Facebook is a landslide internet success. An elite group of investors are hoping that it will remain so, because they are investing billions of dollars in the company and its business model. Even Google, which has launched a rival social network, Google+, will have a tough time competing because of Facebook’s dominance of social networking. So surely they are onto a sure fire winner? Don’t be so sure, this could be a far greater debacle than Rupert Murdoch’s $500m loss on MySpace, and not because of Google+. I think both models are vulnerable to something that is not on the radar yet.
For the record, I think that Google have a chance against Facebook. but in my view even Google is not the main threat. There is a far more more powerful and compelling business model that is a threat to both Facebook and Google+.
I’ll go even further, and predict that the business model I outline in this blog post is bound to devastate Facebook, and Google+ for that matter.
The threat I’m talking about is a consumer cooperative social network. Watch out all you investors in Facebook!
A consumer cooperative is a simple, tried and tested centuries old business model that would compete against even Facebook and Google in this market. Once started, there will be nothing they can do to stop it.
This bold claim is not the only reason I won’t be investing in Facebook shares, but it is the most compelling for me.
A Consumer Co-operative Social Network
A consumer cooperative shares the benefits amongst the consumers purchasing from the business. Benefits might be bulk purchase discounts, or even profits.
In a consumer cooperative social network, the users or members would be treated like shareholders. With any commercial profits distributed amongst the users. I don’t mean some token amount fo the profit, but all profits that are in excess of the revenue needed to fulfil the aims of the cooperative. All the profit goes to the service users: you and me!
In my post about the rather clever way Facebook and Google make money by acquiring valuable data from users for nothing, I pointed out that their business model was vulnerable. (More here: What Can Google Do With Your Copyright Content & Photos?)
The reason that the Facebook and Google+ business model is vulnerable is because it relies on factors that are both weak and hard to defend.
Firstly they rely on the ignorance of their users as to the value of the data they own, and which those users give to these companies for virtually nothing in exchange. Secondly, for the few who are aware, these companies rely on apathy and inertia to deter users from doing anything about it. Finally, the lack of a viable alternative prevents even those users who would be bothered from migrating elsewhere. However..
I believe that there will very soon be a viable alternative: in the form of a co-operative social network.
A cooperative social network will be a viable alternative because once it exists, it provides users with a powerful incentive to move and to spread the message to others. Once this kind of alternative exists, it will be very hard for Facebook or Google+ to retain users purely on the basis of ignorance, apathy and inertia. In fact, the Facebook and Google+ networks will surely become the means by which people raise awareness of the alternative and provide sufficient initial users for an alternative to gain critical mass. The only defence will be to offer similar incentives, cash and respect for data, and to confuse their users sufficiently to undermine awareness.
For the time being this kind of social enterprise only exists in my imagination. So until a cooperative social network arrives, Facebook and Google+ are safe. However, there’s a good chance that its arrival is inevitable and only I believe it is only a matter of time.
Let’s look at why I think it is only a matter of time before a co-operative social network comes along. Some precursors are needed, and these will need to come together to create a cooperative social network.
Precursors To A Cooperative Social Network
The precursors necessary for a cooperative social network are:
- A team of people with the knowledge, motivation and administrative resources to create a co-operative social enterprise around a social networking service.
- A technical solution and the experts needed to set-up and administer the service.
Cooperative enterprise is not new. Cooperatives have been around for centuries and today there are many modern examples. The most relevant kind are “consumer cooperative enterprises”, for example the British Co-op, a retail group which provides a wide range of consumer services throughout the UK. This means there are lots of people with the necessary knowledge and experience, and so I believe that the team (precursor 1.) will arise spontaneously once there is sufficient awareness of the idea itself and its practicability: i.e. the near readiness of the technical solution. So how close is the latter?
Potential “technical solutions” are already available in prototype form because several social network projects are being developed within the open source community. Business hasn’t been interested because of the dominance of Facebook so such projects lack commercial support and motivation. Only Google has dared to try and take Facebook’s market directly. Development has therefore been reliant on small bands of enthusiastic developers who have little or no funding, and will struggle to provide users of Facebook to migrate to their alternative services.
The most promising such project to date has been diaspora which is an open source project to develop a social network that overcomes the copyright objections raised in my earlier post (What Can Google Do With Your Copyright Content & Photos?). This has in fact secured funding from other enthusiastic investors who want to support an open source social network alternative.
Such projects already demonstrate the feasibility of creating a “technical solution” from scratch (through open source development), or could adopt a consumer co-operative business model and thereby overcome their greatest hurdle: providing the incentive for Facebook users to jump ship.
Either way, such projects demonstrate clearly the method and feasibility of creating the technical solution (precursor 2.).
All That Is Needed Is Awareness
So I think the main thing that is needed is awareness of the idea! Once people understand that it is possible to create a consumer co-operative social network, I think the benefits are obvious and the motivation for one or more projects will be created.
In fact, I would expect not just one, but probably several rival social network co-operatives to arise and to compete to provide the most attractive solution.
Nothing will stop this because it will be so attractive to users. They will stampede from Facebook to a service that is operated in their interests, makes billions of dollars just like Facebook, and distributes all the profits directly back to them, the service users.
Even though such a happening would have the potential to devastate multi-billion dollar businesses, I can’t see what those businesses can do to prevent this.
Time To Spread The Idea!
If you like the idea of a consumer co-operative social network, please spread the idea to help it reach people who will make it happen.
Perhaps you are one of those people? If so, and you want to connect with others who might be interested let me know and I will interested people in touch with each other.
Spread the idea: Share this on Facebook, Twitter and Google+ (use the “SHARE THIS” buttons below this post).