Category Archives: Online Trends

The Social Media Menagerie

First published January 17, 2013 in Mediapost’s Search Insider

Did you know there are 18,903 social media gurus on Twitter? I haven’t the faintest idea what the prerequisites are for becoming a “guru,” but apparently thousands of people have passed the hypothetical “bar.” As a baseline, the original Sanskrit meaning of “guru” meant “teacher” or “master.” Fair enough, I suppose. It seems fairly benign. But the way many use the term, I think Wikipedia’s definition might be more fitting:  “In the United States, the meaning of ‘guru’ has been used to cover anyone who acquires followers, especially by exploiting their naiveté.”

To be fair, I have had the label applied to myself by others in certain contexts. But I have never used it to refer to myself. To me, it just smacks of a king-sized stroking of one’s own ego. What the hell makes you a guru? Did you take a test? Study under a true “master”? Lock yourself away in solitude to consider the intricacies of Facebook or Twitter? Was there a vote of a “guru” nominating committee that conferred the title on you? Did the god of social media anoint you? Or did you just sign up for a Twitter account and suddenly decide you were ready to go into the consulting biz?

I’m sure some of the 18,903 actually know what they’re doing. But I’m betting there are just as many that you should fend off with the proverbial 10-foot pole. Let’s face it: if you need to call yourself a guru to justify your self-worth, there may be other inadequacies in your own personal inventory.

To me, true masters always refers to themselves as students. They know they don’t know everything, but they’re always ready to learn. They open themselves up to constantly growing by doing. They know the value of “screwing up.” They realize that this is an area that is just defining itself, and to believe you have it mastered is the height of presumption. Give me one social media “student” over 18,903 “gurus” any day.

Of course, “guru” is not the only moniker appropriated in the Twittersphere – there are also 21,928 social media “mavens” and 21,876 “ninjas.” For some reason, I don’t take the same offence to these terms. In Yiddish, a “maven” is “one who understands, based on an accumulation of knowledge.”  And a “ninja” is a “covert agent or mercenary who specialized in unorthodox warfare.” The former seems to be a little less self-aggrandizing, and the latter is just stupid. Let the mavens keep learning, and let the ninjas battle each other to the death in some type of social media grudge match. I presume they use Twitter throwing stars and Linked In nunchucks.

Apparently, to consult in social media requires some kind of “out-there” title. There are only 9,031 social media “consultants”, 5,555 social media “experts” and 1,555 social media “marketers”. But there are 287 “freaks,” 104 “warriors,” and 35 “wonks.” I was also heartened to find that there are 174 social media “whores.” Now, there’s a title you can relate to.

Look, I get that you need to “stand out” — but if there are 20,000 other people calling themselves the same thing, how much are you really standing out?

Evolving on the Fly: Growth Hackers, Agile Marketers, Bayesian Strategists and CMTs

First published January 10, 2013 in Mediapost’s Search Insider

If you are a Darwinist, one of the questions you may have asked yourself is, on what timescale does evolution play out? Is it a long, gradual development of new and differentiated species? Or, as Stephen Jay Gould and Niles Eldridge believe, does evolution happen in short spurts, separated by long periods of stasis (their theory is called Punctuated Equilibrium)?

The next question you might ask is, what does this have to do with marketing?

I venture to say: everything. Bear with me.

If you believe, as I believe, that evolution happens in spurts, then it’s important to understand what causes those spurts. Among many contentious alternatives, one that seems to be more commonly accepted is a sudden dramatic change in what evolutionists call the adaptive landscape.  This is the real world that species must adapt to in order to survive. “Flat” landscapes create an even playing field for all species to survive, resulting in relative stasis. “Rugged” landscapes significantly favor some species over others, accelerating evolution dramatically. “Rugged” landscapes generally emerge after some big event, like a catastrophe.

I propose that marketing is currently a very rugged adaptive landscape. Some marketers are going to thrive, and others are going to disappear from the face of the earth. We’re already seeing exciting new species emerge.

Growth Hackers

If you haven’t heard about them, Growth Hackers are “the next big thing,” at least, according to Fast Company.  A post by Andrew Chen is referenced, where he explains, “Growth hackers are a hybrid of marketer and coder, one who looks at the traditional question of ‘How do I get customers for my product?’ and answers with A/B tests, landing pages, viral factor, email deliverability, and Open Graph.” Think of hackers as tech-savvy marketing guerillas. They move fast, exploit technical opportunities, and track and test everything.

