The Social Network Business Plan E-Book

David Silver

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 283

Veröffentlichungsjahr: 2009

Beschreibung

All of us know that users of the Web do not read advertisements onthe websites we visit, yet the online communities are emerging asthe next great media rely solely on this method to produce revenue.In The Social Network Business Plan, social network expert, DavidSilver presents and explains 18 cutting-edge methods to createrevenue for social network websites--none of which are advertising.He also predicts the demise of seemingly successful onlinecommunities such as MySpace and Facebook that rely on advertisingas non-sustainable modalities. Silver describes and explains thatin the future new products and services will be introduced, talkedabout, rated, reviewed and recommended - or killed - by onlinecommunities. One example of the 18 new revenue channels that onlinecommunities are adopting is the sale to vendors of anonymizedconversations of the community members concerning those vendors'products or services. Another example is online communities whopartner with the internet providers to receive payment when aparticular online community's information is downloaded usinf thatproviders service. The other sixteen revenue channels are equallyhead-turning! Silver is the only angel investor, operating down where the rubbermeets the road, who is investing in online communities in theirinfancy, and writing about which ones will win and which ones willfail.

Leseprobe

Table of Contents

Title Page

Copyright Page

Acknowledgements

Introduction

Disrupt the Old Business Model

The Efficiency of the Community Model

Oligopsony Power

The Talisman of the Revolution

Solving Pain

Creating the Elegant Recommender Community

Your Recommender Community as Theater

Mimic the Bakers and Copy Starbucks

Why Not Start Five Simultaneously?

Loyalty and Passion Builders

Disruption: The Sumptuous Impertinence

Maximize Your Selling Price

Wrap-Up

Frog Boiling

Chapter 1 - Eighteen Sustainable Revenue Channels

Subscription Fees

Tip Jar

Reputation Management Fee

Slice and Dice the Conversation

Port the Community to Mobile Phones

Kudos

Users Group Meetings

The J.D. Powers Business Model

Synthetic Currency

Affiliate Ad Networks

A Boon to Local Retailers

Setting Up a Not-for-Profit

Prepaid Credit Cards

Creditefficiencies.com: The Business Model

Rate, Review, and Recommend

Tip Jar

Silver’s Law Applies

Chapter 2 - Your Recommender Community as Theater

The Age of Experience

Experience as Theater

Names

Design

Theater

Go Hollywood

The Creative Process

The Playbill Solution

Chapter 3 - Mimic the Bakers and Copy Starbucks

The Discovery of Bread

The Ubiquity of Bread

The New Bread

Authenticity

Authentic and Nonauthentic Social Networks

The Baker’s Knife

The Wedding Cake

Learning to Observe

Personality

Starbucks Strategy of Target Pricing

Let Them Eat Pastries

Chapter 4 - Why Not Start Five Simultaneously?

So, Why Not Launch Several?

Analysis of Three Business Models

Ideas for Multiple Launches

Business Plan for Rodeochicks.com

Other Huge Opportunities

Purchasing Lagging Communities

Chapter 5 - Loyalty and Passion Builders

Mechanisms for Rewarding Members

Mapping or “Watch Us Grow”

Every Member Has Her Own Web Site

The Membership Identifier

Members Are Searchable by Victories

Lockers

Closets

Award Status with the Potential of Earning Elite Status

Entrepreneurship Is Gift Giving

Spokesperson

The Unexpected Rewards

Returning to the Concept of Shared Ownership

Chapter 6 - Disruption: The Sumptuous Impertinence

Branding

Schumpeter Predicted the Disruption That Is Coming

Voting Communities

The Endowment Effect

Pain Solving

The Transfer of Wealth

Being on the Winning Team

Chapter 7 - Should You Sell, or Are You Having Too Much Fun?

The Question of Using a Broker

The “Theater” of the Sale

Stirrups

The Financial Buyer’s Stirrup

The Measure of Value

The Arbitrage Flips

Why Do Strategic Buyers Always Pay More?

Positioning Your Company

How Do You Locate Strategic Buyers?

Chapter 8 - Wrap-Up

Why You Are Reading This Book?

