Are You Fighting Human Nature? Measuring Opportunity Cost

Sep 9th

Danny Sullivan highlighted his frustrations with dealing with running Sphinn, a social media voting site for internet marketers:

Sounds easy, right? Sure, but as I’ve learned in the two years since we’ve run it, it’s a minefield.
...
While a community site can be fraught with egos, and concerns about double-standards or fairness, at least you have sympathy for people who are part of the community itself. Who have invested time, or energy or part of their souls to it. You want to do well by them. You want to do nothing for the drive-thru asshole who makes no effort at all.

A number of years ago I bought Threadwatch and eventually shut it down in part because it was facing some of the same issues. Largely it can be summed up with drinking well = pissing well (and, to some, a full on outhouse).

We can complain about human nature, but we can't really change it.

The problems with free for all internet marketing sites are 3 fold

  • The economic incentive for sharing is broken. Apply an idea to your own website in obscurity and make thousands of dollars (or more) off it. Share it publicly and lose a competitive advantage as you watch it get cloned and/or burned to the ground. If it is really effective then sharing the idea can not only cost you a competitive advantage, but can also put you on the Google watch list, and make search engineers more likely to penalize your websites.
  • There are perhaps at most a few dozen SEOs who both a.) are original thought leaders b.) who frequently share original strategies publicly freely. While there are over 1,000 SEO firms listing in DMOZ AND there are over 4,000 SEO blogs listed in BlogCatalog's SEO category. Most of the market ***is*** noise. Sure people who are relatively obscure have great ideas from time to time, but rarely are they the people trolling public internet marketing sites to vote up a pool of (largely) spam & rehashed content.
  • Those who really know what they are doing in the SEO field should eventually be able to earn x hundred to y thousand Dollars per hour. Whereas the media that is freely available is often presumed to have limited value because of its price-point. Even if you share great tips with people they won't value your help. A couple days ago a person who bought a domain name based on a mention here also wanted me to link to them for free. And if you went to their site there was no mention of me and no link to my site, in spite of me being the reason they have the great domain name. Take. Take. Take. Take. Take. No thanks!

Want to get rid of the noise? Charge $100 (or more) to open a new account (and maybe an annual membership fee). That will clear out the 99%+ of the market that are faking it until they make it and/or who are there just to spam the site with dreck. And (if required) you could charge $1 each for votes, making them have a real economic cost.

Such moves would clear out a big chunk of the current Sphinn audience, but no pain no gain. Longterm the site would be far stronger if the signal to noise ratio was improved. Take the earnings from new account registrations and apply that to hiring a full time editorial staff that both writes original featured content AND scours the web to submit stories. Maybe some of the features become member's only.

To further promote hunting for leading content across the web, perhaps whoever submits posts that make the homepage get some "earnings" for finding that story (though this would need some thought to prevent encouraging of spamming...but it is easy enough to have advertising sponsors offer prizes and such that are non-monetary to some degree).

One of the lessons I learned the hard/slow/stupid/painful way is that anytime you put all of the opportunity cost on yourself people will abuse it. They will treat you like a tool and waste your life. And some days they will make you loathe humanity. The more popular you become the more nutcases you reach. (Of course you reach great people as well, but they are not the pain in the ass that the bottom 10% of the market is).

You have to cut off the bottom feeders and charge for anything that wastes your time. Today a guy called me up for phone support for one of our free tools. He got no help because my business model is not built around offering quality tools AND premium personalized support for free. If I value my time at $0 then eventually so will the market. I can't think of another person who works as hard as I do who sits around waiting for calls demanding free help. Of course people can pay for help and get my best. And that is the beauty of economics...it fixes most of the noise problems. But if you don't value your time you can't (legitimately) expect others to do so.

Published: September 9, 2009

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Comments

September 9, 2009 - 6:21am

Ya know I've never wasted my time with Sphinn.... thats because well, "I'm Working"... I'm building websites that give me a nice residual income, not wasting my time hanging out in forums and shooting the shit all day on twitter or something trying to become some IM rockstar....

I'd much rather think of niches that I can dominate in Google and make some cash.....

