"The personalized RSS Feed subscription URL" is the ultimate solution to the issue of user tracking.
[+] The preciseness challenge for RSS subscription marketing
As a matter of fact, RSS subscription marketing is not able to track users' activities because of its open feature. Currently, most of website operators provide open RSS Feed URLs that could be obtained and added to the reader software by everyone.
The idea of one-to-one marketing, the most advocated personalized marketing in the Internet age, thus collapses because website operators are not able to identify subscribers, not mention to track and analyze their post-subscription behavior. That is the preciseness challenge for RSS subscription marketing.
Before we find solutions to that problem, let's look back at how previous Internet marketing tracks subscribers. First of all, newsletter subscribers have to leave their email addresses or register to become members. Therefore we have the basis to identify users: user name or email address.
When a website operator sends out newsletters or marketing emails, the typical way is to insert a transparent image in the email in order to track whether the user has opened this email. When the image is displayed on the user's screen, the server on the operator's end will create an access record.
The image is imperceptible since it's transparent. Actually, the user's email address or user name has already been sent back to the server at the moment when the image is displayed. Therefore, the website operator knows which user has opened this email.
After identifying who has opened this email and comparing with the user's registration information, it is not a problem at all for the website operator to obtain information such as the gender ratio of the user group, its age distribution, even previous website shopping records of the user, etc.
[+] The tracking method of traditional email marketing
In addition, the email sent out may have many links in it, which in fact may carry the reader's personal identification information such as the user's name or email address. When the reader clicks on these links, the operator will know which member has clicked on which link.
Therefore, it is completely possible to analyze which members open the marketing emails after they receive them, which links they click on and what they do on the website. The similar system can even track how many times the reader forwards the email to others.
For a user of the Internet, the above sounds horrible, doesn't it? Such things are taking place in your daily life but you are just not aware of them. However, current anti-spam mail systems are becoming smarter. They start to help you filter those images that contain tracking technologies.
At the beginning, the anti-spam mail technology is used to get rid of spam mails. But nowadays, even the most honest website operators are severely impacted. Sometimes, even the registration confirmation email or inquiry email for recovering the user's forgotten password could not be delivered, not mention those marketing emails.
RSS is an emerging way to keep in touch with users. But its anonymity bothers operators a lot. However, operators are still able to track users' reading behavior as long as they make some changes to the RSS subscription method.
The key point, which I believe, is called "personalized RSS Feed URL".
[+] Introducing "personalized RSS Feed"
You can find the typical open RSS Feed on many websites, such as:
Digital Wall (English version): http://english.digitalwall.com/rss20/rss_eng.xml
Obviously, this kind of RSS subscription website doesn't have personal identification information. When 30,000 users subscribe to the above websites through their RSS reader software, the operator cannot tell who they are.
If the URL of RSS Feed is changed to:
http://english.digitalwall.com/rss20/rss_eng.may@yahoo.com.xml
Do you notice that I added a personal identification information - email address in the RSS Feed URL? In other words, "personalized RSS Feed URL" is the ultimate solution to the issue of user tracking, that is, to issue each person a different RSS Feed.
Website operators should use the personalized RSS Feed URL instead of the open one. Those who want to become subscribers have to register as a member or leave email addresses in order to obtain the unique RSS Feed. It is up to the user to choose from email subscription or personalized RSS Feed.
Website operators might be afraid. Will that establish an obstacle to subscription? I have to point out that operators used to ask users to register membership or leave their email addresses to become subscribers. What is the difference from the personalized RSS Feed?
It's easier for the website operators who already have newsletter subscribers or members to transit from email subscription to RSS subscription. By creating a unique RSS subscription URL for each user, the operator can inform the user of this option every time when he logs in.
The subsequent analysis of users' reading behavior is similar to that of email marketing. As long as the user is identified, it is easy to perform any analysis. So far, a RSS advertising market is emerging: to insert advertisement in RSS Feed according to the user's identification information.
[+] The privacy issue
The above proposal might be rejected by fundamentalists who think that it violates the idea of RSS open message publishing. Years ago, when emails were used as spam mails for the first time, fundamentalists reacted drastically, but spam mails became part of our daily life at last.
In fact, most things prevail out of commercial demand. It has been at least seven years since website operators started to do user analysis through their email reading behavior, not mention that Amazon started very early to analyze users' shopping habits through their website surfing behavior long time ago.
Will that violate the right of users' privacy? It is the same to ask whether the email tracking technology violates the right of privacy. Now that the former has existed for such a long time, probably the latter will develop rapidly as long as there is strong commercial demand.
The difference is that basically the control is retained in readers' hand with RSS subscription. As long as readers find out that the content is not good or the advertisement is too much or even the update is too frequent, they can keep themselves from disturbance by simply unsubscribing from the reader software. This feature will constrain operators who use RSS marketing not to abuse it.
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Prev : The Fourth Generation of Internet Marketing (1) RSS Marketing
Next : The Fourth Generation of Internet Marketing (3) IM Marketing
- Today in History
The Fourth Generation of Internet Marketing (2) RSS Tracking - 2006/12/24
Dream of "Digital Furniture" Store - 2003/12/28
Is there still any reliable way to distribute information in the disordered world of Internet?
[+] Emails are not reliable
In a busy office, Chen is confirming with the client on the phone whether the price list has been received which is just sent by fax. Fax as an outdated technology is not so reliable. Loss of documents happens from time to time. Telephone follow-up is therefore necessary.
Meanwhile, Li, who sits next to Chen, is apologizing on the phone to the client, because he had thought the client had received the email he sent out, but obviously the client does not. The client is outraged. Li ensures that the email has already been sent out. Although feeling aggrieved, Li has to make apology.
Ms. Zheng, who sits behind, has just purchased a purse from the net. The browser shows the transaction is successfully completed, but she still has not received the confirmation email from the online shopping site. She calls the customer service, they send the email again, but she still fails to receive it.
