Is Orkut Disruptive

February 2, 2004

in Social Software

Hate it or love it it is hard to ignore. Drop out of the blogworld for a week and just start ORKUTTING your newsreader. Newsreaders make it so easy to catch up on posts and difficult to quote or capture them. From behavior to security breaches, Orkut growth appears to be continuing.

What intrigues me is the potential social networking software represents for disruptive innovation. It really clicked today when I saw Dave Winer’s comments on Orkut as Google’s identity system. Not that I believe that is the end game or the only one. Rather his example perfectly highlights how new value networks can emerge simply because a disruptive innovation is is creating a new context for competition and consumption.

The interesting thing about all the social networking services so far is they haven’t impacted (for the most part) on how business is done. So using Dave’s example the ad placement co’s, and (add to this) the direct mail companies aren’t taking an active role in their development. Similarly, the telephone companies don’t see them as new dialing systems, or the spammers a threat to access, or the retailers as a threat to buying power.

So what’s the test for disruptive market potential? Interpreted from Christiansen (The Innovators Solution)
First people have never before been able to aggregate their information in this type of fashion. So for the most part we’ve let the retailers do the buying for us, or the telephone company hold the numbers. These services were centralized but that centralization was location based and so is increasingly inconvenient. Information can use global nodes. Christiansen goes on to say that these type of market innovations are competing against “non-consumption” (in this case it wasn’t possible before at a price that worked). Then more importantly when critical mass forms they absorb or is it consume what came before. For example could evolved services consume e-mail?

In the dating area (constantly quoted) I’m pretty sure the overall dollar market has grown. What is disappointing is there are not more comments like Dave’s suggesting this is Google’s identity play. It may well be and then it might not. The point is not enough effort is going into understanding the disruptive nature of this technology. A year ago I got really excited when I decided to start digging deeper into Ryze, and what was happening with DIgital Identity. My view hasn’t really changed. Companies that want to prosper better take a long term view and not just at social software, but expand horizons to include communications and mobility. Frankly that’s what scenarios are for.

Questions remain on how to make money. The problem is primarily perspective. The models to date are typically based on subscriptions, rather than creating power for the emerging value network. Social networks are tied to information asymmetries. Not enough work is being done to identify where rapidly forming social networking services can change information asymmetries. When they do — their owners will be facilitating markets.

Dave is speculating on the uses of Orkut. If Orkut (or;any other premium service) provides a way for Google to get credit card information and other personal details (demographic data), it can begin the process of changing adwords to target keywords and user profiles. This would let them charge more for premium click-throughs and serve to differentiate their advertising service from all others. Scott Rosenberg wonders what’s the big deal with href=””>Orkut. Lots of people are wondering, me too. Like Scott, this is the first one I’ve joined, although I’ve been invited countless times to join Friendster, LinkedIn, etc etc. Like David Weinberger, I’m not impressed. It’s a puzzle, why would Google bother with this? Well, first, it doesn’t have to be very useful for Google to try it out. They’ve launched lots of speculative services that have failed to find users. This one is finding users. So what can they do with it? Easy. It’s their identity system. At some point they’ll add a web services interface so our comment systems can connect to their back-end to validate users. Now you can go to one place to see all your comments. Then it gets better. Give it your credit card info, and then when you go to an Orkut-enabled e-commerce site, you can have one-click ordering (modulo a certain patent). Think about all the relationships Google has with sites that run their ads. Even I run their ads on one of my sites, and it’s a pretty good deal, that one site pays for the bandwidth on all my sites. Anyway, that’s a ramble. The net-net — it’s Google’s identity system, and if you trust them, it can be yours too.

Previous post:

Next post: