Cluetrain manifesto of 1999 pointed out that markets were conversations. To an extent, this has always been true and it is just as true today. Social networks are virtual spaces in which businesses can conduct conversations – no more, no less. It is in these conversations that their lasting value lies, and the bubble will burst if companies use questionable methods in an attempt to control and monetize these networks.
To succeed in the cloud economy, you must be able to listen, particularly when people are saying things you don’t like. Ironically, the value of social networls lies precisely in the fact that they also generate negative feedback which companies must respond to. If the cloud simply becomes a means to a quick profit, it will unleash not gentle showers of money, but a damaging storm.
Humans are social creatures. Vle want to share our knowledge and interests with others, and companies and brands can and must take advantage of this; this must, however, be a substantive debate based on a commitment to real relationships. ·without these, in spite of its technological potential, the cloud economy will remain a misty abstraction.
Having a few thousand Facebook friends or Twitter followers is one way of engaging in this debate, but dialog is not a popularity contest, and your number of friends is not the sole indicator of how much customer loyalty you enj oy or how attractive your brand is. A conversation is not just about liking or not liking someone else’s Facebook post. A customer relationship is not simply a Facebook friendship, a real customer is not just a drop in an ocean of data, and doing business successful1y in the cloud economy is anything but a rain dance.

The author
Thomas Vasek

was the founding editor of the German edition of Technology Review, the innovation magazine published by the
Massachusetts Institute of Technology, and went on to edit P.M. Magazine. He is now a Munich-based author and journalist, writing for such publications as Die Zeit and the business magazine brand eins.



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