Social media is a value exchange, and the exchange of value requires common currency.

In 2008, we conducted social media workshops for a number of clients. Below is Part III of the full-day presentation (also see Part I and Part II).

In Part III, we dive into the four types of social media currency. This may not be an exhaustive list, but it covers a broad swath of the social media economy.

Social media value comes in the form of various types of currency. Cash is not one of them.

Just as cash was once backed by gold, each of these is backed by corresponding value.

Time is a finite resource, and we all make value judgments as to how best to allocate it. As much as possible, we want to invest our time and get a return. The value proposition of many technologies is simply that it saves you time. Or perhaps you’re offering something of value in exchange for someone’s time. By and large, advertising is waste of one’s time. It’s disruptive with no discernible value or return for one’s time. The value of the exchange is entirely weighted toward the advertiser. It’s unsustainable.

One of the key metrics we track on the web is time spent. What’s the average time people are spending on my site? Based on this, we get a pretty good idea of engagement: the longer they spend, the more engaged they are. Of course, we have other metrics to tell us how they’re engaging, which is just as important.

Reputation is obviously something that you build. Each of us has a reputation among our friends and colleagues as individuals and professionals. But it’s not necessarily something you can measure. In the economy of the Social Web, it most certainly is.

In many ways, it is a Reputation Economy. Which means that you can build and leverage reputation capital. This is similar to the concept of brand equity, but it’s even more tangible.

The Google search algorithm is based on PageRank, which is an expression of a site’s reputation or importance based largely on the collective reputation of sites linking to it.

The Social Web has a similar set of metrics to gauge reputation and influence, and they are evolving every day.

Maybe you’re thinking, “Can’t I just buy influence ?” It’s possible. But if you look at something like Twitter, where it’s highly reputation driven, it would be very difficult. You could give $1 to everyone who follows you. After about $10,000 or $15,000 you’ll have as many followers as Guy Kawasaki. [Remember, this is 2008.] But how much reputation capital will you have generated? Zero.

Community is really an emerging type of currency. It’s not clear how it’s being traded or exchanged, but it’s definitely being leveraged. We included it because we think it’s relevant to this workshop.

Different types of communities: collective intelligence, social networking, social action, political action, and offline networking.

The most tangible and tradable currency on the Social Web is content. This is really what drives the Social Media Economy.

User-generated content is pretty self-explanatory.

Editorial is what we see in magazines, newspapers, blogs, and news programs. It’s the bulk of what’s consumed on the web, and a good portion comes from amateurs. The proliferation of editorial content on the Social Web is a big reason why newspapers today are floundering. On the Social Web, all content is created equal.

Branded content is professionally produced content with a brand message. It’s distinct from advertising in that it provides value, whether through information or entertainment. Our favorite all-time example of this is BMW Films, circa 2001.

Social media is a value exchange, and the exchange of value requires common currency.

In 2008, we conducted social media workshops for a number of clients. Below is Part II of the full-day presentation (also see Part I.).

The second part of the workshop introduces the concept of a social economy—the economy in which social currencies are exchanged.

The Social Web has its own economy. Like any, it’s based on value. But it’s not the same as the actual economy. It’s governed by a different set of economic principles, if you will.

John Battelle is a well-known blogger, entrepreneur, and thought leader in search marketing. We picked this quote of his because it speaks to our point about creating value.

Battelle wrote this on OpenForum. He’s one of their bloggers. The conversation he’s referring to is his own, and the underwriter is American Express. His point is that American Express is leveraging the value of that conversation (Battelle’s content) for its own brand. It’s providing value that goes beyond its actual products. When was that last time you saw an advertisement and thought to yourself, “Wow, that was really valuable and useful.”

Just as the actual economy was once based on the gold standard, the economy of the social web is based on the value standard. This begs the questions: How is value created? Who determines what is valuable?

These are some of the basic economic principles. We exchange value for value. Value is subjective, but it is also very real. Unlike the actual economy, where so much wealth was created in the absence of value, the principles of the Social Web are more strict. That also means that the creation of value by anyone benefits everyone. Creating value on the Social Web is an investment with a measurable return.

With all the skill it takes to sign up for an email address, you can start a blog or your own social network…for free. And this is where the trend is headed. Everything is getting more free, if that’s even possible. Chris Anderson is the editor of Wired and wrote the iconic book, The Long Tail. It describes a distribution curve and the new economics of the digital world. His next book is called Free, and it essentially builds on this new economic reality. This is the primary principle behind Social Media Currency. [Remember, this was 2008.]

Go to Part III

Social media is a value exchange, and the exchange of value requires common currency.

In 2008, we conducted social media workshops for a number of clients. Below is Part I of the full-day presentation.

Admittedly, we encountered many blank stares when suggesting social media success amounted to trading in various types of non-cash currencies. For the most part, these people were expecting tutorials on using Twitter, Facebook, YouTube, and blogs. And if we hadn’t gotten sidetracked with other projects, that would have certainly been part of the second workshop. But before one can understand how to effectively use these individual tools, one has to understand how and why they’re used in the first place.

This first section defines the social media landscape. We’d been using terms like Web 2.0, the social web, and social media fairly interchangeably. This attempts to clarify. Again, this was in 2008.

