Sharing the Wealth

A couple of weeks ago, Henry raised a key issue in the global discourse on user-generated content. That issue: should users benefit financially from content they have created with industry-provided tools (or shared via industry-provided distribution systems?) Here’s a good quote from the post:

If consumers are helping to generate the intellectual property and helping to market the product, shouldn’t they receive some economic return on their participation? Lund says no — that this would fundamentally change their relationship to the company…

I made a few comments on Henry’s post which I’d like to echo here. To the point: I think it’s clear that economic returns, while not always the best (or even appropriate) creative incentive, are not inherently contrary to the spirit of user-generated content. In some cases, financial incentives may even grease the wheels of UGC.

MIT Professor Eric Von Hippel has been researching “lead users” (the non-media world’s creative consumers) for many years now; his research was the context for Henry’s post. So let’s talk about Von Hippel’s research. One of his observations was that many (not all) “lead users” innovated precisely because they were seeking some sort of “economic return”. For example: the farmer who invents a new irrigation system because commercially-available models have not met his business needs. Eventually, a corporation discovers the farmer’s invention and commercializes it. Von Hippel’s research has shown that this phenomenon is exceedingly common, and has been the root of a surprising number of profound innovations. (The farmer story is actually a true example.)

At the core, a “lead user” is just an individual who has good reason — which may be economic, social, and/or something else entirely — to innovate (and who has the skills and tools necessary to do so). A pure desire for self-expression counts as a “good reason.” Now, as long as companies don’t “pervert” the lead user’s environment with reward systems that overly-incentivize unproductive behavior, economic benefit-sharing should not inherently be a problem.

Case in point: Google Adsense. Adsense has enabled many users (who couldn’t easily monetize their online content before) to earn a financial return on their creative efforts. It’s hard to argue that Adsense has stifled or overly-perverted user innovation. And it’s hard to argue that Adsense has tainted the reputations of the bloggers who employ it — a pretty large number of popular blogs feature ads.

Profit-seeking Second Life users seem to be doing OK too (on both the innovation and reputation fronts), despite the fact that their efforts are generating millions of dollars in collective revenue. And what of the many successful contests that have rewarded user creativity with valuable prizes (or jobs); do those count? (Examples: 1, 2)

Does great user-generated content often stem from non-financial incentives? Absolutely. I can’t say for certain, but I’m pretty sure that the guys who first made Counter-Strike didn’t do so out of expectation for eventual financial reward. (The again, Valve did hire them to continue making games, and I guarantee the consumer world noticed…) But I digress. There are a million great examples of UGC that was inspired without financial incentive. I merely wish to debunk the notion that financial incentives are inherently bad.

19 responses to “Sharing the Wealth

  1. David,

    I see some signs that point towards financial incentives for lead users becoming increasingly popular in web2.0 products. Some I have already mentioned to you in emails, but I’ve stumbled across a couple more that I found interesting.

    The first is weblo (www.weblo.com) that I mentioned in an email to you and Henry a while back. The interesting thing about weblo is that it is trying to turn all users into lead users through an ad-revenue sharing program. Even the most casual user has financial incentive to try and create quality content that attracts visitors. Of course, a ‘casual’ user of weblo still had to pay for the right to use the service, so just how casual can they be? Nevertheless I find the idea that the entire business model of the site is based off of creating a home for ‘lead users’ interesting.

    I don’t remember if I had told you about my FloatNotes idea before or not (http://toomuchimagination.blogspot.com/2006/10/geotags-and-heartbreak.html) but a company called Navizon is currently offering a service similar to my idea and have an interesting ‘lead user’ system in place. To use their peer-to-peer GPS network costs $20 (lifetime fee, I believe) but you can also make $20 every time you contribute a certain amount of data to their network (in doing so, improving the experience for the paying casual users).

    Second Life made it possible for Lead Users to find financial incentive for their contributions. I think as more and more companies try to create Long Tail businesses, they will likely depend more and more on Lead Users to help initially seed the system and will therefore probably work even harder to find incentive systems (financial or otherwise).

    -Ben

  2. >should users benefit financially from content they have created

    This question seems a bit silly to me, quite frankly. “Should” implies some kind of assertion that there’s a “right way” and “wrong way” of doing things.

    COMPANIES creating tools/mediums/places for users to create content that may then be used by others SHOULD, in a free market economy, be able to offer whatever they darn well please to those users in exchange for their services. That could be recognition, a financial incentive, heck, even a FEE! (One could say that web sites are user created content and some ISPs charge for the hosting, right?

    INDIVIDUALS creating the content in those sites/mediums/places, if they have one right above all others, would be the right to be clearly told what they are or are not getting out of this relationship. They can then decide if they’d rather not do it and take their talents elsewhere.

    Let the free market work it’s magic, and the rest is easy.

    Now if the argument is that “hey, I created my content and uploaded it for free, but now that SL has boatloads of users and advertisers, I want a piece of the action!”, well, buyer beware. Read your terms of service. Once bitten, twice shy, next time that user will ask “how long is this agreement for.

    Now if you’ll excuse me, I’m going to tell the youtube guys that I want a piece of their $1.6B for that video of my cat chasing a ball of yarn.

  3. company called Navizon is currently offering a service similar to my idea and have an interesting ‘lead user’ system in place. To use their peer-to-peer GPS network costs $20 (lifetime fee, I believe) but you can also make $20 every time you contribute a certain amount of data to their network (in doing so, improving the experience for the paying casual users).

    Love this (assuming it actually works.) I just downloaded their software — will install and test over the weekend (I just happen to have a GPS for my phone, so I can try the advanced app).

  4. “Should” implies some kind of assertion that there’s a “right way” and “wrong way” of doing things.

    Couldn’t agree with you more.

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