Above Image: An advanced view of the Collaborative Economy Value Chain in an ‘exploded’ view. This exclusive image, which was not included in the seminal report on the Collaborative Economy, shows a potential new business model that taps into new transactions beyond traditional selling. In the final phase of “Provide a Platform,” the crowd is building new products.
[The Collaborative Economy is an economic model where ownership and access are shared between corporations, startups, and people]
First, it’s key to read the full report and watch the 18 minute video of the highlights of the research report, the Collaborative Economy. The report defines the movement, gives quantified examples of disruption, indicates the three market forces that are driving this trend, and offers solutions for corporations who must adopt the value chain. Once you’ve done this, we can explore the advanced model (above), which proposes a hypothetical model that we created in the market where new forms of transaction emerge and the end state is where the crowd starts to design and build the company’s products.
[For corporations that adopt the Collaborative Economy Value Chain, this results in market efficiencies that bear new products, services, and business growth]
Exploring the Above Graphic: The Collaborative Economy Value Chain (Exploded View).
Starting at the top at the products and moving clockwise, let’s explore the three major use cases of the Collaborative Economy for corporations. In each phase, a shift is required as products become services, services become marketplaces, and marketplaces build products. I have named each of these phases, and then I have given real world examples of these phases already happening. In the table below, I give further definition to the transaction types at each phase.
- In Company as a Service products become services. In this advanced model, companies move beyond traditional selling and transform their products to services. I call this, “Company as a Service.” To date, both BMW and Toyota are renting their cars from their dealership lots in San Francisco in order to serve the growing car-sharing trend. For those familiar with Netflix or Salesforce, this business model isn’t new, and it’s a good entry point for corporations.
- In Motivate a Marketplace services become a marketplace. Companies evolve their services to an entire marketplace, called “Motivate a Marketplace,” which taps into peer-to-peer markets that are already trading goods and services a traditional company involved. The difference here is that corporations must join this marketplace, rather than stand aside and be disrupted. One notable example today is Patagonia, which partnered with eBay to encourage customers to buy used goods, rather than buy new.
- In Provide a Platform, marketplaces build your products. The last phase, where marketplaces shift to products, means that corporations allow the crowd to collaborate on core business functions, such as design, funding, marketing, development, production, delivery, and sales. We’re already seeing examples emerge in pieces (Kickstarter for funding, Etsy for production, Quirkly for development, and Deliv for delivery). I see copious, open, market opportunities for brands to transform their businesses by being involved in the Collaborative Economy.
Transactions in the Collaborative Economy
Now that we’ve identified the phases in the Collaborative Economy Value Chain, we are free to explore the many transaction types that have already emerged in the industry. I’m thankful in particular to Neal Gorenflo, the founder of Shareable Magazine (the premiere media site in this space), who spent a few afternoons with me to map out the transaction types during my research process. The table below was featured in the appendix of the report.
||Not new — but more and more individuals are empowered to provide goods and services directly to consumers online.
||Crafters sell their wares on Etsy; virtual workers get hired on oDesk and Elance.
||Traditional selling as we know it has morphed as disintermediation has occurred.
||For payment, a seller offers used goods for purchase.
||Craigslist and eBay are household names, but Apple’s refurbished products also count.
||Most non-consumable goods
||For payment, a provider offers a product for use.
||RelayRides enables consumers to rent cars from anyone. Rent-a-Toy allows parents to rent toys for their children.
||High-cost or low-usage goods
||For a recurring payment, a provider offers repeat products or services.
||Zipcar offers a month-to-month subscription plan with tiered pricing.
||Renewable goods, goods that require seasonal storage, repeat services
||Two or more own or share a product or service together. Applies to individual and business.
||Sharing babysitting services on Sitting Around.
||High-cost or low-usage items
||Consumers become investors or banks, or invest in or lend directly to each other.
||Kickstarter enables the crowd to fund and help products to market. Lending Club, Zopa, FundingCircle, and Prosper facilitate peer-to-peer lending.
||Financing at reduced rates
||For no payment or a nominal fee, two parties trade goods or services directly.