Secretary Tao wants to subscribe to several newsletters to learn more industry knowledge. The website indicates that the registration won't be successful until she clicks the link in the confirmation email. But she does not receive it even after waiting for the entire afternoon. So, she wants to change the email address, but is not allowed to login to do so because she has not obtained the membership yet.
The company's IT manager has just sent out an email, stating that the anti-spam mail system he recently brought in performs extremely well, and saves a lot of money for the company to process spam mails. The others are going to an uproar at that, because bunches of their emails have been filtered by the system.
[+] Worries of website operators
Ironically, people who purchase anti-spam software to get rid of the increasing spam mails often find friends' emails in the spam mail box. The software is useless if the user reduces its sensitivity, because by doing so, he has to filter hundreds of spam mails by hand every day.
From the perspective of the website operator, the traditional website design is based on the principle of 'emails are going to be received'. However, now they have to reconsider the website design and additional service costs under the assumption that emails could not be received.
I used to see an shopping website teaching users how to set up the white list function in their Yahoo! email box to receive member newsletters and marketing messages from the website. The power and effect of marketing has been largely reduced by doing so, because few people will bother to set up that function.
Realizing that email as a way of Internet marketing is doomed to fade away, I have studied the ranking methodology of search engines since early 2005, and wrote three articles entitled "The Third Generation of Internet marketing: Search Engine Marketing" in April of the same year, and used the skills in those articles till now.
Improving the ranking on search engines will help websites to constantly attract visits. But that is only helpful to obtain new clients. For the old ones, email is still an important tool, but becoming increasingly ineffective. It is really worrying to see the reach rate of the newsletter keeps going down.
[+] Microsoft IE 7.0 paves the way for the prevalence of RSS
The first generation of Internet marketing is the purchase of the website banner advertisement starting from 1998. The second generation refers to the email marketing coming afterward, while the third generation is called search engine marketing. Then what else to do after all of the three approaches have been used up?
Or I should ask in this way: in such a disordered Internet, is there still any reliable way to distribute information? I used to count on the newly emerging dissemination method - RSS. My website - Digital Wall - started to provide RSS subscription in 2004. Currently, the pageview of RSS almost accounts for half of that of the website.
In spite of that, RSS is still a subscription method difficult to explain, and needs to install special reader software. It sounds difficult to expect ordinary readers or consumers to download and install certain software in order to subscribe to newsletter.
In addition, I think that the user interface of RSS is a big issue. In the instant when the visitor clicks the 'RSS' or 'XML' icon, the XML markup language pops up, and that is too overwhelming to make the subscription intuitive.
The good news is that Microsoft IE 7.0 has embedded RSS subscription function and provides more user-friendly interface and gets rid of the long strings of XML. With the gradual update of the browser version, users will no longer need to download and learn how to use additional readers.
[+] Those who can analyze RSS users will grasp business opportunities
Although the subscription procedure of RSS is not so intuitive, website operators at least do not need to write user instructions for different RSS readers, instead they can only provide the illustration for IE 7.0. Therefore, operators should be prepared with the advent of IE 7.0 as soon as possible.
It can be seen that, for website operators, RSS subscription will gradually replace email. While for users, RSS is a way to regain the right of use, because they can receive the latest messages without leaving any information on the website.
However, that brings a new problem for website operators. Before, receivers' activities could be traced by the hyperlinks embedded in the email, such as whether they kept shopping on the website, whether they were male or female, how old they were, etc.
Since RSS is based on open subscription, registered members do not need to leave any information. Therefore, operators are not able to know who the subscribers are, not mention to analyze their activities after receiving new messages. Operators are nearly uninformed, because they can only measure the result of the marketing on the basis of RSS pageview.
If any website operator could solve the issue of RSS subscriber behavior analysis regarding to Internet marketing and website operation, they will grasp huge business opportunities, because the email marketing has faded away. In a user-as-king era prompted by browsers, RSS will become the new mainstream.
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Prev : Great Future of Wireless Broadband (4) WiMax, 3G and 4G Next : The Fourth Generation of Internet Marketing (2) RSS Tracking
- Today in History
The Fourth Generation of Internet Marketing (1) RSS Marketing - 2006/12/17
Internet and Books (2) the Supply for Content Exceeds the Demand - 2005/12/11
VoIP (4) Dual-network Handsets Will Die of Subsidies - 2004/12/19
VoIP (3) Phone Number Is Vital - 2004/12/12
WiMax will eventually engage with 3G in the field of voice communication.
[+] The declining communication revenue
Imagine this: you will be able to make mobile phone calls for unlimited minutes so long as you pay a fixed amount of money each month; if you want to watch a movie or download music or use other value-added services, you pay additional charges, but there's no such costs as communication fee or transmission fee any more.
For telecom operators, this is a nightmare. No more are the good days of waiting for subscribers to make phone calls and printing phone bills calculated on talking minutes. They now have to earn their meals by providing sufficient contents. But that is too troublesome and not the specialty for operators. Worst of all, they will have to share money with content providers.
This is what's happening to your phone line at home. For an ADSL line, the telecom operator is able to charge only two types of fee: the lease for the line (including voice and data services) and the Internet access fee. Both are almost fixed each month.
If, instead of dialing traditional phone calls, you use the line only to dial Skype VoIP calls, you will be able to use both the Internet and the voice services with that amount of monthly payment. Eventually, telecom operators will have to sell IPTV to you to look forward to earning more through contents.
Yes, wireless bandwidth resources are limited and incomparable with the cable broadband. But who can say that some kind of a novel technology will not appear in the future to change all this? After all, consumer demands are always there and the amount of bandwidth that a consumer can buy with each dollar has been on the rise over the past years.
[+] The unpredictable future of WiMax
In the field of 4G, a concept which is not even clearly defined so far, players are already fighting for the ability to set the standards. Thanks to the promotion of Intel, WiMax has got the support of many telecom equipment suppliers and handset manufacturers, and is now the hottest bidder for the 4G technology.
Intel is going to embed WiMax into its notebook computers, in a hope to get the popularity that WiFi once had. Despite the slower-than-expectation progress, the ambition of the giant should never be ignored. In addition, Nokia has also got into the line of supporters, announcing its plan of introducing WiMax handsets.
