Saturday, May 28, 2005
The Snowball Effect
"...Their new book, Call to Action, is distributed entirely without nationwide bookstore support. Over 90% of the sales have been done online. Through a combination of low pricing and aggressive viral marketing, Bryan and Jeffery have essentially beaten the system at its own game. By working directly with bloggers, pundits and well-known members of the online marketing field, the Eisenbergs were able to spread the word like wildfire."
This is a nice example of what I call the snowball effect. It's the dominant Media 2.0 strategy; the inverse of the blockbuster is a useful way to think about it.
Note, it's not simply about viral marketing. That's missing the forest for the trees.
It's about the fact that consumption is connected - in a networked world, when you consume something, your consumption has an externality: I generally know how much satisfaction you got. As enough of this info is aggregated, demand within the niche increases for high-quality goods (and decreases correspondingly for low-quality goods).
That is, quality drives popularity hyperefficiently...if your good is of high enough quality, it will realize increasing returns, as people's consumption reveals their satisfaction to yet more people.
Now, this can happen via word-of-mouth. But that's a very inefficient mechanism, and it's not really economically powerful enough to create enough snowballs to destroy old industry economics.
It's the advent of much more efficient info processors - micromedia like blogs, and their distribution, aggregators - that is going to lay the groundwork for the snowball effect on a much larger scale - on a scale that is going to deconstruct industries which depend on marketing scale and scope economies. Like Hollywood, for example.
Now, this may seem obvious, but the implications aren't. For example, one big implication is that your dominant product strategy is to open up your goods - not protect them.
If you wanna read more of this kind of thing, grab a copy of my micromedia presentation.
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I find your article very inspiring and your presentation - "The new economics of media" - detailed and correct.