October 31, 2008

Online Business and Reciprocity

Farhad Manjoo recently wrote an article on Slate promoting the notion of online businesses like Facebook charging people for services. It’s an interesting business argument, but I wanted to address this situation from a more social perspective.

There’s some notable differences that emerge when I compare my two favorite web-based businesses, Google and Amazon. I feel very comfortable in my relationship with Amazon, largely because I understand how they help me and how I help them: I give them money, they give me goods or services. I know exactly how I’m helping them out, and I know exactly what I’m getting in return. It’s very easy for me to weigh the costs and benefits and make sound economic decisions based on them.

This kind of relationship is a well-known cultural norm that’s as old as our civilization: it’s called reciprocity. Assuming that all individuals and businesses have self-interest in mind, it’s actually a mechanism that helps build trust, because it makes intentions transparent. Almost everything that Amazon knows about me is based on the reciprocal relationship I’ve had with them, and as a result the information that they extrapolate based in it is not only highly accurate, but also welcome and appreciated. For instance, whenever I get an email from them suggesting a product that I might be interested in, there’s quite a good chance that I’ll actually be interested in it, because their suggestion is based on very good evidence—i.e., previous purchases myself and thousands of others have made with them. Because their business model is based around this reciprocal relationship, it’s in their best interests to offer supporting infrastructure to help their customers make informed decisions about their transactions with them. For them, this means my increased loyalty and purchasing; for me, this means an online resource that I find no less useful than Wikipedia.

Not having reciprocity in a relationship, on the other hand, can lead to suspicion and mistrust. If someone were to continuously give me, say, incredibly useful search results, an email client with an outstanding user interface, and an awesome code-hosting service completely free-of-charge, I’d wonder what their ulterior motive was. I’m referring, of course, to my relationship with Google, which I’ve received a tremendous boon from and Google has asked nothing for. Apparently they like to mine the personal data I’m giving them, but I have no idea what they’re doing with it. They throw ads at me, but I don’t visit Google to buy things; I visit them to search, receive and send email, and host my code, so the ads simply aren’t in the best interests of the user experience the way they are on Amazon.

It also makes no sense for Google to predict what I might pay money for, because they don’t know anything about what I’ve paid money for before. For instance, just because I have an email conversation with someone about our World of Warcraft raid last night doesn’t mean that I want to buy gold online. Even if the advertisement is potentially useful, there’s no social information to help me make a decision, such as the user-ranked ratings and reviews present on Amazon, and there also isn’t a trusted intermediary like Amazon to ensure that I’ll receive what I pay for. And I don’t expect Google to ever offer such things because they make money off selling advertisements to other companies, not selling products to me.

So, my relationship with Amazon mirrors my relationship with the store on main street, which itself is part of a functional social dynamic that’s been in place for hundreds of years, if not thousands. I’m not sure what my unbalanced relationship with Google mirrors, because technology has never actually allowed anything like it to exist before.

I do think there’s a word for a business relationship that doesn’t involve reciprocity, though: it’s called creepy. Check out Jenny Boriss’ excellent blog post titled Facebook is acting like your mother, and she’s very disappointed in you. The bottom line is that if I have to pay companies like these a monthly fee so that they can turn a profit and give me great service and not be creepy anymore, I’ll gladly do it.

Because reciprocity is awesome.

© Atul Varma 2020