However, in view of the current status of 3G services around the world, WiMax, which claims to be 10 times faster than 3G, is really in an awkward position. As 3G has been in commercial use for only a few years, mobile operators who are yet to retrieve the return of their investments are really hesitating about making additional investments in WiMax.
A more possible solution is to issue licenses to fixed-line telecom operators or emerging mobile operators and allow them to build WiMax APs. As a matter of fact, struggling to stem the multi-year decline in revenue, fixed-line operators have been longing for accessing the mobile market for many years. For them, WiMax could be an opportunity.
When mobile operators have little interest in WiMax, a fallacy has appeared in the market, holding that WiMax is a complementary service, instead of substitute of 3G. This has rendered wider imagination for WiMax, particularly in the China market, where 3G has not been launched yet.
[+] 3G and WiMax: foes, not friends
The two services are considered by some to be complementary because the priority of 3G is the mobile voice communication, while WiMax, with its advantages in data transmission, can provide notebooks with the Internet access. In this regard, mobile operators could build two types of network to separate the services: "3G serves people on feet, and WiMax serves people on seats."
In Korea, dual-mode handsets supporting both 3G and WiMax are already available in the market. It seems possible for both to co-exist peacefully? However, we see now that the two technologies are born to fight each other to death and there could never be such a thing as complementation for each other in the real market.
First of all, if fixed-line operators get the WiMax license, they will use the data transmission capability of WiMax to provide wireless VoIP services, which is bound to dig a portion of subscribers away from mobile operators. With so many world-leading suppliers involved in the development of WiMax handsets, the supply of terminal devices will not be a problem sooner or later.
It is reported that the data transmission cost of WiMax is only one tenth of that of 3G. Maybe the WiMax community led by Intel is too optimistic. But if it were true, the fee rate of WiMax-based VioP could be as low as one tenth of that of 3G too.
If the operators that have got the license forget the fact that the number of mobile phone subscribers is far larger than that of notebook users, and only plan to provide Internet services to notebook or PDA users with WiMax, then they must be crazy. WiMax will definitely engage with 3G in the field of the voice communication.
[+] Mobile phone flat rate with unlimited minutes
Were WiMax to appear a little bit later, the follow-on versions of 3G might have the chance to provide larger bandwidth and a more comprehensive IP environment; or, in plain words, a 4G network environment upgraded from 3G might be able to provide the VoIP service, thus render WiMax unnecessary?
Could VoIP all-you-can-eat monthly flat rate become a reality in the 4G time? It will have to depend on how low the transmission cost is. Even if it is low enough, the 4G-based VoIP service might still be charged by minutes in the initial stage. Operators will not withdraw to the bottom line of monthly flat rate at once, so long as the fee rate is acceptable to consumers.
Yet for 4G Internet accessing for notebooks, which does not go through a phone number, operators might consider to offer monthly flat rate. Although 4G is a comprehensive IP environment, operators might still want to separate the Internet access from the voice communication after taking into consideration the reality in the marketplace.
However, there's one thing uncertain here. Today, WiFi handsets with embedded Yahoo! Messenger or Skype are already available. Such handsets will be supported in the 4G wireless network too. With such handset and access to the 4G network of an operator, consumers would be able to make phone calls free by only paying the monthly fee.
Such handset might not have their own phone numbers, or would have to go through troublesome procedures (e.g. SkypeIn) for the numbers, or might encounter the containment from telecom operators. But anyhow, the competition is there and operators have no way to pass it by. It will eventually drive 4G VoIP toward the destiny of monthly flat rate.
The trick is that if 4G really offers monthly flat rate, it will deprive Skype of its room of survival on the mobile terminal. How could Skype, a service that depends on consumers' hunger for lower fee rates, expect to survive any longer once the mobile phone service is as cheap as what monthly flat rate offer?
To be able to make free phone calls has been the dream of mankind, and unintentionally become the driver for the evolvement of the communication technology. Telecom operators who depend solely on the switching of phone calls or transmission of data for their income would face severe challenges sooner or later. They will have to transform into service providers with diversified abilities.
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Prev : Great Future of Wireless Broadband (3) Scarce Resources Next : The Fourth Generation of Internet Marketing (1) RSS Marketing
- Today in History
Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03
Internet and Books (1) Dilemma of Online Publishing - 2005/12/04
VoIP (2) Who Depends on Whom - 2004/12/05
VoIP Gives out the First Cry - 2003/12/07
What will not change in the wireless world is the spectrum scarcity.
[+] Bandwidth that can be increased
In the wired world, when a telecom operator lays a cable into your home for broadband Internet access, it exclusively belongs to you and your bandwidth is guaranteed. If you are not content with the existing bandwidth, you can simply pay a little more to get it increased, so long as it is technically practical; or you can just apply for another line.
For the part of telecom operators, they receive all user data traffic into their servers, and switch or transmit them out. When the user number or the bandwidth of each user increases, they can deploy more equipment or increase the bandwidth to outside by laying more cables.
In the wired world, the shortage of bandwidth can always be solved with additional cables, if the operational costs of telecom operators are let alone. Both the bandwidth of end users and that of telecom operators can be expanded.
Wireless Internet has similar situations. The base stations deployed by telecom operators have user number and bandwidth limits too. That is, the number of concurrent user cannot exceed a limit. The bandwidth of a base station is shared by all concurrent users at any specific point of time. Of course, the more people online, the slower the connecting speed for each one.
In other words, if users are always having trouble accessing the Internet, or are suffering from slow speed, it is time to increase the number of base stations. Let alone the issue of operating costs of telecom operators, they could always increase the bandwidth by deploying additional base stations.
[+] Bandwidth that cannot be increased
For wireless bands, however, there is a lethal vulnerability. Due to its inherent spectrum limit, the volume of data that a wireless band is capable of transmitting is always fixed. When an operator is allotted a wireless band for its services, the total capacity of its bandwidth is almost nailed down.
