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Thursday, September 13, 2007 

Vol. 3 No. 15

Social Networks on the Web are Changing Everything…

....When the Best Way a High Powered Music Label can Think of to Launch the Career of One of its Signed Artists is to have her Masquerade as an Unsigned Unknown on YouTube.com

Although this entry is unique in that it has almost nothing to do directly with the car business or or automotive conventions. A Wall Street Journal front page article caught my eye last week that clearly identifies a major paradigm shift in marketing and promotion, which, of course will effect how the car business (one of the largest media advertisers in the country) will be conducted in the future.

The article that amazed me was written by Ethan Smith and Peter Lattman, and appeared as the center feature article on the front page of the Wall Street Journal, last Thursday, September 6, 2007, entitled, “Download This: YouTube Phenom Has a Big Secret” Singer Marie Digby Isn’t Quite What She Appears: ‘Make People Like Me’

So What’s the Big Deal?

Twenty four year old singer Marie Digby’s simple, homemade music video on YouTube has been viewed over 2.3 million times, and according to what viewers where supposed to believe, bootstrapped her into fame and fortune and a major record contract almost overnight. As Hollywoods Records label declared last week: “Break through YouTube Phenomenon Marie Digby Signs With Hollywood Records.”

Only problem is, it appears that Ms. Digby signed with Hollywood Records over 18 months ago, back in December of 2005, and the whole “rags to riches” YouTube launch, according to the WSJ article, was cleverly manufactured by the record label itself.

So What’s the Point?

I think this represents a monumental paradigm shift in commerce and promotion that is in most circles, still being discounted right now (the WSJ doesn’t under rate its significance though as it did make this story a front page center feature…above the fold), but will greatly effect all large consumer industries in how their “products” are promoted and sold, including, of course, the auto industry.

To me the music and entertainment business for the last 50 years is similar to the car industry, in that it has always been the epitome of the theory that you need to spend huge amounts of money for promotion as the only successful entry ticket to widespread sales success. Hollywood has for a long time been the capital for “over the top” spending to promote talent. Indeed, I don’t know much about that business but don’t music labels justify taking the high percentage of music sales revenue (as opposed to giving it to the artist) precisely because of their finance driven promotional model?

So given this history, all of sudden the best way these folks could figure out how to promote a new artists is to mask their financial clout backing her and produce a home grown YouTube video, and then cleverly, through brains not money, stack the deck in clever online search methods (the article highlighted how the initial video recording engineered search traffic by “posting covers of hits by Nelly Furtado and Maroon 5, among others, so that users searching for those artists’ songs would stumble on hers instead”) so she was “discovered.”

My Observation

Where success in the game used to be predicated on who had the greatest financial resources, with some "brain power" added, the Internet networking phenomena now has changed the paradigm so that success is proportional to the "brain power" available and now cash is the secondary requirement. Now this doesn’t mean that everything now is fair and egalitarian all of a sudden - as evidenced below, as always, those with a whole bunch of money can buy enough "brain power." However what it does mean is that if you just have "brain power," right this minute while the whole old system is in the process of disruption, you can have equal to or better results than those who have access to the “system” and a whole lot of orthodox backing (as evidenced below, the institutions are using the non-capital requirement means to effectively promote, even though they have access to every means at their disposal). As the WSJ article said, “traditional media conglomerates are going to new lengths to take advantage of the Internet’s ability to generate word-of-mouth buzz.”

It occurs to me that Hollywood Records didn't do a lot more than what a clever Ms. Digby could have done on her own, which is exactly how they could so easily sell the fabricated "rags to riches" story with some believability.

A Final Note

As mercenary soldiers are never quite as good as those fighting for themselves, for a while, at least, those folks working for themselves as entrepreneurs may have the ability, under this new networking paradigm, to “out think” or at least “match” the established competition to gain leverage. The entry ticket now depends as much on clever ingenuity as it does capitalization, even in traditionally capital intensive marketing budget industries. I think that’s why social networking is one of the hottest models for VC’s right now, its why the youtube.com folks are rich, and its why Google has a cap value worth more than the all of the US auto companies combined, yet they have very few tangible assets. This phenomena must greatly effect the auto industry of the future, and, is just now in the beginning stages of being recognized for the impact it will have in years to come.

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