Web 2.0 is a technological trend. It’s driven by new technologies. These technologies have created new realities on the web. Our computing platform has evolved from the desktop to the web. The web is now the platform. Our browsers are now running applications: email, widgets, customer relationship software, word processing, spreadsheets, etc. Our data and software is being stored and accessed in the cloud. Our computers are becoming portals or access points.

Anthropologic Revolution = Greater levels of participation, interaction, sharing, customization, personalization, collaboration, and communication. Wikipedia and the election of Barack Obama are probably to the two greatest triumphs of Web 2.0. [To this point.]

When we make reference to the Social Web, we’re referring to a place. It’s its own universe or ecosystem. The above looks more like a Social Flower. Everything you see here is either integrated or interlinked. It truly is a web. This is where Web 2.0 and social media take place.

And when we talk about Social Media, we’re talking about the medium. This is the channel. This is how the information travels. By definition, the medium is people. Social Media is people. It’s human beings. We are the media.

Our blogs, our social networking profiles, our social graphs (our friends and contacts), our videos, our comments, our reviews, our wiki articles, our photos, and our tweets. All of this “media” is people. This is the anthropology of Web 2.0.

Go to Part II

Giving Twitter credit for effectively spinning off companies like Foursquare, Gowalla, Plancast, GetGlue, and Foodspotting.

Happy Days is one of the most successful and iconic sitcoms of all time. This idealized portrayal of life in the ’50s and ’60s ran from 1974 to 1984. It gave us the Fonz, the term “jumping the shark”, and a bevy of spin-off series. In fact, few shows have had as much success in spinning off other hit shows as Happy Days.

The shows Laverne & Shirley and Mork & Mindy each had successful runs and launched the careers of Penny Marshall and Robin Williams respectively. Then there was Joani Loves Chachi and the less successful career of ’80s teen idol Scott Baio. In each case, the main characters were introduced and developed on Happy Days. Audiences got to know them. Producers undoubtedly tested them for breakout potential, and the spin-off shows debuted with built-in familiarity. By and large, the same phenomenon is happening with Twitter.

Yes indeed, Twitter will be remembered not only for its own success but for that of so many successful spin-offs including Foursquare, Gowalla, Plancast, GetGlue, and Foodspotting to name a few. To be clear, we are not referring to the cottage industry of companies built on the Twitter platform such as TwitPic, TweetDeck, or TweetUp. These are part of the broader Twitter ecosystem. They’re part of the main show. The companies we have in mind are entirely independent of Twitter but were spun off based on the behaviors Twitter pioneered and made popular.

How is this possible? Well, the Twitter platform is as simple as it is brilliant. It appeals to our narcissistic tendencies. It is the lowest common denominator for most of the connected universe, a place to voice our opinions and potentially have them affirmed. It’s a place to vent and promote and seek acceptance. It’s no wonder how successful it’s become nor how much influence it’s had on how people use Facebook. The problem is that the Twitter platform (nay, the Twitter experience) is a mile wide and an inch deep. It does so much in terms of sharing and linking information that it’s impossible for Twitter to satisfy our deeper needs—to satisfy every narcissistic niche, if you will. It simply lacks the features and infrastructure. So quite naturally, new companies have responded to the demand. Here are five that fit the bill.

Foursquare and Gowalla

Before there was Foursquare and Gowalla there were tweets about your current location. Isn’t that what a checkin is? It’s a tweet about where you are at the moment, yes? If you tweet that you’re at the Starbucks on Main Street, those who (a) know you, (b) follow you, and/or (c) live near you will know exactly where you are. They certainly don’t need a map, and you never needed a badge or mayorship to prompt this type of tweeting. It followed naturally from the question, “What are you doing?” The problem is that Twitter does a thousand other things. It’s impossible to see only tweets about your friends’ current whereabouts. Hence, the need for services like Foursquare and Gowalla, which include very specific feature sets that make checkins, i.e. tweets about where you are, more useful and meaningful. These services go deep into this vertical tweet niche. So it ought to be acknowledged that the rapid success of Foursquare and Gowalla has a lot to do with the behavior Twitter established. Dodgeball? Sorry, the widespread consumer behavior wasn’t established there.

Plancast

Plancast lets you broadcast your future whereabouts i.e. where you’ll be at a particular date and time. It could be within the next couple hours or several months from now. Your friends see this, and they can essentially RSVP to be there with you. It’s a handy social utility. But a “plan” is really just a tweet about where you’re going to be. Plancast has institutionalized this specific category of tweet by creating a feature set designed for this purpose. Again, we were already engaging in this type of activity. Like the characters in a Happy Days spin-off, we were already familiar with it. It just needed to be productized and packaged accordingly to make it more useful and effective.

GetGlue

GetGlue takes the “checkin” in a whole new direction. Instead of physical places, it enables users to check-in to movies, TV shows, books, video games, etc. Pretty much any type of media. The idea is that you can see others, including friends, who are watching the same show and join a conversation about it in real time. In fact, this is one of the first ways we used Twitter. We’re big fans of The Daily Show and Colbert Report. As we watched these shows in 2008, we’d tweet out various quotes and zingers. Others would respond, and we’d have a conversation. This type of Twitter activity became most pronounced during the 2008 presidential debates, where we’d follow specific hashtags and both CNN and Current TV would display tweets on screen. Now that Twitter has exploded in size, it makes a lot more sense to engage in this type of activity with a dedicated service like GetGlue. Once again, though, Twitter established the behavior and paved the way for GetGlue’s success.