Agile Marketers

According to the Agile Marketing Manifesto, this offshoot of Agile Development enshrines customer focus, validated learning, iterative approaches, flexibility and learning from our mistakes. In the words of my friend Mike Moran, it’s learning how to “Do It Wrong Quickly.” As opposed to Growth Hackers, which is more of a job description, Agile Marketing is a corporate philosophy that encourages (demands) rapid evolution. It embraces the realities of a “rugged” adaptive landscape.

Bayesian Strategists

This was top of mind after my last column, so I added this in as my contribution. As stated last week, I envision strategic thinking to become less of a “shot in the dark” and more of a “testable hypothesis.”  I would never want to see “Big Thinking” give way to “Big Data,” but I believe the two can co-exist, and co-evolve, quite nicely.

Chief Marketing Technologist

Finally, under whose watch does all of this fall? If you believe Scott Brinker (which I invariably do — he’s from Boston and he’s “wicked smaaht”) it falls quit nicely into the job description of the Chief Marketing Technologist. I’ll let him explain in his own words: “A chief marketing technologist (CMT) is the person responsible for leading an organization’s marketing technology.”

A CMT sits astride the rapidly colliding worlds of marketing and technology and makes sure an organization does not fall prey to the all-too-common trap of having these overseen by two completely separate (and often outrightly hostile) departments.

A CMT understands the following realities:

Everything is Marketing

Everything is Changing

Everyone Must Be Agile

In the words of Peter Drucker, “Business has only two basic functions: marketing and innovation.” In today’s world, those two functions are inextricably linked. As a marketer, you have two choices: adapt and survive, or stand still and die. The ones who do the first the best will emerge at the top of the marketing food chain.

McLuhan 50 Years Later

First published December 20, 2012 in Mediapost’s Search Insider

My daughter, who is in her senior year of high school, recently wrote an essay on Marshall McLuhan. She asked me to give my thoughts on McLuhan’s theories of media. To be honest, I hadn’t given McLuhan much thought since my college days, when I had packed away “Understanding Media: The Extensions of Man” for what I thought would likely be forever. I always found the title ironic. This book does many things, but promoting “understanding” is not one of them. It’s one of the more incomprehensible texts I’ve ever encountered.

My daughter’s essay caused me to dig up my half-formed understanding of what McLuhan was trying to say. I also tried to update that understanding from the early ‘60s, when it was written, to a half-century later, in the world we currently live in.

Consider this passage from McLuhan, written exactly 50 years ago: The next medium, whatever it is—it may be the extension of consciousness—will include television as its content, not as its environment, and will transform television into an art form. A computer as a research and communication instrument could enhance retrieval, obsolesce mass library organization, retrieve the individual’s encyclopedic function and flip into a private line to speedily tailored data of a saleable kind.

(See, I told you it was incomprehensible!)

The key thing to understand here is that McLuhan foretold something that I believe is unfolding before our eyes: The media we interact with are changing our patterns of cognition – not the message, but the medium itself. We are changing how we think. And that, in turn, is changing our society. While we focus on the messages we receive, we fail to notice that the ways we receive those messages are changing everything we know, forever. Twitter, Facebook, Google, the xBox and Youtube – all are co-conspirators in a wholesale rewiring of our world.

Now, to borrow from McLuhan’s own terminology, no one in our Global Village could ignore the horrific unfolding of events in Connecticut last week. But the channels we received the content through also affected our intellectual and visceral connection with that content. Watching parents search desperately for their children on television was a very different experience from catching the latest CNN update delivered via my iPhone.

When we watched through “hot” media, we connected at an immediate and emotional level. When the message was delivered through “cool” media, we stood somewhat apart, framing the messaging and interpreting it, abstracted at some length from the sights and sounds of what was unfolding. Because of the emotional connection afforded by the “hot” media, the terror of Newtown was also our own.

McLuhan foretold this as well: Unless aware of this dynamic, we shall at once move into a phase of panic terrors, exactly befitting a small world of tribal drums, total interdependence, and superimposed co-existence. […] Terror is the normal state of any oral society, for in it everything affects everything all the time.

My daughter is graduating next June. The world she will inherit will bear little resemblance to the one I stepped into, fresh from my own graduation in 1979. It is smaller, faster, more connected and, in many ways, more terrifying. But, has the world changed as much as it seems, or is it just the way we perceive that world? And, in that perception, are we the ones unleashing the change?

