32 posts tagged “brand”
Operators always seek to avoid direct discount.
[+] The 3G war in Taiwan started 5 years ago.
In the previous sessions, I envisioned the post-restructuring 3G fee rate war in mainland China, and provided suggestions on the offensive and defensive strategies for operators. However, as those are just general discussions, it is hard for ordinary people to understand the remarkable aspects of the strategies. Now let's forget about New China Telecom, New China Mobile and New China Unicom, and take a look at the 3G price war that has been ongoing in Taiwan for 5 years.
Taiwan is a place with a GSM penetration rate higher than 100%. In other words, it has more GSM phone numbers than its entire population. Thanks to white hot competitions in the market, the public has been well educated about the "on-net" and "off-net" fee rates. Calls between subscribers of the same operator are entitled to 50% off "on-net fee rates".
Just take a look at the fee rate lists of operators in Taiwan, and you will see this is an inherent logic of their billing practice. As a result, the larger an operator is, the more powerful its ability to attract new and retain existing subscribers. The public knows that, for example, being a subscriber of Chunghwa Telecom, you have better chance of calling somebody who happens to be a subscriber of the same operator and being entitled to preferential (on-net) fee rates.
At the beginning, emerging operators were not able to take a bite from the existing subscriber bases of the "Big 3", i.e., Chunghwa Telecom, Far Eastone Telecom and Taiwan Mobile. The first attack was launched by Taiwan's first 3G operator: Asia Pacific Broadband Wireless Communications Inc. (APBW) In July 2003, APBW launched its value-added brand QMA and two expensive 3G handset models, believing that the first 3G subscribers would arrive soon for its rich portfolio of applications.
[+] Free calls for on-net subscribers
It was not long before APBW found that its 3G vision was a beautiful mistake. Unable to achieve its sales target with expensive handsets and value-added services, the operator soon started its phase-II operation. With free handsets and a stunning offer of "free calls between on-net subscribers", it triggered a price war. Free on-net calls meant that calls between any two 3G subscribers of APBW were free of charge.
The bloody price war did not trap the Big 3, which, as public companies, could not stand the consequent ugly finance statements. In addition, with strong brands, they did not feel the need of an immediate response. Many lovers and students joined the subscriber base of APBW in couple for the free on-net calls. They turned out to be the first subscribers of APBW.
The Big 3 seemed to be so confident that they waited until the end of 2005 to launch their own 3G services. Their strategies were simple: just regarding 3G as a value-added service of 2G. They offered similar fee rates for 3G, except for the mobile Internet service. Up until then, there had not been an all-out 3G price war, as existing operators had been defensive, instead of offensive in the 3G market.
In December 2005, a new 3G operator, VIBO Telecom launched its business operation. Like APBW, VIBO Telecom tried to build its subscribe base from scratch. With lessons learned from APBW, VIBO Telecom did not expect too much from value-added 3G services. Instead, it posed for a price war right from the beginning by offering a package "Everybody On-net".
[+] Same fee rates for on-net and off-net calls
"Everybody On-net" was just the opposite of free on-net calls. The following are a few examples of the differences:
General 3G: NTD X/second for off-net calls and NTD 0.5X/second for on-net calls (like the case of 2G);
APBW: NTD X/second for off-net calls, free of charge for on-net calls
VIBO Telecom: NTD 0.5X/second for off-net calls, NTD 0.5X/second for on-net calls (the same price for on-net and off-net calls, "uniform rates")
As mobile subscribers in Taiwan tended to believe that using services of major operators means better chance of enjoying the 50% discount on-net rates, "Everybody On-net" was actually an attempt to tell consumers that, with VIBO Telecom, they could have 50% discount rates for both on-net and off-net calls. As a matter of fact, VIBO Telecom's price war was to offer 50% discount for off-net fee rates.
"Everybody On-net" led to the counterattack from the Big 3. The first to respond was Taiwan Mobile, which offered a "Local Life" package, dividing Taiwan into 5 regions. Calls within each region were entitled to uniform fee rates similar to those of VIBO Telecom. However, out of the selected region, the cost of communication would rise sharply.
It was really a smart action. It squeezed VIBO Telecom out of the spot light of "uniform rates" without too much compromise in actual fee rates. The region-specific preferential rate package was not as lethal as the 50% discount of VIBO Telecom. However, the strong brand of Taiwan Mobile helped to prevent its subscribers from switching to VIBO Telecom.
[+] Big brands sat tight
For Taiwan Mobile, it was a successful defense. For APBW, however, it was an alert. It followed suit immediately by launching the brand new "Wonder 4" package, ,which, like that of Taiwan Mobile, divided Taiwan into just 4 regions, and offered lower rates than "Local Life". In this package, on-net calls were no longer free. It gave APBW a chance to get rid of the double-edged sword of free on-net calls.
By far the 3G price war really begun, only Far Eastone Telecom and Chunghwa Telecom still sat tight. Instead of introducing new 3G packages, Far Eastone Telecom offered "get one free minute for each minute of on-net calls" promotion for the its existing package. In other words, it was another 50% off based on the existing 50% discount rate.
