Blogs and the Gift Economy as ‘Disruptive Innovations’

giftIn The Innovator’s Solution, Clay Christensen identifies two types of disruptive innovation in business:

  • Low End Disruptive Innovation: Offering a lower-cost product to existing over-served customers, which incumbents don’t care about because these products are at the low-margin end of their customer base; then as technology improves, the disruptor gradually eats into the incumbents’ primary markets from below. The classic example of this is steel minimills, which initially focused on the low-end, low-margin rebar market (which the integrated steel makers were pleased to vacate), but then used new technology to move upscale to the point they have now stolen even the high-end market (sheet steel) from the giants. To achieve this, it’s essential that the innovation not be suitable to or adaptable by the incumbents — that they don’t find the disruptor’s initial business model attractive; otherwise, the incumbents will bring their considerable resources and strong customer relationships to bear to make the innovation a ‘sustaining’ one for them, and ward off and defeat the disruption attempt.
  • New Market Disruptive Innovation: Offering a product with benefits previously not available at all or which were previously very inconvenient to customers, and hence creating entirely new markets for entirely new groups of customers. The personal computer and personal copier are examples of this. In some cases a New Market Disruptive Innovation can later become a Low End Disruptive Innovation as well.

Christensen’s definitions are rooted in the Market Economy, and hence don’t exactly apply to blogs and other ‘products’ of the Gift Economy. Or do they? ‘Free’ is certainty ‘a lower cost’. Readers are clearly ‘overserved’ by newspapers of which they read and care about 10% or less of the content. And blogs offer ‘benefits not available at all’ and ‘previously inconvenient’ to newspaper readers — the ability to comment, respond and discuss articles with the authors, and hotlinks to previous articles, backgrounders and more detailed reports on the same subject.

But blogs don’t quite meet the definition of a Low End Disruptive Innovation (LEDI) because the incumbents do care about losing business (readership) to bloggers. And they don’t quite meet the definition of New Market Disruptive Innovation (NMDI) either, because blog readers are not ‘new’ to newsreading — they were mostly (except perhaps for ‘pure’ personal diary bloggers) already avid consumers of news in another format.

The legacy media initially ignored blogging as a fad, and then as blogging has continued to grow, they have taken potshots at it (“a million guys in pajamas”) and tried to coopt it with their own blogs. A few have even formed partnerships with bloggers, using them as ‘extensions’ of their print and online editions. And many newspapers now offer stripped-down tabloid size editions free to commuters, funded entirely by advertising and full of teasers to additional information only available in the paid editions. Many magazines have done the same thing — embargoing each edition so that paid subscribers get the ‘scoop’ first, or offering some articles only to subscribers. But bloggers persist because the legacy media can match neither the price (zero) or the variety (virtually infinite) of entertainment and information that bloggers offer. And the legacy media persist because:

  • The majority of their audience is still on the other side of the digital divide (those who can’t, don’t or won’t use computers and the Internet for information and communication).
  • People don’t have the time or inclination to search and browse the blogosphere (or time to read more than capsules and sound bites on any subject).
  • Most people are disinterested in news and information that is not (a) actionable, (b) easy to understand, and (c) suitable fodder for social conversation.

What then is the future of blogs? Much has been written about what blogs could become or might evolve into, but as interesting as this is to read, most of it won’t happen because of the three constraints bulleted above. In fact, the newest reports indicate that the proportion of blogs that are active is dropping sharply (lots of people find they just don’t have that much to say, or the time to say it to people they don’t know well) and that the ratio of blog readers to blog writers has plateaued and is now also falling.

I’ve written before about what I think will happen to blogs as a medium for business knowledge sharing, and I think it just makes sense to let selected people browse and search a well-ordered, context-rich archive of business colleagues’ electronic filing cabinets, and to use RSS digests of this content as a means of selectively communicating with and even selling to customers. I see business blogs migrating from their current reverse-chronological format to a more dynamic format to suit this business purpose.

Non-business blogs, I believe, are likely to become mainstream not as a source of useful and interesting information (which they mostly are now), but as a means of very dynamic social recreation. They are a greater threat, therefore, to television, radio and other forms of recreation (the telephone, the movie theatre, the shopping mall, sports, even recreational reading) than they are to the news and information media. We are, at heart, far more social than political creatures. We care more about social interaction than about learning (admit it — you too!) And that means there will be more of an appetite for new technologies and products that enhance human interaction than there will be for those that inform us. As a consequence, look for blogs to go conversational, multimedia and ‘live’.