Foodspotting

Foodspotting has productized the most vocal critique of Twitter. Who cares what you’re having for breakfast, lunch, or dinner? Well, if you focus in on these types of tweets and add both photos and places, then you have the makings of a valuable service. With the exception of Denny’s and most Thai restaurants, menus don’t typically have pictures, much less consumer reviews. Foodspotting could provide a crowdsourced, virtual menu for any and every restaurant in the world. Just open the app, select the restaurant, and browse images. Its success, of course, will be traced back to those annoying what-I’m-eating tweets.

Conclusion

As with Happy Days, Twitter was the first to introduce the above characters, which have each gone on to become their own show. We became familiar with them and established certain affinities. In studio terms, they tested well. So it should come as no surprise that, like Laverne & Shirley or Mork and Mindy, they’re realizing some success.

It should be noted that these Twitter spin-offs have also built audiences by enabling users to push their activity to Twitter (and Facebook). If you’re building a service based on a vertical tweet niche, it’s only natural that it serves as a Twitter proxy. The problem is that this does nothing for Twitter’s noise and relevance issues. The great potential of isolating these activities on dedicated services is that they no longer have to clutter our Twitter streams. If we want to know where our friends are, where they’re going to be, what they’re watching, and what they’re eating, we can now use Foursquare/Gowalla, Plancast, GetGlue, and Foodspotting respectively. Otherwise, we’ll continue to use Twitter for…well, all of the other things we use Twitter for. That is, until some other tweet niche gets spun off into its own dedicated service.

What other services have been spun-off from Twitter in this way? What others might be spun off in the future? Feel free to speculate in the comments.

This post was written by Rob Reed. He is the founder of MomentFeed, a location-based marketing, strategy, and technology firm.

Location technologies are transforming how we experience, navigate, and ultimately better our world. From the global to the local, here are #10Ways geolocation is a positive force for good.

Social media has changed the world. It has revolutionized communications on a global scale, and the transformation continues with every status update, blog post, and video stream. The global citizenry has become a global network.

Since becoming widely adopted just a couple years ago, social media has supercharged social action, cause marketing, and social entrepreneurship. Indeed, the true value hasn’t been the technology itself but how we’ve used it. Today, a second wave of innovation is defining a new era and setting the stage for change over the coming decade.

Mobile technologies will extend the global online network to anyone with a mobile device while enabling countless local networks to form in the real world. We’ve decentralized media production and distribution. We’re doing the same for energy. And we’ll continue this trend for social networking, social action, and commerce.

The combined forces of smartphones, mobile broadband, and location-aware applications will connect us in more meaningful ways to the people, organizations, events, information, and companies that matter most to us—namely, those within a physical proximity of where we live and where we are. Can location-based services (LBS) change the world? Here are #10Ways:

1. Checking in for Good: If Gowalla and Foursquare have taught us anything, it’s that people respond to simple incentives. By offering badges, mayorships, and other intangible rewards, millions of people are checking in to the places they go. Apps like Whrrl take this a step further and enable like-minded “societies” to form on a local basis. The next step is for these apps to add greater purpose by encouraging more meaningful checkins and offering corresponding badges and stamps, thus mapping the cause universe. Or for a dedicated app to be developed that rewards conscious consumption, social responsibility, and civic engagement. Yes, the CauseWorld app features a cause element, but it’s not about cause-worthy places.

2. Eating Locally: Sustainability demands that we source our food as close to its point of production as possible. Many so-called locavores subscribe to the 100-mile diet, which requires that one “eat nothing—or almost nothing—but sustenance drawn from within 100 miles of their home.” Given the difficulty of accessing and verifying this information in order to live by this standard, there’s a geo-powered Locavore app. It gives you info on in-season foods, those coming in-season, farmer’s markets, and links to recipes. This rather simple app is clearly just the start. In time, location-aware apps will guide us not only to the grocery store or farmer’s market but through them. All the while identifying foods based on our particular diet or sensibility.

3. Political Organizing: In the next presidential election, politics will not only be local but location-enabled. We saw the power of social media in Obama’s 2008 landslide victory. In 2012, location-based apps and technologies will play a central role in how campaigns are organized, managed, and ultimately won. Much of this will be visible through mobile apps and location-aware browsers. Activists and volunteers will be more empowered. Voters will be more engaged in the moment, right down to casting their votes. Behind the scenes, though, we’ll see massive new sets of data available to campaigns for targeting, empowerment, and optimization. The party, candidate, and/or cause that has the best handle on geolocation will have a measurable advantage. (The Elections app will soon be updated for 2010.)

4. Finding Green Businesses: The web has effectively replaced the paper Yellow Pages as a way to find local businesses and services. However, this “stationary web” experience is quickly being supplanted by the mobile web and mobile applications, which give us access to this information when we most need it. The Yelp and Around Me apps are popular ways to find restaurants, coffee shops, or hotels wherever you are, but what about green-rated businesses? Greenopia has transformed its printed, local guides into a dynamic, nationwide mobile application that lets you find local, green-rated businesses in any category. No more paper and a much better experience. The Green Map app is another that facilitates discovery and connects us to local green environments.

