Transcript of Andreas Weigend

Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Andreas Weigend (www.weigend.com)

Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley

April 2, 2009

Class 2 - Communication: (Part 1 of 2)

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Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 1 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Andreas: Welcome to class 2 of Marketing 2.x. I promised you we would start by reflecting on what traditional marketing has been. I asked you, if you haven’t in any other class yet, to look up on the web the four Ps of traditional marketing. As a hint, no it’s not porn. It is not prostitution. What are the four Ps of traditional marketing?

Pricing – how has that been affected by what we learned in last class, by the social data revolution?

Male: [Cant’ hear]

Andreas: The information asymmetry that used to be the basis of many shops, and if you still go to an airport shop because you forgot your headset, you’re still bound to pay 2x what you would pay at Amazon.com. Or, if you go to your local Radio Shack to pick up something, you probably pay – for instance, I bought a memory card there for about $20 as opposed to $9 at Amazon. But, online, pricing has become very transparent.

For most customers, pricing is not the most important thing. People are not as price sensitive as we used to think, before we actually did online studies.

What’s the second P?

Student: [Cant’ hear]

All right, product – what do you mean by that?

Female: What it is you’re selling and what’s it’s features are and other products with similar features.

Andreas: Okay so it used to be the case that the manufacturer clearly knew the most about the product. Who knows most about the product now? Certainly not the company that makes the product. But, it’s the web. Why? Because people share information about the product because of the social data revolution.

If you want to find out what code to punch into your phone so your caller ID doesn’t get transmitted, would you go to the T-Mobile or AT&T website; probably not. You’re laughing. The other solutions – Google knows more about the product than any individual company does.

And, Google’s incentives are aligned with your incentives, namely, Google wants to show people that information which people will actually want to see, as opposed to carefully crafted marketing information that might be produced online at the company’s website.

We saw that both pricing and product are greatly impacted by the social data revolution. Product also has another dimension in the tradition of the 4 Ps, and that’s in the tradition of market research. Traditionally you had focus groups, you sent out to people, you give them pizza, or whatever you need to feed them so they

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 2 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley actually show up and don’t leave early. Now, there is world of information out there, maybe a hundred million blogs and we just looked at one company called F- Secure, which is a virus company that has about thirty thousand blogs talking about them.

In terms of social data revolution, the market research, the understanding of what people are saying about their product, not only the attributes of the product, again are out there in the world. What’s the third P? Thomas –

Thomas: Promotion

Andreas: Promotion, and what does that mean? I’m getting a promotion? No, that’s something else.

Thomas: It’s efforts to inform people about the product, advertising…

Andreas: What other elements does promotion have?

Male: Advertising

Andreas: Advertising, yes, I heard that twice.

Male: Discounts

Andreas: Discounts, okay – discounts interacts as pricing, so those 4 Ps actually are not [0:04:08.6 unclear] mathematical sense, but they somewhat overlap. Promotions mean that you try to get people’s attention.

The promotions Cotler had in mind; what kind of promotions did he have in mind?

Male: You mean examples of promotions?

Andreas: Yes

Male: Magazine, television, radio…

Andreas: Yeah, so those were promotions that typically were carefully crafted and they almost had no direct feedback loop. The promotions now, are actually much smaller in scale but many more different ones in parallel. One of the first homework assignments was thinking about how you could use Twitter in a business perspective for promotions.

Secondly, you almost have constant feedback. You can constantly adjust the message you are getting across in the promotions. Again, they are hugely impacted by basically zero costs in communication.

What’s the fourth P?

Male: Placement

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 3 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Andreas: Placement – what does that mean? Traditionally it means do I put Pepsi up here and Coke down there or Coke up here and Pepsi down there? No, placement is actually as important as it’s always been, but in the virtual world, placement means that we have infinitely many possibilities. The question of opportunity costs in the physical world, shelf space, is just the same question in the virtual world, namely, what do we show on the screen.

The question of promotion, the question of placement really has been in some ways superseded by the question of relevance. What do I show to a given customer in the given situation at a given point in time?

The situation is important, more important than its past history. Past history is much more important than where he lives, so which zip code we might be sending that newspaper flyer to.

