Bart Stevens recently suggested a breakdown on the potential economic impact of VRM, based largely on a post by Steve Rubel arguing that $1B is wasted in online advertising today.

First, I anticipate the Personal Datastore to become a design pattern that underlies other VRM services, rather than a service by itself. In fact, a PD isn’t really a PD unless it enables VRM services explicitly… Personal Datastores aren’t just online storage like Amazon’s S3.

Second, I think the $1 Billion number is far too small. Steve is only estimating the CPM costs for display ads that are literally missed by users during eye tracking studies. That’s an intriguing number because those ads truly are wasted… there isn’t even any brand exposure because the ads are not even seen. It’s like paying for ads in a magazine that is never opened by a real reader.

On the other hand, there are still plenty of ads that are seen by the wrong people and CPC ads that are clicked on by the wrong people. Note that for the “right” people, those ads arguably generate useful brand exposure, so they aren’t wasted.

When advertising starts with the advertiser, it inherently wastes money, as it inevitably buys placement in ineffective or misaligned media. By now it is an old chestnut that advertisers waste half their budget–they just don’t know which half. Sometimes advertising is an investment in exploring potential markets… the goal is the data gained in the test marketing, which isn’t entirely a waste. Other times advertising is educational outreach where the goal isn’t so much to trigger a sale, but instead to introduce people to new products and services. Sometimes this is called demand generation. And that still leaves a vast amount of waste, buying media (offline or online) that just doesn’t perform or create any value. The potential savings in these areas is not only missing from Rubel’s analysis, I’d wager it is far more than $1 billion.

The huge potential of VRM is to turn these models inside-out, by providing a scalable pipeline directly into the product development and sales divisions of capable firms. Instead of Vendors guessing what people want, VRM services can cost-effectively tell Vendors what people truly do want. If the product is available, the sales team can enable purchase and delivery. If the product doesn’t exist, the Vendor can create it if demand is sufficient.

This new paradigm is exactly the shift from Attention to Intention that Doc and I have been advocating. The Attention game is the world of traditional advertising, where the industrial manufacturer competes in mass media to get the attention of the right consumers in order to generate demand for their products and services. Given that attention, they seduce, cajole, and entertain in hopes of winning new sales.

The Intention game, on the other hand, starts with explicit requests from the user to fulfill actual demand. Sometimes that intention will be nascent, needing further exploration and discovery. But eventually, for the segment of the population that finds something they want or need, that intention shifts from educating oneself about available options to seeking specific satisfaction, that is, buying a solution. Because intention starts with the user’s commitment to take the relationship to the next level, it immediately takes a vast amount of guesswork and wasted advertising out of the equation.

This guesswork and wasted advertising is probably closer to $100 billion/year, but that’s just my gut feeling. And that number only addresses the loss side of the equation, that is, the money we save by not wasting product development and advertising dollars. It ignores the value of products and services that today languish as innumerable missed opportunities–missed because companies have no way to efficiently gauge true market demand. There are undoubtedly services and products that exist–or could be profitably offered today–which fail to reach customers because we don’t have a suitable mechanism for connecting the right customers with the right companies. This potential to close the gap between potential sales and unmet demand, is simply too large to estimate.

The Cost-Per-Action/Pay-for-Performance business model of Affiliate Marketing is likely to continue to transform the ad industry, significantly reducing billions in unnecessary expenses, including the $1B wasted on unseen display ads in Rubel’s analysis.

It won’t be until we transform explicit intent into new offerings and new sales that we unleash the vast potential that is VRM.

What do you get when you turn proprietary data silos inside out?

Users in control.

Doc Searls has been advocating VRM for a while (here too). What’s nice about his thinking — in addition to the open source/open standards approach we’d expect from a senior editor at the Linux Journal — is that he’s working the problem through the entire technological spectrum:

I don’t think VRM should be confined to a browser, either. I think this is something that should work through a cell phone, a card, or any other device or representation that works for the individual.

Not only are the vendor’s silos being turned inside out, so are the technology and network providers’.