5. Traveling More Efficiently: We’ve had access to GPS navigation systems and static traffic information for some time, but only now are we seeing the full potential of these technologies. With access to more detailed traffic information that is specific to your route and updated in real time, we can minimize congestion and maximize traffic flow (as much as physically possible). The new turn-by-turn MapQuest 4 Mobile app is a good start, as you can get traffic alerts specific to the route you program. However, user-generated information from apps like Trapster and Waze can crowdsource more specific details, such as whether to avoid an intersection due to a toxic chemical spill. Or, if you want to avoid automobiles altogether, Google Maps makes it easy to use public transportation and take a bike.

6. Scanning for Ethical Products: With online shopping, we’ve become accustomed to reading reviews and making comparisons before we buy. This can now be done in the physical world through games like MyTown and services like Stikybits. By scanning a product barcode using a smartphone camera, you can unlock a treasure of additional information (not to mention deals) that can help with your purchase. This might include where it was produced, how far it traveled, the reputation of the manufacturer, chemical contents, carbon footprint, or the full lifecycle analysis. Location-aware applications can also transform commerce itself by giving us better access to local inventories and locally-produced goods. Whether it’s fruits and vegetables or books and electronics, if something can be found within blocks of your current location, it makes no sense to ship it from afar.

7. Networking Neighborhoods: One of the hottest categories in geolocation is neighborhood networking. The vision for many of these apps is to strengthen the very fabric of our communities. With DeHood, you can keep track of what’s happening in your neighborhood, share your favorite places, and grease the wheels for actually meeting people. After all, if you’ve made contact through the app, it’s a lot easier to say “Hello” in the real world. Blasterous is another that lets you share information locally, whereas BlockChalk does this on an anonymous basis. Finally, NeighborGoods uses your street address to facilitate one-to-one borrowing and trading of useful stuff. In the end, making connections with your neighbors can lead to safer, more productive, and more sustainable communities.

8. Tracking Environmental Disasters: The size and scope of environmental disasters appears to be growing. In 2008, we had the Tennessee coal ash spill, which was billed as “the largest environmental disaster of its kind in the United States.” And that was before we realized it was three times bigger than originally estimated. More recently, the BP oil spill set daily records for “largest environmental disaster in the U.S. ever.” In each case, geolocation technologies can be used by engaged citizens to monitor and track the effects. They can be used by response teams to coordinate containment and cleanup efforts. Ultimately, these technologies can be used to accurately measure the size and impact of a disaster in order to better understand its damages and costs.

9. Viewing the World Through an Eco Lens: Augmented reality (AR) follows geolocation as one of the hot trends in mobile technology. It enables you to view the world through a smartphone camera (or similar device) and see layers of geo-specific content or information. One of the most popular apps is Layar, an augmented reality browser/platform that lets you choose specific data layers or experiences. The potential for green- and cause-related content is tremendous. You might view green-rated businesses, LEED-certified buildings, or virtual GHG emissions as they enter the atmosphere. Combined with smart meter technology, you could see the most efficient and inefficient homes around you in real time. And for the cynics among us, you could view our mountains, forests, rivers, and oceans as they once were…before the effects of climate change and so many environmental disasters.

10. Capturing the Moment: Better access to information about what’s happening around us—right now—can dramatically improve quality of life. This sense of “geospatial awareness” is possible through today’s smartphones, whereby a piece of content or information—a moment—is captured and preserved based on the unique time and place in which it occurred. It is essentially to document spacetime. Protests, natural disasters, sporting events, parties, political crises…real-time information about anything happening anywhere at any time, as well as the history of what happened. This will take several years and a number of different applications to realize. In the end, though, it will revolutionize how we access and consume content. It will complete the democratization and decentralization of news and information…based on time and location.

Cautionary note: Privacy is the single biggest issue in the LBS industry. It’s important to understand what information you are sharing with regard to your location and with whom.

Author’s note: We’ll be hosting geolocation events for Social Media Week in Los Angeles this September. This is the third in Max Gladwell‘s #10Ways series of distributed blog posts. It was published simultaneously on as many as 300 blogs.

The upcoming Geo-Loco conference has one question for attendees: Is Location a Business or Feature?

We’ll be attending the first annual Geo-Loco conference in San Francisco on July 21st of this month. The event will focus on the intersection of marketing and location-based services (LBS) such as Foursquare and Gowalla. Organizers of the event describe geolocation as “the next big thing in advertising, social media, and discovery,” and we couldn’t agree more. This is the new frontier, and it is evolving at warp speed.

The question posed by the organizers is a common refrain when it comes to new and emerging technologies. The excitement and newness can be blinding, so it’s essential to delineate between features, benefits, products, and full-on businesses. We should keep in mind, however, that these can be dynamic states that change over time.

We initially asked the same question of social networking. Indeed, in 2007, Sergey Brin dismissed Facebook as a feature not a product. At the time, he may have been right. Today, Facebook is doing more than just proving it’s a business. It is challenging Google’s dominance. By the same token, Facebook is a helluva lot more than a social network.

