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

HOW TO BE
A SOCIAL CAPITALIST

I f 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 businessfrom a Fortune 500 company to the start-up just opening its doorsyou 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 wavethe world of mass collaboration and social networkingusing 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.

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, 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.

In the future as envisioned by Doctorow, whuffie is the only currency used. Other currenciesdollars, euros, renminbi, whateverwill simply disappear.

Whuffie is the residual outcomethe currencyof 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.