||99dresses allows women to trade fashion. HomeExchange facilitates home swaps.
||All goods and many services fit into this category.
||For no payment or a nominal fee, a provider offers a product that will be returned.
||NeighborGoods facilitates loaning of household items, and more.
||Most non-consumable goods
||For no payment or a nominal fee, a “gifter” provides a product or service to a receiver. Reciprocation may be a requirement.
||Freecycle facilitates gifting of goods. GiftFlow’s mantra says it all: “Give what you can. Ask for what you need. Pay it forward.”
||Most non-consumable goods
Counterintuitive: Let go of your company to gain the market.
This macro view of how a corporation’s business model must change beyond the traditional selling model may be foreign to sellers of durable goods, CPG, retailers and wholesalers. When you look closely, however, large tech companies like IBM, Cisco, Microsoft, Salesforce and others are already activating many of these use cases. We expect that some companies will eventually incorporate at least one of these major use cases, but the really savvy ones will activate all use case scenarios to tap into their marketplace and glean a share of the new market transactions that are already happening without them. We looked closely and found that, on average, the sharing startups like Kickstarter or Uber are taking about a 20% transaction fee. We believe corporations can do the same. Without a doubt, the biggest challenge is the of the major paradigm shift that is necessary for corporations to let go of old methodology. The only way for business leaders to advance to this phase is to “let go” of your company to gain the market.More: Read all my posts tagged the Collaborative Economy for additional information.
Thanks to you, last week’s Report on the Collaborative Economy was readily received, and has been viewed over 26,000 times. The media and bloggers alike have picked up on it. As we digest what it means, it’s important to recognize that this is the next phase of the internet and the next phase of social business. An interesting finding is that the second era (social) and the third era (Collaborative Economy) use the same social technologies but, instead of sharing media and ideas, people are sharing goods and services. This is all part of a continuum. We need to understand how our careers will progress as the market moves forward with us.
[Social technology enabled the sharing of media and ideas called social business –The same tools enable sharing of goods and services called the collaborative economy]
Internet Phases: Past, Present, and Future
||Brand Experience Era
||Customer Experience Era
||Collaborative Economy Era
||CMS and HTML
||1995: Internet had 14% American adoption
||2005: Business blogging disrupted corporations
||2013: AirBnb, TaskRabbit, Lyft, gain mainstream attention
|What is shared
||Personal Ideas and Media
||Goods and Services
|What it looks like
||Brands and media talk, people listen
||Everyone talks and listens
||Buy once, share many, need to buy less
|Who has the power
||Brands and publishers
||Those who use social
||Those who share goods and services
|Who is disrupted
||Traditional mediums: TV, Print
|What must change
||Communication and marketing strategy
|How corporations responded
||Created their own corporate website
||Adopted social tools internally, externally
||Learn to share products, enable marketplace
||CMS and design tools
||SMMS, monitoring, communities
||Marketplace, ecommerce, communities, SMMS, Monitoring
||User Experience, Design, Content
||Social strategy, community managers, communicators
||Agencies that help with trust, customer advocates, ?
||Those who adopt
||Those who adopt
||Those who adopt
What it means to your career, clients, and company:
Change in our careers is good. It leads to new opportunities, growth, and even fun. It often requires us to step out of our comfort zones and be prepared to adopt new paradigms. With that said, here are three insights to remember as we enter into this next phase.
- Prepare for the next phase in your career as we shift eras. The internet continues to evolve and, with, that our careers do as well. The mid 90s saw the blistering heat of the “dot bomb” era. As the internet became a dominant force, it subsided with the global recession and industry implosion until we saw the second phase emerge. We dubbed it “Web 2,” where information creation and consumption was democratized by all. The next phase uses the same principals of sharing and democratization, but involves goods and services.
- Take what you’ve learned in social business and apply it to the Collaborative Economy. If you’re in social business, you’re in a good spot. The same rules apply about letting go of control, shifting to engage, and connecting with customers. Learning to listen for understanding, engaging with customers, developing programs where customers become your advocates, and applying scalability, all topics I’ve researched deeply, will apply to this next phase.
