Get ready for "fourth party" services
The time has come to re-define "parties" in business.
In software, "third parties" have always been accessories to supply more than to demand, because their job in most cases was to add value to a vendor's platform. But growth in customer power will invite a new kind of software and service into the marketplace: a kind that adds value to the customer's platform and weight to the customer's side of the market's equation. What do we call that new kind of software, and the kinds of companies that put it to use?
It's odd that the term "third party" grew popular in business without much attention being paid to the first two parties. Still, the meaning has always been clear: The first party is the vendor. "First party" games, for example, are those made by the vendor itself. We see this in Wikipedia's First-party developer entry, which (currently) dwells mostly on the example of games, and doesn't mention a second party. Same with this article about Sony's line-up of games for its Playstation platform. In an old support article titled What is a third-party product?, Apple says "A third-party product refers to a product that's produced by a company other than Apple", then adds, "Technically speaking, Apple is the 'first party,' but that's not really a common phrase. The second party usually refers to the product's user—that would be you!"
Apple's voice here is first person. We (the vendor) are the ones speaking. You, the user, are the second person: the ones listening. They (the third person plural pronoun) are the third parties, who may or not be listening. Either way, they are aligned with the vendor's side of the monologue. Note that there is no implicit dialog here. Fittingly, Apple's support article is long since closed to comment.
On the whole, third parties also speak in monologue to users, or to customers. Nothing wrong with this, just something that will become more retro over time, as users and customers increase the degrees to which they participate in vendors' product development and service deployment. Also as they begin audibly to demand products, services and forms of sanity they're not getting from sellers.
I bring up sanity because you become psychotic when you talk only to yourself. You become detached from reality. In working economies, reality lives in the marketplace. That's the open operating environment where customers outnumber vendors, and often outsmart them as well.
Companies often call customers "resources" and talk jive about "customer care". But caring without relating is insane too. It has just been going on for so long that the insanity has become routinized and deeply embedded in business methods.
The computerization of this insanity began when the rise of mainframe-based "automation" enabled companies to start distancing themselves from customers, especially in "mass" markets. Big companies operating in "mass" markets began to scale up service the same way they scaled up manufacture.
The rise of personal computing gave customers far more power in markets, but not enough to overcome the service automation imperative. Once the Net and the Web came along, companies found handy paths for outsourcing service to the customers themselves. "Go to our website!" they said. And if you ever got through to an actual human being at a call center, you found yourself dealing with humans whose speech was so scripted and roboticized that it sounded like they could flunk a Turing test. We all have call center horror stories. As of this morning, a Google search for call+center+hell brings up over 8 million results.
This insanity has advanced so far that vendors have taken one of the most annoying unsolved problems in the online world — the need to register or become a "member" in order to do business with a store or a service — and brought it into the brick & mortar world of retailing. The result is loyalty programs, which require you to carry around cards and key fobs with your own little bar code, in order to get a "discount" from the higher price that non-card-carrying schlubs have to pay.
Loyalty cards are the S&H Green Stamps of our time. At the height of the Green Stamp Age — back in the 50s and '60s — you couldn't buy anything from a retail store without also getting sheets of Green Stamps along with your purchases. An ocean of saliva was spread across the backs of these things, which would then be glued into pages of books that customers would later trade for goods from catalogs. S&H was born in 1896 and lives on as YOU Technology Retail Services ("The Leading Provider of Customer-Based Business Solutions"). On their about page, YOU brags that "In the 1960s, the S&H catalog became the largest publication in the country and S&H printed three times as many stamps as the U.S. Post Office". (Most, by the way, were never cashed in.) Today, at the height of the loyalty card craze, most of us carry as many of the things as our wallets and purses can handle. I know one guy who carries around a janitor's key ring strung like a necklace with dozens of loyalty fobs. Is he actually loyal to any of those stores? Have any of those stores actually "raised switching costs" or whatever else their rationalization is looking for? Is the data they gather really worth the pricing complexities or the friction required in the check-out line?