To summarize, the problems of course, of trying to sell stuff to people remain the same. However, due to the dramatic drop in communication prices, due to people being willing to share information about themselves, about products, about their friends, about their purchasing behaviors; the dramatic change due to the social data revolution, those four Ps have actually really changed in meaning.

I would argue that a fifth P needs to be added to it, which is the P for “Platform”. If you think about Facebook, it’s a platform where people interact with each other. If you think about eBay, it’s a platform. Amazon is a platform. Google is a platform. With those platforms, you could say that maybe the local market somewhere serves as a platform, but not really. Those platforms which are also by advertisers, if you think about AdWords, for instance, self-service; that really is the fifth P of advertising, which Cotler didn’t have.

I’ve been on stage twice this year with Cotler and we are actually debating those things. He is a smart guy so it’s not that he believes exactly what he said forty years ago, or whenever he came up with those four things. I think it’s interesting, from our perspective, a much younger perspective, to try to understand how the social data revolution has dramatically changed the Four Ps.

Are there any questions?

Male: Why do you actually want to continue with the same four Ps? If there is really a revolution, you should actually go and try complete new dimensions. Those dimensions were relevant for the way a business was done forty years ago. Trying to stay with the same ones is like trying to take the same things for communism and use them for capitalism. It’s like there is a difference there.

Andreas: That’s right, but I believe the right way of taking people somewhere is you pick them up where they are. I think more of you took some traditional marketing classes where you learned about the four Ps. I think starting and saying these are the old

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 4 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley concepts and how they have changed is better than just telling you about a brave new world without knowing how it relates to other stuff.

Let me give you an example and draw you one picture here. That is the picture of where the communications actually happen. Let me go to this site. It used to be that here is the brand or company and the brand tries to communicate to all the people down there.

That used to be a Super Bowl ad, a newspaper ad, or a TV ad. Now, what’s changing is that brands can actually listen to where the conversations are so they can open up their ears and try to figure out what is happening. That would be an example of listening to social media.

But, where do the conversations actually happen? They don’t happen between the brand and the consumer. They happen between people, us talking about it. Here, is where those conversations happen. Here, this old term of C-to-C, which you probably heard, like eBay ten years ago was a C-to-C business. Yes, the world is C-to-C, but not just selling stuff or buying stuff. It’s the world of C-to-C in terms of people talking to each other.

The example I gave you in the last class about this factor of five or so between trying to do traditional marketing versus simply selling stuff to people who actually have friends who bought this stuff is an example of leveraging the conversations down there.

I want to tell you what we’re doing today. I gave you a quick recap, and as promised, from the perspective of the four Ps; Ted Shelton, who is a friend of mine and the CEO of The Conversation Group, was an executive at Borland beforehand. He is a person I deeply appreciate for his intellectual insights. For me, it’s always a deep treat when we actually have a chance to talk about stuff. He is going to give his perspective and say why marketers care about this social data revolution. Why can’t they carry on their business as they always have?

Then, as a group, we will spend about forty minutes coming up with dimensions of communication systems, synchronist versus asynchronist; feedback; what’s the expectation of the time scale, do we talk about seconds, do we talk about months.

We will then talk about what, of these new dimensions of communication systems, should and could be exploited by marketing, which couldn’t’ be exploited ten years ago when we didn’t have access to them.

Then, I’m going to talk about the value of data for commerce. Data is only worth as much, as I said in the last class, quoting Dave [0:11:35.9 unclear], as much as it influences the decisions people make. We want to drill down a little bit and understand what is the value of data for commerce.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 5 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Then, what are the implications for marketing? Then, we will have about ten minutes where Ted totally surprised me in saying, “Well Andreas, if you’re interested in getting to know this person here, let me just file off a tweet about it.” I said, “No need, I have a housemate. He knows him,” and so on. My housemate still hasn’t gotten back to me yet, but the same morning, Ted had an answer that said, “I hear, Ted Shelton, that you are interested in getting to know me,” from the person I wanted to get to know. We had had our phone call a day afterwards.

So, the sociology of Twitter is Ted’s deep experience of how he and how brands use Twitter, which will hopefully be useful for the homework. Then, in the last five minutes, I will be ready to tell you about what the big project will be for the class. I only want to say that much. I will give you exactly the same project to you as I will give to my class at Stanford.