Consider what Skype has started doing to telephony — it threatens to bury the VoIP ‘industry’ before it can even be born. You can now call land lines in most of the West, and talk as long as you want free of charge, even with people on the other side of the digital divide. Video add-ons to Skype allow you to chat with Grandma in Britain or the kids at university in Australia, free. The videophone has long been predicted. But now that it is free, and drawing people who previously had no use for computers, watch it take off.

That functionality will extend multimedia blogging from its current state of evolution (podcasting) to seamless conversations between and among bloggers and blog readers. Why would you want to watch the news of what’s happening in Paris or Honolulu or Sri Lanka or Iraq or Caracas when you can ‘blog in’ (hey, I want credit for inventing that phrase — I used it first in this context!) to a live conversation (with video, and text transcription produced by voice recognition software) with someone who is right there and can tell you and show you first hand, and chat with you about what it means?

How about from the perspective of us introspective blog writers, though? We like to spend the time carefully crafting our posts, with useful links in them, and we’re more comfortable writing our thoughts than communicating orally real-time, right? Well, that’s probably true, but what if you found that if you spent the time in selective conversations (right people, right topic, right time) instead of writing:

  • you produced more,
  • you learned more (because of more interactivity, richer context),
  • your reputation, social networks and ‘popularity’ were much greater, and
  • you ultimately had more fun online.

This is what I think will happen. When you turn on your computer in the morning, your e-mail and RSS will have many fewer articles and many more invitations to join real-time conversations (with video) scheduled at various points during the day on specific topics that you are interested in and/or acknowledged as informed about. It will have some live audio and video feeds with commentary from the areas where breaking news is happening, hosted by a blogger who lives there or has traveled there. You’ll be able to see for yourself, and ask questions of the host blogger. Some bloggers will be offering live travelogues you can ‘blog in’ to and chat with them about. Blog posts will evolve into blog events, ‘programs’, from an impromptu kaffee klatsch about a book you (or someone you trust) just read, to an hour in the life of a blogger’s family in Riyadh. Your blog will look more like a program schedule (with multimedia tapes and transcripts of the programs and events) than a journal. What’s fascinating to me about this is that the word ‘diary’ will still apply to these evolved blogs, but in the future-oriented sense of ‘daily agenda’ rather than past-oriented sense of  ‘daily record’.

This should spell the end of talk radio and TV (why listen or dial in when you can participate as a peer?), and the end of reality TV. It will disruptively innovate all ‘canned’ programming — TV and movie drama, comedy, documentary — because you’ll have the option to be part of a ‘live’ program instead, somewhat less polished but including you as participant, part of the ‘cast’. It will profoundly blur the lines between the different parts of our social networks, and deepen and broaden those networks. It will drag the rest of the world across the digital divide to see what all the commotion is about, and to play. And it will all be free.

Blogs will then become both LEDIs and NMDIs — but not so much to the news media as to the entertainment and recreation industries. The software developed for multi-player gaming apps will be adapted to manage multi-participant blog events. Just think what this capability could mean for business conferences, university courses, amateur sporting events, investigating reporting, live theatre, real-time real-space games, shopping trips, dating, Friday-night poker, parties.

And like all disruptive innovations, the incumbent providers and arrangers of entertainment, recreation, communication and other forms of social interaction won’t know what hit them until it’s too late.

I believe every aspect of the burgeoning Gift Economy has the opportunity to be a similar disruptive innovation. We have already seen this in open source and file-sharing. Software vendors disrupted by open source technologies have responded by refocusing on large corporate accounts (their ‘high end’) where they can offer customization and services that open source cannot — a classic response to LEDI. They will survive as long as those high end accounts continue to thrive — even fat cat companies can only say ‘no’ to ‘free’ for so long. Record, movie, and now book vendors (Amazon and the publishing industry are balking at Google Print, which provides free full text of books in print) have tried to sue customers who use technology to make personal-use copies of their content — a foolish and fruitless approach. These industries need to follow the lead of the software vendors and respond to the file-sharing LEDI by offering something that file-sharing cannot — like concert tickets, personalized content, and personal interviews with the performers. As consultants have learned, you give away your recorded content free, as calling card and publicity for a personal, personalized appearance, something that cannot be copied.