As we consider this fundamental question, it ought to be viewed through the lens of creating and sustaining meaningful value—not to mention doing so from a defensible position. If a feature does that, then it’s quite likely a product and quite possibly a business.

When it comes to the LBS or geolocation space, the bulk of the hype has been focused on geo-social apps like MyTown, Loopt, Brightkite, and the aforementioned. Each takes a slightly different approach. Some emphasize social as a utility to stay in touch with friends on the fly while others employ game mechanics to encourage adoption and frequency. Each service is essentially a list of features and benefits that (hopefully) constitute a compelling product that can be leveraged into a business. One of the key differentiators (and a way to address the feature-business question) is the respective feature hierarchy of each. All of the geo-social services include location as a feature, but where does it fall in the hierarchy? If it’s the #1 feature, then it’s likely that a business needs to be built around that feature (just as Facebook was built around social networking). On the other hand, if the #1 feature is a game or publishing platform that happens to be geo-enabled, then location may be a necessary element, but it’s not the entire business.

At the opposite end of the LBS spectrum is SimpleGeo. The company provides backbone technology for location-based services i.e. the picks and shovels for the geolocation gold rush. The product here is data and data infrastructure. Location is a universally shared quality or feature of that data. In the hierarchy of features, then, location is #1 for SimpleGeo. Which means that the business is almost entirely based on location. It’s a clear case of location as a business.

Another way to approach this question is in terms of benefits. The value of a product is essentially the sum of its benefits, which can be tangible and intangible, utilitarian and emotional. If a location-based service was to quantify that value, what percentage would be derived from location? The answer is certain to help in determining location’s spot in the feature hierarchy and whether or not its in the business of location.

The simple answer to the question is that location is definitely a feature, possibly a product, and potentially a business. It all depends on how you use it and where it falls in the hierarchy.

By Tom Savage of Bright Green Talent, Tip the Planet and Simpletom

I’ve often said that the environmental movement needs convenient actions, not inconvenient truths. Said differently, many of us have a sincere ‘will’ to change our planet, but are not not sure of the most effective ‘way’ to do so. When you couple this with the environmental preachers out there, who are quick to chastise us – it’s not surprising that there is a sense of apathy. The more ardent campaigners find it hard to understand why the majority of us are not more environmentally contentious – yet for most of us, environmental conscientiousness competes against a plethora of other forces within our daily lives.

In addition, there is often disagreement about how one should act. If we try to be green, yet we’re still criticized, it can lead to people giving up trying, rather than trying harder. If we hear rumors that hybrid vehicles are actually less efficient, because of the dangerous chemicals in their batteries, or the increased energy consumed to build them – whether this is true or not – it can lead to a sense of hopelessness. If we’re told that we shouldn’t fly, yet we have family or work abroad, it often merely serves to make people give up trying, rather than flying.

Rather than making us feel guilty about what we’re not doing, it’s important to make going green easy, even easier. We need to uncover and promote actions and activities that are convenient. We need to find out which airlines are the greenest, and try to fly with them, or put pressure on those that aren’t to change. We need to make flying green, rather than telling people they can’t. We need to determine which cars are the best to drive, the cheapest to run AND the best environment. Only when it works for consumers, will we see real change.

Ignorance often stands in the way of people’s desire to do ‘the right thing’, or prevents people from realizing how simple it is to make small beneficial changes to one’s life.

With this in mind, I want to draw your attention to Tip the Planet. Started a few years back, I wanted to create a user-generated central place where people could put tips and more information about environmental issues and actions. Since then, I’ve hardly touched the site and yet more and more people have started to edit the site. For example, someone who wanted to share their knowledge, went wild on the ‘air-dry washing‘ page, and suddenly we’re number one in Google. Although the pages don’t look pretty, every time I go back to an edited page, I discover that someone else has added a link to a new site, or a piece of information. In time, and through the power of wiki technology, the information will get better and better. If one person shares a tip they’ve uncovered which proves convenient and a thousand people implement it, suddenly we’ll start to see change occur on a bigger and bigger scale.

So, if you’re looking for solutions rather than problems, or want to share your experiences, take a look and help spread those conveniences, rather than lament the inconveniences.

The combination of smartphone technology and mobile broadband have lead to a brave new world of opportunity and possibility. It’s nothing short of a panacea. This is Internet 2.0.

It’s been more than a year since we wrote about the New and Improved Matrix, a discussion about the paradigm shift of being perpetually connect wherever we are and how the Web is being applied to the actual world. These trends are being driven and accelerated by the proliferation of smartphone technology and mobile broadband. It represents a tremendous opportunity, to be sure, but most still don’t realize its true magnitude. To get a better feel for what’s to come, it helps to understand the landscape and what is really happening in the market.

Though we’ve heard about the “mobile web” for many years, there wasn’t much excitement about its immediate potential. One could envision the day when accessing the web from mobile devices would create new opportunities, mostly in advertising. Then along came smartphones (mini computers) and mobile broadband. Naturally, people assumed this would lead to increased use of the mobile web. This amounts to not seeing the forest for the trees.