Complex, Determined, Imaginative People

Community-Building Heroes

The Planet’s New Heroes

Their Timing Couldn’t Be Better

How Global Warming Will Be Foiled by Social Networks

GreenableWorld.com

Pent-Up Demand

The Need That the Company Is Addressing

Site Features

Cash Flow Statement Projections

Fighting Terrorism via a Social Network

Calamitytower.com

Marketing Strategy

Business Strategy

Strategic Plan

Glue Factors

Business Plan

Summary

Bibliography

Index

Copyright © 2009 by David Silver. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada

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Library of Congress Cataloging-in-Publication Data:

Silver, A. David (Aaron David), 1941-

The social network business plan : 18 strategies that will create great wealth/David Silver.p. cm.

Includes bibliographical references and index.

eISBN : 978-0-470-45501-2

1. Business planning. 2. Social networks. I. Title.

HD30.28.S4344 2009 658.4’01—dc22 2008037344

Acknowledgements

“WE ARE TALKING NOW OF summer evenings in Knoxville, Tennessee in the time that I lived there so successfully disguised to myself as a child,” wrote James Agee, who was born and grew up about a block from my house in Knoxville, but a little before me. That’s where I learned about communities: in Knoxville, chasing fireflies on summer evenings, while the adults from the various homes on our block sat drinking ice tea and lemonade on the back porch. We had a hobo in our neighborhood as well. His name was Nathan and he rolled a tire with a stick and talked to himself. All of the families on Third Avenue fed and clothed him. The problems of our community were solved by the community or they didn’t get solved. Clogged sewers, broken street lamps, accumulating trash in the empty lots, an under performing teacher at Brownlow Elementary School, cars driving too fast . . . all of these issues were handled and done so very efficiently by the members of the community. It was all very informal but effective.

Now our world is more complex. People don’t gather on back porches to solve shared community problems. They are isolated from one another. Some of the obvious solutions are blocked by regulation. Those three factors—complexity, isolation, and regulation—have been identified by entrepreneurs starting online communities and social networks as the three factors that pre determine a huge need for an online community or social network. As an angel investor for the last 30 years, I have always tried to catch waves, and the current wave I’m riding is the social network. Here’s how I see the rolling of the waves. If there is no euphemistic back porch where the neighbors can meet to discuss and solve common problems, but rather the market is characterized by complexity, isolation, and regulation, I am probably going to see if I can find a strong entrepreneur to back in building a social network for that market.

There are other markers, such as the number of people who have the problem, the homogeneity of the problem, the price they will pay to solve it, and the willingness of the people with the problem to discuss it with others in the forum section of an online community. But, without complexity, isolation, and regulation, it probably will not be a wave I will fund with angel capital.

To be a wave-catcher, one needs outstanding helpers. And I have some wonderful support from Jennie Herrera, my executive assistant, and Susan Sterrett John, who manages our office. Other friends, advisors, and consultants who have contributed to both my wave-catching and this book include Bob Crull, Sylvan Corazzi, Kyle Gillman, Susan Mangiero, Gordon Dickson, Patrice Peyret, Robin D. Richards, Bob Armbrister, Claude Silver, Caleb Silver, Hank Carabelli, Ewan MacLeod, Sean Malatesta, Lynne Saccaro, Sheila Ortiz, Nancy Garcia, Diedre Adams, and Randy Farmer.

Special thanks to the Wiley team, and my editor, Shannon Vargo. As for my agent, Fredrica S. Friedman, who is sui generis in the field of publishing, I will say that it is an honor to be in her entourage.

—David Silver Santa Fe, NM October 2008

Introduction

HERE IS a ONE-SENTENCE DESCRIPTION OF THIS BOOK: There is a lot of money to be made if you get a lot of smart people talking and then sell their anonymized conversations to vendors.

That, in a nutshell, is what this book is about. Most of the text defines, describes, and elaborates on this sentence. It defines how all parties benefit. It describes how the money is made, by whom, who gets paid, how much is paid, paid to whom. Then it explains how you persuade a lot of smart people to start talking about something that has commercial value. What will they talk about? Why? When? Why will vendors pay to overhear these conversations?

