Openness, where is it going to take us? (3)

Nov 22, 2008 at 8:30 AM
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After open platform comes the matter of profit share.

It is predictable that the open platform would change the existing dynamics of the industry. For example, we have seen many third parties developing applications for the social network websites in China - 51.com and Xiaonei. They can of course do the same thing for bigger players like Baidou or qq.com if they decided to open their platforms. Yet, is it possible that 51.com and Xiaonei develop applications imbedded in Baidou and qq.com?

Moreover, what if 51.com and Xiaonei develop applications to be imbedded in each other's websites? In that case, which is the big brother, and which is the little one? The relationship will become so complicated that in the end there will surely be many tangible and intangible clauses and terms made to prevent competitors from cutting ground by using imbedded applications. However, as far as social network service providers are concerned, to what extent should they open their platforms?

Some social network websites make it clear in their contracts with third party developers that applications in specific areas (such as recruitment and travel services) are not to be opened because the big brothers want to do it themselves, now or later. These areas are not supposed to be touched by little ones. Such cherry picking mindset is rather paradoxical - can this be called open?

In fact, social network websites need not to be afraid of opening themselves, as long as they get a good hold of their core value. The internet was born to be open, and online service providers should embrace this reality. They should open themselves except for their core. Yet, eventually what is the core value of social network?

[+] Only the core that should not be opened

From the surface, the tangible products of social network services are blogs, photo upload, friend lists and so on. Yet we should know clearly that the value of social network underneath these products lies in two parts - data storage and social relationship. The former is users' tangible asset and the latter the intangible.

A social network website's user may store blog articles s/he has been working for threes years and photos for one year at the website. Guess if s/he would run away from that website? Many people see the glamorous part of social network service providers but hardly their efforts in providing basic data storage functions. To be a platform operator or a big brother in social network services, data storage is the basic work, which needs to be under full control.

In addition to basic data storage, the intangible asset of users' social relationship needs to be taken good care too. The key for social network services to become sticky and irresistible for users lies in interpersonal interaction, which allows users to know what their friends are doing online easily. As long as social network service operators have god hold of users' social relationship, they don't need to be afraid of opening up.

In other words, it is OK to have third parties to develop applications except in areas involved in basic data storage or in ways intended to steal or transfer user's social relationship. This can be compared with the opening up of state-owned enterprises. It takes thorough consideration to decide which parts are about basic applications that should not be opened and which parts can be opened in moderation.

[+] Five tasks for open platform

After open platform comes the issue of profit share. A social network website operator should help third-party developers revolve problems and earn profits in the following areas:

1) Promotion. A social network website operator should provide a mechanism through which new services or applications can promote themselves while those not favored by users can be naturally weeded out.

2) Advertising revenue. For instance, a website can work with Google Adsense, a popular online advertising solution to web publishers in China, and let third-party developers keep all of the advertising revenue they bring in instead of sharing with them.

3) User payment. Users may be willing to pay for applications such as games, and social network websites should provide a solution to help application developers with user payment.

For the points mentioned above, 51.com has taken the initiative to provide solutions. 51.com opens its virtual money API to third-party developers, and by working with the sales channel of prepaid game cards of the game developer, Giant, users can top up easily. This is an attractive advantage for developers.

4) Basic web hosting. For developers to start offering their services at a lower cost, provision of basic web hosting may be necessary.

5) Investment or acquisition opportunity. A good application can be a good potential investment target; especially if it can be applied in a number of various social network websites and accumulate a huge amount of users. By provide funding opportunities at the initial stage, the website operator can help a application developer to grow and reserve a good investment opportunity for the future.

Open platform unveils a new competition for users. Social network websites wish to grow bigger, but at the same time they are worried to lose their turf. The top priority is to know yourself well. Your best chance lies in opening up yourself to the outside but preserving your core, and for this you need a good profit share system. At the end, you may even need to open up your user data to others to ensure lasting growth.

Yet, why do social network websites need to open their user data which they have made every effort to gather? ( 2008/11/23 - By Digitalwall.com - Way to China Internet/Telecom )