- Change is in inevitable. Prepare for this next phase now. The next phase has already begun. Last week’s LeWeb received international acclaim, and funding to sharing startups is on rise. Even cities like Amsterdam are opening up to the potential of companies like AirBnb. Mainstream media is covering this movement. We must prepare for the next phases of our careers now. We can and will do this together.
I hope this graphic and matrix help to clearly articulate our next phase. Save it, share it and activate on it now. If you’d like to join me on a webinar to learn more and ask questions, you can register on this page.
Remember, those who adapt, win.
Above Image: Market Opportunities for the Collaborative Economy by Vertical, from Sharable Magazine follow them on Twitter.What’s the next phase of Social Business? That’s the question I’m frequently asked. Without a doubt, the next phase is the Collaborative Economy.
[Collaborative Economy is next phase of social. Social networks share ideas, yet collaborative economy shares products & services]
What’s that the Collaborative Economy? It’s where brands will rent, lend, offer subscriptions to products and services to customers or, even further, allow their customers to lend, trade, or gift branded products or services to each other. This unstoppable trend is fueled by the social web. Its specific features include relationships, online profiles, reputations, expressed needs and offerings, and ecommerce. Brand customers are already starting to conduct these behaviors among themselves using TaskRabbit, AirBnb, Lyft, and many others tools. Some of these are disruptions for brands. Others are opportunities.
[The next phase of Social Business is the Collaborative Economy; Brands will enable customers to share, trade, lend, gift products and goods using social technologies]
While this movement will have broader global and economic impacts, at Altimeter we’re focused on disruptions to corporations. We’re knee deep in interviews for our next report on the Collaborative Economy. We have interviewed startups, venture capitalists, brands, social business software vendors, authors, and thought leaders. We are dissecting data of 200 sharing startups for a broad overview of what it means to business.
Matrix: Phases of Social Business
||PR and Brand
||Dell Hell incident, Kryptonite Lock
||Marketing realizes an opportunity to conduct outreach
||Corporate blogs: Fast Lane by GM, Microsoft blogs, IBM Blogs
||HP massive online communities, Home Depot Communities, Comcast Cares
||Starbucks Ideas, Dell Ideastorm
||The Business model, supply chain, various other departments
||Using social tools, customers are sharing, selling, and renting your goods to each other
Caveat: There are many broader impacts inside of a company that also impact HR, recruiting, supply chain, IT and other departments. Those cited above are just a sample of the most often publicized impacts.
Brands Already On Board: Toyota, Barclays Card, Avis, BMW, Walmart
What are some examples of companies that are already taking advantage of this new social business trend ? Here are a few from the Master List of Brands Participating in the Collaborative Economy: Toyota, OnStar and BMW are allowing cars to be rented so that they can stay current with car sharing or lending services like Lyft, RelayRide, Zipcar and Uber. Barclays Card sponsors and supports bicycle sharing in the city of London, associating their brand with the movement. Retail giant, Wal-Mart, is considering competing with TaskRabbit and Amazon by allowing customers to deliver goods to each other.
[The first phase of Social Business impacted branding and PR, then it shifted to support and product development. The next phase impacts core business models]
Ecosystem Opportunities Aplenty
What are the immediate business opportunities? There’s a long list, and the report will probe them in detail, but it will include sponsorships, partnerships, investments in startups, building branded communities that enable renting and gifting, customer advocacy programs, and more. I’m seeking a “Software as a Service” (SaaS) startup that would enable this for brands and dedicate an entire post outlining the market opportunities. For example, on just the retail vertical, yesterday I met with Neal of Sharable Magazine, and he shared many opportunities for retailers.
[Social Business + Sharing Economy = Collaborative Economy]
Paradigm Change Required in Corporations
So there you have it, the next phase of Social Business goes beyond marketing and customer support. It changes the fundamental business models and relationships that we have with our customers. The big change that brands will have to face is that they will have to care about the relationship between customers as they trade and rent your products between themselves.