This is the spectrum scarcity. In other words, wireless operators must decide how to distribute the fixed bandwidth resources available. If there are too many users, the part allocated to each would be too small to satisfy his/her needs.
Technological advances might be able to solve part of the problem. For example, better wireless modulating technologies or compressing abilities might help to squeeze more data volumes into a wireless band, and therefore increase the total bandwidth of the operator. An example is the evolution of the technology from 2G to 3G, and then to the current 3.5G, and to 4G in the future.
Unlike the wired world, however, this increment is still limited. This is why the 3G wireless Internet monthly tariffs of most mobile operators are very expensive. With so many people bidding for limited bandwidth resources, those who afford the high prices can get the service.
In addition, both 2G and 3G systems of most operators are intended for voice communication services. When a number of users are fighting for the bandwidth of a mobile base station, the operator will give voice service subscribers higher priority, in which case, Internet users might be unable to get connected. All these have rendered the prices and experience of the wireless Internet service less appealing.
[+] 3.5G is shining over the horizon.
Generally, there are two solutions to the above limits. One is to introduce new technologies, for example the upgrade from 2G to 4G as mentioned above to squeeze out more bandwidth for operators. The other is to provide separate routes for voice and Internet services to avoid the conflict for base station resources.
When will the monthly fees for the wireless Internet service drop down? Currently in Taiwan, the fee rates of most WCDMA 3G operators range between NTD750 to 850, while, in theory, the data rate is 384K.
Compared with ADSL, it is cheaper, but the speed is much slower, although it already has the "bandwidth sufficient for mobile services". Compared with WiFi, it also has its own advantages: signals are available everywhere and users don't have to search for hotspots. This explains the continued hot sale of 3G wireless network cards since their introduction.
As I explained in previous sections, the wireless Internet service should be able to substitute ADSL if it were ever to see a substantial increase in its user number. Currently, this is still beyond the ability of 3G. If there could be a wireless Internet service that can be used both at home and out on the road and has about the same data rate of ADSL, isn't that great?
3.5G is here. The HSDPA-based wireless Internet model could offer a download data rate up to 14.4M in theory, and 3.6M in practice. It was first introduced in Taipei in October 2006 at the same monthly package fee rate as the 3G wireless Internet service.
[+] The cost for serving household users will increase drastically.
With this price and proven data rate, the service, which is capable of substituting ADSL, has attracted the eyeballs of many computer addicts and business people ever since it was introduced. Yet on the other hand, operators who have vowed to develop the WiFi service in Taipei are caught in a dilemma.
Currently, 3.5G wireless network cards are still a little bit too expensive—about NTD10,000. In the meantime, notebooks with built-in 3.5G chips are already available in the market, sold at about NTD 80,000. Price cuts can be expected so long as operators have the momentum for promoting the service.
For operators, however, this is a mixed feeling, as HSDPA has not fundamentally increased the number of concurrent users. A 3.5G base station can still accommodate only 16 people online at the same time. When the situation of "substitution of ADSL" does occur, the base station will be short of resources.
In the case of the mobile voice service, a normal phone call will last for minutes and will not occupy the base station for long. However, for the wireless Internet service, it is a different case. A user could stay online overnight to download files. To address the needs of household users, the number of base stations will have to increase too.
Consequently, there could be implicit increases for monthly fee rates or restrictions to the bandwidth assigned to each user. The scarcity of resources will never change in the wireless world, unless there is a better technology to provide larger bandwidth. Will 4G be the new technology expected?
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Prev : Great Future of Wireless Broadband (2) Public WiFi is Not Enough Next : Great Future of Wireless Broadband (4) WiMax, 3G and 4G
- Today in History
Great Future of Wireless Broadband (3) Scarce Resources - 2006/11/26
Google's Choice (2) Lessons for the Software Giant - 2005/11/20
VoIP (1) It's a Fool Not to Make Telecom Money - 2004/11/28
Many round-about business models have appeared as a result of the technical bottleneck. Unfortunately, none is the ultimate solution.
[+] "Killer application" does not exist at all.
What is the "killer application" that attracts consumers to apply for ADSL? Or, in other words, if you want to apply for ADSL, what is the application behind your decision?
Is the reason for a larger mailbox, or the Internet TV, or the ability to download larger files, or the video phone? You can hardly tell what it is exactly. Anyone who applies for ADSL is aiming at "all of the services available on the Internet", instead of any particular one.
In other words, the killer application is the entire Internet itself, which is a fact ignored by most people even though the Internet has been developed for more than a decade now. Whenever a new transmission technology runs into a bottleneck in the market, the first reaction of those involved is to find a killer application, although they have never succeeded to find one at all.
This is the paradox of Taipei, the largest WiFi city in the world, which has merely 40,000 WiFi subscribers. Both the city government and its contractors believe that Voice Over WiFi could substantially stimulate the growth of the subscriber number.
I don't know if you ever have the experience of making phone calls through WiFi. I myself once dialed a call with the Skype phone of a leading supplier over WiFi (without connecting to a computer). Frankly, the communication quality depends on your luck. After all, WiFi is not designed for voice communication.
[+] Price cut is not the solution.
If we look back at the process that we upgrade all the way from the dial-up access to the 512K ADSL, and then to 1M, 2M, 8M and 12M, we can see that there is only one fundamental driver behind: the price. Following each price cut, a large number of users switch to services of higher bandwidth.
Currently, the monthly fee for the public WiFi service in Taipei is about NTD400. Will the number of subscribers rise drastically if the fee rate is cut down to NTD200? Frankly speaking, with my own experience of using the service, I dare not say yes. Yet for service providers, such a fee rate is too little.
From the viewpoint of consumers, a flawed product (at least with many restrictions to its functions) has little appeal however cheap it is. From the standpoint of service providers, those who could bear the flaws and functional restrictions are the ones with real demands, and therefore, a price cut is the least thing they should do.
The question is how large is this group? When we get the answer, we will see that the target group of the public WiFi is really a small one. They must be notebook owners who are often out of their office and have Internet access demands. What's more, their range of activities must be around streets, where good signals are available.