Pursuing the Unlaunched Search

First published November 29, 2012 in Mediapost’s Search Insider

Google’s doing an experiment. Eight times a day, randomly, 150 people get an alert from their smartphone and Google asks them this question, “ What did you want to know recently?” The goal? To find out all the things you never thought to ask Google about.

This is a big step for Google. It moves search into a whole new arena. It’s shifting the paradigm from explicit searching to implicit searching. And that’s important for all of the following reasons:

Search is becoming more contextually sensitive. Mobile search is contextually sensitive search. If you have your calendar, your to-do list, your past activities and a host of other information all stored on a device that knows where you are, it becomes much easier to guess what you might be interested in. Let’s say, for example, that your calendar has “Date with Julie” entered at 7 p.m., and you’re downtown. In the past year, 57% of your “dates with Julie” have generally involved dinner and a movie. You usually spend between $50 and $85 dollars on dinner, and your movies of choice generally vacillate between rom-coms and action-adventures (depending on who gets to choose).

In this scenario, without waiting for you to ask, Google could probably be reasonably safe in suggesting local restaurants that match your preferences and price ranges, showing you any relevant specials or coupons, and giving you the line-up of suggested movies playing at local theatres. Oh, and by the way, you’re out of milk and it’s on sale at the grocery store on the way home.

Can Googling become implicit? “We’ve often said the perfect search engine will provide you with exactly what you need to know at exactly the right moment, potentially without you having to ask for it,” says Google Lead Experience Designer Jon Wiley, one of the leads of the research experiment.

As our devices know more about us, the act of Googling may move from a conscious act to a subliminal suggestion. The advantage, for Google and us, is that it can provide us with information we never thought to ask for.  In the ideal state envisioned by Google, it can read the cues of our current state and scour its index of information to provide relevant options. Let’s say we just bought a bookcase from Ikea. Without asking, Google can download the user’s manual and pull relevant posts from user support forums.

It ingrains the Google habit. Google is currently in the enviable position of having become a habit. We don’t think to use Google, we just do. Of course, habits can be broken. Habits are a subconscious script that plays out in a familiar environment, delivering an expected outcome without conscious intervention. To break a habit, you usually look at disrupting the environment, stopping the script before it has a chance to play out.

The environment of search is currently changing dramatically. This raises the possibility of the breaking of the Google habit. If our habits suddenly find themselves in unfamiliar territory, the regular scripts are blocked and we’re forced to think our way through the situation.

But if Google can adapt to unfamiliar environments and prompt us with relevant information without us having to give it any thought, the company not only preserves the Google habit but ingrains it even more deeply. Good news for Google, bad news for Bing and other competitors.

It expands Google’s online landscape. Finally, at this point, Google’s best opportunity for a sustainable revenue channel is to monetize search. As long as Google controls our primary engagement point with online information, it has no shortage of monetization opportunities. By moving away from waiting for a query and toward proactive serving of information, Google can exponentially expand the number of potential touch points with users. Each of these  touch points comes with another advertising opportunity.

All this is potentially ground-breaking, but it’s not new. Microsoft was talking about Implicit Querying a decade ago. It was supposed to be built into Windows Vista. At that time, it was bound to the desktop. But now, in a more mobile world, the implications of implicit searching are potentially massive.

Google’s Personality Crisis

First published November 15, 2012 in Mediapost’s Search Insider

“Be not afraid of marketing: some are born marketers, some achieve marketing, and some have marketing thrust upon them.” — (paraphrased from) William Shakespeare.

Google has never been comfortable as a marketing company. The only reason it became a marketing company (or worse, a media company) is because it happened to stumble on the single most effective marketing channel of all time and had to figure out some way to monetize it. Even then, Adwords wasn’t Google’s idea, but Goto’s (which became Overture, which became Yahoo). Google just stole it and tweaked it a little. Because that’s what engineers do. And that’s what Google is, first a foremost, a company of engineers. Google has worn its marketing mantle the same way I wear a Speedo: uncomfortably (and yes, a little incongruously).

Anytime Google has tried to embrace its inner “marketingness,” the results have ranged from vaguely boring to disastrous. Asking Google to become a marketer is kind of like asking Stephen Hawkins to enter a wet T-shirt content — a terrible waste of cranial processing power (and frankly, not something I’d particularly want to see).

