The Whuffie Factor: Using the Power of Social Networks to Build Your Business - Hardcover

Hunt, Tara

Hardcover

ISBN 10: 0307409503 ISBN 13: 9780307409508

Publisher: Crown Business, 2009

Synopsis

The book that catches the crest of Web 2.0 and shows how any business can harness its power by increasing whuffie, the store of social capital that is the currency of the digital world.

Everyone knows about blogs and social networks such as Facebook and Twitter, and has heard about someone who has used them to grow a huge customer base. Everyone wants to be hands-on, grassroots, and interactive, but what does this mean? And more to the point, how do you do it?

As one who has actually launched a company using the power of online communities, and who now advises large and small companies, Tara Hunt (named by the San Francisco Chronicle, along with luminaries Jimmy Wales and Tim O’Reilly, as a digital Utopian) is the perfect person to do this book.

While The Whuffie Factor will traverse the landscape of Web 2.0 and show how to become a player, it is not just another book about online marketing. People see the huge business potential of the online world and the first impulse is: Let’s throw a bunch of money at it. To which Tara Hunt says: “Stop! Money isn’t the capital of choice in online communities, it is whuffie–social capital–and how to raise it is at the heart of this book.” In the Web 2.0 world, market capital flows from having high social capital. Without whuffie you lose your connections and any recommendations you make will be seen as spam–met with negative reactions and a loss of social capital.

The Whuffie Factor provides businesspeople with a strategic map and specific tactics for the constantly evolving, elusive, and, to some, strange world of on­line communities. By connecting with your customers through community interaction, you’ll raise your social capital, create demand, and sell more product. Consumer loyalty is a direct result of whuffie. With great stories of online business successes and cautionary tales of major missteps–recording industry, anyone?–Tara Hunt reveals how social networking has more influence over buying decisions than any other marketing tool and how your business can tap into the vast world of Web 2.0 to build an unshakable foundation for twenty-first-century-style online success.

For those without millions–even thousands–to throw around, here is a fresh perspective for using social networks to help build a business whether you are a start-up or a Fortune 500 giant. Even those in big rich companies need to learn how to be effective and not waste their money. For them–as well as the entrepreneur–The Whuffie Factor is an eye-opening guide to a world they probably don’t understand all that well.

About this title

About the Author

TARA HUNT was the co­founder of Citizen Agency, a community-marketing consulting firm based in San Francisco, and is now leading the marketing efforts for Intuit’s partner platform. She has been cited in national newspapers such as the Wall Street Journal and the New York Times and is well-known in the Web 2.0 technology and start-up worlds for her community-­marketing experience. Her blog, Horsepigcow.com, explores themes in marketing and economics and has been pivotal in raising Tara’s own whuffie in the online marketing space.

Excerpt. © Reprinted by permission. All rights reserved.

1

HOW TO BE

A SOCIAL CAPITALIST

If someone comes up to you and, out of the blue, asks: "How's your whuffie?" don't call security.

I'll explain why shortly, but initially I want to make a couple of assumptions: first, that, like everyone in business--from a Fortune 500 company to the start-up just opening its doors--you want to be more hands-on, _grassroots, and interactive to maintain a continuous flow of information to and from your customers; and, second, that you've seen a steady rise in the money you spend for marketing and promotion but a decline in the return on that investment. Yet every time you turn around, there seems to be a story about a business that's grown a huge customer base at little or no cost by catching the Web 2.0 wave--the world of mass collaboration and social networking--using blogs, Facebook, MySpace, Twitter, and other social networking tools. But when you go online and check them out, all you see is a bunch of chatter and noise. So, you think to yourself, "How do I make sense of it all?"

The question is how to do it. Catching the social networking wave of Web 2.0 is neither as easy nor as straightforward as it might seem at first blush. Simply spending money and trying to buy your way into online communities works about as well as a dude in a Brooks Brothers suit trying to fit in at the skateboard park.

To succeed in this Web 2.0 world, you have to turn conventional wisdom on its head and become a social capitalist. A social capitalist is as ravenous as corporate titans like John D. Rockefeller and Bill Gates for success, but the coin of the realm is different. People are on social networks to connect and build relationships. Relationships and connections over time lead to trust, which is the key to capital formation. The capital I'm talking about, though, is not of the monetary variety. It is social capital, aka whuffie, and a social capitalist is one who builds and nutures a community, thereby increasing whuffie.

Once whuffie is "in the bank," monetary capital then starts to flow from social capital. It used to work the other way around. Of course, rich individuals and big companies still have lots of influence, but we're talking here about an emerging world where the rules for success are truly different. If a company tries to buy its way into social networks, the law of unintended consequences kicks in and its social capital starts to diminish. Without social capital, connections in online communities are lost and any recommendation made will be seen as spam, met with negative reactions and a further loss of social capital. So, if someone asks about your whuffie, what she's really getting at is how well you are dealing with the tricky proposition of growing your business in the Web 2.0 world of social networking.

HOW WHUFFIE CAN BUILD YOUR BUSINESS

What it comes down to, in this Web 2.0 world, is that there really are only three ways to build a business and make money online: porn, luck, and whuffie.

