Author and consultant Doc Searls writes in a post memorializing Givotovsky that "Every encounter with Nick was engaging and mind-sharpening." London entrepreneur, Ian Henderson, offers the following quote from Givotovsky, exemplifying his contribution to the digital rights conversation.

There are indeed technologists fully qualified to architect the infrastructure to enable a better, more equitable, reciprocal, transparent and accountable digital realm, and they have to a large extent already built the tools and system. Now, the application of that prospective infrastructure to systems and services with the potential to change "the digital deal" from the user-centric perspective is what's needed, and I hope, what's next.

Going forward, the formulation, creation and assertion of binding identity rights agreements in the context of "leverage", that in turn drives change enabled in the market by market forces, is the most pragmatic, short path to something better than a-shrug-a-click-and-a-sigh privacy statements.

It's exactly the implementation of such use cases to which I think the most beneficial and productive (though not always the most immediately profitable) effort can, and should be devoted. We all need a better, fairer, more accountable and credible digital deal. If we are to be "digital citizens" should we not also know the real "digital deal"?

Givotovsky leaves behind a wife and two children.

Anybody who criticizes Facebook's financial results gets accused of being small-minded, of missing the point, of (gasp!) "not getting it." In digerati circles, not getting it is like having body odor. Facebook is changing the world, they say. It is a new form of communication, akin to the printing press. Once you get to scale, profits always follow. Google created a service without knowing how to monetize it.

In fact, far too much money has been invested (in both Facebook and hundreds of "me too" ventures) based on that one premise, that "Google created a service without knowing how to monetize it." The statement is true. If it had not devised the AdWords revenue model, Google would perhaps have sold some kind of enterprise search technology to Fortune 500 companies and rented banner ads on its home page. With AdWords, it found the perfect native revenue model for search, meeting two contradictory needs at the same time:

1. Do not irritate or interrupt the user, and even occasionally add value for the user.
2. Provide a compelling value proposition to paying customers.

The problem is that Facebook does not seem to have a clue how to do that. Google did not wait 6 years to unveil AdWords, and when it did unveil it, revenue and profit took off like a rocket. Facebook keeps trying. But to date, its attempts look weak and subject to diminishing returns.

There is a world of difference between increasing returns (what Google gets) and diminishing returns (what Facebook gets with its current strategy). That one-word difference equals billions of dollars.

Email Permission Marketing 2.0 Won't Cut It

At Federated Media's Conversational Marketing Summit in New York a few weeks ago, Mike Hoefflinger, Director of Product Marketing at Facebook, gave a talk titled:

"Adventures in the Funnel: Awareness, Consideration, and Intent in Media that is Social
Facebook's new director of product marketing presents his case for why advertising must engage, rather than exhort."

In a conference full of great case studies, this was a weak presentation. It sounded like Email Permission Marketing 2.0. Yes, email is all spammed out. Yes, every trick in the SEO/SEM book has been tried. And "tradigital", as social media mavens call it, looks old and tired. But Facebook's revolutionary alternative is to allow consumers to invite brands to communicate with them, like we used to invite companies to send us emails. That would get over-used and spammy in a heartbeat. Highly innovative brands would do well, as they always do in a new medium, but the law of diminishing returns would apply. By the time this model scaled, and it would have to if Facebook wants to move the revenue needle, users will have switched off in droves.

These are the diminishing returns. The more the model scales, the more it will irritate users, and the more users will switch off, and the sooner growth will slow down and reverse. As with email, Facebook can "make up for this with volume." But unlike with email, which is virtually free, Facebook has to pay money to serve each user.

Sorry, "Coca-Cola wants to be your friend" is in no way an enduring revenue model. If it sounds phony, maybe that is because it is phony.

The one lesson from social media marketing is that authenticity matters. What no one has shown -- and methinks this would be impossible -- is how to scale authenticity.

This is where behavioral marketing supposedly comes in. Wired calls this the "third rail of Internet marketing." Back in March 2008, we wrote about the toxic mix of legislation and user backlash that hinders behavioral marketing. Or, as Wired puts it, "As the Beacon debacle showed, there is a fine line between 'targeted and useful' and 'creepy and stalkerish' -- and so far, not enough advertisers have been willing to walk that line."

Facebook Should Be Genuinely Radical

Facebook talks a great game about helping the world to communicate. It tries to sound like a group of benevolent revolutionaries. But then it turns to really old-fashioned tools to make money. Its basic message to marketers seems to be, "We have 'em locked in. Yep, Google can't see them, so we are the only way to get to them. And not only that, we can tell you what every one of them is doing and saying right now. Step right up, folks!"

