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People are always focusing on revenue enhancements. How are they doing that with Web 2.0?
Clemons: One way is by selling insight. I look at Second Life, where there are no constraints, and say, "That's how people want to look." I look at YouTube, where everything's free, and say, "That's what people want to post, what people want to watch." So it's using the Net to develop an anthropological insight into social behavior.
A second possibility is selling stuff. Amazon has figured out how to sell lots of books online, but it hasn't really offered me, initially, any breakthrough stuff. I'm looking at products because I'm interested in things you almost couldn't sell if you didn't sell them online. We can sell virtual stuff: There are now shops in Second Life that enable you to buy clothing for your avatar. I don't know how big a market that is, or should be, but at least we know it exists.
There's also money to be made by charging a subscription for information, but that's been remarkably difficult. Very few companies besides Blizzard's World of Warcraft have found a way of getting people to pay for online subscriptions. It's a problem that can be addressed. We need to figure out if it's about educating people, or if there's a fundamental reason why we won't participate in a service that charges us.
Social networking and social network-based advertising can be done badly, like the way Microsoft tried it with Facebook, which was catastrophic. There are some examples of wonderfully crafted marketing efforts that could not exist without social networks-- the natural extension of social network marketing to mobile network-based marketing.
Then there's the Google-based model, which is basically snooping: reading my e-mail and then putting an advertisement in it. Each of these differ enormously in terms of their plausibility, customer acceptance, social acceptability and revenue possibilities.
You say they differ. Does one of these scenarios stand out?
Clemons: We can manufacture anything we want. We can have anything we can describe. A customer doesn't even know he wants it: Somebody will make it; the customer will find it and fall in love with it.
There are probably 5,000 kinds of beers available today, yet at one point, it looked like we were down to three. When I was a kid, it looked like every soft drink would be either Pepsi or Coke. Now Pepsi and Coke are losing sales to products like iced tea. That's not a change in our ability to manufacture--that's a change in our ability to inform consumers.
Some of that comes back to social networking sites, but some of it comes back to learning what consumers want and don't want. We haven't yet figured out how to monitor traffic online to figure out what's hot and what's not. One trend that I think will happen--not because of CIOs, but because of chief marketing officers--is gaining insight from traffic. Companies will have to master social networking marketing.
A friend of mine opened a beer distributorship. If you go to the right-hand side of his Web site and click "What's New," you'll get a list of the stuff that's come in the last two weeks or so. If you click on it, you'll get his description of the beer. Click on the beer name, and you get access to RateBeer.com and hundreds of thousands of reviews. If you get a reviewer and he likes the beer, that doesn't mean you'll like it, and if he hates it, that doesn't mean you'll hate it. A good reviewer will tell you what he likes and doesn't like.
The principal impact of this is that it changes the nature of what my friend sells. He still sells Coors, but he's also one of the highest-volume retailers on the East Coast of the stuff no one else sells. We know he has it, so we go there. He knows we'll find him, so he stocks it. It becomes a self-reinforcing phenomenon.