The Co-Produced Future

• Haven’t seen anything yet.

• Innovation and product development needs greater involvement by customers (Wind, Mahajan, Gunter, 2001)

• Open systems lead to more innovation than closed architectures (for software or high-tech design and functionality) (see Von Hippel, 1988)

Communities and Valueon the

Internet: Does it exist?

The Struggle of the Online Community Sector

• Overall, communities are not the killer app people had hoped for.

• But, a number of specific niches show strong revenues, credible earnings, and a promising future.

The Classic Dream:

• "online community" as a place where thousands or millions of users would discuss issues of importance (or triviality).

• These gathering places would prove economically potent through a combination of advertising, subscriber fees, e-commerce, and other sources of revenue.

• Unfortunately, this vision didn't play out.

The Problems:

• Advertising:

– companies are reluctant to advertise on pages with "user generated content“

– users in online communities interact with advertising less than users of content or transaction parts of sites.

We can hypothesize why this is, but we certainly see it as an empirical fact.

Advertisers know that online communities haven't proven to be a compelling target for their campaigns.

• Subscriber Fees: – Online community sites have struggled to

generate substantial subscriber income.• Users don't want to pay simply to talk. • subscriber fees dampen traffic, community

dynamics suffer.

• Bottom Line: many communities will never be economically viable.

Success Stories?

1) Search Communities: • Classmates.com: annual revenue of $30 million• Match.com: annual revenue in tens of millions • Monster.com: annual revenue in the hundreds of

millions.

• Not just a place to chat

• Network effects!

• Trading Communities: – eBay: $600 million in revenue, $18 billion

market cap. – exp.com and keen.com show promising

revenue growth.

• Education Communities: – Online education is booming.

• SmartForce: revenues in the hundreds of millions.• University of Phoenix: annual revenues over a

hundred million dollars.

• Subscriber-based Communities: – most online communities have struggled

mightily – a few very large sites are showing some

encouraging signs. • Ezboard: subscriber fees per month in the $million

range. • Salon.com talks of early success.

• CRM Communities: – Corporations spend billions of dollars annually on

Customer Relationship Management (CRM) programs.

• efforts involve message boards, Q&A areas, etc. • online community companies: PeopleLink, CenterWheel,

Prospero and others have reoriented strongly in this direction.

• Maybe there is promise but there has yet to be overwhelming evidence that corporations are willing to spend significantly for online community services within this niche.

PeopleCriteriaPeopleCriteria

Membership is a conscious choice

Member base has achieved critical mass and sustainability

Members feel a great sense of trust

Technology Criteria

Technology Criteria

Efficiency in interaction is maximized

The community is easily navigable

ProcessCriteria

ProcessCriteria

Members agree on communication formats

Roles are established, not imposed.

Community activities kept on track

CultureCriteriaCultureCriteria

A spirit of participation and feedback is clearly cultivated

A sense of affiliation is achieved through ownership of equity in the community

What are the criteria for defining online community?

Community Definition and Criteria

A set of interwoven relationships built upon shared interests, which satisfies members’ needs otherwise unattainable individually

What is community?

IndividualizationIndividualization InteractivityInteractivity

Less accountability Punishing an individual’s inappropriate behavior becomes more difficult on the Internet.

More anonymity User identity can be easily disguised by logging on with aliases.

Convenience Communication and resource sharing can take place anytime.

Reach Elimination of geographical boundaries allows for the creation of both large and effective communities.

Individualization and Interactivity Affecting Online Community

Individualization and interactivity are at the core of relationships, and hence community

Online CommunityOnline Community

Shared Interests in Information

Shared Interests in Information

Shared Interests Arising out of

CommonalityShared Interests Arising out of

Commonality

Members’ primary interest is the sharing of information. Examples include:

Motley Fool

LastFM

Community members share a common attribute or characteristic. Examples include:

neopets.com (kids)

Physicians’ Online (doctors)

Marketingprofs.com

Shared Interests in ActivityShared Interests in Activity

Shared activities forms the main glue in these communities. Examples include:

eBay

There.com

Limwire

LastFM

The Foundations of Community

Open CommunitiesOpen Communities Closed CommunitiesClosed CommunitiesClosed CommunitiesClosed Communities

Membership policy: Open to all regardless of

individual profile

Used typically for: Communities based on a more

general and highly accessible topic of interest

Examples: Yahoo.com Craigslist.com Motley Fool.com Healthyplace.com

Membership policy: Outsiders generally not allowed

inside community Members must fit specific

qualifications

Used typically for: Extranets or intranets between

well-known parties and sources, dealing with highly specific and / or sensitive data exchange

Examples: Corporate intranets or extranets

(e.g., Ford Motor Company and its suppliers)

Physicians Online

Open vs. Closed Communities

Transfer of Value Triangle (see Zwick and Dholakia, 2004)

User to Administrator:Examples of Types of Value Created and Shared

Community subscription fees Content fees Fees to engage in an activity

(e.g., online video-game participation)

Commission fees (e.g., for goods sold through the community)

Increased value for selling online advertising space

User to User:Examples of Types of Value Created and Shared

User-generated content (e.g., information, opinions, advice)

Distribution of digitizeable goods (e.g., MP3s, shareware)

Relationships / support / conversation

Administrator to User:Examples of Types of Value Created and Shared

Administrator-generated content / proprietary content (e.g., articles, editorials)

Mailing lists Newsletters Webcasts (e.g., of guest speakers) Supervised chats (e.g., chats

featuring guest Q&A) Offline events (e.g., parties for

members within geographic proximity)

Rewards points (e.g., to use on goods or services traded within the community)

Transfer of Value in Communities

The Membership Life Cycle

©Wired 2002

DissolutionAwareness Exploration /Expansion

Commitment

Level ofIntensity

Intensity Patterns During the Four Relationship Stages

Visitors

Novices

Regulars

Leaders

Elders

Time

Relationship Stages

Community Building Strategy

Community Level

Nascent Formative Mature

General Strategy and Operational Objectives

Attract users by creating administrator-user value, promote administrator-generated content

Seek feedback to determine where the community is going

Foment relationships and vibrant discussion within only a small number of community groups

Leverage increasing size to create user-to-user value and promote user-generated content

Explore different processes of communication (asynchronous vs. real time, or both)

Establish roles for members (volunteers, e.g., watchpeople, guides, supervisors)

Allow for further segmentation of discussion topics

solidifying branding

Leverage size to increase user-administrator value (e.g., advertising)

Further develop community leaders / caretakers of the community to create sustainability

Incorporate offline events / marketing to further solidify community relationships, activities and community presence

Marketing Objectives

Increase member base Get the word out Use content to attract

members

Refine community vision (as defined by members)

Generate equity for members within community

Monetize the community Establish solid brand and

clear mission Establish community

presence

Value Types

Look at Value System to

Discover New Business

Opportunities

Liberate Trapped

Value

Introduce New-to-the-World Value

Create More Efficient Markets

Enable Ease of Access

Customize Offerings

Extend Reach and Access

Create More Efficient Systems

Disrupt Current Pricing Power

Build Community

Enable Collaboration

• ebay.com (furniture, etc)• Covisint (eBusiness Portal)

• www.Guru.com (Labor market)

• Ofoto.com• FedEx

• forsalebyowners.com• Priceline.com

• MyYahoo, My NYTimes• Amazon personalized page

• Keen.com (Advertise yourself)• blogs

• planetout.com• Epinions.com

• Buzzsaw.com

Community Value: Three Examples!

• Craigslist.com (shared activity)

• PlanetOut.com (shared commonality)

• LastFM.com (shared information)