Pornography, of course, needs no introduction, but I can neither endorse it nor advise you on it. I'll cringe, though, and admit that we owe it a debt of gratitude. The online porn industry pushed the adoption of much of the technology we know, use, and love today. Video and audio streaming, geo-location software,1 and interactive-type content, such as cookies (used today by sites like Amazon.com and Google), help you find exactly what you need by recording data and storing it each time you return, then returning better and better results. Of course, porn also gave us despicable black-hat tactics like pop-ups and spam. Although effective, they're not tactics I encourage you to use, unless alienating customers and muddying your reputation is your end goal.

Getting extremely bloody lucky is the second way to make money online. I have been working in online marketing for close to a decade and have seen people who struck it rich by being in the right place at the right time. There are, however, rarely consistent patterns for these lucky folk.

Okay, so porn is out and luck is a crapshoot. That leaves whuffie, the only predictable way to both build a business and make money online.

The term "whuffie" was coined by Cory Doctorow, creator of the popular blog Boing Boing, to describe social capital in his futuristic science fiction novel Down and Out in the Magic Kingdom.2 In the future as envisioned by Doctorow, whuffie is the only currency used. Other currencies--dollars, euros, renminbi, whatever--will simply disappear.

WHAT IS WHUFFIE, ANYWAY?

Whuffie is the residual outcome--the currency--of your reputation. You lose or gain it based on positive or negative actions, your contributions to the community, and what people think of you. The measurement of your whuffie is weighted according to your interactions with communities and individuals. So, for example, in my own neighborhood, where I have built a strong reputation for being helpful, my whuffie is higher than when I travel to another neighborhood where nobody knows me. There, members of that community "ping" my whuffie to find out whether I can be trusted. But for me to be fully welcomed, I can't simply use my whuffie account; I need to be helpful there as well. And I can do that, as Cory Doctorow points out in Down and Out in the Magic Kingdom, in three ways: be nice, be networked, or be notable. I'll explain the how-tos of all three whuffie-building strategies over the course of the book.

In this futuristic world, if you need a hotel room, a car, or fare for a ride on the bus, you will pay with your whuffie. It isn't a card or a piece of paper; your whuffie is stored on your person and anyone can ping your internal computer to figure out how whuffie wealthy (or poor) you are.

Yes, this is an idea from science fiction. In reality, though, the importance of social capital is neither fictional nor in the future. In every online community I've been part of, whuffie is a core component of connection; in many cases it is more valuable than money. Since the basis of these social networks is trust, something must determine how I value the differing opinions of the 2,000-plus "friends" I have on Facebook. In online communities, a friend can't pay me to make a certain choice or have a certain preference. That would be seen as dishonest and would damage my whuffie. Financial transactions don't mean much of anything in the world of online communities. They work antithetically to it. Financial transactions are part of the market economy, whereas whuffie is part of the gift economy, where services are performed without need for direct payment.

In the gift economy the more you give away, the more whuffie you gain, which is completely opposite from currency in the market economy, where when you give away money, it's pretty much gone. Saving whuffie for a rainy day doesn't work as well as saving money for a rainy day. Whuffie increases in value as it circulates throughout the community; for instance, when I use my whuffie to help you raise yours, there will be a net increase in whuffie for both of us. As it circulates throughout the community like this, it inherently connects people. This really is the key to creating wealth online, and I'll be returning to this concept throughout the book.

You may be saying to yourself, "Well, this is very interesting but I live in the real world! What about paying my rent? Paying my employees? Saving for retirement or sending my kids to college?" Of course! Day to day, you still need $1.99 to buy that quart of milk, but in online communities that $1.99 won't do you much good. We're dealing with two parallel but valid economies here. Market capital now flows from having high social capital. For example, if you are on the job market, you are probably competing with dozens of other candidates with similar qualifications. However, having lots of social capital will put you ahead of the competition if you have good connections that can recommend you for the position (network); if you have a list of public accolades on the work you've done (notable); or if your references have glowing reviews of your ability to lead a team and your likability (viewed as being nice). Having high social capital will give you access to better positions with better pay.

The same goes for your business. There is a great deal of competition in the marketplace. Having lots of social capital will make you stand out: You've really connected with many of your customers, who spread the word to their network; people talk about your product because it is notable; or you have a record of having the best customer service, and customers who have bought elsewhere now go to you because they know they'll be treated better. Having high social capital will help you win customers and sell more product.

It used to work more in the opposite direction. Those with lots of money used to have more influence. When you had money, you could buy more advertising, which was more influential before the Internet because your message could reach a wider audience than word of mouth. Money still carries clout and you can still buy your way in front of large audiences, but this doesn't guarantee influence. The stories in this book will demonstrate, time and again, that those with social capital have enormous influence. The myriad of social media tools I introduce have given people without much money, but with lots of whuffie, the ability to broadcast messages to large audiences. And because they already have relationships with these audiences, they are more likely to have influence. Market capital and social capital are converging more than many recognize. There may even come a day that social capital is seen as viable currency in the market economy.

There are clear advantages to raising whuffie. For one, as you build whuffie, you build relationships with your customers that yield longer-term loyalty. Second, the more whuffie you have, the more people will talk about you in a positive ligh...

Edition details

• Publisher: Crown Business
• Publication date: 2009
• ISBN 10: 0307409503
• ISBN 13: 9780307409508
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 320