I will explain all of this to you by defining an elegant new painsolver called the recommender online community. Online community and social network are essentially the same thing, and I will use them interchangeably. The social network is a force of nature, that is, our natural inclination to join communities and associations in order to accomplish things that we cannot get done by acting alone. The recommender online community will create a new way to launch new products and services, and it will generate new revenue channels for old media. But it will also be enormously disruptive.

Disrupt the Old Business Model

There hasn’t been a disruption machine as intrepid and forceful as the recommender community since the invention of bread 6,000 years ago disrupted hunting and the preserving and eating of meat in the economic and social life of the inhabitants of earth. The existing model at the time was this: Find an animal, shoot the animal, cook it, and eat it. Then find another one. Then it all changed. Ants were seen by the Egyptians in 4000 b.c. sowing and reaping grass. According to Linnaeus, and echoed by Dr. Gideon Linceum, a nineteenth-century American physician, ants plant grass seeds around their mounds in the spring, harvest them in the fall, and take them inside their mounds, where they eat them in the winter.

While the men were out hunting, the women, who had observed the ants, began planting gardens. They invented a tool called the grubbing stick in order to dig furrows. In the furrows, the women dug holes and put grass seeds into the holes, then ran water through the furrows. The men came home from hunting and observed the women, weary from work. They improved on the grubbing stick by tying a short stick to the end of a long stick to create the first plow. Then they created a harness for their cattle, attached the plow, and that enabled the women to make larger gardens, cultivate more grass, and produce more grain with which to make bread. Soon the men began participating in growing wheat and making bread.

We know from the paintings in Egyptian pyramids that over time an industrial process evolved, along with municipal governments, to build canals to distribute and store water from the Nile; and we know that bread became the currency of Egypt and its trading partners for thousands of years. Nomadic societies, such as the Hebrews, and seafaring societies, such as the Greeks, had no ovens; and thus began commerce—the exchange of goods (fish) and services (slave labor) in exchange for bread.

Bread obtained religious significance. The cult of the bread goddess became the state religion of Athens. The Hebrews thanked Jehovah before eating their bread. And from the Bible, we know that the tempter came to Jesus and said, “If thou be the Son of God, command that these stones be made bread.”

The disruptive effects that bread had on economic life six thousand years ago are being repeated today with the disruption of conventional business models by the recommender social network. The effects of bread on the hunter-gatherer economic life were these:

• People needed to form communities.

• The find-an-animal, kill-the-animal, bring-it-back-to-the-family, and go-out-and-find-another-animal business model was replaced by the wheat-growing community and its recurring revenue model, which was far less expensive.

• Bread (from wheat) became the currency of all civilization for thousands of years.

The corollary effects that recommender communities are having on economic life today are these:

• People feel the need to form review, rate, and recommend communities in order to find the truth about products and services, their prices and efficacy, the vendor’s after-sale support, the best model and the worst one, and the experience that others have had with them.

• The find-a-customer-with-advertising, sell-the-customer-something, then-find-another-customer business model is being replaced with the recurring revenue model of recommender communities.

• Synthetic currency used in recommender communities will replace authentic currency.

Today the old revenue-generating model, which I call the “antelope hunt”—informs the customer with advertising, then goes out and catches the customer, sells something to the customer, then goes out and catches another customer—is dying, just as certainly as the hunting model was replaced by the bread model. Why so? Because placing ads on the Web to find new customers is completely wasteful. My ham sandwich can find a new customer on the Web faster than an advertisement can. So there will be a massive disruption as the antelope hunt model is replaced by sales influenced by recommender communities. Jobs will be lost in the four big support industries—advertising, marketing, sales, and public relations. All four will undergo massive layoffs followed by an Electra event to rise up once again in a new format.

The Efficiency of the Community Model

The management, stockholders, and employees of a company that sells a product or service spend a large part of the company’s gross profit on advertising in order to find the customer and sell something to the customer. Then, having done that, they have to repeat the process. The managers meet with advertisers, the media, graphic designers, marketing consultants, lawyers, trade groups, lobbyists, foreign distributors, and others in order to improve the timeworn process of find a customer, sell something to the customer, then find another customer. This process is known as shrinking the available market with each sale. It is inefficient, costly, repetitive, and not conducive to innovation because of its centripetal, or inward-looking nature.