A recent Fortune interview with the CEO of Ericsson highlights how even industry leaders largely missed this:

Wireless phone companies and equipment manufacturers totally underestimated the potential of their own industry, says Ericsson (ERIC) CEO Hans Vestberg. Now he and his company are preparing for a totally interconnected world in which billions of consumers — and machines — talk non-stop to one another via wireless networks.

It’s not about the mobile web. It’s about something entirely different.

Early last year, we joked among friends about how big the opportunity would be to create a parallel Internet. What if that was your business plan and you could pull it off? It would be a trillion-dollar opportunity. What if there were a parallel online universe with all of the same opportunities as the original Internet and you owned it all? You could sell sex.com and business.com. You could build another Amazon and Google. It turns out that this is precisely what smartphones have enabled.

The conventional view of the mobile web consists of accessing the Internet from a mobile device. The Smartphone Web (as we call it) is entirely different. It is a new online universe unto itself, which is largely created and accessed exclusively through smartphones. This is where most have gotten it wrong and why the magnitude of the opportunity has caught so many by surprise. Indeed, a lot of smart people are still trying to wrap their heads around it.

To be clear, this isn’t to suggest that the Smartphone Web and the Internet are mutually exclusive by any means. Rather, it’s a bit like how the Internet was built on top of the electrical grid and powered by computers. The Smartphone Web is built on top of the Internet and powered by smartphones. The two are indelibly linked. The parallel nature is driven by the fact that the Smartphone Web necessarily integrates the real world. Through geolocation and augmented reality technologies, the real world is an essential part of the Smartphone Web. Whereas the Internet is largely a virtual place, the Smartphone Web is both virtual and real. It’s virtual on top of real. It’s the size of the Internet plus the size of the real world. It’s a big f’ing place.

To stick with our initial analogy, could you build another Amazon on the Smartphone Web? We think so. What if there were an app that let you browse real-time book inventories for all book stores around you (including tiny niche players), make a selection, and purchase it. You walk a couple blocks to the store, and it’s waiting for you at the checkout area. This can apply to any type of commerce. And in many ways, it would also be more sustainable by reducing shipping needs and accessing locally produced goods.

Can you build another Google on the Smartphone Web? Certainly. This is a new and largely real-time environment in which physical locations are digitally connected. The link structure may end up being vastly different on the Smartphone Web.

In short, the Smartphone Web is every bit as disruptive today as the Internet was in 1994. Today, smartphones represent only 15% of all mobile phones in the U.S. If our analogy is sound, it means this is like the days when only 15% of U.S. households had Internet access. Yes, that’s a huge opportunity. Plus, the playing field is quite level. Just as Barnes & Noble was caught by surprise and had little competitive advantage over Amazon, established companies on the Internet today have little advantage over startups on the Smartphone Web. Just as the world of Amazon was fundamentally different from the world of Barnes & Noble, the world of the Smartphone Web is fundamentally different from the world of the Internet.

So if you’re thinking about starting an Internet-based business and realize that the space is crowded, ask yourself whether a similar business exists on the Smartphone Web. These are where the biggest opportunities of the next decade will be found. Indeed, it’s quite possible that this sector alone could spark enough economic growth to get the country (and world) back on track.

April 2nd marks the start of the Max Gladwell New Year. It is our second anniversary and the first day of MG 02. First, we look back on the year that was MG 01.

The Max Gladwell calendar resets tomorrow and marks the start of a new year. The last 12 months have been interesting to say the least. It feels like part of a larger transition phase on many levels…economically, politically, and technologically. Health Care reform passed by no small miracle. The tech hype centered around the iPad, and the economy is getting back on track, albeit more slowly than most would prefer.

At the start of MG 01, we wrote up 10 Predictions for the New Year. In this reflection post, we’ll review those and see where we got it right and where we were perhaps too optimistic or naive.

1. We said, “We’ll pull out of the recession and start to thrive by year’s end (MG 01).” At that time, we were just starting to see the green shoots of a recovery. It’s pretty clear that the recession is technically over, but it’s far from thriving. We’re experiencing a jobless recovery. Wall Street and the tech sector have gotten back to business, but the rest of the nation is still struggling with double-digit unemployment in many states. The nation needs a major shot in the arm from cleantech and broadband (terrestrial and mobile) to encourage sustainable job growth. Nevertheless, we accurately predicted that any sign of a housing recovery amounted to a false bottom, as the market continues to decline in nearly every region of the country. We won’t see a bottom until some time in 2011 (MG 03), and even then it will be flat thereafter. Renting will be economically preferable for some time.

2. We said, “We’ll take meaningful action on climate change.” Alas, health care reform dominated the legislative agenda. Meanwhile, the global recession has undermined the support and sense of urgency with regard to the carbon problem. The best way to get back on track is to first solve unemployment and return to solid economic growth. Many would argue that a climate change bill that prices carbon will naturally have this effect, and we agree. But it won’t happen quickly enough to gain the support such action requires.

3. We said, “Oil will shoot back above $100/barrel as the global economy turns around and U.S. inflation kicks in.” This was perhaps a bit premature. The economic recovery hasn’t been as brisk as one might have hoped. Nevertheless, the threat of inflation and a spike in energy demand still looms, which will surly take oil back to triple digits. The one sign of hope, however, is the promise of a new gas tax in the Kerry-Grahm-Lieberman energy reform bill.