The problem with all loyalty programs is that they don't know what they're missing. At best they are blinders to clues, and at worst they leave money on the table. Do Vons, Albertsons, Safeway or Stop & Shop know we'd rather get our groceries from Trader Joe's because TJ makes a point of not having a loyalty program? Or that we prefer TJ's receipts because they don't have coupons printed on the back the give us discounts on stuff we just bought? They don't know any of that, because their "relationship" system prevents far more relating than it supports.
Four other examples here, each of vendors I actually like, and which are leaving my money on the table. If you're in a hurry, skip over these.
- The Coop: the Harvard/MIT cooperative that has been rolling since 1882 (the year my grandmother was born). I love shopping in The Coop. It's a great place, with a fine café and bookstore. But I recently got tired of paying full price, since pitches at the cash register kept telling me I would get a 10% rebate if I joined as a member. Since the form is too long and retro to fill out, I went online and attempted to register there. It didn't work, and I've avoided going in ever since.
- Sirius Satellite Radio. I've been a radio freak since I was old enough to operate a dial, and a Howard Stern listener since he started on WNBC in New York in 1982. So when Howard went to Sirius, I became a subscriber. I pay $143.45 per year for the privilege, on top of whatever I paid for a Sportster radio, plus cradles for house and car, and a boom box. I also listen online, through a service that can be accessed only by logging into a page on the Sirius website. Now Sirius is "upgrading our Internet listening experience", they say, for an additional $2.95/month. They currently interrupt your login to say "LAST CHANCE TO KEEP LISTENING ONLINE FOR FREE" — provided you renew your subscription. I'm not interested in paying extra, nor am I interested in the higher (128kb) bandwidth required for a hi-fi "experience" when most of what I listen to is Howard, and the bigger bandwidth will prevent listening over GPRS, or even 3G, on a cell phone, which is how I get most of my radio in the car these days. The Sportster radio I use is dying, and can't be replaced except by other gear only Sirius sells and probably won't work with my accessories. (Sirius is such a total silo that they even make all their own radios.) So I'm bailing after the current subscription period runs out.
- WMBR, the MIT station, which has two Saturday morning shows that I like: Lost Highway and Backwoods). The week before last, when I was at the IMA Public Media conference in Atlanta, I thought I'd throw a little money at both WMBR and WUMB (the next example) during a break in the action. On the 'MBR site the only contribution links said "Fundraising Drive" and "Underwriting". I clicked on the fund-raising link and got to a page that told me the 2008 drive was over. Dead end. So I clicked on the Underwriting link and got to a page of scary-looking Legalese. Not inviting. So I gave up.
- WUMB, the UMASS Boston station, which recently sent me an email reminding me to renew, and providing a link to click on. When I did it took me to a page that told me I needed to enable cookies in my browser. Cookies were enabled already, but that didn't do any good, because the site found no cookies and had no idea I was a returning member. When I went to the renewal page anyway, it started out by asking for my membership number. I didn't have that, so I gave up.
Each of these problems is different; but each can be solved the same way: by arming customers with their own tools of engagement — ones that give them consistent ways to engage all vendors, rather than depending on disparate means supplied by each vendor, especially when those vendors are busy trying to keep customers captive.
Free markets need free customers. Right now "free" means "your choice of captor". Not good enough. Free customers are more valuable than captive ones. We know that in our bones, but we need to prove it in the marketplace. And we do that the same way we've made software free: by writing the code.
There is a line that runs from free software to free customers. As Richard M. Stallman By arming them with tools of both independence and engagement. . The other says here, "The free software movement has campaigned for computer users' freedom since 1983".
We won't have free customers, or completely free markets, until we apply the lessons taught by Eric S. Raymond in The Cathedral and the Bazaar. That's where ESR minted "Linus's Law": Given enough eyeballs, all bugs are shallow. Sellers need buyers' eyeballs on the sellers' own bugs. In that same chapter of CATB, ESR explains how Linux employs users as "co-developers":
More users find more bugs because adding more users adds more different ways of stressing the program. This effect is amplified when the users are co-developers. Each one approaches the task of bug characterization with a slightly different perceptual set and analytical toolkit, a different angle on the problem.
