Marshall Van Alstyne(PI)

Dawei Shen(EL)

Bob Lloyd(IM)

Using economic stimulus to get results from social software

http://youtu.be/3eQkn0PmAGg

Industry overview - a 50-year old problem

Ecosystem of Enterprise Social Software

– Gartner Magic Quadrant

> $500 Billion

$157 Billion

$15 Billion

• Global Knowledge Management Market Revenues to Exceed $157 Billion by 2012.

• CAGR of 45.3% from 2002-2010 - Global Industry Analysis, Inc.

• Social CRM market to reach over $1 billion in revenue by YE12, up from approximately $820 million in 2011. Over 30% growth in 2011.

Pain Points of Today’s Social Software

• Low adoption rates

• Noise: Clamoring for attention promotes information A.D.D.

• Social software makes the popular more popular, causing bottlenecks (Booz Allen Hamilton study of IFC)

• Little managerial control

• Can’t measure ROI

Recent trends & early attempts

SAP Developer Network

Stack OverflowReputation points

Quora Credits

Multi-Sided market Price Discovery

Monetary policesEconomics of information

Economic practices

Opportunity:

Use established economic practice to optimize social software

Barter’s Core Technology Layer – 3 key components

Currency

• Security• Controlled rate of

creation & optimal entry rules

• Controlled rate exit & optimal expiration rules

Market engines

• Exchange mechanism for information products

• Address information asymmetry

• Transactions facilitation & clearance

Economic policies

• Monetary policies to manage currency supply

• Fiscal policies for:• Reward knowledge

reuse• Reward voting,

tagging, tipping

Barter’s IP: three provisional patents have been filed

DOES IT WORK? YES!

• A two year study of loan officers at a Japanese bank showed productivity gains averaging 10%.

•Users promoted faster.

• Plots show productivity ranges. Low performers emulate high performers.

• What would you do with 25 days of extra productivity for you and members of your team?

0.0

1.0

2.0

3.0

4.0

5D

ens

ity

20 40 60 80 100

Existing Accounts

0.0

1.0

2.0

3.0

4.0

5D

ens

ity

20 40 60 80

Restructuring Group

Kernel Density Estimate of Productivity

"Information Sharing and Productivity: Evidence from a Japanese Bank" NBER

Cambridge, MA. July 22, 2011.

First version

Before

Learning

• Plan to develop all features• Plan to sell to all companies• Unclear value propositions• Blurry line between partners and customers

• Good news - • Problems are prominent and painful• Our technology is popularly received

• Bad news - • Enterprise software installation is troublesome and time-consuming• Replacement is an art and difficult

• Break out the Barter Market Engine TM

• Plug it into existing platforms• Sharepoint• Jive• Yammer• Cisco quad• Social cast• Success factors• IBM lotus connection• Salesforce chatter

• Turn competitors into “complementors”!

Key pivot

with existing enterprise social software vendors: Cisco, SAP, IBM

integration with user-interfacing modules• Early stage• Long-term viral

strategy

Currency Markets Economic Policies

Barter Platform SPI (Web Services)

to existing open platforms• Large-scale

market entry strategy

• Avoid challenges on duplicate development and sale channels

Barter’s Product & Services

Our core technology layer

Plugin Full vertical Partnership

• More, faster, better answers

• Higher social software participation

• Managers’ ability to drive performance

• Long-term sustainable incentives

• Productivity Gain• Accurate measure

of expertise & information value

• Controls/Visibility of the platform using economic tools

• Idea Genesis

• Initial launching partners who pilot with Barter

• Cisco• SAP• Deloitte• Humana• PWC

• Companies who co-develop certain modules of Barter

• Artem Associates

• Big players already in enterprise social software space

• Cisco• SAP• Sharepoint• Jive• Yammer

• Software development

• Key mechanism design and algorithm development

• Human Resources

• IP (mechanism design algorithms)

• Automated account management

• Communities• Co-creation

and co-design

• Existing MIT sponsors

• Direct sale from the web service

• Freemium• OEM / VAR• Piggyback on

existing software solutions (+)

• Big Enterprise customers

• Small enterprise customers

• Customer community (+)

• Government agencies

• Education• Open APIs• Highlighted

industries (+):• Lawyers• Patient

Healthcare

• Human (Programming, designers, sales team, support staff)

• Hardware (Office space, computer equipment, web hosting service fee)

• Patent applications

• Up-front subscription fee• Per-seat charge ($2 / Seat)• Professional services / Consulting• Licensing fee of the API platform

Team 8

Enterprise Users• Leadership of business units

• Regular business units• Customer service managers• Help desk managers

• Innovation office• CIO / IT Departments

Who are the users and who are the buyers

Direct Sales of

Software, consulting service

• New Deployment

• Fixing existing systems

Indirect: Consultants,

VARs

External early adopters using

public/free version

We have paying customers!4 corporate clients have committed (with resources) to use Barter

10+ companies are actively discussing on deploying/piloting with Barter

4 partnership opportunities in conversation

1 education usage

APPENDIX

BOTTOM UP ESTIMATERevenue Model• Charge $2/seat/month

• Very affordable: Yammer already charges as much without sophisticated economic optimization. Gartner says range $2-5 supported. Interviews agree.

• 10,000 seats in one firm ~$250,000 / year• 1 Beta client already. 30+ firms this large among MIT Media Lab sponsors alone.

• Only 12 firms in 3 years to reach $3M revenue annually• Very conservative linear growth

Cost Model• 4 programmers x $150,000 in year 1, +1 in year 2, +1 in year 3 gives $900k cost• Round up to $1M expenses annually

Net Income $3M-1M=$2M• Very conservative PE Ratio of 10 (NASDAQ is 24) gives $20M valuation in 3 years.

Conclusion• Investment of $750k covers 4 programmers and 25% contingency for 1 year.• $1.25M pre-money is 3/8 of $2M post-money. Implies 10X return in 3 years.