The one thing that Facebook has on its side is trust. Users trust the company with their real identities. That is massive. Break that trust and bye-bye.

If it were really radical, Facebook would use that trust to good advantage and really turn the tables. It could show users how to do better business with big companies and with each other. That would be radical. Facebook could create a revolution, do good, and make billions in the process.

This is where I move from easy (critiquing) to hard (suggesting an alternative).

To be revolutionary, to disrupt a market, be prepared "to be misunderstood for long periods of time." That is Jeff Bezos speaking. Or, to quote Mahatma Gandhi, "First they ignore you, then they ridicule you, then they fight you, then you win."

One revolutionary who has been banging his drum for over a decade is Doc Searls. He became famous as one of the authors of The Clue Train Manifesto. Ten years ago, those authors heralded "The End of Business as Usual." Eerily prescient, they spoke of social media before it existed. Now that social media has arrived and is everywhere, they may be disappointed to see that business is very much as usual. They are seeing that when 300 million people get together to communicate, the end result is (drum roll, please)...

"Coca-Cola wants to be your friend."

For many years, Doc Searls has been promoting a radical alternative that he calls vendor relationship management (VRM). In simple terms, it the inverse of CRM. We first wrote about it here back in October 2007; its Wikipedia entry is here.

VRM is a wonderful idea that has largely been ignored, despite a passionate and highly talented set of true believers. It has limited traction, but hasn't seen the breakthrough it deserves.

Mark Zuckerberg, meet Doc Searls. No fee for the introduction, please. Do you two know each other? Are you already working something out?

VRM has suffered from sounding a tad academic. Proponents have not been able to show its relevance to real consumer needs. But relevant it is, particularly to three types of consumer-facing companies. I call them "the three horsemen of the consumer-clypse":

• Phone companies,
• Health insurance companies,
• Credit card companies.

I know, I know: there should be four horsemen. But these are the only three that come to mind.

These are companies that:

1. Have services we cannot live without in a modern consumer society,
2. Nickel and dime us and tie us up in knots because of the simple reality that a big company can out-negotiate the individual consumer.

Or, as the Beatles put it, more eloquently:

"You're holding me down,
Burning me round,
Filling me up with the rules."

The VRM model says, "I, the consumer, will tell you, the vendor, the terms under which I am willing to buy your product or service." A lovely idea. Consumers who have felt burned for decades would love it. It would do particularly well right now, when times are tough, and particularly in emerging markets where Facebook is growing and in which traditional consumer marketers (i.e. US marketers) are not interested because the consumers there are not rich enough.

Would phone, health insurance, and credit card companies love VRM? No, they would hate it, and resist it in every possible way... until, that is, they are faced with 300 million Facebook users all saying, "My way or the highway." Then those companies will see things their way. It's called clout.

The terms don't have to be outrageous. Companies have to make money, after all. If the price is genuinely too low, they won't play. This is less about the base price than about the nickel and diming pettifogging rules that you supposedly "agreed to when you clicked on that form."

In fact, the terms should be such that you would accept them the other way around, in which case they could even be used for peer-to-peer business as well. If a bank wouldn't loan money on those terms, would any peer from your network do so instead?

The irresistible force is personalization. This is the key to productivity. Personalization technology cuts through the clutter and saves time. The firm that delivers personalized content sits at the top of the attention economy food chain; all other content is “drive-by commodity”. Personalization leads to relevancy in advertising; and loyal customers.

The immovable force is privacy. You cannot do personalization effectively without knowing an awful lot of information about an enormous number of people. The privacy backlash is building. Today it is only techies who are aware of the issue and where it is headed, but when mainstream users get spooked by a few more high profile cases, we will see consumer backlash and then, with politicians on the bandwagon, more regulation.

This will make a loud noise and will be messy; and in that mess will be big opportunities for entrepreneurs. VRM (Vendor relationship Management) may be a key part of this, which we'll explore in this post.

Photo: Doc Searls

People just got fed up with intrusive marketing. However, traditional direct mail will seem merely annoying compared to the intrusiveness of pitches that will seem to know precisely who I am, what I did yesterday and so on.

If there is any justification for that $15bn Facebook valuation (I don’t think there is, but that’s another story) it has to be based on the fact that the advertiser can know so much about you and all your friends, so that they can target incredibly precisely.