Google had the questionable luck to become fabulously profitable as a marketer, simply because it created a utility that just happened to capture eyeballs when they were attached to wallets ready to spring into action. It was like stealing candy from a baby. But then the hard cold reality hit home. Google became a public company, which meant it had a lot of shareholders who fully expected the stroke of fate that poured money into Google’s coffers to continue. So the company had to find other marketing channels, which in turn meant its strategists had to get over their distaste of marketing in general.

So they, being resolutely Googlish, decided to reinvent marketing to make it less, well, ”markety.” They would introduce their idea of marketing, infused with a pure geekish streak of scalability, market efficiency and engineering precision. I think we all know how that turned out, as the echoes of Google TV, Google Print and Google Radio still reverberate in the Hall of Stupendously Spectacular Failures.

Face it Google. You don’t get marketing, so stop trying. Step away from the bling and tchotchkes. Retreat to the warm embrace of your slide rules and HP scientific calculators.

But, whether it gets marketing or not, Google’s dilemma remains. Its revenues depend on marketing. And marketing revenues can be staggeringly profitable, yet notoriously fickle. It’s all about eyeballs, preferably with wallets attached. Where can Google get more of the same, if not from marketing?

If we break this down, we can assume a few things to be true. Eyeballs will increasingly turn their gaze online, at some screen or another. Also, those eyeballs will be looking for ever-more-relevant stuff to do something with. Finally, if that “stuff” has something to do with buying things, then there’s a good opportunity for companies who market those things.

Let’s look at what Google is good at. Google is good — make that great — at engineering scalable, efficient, redundant systems.  Google strategists believe that if they could totally remove human “noise” from the equation, the world would be a much happier place. It’s Nirvana as envisioned by Stanley Kubrick: a little sterile, but oh-so-dependable.

That skill set is a horrible match for marketers, where empathy is kind of important. But it’s a great match for utility providers. At its roots, that’s what Google was, right from the first inception of “Backrub” running surreptitiously from a Stanford dorm room: it was a tool.

Google has tentatively ventured down this path — with WiFi access, Android, and, most recently, by rolling out high-speed Internet access for Google TV subscribers. But in each of those cases, the utility was not the end goal – it was to provide a platform for more marketing.

At what point will Google principals realize they suck at marketing, but are damned good at providing the underlying infrastructure required? It’s not as sexy, or as profitable, but as Google approaches middle age, isn’t it time they started getting comfortable in their own skin?

The Swapping of the Old “Middle” for the New

First published November 8, 2012 in Mediapost’s Search Insider

For the past several columns, I’ve been talking about disintermediation. My hypothesis is that technology is driving a general disintermediation of the marketplace (well, it’s not really my hypothesis — it’s a pretty commonly held view) and is eliminating a vast “middle” infrastructure that has accounted for much of the economic activity of the past several decades. It’s a massive shift (read “disruption”) in the market that will play out over the next several years.

But every good hypothesis must stand up to challenge, and an interesting one came from a recent article in Slate, which talks about the growth of a brand new kind of “gatekeeper,” the new “bots” that crawl the Web and filter (or, in some cases, generate) content based on a preset algorithm. These bots can crawl blog posts, pinpointing spam and malicious posts so they can be removed. The sophistication is impressive, as the most advanced of these tap into the social graph to learn, in real time, the context of posts so it can make nuanced judgment calls about what is and isn’t spam.

But these bots don’t simply patrol the online frontier, they also contribute to it. They can generate automated social content based on pre-identified themes. In other words, they can become propaganda generators. So now we have a new layer of “middle” that acts both as censor and propagandist. Have we gained anything here?

The key concept here is one of control. The “middle” used to control both ends of the market. It did so because it controlled the bridge between the producers and consumers.  This was control in every sense: control of the flow of finance, control of the physical market itself, and control of communication.

With disintermediation, direct connections are being built between producers and consumers. With this comes a redefinition of control. In terms of financial control, disintermediation should (theoretically) produce a more efficient marketplace, resulting in more profit for producers and better prices for consumers. That drastically oversimplifies the pain involved in getting to a more efficient marketplace, but you get the idea.  In this case, the only loser is the middle, so there’s no real incentive for the producers or consumers to ensure its survival.

