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Jason Calacanis says in an AOL memo he’s posted that his model for Netscape has been vindicated by the recent conflagration at Digg and rapid growth of page views at Netscape. He says recent events are proving that top contributors to social media sites need recognition and approval, if not payment, in order to continue doing the hard work required to make a social site vibrant. Mike Arrington has called Calacanis’s move to hire top users away from other sites by offering to pay them a huge red flag for Netscape, but I disagree with Mike and think current developments in spaces like social news but especially video sharing indicate that rewarding top users may be a solid strategy. (Update: See comments below where Mike says I’ve inaccurately described his position and he clarifies.) I don’t think it’s as clear yet as Calacanis does, but I can’t think of a more interesting question to look at.

As social news works itself out, advertisers seek to get into places like MySpace and YouTube and the line between amateur and pro continues to blur - there’s a number of things unfolding that could change media in the same way as bloggers at the Democratic National Convention went down in history as a key turning point for that medium. When Yahoo! bought Flickr they said that one of the system’s biggest appeals was that users built the community for free. According to Calacanis’s logic, that’s not be the direction things are moving in these days. There’s a lot of evidence to support that opinion; these sites are being made viable by the work of rewarded top users combined with high quality, very unorthodox corporate advertising.

To put the recent debates about Digg (our coverage) and Netscape (our coverage) in context, here’s an overview of some of the key events unfolding right now that are blurring the line between amateur users and professional content producers.

Here’s some bullet points for this meme:

• some top Digg users feel unappreciated
• Netscape’s hiring top contributors is helping grow page views fast according to Calacanis
• a top YouTube user turns out to be a professionally produced work
• YouTube users are going pro and pros are succeeding in YouTube
• MySpace isn’t a training ground anymore - it’s a sales platform
• the Revver video community has stars of its own and they’re getting paid
• people hate Paris Hilton.

Details below.

YouTube is the most interesting site right now concerning these questions. Last week one of YouTube’s most watched video makers, Lonelygirl15, was revealed to be the work of the powerful Beverly Hills talent agency Creative Artists Agency - not a stereotype affirming, sheltered 16 year old girl making and posting videos behind her parents’ backs. The controversy has been huge; was Lonelygirl15 a legitimate work of pre-commercial art or a manipulative attack on the authenticity of community media sharing? Danah Boyd has some of the best blog coverage of the event and says that the New York Magazine has the best mainstream coverage so far.

The community response has ranged from Bravesgirl15’s attempts to emerge as a leader in condemning the company behind Lonelygirl to long time site leader Renneto recording what appears to me to be a piece of faux indignation smartly following the lead and ethos of Lonelygirl. Still others have posted a mock press conference with a purple monkey puppet that resembles Lonelygirl’s and countless other less interesting replies. This is the discussion driving YouTube right now and it’s important to the future of all of these kinds of sites.

While the headline smashing YouTube/Paris Hilton deal has been an unqualified flop and provoked a substantial backlash on the site, Smirnoff’s Tea Partay music video is at least very compelling if not a success. Site favorite Brookers has signed a deal with NBC after making less than 30 videos, many of which were her lip syncing to commercially copyrighted songs.

Arguments that copyrighted video pilfered from off site was the only thing sustaining YouTube seem less solid than ever, but so do arguments that commercial activity on the site is impossible to pull off.

MySpace has become the new companion home page for YouTube stars, a major advertising platform via the Google deal that will go into effect later this year and a path direct to market for musicians. While the Arctic Monkeys rode MySpace success to big record sales off-line earlier this year, these new developments indicate that social media sites have the potential to be more than just training grounds for mainstream success.

Not content to concede viral video to YouTube, competitor Revver has stars of its own and a revenue sharing program based on still image ads at the end of each video. Ad based revenue sharing is unlikely to be sufficient incentive for the vast majority of any system’s users, but that may not be the case for a site’s biggest stars. Those stars may be incentivized to use a particular service and pull in a large audience of viewers who are also long tail content producers themselves; they could in aggregate monetize well for the site. Ze Frank has shown on Revver that news video blogs don’t have to be performed by boring, pretty girls in order to build a large audience. Even Steven Colbert has been accused of lifting several jokes from Frank. Ask A Ninja, another project now on Revver, is working on a commercial movie with Viacom’s Atom Films and selling merchandise on their site.

Of all of these examples, the Lonelygirl15 controversy is probably the most timely and interesting, but I think all this sheds light on some of the recent Digg/Netscape debates. As my friend Alex Williams puts it, viral media sites are the new Star Search and recognition of top users, be it through financial compensation and/or status, could be a key driver in making these sites viable. And conversely, commercial activity is possible in these communities but the format it can take is still up for debate: Paris Hilton no, Tea Partay yes, but for short campaigns and Lonelygirl15 maybe - I don’t think there’s consensus, or any indication that model could be reproduced well enough to be sustainable. As a proof of concept though, it was fascinating.

Advertising in these spaces well takes a whole lot of skill and we’ll see far more people fail than succeed, but occasional success could help build tolerance for the bulk of attempts instead of a wholesale rejection of commercial engagement with viral media communities. Companies are struggling to find people capable of pulling off advertising in social media spaces. Second Life is a whole other can of worms.

Who’s going to drive these sites and make them commercially sustainable? Top users are going to be an important part of it, and they will want to be rewarded for their work. It’s hard work to do what these people are doing and recognition, if not payment, is proving itself to be very important.

Tags: Techcrunch, Web2.0, users, UGC, debates, media, video,

A little known Digg-fact is that a relatively small group of users submit a large percentage of the stories that end up on the Digg home page. Netscape, which recently relaunched as a Digg-clone, wants to pay those top users to switch over to them. Jason Calacanis, who runs the Netscape property, wrote a post earlier today offering to pay top Digg users $1,000 a month or more to switch to Netscape and submit news there instead.

I have a couple of observations on this. Netscape has a massively larger audience than Digg, but has absolutey failed to impact Digg growth at all. AOL placed a big bet on this product, and I imagine they want to see fast results. They aren’t getting those results. Jason’s post is a sign of desperation more than anything.

There is the question of whether or not this will fix this. Digg’s Achilles heel is that such a small group of active users drives so much of their success. However, even if those users bail to Netscape, others will certainly take their place at Digg. In my opinion, Netscape may gain some human assets and may get better story submissions, but Digg will probably continue to thrive.

At the end of the day, the Netscape product is a soulless reproduction of one of the most interesting cultural experiments occuring on the web right now. It was thrown at millions of mainstream Internet users (previous Netscape portal users) who don’t understand Digg and probably don’t care (yet). If anything, my bet is that total page views at Netscape have dropped since the changeover, possibly substantially. Buying users from Digg won’t change that one bit.

It looks like AOL has a mess on its hands. The obvious question is, will Jason will be the fall guy when it comes time to point fingers?

The deck chairs are being rearranged on the Titanic Netscape.

Tags: techcrunch, web2.0, web_2.0