September 9, 2009 - 6:37am

I don't think it would just clean up the noise, it would make it where only the people who are rich would dominate Sphinn. I don't think you want that happening.

September 9, 2009 - 6:46am

When building a marketing community you could do far worse than self select a successful membership base. IMHO ;)

Not all of our customers are "rich" but most are quite successful, and I would rather work with (and learn from) successful people than people who lack success and want everything free. The only reason people expect stuff for free is because it is a reflection of their internal view...those who are successful value time, whereas those who are not generally do not.

You can learn something from everyone...but signal to noise disappears as a problem (or at least is significantly dampened) if you select the right customer base (and introduce a bit of opportunity cost to filter out those who are not serious).

September 9, 2009 - 7:19am

Help vampires are a dangerous group. The worst part of their time drain is that they keep you from doing things that will make a difference in your life.

September 9, 2009 - 9:39am

I used to have the same problem with "freetards". You have to put a pay wall between yourself and these people.

September 9, 2009 - 10:47am

spam comment deleted

September 9, 2009 - 11:17am

The post above seems to illustrate some of the points you raise rather well!

September 9, 2009 - 11:35am

A very refreshing post. You are right, there are tons of garbage out there! The masters are not only the ones who contribute, but those who are also able to navigate through the mess and find the most valuable content.

September 9, 2009 - 1:42pm

You could compare this to a small town on the Internet - you started a community and have divided it into 1,000 lots which are for rent. This rent is not dissimilar from a town where owning property is taxable. The town collects taxes from the property owners, in this case renters, to make the community nice. Cooperative and communal situations, by contrast, suffer from the free rider effect. Free riders do not carry their own weight and ruin the community. Charging members eliminates free riders. In terms of voting, America also historically limited the right to vote to property owners. There is a limit to applying concepts of terrestrial governance to virtual communities but if the question is how to build great communities and deal with human nature, I think the town model provides interesting insights.

September 9, 2009 - 2:25pm

Seeing all the noise in so many places today makes what was accomplished at Threadwatch for such a long time all the more remarkable...I seriously doubt that success could be replicated now.

September 9, 2009 - 10:00pm

I think that was only possible because Threadwatch was willing to run on essentially free labor and did not have to cave in to the interests of investors or advertisers. It is really hard to be that blunt and curt and still build a business though.

September 9, 2009 - 2:51pm

When I blog about SEO issues, I'm trying to demonstrate that I can come up with good ideas. It's SEO -- most of the stuff I do is either a) common knowledge, b) difficult or expensive to implement, so knowing what to do is not as important as actually doing it, or c) not going to work forever.

This kind of thinking works especially well in stock-trading communities like Stocktwits -- everyone who participates is giving away money in the short term, but they're demonstrating their trading skills in the long term. So far, it works.

September 9, 2009 - 6:10pm

"I don't think it would just clean up the noise, it would make it where only the people who are rich would dominate Sphinn. I don't think you want that happening." -Carlstips

Not being very familiar with Sphinn, I took a few minutes to check it out and see what this discussion was really about. Initially I thought the above comment made a lot of sense, as a variety of industries (the internet especially) has opened up opportunities for very bright and hard working people to make plenty of money. Would I want to scare potential budding entrepreneurs and thinkers (who at the moment aren't rich) away to hear from only the "rich"?

Another example - College students are often broke, but may be the ones that are worth hearing from the most as the right ones truly are exceptional thinkers just getting started on their paths, and bring fresh ideas, viewpoints and challenging thinking to the table. Do I want to do something that could exclude them?

In many cases, I would do my best to come up with some very creative solutions to keep the "noise" out while not discriminating against anyone I might want involved. However, in this specific case, the people who's votes I'm most likely going to value are the EXPERIENCED, educated, successful marketing professionals. Some quality votes would be lost if you charged, but the potential for an extremely high quality content site is there if this route were pursued. At least, I'd hope the people with money who would pay to vote are the smart ones and not the stupid ones...

I'd like to disagree with Aaron and make a scene, but I'm afraid I'll have to watch for another opportunity.

