Can Hubdub Survive?

I’ve been playing with Hubdub recently and all I can say is it has a looong way to go. In fact I think that unless some major changes are made Hubdub won’t survive 2009. Unfortunately, I think Hubdub faces some major, major hurdles, that will make the struggle to build a decent revenue stream (remember now cash is king...angel funding will only get them so far).

Hubdub for those that have not come across it is as predication market based around news. The idea is to combine news aggregation of some sort with predictive markets.

I’ve put down bets and created questions. My consequent experience has been less than heart warming. But to illustrate my concerns let’s look at the questions I created.

My first question was “Will Digg buy Hubdub in 2009?” Speculative yes, but Hubdub is a predictive market – questions are by nature speculative. Background to the question: Kevin Rose discussed Digg’s international expansion plans in his talk at FOWA London. This talk was widely reported in the media. Some other facts:

• Digg has just closed a funding round of $29m in September
• Hubdub has only raised angel funding and has 4 employees
• In this economic climate cash is king. Getting revenue positive is the holy grail
• Hubdub has not articulated a source of revenue that is sustaining

From these data points (which are all easily available with a quick search on the web) one concludes that Hubdub is a good target for acquisition. It has a decent (although it requires some work) prediction platform but other than that it has nothing special. Kevin Rose wants to expand internationally and the prediction market technology would work well with the Digg platform. It would certainly give Digg greater number of potential revenue streams. I will be the first to admit that this is speculative but it is based on facts. But all it took was one person to raise a question and the question was voided.

Second question was “How far will UK house prices fall by December 2008?” This question was voided as it didn’t have an option for housing prices fall being below 15%. Let’s look at the logic of this. As of September 2008 both Halifax and Nationwide have reported house price falls of 12.4%. There are three more months to go before the end of December and these things don’t turn around on a dime. Being below 15% is not an option as credit is still tight and the UK has entered recession. There is no sound possibility that house prices will not fall less 15%. Now let’s look at this from angle of question creator. I may not want to provide an option so why should I? Why do questions have to be modified to provide gamblers with an option they want?

The issues with the questions are merely symptoms of what I see as major flaws of the Hubdub system. They are:

1. The rules for creating questions are vague and easily open to interpretation.
2. The very act of creating questions is daunting and annoying
3. The site is rapidly becoming dominated by power users

Hubdub is seeing the play out of Clay Shirky’s maxim “A Group Is Its Own Worst Enemy”. Power users and early adopters will band together to void questions and in other ways hassle newbies merely because they don’t like the question (rather than it’s predictive quality) or because newbies are falling afoul of capricious unwritten rules. There is no penalty against power users for this type of behaviour. This is over and above the effort needed to create questions in the first place. It is extremely disconcerting to put the effort into questions only to have them void on relatively spurious grounds.

The single most worrying aspect about the flaws in Hubdub is everyone has been talking about the development of communities and their interaction for the last 11 years. Let’s recap – Usenet went through the same problem, Slashdot went through the same problem, Digg went through the same problem. See a pattern here?

Clay Shirky has been shouting from the roof tops about it for years. Hugh McLeod and Tara Hunt have all discussed it. At what point do people pay attention? Angel investing or not, for a service that is based on community and users, to not have the necessary tools needed to manage the community’s interaction with the platform is simply, well, scary. It speaks to a company that has a fundamental lack of understand of community base services.

Is it important? Very. Hubdub needs a diverse, large and vibrant community not only of speculators but also question creators. The way Hubdub is going to make money is from selling premium access to data and audience to businesses. However, companies will only pay if the Hubdub community is diverse and large as then the data and audience has value to them. As it is the current community is doing very well at driving new members away. Hardly a good method of growth.

Hubdub can possibly turn this around. The first step is to build the tools and features necessary to manage the community interaction. This will piss off the power users and early adopters as it blunts their power. That is the price to pay for improving the experience and engagement for a broader and more diverse people. Actions must have consequence. When actions have no consequence poor behaviour soon dominates. Slashdot found this out the hard way as has Digg.

The other part of the engagement issue is question creation. Relying on people to read FAQs about question creation is very, well, RTFM. Most people don’t RTFM and nor should they. If there are rules about question creation they need to be clear and objective with no room for abuse to void questions that someone doesn’t like. Of course, if the rules are clear and objective the system should not allow questions to be created in the first place that don’t meet those rules. People should not have to RTFM.

In fact, I wonder why voiding is necessary at all – isn’t the very act of betting on a question a vote on the question's quality? Why not just use the activity on the questions as a way to surface or subsume questions? Activity is a much better method than voiding or voting. Using activity blunts the prejudices and power of any single person or group of people.

The interleaving idea through the emails from Hubdub and site of not being a speculative market still stumps me. It’s a predictive market they are, by definition, speculative. It’s like being a fish and trying not to drink the water. Hubdub is a speculative market – if the problem is with questions that don’t have any news or are a long time in the future have a special section for these types of questions. Don’t ban them.

I did hope that Hubdub would be good. But I am sorely disappointed and I now doubt the company’s survival. I certainly would not invest any money in the company without some major changes to the platform.

Paying people for UGC

In a recent post Umair wrote a reply to a question that had come up in a recent Beers & Innovations night. Summary is when will people be paid for "user generated content." I made a point in the comments about how different people get value from services in different ways i.e. monetary payment is not the only form of received value. This is all well and good but many people will still want to be paid.

The biggest hurdle is that transferring small sums of money is prohibitively expensive for the size of the funds transferred. Widespread payment for UGC will not occur until someone cracks problem of providing transfer of funds between parties with a cost approaching zero.

There are several possible methods for doing it. The first would be for a company such as Google to create a financial transfer company and absorb transfer fees the banks impose as a cost of doing business. This is a big and costly option that runs up against (massive) regulatory problems.

The second would be to create a frequent flyer style points system that people can accumulate and then use to for discounts at stores or to purchase gift certificates. This option is probably one that would work well. The "frequent generator" (FG) points would be tied to an identity. For example, I could state (just as Amex holds my "loyalty points") that all my FG points would be held by Google whom attaches my FG points to my Google identity. I can then go to various stores and reclaim the points for discounts, gift certificates etc.

The third option is to essentially create an "internal market" where parties with an identity can transfer, at zero cost, funds. For this to work a provider, lets say Google, would create relationships with the various users of UGC. These users would deposit an opening balance to Google (Google holds this in escrow). When a user uploads some UGC to the site, which then makes some money, the service "transfers" money to the user by saying to Google "user x receives y amount". Google records against the users identity that they have received x without directly transferring the money. The costs are only paid if the user moves money to their real world bank account. Paypal on steroids if you like.

My guess is that a frequent-flyer like system is probably the best option. There is less regulatory overhead, capital and technical requirements. The other major attraction of FG points is that everyone understands frequent flyer systems and the redemption of points. GAYME companies are the obvious candidates to create these systems (they have identities and relations with the users and UGC companies) and I can see this being the next battleground for the hearts and minds of internet users.

Tags: UGC, Web Services