Sunday, December 16, 2007

Democratizing Market Forces

Friday’s Wall Street Journal ran an opinion piece by Randall Rothenberg on Facebook Beacon and Facebook’s decision to allow users to opt-out of the advertising program. From the Facebook website:

Facebook Beacon enables your brand or business to gain access to viral distribution within Facebook. Stories of a user's engagement with your site may be displayed in his or her profile and in News Feed. These stories will act as a word-of-mouth promotion for your business and may be seen by friends who are also likely to be interested in your product.
While this may be great for business, and also allows Internet services to remain free to the public, it caused an uproar among users whose Christmas gifts were revealed to recipients via Facebook's News Feed, and when businesses failed to ask permission or even issue a warning before transferring information about purchases made with an email address different from that associated with the Facebook account.

A group of 50,000 signed a petition created by calling for Facebook to add privacy features that allow users to opt-out--and it worked. Rothenberg used a term coined by Bob Garfield, co-host of NPR's On the Media, to describe the phenomenon: “Listenomics,” according to Garfield, means “the herd will be heard.”

Rothenberg goes on to offer an explanation:
Why does the herd have such a powerful voice? Because the technologies that enable people to network to their 10,000 closest colleagues, build a blog or launch a global digital video network are now built into personal computers or available gratis on the Web.
A blogger on expands on the economics part of the equation:
Yes, social media marketing needs to be monetized either directly or indirectly. When the dust settles any marketing organization must remembers its most valuable asset is its community members. Social media is driven by people banded together to form communities, not by technology or informal networks. When community is sacrificed for dollars, organizations lose both. No community equals no transactions.
Just how important of a factor is economics compared to the power of the Internet to mobilize? Will "listenomics" be as effective in politics as it is in business? has another petition demanding that Congress not grant immunity to the telecom industry for its role in illegal wiretapping. Will that matter if companies like AT&T and Verizon are donating tens of thousands of dollars to Senators?

1 comment:

Matthew Hennessey said...

Well, it looks to me like the market cleared.

If you think of the "herd" as the demand-side players in a market (for privacy, for reponsiveness from Facebook, whatever &c.) then you can begin to better underdstand the way in which public choices are made.

Yet many of the most vocal members of this herd reject the language of market economics in any other puclic arena (apart from the one they are stakeholders in). Why is that? Perhaps they perceive the internet as a pristine environment un-degraded by the market forces seen as to blame for many of the world's ills. Yet as we see here, when demand is sufficient, supply rises to meet it at a price acceptable to both (but set by neither).

As with democratic politics, the market "herd" sometimes produces results that are less than optimal from certain points of view. But we do not lose faith with the system simply because it produces occasional unfavorable results. Rather, we celebrate the fact that sub-optimal outcomes do not sink the ship. Markets, like strong democracies, are resilient, and if cultivated, they allow for the best possible overall outcome.

Congratulations Facebook users, you moved the market.