Disintermediation of the physical market essentially works itself out. If the product needs a face-to-face representative, the middle will survive. If not, then we’ll figure out how to facilitate the sale online, and you can expect to see a lot of UPS vans in your neighborhood. We consumers may mourn the loss of a “face” in some segments of our marketplace, but we’ll get over it.

When it comes to control of communication, it’s more difficult to crystal-ball what might happen in the future. This area is also where new gatekeepers are most likely to appear.

Communication between marketers and the market used to be tightly channeled and controlled by the “middle.” It also used to flow in essentially one direction – from the marketer to the market. It was always very difficult for true communication to flow the other way.

But now, content is sprouting everywhere and becomes publicly accessible through a multitude of online touch points. It could soon become overwhelming to navigate through, both for consumers and producers. In this case, arguably, the middle served a very real service to both producers and consumers. The middle could edit communication, saving us from wading through a mountain of content to get what we were looking for.  It could also ensure that the messages producers wanted to get to the market were effectively delivered. The channels were under the control of the marketplace. For this reason, both marketers and the market may be reluctant to see disintermediation when it comes to communication.

The new gatekeepers, such as those featured in the Slate article, seem to serve both ends of the market. They help consumers access higher quality information by weeding out spam and objectionable content. And they help producers exercise some degree of control over negative content generated by the marketplace. In the absence of tight control of channels, a concept that’s gone the way of the dodo, this scalable, automated gatekeeper seems to serve a purpose.

If the need is great enough on both sides of the market, we are likely to find a new “middle” emerge: an “infomediary,” to use the term coined by John Hagel, Marc Singer and Jeffrey Rayport. According to this definition of the middle, Google emerges as the biggest of the “infomediaries.”

The question is, how much control are we willing to give this new evolution of the middle? In return for hacking some semblance of sanity out of the chaos that is an unmediated information marketplace, how much are we willing to pay in return? And, where does this control (and with it, the associated power) now live?  Who owns the new gatekeepers?  And who are those gatekeepers accountable to?

Disintermediation of a New, More Connected World

First published November 1, 2012 in Mediapost’s Search Insider

On Monday, one of the byproducts of disintermediation hit me with the force of, well — a hurricane, to be exact. We are more connected globally than ever before.

This Monday and Tuesday, three different online services I use went down because of Sandy. They all had data centers on the East Coast.

Disintermediation means centralization, which means that we will have more contact with people and businesses that spread across the globe.

The laptop I’m writing this column on (a MacBook Pro) was recently ordered from Apple. I was somewhat amazed to see the journey it took on its way to me. It left a factory in China, spent a day in Shanghai, then passed through Osaka, Japan on its way to Anchorage, Ala. From there it was on to Louisville, Ky. (ironically, the flight path probably went right over my house), then back to Seattle, Vancouver and then to my front door. If my laptop were a car, I would have refused delivery – it already had a full year’s worth of miles on it before I even got to use it.

A disintermediated world means a more globally reliant world. We depend on assembly factories in Taiyuan (China), chip factories in Yamaguchi (Japan), call centers in Pune (India), R&D labs in Hagenberg (Austria), industrial designers in Canberra (Australia) and yes, data centers in lower Manhattan. When workers brawl, tsunamis hit, labor strikes occur and tropical storms blow ashore, even though we’re thousands of miles away, we feel the impact. We no longer just rely on our neighbors, because the world is now our neighborhood.

This adds a few new wrinkles to the impacts of disintermediation, both positive and negative.

On the negative side, as we saw forcefully demonstrated this week, is the realization that our connected markets are more fragile than ever. As production becomes concentrated due to various global advantages, it is more vulnerable to single-point failures. One missing link and entire networks of co-dependent businesses go down. This lack of redundancy will probably be corrected in time, but for now, it’s what we have to live with.

But, on the positive side, our new connectedness also means we have to have interest in the well being of people that would have been out of our scope of consciousness just a mere decade ago. We care about the plight of the average worker at Foxconn, if for no other reason than it will delay the shipment of our new Mac. I exaggerate here (I hope we’re not that blasé about human rights in China) to make a point: when we have a personal stake in something, we care more. When you depend on someone for something important to you, you tend to treat them with more consideration. Thomas Friedman, in his book “The World is Flat,” called it the Dell Theory of Conflict Prevention:

“The Dell Theory stipulates: No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other as long as they are both part of the same global supply chain.”

