Adam Smith Economics Don’t Fly Online

The invisible hand is a powerful thing. According to Adam Smith it matches up willing buyers with willing sellers to create value enhancing exchanges. Each party benefits by looking to satisfy their own selfish desires. A simple concept and one that has driven the world economy for centuries. It doesn’t quite work online though, not how it used to, and I’ll explain why in a minute, but first a story.

About a month ago I was approached by an older entrepreneur that had a product to sell. He came to me and asked for help selling this product using “social media marketing.” He didn’t have much money to spend, and he didn’t even understand the basics of how social media worked and so I gave him a few ideas and sent him on his way. Soon after that, he contacted a good friend of mine that handles social media for Symantec. My friend was very generous with his time, created a power point presentation for this man and walked him through the basics of how social media works.

My friend explained to him that “selling” your product through social media doesn’t really work. People don’t pay attention to advertisements, they like stories, they like participation and they don’t like to be asked for their credit card. You need to build their trust long before you try and sell them anything. That takes time, it takes engagement and it really isn’t very easy.

This was not the answer the older entrepreneur wanted to hear, it just didn’t jive with his understanding of economics. In one exerpt from the email he basically asked what about Adam Smith? Aren’t people online interested in a product that will improve their lives? Here is an excerpt from the email:

[T]he key to providing a product or service is to make an appeal to a persons selfish side, or “own gain”… there has to be an appeal key that resonates.

In essence what he was saying was, “I have a product to sell that will help people, why can’t I just sell it online?”

The simple answer: because it won’t work.

Twitter, Facebook and really every single social network in existence is littered with highly ineffective spam campaigns. It isn’t that the spam doesn’t offer value enhancing exchanges (I’m sure there are people out there that find value in teeth whitener, online pharmacies and losing 30 pounds in 30 days)- it’s that most spam is irrelevant to us. There is not enough time in the day or in our entire lives to read every spam message sent our way. It is no longer our money that we hang onto with a death-grip, it is now our TIME that is our most valued commodity.

If you want to gain our attention online, you need to give us serious value for free. Think about how even Super Bowl commercials have recognized this fact and evolved. If the commercial isn’t awesome or hilarious, *skip*. We are now programming ourselves to block out all non-essential information and we have become especially sensitive to people trying to sell us stuff. It doesn’t matter what. I may need a new leather jacket, but if there is a spam message in my inbox offering online leather jackets at discount prices I may delete it because of how the message came to me.

Adam Smith said back in 1776 in the Wealth of Nations, “Every individual…neither intends to promote the public interest, nor knows how much he is promoting it, (rather) he intends only his own gain, and in this…he is led by an invisible hand to promote an end which was not part of his intention.” Online however, the invisible hand is becoming more visible.

Adam Smith economics may function quite well in an open air market where people have come to buy, and others are trying to sell. It doesn’t work quite the same though when online participants are not using Twitter or Facebook to shop- they are using these tools to socialize and to communicate. If you want your product to resonate with these online socializers you need to give them something to talk about. What do people like talking about online? It’s different for everyone, some like sharing YouTube videos of Larpers-

others like sharing videos like The Last Lecture, one of the most popular Youtube videos of all time-

 

All videos that people can talk about. The videos are free, but they are value enhancing. So all the viewers or “hippie free loaders” as Mr. Burns from the Simpsons would refer to them are getting something of value without providing any monetary renumeration. But they are paying something, they are paying with their valuable time.

Mr. Burns scowling at freeloaders

It isn’t easier to market products online, in fact it is much more difficult. Not only do you need a product to be good- you need more. You need something so exceptional that people will talk about it once their computers are turned off. If that is too hard for you, you can always buy massive email lists, purchase Twitter followers and Facebook friends and simply spam like crazy and pray you get a sale. Just please, don’t put me on your list, I have better things to do with my time.

Comments

10 Responses to “Adam Smith Economics Don’t Fly Online”

  1. Stan Faryna says:

    You’re on the right track.

  2. Thanks for not wasting my time with this post! ;)

  3. Damian says:

    One thing I was thinking about in reference to this conversation is that the I believe the invisible hand is still in effect. However, I think the audience is much less trusting of advertising. It used to be that a snake oil salesman could walk into a town and say, “this elixir does X”, Dishonesty was rare and so people bought boxes and boxes.

    So when someone comes offering us any sort of elixir, it is not the promise to improve our station that works, we need a verifiable example, we need to “believe” that the product will improve our station, which we either gain by our own experience or by recommendation by a TRUSTED source. So you either need to help people “experience” the product/service first, or gain their trust somehow.

  4. Matt says:

    The currency all marketers are trying to deal in is believability. I’ve sat and listen to many, many people who think they have a “great product” that everyone would love, if only they heard about it.

    There are many issues that marketers need to address, but one of the biggest ones is that people aren’t sitting around waiting to be sold that product (even during the Superbowl).

    Everyone agrees that word of mouth is the best form of marketing. That’s because believability is inherent in the conversation. If I tell Adrian to try a product, he knows I have no vested interest in suggesting the product, so Adrian might give it a whirl.

    That’s the crux of social media. It’s not about getting people in a room so they can be pitched. It’s about getting people in a room so they can pitch their friends. That sound callous and opportunistic, but the reality is, it’s hard. One doesn’t want to be irrelevant (that’s the very definition of SPAM). Additionally, one needs to offer value to these best customers, something that gives them an idea that there’s something in it for them. That means understanding why consumers might share something, and trying to incentivize that behavior.

    Again, easier said than done. Like an earlier commenter said, you’re on the right track. Marketers seek to increase their amount of believability. Communities are an excellent source of it.

    My guess: you’ll see a lot of ads during the Superbowl that end with: see what real people are saying on Facebook.com.

    (Good topic, and one I’ve been thinking about a lot lately.)

    • Thanks for your comment Matt, I agree this is hard to do. You can just imagine how hard it is for law firms to deliver a product that is fun to talk about at parties, but the concept is a sound one. Create SOMETHING worth talking about. It sets the bar pretty high.

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