Now apply that to vendors. Then apply it to markets. Because the cathedral and the bazaar both need de-bugging.
Some big companies are more evolved than Facebook. The leading edge there is implicit in the title of Jeff Jarvis's new book: What Would Google Do? In it Jeff shows how Google prospers not only by aligning with the interests of users, but by listening to them as well. Significantly, Google at its umpty-zillion-server heart is a Linux company. But to what degree is Google accountable to individual users? Or, put another way, to what degree do any of us, as individuals, actually drive vendors such as Google?
We aren't equipped for that. To be equipped, we need tools of engagement. Customer Relationship Management has been providing this for the duration — but only on the vendor's side. CRM is how vendors manage their relationship with you, not how you manage your relationship with them. That is, you don't have means for managing relationships with many vendors in one set of easy and consistent ways. CRM is first party stuff. It's one more way that every vendor builds its own silo, it's own cathedral with walled gardens for holding customers captive, some in more comfortable surroundings than others. If you're going to manage your relationships with vendors, you'll need your own equivalent of CRM, your own reciprocal tools and systems.
That's why we're working on VRM, or Vendor Relationship Management. We need own box of tools, not just to debug vendors and their goods, but to invite products and services that help us relate as parties of equal power and responsibility in the marketplace. VRM tools will make us both independent of vendors and better able to engage with vendors. As the customer's box of VRM tools grows, we will become platforms functioning independently of any vendor's cathedral.
That's as far as I'll pitch VRM. I don't want to overdo it, and I only want developers who are ready to engage in FOSS work to get involved. That's what we have already, and we're getting great work done. (Check out The Mine! Project, for example.)
What I want to visit here is the question of what kinds of new companies, and services, customers will drive once they have VRM tools that effectively make them platforms for business.
For example, we are working right now on listen logging, as a breed of media logging that will some day come to include all music and everything else we can consume on an electronic device. This will be for our own purposes as users, and will help us determine what to pay for the goods we get for free (such as music, videos and public radio content), but have value to us in excess of $0.00. Note that this is not about micro-payments. It's about micro-accounting. We need means by which to decide what something is worth to us. Media logging does that, and much more — if we like. The choice is ours.
Choosing what to pay is facilitated by what we call PayChoice. This will provide a new business model for otherwise free media, based on buyers' willingness to pay whatever they like for any media they like — with minimal friction.
Ease is the key. Ignore whatever evil you think Apple may be doing with iTunes and give them credit for showing that people are willing to pay for otherwise free stuff. People do that for two reasons: 1) the goods have value, and 2) Apple makes it easy to pay.
PayChoice will do that with all media. The difference is that it gives each of us the pricing gun, and hooks into means of informing the seller why we're paying what we're paying.
So let's say I've logged 20 hours of listening to Lost Highways and Backwoods on WMBR over the last few months, and I'd like to pay them a buck an hour for that. With a combination of Listen Log and PayChoice, I can do that, whether WMBR is ready to notice or not. I'll have a standard way WMBR gets notified that they've got $20 of money otherwise left on the table, and that it's for those two shows. This is both good money and good information. Or let's say I want to pay 1¢ for every song I hear on a stream from Pandora, Radio Paradise, or any other source I like. With Listen Log I can keep track of exactly what I've listened to, and with PayChoice I can put the money on a table where it can be picked up, or combined with other listeners who have kept track of the songs they've listened to.
Where does that PayChoice fund live? I don't know yet. I just know there's a business to be found there — one that belongs to a new class of user-driven services, rather than vendor-driven ones. It would be a third party for me, rather than for the vendors.
But would that service still be a "third party"? Or would it be a fourth one?
I lean toward "fourth party" as a label, because the first, second and third are already taken. But I have reservations. I'm my own first person, my own first party. Relative to me, the second party is the seller.
But I'd rather not try to change everything at once. "Fourth party", as a classification for user-driven services, sounds like a pretty cool new category, and a place where a vast new marketplace can open up, serving customers first. For real this time.
Doc Searls is Senior Editor of Linux Journal
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