Facebook volunteered to write a dashboard which will, in real time, track how you’re doing compared with them. We will see whether the MBAs at Berkeley or MBAs at Stanford have a higher chance to do brand marketing. That’s what we’re going to do, today.

I am turning it over to Ted, who actually kindly prepared some slides. You are in marketing here and why should you care? Why should marketers care about the social data revolution? Ted Shelton.

Ted: Thanks Andreas, actually, as an introduction to these slides, I probably should … the microphone. We’re trying to record as well, even though this doesn’t amplify it for you; it’s doing it for a machine.

I want to point out that the name on the slide is different than mine. I’m Ted Shelton. The name on this slide is John Wilshire. John is the head of innovation for a company called PHD, which is an advertising firm in London.

I could have created a slide deck that said the same thing as this does. He’s thinking about the same sorts of things I’m thinking about. He did a very good job of putting together some slides.

I happened to see a colleague of mine send out a little memo on Twitter saying, “There is this really great new slide deck out there by the same guy that I knew [0:13:53.0 unclear]. I went and took a look at it because of that tweet in Twitter. I loved it. I tweeted that I loved it and John Wilshire answered me saying, “I’m so glad you like it. We would love to meet you next time you’re in London.” I’m going to meet him on the 28th of April, when I’m in London next time.

I thought; what better ting to do to show you how to learn more, faster, from your network than to use John’s slide deck, rather than my own. So, this is a talk he gave at an advertising association meeting in London to try to explain what he sees as a practitioner at the leading edge of advertising happening in the marketplace, and why. What he said was it would be great if we could have a time machine and we could

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 6 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley go forward into the future, and see what is going to happen to advertising so we would be smarter about what we’re doing today.

The good news is we can use the time machine to go backwards and forwards in time. We can reflect on what happened in the past and maybe learn something about what’s going to happen in the future.

As this intellectual grounding for why marketers should care about the social data revolution, I would like to talk about the direction in the way in which companies have interacted with their customers, and how those markets function. If you think about the past, I mean by one hundred fifty years ago, free mass media. People engaged in small collections and relationships in local communities in order to exchange information about markets.

If you walked into a marketplace, and there were a couple of different vendors there selling eggs, or selling rugs or whatever they happened to be selling, you might choose who to buy from based upon who your family normally bought from or who your friends bought from, or who somebody you trusted gave as a recommendation. Word of mouth, social networks, referral, and all those things existed in a pre mass-media world.

If you think about that pre-industrial world, think of three stages of pre-industrial, industrial, and network. The underlying argument in this is going to be about how network age is sort of a Back to the Future.

In this first stage of local, face-to-face, everybody works together. There is communication which is in these local pockets, but they are localized. It’s very rare that you get information travelling from one part of Massachusetts to another part of Massachusetts, or Maine, or wherever this happens to be a map of. It’s probably in the UK, since this is a British guy.

All that community was localized, information was localized, and how we engaged with merchants was localized. The merchants engaged with us and only marketed to us locally, and built relationships of trust and value that they created.

Something happened. The Industrial Revolution comes along. It transforms communities. First of all, it creates higher concentrations of people inside of cities so rural communities become urban locations. Factories and mills get bigger and the factory and mill owner need to work [0:16:57.3 unclear] mass production of goods. All these goods can be mass produced. All these things that were produced locally, where a local merchant is making a good, even a bar of soap; I trust a particular guy to make a particular bar of soap for me. All that is now being mass manufactured in centralized places, as long as everything is the same.

There is one bar of soap, Dove, which goes everywhere. We can manufacture, we can mass produce everything very cheaply as long as it’s all the same. Mass media, as well, develops in this model.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 7 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Similarly to a bar of soap or any other good, there is a creator, a production cost for that creation. We duplicate, we ship, and a consumer receives that good. So, what you see happening then is this breakdown of a localized community of information and the dominance of mass media is the way in which information is being shared within communities.

The interesting thing about mass media is that it becomes a one-way communication, rather than what was happening in our local market, of a two-way communication between all the participants in that neighborhood, village, or community.

The challenge then is that it’s all the same. The good thing about it is that it’s all the same. We do have to reflect on the fact that mass media was actually an enormous advantage in many ways over the parochial, even xenophobic kind of behavior in local communities. If you lived in a small community somewhere and somebody came from outside that community, you might say, “That person is different from us. We don’t like them just because they’re different.”

