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Web person at the Imperial War Museum, just completed PhD about digital sustainability in museums (the original motivation for this blog was as my research diary). Posting occasionally, and usually museum tech stuff but prone to stray. I welcome comments if you want to take anything further. These are my opinions and should not be attributed to my employer or anyone else (unless they thought of them too). Twitter: @jottevanger

Thursday, March 08, 2007

Nicholas Carr on "Customer value and the network effect"

Talking about the value to the "company" of users who (to use Lorcan Dempsey's favourite term) provide the flow around their business even if they don't buy anything themselves. He identifies two-sided markets - essentially, I take it, those where the locus of activity is an agent between other two parties - that must attract both buyers and sellers. Without understanding the value of the non-paying "customers" (i.e. buyers, who don't pay eBay) it's hard to know how much effort to put into attracting them versus sellers (who pay). But the elements of that side of the network effect equation are hard to weigh up since they're not paying, but feed into the whole buzz, UGC etc.
For us, we are not really serving a "paying" party, but nevertheless we are interested in generating some sort of value. It may be that we should include various intangible network effects that sustain that value even if the activities themselves are not valuable. Here's a quote that Carr cites from Sunil Gupta (interviewed here http://hbswk.hbs.edu/item/5595.html) who is currently
"working on understanding and modeling complex network structures such as those of MySpace. Here the issue that we are grappling with is the tangible and intangible value of customers. In other words, customers provide tangible value to a firm through direct purchases but they also provide intangible value through network effects or word of mouth. It is quite possible that some customers have low tangible but high intangible value. Traditional models would label such customers as low value and would miss a huge opportunity for a firm."

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