The Internet has been the great social leveler, characterized by a democratic sharing of content with friends and strangers alike. But what has worked during the Internet’s childhood and adolescence may not be fertile ground for a thriving adult. Mung Chiang, associate professor of electrical engineering at Princeton University, maintains that two serious challenges must be overcome for the Internet to be viable over the long term: it must be able to remunerate producers of content like videos, texts, software, and pictures and to function as an effective advertising venue.
The last few years have seen a huge increase in user-created content, ranging from YouTube videos to fixes for software bugs to useful information such as where to glimpse a rare bird making its way through New Jersey — all of which can now be read or downloaded for free. Chiang and many others are dubious about whether this free economy can continue to work effectively. “A lot of people believe that it is okay to have a free economy to get things going for the first couple of years,” he says, “but it is unlikely we can keep this going for hundreds of years. Eventually we need monetization of this content.” Put simply, people must be paid for the content they create.
The second big headache of the Internet, says Chiang, is that online advertising is not working effectively — except for Goggle’s model of search-based ads, which has been successful. As a result, Internet advertising still lags behind traditional media like television and newspapers.
Chiang and his two colleagues, Vince Poor, dean and professor of Princeton University’s School of Engineering and Applied Sciences, and Hazer Inaltekin, a postdoctoral research associate, have submitted a project to Princeton University’s fourth annual Innovation Forum that will create a financial system for sharing online content. Their solution, titled “Sharing Mart: A Monetary System for Online Content Trading,” will be offered along with 11 others on April 2, 6:00 p.m., at the Computer Science Auditorium 104. The event is sponsored by the Keller Center for Innovation in Engineering Education, the Jumpstart New Jersey Angel Network, and Morgan Lewis & Bockius. For more information, contact Bob Monsour at firstname.lastname@example.org.
The mart that Chiang is proposing would resolve the problems with the blanket advertising that now pervade the Internet — the annoying banners and sidebars. “Online advertising needs a workout,” says Chiang. “It needs to be innovatively reengineered. It is not reaching the right people at the right time, and it’s just money being thrown out.” Instead the sharing mart would offer advertisers the opportunity for targeted advertising based on user profiles.
A fairly primitive example of targeted advertising, says Chiang, is the way Amazon recommends books based on what a user has already purchased. The mart’s analysis, however, will be more quantitative and sophisticated. Rather than suggesting horse-related books because a user has already bought them, it would determine, based on a user’s transactions buying and selling content, exactly how interested the user is in horses and assign a number to represent that interest. A person who scores 93 out of 100 with regard to interest in cooking, for example, would be a good match for cooking utensils and cookbooks.
“Without overcoming these challenges, a viable online community is a big question mark,” says Chiang. He believes the mart will resolve both. On the one hand, it will enable a token-based economy where people are rewarded for content they generate, and, on the other, it will enable targeted advertising based on user profiles that are interpreted mathematically.
As pragmatic, albeit visionary, as this project may seem, it started with an entirely theoretical research question: “How much is a piece of information worth?” If content may be purchased for a set price, say a $15 DVD of a movie, then the answer is straightforward. But if a movie on YouTube gets 300 hits, how much is that worth? Chiang and his colleagues realized that the answer depends on who the potential buyers and sellers are and also the context for the transactions, that is, the social networks in which they occur.
In their research the engineers decided to use the pricing formulas developed for stock options as their role model and developed a formula for assigning a value to a certain piece of information in a certain social network. To begin testing the model they had developed, they set up a social network of about 250 users in the school of engineering.
Once the sharing mart steps beyond its university prototype, it will function as follows: If a member of an online social network has content to sell, he or she would sign up for this content trading service. The user may offer content to be downloaded, viewed, or even purchased with the right to resell, for a specific number of tokens. Or instead the user may put the content up for auction, as is done on eBay. As a result, successful content producers will be rewarded. “The amount of money you make is directly proportional to how popular your content is,” says Chiang.
To enable users to make purchases, the mart would provide each new user with a certain amount of virtual currency to spend as desired. To supplement these free tokens, a user can earn additional tokens either by selling content that others want to buy, by answering other people’s requests for content, or by watching or listening to advertisements that have been selected to match the user’s interests.
This ability to target advertising based on user profiles is critical, yet Chiang sees no privacy concerns with the system. The mart only tracks transactions, not where the user is on the Internet at any given time. It does not release specific content about user behavior to advertising agencies, but rather uses transaction information to quantify profiles of its users in order to select the right advertising and content to suggest to them. Chiang explains that he and his colleagues are learning to read users’ minds mathematically. He adds that users can opt out of this “mind-reading” function and just allow sharing mart to monitor transactions.
For the users who opt for all of its services, says Chiang, sharing mart will function simultaneously as a commercial and a central bank. Like Bank of America, it will manage accounts and monitor transactions of content being exchanged for virtual currency. Like the Federal Reserve, it will control the volume of tokens in the system. The mart also acts as a police station, ensuring that promised content is delivered and that there is no fraudulent behavior.
The token system does not require content consumers to pay out of their own pockets, although they may choose to do so. Eventually, says Chiang, it will be the advertisers who pay the content producers. “The advertisers will not simply be writing out checks to whoever is writing a blog,” says Chiang. With the sharing mart system, he explains, they will pay just the right amount on a rolling basis. Rather than write checks ahead of time, they will pay based on the effectiveness of the advertisement to motivate a user to make purchases.
Another advantage of the sharing mart system, says Chiang, is its mathematical sophistication. “It is not trivial to control money supplies and get auctions to work in the right way and learn to read people’s minds, even if you have a lot of information about them,” he says.
Chiang was born in China and grew up in Hong Kong. His mother was a high school teacher of Chinese. His father, Chi Tung Chiang, was a partner in a business firm, but left 10 years ago to pursue his successful oil portraiture full time. He was a finalist last year in the international Art Renewal Center’s Salon Competition.
Chiang came to the United States as a freshman at Stanford University, graduating in 1999 with a double major in electrical engineering and mathematics. He also did his graduate work at Stanford and received a master’s degree in electrical engineering in 2000 and a doctorate in 2003. He then joined Princeton University’s faculty as an assistant professor of electrical engineering.
Chiang is optimistic about the commercial possibilities for the mart, which was conceived in December 2007 and developed with the support of software engineer Necati Ogzencil. The technology, which he believes is way ahead of anything similar being developed, is protected by patents, and the group is now seeking outside funding in exchange for exclusive licensing from the university, which owns those patents. “We are facing a tough time, including the private equity markets,” says Chiang, but he quickly adds that Apple was founded during a big recession. “I think that the difficult economic situation means that the big players and companies are retreating into their bases and leaving more space for small startups to provide solutions that are needed.”
To begin moving the project into the outside world, Chiang has been speaking to three types of people: potential angel investors in the United States, China, and the United Arab Emirates; high profile advisors in the banking, online advertising, and high-tech industries; and potential commercial partners, including social networks inside and outside of the United States. “We’ve gotten very positive feedback,” says Chiang. A publicity campaign is also on the verge of being launched by a group in Abu Dhabi.
Sharing Mart will allow users to produce and consume content within closely held communities sharing a particular passion as well as general public networks like MySpace, Facebook, and YouTube (which themselves can be subdivided into interest groups). As more and more of the content that people consumer on evenings and weekends is generated by other users, Chiang believes that if the Internet is to have a viable future, a virtual economy like Sharing Mart is not a choice but a necessity.