Typically, such people are either computer addicts or salespersons. In this sense, it is safe to say that we are lucky to have so many public WiFi subscribers. Then how come we have built so many WiFi APs - enough to cover 90% of our population - for such small group of people?!
[+] Households are the only hope for the increase of the subscriber number.
With the earnings pressure, public WiFi service providers are beginning to shift their eyesight to corporate users. This is a right business decision, as they will be able to secure a large user base rapidly by introducing service packages or price cuts in the corporate market, not mention corporate users are the very target of the public WiFi.
Nevertheless, it is by no means a smart investment to spend so much money in building so many APs to only serve business people who own notebooks in Taipei. If the subscriber number is what counts, the target market of the public WiFi service should be households. In other words, it should try to substitute ADSL.
Notebooks have become the mainstream in the computer market over the past years. With their mobility, notebooks can be used in your study, sitting room, bedroom, or on the road. Once regarded as a subsidiary product to the desktop computer, the notebook is now in the mainstream and the primary choice for many people.
The problem is, when you use your notebook at home, the ADSL cable does not follow you everywhere. Yes, you can use a WLAN at home, but not everyone is good at constructing a WLAN AP. Maybe WWAN like 3G could provide a solution to such problems.
Theoretically, 90% of the citizens in Taipei will be able to surf the Internet with their notebooks at their sitting rooms, kitchens and bedrooms without the restriction of the ADSL cable, so long as they pay NTD 400 each month to subscribe for the public WiFi service. The reality, however, is not that simple.
[+] Technical restriction is the root.
"To compete with ADSL in the same market" is a viable direction. However, with the bottleneck of the WiFi technology in the WAN field, the commercial public WiFi service has been unable to grow big. With such a large coverage, the APs have not been able to enter the largest household market, and suppliers engaged in the niche market are still struggling to sustain themselves.
How about offering the AP in households free of charge to the public, instead of having all APs run by a single operator? This is the idea of FON, which was founded in Spain in November 2005. By purchasing a USD5 FON router, consumers could share the broadband at their homes with anyone else.
Of course, you can use the FON wireless broadband of others when you are out of your home. The WiFi service provider, which entered the Taiwan market in November, has secured 80,000 subscribers all over the world within only a half year after the introduction of the service. What's more, its subscriber base is growing by 10,000 each month.
However, the deployment of APs is a highly sophisticated technological work, and requires optimization for satisfactory quality. It is beyond the ability of this grass-root model. Can this service cover 90% of the population? Or even if it can, would the problem that it will face be any different from the existing public WiFi network in Taipei?
Few people would be willing to install an AP at their homes, fewer to share them with others. Considering the world population, the subscriber number of FON is nowhere near large at all.
The root is the technical bottleneck, which has led to the appearance of a lot of round-about business models, in wireless broadband market, like public WiFi in Taipei or FON. Unfortunately, none is the ultimate solution, for what consumers need is the ubiquitous access, which only WWAN, for example, 3G or WiMax can provide.
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Prev : Great Future of Wireless Broadband (1) Living in the WiFi City Next : Great Future of Wireless Broadband (3) Scarce Resources
- Today in History
Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19
Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12
Google's Choice (1) Lessons for Portals - 2005/11/13
A Word of Advice for Small Online Stores - 2004/11/14
Ubiquitous Access is what people really want.
[+] Living in the largest wireless broadband city in the world
Imagine this: you are living in a city where you can access the Internet through WiFi from 90% of the city area, where you can receive signals from access points whenever you turn on your notebook. Doesn't it sound great?
In early June of 2006, Taipei was awarded "Intelligent Community of the Year" by the Intelligent Community Forum (ICF) of the World Teleport Association (WTA). In the meantime, the world's WiFi hotspot authority JiWire announced that Taipei's city WiFi network was the largest in the world.
While most other cities around the world are just beginning to build their city WiFi networks, the wireless access points in Taipei has already covered 90% of the city's population. It will take other cities at least one and a half to two years to keep up with the pace of Taipei.
Taipei city government does not pay a cent for the project. All the wireless access points in the city are built by outsource contractors, who are allowed to retrieve the return of their investments from follow-on service charges. Most other cities in the world also follow this model in designing their wireless city blueprints.
I bought my first notebook computer in September and was excited when I read the news. Thank God I am a citizen of this great city. I immediately applied for a NTD 400/month package, dreaming about the freedom of accessing the Internet anywhere, anytime.
[+] Real life and experience about the wireless city
The first problem I encountered was no signal available in my office, which was on the 8th floor (surprisingly, the office of the outsource contractor responsible for the access points deployment was at the 9th floor of the same building). Among the so many access points, which allegedly covered 90% of the population, none was detectable. Carrying my notebook, I walked down the stairs and finally got signals on the 4th floor.
Later, I learnt that, as the access points were installed on lamp posts, trees, and telegraph poles, it was natural that the signals were unavailable at high floors. Yet while I was able to access the Internet at the side facing the street on the 4th floor, the signals vanished again when I moved to the farther side of the same floor.
Already accustomed to the ubiquitous availability of mobile phone signals, I was surprised. As a consumer who spent NTD 400 each month on the service, I didn't feel it was normal that I should "cooperate" with the technical problems of contractors, and find a way to access the Internet myself.
Later I figure out that it'd better to use wireless networks precisely according to the instructions in the user manual offered by service providers: sitting right at Starbucks outlets below the second floor, beyond which, there's no guarantee for signal availability.
Many people would argue that nobody really carries a notebook computer and walk around, and being able to access the Internet from a cafe is good enough to meet most people's needs. They do not understand for sure that what consumers need is the freedom for ubiquitous access.
[+] Wide area wireless network is the future
Having experienced the setbacks of the public WiFi, I realize that the Wireless Wde Area Network (WWAN) is what consumers really desired. Trying to use WiFi, a technology designed for local areas originally, in wide areas and making patches here and there are just like to have a mall kid behind the steering wheel of a big car.
Please note the word I used: desire. Now that the Internet is already an integral part of people's life, they will not tolerate such a defective wireless Internet service, on which they spend money.
