Koby says: “Pay Your Customers What They’re Worth to You”

Online retailers, e-commerce companies, and other moneymaking enterprises often talk about customer lifetime value.

What piece of that value, if any, enriches the customer directly? The old-school answer is “none.” That’s because whatever monetizable value you receive from your customers–sales, contract renewals, etc.–goes directly to your financial bottom line, not theirs. In traditional business, the only value that the customer receives is in the goods and services you provide.

In today’s “sharing economy,” people have grown accustomed to offering whatever resources they possess to all comers, often on a complimentary basis, but also through bartering, swapping, and other arrangements that deliver some sort of tangible reciprocal value. One can construe traditional social media as one type of sharing marketplace–in other words, for sharing posted information–in which commercial enterprises monetize those contributions without directly compensating their suppliers (i.e., writing a check to anybody who tweets, posts Facebook updates, puts their resume on LinkedIn, etc.). Likewise, e-commerce sites such as Amazon and eBay derive a considerable amount of monetizable value (i.e., stimulated commercial transacations) from user-generated reviews, ratings, and recommendations.

Most consumers don’t expect to be compensated directly by the likes of Facebook, Google, Amazon, and other big Web brands. All the while, consumers continue to add their posts to the massive big-data repositories that power these communities, growing those firms’ bottom lines. Unless they’re also shareholders in these firms, few consumers expect a cut of the big-data-swollen profits to which they indirectly contributed.

Many people shrug off the big-data mania, thinking “what’s in it for me?” In many people’s personal lives, this thing called big data seems like an irrelevance, something that they don’t see having any material impact on their own bottom line. Most people see big data as something that’s owned and controlled only by big institutions, producing no direct financial return to their customers.

If you feel that you can personally can monetize big data, you’re probably an entrepreneur who has identified a hot business opportunity. You’re probably not thinking of monetizing big data in your capacity as an average consumer.

To the extent that the consumer expects something of “value,” direct or indirect, from big data, it’s usually in the sense highlighted in the head to this recent news release: ” IBM Study: Consumers Willing to Share Personal Details, Expect Value in Return.

In the study, the term “big data” is used primarily in the limited sense of the subset of a retailer’s stored data associated with each specific customer’s personally identifiable information. And it discusses “value” only in the qualitative sense of B2C “omnichannel capabilities” (price consistency across shopping channels; ability to ship items that are out of stock in the store directly to their home; option to track the status of an order; consistent product assortment across channels; ability to return online purchases in the store). That’s not the same thing as monetization.

Some construe consumer-side B2C big-data monetization more literally–and see that as sorely lacking in an online economy that is increasingly dominated by megabrands. Internet visionary Jaron Lanier made that provocative thesis the centerpiece of his recent book “Who Owns the Future?” This excerpt from a New York Times review of the book summarizes it thusly:

“He’s talking to ….. you, Google. (‘The Google guys would have gotten rich from the search code without having to create the private spying agency.’) And to all the other tempting Siren Servers (as he calls them) that depend on accumulating and evaluating consumer data without acknowledging a monetary debt to the people mined for all this ‘free’ information. One need not be a political ideologue, he says, to believe that people have quantifiable value and deserve to be recompensed for it. …. ‘Who Owns the Future?’ reiterates some ideas in Mr. Lanier’s first book: that Web businesses exploit a peasant class, that users of social media may not realize how entrapped they are, that a thriving middle class is essential to keeping the Internet sustainable. When ‘ordinary people ‘share,’ while elite network presences generate unprecedented fortunes,’ even that elite will eventually be undermined.”

You don’t need to buy into every element of that overheated ideological rant to see that it succinctly expresses a popular anxiety. Likewise, you don’t need to stigmatize a specific group of firms that profit from this new online-sharing model to recognize that failure to compensate users fairly for their contributions may become an Achilles heel in many business models.

Paying your customers directly is not such a radical idea. You’re already paying many of them indirectly in the form of markdowns, rebates, incentives, and other traditional approaches.

If an online brand starts to offer users financial incentives (even tiny ones) for their online shares, they are likely to cause significant user churn away from competing brands. All it takes is the right business model that involves keeping the income-producing activities (e.g., advertising) producing enough revenue to keep content suppliers (aka users) from jumping ship.

As this review of that same book makes clear, Lanier has sketched out a rough business model for this vision. According to reviewer Kas Thomas:

“His solution: Ordinary web users should be compensated, through a system of micropayments, every time any personal contribution to the web, of whatever kind, is utilized (or indeed even accessed) by a third party. If you post something that others read, you should get paid. If you’re spied on, you should get paid. Conversely, if you access the work of others, you should pay.”

However, Lanier’s proposed business model has issues, says Thomas:

“He doesn’t calculate, for example, what a typical web user’s earning potential might actually be, were Internet accounting practices to be reoriented along the lines he suggests. He seems to believe the Internet’s network architecture should include two-way accounting such that all inbound links are accounted for (and updated continuously), yet fails to say who will manage the servers that would take care of such accounting. But at this point, one senses Lanier would be satisfied merely to get a meaningful (and inclusive) dialog going among stakeholders, with regard to the ideas presented in his book—the main one being that the current system of allowing companies to steal people’s Internet-usage habits is both unethical and unsustainable.”

I don’t agree with the Lanier’s overheated notion that the current Web sharing economy is predicated on theft, exploitation, or anything else that’s unethical, illegal, or otherwise unsavory. Users freely share content on social media, blogs, and other sites because they derive personal value–in various qualitative senses of the word–from those interactions. They may also share because they’ve found a way to indirectly monetize what they share through other activities (such as building businesses that leverage their social presence).

But if users can also accrue extra spending cash directly from these online sharing services, all power to them.

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