The recommender community, or for that matter, subscription-based businesses, are centrifugal in nature. It is a force that tends to impel its core content outward from the center of rotation. When a subscription-based business sells a monthly pay membership to a customer, it expands its market by 11 consecutive payments. Clubs like Netflix, franchising businesses such as KFC, party-plan sales organizations like Mary Kay Cosmetics, Internet service providers, and online communities and mobile social networks expand their universes with each sale. But the recommender community takes the franchising and subscription-based club model one giant step further—just as the ancient Egyptian men did when they took the plow out of the women’s hands and attached it to their cattle—the members of social networks do the heavy lifting. They supply the need to collaborate with others, which is the raison d’être of the community’s existence. The members supply the conversation. They create the value. They pay for minutes of connect time on their mobile phones to their Internet service providers. They provide the time to search for an inquiry of another member. And here is where the excitement comes in: The old antelope hunter will pay through the nose to listen to anonymized conversations about products or services that are collected, sliced, diced, and bar-charted by the recommender community. The recommender community business model is elegant and efficient, whereas the antelope hunt business model is clunky, costly, has too many moving parts, is less profitable, and ineluctably forces the consumers to pay more for the product or service. To feel its inefficiency first-hand, call Dell’s customer service department and enter Dell Hell. CRM software has too many “thank you’s” built into it and not enough real assistance.

There is a second market for the conversations and activities of the members of online communities: traditional media. Television, newspapers, and radio are dying. They need more advertising revenues. The solution to their pain will be provided by online communities in the form of advertorials produced by the online communities and paid for by its “powered by…” sponsors.

There are several more uses for the online recommender community. It is a good place to introduce new brands, and it is a good place to gain an endorsement. Ads will soon appear on products in retail stores that say, “Voted #1 by such-and-such social network.”

Everyone benefits: Vendors learn what products are working and what products are failing—and the reasons why. Community members provide useful services and achieve their goals of better products and services and lower prices because they need less advertising for promotion. Old media captures new revenue channels. Retailers earn in-store ad revenue by placing “Voted #1” signs on some of their products. Communities take over the new product branding job. There are a lot of changes coming. But there will be blood.

Who Gets Disrupted and When?

The symbiotic service industries get disrupted most severely: advertising, marketing services, media, sales forces, public relations, shopping malls, and their supporting industries—printing, graphic arts, jingle writing, acting, and so forth. The social networks, acting as consumer rating services or recommenders of products and services, will eliminate the need for finding the customer. That task will become the principal task of the recommender communities. They will act like miter boxes, guiding the handsaw that is the consumer product or service, at the proper angle in making a miter joint between the product or service that the crowd of members want, at the price they want and delivered to them when they want it. If the members agree that a certain Procter & Gamble product can be trusted to absorb a baby’s defecation without leakage, then Procter & Gamble will have found a recurring revenue stream without the need for massive advertising. Goodbye billions of dollars previously spent on advertising, marketing, eye-level shelf positioning, sales forces, media buying, and so forth. Hello increased efficiencies in the way consumer products and services are sold. The brilliant economic thinker and writer Peter Drucker said, “The purpose of marketing is to make selling easy.” The social network that encourages reviewing, ranking, and recommending is the new marketing tool.

But if the community finds that the Procter & Gamble diaper is not as good as one being made by a start-up that uses stuffing similar to that used in Patagonia outerwear, or some other substance, such as the start-up MyLil Star, then goodbye Procter & Gamble’s market share, because the recommender community will vote for the start-up. Baby care supplies were $6.5 billion in sales (at retail) in the United States in 2006, and diapers represent 69 percent of that figure. If the babyproductvotes.com community ranks Procter & Gamble’s product near the bottom, it could lose billions of dollars in revenue, profits, and market capitalization. Marketplace power will shift to the consumers who belong to recommender online communities. Their power—oligopsony power—will be awesome, and the suits who work at the major brands will bend the knee and bow the head when dealing with them.

Oligopsony Power

What about oligopsony power? The advertising agencies, sales organizations, media companies, shopping center owners, supermarket chains, and acolyte industries will scream to their lawyers for forceful advocacy. Always ready for some billable hours, the lawyers will write useless briefs because they know that fear pays. But there is nothing illegal in forming associations in order to recommend and buy products more efficiently.

