Before I get into social arbitrage, let me just toss in the usual MBA definition of arbitrage to get the ball rolling. According to Investopedia, arbitrage is:
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.
What I like about this definition is the words “market inefficiencies” which implies that if one can invent more efficient ways to get things done, buy/sell, acquire customers, etc. then you could bring about an arbitrage and make more cash than you otherwise would. In the world of digital, arbitrage is a common thing. When Bob buys a collector’s baseball card for $5 at a swap meet and turns around and sells it on eBay for $50, an arbitrage occurred. But Bob had to take the time and energy to go to the swap meet and find the card plus he needed to actually know something about such things.
When thinking about arbitrage through social media, it’s important to go back to the words “market inefficiencies” and think about how your business may function inefficiently wasting money or reducing the impact in the market. These days the buzzword “social design” is so prevalent because social must be built into the very DNA of the business to unlock the value of truly understanding your customer’s mind and putting your advocates in the spotlight.
One thing that gets my goat is so much money is spent and wasted on paid-media-only initiatives as marketers get too preoccupied with segmentation and dumping money into buying eyeballs. But what if you failed to identify the right segments that naturally live in digital and social? And what if someone clicks your banner ad, looks at your content or even buys your stuff BUT the trail dies there?
A lot of what’s cool about social business, media, commerce, (add word here) is that it helps to discover arbitrage by being flexible enough to find those baseball cards and baseball card lovers where you otherwise wouldn’t be looking. In coming blog posts, I hope to continue addressing other examples of how to use social design for your brand. Business as usual implies you know what the market is doing all of the time. How many CEOs and CMOs does it take to screw in a light bulb? A lot less if there are social arbitrageurs in the house.
– Lance Shields