The good thing about mass media is it started taking broader pictures of what it was to be a human being in our age and on our planet, and showed them to a much broader audience, and that local, regional, national, even international perspective began to be something that could be broadcast into the homes of even local communities.

Andreas: Let’s pause for a moment. Try to locate this. Is that good on Guttenberg, who invented the printing press and is responsible for all the trouble we’re in, or is it radio, is it newspapers? What do you think when we talk about this tower in the center broadcasting everywhere?

Male: I think in terms of making people the same or making them more similar because they share similar content is more TV than radio and newspaper. If it’s just in terms of being informed of what’s happening in the world, it was probably newspapers of the last 19th century…

Andreas: When did advertising start?

Ted: If you want to define how advertising evolved, you have to look at what should we call advertising. You could say advertising is simply about promotion. It’s about how do I put a sign up in front of my pub to say we’re now open? That could be a simple form of advertising.

Advertising certainly stretches as far back as signage, which we know goes back to the Roman era. The idea of purchasing placement in a media certainly starts in the 1500’s or 1600’s, when the first papers were being put together. The first papers were all about shipping charts. You could make or lose an enormous amount of money if a ship coming in was going to be delayed or was going to be early with a shipment of spices or whatever the goods were that were coming into a market.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 8 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Venice was one of the first places these shipping charts came out. You could also purchase space in these to promote your goods. It has a very long history of the idea – remember that even in this heyday, this beginning point of mass media that you talk about in the late 19th century; they were still very local phenomenon. In fact, in a city like San Francisco, you might have had a dozen papers. It would have been very diverse. It would have had a very niche audience.

Over the industrial period, there is an enormous economy of scale in centralizing both the cost of creation, reproduction, and distribution. You had families like the Hurst family able to take over cities and control a paper, entirely, in San Francisco.

The interesting thing is that as a result of mass media is the creation of mass consumers. You take the good part about how we’re now taking these broader ideas about society, what it is to be a human being on this planet, spreading these broader ideas, and helping to create a broader sense of a nation, broader sense of a people. You also get this mass message out to the marketplace about what they need to buy. You need a washing machine. You need this new car. You need this particular bar of soap.

Frankly, as marketers, we loved this. You give us a platform, a broadcast tower where we can reach millions and millions of people, get them to all buy our bar of soap, and that’s a fabulous thing. We say, “Buy our stuff,” from that broadcast tower. People would march into the stores and buy our stuff. That was the dream, the beauty, and in effect, the reality of much of the latter half of the 20th century. Mass media worked. “As seen on TV” became, in itself, a brand that showed a product had a high quality. If this company can afford to advertise this product on TV, it must be a good product. Marketers would put that label, “As seen on TV” right on the product packaging.

Community was still a local phenomenon. You didn’t have mass community as a result, you had this context that was mass, but you still had community that behaved locally - people in their church group, in their school group, or in their neighborhood businesses. Then, this revolution came along, that you have all experienced, certainly over the last ten or fifteen years of your lives.

Arguably, the Industrial Revolution is now being supplanted by the Internet Revolution. This is a picture of a fellow named Yochai Benkler. He wrote a very influential book, which I highly recommend, although it’s hard slogging through. It’s very deep stuff. It’s called The Wealth of Networks. He chose the name of that, not coincidentally, with the Wealth of Nations being the model. His argument, much like the arguments made at the beginning of the Industrial Revolution is that there is something fundamentally different that is happening because of technology that is changing the very notions we have about how our society works. We don’t understand all these changes that are going to happen, but as with the Industrial Revolution, where public institutions transformed dramatically, government changed, companies became very different kinds of entities, society changed; all these things are going to happen as this phenomenon of social technology and networks continues to expand.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 9 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley If you think about this production process, there are a few steps in this production process that suddenly changed when instead of needing a million and a half dollar studio to produce music; you can actually do it in your own bedroom. People can produce, duplicate, and distribute online and so all of these intermediary points that separated the creator from the consumer have largely disappeared, arguably going to zero. I can produce music in my bedroom and put it into an online file and reach one person or a million people if it’s good music, without all those intermediaries that had grown up during the industrial era to solve these problems of production costs, duplication costs, and distribution costs.