Hasbro, Inc., the owner of Scrabble’s North American rights, sued Rajat and Jayant Agarwella, the developers of Scrabulous, in Federal Court on July 29, 2008. Facebook, which hosted the popular game played by millions of people, then removed Scrabulous; 46,000 people protested the removal of Scrabulous by Facebook in the first hour after it was taken down. Two days later it was reborn as Wordscraper with new rules and circular tiles. Thousands of people began playing the new game.

A few years ago, Sinclair Broadcasting and its advertisers felt the scorpion’s sting of the collaborative power of smart people holding conversations. Sinclair reaches 26 million television-watching households. It is a decidedly pro-Republican company, and during the 2004 presidential elections, Sinclair decided it would broadcast a documentary called Stolen Honor: The Wounds That Never Heal, as a news program, ten days before the presidential election to embarrass John Kerry. The documentary “was reported to be a strident attack on candidate John Kerry’s Vietnam War Service.” The Los Angeles Times broke the story of Sinclair’s plan a week before and alongside the standard Democratic responses, the blogosphere became rebarbative and agitated.

Josh Marshall on talkingpointsmemo.com, Chris Bower on MyDD.com, and Markos Moulitsas on dailykos.com launched “boycott Sinclair” messages. Their readers took up the baton and rebroadcast the boycott request throughout the Internet. Then, another blog, theleftcoaster.com, posted a variety of action agenda items, including picketing Sinclair affiliates, and dailykos. com published the names of the program’s proposed advertisers. A reader of one of the blogs took matters into his own hands, got the list of local advertisers to an Ohio Sinclair affiliate, and organized a letter-writing campaign to its sales managers, saying they would boycott the local advertiser’s products and services. He reported the success of his tactic on the blog. A boycott database of 800 advertisers was published on the blog, along with sample letters. A blogger picked up on this and wrote a program that he published on the Internet that instructed interested people on how to send the boycott letter to all 800 advertisers simultaneously. Sinclair’s lawyers sent out threatening letters to everyone involved.

Then an analyst at Lehman Brothers issued a research report that downgraded the price of Sinclair stock, citing concerns about loss of advertiser revenue. Mainstream news reports picked up on the analyst’s prediction, and Sinclair’s stock price dropped 8 percent. The next day, the price fell another 6 percent, to its lowest point in three years. Sinclair pulled Stolen Honor.

The blog that contained the database of 800 advertisers received more than 300,000 unique visitors during its first week of operations and more than one million page views. And that was half a decade ago.

The Talisman of the Revolution

The revolution in the way goods and services are sold is a ground-swell today. But it was predicted by Yochai Benkler, Harvard Professor of Internet and Ethics, in his 2006 landmark book, The Wealth of Networks, when he wrote, “A particular confluence of technical and economic changes is now altering the way we produce and exchange information, knowledge, and cultures in ways that could redefine basic practices.” Forrester Research echoed Professor Benkler’s promise when in November 2007 it wrote, “Seventy-one percent of online shoppers read reviews, making it the most widely read consumer generated content.” And Bizrate in January 2008 said, “Fifty-nine percent of our users considered customer reviews more valuable than experts, reviews.” James Surowiecki, author of the ingenious book, The Wisdom of Crowds, writes that “user-generated searches, stories, advertisements, designs, product reviews on many consumer products and services will nearly always be superior to those generated by a group of experts.”

Trend spotters have reported such transformative events: “According to Global Nielsen survey of 26,486 Internet users in 47 markets, consumers’ recommendations are the most credible form of advertising among 78 percent of the study’s respondents” (www.bazaarvoice.com).

A consumer survey by the J.C. Williams Group ranked consumer content as the number-one aid to a buying decision (J.C. Williams Group, global retail consultants, October 2006).

Marketing Sherpa reports that “86.9 percent of respondents said they would trust a friend’s recommendations over a review by a critic while 83.8 percent said they would trust user reviews over those of a critic” (Marketing Sherpa, July 2007).