Collaborative Economy Requires a New Business Mindset
||Social Business Mindset
||Collaborative Economy Mindset
|How they think:
||Brands are in charge. Deal with it.
||Brands are in charge. Deal with it. Customers are in charge. We are listening, and we will engage. We care about your current experience with our goods.
||We must now care about extended life of good after we sell it, and the relationship between customers.
|Strategy they deploy:
Stay tuned for Altimeter’s report on the Collaborative Economy in just a few weeks. I’ll be presenting the findings at LeWeb, which is themed on the Sharing Economy. Thank you, Vivian Wang and Neal Gorenflo for the inspiring interviews these past few days.
Above: Facebook’s employees hard at work in the open working conditions
As an Industry Analyst my role is to identify trends, market forecasts and publish my findings in research reports. As such, Industry Analysts are different than Financial Analysts, which I’m not. While I cite where I’ve found the data in the comments, I can’t ascertain the accuracy of some of these sometimes 3rd party data sources. Note that the 2012 revenues are reported at a different time from the employee headcount was likely reported (Q1, 2013) The following is not to be considered for investment purposes.
With that caveat behind us, the following analysis takes into consideration the following consumer and public facing consumer social networks. To see enterprise class and business social business software vendors, see my additional posts on VCs and investing. While many of these startups did not have public available data, I conduct a breakdown of these startups:
Automattic (WordPress), Branch, Digg, Facebook, Foursquare, Gowalla, Groupon, Instagram, LinkedIn, LivingSocial, Pinterest, Reddit, Snapchat, Tumblr, Twitter, Yelp, and Zynga. Here’s what I found:
2012 Revenue Per Employee
Comparing both revenue per employee, rate, we found some amazing efficiencies, in particular with Facebook, Zynga, and WordPress. Here’s a data table comparing the 2012 reported revenue over employee headcount, found from online public data.
||2012 Reported Revenues
||Revenue Per Employee
|Nasdaq 100: See how other companies fare
Update: There are many comments coming in about Foursquare revenue, please see comment section, there is additional insights on fundraising, and their focus.
Facebook shows highest revenue per employee
As reported by public available data, Automattic, Zynga, Twitter, and Facebook are all making over $300k per employee, with tech salaries often ranging in 100k range, with additional costs, 300k is a benchmark number for revenue per employee that I often look for. For comparison, Facebook is pushing over $1m per employee, compared to Google (50b revenue for 53k reported employees) is about the same, at $946k per employee. While WordPress team has a modest $45m their internal revenue per employee stands toe to toe with the big dogs.
Overall industry revenues in billions of dollars
Of these consumer social network, only eight had publically available revenue run rates for 2013, on average, they’re forecasting $3.7b. In total, they’re estimating revenues of $8.3b. Last year, in 2012, ten of the consumer social network sites had publicly available revenues, which amount of $10.7 billion global revenues, averaged across the ten is $1.7b.
Some social networks boast rapid climb in revenues
These startups saw a rapid climb in revenues, on average these companies started in 2006, just seven years ago. There were some startling accelerations in revenues, with Facebook achieving $5b in revenues in 8 years, reported by 2012 public revenues. While under business model scrutiny and executive change-up, Groupon started in 2008 and achieved $2.3b in revenues in four years reported in 2012. Even with this acceleration, Facebook is still far behind Google, which boasts revenues of $50b in 13 years since inception.
Not all startups created equal, some have modest revenues
Many companies are no where near the $1b annual mark, in fact, several players are not on a growth trajectory. Of the lower revenue performers of the group includes: Foursquare, (a low yield of $2m in revenues 2012), Tumblr blogging software ($13m revenues in 2012), and long time Automattic, the makers of WordPress ($45m revenues in 2012).
Industry workforce, over 28k professionals
We can’t look at revenues alone, as these numbers don’t take costs into accounts, and found that LivingSocial employs 4,500, and surprisingly, Groupon employs a whopping 10,000 employees. All together, across these 17 consumer social networks, they employed 28,177 professionals. Obviously, this number doesn’t take into account 3rd party software like social media management systems (SMMS) and digital agencies, consultants, and of course, industry analyst firms.
