Social Media Strategy: “Dirt Cheap Labour” meet Game Theory

In the social media stampede, how long would free be truly “free?”

I just read the article “Dirt cheap labour – How businesses are getting the public to work for them for free” by Stephanie Findlay in the Business section of Macleans’ online magazine, published last week. Check it out.

OK. Let’s repeat the question: How long would free be truly “free?”

It is my sense that businesses should be very cautious in hinging strategic initiatives on crowdsourcing and these so-called “free” opinions. And, while most people’s eyes glaze over by its very mention, economic theory has a role to play in organization’s social media strategies and the value of such opinions.

Based on our monitoring, some businesses are considering such crowdsourcing approaches in their foray into social media where such organizations are looking for their consumers to assist them in their product and service development. Such attempts to “listen” to the core audience are admirable.

There are also a host of products that monitor and scan the Internet for consumers’ perspectives on various brands.  Groundswell by Charlene Li and Josh Bernoff discussed at length how corporations are setting up consumer communities (with such tools now readily available from the likes of Toluna and Vision Critical).  Also, organizations are setting up public forums where the public can provide feedback on various initiatives. Results have been mixed to this point – a good example cited in the article (one I have followed with great interest) is the Netflix competition where there was a $1 million prize for the best algorithm to improve the accuracy of the site’s film recommendations.  Beyond this success, some question that in many instances the discussion is that the feedback organizations get is from a motivated segment, and some argue if you are speaking to the most enthusiastic consumers – those who would normally share their opinion.  Others question the representativeness of such feedback (this will be the subject of another post in the future).

Let’s revisit the Netflix example… because at some point all aspects of crowdsourcing will be facing the same critical issue.

The Netflix Competition was a successful application of crowdsourcing because: (1) It was an interesting problem (with a clear objective); (2) There were clear rules for participation (and expectations identified); and (3) There was a substantial financial reward (with ongoing progress prizes).

Marketers should take note, as any crowdsourcing strategies should fulfill these three criteria plus a fourth – vested interest.

However, with some organization considering any strategies in tapping into the creative commons, it is my opinion that participants in these various forums may consider that their opinion and feedback will actually be worth something. A classic example is in the decline in the participation rate of telephone surveys – a more archaic approach to doing surveys – and not wanting to be bothered during dinner time.  People have realized that their opinions are worth something and have become very selective in how they share them. Further, we have also seen declines in participation of public service groups such as the Rotarians and Kiwanis clubs. This will happen too with social media – as social media is about being social and collaborative; and (as I have postulated in this blog) that while social media is alive and evolving, it’s another business tool.

Using Netflix as an example and considering crowdsourcing as another business tool, marketers have now delved into the territory of the economics and game theory known as incentive compatibility.

From the Wikipedia explanation:

(In mechanism design,) a process is said to be incentive compatible if all of the participants fare best when they truthfully reveal any private information asked for by the mechanism. (Where mechanism design is a field of game theory studying solutions concepts for a class of private information games).

Here’s another equally unfriendly explanation of this concept.

Without going into great detail (and my attempt to simplify), the principles of designing a forum for organizations to optimally leverage social media have to fulfill some basic foundations of game theory.  In this case, the mechanism by which parties are collaborating and sharing information, identifying what information is sought, the revelation of how the information is disclosed, implementability of the ability to follow through and necessity and sufficiency that supports the parties mutual desire and need to participate in this forum need to be considered. Also, there are variety of games to be considered – from such candidates as symmetric games, repeated games, sequential games – in any community feedback/engagement/crowdsourcing strategy considered (and a single program may entail a host of different games to fulfill a single objective). Further, social media through its (online visual) articulation improves the transparency of the flow of information. Ultimately, there needs to be a well articulated pay-off for participation by all parties. Yes marketers, mechanism design theory is alive and well with incentive compatibility at its core.

Enough of the technical jargon (but I am happy to chat with interested parties on how this works and in optimizing programs)…

Community/Engagement initiatives and crowdsourcing via social media is and will likely still be cheaper, faster and more efficient in the long run (as it satisfies a host of incentive compatible conditions given the mechanism of social media). Organizations that grasp incentive compatibility, the basic constructs of game theory and are respectful of the real cost of participation and the sharing of perspective via this vehicle are the ones who will thrive in this medium.

Brian F. Singh, CMRP
ZINC Research
Web: www.zincresearch.com
Twitter: @BFSingh
LinkedIn: http://ca.linkedin.com/in/brianfsingh

A short note on “free.” Please note, I appreciate the efforts of many organizations and individuals who post vast amounts of free content on the web. I applaud you in the ability to democtratize intelligence and knowledge resources for the wired masses. The “free” I am focusing on the is the ongoing expectation of entities to tap into the network of individual to progress their own business goals.

1 Comment
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    March 6, 2012

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