Wikipedia is nearly infinitely more flexible and up-to-date than its precedessors–the multi-volume encyclopedias. Yet, still, here is just one example of how it refused to accept new knowledge because it was stuck on looking for validation from the very same backward world of paper.

As for whether 2010 will be the year for social commerce, I’m not sure. I think 2009 really accelerated the social advertising trend. Some of my posts are here.

Social commerce still has a ways to go. I named this as a key e-commerce 2.0 trend back in 2006 and didn’t explicitly distinguish it from social advertising. I should have.

Today, we’re adding a fifth principle that clarifies a specific use case that we feel is particularly damaging to the user experience: promotions that include hidden renewals without specific opt-in will not be permitted. Because it’s our belief opt-out offers are misleading and do not have the best interests of the users in mind, we will be updating our Terms of Use this week to better clarify this for users and developers.

via MySpace Says Zero Tolerance For App Scams, Changes Terms Of Use

There is a simple principle at work here. Visibility is key. There are many shady things quietly going on on the Net today.  Once someone shines a big, bright light it becomes harder to hide. Everything starts with visibility.

An interesting twist to the model comes when you combine it with social incentives. The latest arrival (I saw the news in PaidContent today) is ArcheType Media / SocialVibe. They let brands sponsor your social network profile. Here is an example (on their site and on MySpace). The bait is doing good and getting goods.

Max’s first post covers the launching of a social developer platform with ten common-sense rules. (My only question is: why always ten rules?) Two key takeaways:

• A platform will only succeed if it makes its developers successful. I wholeheartedly agree and hence my Ecosystem Test.
• Be humble, open and embracing of the developer community. That’s how we built the developer community at Allaire. It was and still is, one of ColdFusion‘s greatest assets to this day.

The second post, really an essay, goes deeper into developer incentives in social networking platforms starting with the hypothesis that “designing a social platform is in some ways similar to designing a competitive multi-player game.” Max offers a Darwinistic/behavioral view of ecosystem management which makes sense in a social environment where multiple developers/apps compete for the attention of consumers.

Perhaps because of the Slide perspective, the incentive analysis is primarily focused on valuable distribution.

It’s worth pointing out that ultimately, until non-advertising business models are devised for social applications (and probably even after they are) valuable distribution (reach + frequency) is going to be the main underlying goal for all developers, commercial and otherwise.

My take is that non-advertising business models are just around the corner. The key is social advertising/social commerce where one is leveraging the distribution power of millions of consumers. There the developer controls a social platform puts in place are somewhat less important.

Over the holidays, one of the comments to the post struck me as needing to be raised to the top level. It comes from Vladimir Dimitroff, a London-based friend of mine with a long career in figuring out how to best develop customer and stakeholder relationships. Below is the full text of his comment.

Great post! In a drill-down, you can add to your thinking the multiple dimensions of consumer participation (isn’t it time we stop calling them consumers? 

- Consumer as communication channel: viral in its purest form just carries over a many to many channel an essentially one to many message from a business to its audience.

- Consumer as message author: recommendations and referrals are where the ‘consumer’ is already an ‘employee’ of the business, effectively working for the Marketing department and generating the message in addition to carrying it.

- Consumer as a transaction participant: where the business has found a mechanism to engage the consumer in more than just passing a message, in ‘closing the sale’ (one more hat for our poor ’sumer – now he also works in the Sales department), processes orders and (why not) takes PayPal payments.

- Consumer as co-creator of the product: from participation in product design R&D with feedback, ideas and recommendations, to UGC, particularly where the ‘product’ is the message he spreads. Two more jobs: in the R&D and in the Production department of our business.

- Finally, consumer as Investor: already an insider of our business, he confidently buys our stock (and recommends that, too). Clever companies find ways to engage them even better in the share ownership through dedicated schemes. (I think I coined the ‘investomer‘ word back in ‘98-99, but can’t be sure, I see evidence of usage at about the same time elsewhere).

This convergence of stakeholder roles is perhaps the most significant aspect of the ‘2.0′ phenomenon and the radically new business and economy thinking. Companies whose visionary management are able to view the world in this way will become leaders in their field and set examples for the entire global economy.

Needless to say, the most interesting ‘things’ to watch in the startup and venture space are business models that harness one or more (the more the merrier) of the above modes and roles.

The most detailed analysis I’ve been able to find is “The Dynamics of Viral Marketing“, which looked at real data from an e-commerce site that provided a simple incentive–recommend what you’ve bought and you + the first person who buys off your recommendation get 10% off.

