I’ve recently listened to Dan Auriely’s Predictably Irrational. Among many interesting things, I’ve learned from it, the one that I would like to discuss with you is (i’m paraphrasing):
Every Man/Woman lives in two different lives simultaneously, 1) Social Life, 2) Market Life. What you do with your friends and family, comes under social norms, and, what you do with your clients, office mates, customers, comes under market norms. For example, if you help your friends/family build a company, most of the time you may giveaway a small amount of money, or give some money as loan, this happens because you are operating in social norms. But, when you talk with investors, both parties are interested in the best possible outcome for themselves. Invester may want equity. A price tag can be attached on everything, because you are operating in Market Norms.
This thought hit me like Triple H’s sledge hammer, because, I’ve been trying to make sense of all this. In a web user perspective, I always had this feeling, there are certain apps, that I would pay for and there are certain things I don’t like to pay. Let me explain, I like to pay for products like, basecamp, podio, github etc, because they are tied to my work. But, I may never pay for Google, Youtube, Facebook, Twitter, as a user, because those apps operate in social norms, they aren’t tied to my work.
Don’t get me wrong on this, I’m not talking about the social media buzz, I’m talking about how we humans operated for centuries. Wikipedia, Youtube are good examples of organizations that operate in social norms. Look at the amount of work people put into wikipedia, or free educational videos on youtube, every user wants to add value to a social place.
But, In an app that belongs in market norms, users pay for the product or service, but, only pay if they percieve the service belongs to their market side of being. I validated this thought, on seeing David Heinemeier Hansson talk about Highrise (I don’t remember exactly, I think it was from startup school Event 2008), which was first aimed at consumer market (social norm) for money, It didn’t work. Then they relaunched Highrise optimised for business. My point is, Even “Charge for your App” Fame, Basecamp people can’t get users to pay, since, People are not ready to pay for an app that belongs to social side of them.
So, How do social apps make money? By making others pay for their product (not users). Look at google’s money machine, they make money off of advertisers, who want to reach google search users. Again Google is the only big company that acheived keeping users in social norm, and still be successful, by utilizing the market side of things correctly. I don’t think, the code is cracked for social norm companies yet. May be, I’m wrong, educate me on that.
So, I’m curious. Where does your product belong? Social side or Market Side? Do you successfully sell products that belongs in social side? Do you agree with my analysis, at all? I’d love to hear your thoughts/opinions.