Paul Montgomery is a chap down in Geelong, Victoria, Australia - who posted an open letter to me - on OpenID adoption. Paul is someone I’ve known for a while and he actually alerted me ahead of time to this post/open letter coming.

I’m glad to be able to answer Paul’s doubts and deal with head on the challenges we all face when thinking about OpenID.

1. Leading social networks aren’t adopting OpenID. Your fears here are that if the big guys who made promises to support OpenID haven’t and that makes you nervous. I agree that its fucked up and I applaud Chris Messina for putting them on his shitlist. But you shouldn’t be surprised. These are not leaders, but followers - and until they HAVE to do something, they won’t.  Announcing support for OpenID is the epitome of being ‘politically correct’ - but the actual end-user benefits are simply not here - yet. To bleeding edge chaps like me, you and Factory Joe - sure - but no one else cares about these subtle technical victories. But they WILL care about the benefits of OpenID2!

I’ve been yelling for a while that OpenID itself was not enough. But with the release of OpenID2 - NOW we have something that will directly benefit end-users in ways more than just single sign-on. So hang in there dude - let’s circle around back to these ‘big boys’ and get them to announce support for OpenID2 - and THEN lets see what happens!

2. Why would a small network want all these users to come in and flood their intimate network? This is kind of a silly question, but I’ll answer it seriously. Metcalfe’s Law does not apply to all social networks. Many, like yours, are built around the basis of intimacy, of small being a good thing, and that the quality of the people matters more than the quantity. This flies directly into the face of Metcalfe’s Law. But dude - look. NO ONE is gonna wanna hang out in YOUR network. Its as simple as that. Trust humans - they migrate to where they’re wanted, to where they’re welcome, to where they feel comfortable. So if someone finds your network comfortable - then it’s the right place for them - right? How do you determine who’s welcome or not in your network? Their proximity to Geelong? Golfing? Chocolate lover? Gay? Hispanic? By what criteria do you welcome people into your network?

This whole thing has a self fulfilling prophecy aspect to it. What will be will be. Just read danah boyd. You can’t force people to do things they don’t want to do, so I wouldn’t worry about people flooding your network. You should have such problems!

Certainly don’t blame OpenID for it!

3. If you don’t own the database of users, how can you monetize? Well I’m glad to see that Paul is thinking like everyone else here. This is the classic complaint and gets at the core reason why the entire ‘monetization of people‘ approach is handled wrong. You don’t own those people or the database. They come to your network as a BLESSING to you and in exchange for them showing up, you get to benefit from it. Its not the other way around. You don’t own SHIT! YOU get rewarded for providing them a nice cozy place to be a community. They can leave just as quickly and go anywhere they feel like it - as long as it’s NOT you. That’s what happened to Friendster.

So please stop thinking like you own a database of people. That list of people is there so they can come back and re-log-in. Period.

If you’re lucky enough to have people who return - then it’s YOUR job to figure out how to monetize. So please stop whining about that - and get on with innovating and thinking about ways to monetize. But NONE of them has anything to do with OWNING the database of people’s name and emails.

POSTSCRIPT: I was just interviewed by an Italian journalist for an article on monetizing and business models - so this is fresh in my head. Here are some guidelines as to what business models Paul should be thinking about:

- advertising - traditional 20%-40%

- advertising - targeted - 2% to start - could grow as much as 20% of revenues

- sponsorships, special deals - 10% - a logo left up all the time, certain aspects of your network ’sponsored by…….’

- freemium pricing - tiered pricing - go beyond simple subscription models - offer a base product/tool for free that’s built into your network, but then tier it - and give only limited capacity of the tool for free. Then charge $40 for the unlimited capacity version, $100 for extra features and $500 for advanced features. That will end up being 10%-15% of your revenues.

- web services - there are a ton of businesses out there - from travel to eCommerce to timeshare condos to media downloading to storage to SWAG to hard copy to concierge to….. - which would DIE to have access to your people. You simply take a cut of the action. This could lead to 5% of your revenues.

- then there’s a marketplace you set up - where your members can buy and sell things to each other. Simply take a reasonable cut of each transaction (>5%.) This will lead to some good money - maybe even 5% of your revenues.

- how ’bout rewarding folks for doing things? Points systems? Contests? Promotions? Surveys? UGC revenue split? Each of these whacky ideas may or may not be relevant - but the aggregate of them could lead to another 5%-10% of your revenue base. Every little bit counts. You get a cut of every deal that happens.

So where are we at - 80%? So where’s the other 20%? Well I can’t do ALL the thinking for you! For each situation - there are unique opportunities put into context. If you were a medical/health oriented site - I GUARANTEE you there’s some pharmo, health plan, medical outfit out there that would DIE to pay for 100% of your costs and make you rich!

If you were a family oriented site out there - well ever heard of Disney, Universal or NYC? Broadway shows or the latest kid’s album? Lots of people wanna get at your constituents.

Or what about music or movie lovers social network? Think maybe there’s a media company who’s love to buy up all your inventory - for the month of March - during their launch campaign?

You gotta think smart to succeed in today’s marketplace. There’s no easy way out or magic dust that makes you rich. These are all just guidelines - but don’t put all your eggs into one basket. That’s for dam sure!

This entry was posted on Thursday, December 27th, 2007 at 11:32 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.