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The madness of e-crowds

February 06, 2007

In a piece about "the madness of e-crowds" at FT.com, Thomas Hazlett argues that the "hype" about user-generated content is obscuring a bigger and contrary trend: that proprietary content and closed databases are becoming ever more valuable. "Deep-pocketed customers" are happy to pay "fat fees for specialised content of keen interest," he says, and closed systems like iPod/iTunes and gaming consoles are minting money. He warns that "our buzz-coloured shades block out key drivers of innovation":

Take wireless. While 2.5bn people were subscribing to mobile networks, the tech spotlight was on … WiFi. While a handy way to make a DSL connection cordless, the disruptive technology claims – that the exclusive rights used for wide area cellular networks were now eclipsed by unlicensed spectrum governed by power limits and regulatory standards – were wrong. Not many folks dropping their mobile subscription to talk from their “hotspot.”

I don't buy his whole argument. As examples of the increasing value of proprietary information, he points to the hefty fees charged by "Gartner, Forrester, Yankee Group, [and] IDC" for research reports. A good argument could also be made that those fees are threatened by the greater availability of free information on the Net (and the greater ability to automatically aggregate and analyze that information). Still, he does a good job of putting some of today's more excited claims into context:

We’ve surfed these waves before. The “user-generated content” business model may have its own My Space page, but it dates to the telephone network of Alexander Graham Bell. “Club goods” allow individuals to gain from cooperative efforts, a standard paradigm in economic theory. Many “commons” sprouting up in the New Economy, where individuals share resources and reap the rewards of teamwork, produce value. But they have some trillions of dollars in productive enterprise to go before they eclipse the workhouse “commons” of the modern economy: the corporation.


Mr. Hazlett is simply saying that he believes the hype of Web 2.0 is overblown. In his final paragraph he states:

"The point is not that “closed” beats “open,” but that capitalism accommodates both. Rules need not be changed to embrace the revolution. Markets thrust revolutions upon us, boldly and magnificently, far more often than we care to remember."

Its hard to argue with this point, but I'm not sure what the point really was. Was it about changing tax law or economic incentives? If it was, I missed it, but it was implied in his close.

Whatever, the point raised about technology analyst firms proving the value of proprietary information is pretty far off the mark. These firms exist mostly as marketing vehicles for the vendors that purchase their services. Yes, they do offer some intelligence, but its not as proprietary as you might think as much of the data comes from interviews and surveys with the client base. It's a bit inbred.

So if whatever he was arguing for or against needs support for justification, I'd have to say he used the wrong example and the argument - whatever it was - was weakened.

Posted by: MarcFarley [TypeKey Profile Page] at February 6, 2007 12:21 PM

>>Rules need not be changed to embrace the revolution.

>>Its hard to argue with this point, but I'm not sure what the point really was.

The Rules of business don't change even though its a social revolution. Money Talks and the "Communities of User-Generated Content" walk...

Posted by: spinchange [TypeKey Profile Page] at February 6, 2007 03:39 PM

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