I also think about applying for the 3G wireless Internet service, which has been available in Taiwan for many years. Plug a 3G wireless PC card, which you can get from any telecom operator at an affordable price into your notebook and you will be able to surf the Internet. What holds me back is that the cost for the monthly package is twice as much as the amount of a public WiFi package.
For 3G telecom operators, that is a right pricing strategy. Although in theory, the speed of the WCDMA technology is only 384k, far slower than that of WiFi, the signals are ubiquitously available. I once tried the 3G link on a highway and did not encounter any single disconnection for two hours.
Due to the wide signal coverage, the service with a much slower data rate can be sold at a higher price. I finally realize that the ubiquitous access is what people really wanted. Consumers are willing to pay for additional freedom, but the public WiFi is facing severe challenges from other WWAN technologies.
[+] Too few subscribers
Despite the alleged 90% population coverage, Taipei, the so called "the largest WiFi city in the world", has as few as 40,000 subscribers for its WiFi service. For contractors who have spent so much time and money on the construction of wireless access points, the miserable income is pushing the day of profitability even farther beyond the horizon.
Many discussions are focused on the high service fee, which has diminished the infiltration rate of the service. However, compared with the fee rate of local ADSL, WiFi is not really expensive. There are also arguments that, due to the scarcity of wireless applications, consumers have little interest in it.
Both arguments, however, only touch the surface of the problem. The real problem is not the slow increase in the number of WiFi subscribers, but our over high expectation, which has led to the wrong market positioning, and all those follow-on problems.
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Prev : The Web 2.0 Revolution (10) the Big Future of Web 3.0 Next : Great Future of Wireless Broadband (2) Public WiFi is Not Enough
- Today in History
Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19
Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12
Google's Choice (1) Lessons for Portals - 2005/11/13
A Word of Advice for Small Online Stores - 2004/11/14
Web 2.0 is not the end of the revolution; it is but an evolution.
[+] Web 2.0 is a confusing term
On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.
In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.
The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.
This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.
[+] The survival condition for Internet services: Cost
Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.
Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.
For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.
Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.
[+] Cost shifted back to Internet users
It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.
One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.
The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.
Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.
[+] Cost conditions for web-based software to prevail
Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.
Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.
At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.
AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?
The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.
[+] Take the advantage of low interpersonal communication cost
When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.
When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.
This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.
As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.
[+] What does Web 3.0 look like? When will it arrive here?
For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.
I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.
As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time.
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Prev : The Web 2.0 Revolution (9) New ECommerce Next : Great Future of Wireless Broadband (1) Living in the WiFi City
- Today in History
The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05
The B2C model won't disappear, so we need to think about how business patterns are likely to change when the cost of bandwidth, of online user communication more precisely, is in a downward trend.
[+] C2C eCommerce is in line with the Web 2.0 spirit
Among all the various applications rising with the diffusion of the Internet, eCommerce, particularly the B2C model, has the least to do with the Internet. While a consumer does place an order online, the vendor conducts the following procedures completely in the physical world - there is little to do with the Internet.
So we finally come to realize that Amazon is actually a retailer. It focuses on reducing stock and operational cost, lowering the cost of goods through bulk purchases, and lifting sales by promotion campaigns, just like any traditional retailers. Its gross margin is practically at the same level of the traditional retailing business - nothing much to expect here.
On the other hand, C2C model is more relevant to the Internet world. What operators like eBay provide was simply a transaction platform for numerous small buyers and sellers. Apparently, the model of e-market, which is formed by gathering many individual users, can expand at a much faster rate.
This was the time when Internet forerunners first learned about the power of the Internet. In the C2C model, the most costly problems, i.e. inventory stocking and logistics, of the B2C model is thrown back to small buyers and sellers.
By matching buyers and sellers, B2C operators are able to collect fees of posting items or advertisements. Online auction services have been in full bloom these days. At the time when it's just sprouted, there was no such term as Web 2.0, but who would say it's not Web 2.0?
[+] Craigslist replaces eBay, not newspaper classifieds
After ten years of development of the Internet, users now are able to get more bandwidth with less money. This is beyond question. As discussed earlier, when the cost of bandwidth drops to a critical point, new intermediaries will arise and old ones be challenged. Let's never forget the true meaning of Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
Following the step of auction websites, classifieds websites such as Craigslist in the U.S. has become a popular new paradigm. The success factor of Craigslist is that, it shares with users the savings obtained from the declining bandwidth cost over the past decade.
Ebay's users will be charged for making transactions on it, but most Craigslist's users don't need to pay for their classifieds posted on the website. Yet Craigslist, a high-traffic C2C website, can still survive without being beat down by the massive bandwidth consumption. This tells us how much the bandwidth cost has dropped these days that it has affected the way business is done on the Net.
Most reports about Craigslist center on its huge influence on traditional newspaper classifieds. Yet to me Craigslist is indeed a newer breed of intermediary which challenges the position of auctions websites like eBay, an once-new intermediary that took the place of traditional businesses many years ago.
[+] How the Web 2.0 spirit is infused into eCommerce
So, does it mean that all old B2C websites need to start doing C2C business in order to adapt to Web 2.0? Not at all. ON the contrary, this is exactly what we should avoid, because B2C model will not disappear. Instead we need to think about how the way of doing business may change when the bandwidth cost, or the cost of communication among Internet users, continues to fall.
Take the tourism for example. We all know that selling air tickets or tour packages online has been the most popular line of eCommerce. Yet we also know that a group tour can be a torture to many of us, because the tourist agency can only offer an ordinary tour plan with very few characteristics. It is almost impossible to offer a tailor-made package, since it is very costly to gather a group of people who have similar requirements to travel together.
Well, this is exactly where we see an opportunity for Web 2.0. The "declining cost of communication among people" has made it possible for an agency to find a group of similar interests and age to tour together.
Through proper execution, it is likely to find enough people who would like to join a tour, even for not very popular routes, in a very short time at a fairly low cost. This will lead to the downfall of discounted packaged tours and the rise of unique boutique tours. Who in the tourism business will be able to seize the power of web2.0?
