Is Social Media Putting Trust Back Into Commerce?

Recently my friend Alan Travers and I were discussing the role of social media in the way business is transacted. The thought process that followed led me to conclude that social media was fundamentally changing the “trust terrain” we all live by. Here’s the story:

Alan and I tossed around the rise of services like Airbnb and Uber, where – increasingly – transactions are eliminating the middleman, and internet-based communications are being re-established on a trust basis. And how social media is re-creating networks that had diminished in influence, at least in Western societies.

Alan is involved in several manufacturing businesses in China. He observed that there, networks never really disappeared, and that it was nearly impossible to conduct business in China without being able to tap into them.

This discussion took me back to my childhood, thinking about the substance of contracts then – before and during WWII. I grew up on ideas like “a man’s word is his bond” and “a handshake is a binding contract”. Those really were “social” contracts.

These kinds of ideas didn’t provide much work for lawyers. I’m not blaming them for the subsequent rise in contract law, but they were complicit in its development – largely, I think, as a consequence of the globalization that began after WWII, and the ensuing separation between sellers and buyers.

Whatever the cause, the latter half of the 20th century saw a dramatic rise in cadres of middle managers of every description, who formed a “bucket line” between producers and consumers.

The development of the internet, and the social media tools it enabled, created conditions where, once again, buyers and sellers could communicate directly. The bucket line of middle managers became increasingly redundant, and the “great recession” of 2008-11 saw great swathes of them dismissed.

The last half of the 20th century also saw the rise of the importance of advertising, as “trust” was still necessary to facilitate commerce. The need to trust is embedded in our DNA, well formed by the time when humans first walked upright – and it’s not about to go away. But in the age of mass commercialization, trust came to be owned and managed by the ad agencies.

When I was a kid, innovative advertising was the Goodyear blimp Goodyear blimphovering over the County Fair. Today, Google Goodyear, and you’re likely to find Goodyear (or other tire) ads floating over the top of other sites you’re looking at. The blimps appear out of nowhere. But we put up with Google’s ads because Google also let’s us find what we’re looking for – for free.

The Internet is dramatically changing part of that formula: Trust is now being negotiated between individuals, but on a global basis. Rules about managing trust this way are being established. For example, it is completely unacceptable, even in a business Twitter site, to be seen to be hawking your service or product. Virtually every guide to using Twitter as a business channel emphasizes the importance of providing useful content – free – as a way of establishing that you are trustworthy.

The speed at which this change is occurring isn’t noticeable when you’re in the middle of it – but sometimes events give you a clue. We have a weekender in a country town an hour and a half from Melbourne. We rent out part of it as a B&B, through an agent. Lately we’ve seen bookings dropping off. Yesterday my wife, Jennifer, did an Airbnb search in the town, and discovered there were 316 places on offer – that’s in a town with a population of about 2600. You do the math!

Those are all direct, person-to-person deals, with no agents in between. And, like you, we’re part of it. We’ve just booked a house in Minorca, Spain, for a week on Airbnb, after direct, one-on-one discussions with a number of property owners.

To answer my own question: I think that social media is relocating the management of trust from the ad agencies back to individuals. Is it possible that a change like this could be deeply disruptive for those agencies?

One more question: If you accept this premise, how does that change the way you need to market to your clients?

(This post first appeared as an article in PSMJ Resources Professional Services Management Journal, June 2015, http://bit.ly/1Fe4zrD)

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