What does that mean? It means increasingly, we are getting back to a world in which these creators and the consumers are being reconnected. Those networks that we thought about in the pre-industrial age are coming back, but now in a way that is disconnected from the limitations of physical geography and time. The network mediates for those differences.

Instead of having a community that is merely the result of the accident of people living in a particular geography at a particular time, you can now create this extraordinarily diverse, distributed community of people which dynamically comes together or falls apart depending on need and interest and time.

Anything can be the subject of the community. Anyone can be the member of the community and it can happen anywhere or in fact, everywhere. Clay Shirky, another terrific author, professor at NYU, and author of a book called Here Comes Everybody, which is also a great book and much easier reading. I highly recommend it as well. He said, “We haven’t had all the groups we’ve wanted, we’ve simply had all the groups we could afford.”

It’s not that people haven’t wanted to have these communities of interest, but there was no way of doing it. There was no way of saying that a skateboarder in Sri Lanka and a skateboarder in Los Angeles could actually connect and compare notes, and share videos of what they’re doing. There was no way of doing it before. Now it is available. Once it’s available, we recognize, “Hey, I always wanted that, as a skateboarder in Los Angeles. I always wanted to connect with the really cool people who care about the kind of skateboarding that I do, that just happen to be physically, or from a time perspective, disparate from where I am.”

Now what happens when those companies are saying, “Hey buyers, stuff…” Guess what’ no one is listening anymore. They’re all talking to each other. This is why we, as marketers, fundamentally have to care about what’s happening. The old methodology of how we got our messages to the marketplace has failed because the audience has said, “Hey, that’s not as interesting anymore as talking to each other. I now have something that I want to pay more attention to.” That’s very frustrating for us.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 10 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley We have to actually figure out how to change our methodology, how to achieve the objectives that we always had, but now there is actually a new way of doing it. We can connect people with those companies.

We’re all working for companies; you’re all working for companies. You need to start thinking, instead of our company broadcasting to customers, how do we connect with customers? How do you replace the model of interrupt with the model of connection so that this connection allows you, as a company and you as an employee of a company – because companies are really made up of people – how does that allow you to start connecting so that your company, right now, is already a group of people that has a particular idea, has a vision, and you’re not connected with all those people you want to have inspired by and believing in what you’re doing. You can be if you create the right context for the interaction. Think of it as relevance.

You have to figure out how are you relevant to this community so you are invited to be a participant. You no longer simply purchase space on the airwaves in order to interrupt people in what they’re doing to make them hear your message. You now have to earn their respect and awareness by being relevant to them and creating a real connection to them.

Andreas: That is a very important point. Who of you, at the beginning of class, thought that it is about finding smarter ways, more subtle ways of interrupting people from what they’re doing to get the messages to them? We’ve all gotten pretty good in avoiding those messages getting to us.

From the interrupt based, there are actually two steps. The first step is to understand the context or what I call the situation that I’m in. That’s better because the cost of interrupt varies dramatically what I’m doing. If I’m really concentrating on writing a paper, the cost is much higher than if I’m goofing off anyway.

The second step of that is what Ted calls the connection. Other people have different words for that, but I think connection is good for the social aspect of it. To truly connect not the brand with the consumer, but the consumer with other consumers who have similar problems. That’s a dramatic shift that was simply enabled by the cost of communication going to zero.

Male: I have to argue that when you say cost of communication went to zero, it doesn’t mean the physical cost went to zero. The cost of time that people put into that is not a monetary cost but it’s a very significant transaction cost.

Andreas: Who carries that cost? It is not the cost carried by the sender. It’s not the cost carried by the one who buys the spot on the Super Bowl. The cost is the one carried by the recipient. I totally agree with you. Our models of what the cost of communication are, if we just look at how much it costs us to push the message out, the

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 11 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley CPM, the cost per a thousand impressions, that’s negligible compared to the cost to the recipient.

Ted: But, it is a totally reasonable point that you are making, which is you can’t assume that this is zero cost. We’re not simply saying, “Oh, we don’t need marketers anymore.” We’re not saying there is zero cost in communicating with a market. We are saying that the place that the company is going to invest its dollars changes from shooting a video, putting it on television, and waiting for the phone to ring, to actually enabling all of their employees to engage with the market. In engaging with that market, if you have a good product and you have a good company, you are enabling that market to also be your voice.

