Monday, March 08, 2010

Dissonance Overload, Needs and "Innovation"

Are "businesses" which aggregate user-provided content in order to serve adverts to those users "innovative?" Are they serving a "need" or attempting to contrive a new "need"?

While I usually present a specific thesis here, today's topic is more a "work in progress" as I think through the paradoxes and connections between "needs" and contrived needs.

The two beginning data points are the South Pacific island nation of Vanuatu, formerly the New Hebrides, and an article from BusinessWeek on the dozens of Silicon Valley startups founded or funded by Google alumni: And Google Begat... The search giant's former employees are seeding tech startups— and shaping another wave of innovation.

A friend's son recently served a Peace Corps stint in a remote Vanuatu village. There is no electricity--illumination is provided by candles--and fresh potable water is a 2 kilometer walk away. The village pursues a generally traditional lifestyle apparently by choice; if you want to own a car and drive around in Western-style petroleum-based affluence, you can do so in the nation's capital.

In the village, the women reportedly do most of the heavy lifting (agriculture, childcare, etc.) while the men have sufficient free time to brew up some hootch (kava) to enjoy in afternoon conviviality.

This "subsistance" is not poverty in the sense that people have enough to eat, shelter, some basic education, relative security from the predations of the State and/or external marauders (in our era, global Neoliberal Capitalism of the predatory/cartel variety).

This lifestyle is, with modest variations such as kerosene lamps or limited electricity, still lived by hundreds of millions of human beings. It is not to be romanticized or distorted by global-market, post-industrial definitions of "poverty." There are all sorts of poverty once you have enough to eat, a community and shelter, and definitions of a "good life" and a "better life" have to be carefully parsed.

We, on the other hand, are embedded in advanced, post-industrial Neoliberal Capitalism-- post-industrial in the sense that most of the nasty bits are performed elsewhere, so "we" get to live with high standards of environmental control, and Neoliberal in the sense that the Savior State is an active partner with global predatory finance Capitalism to exploit both foreign markets and domestic populations.

By the standards of our status quo, residents of Vanuatu are living at "Stone Age" levels which are far below the "poverty" of our low-income citizenry. That the teens of this Vanuatu village cannot have iPhones is an unspeakable and essentially incomprehensible degradation of what we consider "basic needs."

A close examination of the startups funded by Google alumni reveals that most of these "innovations" are parodies of innovation, designed to serve entirely contrived "needs" for mobile computing "crowdsourcing."

One "star" is the firm which created the game Tap Revenge for the iPhone and other mobile devices. This shining example of American "innovation" and technical prowess (entire new empires of technical innovation beckon from here) is raking in the vast sum of $1 million a month now.

Another "hot company" is Fan Bridge which makes software to manage one's online fan base. The site supposedly has 20 million users and is described as a "no-brainer" goldmine for vulture/venture capitalists.

FourSquare lets "friends" (in parentheses because the word has been so debased by online "friends", Friendster, "friend me," etc. that it has an ambiguous meaning now) share tips on local hotspots.

This is known as crowdsourcing, in which the audience/users provide the content for free and since there are so many voices contributing, the content embodies the "wisdom of crowds." In exchange for creating the content exploited by the "innovative" site, the users earn the right to be bombarded with adverts on their mobile devices.

The silly little detail which is not mentioned in this breathless account of "innovation" is that the vast majority of these "businesses" are based on precisely this same model: crowdsourcing provides content, and advertising provides the revenue stream because everyone already knows nobody will pay even $5 a month subscription for these sorts of proliferating "services."

After all, Yelp and others have already occupied this "space" for some time.

The unasked question in all this "innovation" based on "mobile computing services" is this: if people no longer have any disposable income, then exactly how effective will all those adverts be? Second question: Exactly how many parasitic services can be supported by online adverts? Yes, that "pie" is growing rapidly at the expense of traditional media (and standard Web banner ads), but it remains a tiny sliver of the economy (a few billions of dollars).

If all this "innovation" boils down to teens and Gen Ys texting each other, posting "hot tips" on "local hotspots" (which cost how much to get in?), "joining" their fave band fan "clubs," and acting on the adverts on their iPhones (the advert has to work or the advertiser will withdraw the ad), then how large is the potential market? It is a zero-sum game in which adverts are siphoned from traditional print and broadcast media and then divided up amongst tens of millions of online sites.

Isn't it painfully obvious that the "pie" of online advertising is rather limited, given the tens of millions of sites clamoring for advert revenue (this site included)? Let's say the online adverts pie expands to $10 billion. How much is that in a $13 trillion economy? How well will those adverts work in an economy with 20% unemployment and a large population of youth who are completely financially dependent on their parents, whose own wealth and income are receding?

The other "fast-growing innovation" heralded in breathless media accounts is the sale of "virtual goods." Who Wants to Buy a Digital Elephant? Sales of virtual goods are taking off. And it's not just kids who are buying.

A few months ago, Nita Flores—a 38-year-old health-care worker—began playing games on Facebook and spending real money on her virtual life. Though the games are free to play, Flores spends about $20 a month for extras like virtual outfits for her cat in Pet Society and a stable for her horses in FarmVille. The games are "very entertaining and relaxing after a hard day," says Flores, who lives in Queens, N.Y.

Ecstatic analysts are already predicting that Facebook's haul (a 30% cut) from the sale of plum trees in FarmVille (25 cents each) and castles in FishVille ($1.40 each) may well exceed $500 million over three years.

Meanwhile, other delirious analysts are already speculating that Facebook--the current darling of "social media" now that former hot-shot social media sites Friendster and MySpace are mostly populated by zombie-users--is worth $100 billion.

If you set out to fashion a parody of technical innovation and parasitic capitalism, could you do better than this? I can't. Basing businesses on the disposable income and online whims of those thrilled by purchases of faux digital "goods" and adverts aimed at youths (not yet penniless but soon to be as their parents' income and ability to support their free-spending ways degrade) is a parody of "innovation" which I cannot top.

A case can be made that "mobile computing" is largely a false, contrived "need." If you have no job, then how "mobile" must you be? And if you're in such a hurry, darting hither and yon, then what sort of state of mind is engendered by relentless "communication" and data feeds, all dependent on content you and your "friends" provide for free? What sort of thinking is even possible in this environment?

Is anything beyond passive consumption and branding--reviews of stuff to consume, places to consume it, and the constant shoring up of an online "identity" constructed of brands and brand affiliations--even possible in this world?

Post-industrial capitalism's raison d'etre and its "growth" requires the constant creation of contrived, false "needs," paid for with newly minted credit, selling commodities produced overseas or digital "goods" with no intrinsic value whatsoever.

If anyone seriously believes this is "real innovation," they are in for a startling awakening when the Emperor strides past sans clothing.

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