[+] Apply Web 2.0 to reduce the cost of B2C eCommerce
B2C eCommerce is characterized by low gross margin similar to traditional retailing business, therefore B2C operators will care more about cost control than those running other types of websites. If the introduction of Web 2.0 services will only lead to the increase of bandwidth cost, then it's really not a good idea to go after Web 2.0.
Let's recall the case of eBay. Are there any things other than the costs logistics and warehousing that we can throw back to online shoppers? How can we make the best use of the trend of Web 2.0 to lower the operational cost in the name of consumer participation, and achieve a win-win situation for both operators and consumers?
Take the example of tourism mentioned above. Wiki applications may be very suitable for sharing individual travel experience. So, is it possible that a travel agency can reduce the number inbound calls for customer service and further lift its online sales through these applications that enable consumers to share their content voluntarily?
Here I would like to leave these questions to B2C eCommerce operators. If you still think that Web 2.0 means those terms like Blog, or RSS, or SNS, and you have no idea how these terms can be associated with your own business, then please allow me to remind you once again: the key is cost.
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Prev : The Web 2.0 Revolution (8) Transformation of the Telecom Industry Next : The Web 2.0 Revolution (10) the Big Future of Web 3.0
- Today in History
The Web 2.0 Revolution (9) New ECommerce - 2006/10/29
The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22
The P2P technology enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.
[+] The operational cost of email service
The lowering of communication cost is the best gift brought by the commercialization of the Internet. Most people can't even remember when is the last time they wrote a letter with a pen on paper to friends afar, but they write emails to colleagues next desk in the office everyday.
Emails are sent through a central mail server from a sender's PC and forwarded through another mail server that link to the receiver's PC. This method has completely replaced paper letters that are more costly and slowly.
Emails may have eliminated traditional paper letters, but it is also facing the challenge from yet another communication tool. In fact, since there must be a mail server in between to deliver emails, an email service provider has to afford a significant amount of storage and bandwidth cost.
If the delivery of electronic messages can be completed by connecting two PCs directly without servers involved in between, and thus shifting the storage and bandwidth cost to the sender and receiver, then the financial burden of communication service providers may become lower.
Instant messaging (IM) software like QQ, MSN Messenger is such kind of service, the provider of which is only responsible for connecting the communicating parties. After the connection is established, all messages are transmitted from one individual user to another, with no server involved.
[+] The low operational cost of P2P model
In fact, IM software has partly replaced email tools. As those we contact frequently are mostly acquaintances or partners at work, IM is more convenient and responsive. Many times we choose IM, instead of emails, to communicate with others.
Users of these communication tools users may not be aware of the technology involved, but for communication service providers, P2P is more cost efficient than Client-Server architecture.
Though the use of these tools has nothing to do with Web, but the emphasis on peer-to-peer (C2C) rather than client-server (B2C) communication is in accord with Web 2.0. In fact, let's keep in mind the true meaning of Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
Finally, the new generation IM service provider has brought a radical and unprecedented change to the application of P2P technology: the arrival of Skype is the consequence of P2P architecture introduced to the Internet telephony service which used to be dominated by client-server technology.
[+] Revolution can not succeed by mimicking your competitor
In the case of traditional telephone service, a call is initiated by a caller, who dials a number, and switched by a telecom operator, which sets up the connection with the receiver; the switch continues to take care of the transmission of the conversation that follows. Every word you say will first enter the telecom operator's switch then be forwarded to the receiver - what we see here is a client-server relationship.
Telecom operator thus needs to invest in costly equipment to provide such service. As the subscriber base continues to swell, the investment will grow in a relatively linear manner. Operators are constantly driven and by the demand for bandwidth by new subscribers - this difficulty is intrinsic to the client-server technology.
Internet phone emerged ten years ago when the operators were thinking about lowering their cost by providing voice communication service via the IP technology. Yet their thinking was still centered on a client-server approach: users purchased an Internet phone set and had it installed at home; users' conversation was still transmitted through operators' switch.
Such way of thinking is no different than that of the traditional operators and has kept the cost of bandwidth and equipment high for Internet phone service providers. To compete with operators they have to set their rates lower in order to attract subscribers, which has capped the growth in their revenue. That is why the Internet phone business remains lukewarm for these years.
Obviously, it is a naive idea to try to compete with traditional telecom operators by mimicking their business model. The telecom market is characterized by severe barriers to new entrants because of the huge investment needed in building up the client-server type telecom infrastructure. To challenge telecom giants, the only way is to come up with a new business model.
[+] The achievement of Skype: challenging the cost structure
Skype, as an IM tool, didn't bring too much surprise to the world at its debut, but it did leave good impression to users by its good sound quality. Its focus on providing Internet phone service was a refreshing approach.
When users using Skype, all communication data is transmitted directly to and from the both parties without any Skype server in between. This P2P model enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.。
This is what really upsets the telecom operators. Telecom operators are not particularly concerned about of potential competitors with deeper pockets as long as the market barrier remains high. Now even small companies can join the business, which has shaken the fundamentals of the industry.
Why Skype's Internet phone model didn't show up ten years ago? As a matter of fact, the broadband service was costly and not very popular then. But now people can enjoy the benefits of high-speed access with relatively less money, so that it is possible now for Skype to shift the bandwidth cost to users themselves with the help of P2P technology.
When the Internet phone service will succeed in revolutionizing the telecom industry? It is when users are able to benefit from higher bandwidth with even less money. At the initial stage, the high perpetration of ADSL and Cable broadband service has paved the way for the scene, now we are expecting FTTB (Fiber to the Building) with stronger broadband capabilities to drive the progress.
In terms of wireless communication, we've already seen 3G on the stage, and we have high hopes for WiMax which promises even high bandwidth. It may take five to ten years to see the results of these developments. Yet we should always keep in mind the big question: what would happen to the world when people can get ten times the bandwidth at the same price they are paying now?
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- Today in History
The Web 2.0 Revolution (9) New ECommerce - 2006/10/29
The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22
When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses.
