Originally published on DogWalkBlog.
I was reading this blog post by Leah Jones. It is a thoughtful look at what happened with the #amazonfail twitterstorm and makes a case for journalism. I think it makes a stronger argument for why twitterstorms are going to drive up the cost of stuff and put small companies out of business. (it is long, but worth the read. I’ll wait for you..)
Read the part that starts with “Deep breath.” If you have never worked for a large company with deep pockets everyone wants a piece of, you probably can’t relate all that much, but trust me, Leah is dead-on accurate about what she describes. The legal opinions alone with no lead time on a weekend probably cost tens of thousands of dollars.
Consumers are demanding unlimited selection, lower prices, unlimited access to buy and increasingly, unlimited attention. Pay attention to me only when I want you to and then I want your full attention. For a large brand like Amazon, the cost to provide someone to monitor Twitter all day, every day and twice on weekends is an incremental cost on each product they sell, probably pennies. But for a small company who will eventually be held to the same standard, the cost is devastating. As anyone who has ever tried to compete against a Walmart knows, it is the crushing cost of customer demands that eventually puts you out of business.
Walmart is open 24/7, Joe’s hardware can’t afford to pay employees 24/7. Walmart has an unlimited selection of plumbing fittings; Joe’s hardware can’t buy in volume and has to special order parts. Eventually, the great service that customers rely on at Joe’s hardware is just not enough to compensate for Walmart’s convenience and low prices. Eventually, they are the only game in town. And prices rise; slightly, but nonetheless, they rise.
Twits are gleefully rubbing their hands at the awesome power they can unleash onto brands. Who wouldn’t get that rush! Media is eagerly reporting on how the new commerce puts the consumer in charge and the horrible brands are bending to their wills.
But, it is as fleeting as Twitter will eventually be. With each twitterstorm will come the tedium of reporting yet another uprising of rage with this group of consumer and that. Eventually, the media will get bored with it all, but not before Twits will have destroyed hard-working entrepreneurs and benevolent brands who are just trying to make their corner of the world a little brighter and cheaper.
Am I crazy? Really? How much do you know about Katrina? Darfur? Iraq? AIG? Yeah, we all got bored with those “twitterstorms in real life.”
The average Twit doesn’t care about any of this, but should. When companies are faced with possible litigation on what they perceive to be a cool product or service, a percentage of revenue goes toward legal fees and insurance. If Amazon perceives that every database change is going to bring about a twitterstorm, they will set aside money for legal and insurance. That won’t come from current revenue; that will come from processing fees or an increase in price.
Their insurance carrier will also probably look at their policy and rate the risk based on the volume and type of books they sell. If one author tends to create a larger twitterstorm than another, Amazon will either pay less in royalties or increase the price to offset the cost.
All sorts of secondary effects will be caused by twitterstorms. While consumers are smacking their lips in satisfaction that they have brought the mighty Amazon to it knees, they will eventually wake up to the fact that prices have gone up and competition has been put out of business.
And the media will not care because they will have moved on to something shinier. Twitterstorms are so 2009.