Outside Innovation

What’s the Value of Customer-Contributed Content? $1.65 Billion!

Customer-created content is good business. Letting customers strut their stuff is profitable.

Google’s acquisition of YouTube is proof that customer-contributed content is shrewd business practice. Going from zero to $1.65 billion in 24 months is an admirable accomplishment. It’s the kind of accomplishment that makes most business people both jealous and incredulous. Yes, letting customers strut their stuff makes very good business sense, indeed! The content is free. Customers flock to the site to see and be seen. Visitors’ viewing, tagging and downloading habits create a natural merchandising engine. It’s cool because others thought it was cool. I can find it easily because others have tagged it.

Customers are playing the roles of Lead Customers/Users, Contributors, Guides, and Promoters.

 
Customers’ Behaviors have Changed the Business Model for the TV Industry

Customer-led merchandising is great marketing. Letting customers strut your stuff reaps advertising revenues and free publicity.

What tickles me is how fast the entertainment companies ran around in front of the customer parade. After years of posturing and hand-wringing about intellectual property protection in the era of file-sharing and easy downloading, all of the major entertainment companies signed up to take part in the spoils.

As the Google/YouTube deal was going down, the dominos fell throughout the movie biz. According to Hiawatha Bray, YouTube deals hint of new era for Net media - The Boston Globe, Universal Studios, Sony BMG, CBS, Warner Music, et al all quickly inked deals with YouTube and Google that go something like this: “It’s OK with us if customers pirate video clips from our movies and TV programming, you (Google-YouTube) tell us about them and give us 50% of the ad revenues.”

This is “found money” – additional revenues they wouldn’t have gotten. It’s also customer-led merchandising. Customers will vote with their eyeballs and their tagging and rating, highlighting as noteworthy programming that might otherwise lag in the Nielsen ratings.

Now, what about all those home videos? Will amateurs also get 50% of the ad revenues for their amazing pet tricks’ videos?

Crowdsourcing, Customer-Contributed Content or Lead Customer Innovation

Jessi Hempel's article Crowdsourcing: Milk the Masses for Inspiration, in Business Week's Innovation Supplement this week, was one of the few mentions of customer-led innovation in this entire 40-page survey of trends in innovation. (It's interesting that BW devotes so much ink to innovative design and to product innovation, and so little ink to customer-led innovation.)

Jessi referenced consumers designing ads on Current TV ("Make the Ads You Want to Watch!),

customers contributing designs at John Fluevog Boots and Shoes open source footwear site,

and scientists competing to solve thorny problems at InnoCentive. 

Thank you, Jessi, for writing about the important topic of user-led innovation!

"Crowdsourcing" was also the topic of an earlier BW article Crowdsourcing: Consumers as Creators by Paul Boutin, in which Paul referencing the  MIT Sloan Management Review article by Frank Piller and Susumu Ogawa that I mentioned last December. This article has engendered a modicum of whining on the part of readers who feel that designers/inventors should be paid handsomely for their contributions, not "taken advantage of." It's important to point out that the people who choose to contribute their time, creativity and ideas to a contest or a challenge, typically do it, not so much for the money, but for the satisfaction of seeing their ideas realized. And, one colleague said recently, "if you don't want to give your IP away, then don't do it!"