My mindset has been stuck in the browser, perhaps with an accompanying helper application that does nice things for users, but still basically software on a personal computer. At the core, SwitchBook’s innovation is useful in larger contexts, but it won’t start out that way. Our strategy in simple:

1. Make it work with current search habits.
2. Augment IE and Firefox.
3. Expand to other OSes and browsers as quickly as possible.
4. Push the underlying API and data format as an open standard.
5. Open the tool for customization as widely as possible.
6. Open source the code for “built-in” customization

But are we going to take the time now to make sure it works in cell phones or datacards or iPods or anything other than a computer? There just isn’t enough bandwidth for that in a bootstrapping startup.

Fortunately, Doc’s VRM work as a Fellow at the Berkman Center gives him the freedom to invest in a solution of that breadth. A VRM solution that is bigger than any one company, technology, platform, or medium. Say goodbye to the silos.

It has also given me a fresh way to think about Complex Search. Much of VRM — as I understand it — is designed to be automagic. Specify your needs, receive bids from selected/qualified vendors using a tool that makes it easy to manage those relationships. But before one can specify needs, most people need to spend time discovering their needs. For all but the simplest purchases, that’s a Complex Search.

For example, take Doc’s latest VRM “Gesture”

I want a phone that is GSM-based (so it works overseas as well as in the U.S.), works across as much of the U.S. and Canada as possible (Verizon has been a disappointment in this respect), has a GPS, and has an easy-to-use UI. I don’t care about PDA functions, ringtones (I like the old Western Electric bell ring, though), or camera functions. I like keys that are easy to read and use, and an address book that’s easy to synchronize with a computer. It would be nice, for personal reasons (I work for Linux Journal), if it ran on Linux. I’d rather it not (for the same reason) run on Windows. Mostly I just want it to be a good GSM phone with a GPS. And I’m willing to let the GPS function slide, just to get a good phone.

That’s a mouthful. Doc is famous enough in the blogoverse to get feedback without the VRM infrastructure. He may not have a vendor make an offer directly (although a smart vendor would seriously consider sponsoring Doc), but he’ll probably get enough direction from peers to narrow down his vendor choices. With a fully operating VRM, the fulfilment side of that gesture will be streamlined and automated so that any vendor who wants to can cost-effectively make Doc a competitive offer, perhaps even a bundled package that leverages their unique value-add. That will take a lot of work, but the potential value to everyone in the transaction is clear.

Compare that to the broad, politicized, unfocused brush strokes of the AttentionTrust and you can see why I think the AttentionTrust goals are still too blurry and ambiguous to generate much success. VRM is working with Intention. It is highly focused. Its output is clear. The benefit to users and vendors is evident. AttentionTrust is stuck thinking about everything, all the time, and only online, then mashing that into some anonymized goulash from which magic is supposed to emerge. Bah humbug. I’ll believe it when I see it.

I think Doc is on to something, though. The Internet so radically drops the costs of so many different modes of communication, it will continue to restructure our society for another couple of decades, at least. Most of the success to date has been based on one-to-many marketplaces, such as Amazon or many-<aggregated-as-one>-to-many marketplaces such as eBay. VRM lets us create inverted “many-to-one” markets. Markets of one. Make your gesture, create a market. That’s powerful.

And yet, Doc’s gesture — as every request for bids must — also contains a treasure trove in the form of Doc’s requirements, a wealth of needs Doc learned the hard way. He’s a power user with heavy demands and he pushes technology to its limits. He is fed up with his current options and, having experimented enough, he knows just what wants. But he’s lucky to have that experience. Most people have no idea what the deciding factors could or should be for the products they want to buy. (Can you say megapixel?) Doc is anything but a typical consumer.

Consider what it was like when the web started taking off in 1994/5/6. At that time, I was out selling Internet marketing services and helping companies figure out what to do online. Overwhelmingly, time and again, smart, capable, professional people asked “How much does a website cost?” Well, what kind of website do you want? Their question was inherently non-sensical, but people didn’t understand that yet.

First, you have to figure out what you want, then, and only then, can you send out an RFP to get bids on it. Sure, you scale your RFP based on what your budget is — and unless you have deep pockets, it pays to be prudent in what you include in your request — but at the end of the day, only a detailed specification provides enough direction for vendors to submit a bid. The result of these conversations was often a small strategy and/or requirements engineering contract to distill their needs into just such an RFP.

