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Wealth of Networks

Electronic Commmerce + Virtual Community = Agora

Internet marketing pundits talk about Electric Commerce and Virtual Community as if they were separate ideas. That's wrong. They are starting to converge, and their merger into an agora is as important to the Internet as the Web itself.

Electronic Commerce needs Community

'Electronic Commerce' can cover a lot of territory, but I'm talking about 'net based advertising, and selling of goods and services from sites. These are a bet by business on the Internet as a new marketing and distribution channel. There's also hope that these activities will throw off transaction fees to help fund the overall Internet infrastructure.

To win in Electronic Commerce, you need lots of repeat traffic on your site. That translates into advertising exposures and trips past the virtual shop window. In the real world, you get the traffic by paying for a good location at the mall or on a busy street corner. On the net, there's no topology, and just clumping storefronts into the virtual equivalent of a strip mall doesn't gain much, and there's little to no barrier to entry or basis for differentiation.

Anyone who's helped run an online service (I have) knows that one of the best drivers for repeat visits is person to person interaction, particularly as part of an ongoing community. The logical conclusion is that commercial sites should host communities, just as a pub or a real world mall provides a hang out space subsidized by sales. Even better, hosting a community focused around topics relevant to the hosting business prequalifies the visitors as buyers or viewers, and gives the business a chance to develop its brand as a symbol of trust to that community.

While not a huge activity yet, this merger is starting to happen. I've found examples across a wide range of interests, from bird fanciers, to RV and campsite owners, nanny brokers, and petroleum services.

Virtual Communities Go Commercial

While the Web gets the big press noise, community platforms such as IRC, Usenet news, and MUDs have always been an important part of the Internet picture. There's been no mechanism, however, for the convenors, moderators and other contributors to be directly compensated, unless they joined a closed online service such as AOL or CompuServe. Internet communities have largely been a gift economy, vibrant but limited in ability to move beyond a socializing venue.

The commercial pull will show those with virtual community building skills that they have a valuable talent. Some will go to work building groups on behalf of existing enterprises, as suggested above. Others will take the reverse road, realizing that they can build up a viable and valuable community center independent of a single commercial enterprise, and then assemble the commerce around the crowd. Electric Minds itself is such a bet.

In some cases, those with virtual community skills will be able to beat out and replace existing commercial players, particularly middlemen who are slow to respond to the Internet's transformation of distribution chains. The net-savvy will have a competitive advantage in their experience with open and transparent relations with community members/customers, and ability to understand non-traditional transactions such as attention swapping.

Virtual Community as Clan

Managment theorist William Ouchi identifies the clan as a third way to organize effort, alongside markets and bureaucracies (1). Clans will tend to appear when there is both uncertainty in advance regarding exactly what type of good or service is to be created, and difficulty afterwards in assessing individual's contributions to the outcome. While they may interact with other organizations through market mechanisms, clans are internally governed by shared values, traditions and beliefs, communion and solidarity, rather than money exchange or hierarchy.

Small partnerships in fields such as design, futurism, law, public relations or recruiting are good examples of clans. Veterans of 'new age' organizations such as The Farm may also recognize this form.

Virtual communities have had little experience with 'real' commerce, and no infrastructure to support it or any form of hierarchy. They have de facto gravitated toward the clan organization model, where common values and folkways are used to create the necessary cohesion and trust for the community to exist. Some of these virtual clans may now prove to be viable in and of themselves. Rather than merely forming an audience, they will be an efficient means of organizing effort in the face of great uncertainty. Of course, the Internet itself is one of the greatest sources of uncertainty in business right now, so both the demand driver and part of the solution are coexistent.

The Next Battle of the Platform War

Unless you've crawled under a rock, you've noticed the war among Microsoft, Netscape, Oracle and Sun for dominance of the Internet and 'intranet' platform. In this struggle, market share is everything, and any potentially differentiating feature is grabbing, cost reduced, and integrated to get a leg up on the next guy. Now, both Microsoft and Netscape have noticed that community is as important a demand driver as content (the Web) and are incorporating supporting features in their platforms.

So far, the community functions we're getting from them are ports and barely warmed over freeware, which share the limits of current news, chat, and MUDs:

Limits to text interaction
Obscure user interfaces
Lack of security and other integrity functions
To enable wider usage and real agora, these limits need to be overcome.

Since both Microsoft and Netscape are essentially acting as consolidators, the place to look for hints of the next generation is at smaller entrepreneurial firms. Take a look at:

The Palace
Electric Communities
for some of the ways in whch these limits may be overcome. If any of them are winners, you can guess the big platform players won't be far behind.

Not a Five Year Forecast

Driven by both commercial imperative and the platform competition, we'll see significant movement to a virtual agora by the end of 1997. Its fraction of overall commerce will remain low, but its concentration in high wealth and income segments of the population will create high relative impact. The five year impacts will be created as virtual reorganization ripples through governance, schooling, and business, and I'll come back to those in later columns.

(1) William G. Ouchi, Markets, Bureaucracies and Clans, Administrative Science Quarterly, 25: 129-41, 1980.


clm said:

What strikes me as important about WebTV is that it is a proof of concept for the notion that the "client-side" can itself be implemented using a client-server model and extremely inexpensive clients. Or, another way of saying it, WebTV exploits the three-tier model of distributed app deployment.

Microsoft (and others) have been promoting this model for quite some time.

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