If you go back to the example of how do you fix the problem with your cell phone that Andreas gave at the top of the class, increasingly, it is your customers who can be your most vocal advocates and supporters, and who can solve customer service problems, who can promote your product, and who can help be the next generation of product development people in even telling you what you need to do to fix the product.

Male: The problem I have with that; I agree, but the core, consistent cost, if it’s more expensive that all the people putting all their time that before they didn’t have to put. Now, someone else is paying for that, now they’re paying it all the time. How often have you been frustrated with trying to get exactly that small solution for the problem, you spent three hours trying to find that software solution. If someone, at that time, would say, “I paid $15 and they got a solution,” so let’s say better customer service paid by the company, I might do that.

I’m saying that the whole system only works out if the total system costs ends up being smaller. If it actually increases in the long term, people will go back to the old models because it was very efficient to have someone think for you and actually make the message for you. You didn’t have to search for the message. Now, you have to think for the message. You have to think…

Ted: You’re leaving one piece of the calculation out, which is effectiveness. One of the challenges with the old model is not just its cost, but also its cost with respect to how effective it is in getting people to actually respond to your message. If you’re putting those advertisements on the television channel, and your phone is not ringing after running the ads, as it used to ring – we’ve been through this over and over with advertisers.

Let me tell you an interesting story about a large family dining chain. The literally spend $50 million a year in television advertising. They do an excellent job of tracking the effectiveness of that advertising, and effectiveness against dollars spent. They say, “If I spend $1, how many people come in the door and buy that special meal I was promoting?” They can show you a direct line of decline in effectiveness from the 1980’s, from before the Internet. Part of it is about channel proliferation. The niches in the

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 12 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley marketplace are becoming much greater, and yet the cost to produce the content is still high so the cost to advertise is still high. My dollars per impression are getting higher.

Then over the last ten years, what they’ve seen is that the effectiveness of that advertising is becoming significantly more steeply worse because people no longer believe, behave, and act on the messages they receive in this broadcast model.

I encourage you to take a look at something called the Edelman Trust Barometer. You can look it up on Google. They do this report every year. The tenth one just came out. They do a broad-based survey. It’s only in the US; unfortunately it isn’t a global study. It is a US study of the trust factor that consumers have in a variety of different sources of information. They found that in 2008, consumers’ interest and belief in advertising had declined to only 13% of the population. Only 13% of people seeing your ad have any reason to believe you, as a company, at all.

One of the reasons for that decline, Edelman speculates, is that there are so many other sources of information available about the company. Why should I believe what a company, which clearly has a vested interest in telling me something, why should I believe what they have to say to me, instead of what my peer has to say to me about that company or product? Google makes it perfectly easy to find.

Think about the change in the way in which authority works in an information space. When you only have broadcast media the source of authority is the programmer who is controlling what goes through that pipe. We believe in NBC. We believe in CBS. We put our trust in those brands to give us honest, truthful information, and by extension the kinds of advertisement that comes through it as well is thought to be trusted and useful.

Google has a completely different model. What Google says is important and trustworthy is the stuff we all link to and read. The more it’s linked to and read, and it could be anybody that wrote it, that becomes the thing that’s the top. This whole notion of authority and what people are reading and believing in is entirely transformed by this technology.

Male: So you’re saying that [0:35:38.1 attention] is higher and this is a new way of connecting that’s going to be a lot more informed, create value where there wasn’t. Why do you say that the people that think it’s just the shiny new toy and that the single… is actually a lot worse and that in terms of effectiveness, you might be seeing a new, cool gadget that is great. Let’s see how it lives through its first few cycles. It hasn’t been seen [0:36:05.8 unclear] cycle, yet, to really determine that this is the way people will connect. The old broadcast media model will not die and it will all be interconnected in social…

Ted: I don’t think that this is a challenge. I think the old ways of doing things are still working, albeit with all the studies that are out there, less effectively than they’ve worked in the past. The new ways are just growing in effectiveness. I think there

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 13 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley are a bunch of studies out there that are also useful to look at that show how much more effective they are increasingly being. There are some great case studies.