Far Eastone Telecom promotion: NTD X/second for off-net calls, NTD 0.25X/second (roughly) for on-net calls.
In face of deep cuts in off-net fee rates by rivals, Far Eastone Telecom chose to increase discount for its on-net rates to consolidate its subscriber base. Chunghwa Telecom launched an intensive TV advertising campaign for its F2 (Friend and Family) package, which offered ultra-low rates for calls between each group of 10 mobile subscribers and 6 local fixed line subscribers. Leveraging its advantages in the local phone market, Chunghwa Telecom consolidated its subscriber base, while responding to the 3G price war in a roundabout way.
It is not until lately that Chunghwa Telecom eventually joins the price war by introducing "uniform fee rates for on-net and off-net calls". Yet it has been 3 years since VIBO Telecom triggered the price war, it is true that market leaders are hurt by the proposition of VIBO Telecom. However, with strong brands, they can afford to be the last ones to join the price war.
[+] Being cheap is just an excuse
Aren't we talking about 3G? How comes that price war takes the place of value-added services as the prime role? As I have said, regarding value-added services as the prime role of 3G is a beautiful mistake. The fact is value-added services are only an excuse for operators to avoid price wars. Whether in Taiwan or in mainland China, 3G price wars are inevitable, so long as price killers exist in the market.
In addition, operators are always seeking ways to avoid direct discounts. For them, the best solution is to make consumers feel an offering is cheap, which is actually not. "Being cheap is just an excuse". This is what I have learned from my experience in designing the "Everybody On-net" package at VIBO Telecom and the consequent price war. Consumers will never know the real planning of the operators behind the fee rates.
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Prev : New Landscape in China's Telecom Market (5) Fee Rates of 3G Services
- Today in History
New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan - 2008/07/20
From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22
New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23
Ultimate Mobile Device (5) Universal User Experience - 2005/07/24
The key of the attack and defense between operators is the fee rate.
[+] Fee rates reflect the mindsets of operators
Telecom services are basic services. The prime goods involved are "fee rates" (and "terminals" too). Selling communication services is like selling bottled water. It is difficult to target at the right market segment. Why do consumers have brand preference even when they cannot tell the difference between the tastes of bottled water? Since any operator can ensure uninterrupted communication, why do consumers prefer specific brands?
Players offering homogeneous products would be trapped into an endless price war, which would eventually erode the profit margin of everybody, if they do not differentiate their brands and fee rates. So far, few researches on the telecom restructuring mention the price competition strategy. Fortunately, I have the experience of working at a 3G mobile operator as the one in charge of service package pricing. Therefore, I do have something to share with my readers.
The first challenge in the post-restructuring 3G market is to attract subscribers of others while ensuring successful migration of the existing customer base. The key is the fee rate. As is shown in the following chart, operators adopting strategy D tend to have strong brands. Therefore, their 3G fee rates would be at the same level of 2G and no discount is expected.
Such operators would choose to gradually migrate their 2G subscribers to the 3G network. With the same voice fee rates for both 3G and 2G services, the migration will not reduce their revenue. However, why should consumers switch to 3G if there's no discount? Do you really believe that the "rich portfolio of value-added 3G services" is the cause?
[+] No price cut v.s. deep price cut
In fact, only a small number of people would switch to 3G for value-added services. For the vast majority, they neither know nor care about what 3G is. But they will consider anything "that's cheaper". "Price cut" is capable of boosting sales without having to explain to the customer what 3G is.
Operators adopting strategy D have enough confidence that their subscribers will not betray them for lower rates. Therefore, they are patient enough to sell 3G as value-added services of 2G. Nevertheless, they will need to give the subscribers something real. So they begin to cut the prices for mobile Internet services deeply to cater for those who have switched to 3G really for value-added services.
It seems that only New China Mobile has the ability to adopt such a strategy. However, New China Unicom and New China Telecom are waiting to launch a price war. For them, strategy B is milder and worth trying. However, the real price killer is strategy A. Low 3G rate packages plus simple, affordable handsets, seem to be ready to sweep across the market.
Anyone who triggers a price war would get hurt, too. At least with its own 2G subscribers flooding into 3G, its revenue would decrease. However, with its CDMA, New China Telecom doesn't have to worry, for its existing PHS service is cheap enough. If New China Telecom's 3G fee rates could be as low as that of PHS, it would be powerful enough to drive all rivals out of the market.
[+] Ways to cut price
Direct discount, e.g., the offering of a 3G rate based on the discount of a 2G rate, is the least desirable way for a price cut. Powerful as it is, there's no tactics to say. Imagine this: how about 50% off for calls between 3G users of New China Unicom? As communication between subscribers of the same operator consumes only internal resources and does not involve settlement with other operators. This would be a useful and low-cost way.
It would enable New China Unicom to maintain 2G fee rates for 3G services, while offering 50% off for communication between its 3G subscribers. In addition, it would attract consumers in couples or in groups. For example, lovers or family members would switch to the service together to benefit from the 50% off discount. It enables operators to build up their customer bases fast.