To all of you who weathered the storm, just know that you’re not alone in this. We depend on you – so, in turn, feel free to depend on us.

The Balancing of Market Information

First published October 25, 2012 in Mediapost’s Search Insider

In my three previous columns on disintermediation, I made a rather large assumption: that the market will continue to see a balancing of information available both to buyers and sellers. As this information becomes more available, the need for the “middle” will decrease.

Information Asymmetry Defined

Let’s begin by exploring the concept of information asymmetry, courtesy of George Akerlof, Michael Spence and Joseph Stiglitz.  In markets where access to information is unbalanced, bad things can happen.

If the buyer has more information than the seller, then we can have something called adverse selection. Take life and health insurance, for example. Smokers (on the average) get sick more often and die younger than non-smokers. If an insurance company has 50% of policyholders who are smokers, and 50% who aren’t, but the company is not allowed to know which is which, it has a problem with adverse selection. It will lose money on the smokers so it will increase rates across the board. The problem is that non-smokers, who don’t use insurance as much, will get angry and may cancel their policy. This will mean the “book of business” will become even less profitable, driving rates even higher.   The solution, which we all know, is simple: Ask policy applicants if they smoke. Imperfect information is thus balanced out.

If the seller has more information than the buyer, then we have a “market for lemons” (the name of Akerlof’s paper). Here,  buyers are  assuming risk in a purchase without knowingly accepting that risk, because they’re unaware of the problems that the seller knows exists. Think about buying a used car, without the benefit of an inspection, past maintenance records or any type of independent certification. All you know is what you can see by looking at the car on the lot. The seller, on the other hand, knows the exact mechanical condition of the car. This factor tends to drive down the prices of all products –even the good ones — in the market, because buyers assume quality will be suspect. The balancing of information in this case helps eliminates the lemons and has the long-term effect of improving the average quality of all products on the market.

Getting to Know You…

These two forces — the need for sellers to know more about their buyers, and the need for buyers to know more about what they’re buying — are driving a tremendous amount of information-gathering and dissemination. On the seller’s side, behavioral tracking and customer screening are giving companies an intimate glimpse into our personal lives. On the buyer’s side, access to consumer reviews, third-party evaluations and buyer forums are helping us steer clear of lemons. Both are being facilitated through technology.

But how does disintermediation impact information asymmetry, or vice versa?

If we didn’t have adequate information, we needed some other safeguard against being taken advantage of. So, failing a rational answer to this particular market dilemma, we found an irrational one: We relied on gut instinct.

Relying on Relationships

If we had to place our trust in someone, it had to be someone we could look in the eye during the transaction. The middle was composed of individuals who acted as the face of the market. Because they lived in the same communities as their customers, went to the same churches, and had kids that went to the same schools, they had to respect their markets. If they didn’t, they’d be run out of town. Often, their loyalties were also in the middle, balanced somewhere between their suppliers and their customers.

In the absence of perfect information, we relied on relationships. Now, as information improves, we still want relationships, because that’s what we’ve come to expect. We want the best of both worlds.

Will Customer Service Disappear with the Elimination of the “Middle”?

First published October 18, 2012 in Mediapost’s Search Insider

In response to my original column on disintermediation, Joel Snyder worried about the impact on customer service: The worst casualty is relationships and people skills. As consumers circumvent middlemen, they become harder to deal with. As merchants become more automated, customer service people have less power and less skills (and lower pay).

Cece Forrester agreed: Disintermediation doesn’t just let consumers be rude. It also lets organizations treat their customers rudely.

So, is rudeness an inevitable byproduct of disintermediation?

Rediscovering the Balance between Personalization and Automation

Technology introduces efficiency. It streamlines the “noise” and marketplace friction that comes with human interactions. But with that “noise” comes all the warm and fuzzy aspects of being human. It’s what both Joel and Cece fear may be lost with disintermediation. I, however, have a different view.

Shifts in human behavior don’t typically happen incrementally, settling gently into the new norm. They swing like a pendulum, going too far one way, then the other, before stability is reached. Some force — in this case, new technological capabilities — triggers the change. As society moves, the force, plus momentum, moves too far in one direction, which triggers an opposing force which pushes back against the trend. Eventually, balance is reached.