4. We said, “MySpace will finally offer a webmail service (yourname@myspace.com).” Whatever. MySpace is the biggest joke of Web 2.0. It’s legacy will be a lesson in how to destroy a front-running company and how users (customers) are ultimately in control of a company’s success or failure.

5. We said, “It’s seems inevitable that Twitter will be acquired.” Wrong. Instead, the company entered the mainstream with help from celebrities like Ashton Kutcher, Shaq, and Oprah. It became profitable with deals from Google and Microsoft. It also became a global phenomenon. Unfortunately, Twitter’s growth and success make it increasingly more difficult to find value and relevance. It’s possible that Twitter is too simple for its own good and that its lack of structure undermines its ability to scale. The value we get from Twitter appears to be inversely proportional to its growth trajectory.

6. We said, “Twitter rivals will likely emerge. As micro-blogging becomes as popular as social networking, Twitter will become too generic and one-size-fits-all for many.” It took the whole of MG 01, but Foursquare has certainly emerged as a viable threat with more 600,000 registered users in its first year and a solid foothold in the geolocation space. Ironically, Foursquare leveraged Twitter in achieving this success.

7. We said, “The mobile web is truly the new frontier, but it’s not confined to the online environment. Geo-location is the new local, and offline is the new online.” This prediction was spot-on. Thanks to smartphones and mobile broadband, we’ve entered a new era of technological growth, innovation, and entrepreneurship. More on this to come.

8. We said, “The iPhone will dominate like no other phone in history,” and “Apple will see $200/share.” On that day, AAPL was at $116/share. If you’d gone long and stayed there, you’d have doubled your money to $232 as of yesterday. And while the iPhone continues to dominate with 25% of the smartphone market, Google’s Android platform is growing by leaps and bounds.

9. We said, “Social media will be added as coursework at leading universities with majors and advanced-level degrees.” This hasn’t generated a lot of headlines, but the point is that social media is now squarely in the mainstream. It’s nearly ubiquitous, and this happened in MG 01.

10. We said, “[President Obama's] approval rating will not dip below 50%.” This was ultimately inaccurate by a few points, as we couldn’t foresee the lengths to which the Republicans would go to shoot themselves in the foot to spite Obama and the Democrats. When the Republicans were in power under Bush, the Dems gave them plenty of rope with which to hang themselves, and that’s precisely what they did. The Republicans aren’t willing to do the same. But what are they afraid of? That Obama’s policies might be popular and successful? If the GOP was confident enough in its own agenda and ideology, it should be willing to allow the majority’s agenda to play out and let the People decide. They don’t have to agree with it or vote for it, but simply trying to block it for the sake of blocking it makes no sense, politically or otherwise.

Enjoy the Max Gladwell New Year’s Eve tonight. We’ll follow up in couple days with our predictions for MG 02.

Photo Credit

Editor’s note: We’re pleased to welcome Arun Mathur of Smart Grid Citizen as a new guest blogger. This is an exciting space with tremendous opportunities for entrepreneurs. Thousands of smart meters are being installed and activated every day. We’ll see plenty of innovative approaches to utilizing them in the coming years.

In the 20^th century the goal was to electrify America.  Electricity was to be made widely available, reliable, and cheap.  Today, as we approach the limits of our current power generation and distribution infrastructure, the focus has shifted to making our energy ecosystem greener and more efficient.  Welcome to the smart grid.

With 40% of total energy consumption coming from the residential market, getting consumers to reduce their consumption, particularly during peak times, is an important part of the energy efficiency equation.

In What’s in Store for Consumers, I presented a long list of home energy management (HEM) solutions.  The mechanisms used to influence our energy consumption behavior vary with each solution, however they all fundamentally start by giving us better information that we can hopefully act upon.  And, that’s a good thing.  Consumers cannot consistently conserve energy without a better understanding of their current energy consumption profile.

The effectiveness of these solutions will be measured on many levels, but I posed two critical questions for which all of these solutions will eventually require verifiable answers:

1. How effectively can the solution meet a desired cost/benefit value proposition?
2. For how long can the solution sustain its positive influence over our energy consumption behavior?

Thus far, amidst a bevy of players touting their high-tech wizardry, OPOWER may be the only company holding a pair of aces.  And, they’re succeeding in engaging consumers in a distinctly low-tech way.

O, How ingenious

OPOWER’s breakthrough is a remodeling of the standard monthly utility bill into customized energy efficiency reports.  These new electric utility bills engage customers to make better choices about their energy consumption using neighbor comparisons and personalized, targeted energy-saving recommendations.

OPOWER’s Neighbor Comparison reporting is an important component of the bill, and has become the sweetheart topic of the press.  In spite of maintaining the privacy and personal information of its customers, OPOWER has still been successful at changing consumers’ energy consumption behavior.   You can find various examples of the signature story line in a long list of prestigious journals including The New York Times, Wall Street Journal, Business Week, Time, USA Today, The Boston Globe, Los Angeles Times, and The Washington Post.

Actually, ‘peer proof’ tactics and experiments in social science are nothing new.  What’s rather unique however, is that OPOWER has proven that it can cost effectively scale its model to tens of millions of customers with consistent results: 2 – 3.5% savings, 85% customer engagement, and with sustainable impact (their longest running program is still delivering consistent and improved results after two years).