Coming Soon: Who made returns? Meet the VCs and Investors of the Consumer Social Networks
(creative commons usage of image by Jakob Steinschaden)
Is SXSW for Business or just a Boondoggle? That’s the wrong question.
More than ever, I heard more folks debating if SXSW was good for business, or just a big party. Those who have attended the event for over a decade swear the soul has been stolen, and local Austin denizens often leave town and rent their place on AirBnb for a pretty penny, there’s no shortage of critics.
Looking closer, the components for a unique petri dish are present, including: 1) Big brands, 2) software vendors who are trying to sell to them, 3) device manufactures who are trying to reach influencers, 4) digerati and A-List tech celebs (which means they are D-List celebs in real life), 5) mainstream media celebs including actors, sports stars and more, and perhaps most importantly, 6) an engaged set of over aprox 25,000 interactive attendees ready to trial new technologies. (see demographics)
Here’s the arguments both for and against SXSW as a business event vs a boondoggle.
Business Goals: The Upsides and Downsides of SXSW
|Unique Interactive Experience
||Concentrating over 25k people into a a few small blocks enables unique social and tech interactions
||The chances of you experiencing a unique breakthrough moment are rare, as the event is dispersed.
|Quality Speakers and Panels
||The keynote speakers are grade A quality: Al Gore, Elon Musk, Wholefoods CEO, and others, deliver earth shaking insights.
||The crowd influenced panels are hit and miss. Most panelists are not professional speakers, and quality is a crap shoot.
||Many of the tech influencers are present, launching books, on stage, hosting parties, or milling about.
||They’re overwhelmed with requests and trying to get their attention to pitch them is very challenging.
|Learn about new trends
||Historically, new technologies have gained grown here, from Twitter, to a rash of location based apps.
||We’ve not seen any major breakthroughts in the last few years, with the exception of Grumpy Cat memes.
|Network and expand connections
||One of the best ways to quickly become immersed with the digital and interactive scene.
||For the first timer, this is a daunting festival, there’s too much to do, events are sold out, and there are many crowds and often bad weather.
|Accessibility and Logistics
||The entire festival officially and unofficially spans the entire city, walking or pedicab rides enable quick access to most events.
||Yet due to headcount increase, the event is straining housing, and unless you book 9mos early, you’ll be paying an expensive travel and expenses bill.
|Grow your business
||A strategic company can host an event, attract prospects, engage customers deeper.
||This requires significant planning, knowledge of the venue, budget to cut through clutter, and extensive influencer outreach.
|Socialize and Have Fun
||This is a fantastic event to see live music, eat great Texmex, and drink from bottomless bar tabs and dance all night.
||Perception of being a party can spill over to workplace, and not everyone will uphold the privacy code to not sharing online.
The Right Question: What are your Goals at the Festival?
So to put this topic to rest, I’m going to assert that SXSW is a festival, which includes both business presentations, networking get togethers, and downright riotous all-night parties. There’s so many options for any individual to partake in whether you’re a first timer, a corporate executive, a new media innovator, or just someone who’s interested in interactive technologies.
If you’re going to go, or are requesting your boss to attend, or are sending your staff, it’s important to set expectations with everyone around you. SXSW isn’t a normal business conference, it’s a social activity. Make it clear to those around you the opportunities of the event and the goals of your specific participation.
The Bottom Line: SXSW is what you make of it, but whatever you do, don’t call it a conference, it’s a festival.
(There’s a discussion brewing on my Facebook newsfeed about this post, Photo by Ahockley, used with attribution under creative commons license)
Imagine your great-grandchildren interacting with your likeness on a daily basis, all derived from your Facebook media, Vine videos and your personality from your Tweets.
Humans, both poor and rich have continued to seek out the greatest quest since the dawn of mankind; how do we stay alive in this world? Fortunately, (or not fortunately) new technologies are emerging both now, including some fascinating developments by leading think tanks, including Stanford.
