April 5, 2016
Ep. #17, Open Source Economics
In this episode of To Be Continuous, Edith and Paul are joined by Sean Byrnes, CEO of Outlier.ai, and Nadia Eghbal. The group discusses open...
If you have a platform or two-sided marketplace, like the App store, Uber or Etsy, you’re familiar with this scenario. One side of your marketplace is the Inventory side, the people providing the apps, rides or crafts. The other side is the Buyer side, the people buying the apps, rides or crafts.
Sometimes it’s simple, both Inventory and Buyer sides want monetary exchange. But sometimes it’s not, the Buyer side is willing to pay, but the Inventory side isn’t motivated by money. The latter is a common challenge among developer communities.
Let’s consider an example of a security platform company. Let’s call this fictional company Secure.ly. This platform would rely on expert volunteers to report vulnerabilities, and sell this reporting to Buyers. Much of the world’s digital security vulnerabilities are reported by a global community of…volunteers. They’re good neighbors saying something when they see something. They’re experts, and they’re anonymous. CISOs and security directors pay attention to the chatter of this community to stay aware of the latest digital vulnerabilities and bad actors.
The CISOs are the Buyers of Secure.ly, and the information provided by the Good Neighbors is the Inventory. The challenge for Secure.ly is to incentivize this group of Good Neighbors to engage on the platform. But like any good neighbor, money is never the objective. What to do?
What you ultimately want here is motivate the behavior you want using carrots available to you.
You might find that you need to create some carrots. While money is one possible carrot, there are often more effective and cheaper carrots available to you if you spend the time to listen to your Inventory providers.
Google is an expert at leveraging the carrots of “convenience” and “functionality” to coax all kinds of private information from its users. This data is Google’s inventory, which is then sold to advertisers in aggregate. Facebook uses the carrots of “your friends on the network” to coax private information into their inventory as well. With Secure.ly we have to first unpack what their target persona is most interested in.
Exact quotes are the key here. Exact quotes get at the root of the Inventory side’s mindset and priorities. Word choice is often very telling. Here are some example quotes that Secure.ly’s Good Neighbors may provide:
From these filtered quotes, it’s possible to discern that the following are priorities for Secure.ly’s Good Neighbors:
Now that priorities are understood, it’s time to figure out the carrots that connect with these priorities.
Let’s touch on the first two priorities, Community and Notoriety. A number of possible ‘features’ come to mind for satisfying these priorities. Standard gamification moves like Points, Stars, Streaks and Leader boards could work. Since the community wants to stay anonymous, we can throw out in-person events. But chats and forums could work.
One ripe area to mine for possible carrots is within the features you already provide to the Buyer side. With Secure.ly, the Buyer side would buy a list of security vulnerabilities, and it’s likely that a visualization of this list is a feature for the Buyer side. How might this turn around and become a strong feature for the Inventory side?
In Secure.ly’s example, it’s recognizing that their Good Neighbors also want to visualize their contributions. Thus, by upgrading the visualization feature to show which Good Neighbor contributed to each security vulnerability, this feature can now be a carrot for the Inventory side.
Once you’ve mined and listed out all your possible carrots, and understood the strength of each, it’s time to figure out what you want as a platform.
Attracting Buyer side and Inventory side….duh! Yes, but what kind of Inventory side? Are there good ones and better ones? And how can you tell? This is an important question because your Inventory side dictates the quality of the final product your Buyer side receives. The higher the quality of your Inventory side, the more attractive your product becomes to your Buyer side.
Take Google again for example. They have this product called Google Opinion Rewards that prompts participating users to answer specific survey questions. It’s often used to gather granular data about visits to specific stores. It’ll ask “Did you recently visit one of these stores? option A, B, C D” then follow up with “How did you pay for your purchase at this store?” By gathering this granularity, they can accurately tell their Buyer side, their advertisers, about payment choices alongside other user information. Powerful.
Let’s go back to Secure.ly. The “Best Neighbors” in this case would be an expert volunteer who posts frequently with unique content, and stays loyal to the platform. So we have…
Now it’s time to connect the dots.
Remembering that the ultimate goal is to motivate the behavior you want using the carrots available to you, then
How you dole out the carrots is at the heart of your incentive design.
There’s no prescription for this, every platform will find its own way through experimentation. But there are some good starting points. For Secure.ly, let’s say their most powerful turns out to be the visualization feature. That feature can be broken down into a less powerful version, and a more powerful version. From here we can provide the most powerful visualization to the Best Neighbors.
This strategy pairs our most powerful carrot with our most important Inventory side providers.
Just as you would provide VIP service to your most important Buyer side customers, this needs to hold true on the Inventory side as well. In fact, there may be room to experiment with having the Inventory side pay for a premium version of the visualization, so that they can achieve their goals of connecting with others in the community. What’s interesting here is that the same feature might be packaged up differently for each side of your marketplace, and that’s an opportunity that can be very powerful for your platform.
So there you have it…
Non-monetary Incentive Design = Motivate the behavior you want using carrots available to you.
I would love to hear about your own examples of Incentive Designs… please let me know on Twitter! Keep innovating.
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