September 10, 2009 - 3:41am

Hmmm.. Take. Take. Take. Take. Take. Sounds like Family. They don't come to visit because they love you, but because they need something. There are many Free SEO sites. I never joined them because people keep posting stupid "Me too" so they can get backlinks to their site. I want real content and the best way to weed those SPAMMERS is to charge. $100/month is good. (Phew, I made it in before the $150/mo)> I'll write it off anyway.

September 10, 2009 - 6:37am

It is really hard to be that blunt and curt and still build a business though

That's the heart of the issue for me. When I offered something free (and I've done this plenty of times before), I'd get in the bad situation of having to deal with a "freetard" - the one who takes all and is demanding, but gives nothing back. And so the inevitable happens: I become blunt and to the point with them after they bug me for several emails/phone calls. And what happens? They treat this as "unprofessional" to be so blunt and to the point and complain about that! You can't win with these people.

So now I just outline my prices, and I say I can help them but my charges are such-and-such before I can help them. I just state facts so we don't get into a subjective discussion about what I "owe" them or what they "thought" was free.

September 10, 2009 - 8:59am

Firstly,

A big thank you for some free advice that you posted in a blog about 10 days ago about how to complete the different sections when writing a wordpress blog. The point was that the input on the blog title did not need to be the same input on the title section below the blog. You helped me big time and thank you.

You are right the....The amount of info that can be obtained on the internet is remarkable and a feature of the internet. However I think that this works as it works as a free sample and that then gets the customer to purchase the premium full bells and whistles version.

I understand your frustration about being ripped off and cloned which sends you crazy.

Unfortunately, cloning is part of our capitalist world and a feature of all product categories from cars to chocolate bars to whisky. ie a cheap poor quality chocolate bar.

The only solution is branding, branding and branding.

Branding to me means creating and owning a UNIQUE shape, name and idea that the consumer knows has specific values.

An issue with the seo industry is the commonality of names which makes it very difficult to differentiate. in two minutes look what i found of seo companies on google

seobook
seoconsult
seochat
soemoz
seotops
seopositive
seoadministrator
seoibiza

When i go into sweet shop I do not find
chocolateabcd
chocolatetops
chocolatewhip

but I find
Mars bar
Snickers

Does the shape and colour of the logo transmit the values of the brand company and what it is all about?.

Aaron,with 30+ years of airmiles - branding experience I can help if you wish. I hope that this post is a fair and reasonable trade for your free information about wordpress that you gave me earlier. see 1st para

September 10, 2009 - 4:28pm

I agree with you 100% Mark. But the issue with this site is who wants to put millions of dollars into building up a site and then re-brand it (and hope all the software, redirects, etc. work on the other end)?

Ideally this site has a lot of life left in it, but if it only had another 2 or 3 years left to run I don't think a rebrand would be good. Then again 2 or 3 years ago I was saying the same thing...so maybe this site has many years of life left in it :D

And on the web many industries are dominated by sites which use a core industry word in the domain names. The me of today (with my current set of resources and knowledge) wishes I did something different way back when, but the me back then needed to seem as relevant as possible to begin building a traffic flow and revenue stream. When this site was started I still had lots of debt and limited cashflow...and I knew way less about brand stuff back then. I still am no leading expert on branding, but agree that it is a big weak spot for this site (especially as we don't even offer a book about SEO anymore).

September 10, 2009 - 5:25pm

Thanks Aaron for agreeing........Very good to read that you acknowledge that this is an issue........You are 90% of the way to finding a solution.

What is done is done and I understand exactly why you did what you did when you started. At that time it was the right decision as you fought to get going with your limited cash flow.

Now things have moved on you can go to the next stage if you want.

As i understand it when a company is sold the high multiples on their Profit After Tax are achieved because of the value of the brand.

Looking at your photo you are still a young guy and have at least 25 more years of good energy in you.

There are two options to me.

Do nothing or

Agree where you want to be in 3 years time and then start working on getting there.

I would rather not propose possible solutions on how you could go forwards as this is a very public forum. There are too many copiers out there.

You have my email address and I can get in touch with me through my website.

PS In my previous life, I was involved in several brand name changes, but it was a different category which may not be relevant but some of these learnings must be transferable.