Compared to all other home energy management and control solutions available, nothing has come close to delivering the same results.  Consider the following chart that compares the current standing of OPOWER with most every other Home Energy Management solution:

Low Tech vs. High Tech

To be fair, the chart above can also be viewed as a low tech vs. high tech approach to engaging customers in more energy efficient behavior.  In many respects, a low-tech, paper-based approach would naturally engage a greater number of people because they’re already accustomed to receiving monthly utility bills.  Conversely, all new capital intensive technologies face challenges in establishing a compelling value proposition.  Moreover, these high-tech solutions are all subject to the innovation adoption curve (see Rogers Technology Adoption Lifecycle model).

In truth, there exists great potential for the high-tech camp to deliver substantially more savings for consumers.  Unfortunately, in the highly regulated utility industry, the challenges of establishing a compelling value proposition and accelerating consumer adoption are made even more acute.  Consequently, it’s unlikely that we’ll see a successful, scalable model established for the high-techs anytime soon.

O, So powerful

For now, the question is not whether there will be a place for more robust home energy management systems with in-home displays, or whether or not high-tech HEM providers can work alongside OPOWER.  The question is whether HEM solution providers can establish a compelling value proposition before OPOWER has the same capabilities.  As it stands, OPOWER has significantly more credible, geo-coded peer data then any other provider.  Their customers include 6 of the 10 largest utilities in the country plus 19 others.  They have an online energy and community portal that rivals the best in the market.  Additionally, their home energy management reports are already being extended to digital in-home displays.  Finally, with each new customer, their system becomes more intelligent and powerful.

In the months ahead, OPOWER will be expanding its paper-based model in even greater numbers while dozens of other companies test and refine their high-tech platforms in small pilot programs.  Over time, this situation has the potential to marginalize other solutions that do not offer something unique and impactful.  In my previous post, I also mentioned that integrated solutions offering more than just home energy management, and automated solutions such as EcoFactor will have a better chance of weathering the competition and establishing partnerships.

No bag of simple mind tricks

I recently had a chance to speak with OPOWER’s Senior Director of Marketing and Strategy, Ogi Kavazovic.  I was intrigued to learn that the application of behavior based energy efficiency is actually a small part of what they do.  You certainly would not get that impression from reviewing their management team.  They’ve hired Dr. Robert Cialdini to work exclusively with OPOWER as their Chief Scientist.  Dr. Cialdini is widely regarded as an expert in the fields of persuasion, compliance, and negotiation.  If you’d like to better understand the reasons why people comply with requests, add his bestseller to your reading list:  Influence: Science and Practice.

To Mr. Kavazovic’s point, the simplicity of the smiley faces and charts that appear on OPOWER’s paper-based energy reports are very much a part of the solution’s beauty.  At the same time, the magic is in the engine that’s used to create them.  No two energy efficiency reports will look the same.  Aside from providing specific energy consumption data, OPOWER’s data engine crunches your usage stats, provides customized tips, and delivers highly relevant cross-reference comparisons with other households of similar size, energy profile, and demographics.

Grid CRM

Mr. Kavazovic also described OPOWER’s ability to fulfill the need for an enterprise class Customer Relationship Management (CRM) solution specific to the utility industry – a “Grid CRM” platform that can be used to successfully engage with all customer segments, regardless of income, age, educational level, or access to technology.  This is a critically important observation.  For the last 50 years, utility companies have not been in the business of developing relationships with their customers, educating them, or engaging in meaningful dialogue.  In the utility industry, customers are often referred to as rate-payers.

Now, with energy efficiency mandates (20 states have adopted Energy Efficiency Resource Standards), utilities need a majority of their customers to act more conservatively with their energy consumption.  OPOWER provides an effective way for them to do this.

Utility companies will also need to engage with customers and effectively communicate the introduction of many new smart grid developments including smart meters, time-of-use (TOU) rates, demand response (DR) programs, and more.  Having a proven engagement platform to communicate these changes will be essential.  Moreover, OPOWER can deliver this functionality with the benefit of a customized-household approach.

Obama’s praise

On March 5^th, President Obama stopped by OPOWER’s headquarters in Arlington, VA to deliver a televised speech on Energy, Jobs, and the Economy.  President Obama commended the company on its achievements in energy efficiency and their ability to generate new jobs in the clean energy sector.  You can watch the video of President Obama’s speech and view the entire transcript here.

To date, OPOWER has saved over 90 million kilowatt hours.  This translates to an excess of $10 million in savings for consumers and an abatement of over 130 million pounds of CO2 from the atmosphere.  These are indeed fantastic sums that deserve hearty praise.  And, while the smart grid sector remains no less competitive, OPOWER’s success should give inspiration to other leaders needed in the 21^st century energy economy.  And who knows, the President just might stop by to thank you if you’re among them.

In this article we depicted OPOWER as a superhero of sorts.  While you could draw analogies that OPOWER is the guy to beat, the reality is that this superhero will need more Superfriends to combat the numerous challenges we face in climate change, energy independence, and creating a cleaner, greener world for the future.  Who’s your superhero? Send in your vote and we’ll work on illustrating a team.

Illustration by Damir K. for Smart Grid Citizen