Monday, September 28, 2009

The Identity Bank – A Business Model for Social Networks

From an op-ed in the Washington Post

A visit from the pope may attract a large audience, but it's not a great place to make money. Likewise, social networks can successfully bring people together, but don't expect them to turn a profit.
The article is penned by Bo Peabody, the founder of Tripod.
Almost 15 years later and as one of the Web's largest social networks, Tripod generates the same advertising revenue in a year that Google does in an afternoon. The bottom line is that advertising does not work on social networks because social networks are not media businesses.
I don't think Bo means advertising doesn't work at all on social networks, but that it is a weak source of revenue upon which to sustain a business. Users of those services are looking to communicate and connect with other people, and are therefore less likely to be swayed by a product or service vying for their attention.

This is the business model that many social networks have pursued and, as Bo points out, have failed. Bo offers a solution.
Instead of expecting profits that won't materialize, the entrepreneurial community should instead operate social networks as not-for-profit organizations. Wikipedia has grown phenomenally with a not-for-profit business model, and while Wikipedia has its problems, its fate is in the collective hands of its users rather than in the hands of media companies or the stock market. Facebook and Twitter should enjoy the same comfort.
He suggests that social networks should become the property of the commons – that the users own their data. I think this is a laudable goal. And yet, I do believe there is a valuable business model available to social networks: identity verification.

This is a very important service, and it is currently done in a number of ways, with varying degrees of accuracy and trust. At the high end are government-issued forms of verification like passports and state driver's licenses. At the low end are usernames and passwords. In between are mobile phones and credit cards.

Now everyone knows you're a dog

Social networks represent a new platform upon which to build a robust, accurate, and trusted system of identity verification. They are already beginning to fulfill this role – Friend Connect and Facebook Connect get us started on the ground floor with outsourcing Web sign-ins. These services allow us to build a network of trust that can carry identity verification across the Web.

For example, Twitter has, on occasion, been the source of impersonation of various people, particularly celebrities. Twitter offers to verify your account, but only if you are famous.
We're starting with well-known accounts that have had problems with impersonation or identity confusion. (For example, well-known artists, athletes, actors, public officials, and public agencies). We may verify more accounts in the future, but because of the cost and time required, we're only testing this feature with a small set of folks for the time being. As the test progresses we may be able to expand this test to more accounts over the next several months.
But did you know that you can verify your Twitter account already, even if you aren't famous? You can do it with the help of a Google profile. Google profiles allow you to verify email domains. But you can also verify your real name on your Google profile using Knol's ID verification system. Once you have a verified name, you can add your Twitter account to your Google profile links. This will generate a prompt asking if you want to tweet about your profile.

The tweet contains a link back to your Google profile. This bi-directional set of links – one account linking back to the other – allows the name and domain verifications to pass through to your Twitter account. This isn't reflected in the UI, but if Twitter tapped into the Social Graph API, they could display the verification badge. You are who you say you are, even without having to be a celebrity.

Now, is that process user-friendly? Not in the slightest. But these are features that were put together quickly, from a number of parts that weren't designed to fit together as a system. Eventually they will fit together. When built on open systems, these features can grow in capability and ease of use.

Take it to the bank

There is real value in providing accurate and trustworthy identity verification. It is essential to the functioning of society. In a decade, we may have identity banks vying to provide you with identity services. Just as you trust a monetary bank to hold on to your savings, you'll trust an identity bank to maintain the personal and private details that uniquely identify you. The identity bank will provide a secure service for identity transactions and the electronic sharing of personal data.

And just like the financial institutions which provide credit cards and collect fees from merchants for processing transactions, identity banks will collect fees from the businesses and services that require your identity to, in turn, provide services to you. Perhaps even the government will outsource identity management and when you are stopped at immigration they can scan the barcode off your mobile, generated by a verified and trusted 3rd party identity bank.

The business opportunity of providing identity services will not be missed. This is the monetization path for social networks. They are nascent identity banks. It is only a matter of time before the various pieces come together and the opportunity is realized.

If this sounds scary – if you are concerned about a private institution being responsible for your identity – think about the world we live in today. So much of our private information and credit history is tied up in corporations that have a near-monopoly and little responsibility to the consumer. We should proactively work towards a world where the consumer is in control of her own information and has a choice about identity verification providers. Let's avoid the same mistakes that have been made with financial institutions, telecom companies, and health insurance.