September 10, 2009 - 5:37pm

Thanks Mark. Part of what we are doing is building up other sites as well. Some of our other efforts have a much higher return than this site does, so while we are still trying to give customers the best customer service we can he we are more focused on growing some of our other sites than we are on growing this one...at least for the next 3 to 6 months or so.

Our end goal is to create a brand or product that defines a category & requires much less work than this site does. But in many ways I think it would be easier to build from scratch with the branding planned out right away (and leverage cross promotion on existing channels) than it would be to rebrand one of our current projects.

September 13, 2009 - 5:48pm

If a complete newbie is starting a blog, they have great ideas, and posess the gift of being a wonderful writer, even they will have a hard time charging members off the starting line. IMO the up-and-coming need to create the free content / tools to gain some links, ranks and respect.

It's okay once you have secured your market / brand position, and have a nice amount of returning visitors; then it's time to charge.

September 13, 2009 - 10:07pm

Right. But Danny Sullivan has been in the industry over twice as long as I have and is probably one of the few people who works more than I do. He could easily charge for stuff if he wants to. ;)

September 14, 2009 - 2:23am

Some people can be very annoying. If it's not their website, who the hell are they to bark orders at the administrators. I'd just be banning their IP, but I'm not sure if that would be damaging to the brand. Maybe it would?

September 14, 2009 - 11:41am

I like your analysis, and establishing a cost to join is a good method to weed out unwanted elements; however, I wonder if that cost could be created with a virtual economy. For example, the site Entrecard has its own currency so users can buy ads on other sites. By performing certain actions (encouraging certain behaviors)users gain more currency to accomplish more on the site. I see a problem with the virtual economy in Entrecard in that users do not really hold to the principle of visiting the sites properly, but do you think that creating a virtual economy would resolve some issues faced by a site like Sphinn?

September 14, 2009 - 12:41pm

Well it can...but the one issue with virtual economies is the inequality in the real world. For example, Danny Sullivan's time (or my time) is going to be priced higher than that of a new SEO. Also his site and this site reach 10,000+ people a day...so advertising to us stuff that we are interested in (with hopes of influencing us) is likely going to be worth more than advertising the same thing to a person who is socially less connected. And then there is a counter balance to most those systems where desperate internet marketing newbies are monetized from pitches of hyped up junk.

And the networks shave off a huge chunk of distribution for themselves (and other select interests in a pyramid type scheme). Meanwhile some individuals at the bottom of the pyramid know what is happening and so they created automated programs to spam the system and promote their stuff more. And so everyone ends up feeding off a few poor dumb schmucks who are paying into the system.

That is precisely why cash is a nice proxy...yes it is manipulated (hey look at the trillions of dollars those bankers stole!), but at the individual level in most online communities few people have the power to really manipulate it.

And as far as Entrecard goes, worse yet, with broad based ad exchanges you are typically promoting trash products that cheapen your site where you could be promoting your own featured content more aggressively and making far more profit from promoting yourself.

The implosion of BlogRush is good proof of the lack of value of broad traffic exchanges and the innovative lengths people will go to get more than their fair share...creating a Tragedy of the Commons for everyone who is not gaming the system. Even with a pyramid scheme and tons of exposure they couldn't make enough profit from it to justify the cost of running it.

And even in less spammy markets people create secondary markets to subvert any value systems that act like cash. See all the gold farming in World of Warcraft and such.

And if virtual currency does work too well then forces in the real world try to marginalize it. China banned virtual currency that was growing popular out of fear of it acting in the place of currency.

Google might be the only online company in a strategically strong enough position to be able to create their own virtual currency system...though if they create one look for governments to step up oversight and regulation.

September 14, 2009 - 7:42pm

how could he ask for a free phone support for a free(better than most paid) tool free? I do have serious SEO questions sometimes and I know if i send Aaron an email, he'll reply me with a solution the same day, it doesnt feel good to me to do such a thing since I am not in the paid membership period right now. And I find it very awkward to seek a solution for free, considering that he sells his time for helping the members in the community and giving out professional seo advise.
It is like asking a trader for his selling item free, since u like it and want it & just coz that trader is polite and has a helping nature.
But Aaron its good to know you have got more strict. Sometimes being too good hurts you.

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