[+] Online job sites has taken the place of newspaper job advertisements
There are two major sources of classified revenue for traditional newspapers: one is job advertisements, and the other is real estate advertisements. Both have been encroached by the Internet during the Web 1.0 period. Online job sites, which has grasped a significant share of job advertisements from newspapers, has managed to reap profits very soon and has become a model.
Long time ago, a job seeker needed to buy newspapers, and those companies in search for employees could only afford to post job advertisements on newspapers for usually several days. It took some luck to find a good job or a good employee. In other words, the cost for both parties to find their counterpart was relatively high.
Newspaper as media could charge higher for advertisements since they monopolize the channel for both parties to access information. Yet the emergence of online job sites has changed the phenomenon of information asymmetry. Companies looking for talents need only to pay a relatively small fee to post job advertisements even for months.
Through the automatic matching service by the system, a large number of CVs will be sent to you everyday for your screening. For job seekers, they can get the employment information from many companies. The cost to match jobs seekers and talent seekers used to be high, but the low matching cost on the Internet has changed this.
In the Web 1.0 period, we first tasted the cost-saving benefits brought forth by the Internet. Old intermediaries have been replaced with new ones coming onto the stage. The key behind this is that new intermediaries can provide more efficient matching service with a lower cost. And the information is liberated completely.
[+] Head hunters still good in business
Yet, after ten years of development, online job sites still can't make any breakthrough in one area - the market for middle and senior positions. Generally, companies will seek the assistance of online job sites when looking for basic level employees; but if they want to find suitable people for a position like vice president, online job sites are not their preferred channel.
For job seekers above a certain age or senior position, it is practically impossible to find a job through online job sites. This is because the market for senior positions has the following characteristics: First, senior level people don't like to be exposed, and they do mind their CVs being browsed freely by some companies.
Second, Companies too don't like to expose the information about their recruiting middle and senior level people, because competitors may detect their future developments. Third, as both sides are very cautious, recruitment for senior positions is often done through acquaintances.
So far online job sites can only address to the demand for basic level positions. Some online job sites have moved up to the segment of middle positions (like senior managers or experts with good salaries), yet they haven't posed a threat to head hunters that have been dominating this segment.
Based on the above characteristics, it may cost companies big money to find people for middle or senior positions. A head hunter may charge a company as much as several times the monthly pay of the talent it helps recruit as reward. This handsome reward comes from another form of information monopoly and is pretty.
[+] Personal references instead of head hunters
Companies are prepared to pay a good deal for recruiting people for middle and senior positions. Yet when the cost of storage and bandwidth continues to drop so as to enable the staging of Web 2.0, head hunters will start to be affected. Let's never forget about what really means by Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
We have seen such a service launched by online job sites: users are encouraged to refer candidates for a specific middle or senior positions and will be rewarded for successful reference. Some social networking websites have launched trial runs of similar service. They also offered rewards for successful reference.
Instead of paying handsome money to head hunters, now companies need only to give away a reward of about one tenth the money for recruiting people. Everyone has her or his own network; to get the reward or to introduce good jobs to friends, s/he will refer suitable candidates naturally.
The reason why this model can work is that "the cost of interpersonal communication continues to fall," so it will cost less to find the people through people than through head hunters! As I have mentioned earlier, the arrival of Web 2.0 will force many B2C companies to be conquered by C2C.
[+] New business models and new intermediaries
As we have just entered the period of Web 2.0, it is still not clear whether the above models can work or not. The trend is clear, but there may be many ways to implement an idea. Yet it can be expected that middle level positions will be the first to be affected, and senior positions above the level of vice president will still be dominated by head hunters.
The most critical factor is the quality of people referred through social networking websites. Head hunters as intermediaries are responsible mainly for quality assurance as so to save the time of both parties - this is the value of their existence.
For online job sites or social networking websites, if they want to play a role in the middle level manpower market via their offering of C2C social networking service, they will have to work on the above mentioned details and ensure the quality of the talents recommended via this channel, so that companies will not have to cope with a large number of unqualified applicants coming through these websites.
Furthermore, online job sites or social networking websites may establish upstream/downstream relations with conventional head hunters in a supply chain. In other words, these websites will not directly charge companies seeking talents, but they can charge head hunters for offering a talent pool. Head hunters may do a preliminary screening and provide a shortlist to companies in need.
Head hunter can spare a part of their rewards earned for successful matching from the company, the talent seeker, to these online job sites. This business method is taking place in the current transition period. It may become a workable business model. But in the long run, this will surely have impact on the business of head hunters.
[+] Web 2.0: it's all about cost
Most people, when looking at Web 2.0, are dazzled by many fancy terms, among which social networking websites and classifieds websites are two most popular categories. The former attempts to practice the so-called Six Degrees of Separation, which is to allow any people to meet other people on the Internet and thus to expand their social networks.
The question is, how can social networking websites generate revenues once they succeed in helping people know each other? One critical factor behind the scene is: "the cost of personal communication keeps dropping." So it is a lot less costly to find a certain type of people through social networks of people.
Recently in the U.S. there comes a kind of loan websites which are to help people borrow money from other people instead of acquaintances or banks. Rules are set up to ensure the quality of both parties and to lower the risks of lending money to strangers. Imagine how high the cost would be to find a reliable stranger and borrow him money when such service is not available?
In fact, there are quite a few loan brokers who help people borrow money from banks and charge commission from loan takers for successful cases. If there is a website that can help matching individual loan borrowers and lenders at a lower cost, this will definitely affect the business of brokers.
Thanks to the falling cost of computer storage and network bandwidth, the cost of personal communication continues to decline as well. When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses. This is the approach to take what we think about Web 2.0.
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Prev : The Web 2.0 Revolution (6) Struggle of the Press Industry Next : The Web 2.0 Revolution (8) Transformation of the Telecom Industry
- Today in History
The Web 2.0 Revolution (7) Death of the Intermediaries - 2006/10/15
Another Picture of Digital Home Market - 2005/10/16
Corporate Website a Handful (3) Strategic Alliance Why? - 2003/10/12