[After Life Technology emerges to store, replicate, and even reanimate the deceased based on the digital data we’re emitting every day]
Whether you find it creepy, narcissistic, or a thoughtful way to connect with future-generations, this is a choice we’ll all be forced to reckon with. Should we shutter accounts? Allow them to be memorials, with or without comments? Allow data to be used to digitally reanimate us? There’s even impacts to corporations, as employees who are public in social channels who will eventually leave this plane, and a communications plan will need to be erected to deal with both the grief at a human way, but also how their personal, or hybrid (work/personal), or corporate social media accounts will be used.
[Even employers need to plan an after-life policy for employees using personal social media for business purposes]Scenario Matrix: Deceased Employee used Personal Social Accounts for Work Purposes
Currently, Altimeter has found that there are hundreds of employees in many companies using personal social accounts for work. We also find that corporate accounts blend and merge with personal accounts, making the blue between personal and work, sometimes indistinguishable. The following matrix breaks down some likely scenarios that could occur:
|Family of deceased mandates content to be removed
||IP created at work is owned by company, yet employee may have used personal social accounts
||IP created at work is often owned by company but now as people use personal social accounts, who owns?
|Deceased employee has content set to publish on timer
||Deceased employee has content on timer, set to publish in coming weeks, potentially conflicting with announcement strategy, messaging and general confusion.
||Does company have ability or right to alter settings or access login credentials?
|Digital reanimation efforts on former deceased employee
||A digital reanimation company seeks to activate likeness of former employee, including using content created around workplace
||IP ownership at question, including potential monetization of reanimate likeness
|Family requests social media accounts
||The family requests access to social media accounts, except they were created at work, and span both personal and work life
||Questions cause legal action due to IP, personal information rights, privacy, with variations at every country
|Family has access to corporate social media accounts
||Using Lifelocker, the deceased has turned over access to social accounts that deceased employee used during work.
||Ownership is not clear, as the account spans personal and professional usage.
While immature, there are several impacts to society, business, family, law that should give us all pause to consider, here’s a running list of what I’ve observed:
Impact to Society
Impact to Individuals
Impact to Family
Impact to Employers
- Corporate Social Media Policies Post-Life: While I don’t see much online, companies must also develop social media policies on how hybrid accounts (personal accounts that are branded with company, like (LionelAtDell) will be used, or not used. Could public social media content created at work be used by third parties including the family, or future digital reanimation companies?
- Most employment contracts indicate that all content created at the company (on company networks, or software) is owned by the company. What right does a company have to use that public facing social media content, after an employee passes on?
Impact to Social Networks
Future Tech: Digital Reanimation
- Future: I visited the Stanford Virtual Reality lab last month, and was able to hear from the Professors who have a simulated lab that they’re already starting to experiment with aggregating Facebook photos to recreate faces. They could easily do this for the deceased.
- Legacy Locker: Allows for the loved ones of a deceased to manage the social media accounts, ecommerce accounts, banking accounts, and more, through a one-stop management tool.
- _LivesOn: Slated to launch soon, this tool would provide Tweets post-life for deceased to communicate with those around them based on analysis of your existing twitter content and behaviors.
- Microsoft Research is conducting an experiment called Life Bits and is capturing an individuals full life on digital record, to understand how to use this technology in a number of methods
- LifeNaut.com was created to help people build a rich profile of information that preserves their essential, unique qualities for future generations and family members.
A New Industry Will Slowly Emerge to Digitally Reanimate The Deceased
Expect a new industry to emerge that offers the following services: Estate planners factor in social media accounts, and blogs and websites, as part of the estate. New software emerges to allow people to opt-in to have themselves digitally communicating with their future kin for generations. In a few short years, expect new virtual reality and simulation software to aggregate and analyze a deceased photos/videos from social networks, and replicate their face, mannerisms, in a way we are most familiar with. In the not-so-radical future, expect that future generations will be able to have the capability to replicate you in a virtual manner, based on the digital trails we’re leaving behind by the gigabyte.
Assume technology will advance to digitally reanimate us, individuals, families, officials, employers must plan for this inevitable future now.
(Photo Credits used under Creative Commons by Raffaello)