Businesses like ThisNext are finding that for lots of people, recognition is as strong a motivator as cash
It's dawn at a Los Angeles apartment overlooking the Hollywood Hills. Laura Sweet, an advertising creative director in her early 40s, begins to surf the Net. She searches intently, unearthing such bizarre treasures for sale as necklaces for trees and tattoo-covered pigs. As usual, she posts them on ThisNext, a social network where people exchange shopping leads. Why does she spend so many hours each week working for free? "It's sort of a cool feeling that you're influencing people," she says.
A half-hour's drive to the west, a serial entrepreneur named Gordon Gould strolls into the Santa Monica offices of ThisNext. Gould has managed to entice an army of volunteers, including Sweet, to labor on his site without pay. Traffic on ThisNext is soaring, with unique visits nearly tripling in a year, to 3.5 million monthly. Revenue comes from advertisers, who pay to display their wares amid so many shoppers. What's in it for the volunteer workers? "They can build their brands," Gould says. "In their niches, they can become mini-Oprahs."
Here's how it works: Entrepreneurs like Gould build meeting places that provide visitors with tools to express themselves, mingle with friends and strangers, and establish their personal "brands." The result, when all goes well, is an outpouring of creativity. These bottom-up efforts have produced not only ThisNext but also YouTube (GOOG) and even American Idol.
Does the crashing economy affect the market for free labor? Gould says no. In fact, he's betting that people will continue to invest in their personal brands during hard times. Between investor visits during a recent trip to New York, he sips a soy latte and speculates. Amid the downturn, he says, firings are sapping loyalty to companies and steering people toward goals of self-sufficiency. In other words, Gould says acerbically, "the only person I can rely on not to screw me—hopefully—is myself."
Beyond brand-hungry strivers, masses of free laborers—from coders building Linux open-source software to editors fine-tuning an entry on Wikipedia—continue to toil without ever seeing a payday, or even angling for one. Many find compensation in currencies that predate the market economy. These include praise from peers, a respected place within a community, victories in online contests, and satisfaction from helping others.
The challenge for managers all across the economy is to harness as much of this free labor and brainpower as possible to their own enterprises. From universities to the computer labs of Internet giants, researchers are working to decode motivations and perfect the art of enlisting volunteers. Prabhakar Raghavan, chief of Yahoo! Research, estimates that 4% to 6% of Yahoo's (YHOO) users are drawn to contribute their energies for free, whether it's reviewing films or handling questions at Yahoo! Answers. If his team could devise incentives to draw in an additional 5%, it would enhance Yahoo's pages, bringing more traffic and advertisers to the site. Incentives might range from contests to thank-you notes.
Raghavan has hired microeconomists and sociologists from Harvard and Columbia to match different personalities with appropriate rewards. Researchers elsewhere are trying out novel approaches. Luis von Ahn, a professor at Carnegie Mellon, has come up with online games that lead people to do tasks computers can't handle, such as identifying the subjects of photos on Web sites. "For some jobs, you need their brainpower for only five or 10 seconds," he says.
Recruiting volunteers for moneymaking ventures, however, can create problems. For centuries humans have learned to distinguish between two economies: the social and the market. Dinner guests, for example, satisfy social obligations by offering their hosts a bottle of wine. But, says Dan Ariely, professor of behavioral economics at Duke University's Fuqua School of Business and author of Predictably Irrational: The Hidden Forces That Shape Our Decisions, it would be a jolting intrusion of the market economy if guests instead handed their hosts a check.
"A VERY DELICATE LINE"
Managers working in the free-labor economy must keep these two worlds in mind. If they recruit workers by appealing to their social side, calling on their generosity or community spirit, and then proceed to make money from them, they can spark a backlash. That can sully their reputations in the time it takes an angry volunteer to update her blog. "It's a very delicate line," Ariely says, "and the modern workplace is right in the middle."
Bo Peabody, co-founder of Tripod, one of the earliest networking sites, and now a venture capitalist at Village Ventures in New York, points to a constant tension between free- labor entrepreneurs and their volunteer workers. Initially, users are "driven by a desire to express themselves," he says. "But there's a limit to how much they'll do for free." Devising ways to reward free workers "is a very difficult jump," Peabody says. "This is a theme running through our entire portfolio."
In the summer of 2006, Gordon Gould didn't spend much time worrying about how to split ThisNext's revenues, which Gould says are now in the low millions, with volunteer workers. Far more pressing was the need to lure thousands of volunteers to his new site. Like most free-labor entrepreneurs, he faced a chicken-and-egg dilemma: how to entice people to perform for a crowd that doesn't yet exist? His solution was to create one. He and his team interviewed a few hundred people, including fashion designers, athletes, and other celebs, and then seeded ThisNext with their thoughts and recommendations. "When the first visitors came, there was a there there," Gould explains.
Laura Sweet was an ideal volunteer candidate. Long before discovering ThisNext in August 2006, she was hunting for strange and lovely things on the Net and showcasing them in bulk e-mails. She loved to share her discoveries, no matter how much work it took. She has a blog whose motto could have been custom-crafted for Gould: "All the money in the world can't buy taste."
Sweet's first hit on ThisNext was a $400 fishbowl from Red Dot Design. When she posted it on the site, it drew thousands of clicks. She hunted for more finds to post. As other visitors to the site found her gems, they gave them high marks, driving Sweet up in the site's contributor rankings. She was becoming a star—what Gould calls a maven. On a recent afternoon she clicked on the site to check her status. "I'm No. 1 in San Francisco, No. 1 in Washington, No. 2 in Denver," she announced proudly.
TURNOVER AT THE TOP
The unwritten quid pro quo between Gould and Sweet amounts to a boilerplate contract for much of the free-labor economy. Gould provides a stage for Sweet to strut her stuff, a platform to reach millions of shopping fanatics around the world. This is the key to his business. It draws advertisers to niche sites populated with shopping enthusiasts, and ThisNext is paid for each click. Gould is happy to give Sweet a boost by putting her in touch with media (including BusinessWeek). His team also sends mavens such freebies as skin cream and sunglasses. Using this strategy, Gould and other entrepreneurs manage to cash in on free labor while glossing over the issue of financial remuneration.
Making money is up to Sweet. She thinks she might cash in on her stardom somewhere else—on blogs, books, TV, or even at a new job. (Her blog, http://ifitshipitshere.blogspot.com, gets tens of thousands of hits per week but doesn't make much money.)
As far as Gould is concerned, Sweet is a freak, statistically speaking—just the kind of freak he was banking on. Gould, who studies network theory, believes much of the free-labor economy would crash and burn if it relied on average people to handle the work. In his view, a handful of people rise to the top through a combination of smarts, good timing, and hard work.
This elite is then thrust into stardom via the links and recommendations of a large network. They soar in the rankings, which for many, including Sweet, is important. This leads them to churn out ever more free product. As a result, fewer than 1,000 of the millions of visitors to ThisNext contribute the lion's share of the work. Gould owes his success to these mavens.
These days, Sweet has begun to wonder about payment, as in money. Gould has called her and picked her brain, she says, asking her the kinds of questions her other bosses pay her to answer. "I figure he at least owes me a sandwich one of these days," she says.
But Gould has a theory. He thinks his superstars rise from the pack and eventually fall. They get tired or bored, or others get bored with them. Mavens tend to revert to the mean. So one day Sweet will tumble down the charts in San Francisco, Washington, and Denver. Her reign can't last forever. The trick in the volunteer economy is less to keep a superstar from quitting than to make sure plenty of volunteers are eager to take her place.