Cadbury just did a tremendous campaign where they ran it on television, and they ran it online. They were able to look at the effectiveness, both in terms of how many engagements they got, how many views they go online versus on the media, per dollar spent. This is an amazing study. I happened to put it on the website for everyone to look at.

They also looked at what the follow through was and how it affected sales. I think there is an increasing set of studies that are showing that these new techniques are becoming more effective. I think you’re right; there is a period here where there is a gap. It’s easy for people who are operating in the old model to say, “The old stuff I’m doing is still working and the new stuff that I’m doing isn’t working very well. Therefore, I might suggest to you that we’re just in a little dip. It’s going to go up again. This old stuff is going to start working, again.”

That’s why I wanted to give you that intellectual framework of thinking about how communities form and how we, as individuals – think of yourself as a customer of products. Who do you trust and do you believe advertising? Put yourself in that framework and say, “Well, how is my pattern of buying going to be affected if I can go to Google and have instant information that is from trusted sources, which is to say my peers; is that going to change how I think?”

I absolutely agree with you; you could wait three or five or ten years to see if it plays out or not, but I think a lot of companies that do wait will be beaten by their competition that jumps on this.

Male: I’m not arguing for people waiting. I’m just trying to figure out that I’m actually going to stop trusting people that I trust. I realize myself how impressionable I am. I’m not any better at filtering trust than the editors are. I am just as able to believe … party line as the paid actor is in the commercial. … another channel for advertisers…

Andreas: I have two remarks on this. One is that by having persistent ID, and Facebook Connect, which came out a couple of weeks ago is actually a very good example towards a step in this direction. Who you are is at stake if you abuse the relationship you have with others. By having persistent ID, is one step in the direction that people will be very careful as to what they are recommending to others.

The other remark is towards what you said. I want to ask; who thinks that going back to the old ways are a possibility, at all? Okay, who thinks no way that we would go back to those old days where we wait for hours on call centers and then have somebody who hardly speaks English and says, “Hello?” Who thinks there is no way?

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 14 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley Male: I think there is absolutely no way because of what you mentioned earlier; information is much more … unless we were to somehow go back to a blind state, I don’t see how…. If anything, it might be a hybrid of the two models, but I cannot see how it would go back.

Andreas: So, what we see emerging is a lot of concierge services. Today, since we seem to be recommending really good books, I think one of the best books I know is Shoshana Zuboff’s book called The Support Economy. Interestingly, Benkler, Clay Shirky, Shoshana, myself, we all have the same agent – Monitor Talent. It’s sort of the same kind of people reinforcing what each other is thinking. I really think Shoshana’s stuff is absolutely great.

What we really need is to address this deep support need that society has. Norberto, I agree with you. There is a need for paying somebody $15 or maybe $150 for fixing my DNS problem at home. By the way, if anybody knows how to fix DNS problem, $100 and if my router works afterwards. It is done in a different way.

For instance, each of these classes is being transcribed. I put them up on the web. I have never met the person. Her name is Tamara. She lives in Israel. I upload to mp3 at the end of class, and magically, a couple of days later, there is the transcript of the class. That needs this global village that we have.

Just to quote one more person in this world who is actually very busy writing his next book, Kevin Kelly made this wonderful statement that “We live in this amazing time where the world actually got connected. That’s only happening once in the history of Earth.”

I think there is no way of getting back because once you have seen and had the efficiencies, this networked digital economy we live in, to go back [0:41:52.4 unclear] a platform where new services are going to be built and communication is the heart. This was my smooth transition here to the next point.

What are the dimensions of communications systems? I want to just throw out a few things to you here, which would be:

. Is it structured or unstructured communication? Structured means that you fill out some form. Unstructured is that you tweet something, “Hey, who could fix my DNS problem,” and see who shows up at my door.

. Is it symmetrical communication like I confirm you on Facebook, you confirm me, and then we can message each other? Or, is it asymmetrical communication where I shoot off something on Twitter and whoever wants to pick it up picks it up?

