Tuesday, January 18, 2011

Markets are conversations- that's great for them. Now shut up so I can go buy stuff

"The Cluetrain Manifesto" started off as a simple list. 95 theses, like those that Martin Luther nailed to a catholic church in 1517, written to herald an end to "business as usual". The first thesis was a simple, yet bold proclamation:

1. Markets are conversations

Now this is not an entirely new idea. Karl Polanyi wrote about markets as conversations in 1944 in "The Great Transformation." He argued that consumers rarely adhere to a strict economic rationality like Milton Friedman might suggest. Instead, consumers take all sorts of factors into account when making a purchase, including social and cultural ones.

To put this in simpler terms, imagine you are buying green peppers. You want to purchase two green peppers, and you need it in time for tonight's dinner. Now most people would simply go to the nearest grocery store and buy the first green peppers available. But imagine you are different from those people. Imagine you are a foodie, or a professional chef. You won't just go to the nearest grocery store for your green peppers, you're going to drive an extra 20 minutes to hit up that farmers market you love. Bill and Marge, the husband and wife who own the place, greet you as you come in-you are a regular after all-and let you know whats fresh. Maybe you walk out with your two green peppers, maybe you opt for something similar instead, but you'll probably incur much more cost for those peppers than if you just went down to the local grocery. You had to pay for the gas to get to the farmers market, you had to spend the time building a relationship with Bill and Marge, you probably spent some time investigating other markets before you found this one. But that doesn't matter, because your green peppers are worth way more than the green peppers down at the local grocery. You enjoy finding the best food ingredients, to best suit your needs, and don't mind taking the time to do it.

These are the people that the Cluetrain manifesto was written for. Yes the internet as you use it now satisfies your needs, but look how much better it could be! What the authors fail to fully appreciate is that the vast majority of consumers aren't searching for the perfect solution, they're simply searching for a solution. They were right in asserting that "markets are conversations," but some people prefer to have these conversations in real life, rather than online. Some people simply want to get in, make their purchase, and get back to their life.

Let me try re-framing this argument using something more technologically relevant today: smartphones. Now I'll be the first to admit that I'm a bit of a geek. I've been fascinated with smartphones since the Palm Pilot came out back in the late 90's. Today's smartphones are leaps and bounds ahead of the Palm Pilot, essentially hand-held computers. The main competitors in the industry are Google and Apple, Google being the developer of the Android operating system. After doing plenty of research, I finally chose to buy an android phone instead of an iPhone. Android is open-source software, meaning unlike apple’s app-store, you don’t have to have an app approved by a mysterious board of reviewers with a vague set of standards. A programmer can develop an Android application, post it to his website or the Android marketplace, and it will immediately be available for download. To me, this is a valuable feature, because it allows me to use experimental applications written by aspiring developers to customize my phone’s capabilities in ways that the iPhone simply can’t. However, it also means I run a higher risk of downloading an app that might carry a virus, make my phone freeze, or that simply does not function as described (all of which have happened). If I wanted to, I could take it a step further and “root” my android phone. This would allow me to install custom operating systems, increasing the customizability of my phone to its limits. However, rooting my phone would void my warranty and take up a lot of my time—time that I simply don’t feel like spending just so I can make my phone automatically turn on the lights when I walk into a room. I am content with my android phone—un-rooted and limited as it is.

In the same way, iPhone users aren’t demanding infinite customization, they want trust. All applications must be reviewed and approved by Apple before they are available for download. When you download an app from the Apple store, you know that it will work on your iPhone, you know that it won’t carry a virus and you can be reasonably assured it will do what it says it does. Now you can root iPhones, just like you can root an Android phone, but most users are using their iPhone right out of the box. They download apps that are ranked highly, have many downloads, or that their friends are using. This is not because they don’t have an alternative, it’s because they’ve looked at the alternatives and decided that they’d prefer to know what they’re getting without spending lots of time in marketplace “conversations.”

In the updated version of Cluetrain, Rick Levine says "we never said it in so many words, but we strongly implied that conversation is an easy thing." Right you are Rick, and while there are many consumers using the internet to improve their conversational skills, there are many more who simply want to remain silent. Take, for example, the vending machine. Its entire purpose is simplicity. Money goes in, candy comes out. Now if you're using a vending machine you know that the candy will cost more than it does at the store, and there's a small chance it might get stuck on its way down, but 99 times out of 100 you're going to get exactly what you expected from it. And if you don't, you can always go to the vending machine's owners to get your money refunded.

A huge portion of internet consumers are just like vending machine users. They want to get in, get their answer or their product, then get out. If they need to buy new earbuds for their ipod, they're going to go to Google, type in earbuds, then purchase the cheapest pair they can find. They probably won't pour over product reviews beyond looking at numerical rankings (4 out of 5 stars, sounds good to me!). Now a technophile would probably skip google and go straight to Newegg or amazon, where they know they can find cheap, honestly reviewed earbuds. They'd read the reviews for the earbuds in their price range, think over the purchase for a little while, maybe ask a friend or two for their opinion, then ultimately buy the earbuds that worked best for them.

The authors of Cluetrain would probably argue that the first consumer would engage in more marketplace "conversation" if he only had the opportunity. Yet he does! Consumers again and again are deciding against conversation in favor of simplicity and efficiency. The massive success of the iPhone compared to Android phones is one indicator, but there are indicators on a larger scale.

Searls and Weinberger heralded the rise of eBay as an incredible "virtual flee market." In its formative years, eBay seemed poised to completely revolutionize the way customers and vendors interact. Direct interaction meant that sellers could match buyers needs more accurately, and since "marketplaces are conversations," consumers would embrace this new way of shopping.

However, a quick look at eBay's history reveals a different story. In the beginning, listing fees for vendors were very low, and all sellers were treated equally. However, consumers were reluctant to buy from a vendor with a low amount of sales since their rankings were based on such a small sample size. This was reflected in the rise of the big sellers- large companies started listing their products on eBay en masse, quickly racking up near 100% reputations with large scores next to them. In 2008, eBay struck a huge blow against small vendors. They increased listing fees- while simultaneously increasing discounts for large vendors, they changed the way that search results were shown to favor large vendors, and they removed the ability of vendors to give buyers negative feedback. Now small vendors have been stripped of their ability to compete with larger ones. Marketplace "conversation" has been abandoned in favor of efficiency and trust for the lowest common denominator of consumer.

Chris Locke's latest addition to Cluetrain, a chapter entitled "Obedient Poodles for God and Country," made me wonder if he hasn't spent the past 10 years cooped up in his basement cooking up conspiracy theories. His writing is a bit eccentric, but he does make a very interesting point about the internet and authority that relates to the idea of markets as conversations. In the original Cluetrain, Locke speculated on the internet's power to undermine authority. In the updated version however, he declares that "ironically, authority seems to be making a comeback, using the very medium we naively thought might defeat it." Anyone who has witnessed the debate surrounding net neutrality, or who has studied the Great Firewall of China is no doubt schooled in authority's so called "comeback," aided by the internet.

Locke's ideal world is free of this authority, like in the ideal world of Cluetrain's authors (and probably the majority of its readers) markets are conversations. However, maybe this isn't the ideal world of all consumers. Maybe, despite Weinberger's wishes, in the ideal world of many consumers, "the Internet [is] as easy to use and as high-quality as cable TV." Maybe, just maybe, these ideal worlds are able to exist simultaneously. I can envision a day where those who want to can engage in unlimited conversation in the marketplace, while those who don't can continue being coerced and controlled by vendors.

Actually, now that I think about it, that day may have already passed.

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