You may or may not have heard about the recent hoopla occurring over at Digg surrounding the recent change in the front page algorithm.
To give you a short summary, it has been pointed out that a few of the most active users on social bookmarking sites like Digg produce the vast majority of the content. Certain people, such as Netscape’s Jason Calacanis, have taken advantage of this by offering top social bookmarkers a set salary to come and bookmark for him at Netscape. Digg, on the other hand, decided to attempt a different strategy of favoring less popular users over their top users. The top users did not like this and some have revolted.
What exactly does this have to do with socialism you may ask?
The methods that Digg has recently employed are based on the same theory behind the progressive taxation at the core of socialism. Instead of rewarding their top users, Digg is actually giving more of a say to the lesser users. You get more bang for your vote as an infrequent user than as top contributor. This is exactly how the progressive taxation of socialism functions, the top contributors to society, the top income earners, get less bang per buck earned because a greater percentage of each of their bucks goes towards taxes.
The Digg method has worked well so far. This has also been the only method until recently. But now there are alternatives.
Jason Calacanis and Netscape decided to take the exact opposite approach. Netscape offers their top users a monthly commission of a thousand dollars, as long as they stay active. In fact, Netscape is taking advantage of the unrest at Digg and has offered top Diggers that same commission to bring their social bookmarking over to Netscape. In fact, not only are the top contributors given money as an incentive, but their content is featured more prominently throughout the website, guaranteeing those users greater popularity and visibility.
The Netscape approach is the supply-side economy. Keep the suppliers happy, give tax-breaks and subsidies to industries and corporations and everything else will follow. “Supply creates its own demand,” or so said French economist Jean-Baptiste Say. Netscape figures that if they pay their top users to supply enough high-quality content, then the user base and readership will follow.
Newsvine uses an entirely different method. They pay all their users directly proportional to the revenue that the advertisements on their columns generate. Top users and new users, long-time users and infrequent users are all given the exact same opportunity to earn as well as vote and gain popularity. Older and more popular users have the advantage that they are already popular. However, if they stop contributing they will find their popularity good for very little. New users may initially be frustrated that no one is paying much attention to their contributions. But if they keep it up and continue contributing high quality material, then they will find that their popularity will grow along with their share of ad revenue.
The Newsvine system is the free market with flat taxation. Every one is treated exactly the same. There are no rules for a certain group and different rules for another group. Everyone is given equal opportunity at sign-up. Where they go from there is up to them.
The phenomenon that is social bookmarking is still in its infancy and it is still far too early to determine which is the winning strategy. In fact, it is not a stretch to claim that human history is still too young to determine which economic system is the best. There are still many proponents of the progressive taxation of socialism, the flat taxation of the free market and the tax breaks and subsidies of the supply-side economy. Some systems like the United States, feature properties of all three.
Digg has been around the longest and thus has a well established pool of top contributors as well as a good base of users. The question now is whether this recent unrest is cause for worry or just a minor pitfall.
Digg has another disadvantage. If the economic analogy is continued, Digg is not a strict socialist state. A good deal of the backbone of Digg is based on feudalism. Everything produced on Digg is done so in the name of the “king” and Digg founder, Kevin Rose. Digg does not disperse any of the revenue to the users. Each user contributes with no actual economic incentive, and instead only for popularity, recognition and community respect.
Considering that Digg has recently expanded from strictly coverage of technology, to coverage of all news, they need to compete with the other social bookmarking services to gain both casual users and contributors outside of technology. There is very little incentive for these new users to start at Digg.
In fact there is little incentive for the current top users to even stay at Digg, when other alternatives offer far better incentives. You can see this example work in real world economies when two companies headquartered in different nations consider where to call their home and pay their taxes when merging into one corporation. The American Chrysler and the German Daimler considered just this exact scenario. Instead of becoming ChryslerDaimer and staying in the United States, the tax lawyers and accountants advised that the supposedly “socialistic” Germany actually offered lower total corporate taxes than would the United States and the company became DaimlerChrysler.
Top users and high income earners will look to move their productivity away from “progressive” systems and towards the incentives of other sites and nations.
Netscape is one of those sites offering new incentives to top users. They already have the advantage that they have a huge built in base of readers leftover from their standard web portal days. However, they must now work to maintain those users by attracting a strong group of top contributors to produce a great quantity of high quality content for that old user base and to potentially attract new users.
Netscape clearly has a winning strategy to attract top users, offering both salary as well as notoriety and visibility. However, could this strategy backfire and alienate more casual contributors who are neither paid not given special status? This could very much form into a middle-class-less society where the high class of top contributors are given advantages and income, and the gigantic base of non-contributing users are left as the lower class, living off of the “wealthy”. What could be lacking are those users who may not provide social bookmarks, but who would vote and comment and stay active in the community, the middle class.
Newsvine has the hardest task of developing both the user base and the contributing base, and doing so with competition in all directions. However, newsvine is the only site that treats its user base and contributing base as one, and can therefore have an easier time developing top contributors from its users while enticing all users to attract even more users. In the end the free market strategy may just be the winning combination in the world of social bookmarking and perhaps in real world economics as well.