In the glorious world being presented by technologists, personalization will be so precise and so useful that nobody will question the privacy invasion. Yeah right -- that may be true by the time we get to Version 3.1. But well before then, we will get enough examples that are almost exactly right but wrong in some crazy, chaotic way, that it spooks and offends enough people to set the Blogosphere on fire. Then MSM will pick up on the story and then politicians and regulators will jump on board.

VRM: The Next Big Opportunity?

Yes, I know, the Attention Economy guys have been banging on about this for a long time and it all seems somewhat theoretical. The basic idea - that data about me is my data and I should be able to control it and benefit from who has access to it - is sound and resonates with people at a gut level. The problem is that the proponents have not yet come up with an alternative model that works in practice. Beyond a few people who live online, seeing the stream of stuff we look at online is about as interesting as watching paint dry. I once looked at my Google search history and it was “ok, now what?”.

There has to be a “show me the money” angle; either in cash, or more likely in productivity and cost savings. The model of paying people specifically to look at advertising is likely to catch lower income people with time on their hands - not the ideal target for advertisers.

It has been interesting to watch the thinking evolve:

1. CRM. That’s good, we can keep track of our interactions with customers.

2. One to One Marketing. Turned out to be a mirage. Mass marketers do segmentation. Genuine mass customization is years away. The front end for that is not hard, the back end is really, really tough and involves massive enterprise change.

3. Attention Economy. The basic issue around supply and demand (supply of content is exploding, demand is relatively static) is sound. Try explaining to somebody quite how this is different from “eyeballs” and what it means to them. Eyes tend to glaze over.

4. Intention Economy. Inferring Intention is why Google is valued at $200 billion. The trouble for the rest of us is: if Google has search all wrapped up, what is left as an opportunity?

Photo: christophercarfi

5. Vendor Relationship Management. Doc Searls, who’s thinking evolved through Attention and Intention, is leading the charge on this. To quote their front page:

“VRM, or Vendor Relationship Management, is the reciprocal of CRM or Customer Relationship Management. It provides customers with tools for engaging with vendors in ways that work for both parties.

CRM systems until now have borne the full burden of relating with customers. VRM will provide customers with the means to bear some of that weight, and to help make markets work for both vendors and customers ‚Äî in ways that don’t require the former to “lock in” the latter.

The goal of VRM is to improve the relationship between Demand and Supply by providing new and better ways for the former to relate to the latter. In a larger sense, VRM immodestly intends to improve markets and their mechanisms by equipping customers to be independent leaders and not just captive followers in their relationships with vendors and other parties on the supply side of the marketplace.

For VRM to work, vendors must have reason to value it, and customers must have reasons to invest the necessary time, effort and attention to making it work. Providing those reasons to both sides is the primary challenge for VRM.”

VRM is still at the conceptual, evangelizing phase. It has yet to be built into a real service that offers real value to both buyers and sellers. There is a real entrepreneurial opportunity here.

Get Ready for the Privacy Backlash

In some respects, this looks like the old idea of “Infomediaries” being recycled. That concept was first raised by John Hagel in 1997 in the Harvard Business Review. Recycling is a good thing. Sometimes the timing simply has to be right.

The timing will be perfect when the privacy backlash really hits. A smart entrepreneur can get ready in anticipation of that. Of course it may never happen, but betting against buyer power in the Internet age is seldom smart.

One key to VRM is ID authentication and that is a tricky subject. It is technically fairly simple. All you need is something like the numbered bank account system which records that ID #1234567 is actually Joe Q Public, male, date of birth, zip code and other details that Joe Q Public controls. The linkage between the two has to be totally secure. The bigger issue is who can be trusted as that Infomediary?

For people to feel genuinely comfortable with privacy, personal data must be a) decentralized (a P2P model or federated servers) b) as secure as possible from hackers. With the number of high profile cases already public, people won’t trust a central database even if the provider has all the best intentions regarding privacy; they can change their mind or their data can be stolen.

The other key is order aggregation. Much as we like to see ourselves as the center of the universe, sellers need volume and are not set up to manage a stream of customized orders. It's a lovely idea but it won’t happen, because the seller’s systems are not ready.

Order aggregation is also not new as an idea. Again the timing might be right as companies tear down their command and control systems and everything moves to a retail model. What is the Purchasing Department (who loves ya Baby?) other than an order aggregator?

Conclusion

This may play out first in B2B and professional markets before it happens in the broad consumer market, for the simple reason that transaction value per individual is higher.

I like VRM as a catchphrase. It is dead simple to understand. It is intuitively appealing to people. Can we say Vroom?

What do you think? Is VRM a viable model? Where could it play out first? What are the alternative models that can combine the benefits of both personalization and privacy?