But most industries disrupted by Gift Economy LEDI and NMDI will probably have to learn the hard way. They will have to learn that:

  • People want their hardware (including their bodies) to be durable, robust, portable, powerful, intuitive, and cool, and are willing to pay a premium for it, even if they can’t afford it.
  • They want their software (including books, newspapers, information, music and video) to be free. And more power to them — a better way to (almost) painlessly redistribute wealth from the rich to the poor has yet to be invented. Business needs to learn to make its money from atoms, not bits. 
  • And they want their ‘socialware‘ (services that legitimately make their lives easier or better) to be personal, personalized, timely and effective, and will pay for that — if they have to, and if they can afford it

Last word to Jeff Jarvis (thanks to Dave Davison for this timely link) who wrote yesterday:

Distribution is not king. Content is not king. Conversation is the kingdom. In our media 2.0, web 2.0, post-media, post-scarcity, small-is-the-new-big, open-source, Gift Economy world of the empowered and connected individual, the value is no longer in maintaining an exclusive hold on things. The value is no longer in owning content or distribution.The value is in relationships. The value is in trust.

But in this new age, you donít want to own the content or the pipe that delivers it. You want to participate in what people want to do on their own. You donít want to extract value. You want to add value. You donít want to build walls or fences or gardens to keep people from doing what they want to do without you. You want to enable them to do it. You want to join in.

In this model, newspapers have a problem: They want to control information and the means of sharing rather than enabling that sharing. Book publishers are inefficient as hell: They have to guess what the audience wants rather than helping questioners find answerers. Entertainment producers are doomed to support extravagant costs: They have raised the bar to success beyond their own reach. Cable companies and broadcasters are lost: They have no idea how to serve people, only masses. Marketers and their agencies are befuddled: They have evolved into beasts without ears. And ó hereís my favorite ó AOL has it utterly, completely, spectacularly wrong: It wanted to control content and distribution and controlled nothing at all.

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4 Responses to Blogs and the Gift Economy as ‘Disruptive Innovations’

  1. Zephyr says:

    Another spectacular essay, Dave. I agree with you that social life on the internet will take more and more center stage, over the next few years. I saw that a discussion board I participated in for a couple of years became the primary spot on the internet where I spent my time. When people invest time in something, they tend to be drawn back towards it, again and again. This spring, I read a new york times article speaking of a website designed for college students to network at. Interestingly enough, those who ran the website brought in tens of thousands of dollars a year for a couple years in a row – simply selling tshirts and such things. Shows you how popular that kind of thing is. I don’t really want to be drawn into the time requirements of hosting social events at my websites, but I was thinking of perhaps setting up a wiki – just for friends and family. Speaking of virtual reality communication, I discovered this wonderful software the other day at It’s a comic book style of chat – you have a comic book character who speaks in thought bubbles with other people in real time. The community there now, is pretty empty, except for sour teenagers and people who want to talk about taboo subjects because of the anonymity they are given – but it has a lot of potential. I thought it a sublime way to interact with people. The company is also going to begin making the software available for people who want to run their own visual chat server.

  2. SB says:

    I dunno, Dave. Some of us introspective bloggers really are introverts.

  3. Greg Burton says:

    Very interesting post, Dave. I do think you’re missing the mark on the second point of stability for the legacy media. While very few people have the time or inclination to search and actually read many blogs, targeted RSS feeds solve that issue. We’re going to see RSS become totally mainstream over the next two years, because it’s the most productive approach to getting targeted, actionable content. BTW – what stats were you looking at on blog writership/readership? I’d be interested in looking at that data.

  4. Dave Pollard says:

    Zephyr: Thanks. Truechat is an interesting model. Kind of a low-tech videoconferencing using avatars.SB: Yeah, I know. But just wait ’til blog-hosted conversations get easy and multimedia — you won’t be able to resist.Greg: I take your point, but I don’t think RSS is for everyone. It takes excellent reading skills and a preference for the written word over the spoken, both of which, I think, are in decline. My source for the data was Pew/Internet surveys, which said that in 2005 blog readership has leveled off at 16% of adult Americans (and few of them read blogs every day) while the number of blogs continues to increase exponentially (see Technorati blog for that data). What interests me is that if you define ‘active blog’ as ‘updated at least quarterly’ then 55% of blogs are ‘active’, but if you define them as ‘updated at least weekly’ then only 13% of the 14 million blogs are ‘active’. Since there are 800,000 blog posts per day (also per Technorati), then if we assume that posting frequency and number of blogs are inversely and logarithmically proportional that would suggest that of the 1.7 million blogs updated weekly perhaps only 0.5 million are updated daily. So I think we have a long way to go before we become a force to be reckoned with in the media. I think we’ll become a social force before we become a political one.

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