A Redefinition of Relationships

In this case, the opposing force will be our need for those human factors. Disintermediation won’t kill relationships. But it will force a redefinition of relationships. The challenge here is that existing market relationships were all tied to the “Middle,” which served as the bridge between producers and consumers. Because the Middle owned the end connection with the customer, it formed the relationships that currently exist. Now, as anyone who has experienced bad customer service will tell you, some who lived in the Middle were much better at relationships than others. Joel and Cece may be guilty of looking at our current paradigm through rose-colored glasses. I have encountered plenty of rudeness even with the Middle firmly in place.

But it’s also true that producers, who suddenly find themselves directly connected with their markets, have little experience in forming and maintaining these relationships. However, the market will eventually dictate new expectations for customer service, and producers will have to meet those expectations. One disintermediator, Zappos, figured that out very early in the game.

Ironically, disintermediation will ultimately be good for relationships. Feedback loops are being shortened. Technology is improving our ability to know exactly what our customers think about us. We’re actually returning to a much more intimate marketplace, enabled through technology. Producers are quickly educating themselves on how to create and maintain good virtual relationships. They can’t eliminate customer service, because we, the market, won’t let them. It will take a bit for us to find the new normal, but I venture to say that wherever we find it, we’ll end up in a better place than we are today.

The Good Side of Disintermediation

First published October 11, 2012 in Mediapost’s Search Insider

You know you’ve found a good topic for a column when half the comments are in support of whichever side of the topic you’ve lined up on, and half are against it. Such was the case last week when I wrote about disintermediation.

This week, I promised to present the positives of disintermediation. I’ll do so at the macro level, because there are market forces at work that will drive massive change at every level. But there were also some very interesting questions raised last week by readers:

  • Is disintermediation killing relationships and our ability to deal with people?
  • Are the benefits of disintermediation tied to social status, driving the haves and the have-nots even further apart?
  • Is more information good for the market, or does it just create more noise for us to wade through?
  • What will the social cost of disintermediation be?
  • What are the global implications of disintermediation?
  • In knowledge-based professional markets where experience and expertise are essential (i.e. health care) what role does disintermediation play?
  • Are we just replacing one type of “middle” with another (for example, online travel agencies for traditional travel agencies)?

Each of these questions is worthy of a column itself, so I’ll file those away for future writing over the next few weeks. But today, let’s focus on the silver lining inside the disintermediation cloud.

I’ve written about Kondratieff waves (also K waves) before. In the world of the macro-economist (who are of mixed opinion about the validity of the theory), these are massive waves of disruption (often driven by technological advances) that first deconstruct the marketplace and then rebuild it based on the new (improved?) paradigm.

The Industrial Revolution was one such wave. What that did was create a new marketplace built on scale. Bigger was better. It introduced mass manufacturing, mass markets and mass advertising. It also created the “middle,” which was an essential part of getting goods to the market. Given the scale of the new markets, it was essential to create a huge support infrastructure. Most of the wealth of the 20th century was built on the back of this particular K wave.

One of the characteristics of a K wave is that the positive benefits outweigh the negatives. After the period of destruction as the old market is torn apart, the new market scales to new heights. Technology fuels increased capabilities and opportunities. The world lurches ahead to a new possibility. We were better off (arguably) by most metrics after the Industrial Revolution than before it. We were more productive, had a higher standard of living and could do things we couldn’t do before.

Today, we’re in the middle of another K Wave disruption, and I believe this one is going to dwarf the impact of the Industrial Revolution. Of course, K waves by their nature are long-term phenomena whose impacts take decades to roll their way through society.

This particular K Wave is reversing many of the market dynamics established by the previous “Bigger is Better” one. We’ve begun to deconstruct the gargantuan support system required to service mass markets. Inevitably, there will be pain, and last week’s commentators zeroed in on many of those pain points. But there will also be growth. And the bigger the wave, the bigger the growth. In this case, the same factors I talked about last week – democratization of information, better user experiences, solving the distance problem – are all being driven by technology. As this wave continues, the market will become more efficient. Information asymmetry will be lessened (if not eliminated) and the superstructure of the “middle” will become unnecessary.

A more efficient marketplace means new opportunities. More businesses will start and grow. Previously unimagined sectors of a new economy will emerge. This new economy will be global in scope, but hyperlocal in nature. Pure ingenuity will have a chance to flourish, freed from the constraints of the need for scalability. Once we get through the stumbles inevitable in the transition period, the economy will ramp up for another bull run. But we have to get there first.