Monday, October 23, 2006

Markets 2.0 - Social Finance. Affinity Markets.

The long tail, smart mobs and social networking are driving the evolution of economics to Markets 2.0. Social networks have been important venues for self-expression and interaction and now, with an increasingly linked online populace, are starting to add a new and important functionality, virtual aggregation for group power, both economic and political.

Two key concepts in Markets 2.0 are Social Finance and Affinity Markets. Social Finance is the virtual aggregation of dozens, hundreds or millions of people for the purpose of conducting an economic transaction. Social Finance is also known as crowd funding and crowd sourcing.

Affinity Markets are marketplaces where transactions can occur based on affinity attributes. Not just is the sweater red, woolen and made in China (legacy attributes) but under what conditions was it made, were renewable materials used, did female entrepreneurs make it (affinity attributes). Affinity Markets are also known as directed capital, cause-based capital and (in online aggregations) virtual affinity groups.

Markets 2.0 have the ability to completely disintermediate traditional financial institutions by providing instantaneous, cheaper, directed capital with more effective results.

What will it be like when people can get their mortgage and home equity loans online from peer finance, when anyone can have a local portfolio manager for commodities in India, when million-member virtual BuyGroups bid for insurance and healthcare services, when synthetic economies nominate and finance virtual candidates for physical world office, when Socially Responsible Debt means that states without measurable social progress cannot get their bond offerings financed?