BusinessWeek’s cover story in its March 3, 2008, issue entitled “Consumer Vigilantes” reports that “behind the guerilla tactics is a growing disconnect between the experience companies promise and customers’ perception of what they actually get.” The article goes into detail about how Advertising Age editor Bob Garfield’s blog, “ComcastMustDie.com,” had a significant influence on improving Comcast’s customer service.

Solving Pain

It is the task of the entrepreneur to solve pain. The pain that the recommender social network entrepreneur solves is to replace the gross inefficiencies of the current business model—which we see in the nonrecurring revenue model—with the efficiencies of the recommender social network. The recommender community will lower the price of all consumer goods and services by gathering consumers into membership clubs where they will have conversations about products, services, candidates, and local civic issues. They will share information about the efficacy and value-add of products and services. They will discuss the truthfulness of statements made by product and service providers, the basis of the warnings on the labels, the origin of the product and that country’s rules concerning child labor, treatment of women, shipment of weapons to terrorists, the carbon footprint of the vendors, and the after-sale support service, among other things.

The consumers will benefit because (1) they will receive services that are efficiently and truthfully provided; (2) they will buy products that do what they are supposed to do; and (3) prices will fall dramatically because of the reduced need for advertising and because recommender communities will give Procter & Gamble, Johnson & Johnson, and your local law firm the recurring revenue model that they have dreamed about. Yes, among the recipients of pain remedies will be the vendors themselves. Why? Because their cost of search will be greatly reduced.

Creating the Elegant Recommender Community

As the recommender community entrepreneur that I will attempt to train you to become, you will need to learn the singular importance of the words trust and verify. Members of your community must be individuals who can add value to the community and not be representatives of American Express or Pfizer pretending to be collaborating while promoting their products. When a member of a community of Huntington’s disease victims, or their families, speaks of the wonders of a treatment he received with a cocktail of certain drugs or the procedure of a certain hospital, there must be a mechanism for verifying the member’s truth. If it is not truth, his membership must be canceled.

You cannot use advertising as a revenue source while operating a recommender community. The early social networks that use advertising as their primary revenue channel—MySpace, Facebook, Bebo, Orkut, and others—are struggling with several inefficiencies. It is important to note that they are oriented toward younger people and, thus, are not role models for disrupting the antelope hunters and capturing their market capitalizations. In fact, these pioneers mistakenly use advertising as their primary source of revenue. That’s a no-no. It does not bring efficiencies to the providers of goods and services, and it does not bring efficiencies to consumers. It does the opposite: It wastes money and keeps prices high. Studying MySpace and Facebook will not train you in the gospel of how to create demonstrably viable economic social networks whose task is to solve the pain of high prices, dubious claims, inefficient delivery models, and terrible after-sale support. MySpace and Facebook do not build trust among their members, and the statements of their members are not verified. Wikipedia is the better model, but it, too, is a pioneer with ups and downs in its method of execution. The elegant recommender community, which is the subject of Chapter 1, is member supported; its mission is truthful exchanges of information that benefit the lives of its members; and it will solve the pain of its members.

One of the largest sources of revenues in recommender communities is the anonymized conversations of the members, their product ratings and reviews, and the slicing and dicing of the recommendations and conversations in monthly, quarterly, and annual reports sold to the producers of goods and services that need the data. I present you with 17 other revenue channels in Chapter 1, plus a business model of a very elegant recommender community that you are free to launch. I have another 500 in my head.

Perfect business models are always built on truthfulness. The more that truth flows between buyer and seller, the more perfect is the business model, the greater the trust, the loyalty, and the respect that grows between buyer and seller, and the more efficient is the marketplace. Efficient doesn’t mean “fair.” Taxes are used to redistribute wealth, thus making a market more fair, but less efficient. When economists say a market is “efficient,” they mean there is a way to make some players better off while harming somebody else. If Tiger Woods is taxed up to 40 percent of his earnings and his tax payment distributed to the other professional golfers, Tiger is worse off, while the other players benefit.