. Is what I see ordered by relevance or by some attempt towards relevance, like Mr. Tweet does it, or is it purely chronological? (Side remark) I think what we see on Facebook, and this my own hypothesis, becoming twitterized by giving up on the hope of being relevant and succumbing to just chronological probably indicates to me that Facebook wants to go

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. Synchronist versus asynchronist communication – synchronist means when we are on the phone, I expect that after a few seconds at least I will hear you, otherwise the call probably got dropped. Asynchronist is I send you something and you answer it whenever you feel like it. It’s a continuum. IM, you might get back to your computer and it’s sort of semi- synchronist, but you might have been away for an hour and messages have piled up.

. In these communication dimensions, what is the expectation that what you produce will be read? I hate nothing more than people asking me, “Did you read my latest blog entry?” I have no fricking idea. How would I know whether I read your latest blog entry? Don’t have an expectation of me reading it.

. Searchability is very interesting. Do we expect that things are searchable, like Twitter is, or do we expect that things are not searchable, like Facebook is not searchable?

. Time scales – are we talking seconds or weeks?

. The move from private to public.

. Finally, what is the chunk size of communication pieces? Is it that deeply thought through, many times rewritten love letter or just a short message or a quick tweet?

Those are some dimension I just came up with when we spoke on the phone. You wanted to make the point of persistence, presence, and scope, I think.

Ted: Sure, I think the point of talking about all these dimensions of communication is if you are going to say, as a marketer now, that you have to create a connection with your market; you need to think through what are the different technologies that are relevant for you, depending upon what your purposes are for connecting with that market. In thinking those through, there are a variety of different technologies that you can map into this communications space that are solving different problems.

The three that I’ve been talking with my clients about are:

. The idea of persistence. Is the message that you’re putting out into the marketplace only of very ephemeral value? There is a sale right now, blue light special. Or is it a message that has a long-lasting value to the marketplace. That’s one dimension.

Transcript by Tamara Bentzur, http://outsourcetranscriptionservices.com/ Page 16 http://www.weigend.com/files/teaching/haas/2009/recordings/audio/weigend_haas2009_2communication-1_2009.04.02.doc Transcript of Andreas Weigend Marketing 2.x: The Social Data Revolution MBA 267, Spring 2009-B Haas School of Business, University of California at Berkeley . Another dimension is, is this a message for a scope of people? Is it a message you are trying to get to a large number of people, or is it a small number of people?

. The third one is about presence. Does it matter that you’re there in person or is it just as good to be distant in space or time from when the message was happening?

You start looking at Twitter and Facebook, and even email and certainly blogs and all these other methods that are being developed in the digital space. They are recapitulating a set of human behaviors we have in the real world. We stand in line at the coffee shop or we stand at the water cooler, or we write a book, or we have a phone call; all these behaviors that we have that are a part of the human communications methods are being built now in the online technologies.

I think Twitter is an example which Andreas has up here, which is a very interesting example of an experiment that is exploring, online, one of these spaces that we really understand well in the fiscal space.

Andreas: Twitter is a wonderful example where different people really use it for different things. At 4:00 or 5:00 this morning, when I realized questions like what is the basic law in this country, I had no idea about it. This morning, I passed my civics exam that you need to take if you want to become a US citizen. That was very ephemeral. People asked me, “Did you pass it?” I could tweet them back and say, “Yes, I did.”

Other things are sometime quotes I hear, which are much more persistent. A friend of mine asked her, “Where is home?” She said, “Home is where your charger is.” You really see this very different space of different dimensions.

For the next ten minutes, I want to give you time to think what is missing. We just threw this up. We talked on the phone maybe for ten minutes where we dropped this stuff in here. There is much more. I had a very rich table in my class at the iSchool last fall. Don’t look it up on the web. Think about what are the dimensions of communication? What are the axes? What are the attributes of communication actions?

I like to do very low overhead. If you don’t mind talking to your neighbor or the three people sitting at one desk. Take ten minutes. At 3:11, according to that clock, we will start collecting stuff from you and I’ll just type up those other dimensions. We will then start thinking about why are these communication dimensions [0:48:46.8 unclear]? What are the untapped white spaces people have not been thinking about, and then we’ll move towards the data that is being created in that communication.

Instead of break, you get a break from Ted and me talking. In the break, I expect you to talk to each other. If you need to run to the bathroom, run to the bathroom. In ten minutes, 3:11, we are going to complement the list which is up here. Are there any questions? All right. Talk to your neighbor. If you have two of them; the more the merrier.

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