So how does that work with VRM? How do people develop enough expertise and understanding of their needs so they can present a request like Docs? How does VRM work for regular folk?

In short, they search. They explore. They learn.

From friends. By reading reviews. Going to various manufacturer’s and vendor’s websites. By learning from people like Doc, either through blogs, reviews at CNET or ThisNext, pricing at PriceGrabber, Google, or through direct conversations. By trying out products. Even from advertising and retail stores. I happened to learn about Verizon’s data services in the Verizon store. Imagine that.

This is Complex Search. People aren’t going to rely on any one vendor or reference point, unless they have an absolutely trusted guide like a brother or daughter or college roommate to point them in the right direction. They are going to check out different sources, browse multiple websites, collate and corollate a lot of information from a lot of different places. Then, after they have searched and narrowed their needs down to the details, they can put it in the form of a digital RFP and see the power of VRM kick in. Zing! A Market of One.

VRM is still evolving. Questions and answers of many varieties must work their way through the community, from people’s and companies’ needs to draft technological frameworks, APIs, protocols, and working code. Good stuff.

Somewhere in there, I’m confident Complex Search will meet VRM and lots of real value will be created for people, vendors, and innovators alike.

Doc will be at the Identity Workshop in early December to discuss VRM and Identity with all comers. It should be a great opportunity to figure out where VRM is headed and how we can contribute. I hope you can make it.

Kim Cameron points to a post by Deborah Schultz, which happens to be a great segue into my follow up with Steve Gillmor:

My latest mantra:

Everyone step away from the keyboard and Engage with Intent in “offline community”

Steve left me a comment the other day, inviting me to call him. So I did.

It was a good conversation.

I still have some lingering questions that will probably only resolve once the GestureBank system gets into play–such as how the system threads the balance between lost context from anonymity and richer context with greater risk of privacy loss–but on the whole, I emerged a stronger supporter of the AttentionTrust.

Why? Mostly because most of my issues appear to be non-issues for the vision that Steve is working to bring into reality. My concerns should be able to work themselves out within the context of the community and still retain integrity to what Steve is trying to create.

I can work with that.

So let’s take a look at some confusing language in the AttentionTrust principles.

Our Principles

When you pay attention to something (and when you ignore something), data is created. This “attention data” is a valuable resource that reflects your interests, your activities and your values, and it serves as a proxy for your attention.

AttentionTrust then presents four rights of users with regards to Attention Data: Ownership, Mobility, Economy, and Transparency.

The problem is that the opening definition of “attention data” is bigger and broader than what is covered by the rights of users regarding “Attention Data”. The rights work when limited to the data recorded by the AttentionTrust Recorder (or similar client-side attention tracking software), but not with the definition actually presented.

In fact, the rights are extremely useful as a foundation for re-using attention data in broader contexts, where users might otherwise be disinterested in exposing this information without some protection. Without such principles, the entire ecosystem of Gestures and Attention that Steve is championing falls apart. So they are a critical foundation for the new system.

But the opening definition seems to apply to all attention, not just that recorded by the user.

When you pay attention to something (and when you ignore something), data is created.

This is true today, even without the Attention Recorder. When I visit a website, a log of my http transactions is created. When I visit Amazon, they track what I’ve looked at, purchased, and added to my Wishlist. When I go to Google, they keep track of the search I’m currently doing, if only to let me page through the results.

This is also “attention data,” created because users pay attention to various websites. But users don’t own it. It represents the attention data for the website and the website owners own it. The website paid attention to users and chose to keep track of it. I commented on this in detail in a previous post.

Steve’s response: “That’s not what we mean by attention data.” But it sure sounds that way. So Steve asked me to suggest some alternative language.

Here goes:

Paying attention matters. When you view a website, read email, or post to a blog, your activities–or gestures–are evidence of your attention and can be logged. That log of “attention data” is a valuable resource that reflects your interests, your activities and your values; it serves as a proxy for your attention.

Because you tracked it on your system, you have certain rights regarding your Attention Data.

This may not be as concise as the previous post. Perhaps it loses some points–such as the idea of the attention data created by /not/ paying attention. I suggest however, that it is a much clearer description of what is actually meant by the AttentionTrust and GestureBank.

Try it on for size.

Let me know what you think.