The youngest person ever to win the Nobel Prize for Economics, Kenneth Arrow, proved that not only are all truthful markets efficient, “all efficient outcomes can be achieved using a competitive market, by adjusting the starting position.” Politicians seize on this theorem all the time by taxing success, raising tariffs to support local industries, and granting subsidies to corn farmers (even though they are making a windfall on ethanol). Recommender communities will one day foil politicians who believe that “if it moves, tax it.” The recommender social network Rethos.com is on the right track. Advertising is a form of attempting to change the outcome in favor of the advertiser. But, advertising is not to be used in online communities. I will present 17 elegant revenue channels for you to use in Chapter 1, and none of them are advertising based; yet the advertising industry will be reborn as a strategic partner of recommender communities.

Your Recommender Community as Theater

It is a sumptuous impertinence, to quote Cyrano de Bergerac, to launch a social network; but to quote Shakespeare, a successful launch is more honored in the breach than in the observance. The goal of entrepreneurship is to make one’s enterprise a substitute for all others in the marketplace while making theirs no substitute for one’s own. In so doing, the entrepreneur will disrupt existing businesses while solving the pain of many and creating wealth for himself and the company’s early investors.

Think of yourself as an actor facing an audience of the most circumspect and negative critics—picture the food critic, Anton Ego, in the movie Ratatouille—and your task on opening night is to save the play and the theater, not merely to win a rave review. The gravitas of the moment, the continual, evolving drama that is the launch of your performance as the lead actor in the play entitled My Pain-Solving Social Network, must be imagined and featured as the most important thing you have ever done in your life. The rough, raw conditions of the start-up emphasize the primacy of the entrepreneur as actor—of the dramatic word made fresh by the living actors in an atmosphere of the highest communicative intensity. “Anything inessential in the writing and acting (not to mention set design, which has to be minimal) will not survive the extreme temperatures of this crucible,” to quote Harry Eyres, the Financial Times columnist. The recommender online community entrepreneur should probably have a background in theater and summer job experience in acting, door-to-door sales, or evangelical preaching; or if that isn’t possible, she needs to borrow those competences.

The winning online community entrepreneur will learn more from the styles of the great entrepreneurs of the 1960s—Ray Kroc, Kemmons Wilson, Debbie Fields, and Jean Neditch—than from the geek and geekette entrepreneurs of the Internet era. The peculiar greatness of recommender community entrepreneurs, of whom the readers of this book will someday soon, I trust, compose the majority, and the sense of the sublimity of the occasion stems from a delight in being alive at the right time and in control of events at a critical moment in history. You thrive on the instability of things.

The infinite possibilities of the unpredictable future offer endless opportunities for spontaneous moment-to-moment improvisation and for your large, imaginative, bold strokes that cause important events that change the course of history. It is your time. It is your moment. The floodlights are on you. Treat your recommender community as the theater it is: filled with your script, your clear, brightly colored vision of—and passionate faith in—your views. There will be attempts by big corporations to crush your start-up. Stand firm. You may be sued. So what? Be joyful that you have ruffled big industry’s feathers. Put this sign on your white board: illegitimati non carborundum est. And believe it. To quote your personal economic advisor, Joseph Schumpeter, “Corporatism may soften creative destruction but will certainly not bring it to a halt.” You will read more about the need to be theatrical in launching and executing the business models of recommender communities in Chapter 2.

Mimic the Bakers and Copy Starbucks

An understanding of the concept of scarcity and its opposite, nonscarcity, is vital to your success as a recommender social network entrepreneur. We pay a premium for scarce resources. Tune into the Antiques Road Show on PBS and you will see quilts and one-of-a-kind chairs valued at $25,000. An orchestra seat at the Santa Fe Opera goes for $150. A limited-edition Lamborghini sells for $160,000, and you will not have a wide choice of colors to select from.

Then there is the Internet. It is nonscarce resource. And its cousin, the wireless network, is so inexpensive that it, too, is a nonscarce resource. They are both ubiquitous. How then does one make a nonscarce resource scarce? How, then, does one convince other people to pay a price that will result in a profit to the owner of an online community, if every Tom, Dick, and Harry can offer the same thing by registering a domain name and having an online community builder such as OneSite put up a web portal? To put a fine point on it, how does one bring paying customers to the nonscarce web portal that you call your recommender community? And then, how does one bring in the second, the third, the fourth, and so on customers to your new, nonscarce social network?