We present an analysis of a person-to-person recommendation network, consisting of 4 million people who made 16 million recommendations on half a
million products. We observe the propagation of recommendations and the cascade sizes, which we explain by a simple stochastic model. We analyze how user behavior varies within user communities defined by a recommendation network. Product purchases follow a ’long tail’ where a significant share of purchases belongs to rarely sold items. We establish how the recommendation network grows over time and how effective it is from the viewpoint of the sender and receiver of the recommendations. While on average recommendations are not very effective at inducing purchases and do not spread very far, we present a
model that successfully identifies communities, product and pricing categories for which viral marketing seems to be very effective.

The great thing about the analysis is that the data set extends to three major categories (books, CDs, DVDs and videos) with lots of buyers over two years. The researchers draw some interesting conclusions, including the observation that “purchases that resulted from recommendations are just a drop in the bucket of sales that occur through the website”.

Reading the analysis it becomes clear that the etailer did a poor job of setting up a successful social incentive system and of providing the tools to let consumers take advantage of it. For example:

• By not imposing limits on the number of recommendations that could be sent out they allowed some people to become spammers, which negatively affected conversion for the recipients, even as far as other senders were concerned. No surprise here–by analogy, email spam has reduced the effectiveness of email as a marketing medium for everyone.
• By having a one-size-fits-all incentive system, the etailer did not take advantage of the fact that the dynamics of viral distribution vary by product category and price range. Imagine picking a simple marketing strategy and putting it in place for two years without change and without any A/B testing. No, that’s not how things should be done.
• The etailer provided no tools to help viral spreading beyond the ability to email people with a recommendation. No profiles, recommendation lists, interest groups, checkout notifications, recommendation-based cross-selling, etc.

To make effective use millions of distribution channels, e-commerce sites need to think systematically about social commerce. They need a strategy first. Then they need to realize that implementing a successful social commerce system will require investment not unlike that required to build any major part of their site.

The latest example is how they approached targeted advertising. Jeremiah has a solid analysis of what the near-term will likely hold for both companies.

MySpace’s approach–allowing brands to target across more than 300 affinities is more traditional and bound to lead to improved ROI given their scale in both users and inventory.

Facebook’s approach is novel, using the built-in viral loop to spread “trusted” brand endorsements. The trust comes from users choosing to endorse a brand. The message is controlled by the brand. In other words, Facebook users opt-in to become distribution channels for brands. It would be very interesting to see what incentives brands put in place to buy endorsement and the extent to which Facebook will provide tools for that. Also, Facebook has a strong incentive to impose some constraints on the system–I’m not sure this is the type of environment where unchecked market forces will yield an optimum outcome for any party (FB, users or brands). I guess I’ll have to find some time to play with the system, although from early reports such as Fred Wilson’s experience it seems there should be no rush.

Clearly, MySpace has the right to shut them down, given their terms of service agreements. The more interesting question is the stance that the company will take in the long run with respect to the openness of their pages. Much of their success was built upon the user experience third party plug-ins/widgets provided. Now that they are big, perhaps they think they don’t need the help anymore? That would be a short-sighted stance. The Web is a big and varied place. Walled properties don’t have a history of doing well.

Well, it seems that the tide is changing under pressure for FIM to make lots more money. MySpace has been working on improved ad targeting. They have been working on an API for nearly a year, while many others are already publishing ways to access MySpace programmatically (here, here, here). And now, LA Times reports that MySpace is contemplating lifting the ban on commerce.

“We don’t want users’ pages to start looking like NASCAR,” MySpace Chief Executive Chris DeWolfe said.
But behind the scenes, the issue is being hotly discussed as DeWolfe and his team of top executives at the biggest property within News Corp.’s Beverly Hills-based Fox Interactive Media grapple with the imperative of squeezing more money out of MySpace. MySpace doesn’t want to encourage the likes of Dolce, Billard and Tequila. But its ban on commerce is difficult to enforce. If the policing efforts fail, shouldn’t it at least try to make money from the online sales it makes possible for others by taking some sort of a cut?

This is all great news for consumers, brands and, most definitely, startups looking to leverage the power of the major SNs. It will certainly be challenging for MySpace. They operate under a very different set of constraints than Facebook, for example. They’d have to figure out a way to do this so as to not jeopardize revenues from large advertisers. On the flip side, MySpace has an opportunity to deliver highly differentiated value because it’s community’s vibe is unique. All in all, the indications of a possible change in direction are refreshing.