Opportunities and Risks of Social Media Tools for the Economy

Research Paper (postgraduate), 2009

14 Pages, Grade: 1,0



1 Definitions
1.1 Applied Terminology
1.2 Economy

2 Social Media
2.1 Definition
2.2 History
2.3 The Term Social Web
2.4 The Term Wiki

3 Collective Intelligence
3.1 Foundation
3.2 Swarm Intelligence
3.3 Assumption

4 Economic Opportunities of Social Media Tools
4.1 Challenges of common paradigms
4.2 Crowdsourcing for Complex Problem Solving
4.2.1 Definition Crowdsourcing
4.2.2 Definition Crowd
4.2.3 Examples using Crowdsourcing using Social Media Tools

5 Economic Risks of Social Media Tools
5.1 Patents and Intellectual Property
5.1.1 Definition
5.1.2 IP Sharing
5.1.3 Fast News Distribution
5.2 Control on Information and Conversation History

6 Summary

7 Appendix - Sources:


The globalization has been strongly leveraged by the internet and the new internet technologies. Using new internet technologies, people and companies are communicating and collaborating more than ever. Information flow and information flow control are emerging tasks of people, companies, governments and other social groups. Social web tools are of key interest when talking of information flow and the attempt of some sort of control. Menace of chance - is the economy suffering or profiteering from the fast growing internet communication traffic? This paper will try to spot on the most important aspects and how they could impact local and global economies.

III. Executive Summary

This assignment elaborates the opportunities and risks of social media tools for the economy. The first paragraphs will show what social media tools are and how they work. The second paragraph will provide an overview of the topic swarm intelligence. The conjunction of the social media tools with their ability to support the swarm intelligence effect will lead to the conclusion of this assignment: Social media tools can generate swarm intelligence effects which can greatly support the economy. As a disadvantage, social media tools support uncontrolled distribution of private information and intellectual property which might hold many dangers for the economy.

IV. Abbreviations

1 T&D – Training and Development

2 R&D – Research and Development

3 IP – Intellectual Property

1 Definitions

1.1 Applied Terminology

- Social Media: collective content created by any individual of that collective;
- Social Media tools: tools that help individuals collaborate, communicate, and access their collective content;
- Swarm: a swarm is a population of individuals that tend to cluster together although any individual is independent and shows a random behavior;
- Crowd: a crowd is a large group of individuals;

1.2 Economy

The paradigm for economies existence is the scarcity of goods. Gregory Mankiw phrased the economy to be the study of how society manages its scarce resources.1 Every individual within a society is struggling for getting most out of these scarce resources. Thus, for economics science, the distribution behavior of these individuals is of key interest.

2 Social Media

2.1 Definition

The term “Social Media Tools” describes websites and tools that rely on people, who are using them in an interactive manner. The content is not being provided by a super user, but by the normal users themselves. Everybody using a social media tool is part of the creation process. The usage change of internet based tools and websites from a read-only way to this interactive style has been labeled as the change from “Web 1.0” to “Web 2.0”. However, the term “Web 2.0” has never been completely accepted within business circles. As a matter of fact, the usage of the term is decreasing.2

Today the term “Social Media Tools” is used. L. Lafko and D. Brake define three basic rules concerning social media:

1. Social Media is all about enabling conversations;
2. You cannot control conversations, but you can influence them;
3. Influence is the bedrock upon which all economically viable relationships are built;3

2.2 History

Toward the year 2000, internet businesses and offerings grew overwhelmingly fast. Unfortunately, as it soon turned out the enormous growth was not much more than a speculative bubble. The internet business collapsed dramatically in the year 2001. It was at that point when key players of the internet business like Tim O’Reilly and the company MediaLive International began to wonder whether the “dot-com collapse marked some kind of turning point for the web, such that a call to action like "Web 2.0" might make sense”.4 Since this turning point, all online tools, which are used in an interactive, user-driven way, were labeled as “Web 2.0” applications. A large amount of consulting and internet companies worked hard to advertise the term “Web 2.0”, yet failed most likely because the term “Web 2.0” was too artificial. Today, the term “Social Media Tools” is increasingly accepted as it simply describes the tool’s purpose better than the theoretical “Web 2.0” term.

2.3 The Term Social Web

Social webs are composed by individuals who are connected to each other. The connection can be used for different purposes such as personal and professional networking, information exchange, and updates. A social web should provide the following information about people:

- Identity: who are you? Depending on the purpose of the social web, different personal or professional aspects are of informative need.
- Reputation: what do people think you stand for? Within a social web, a user needs to create a personal or professional profile. Users try to create a preferred image of them that may differ from reality. The proper term for this phenomenon is “reputation management”.
- Presence: where are you? Technologies geared toward the increase of a user’s presence are currently growing on the internet market. A popular tool is called “Twitter” and is used for small status messages.
- Relationships: who are you connected with? Who do you trust? Connections between users describe personal or professional relationships. Most tools have the disadvantage in that they do not show the quality of the relationship.
- Conversations: what do you discuss with others? Conversations in social webs are performed in the same way as in direct inter-personal exchange. Forums and emails are the most important, and well-known media.

2.4 The Term Wiki

A wiki (the Hawaiian word for 'quick'), is a collaborative web site that allows virtually everybody to edit its pages. Usually, a website is created by a single person, team or company. Subsequently, the website’s content is accessible to internet users around the globe. A wiki website is not created by a single person, team or company. Its base construct is created and published to the internet. As a consequence, every user has the possibility and the right to create, change or delete articles, pictures, and movies within a wiki page. Bo Leuf and Ward Cunningham have published a book called “The Wiki Way - Quick Collaboration on the Web.” This title describes the phenomenon in a nutshell: Wikis are about collaboration. Users are working together on a central knowledge base, a base constituted by the user’s collective knowledge, ergo the steep increase of contemporary discussion concerning the term “collective intelligence”.5

3 Collective Intelligence

3.1 Foundation

In James Surowiecki’s seminal book Swarm Intelligence – Why the Many are Smarter than the Few, he explores a deceptively simple idea with profound implications: large groups of people are smarter than an elite few, no matter how brilliant this smaller group is, that is in their heightened ability to solving problems, fostering innovation, and making correct decisions.6 In the context of wiki and the usage of social web tools, the increasing collaborative behavior of individuals is leading to a construct comparable to Surowiecki’s notion of a collective intelligence.


1 Mankiw, Gregory Principles of Economics (p.4)

2 Rusak, Sergey http://www.progressiveadvertiser.com/web-2-0-becoming-an-outdated-term/ Accessed: 11\19\2009

3 L. Lafko / D. Brake (2009) The Social Media Bible, Tactics, Tools, and Strategies for Business (p.52)

4 Tim O’Reilly (2005) http://oreilly.com/web2/archive/what-is-web-20.html Accessed: 11\19\2009

5 Bo Leuf, Ward Cunninghama (2008) The Wiki way - quick collaboration on the Web (p.448)

6 James Surowiecki (2004) The Wisdom of Crowds - Why the Many are Smarter than the Few (p.1)

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Opportunities and Risks of Social Media Tools for the Economy
The FOM University of Applied Sciences, Hamburg
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opportunities, risks, social, media, tools, economy
Quote paper
Dominik Heinz (Author), 2009, Opportunities and Risks of Social Media Tools for the Economy , Munich, GRIN Verlag, https://www.grin.com/document/190437


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