Understanding the Changing Web Economy

You know how you look back sometimes and wish you'd paid more attention in school? I've been having those moments lately as the conversation has turned toward the Web Economy. Its not that I didn't like or didn't pay attention to Mr. Gipson during Ecom class, I just didn't understand the application to real life. Well, now I know.

20090805-used-car-dealerThe Old (Current) Web Economy
As the Internet has been maturing, our first forays into business online mimicked those of our off-line exploits. Following the rules of the industrial age, it was based on a scarcity mentality... get our products to market first, be the best, horde all the customers and put everyone else out of business. That approach worked really well when, for instance, you were the only car dealership in town. You had a captive audience. It was great!

But now that geography is no longer a limiting factor, the scarcity approach isn't working as well. You can go to any number of on-line car dealers, find the car you want, with the features you want, at the price you want and have it delivered to your door. Now, instead of having to get a lock on the local market, business owners now have to lock the world market... a slightly more difficult task!

On-line, the Old Economy is characterized by premium content, pay walls and exclusive distribution agreements. These are all on-line attemps to emulate the off-line practice of cornering the local market.

Enter the New Web Economy
The New Economy is driven by abundance rather than scarcity. Its about finding your niche and being the provider of choice for that niche. Continuing the car dealership example, be the world's leading authority of 1996 Jeep Cherokee Classics. You can't corner the world market on cars, even Jeeps, probably not even Jeep Cherokees... but 1996 Jeep Cherokee Classics... that's possible. For everything else, link out to the world's leading authority in their respective niche, This is the new Link Economy emerging from Web 2.0.

This transition is being brought about by the transition of the web from a destination based experience to an information based experience. It is the reality of the new, post-industrial, decentralized economy... and it is changing everything. Be the best in your field, and link to everything else. If your visitors find value in the links you offer them, they will associate that value with you, and your credibility grows. Hence, you not only want to be a good link target, you want to ensure that the links you give away are high quality links, not just links to any old Jeep dealership.

What the Changing Web Economy Means to You
For the consumer, this is fantastic! Its crowd sourcing (aka Survival of the Fittest) at its best where the best products at the best prices rise to the top. The best resources spring from nowhere (think Wikipedia) and the laggard thinking scarcity thinkers are quickly pushed aside.

This changes search as well. Google knows this and they're trying to equip us to take advantage of it, albeit weakly. Why google a source of 1996 Jeep Cherokee parts when I can Tweet, "Where can I get parts for my 1996 Jeep Cherokee Classic" and get 10 replies from trusted sources? They are immediately more valuable and reliable that ANYTHING search can return.

For businesses, the case can be a bit more problematic. Surviving in the new link economy means a compete re-think for what we used to call marketing. Now, instead of standing on the box and shouting, "I have the best deals" to a large group, businesses will now have to engage individuals and build credibility as an authority. This also doesn't bode well for advertising outlets that sell CPM (or cost per thousand).

Staying In Front of the New Web Economy
Over the next few weeks, I'll continue to explore the changing web economy and what it means. Ways to take advantage of it, maybe even cash in on it. If you haven't already, subscribe to the RSS Feed to ensure you don't miss any of the conversation.

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