You might want to ask: "aren't lovers' or family packages very common in today's market?" The fact is most packages available in the market require the payment of an additional fee monthly. What I mean, however, is automatic availability without the need to pay for an additional package. The practice, which offers different fee rates for "on-net" and "off-net" calls and favorable rates for the former, has been popular around the world for years. But it has never appeared in China. For example:
A 2G subscriber of New China Unicom calls a 2G subscriber of New China Mobile (off-net): RMB X/second;
A 2G subscriber of New China Unicom calls a 3G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls a 2G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls a 3G subscriber of New China Mobile (off-net): RMB X/second;
A 3G subscriber of New China Unicom calls another 3G subscriber of New China Unicom (on-net): RMB 0.5X/second;
A 3G subscriber of New China Unicom calls a 2G subscriber of New China Unicom (on-net): RMB 0.5X/second;
The above fee rates would have a number of results. 1) It would attract groups of subscribers of other operators to use the 3G services of New China Unicom to benefit from its favorable rates; 2) existing 2G subscribers of New China Unicom will speed up their migration to 3G for the favorable rates, without causing substantial loss to the revenue of the operator. In fact, if it is New China Mobile that adopts the above practice, the result would be even more stunning, as it has a formidable customer base. The problem is New China Mobile might think it is an unnecessary act.
Maybe you would ask: "why 50% off instead of 20% off?" Mainly because 50% off is more impressive.
What if New China Unicom and New China Telecom both use the same weapon? How would New China Mobile respond? It could simply offer 50% off for calls between its 3G and 2G subscribers, while maintaining the rates for other services. It would enable faster migration of existing 2G subscribers to 3G, and allow the operator to respond calmly to the price war waged by rivals.
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Prev : New Landscape in China's Telecom Market (4) Dealing with Existing Subscribers is Key
Next : New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan
- Today in History
New Landscape in China's Telecom Market (5) Fee Rates of 3G Services - 2008/07/13
From Idea to Business (1) How to Estimate Your User Number? - 2007/07/15
New Era of Online Advertising (1) from Media to Channels - 2006/07/16
Ultimate Mobile Device (4) Email Service Anywhere Anytime - 2005/07/10
As a matter of fact, each of these operators has more than 100 million subscribers to deal with.
[+] Are there bystanders in the 3G market?
One interesting question: is it possible that, having obtained their 3G licenses, the 3 new operators, i.e., New China Mobile, New China Telecom and New China Unicom all choose to postpone the launch of their 3G services, and wait for the response of the market? After all, migrating existing GSM or CDMA or PHS subscribers to 3G proves to be a huge workload, and might trigger a price war if not dealt properly.
In April 2007, I analyzed 4 possible market accessing strategies of 3G operators with a chart titled "Market Strategies of 3G Operators". As a matter of fact, each of these 4 strategies has been used by telecom operators around the world. Which is the best depends on the competition situation among local telecom operators, as well as standards they adopt.
Most operators planning to postpone the launch of 3G services would adopt strategy C, i.e., starting by providing internet access service only. With base stations mostly located in cities, these operators primarily sell PC data cards to business people to enable Internet accessing for notebooks.In suburb regions, where 3G signal is not available, services will automatically roam to the original GSM network. So the operators will not provide 3G mobile phone and voice services in the initial stage.
Operators adopting this strategy have a number of common identities: 1) they are market leaders with strong brands, and not afraid of rival operators trying to snap market shares away from them with 3G services. 2) Their 3G infrastructure development tends to be slow, with signals capable of covering only urban areas at the beginning. Business people do have requirements for mobile internet, but they care even more about the quality of voice communication. Therefore, the limit signal coverage for the voice service in the initial stage would offend them.
[+] Maybe everybody is a bystander
The one that's most likely to adopt the above tactics is New China Mobile. In view of the heavy workload of migrating hundreds of millions of subscribers to TD-SCDMA, and the possibility of revenue decline, it pays to be careful. Anyway, nobody has experience in TD-SCDMA. With confidence in the brand, many subscribers would rather wait for New China Mobile's 3G services than switch to other operators.
Therefore, New China Mobile might well be a bystander at the initial stage. Although 3G is a more advanced technology, it is hard for ordinary consumers to tell the difference from 2G (I have a 3G phone myself, but I use it only to make phone calls and send/receive short messages). Therefore, it would be hard to persuade them to switch to 3G in the initial stage.
Should other operators take the advantage of the time window in the 3G voice market left by New China Mobile to introduce their own services? Should they launch attacks with 3G systems and infrastructures that are more mature and easier to deploy, as well as 3G handsets and more affordable fee rates? Or should they join New China Mobile to adopt strategy C and be a bystander in the initial stage too?
There's one factor they must consider when selecting their competition strategies: where will their 3G subscribers come from? In our view, the 3G subscribers will come from: 1) their own 2G customer base; 2) the 2G customer bases of other operators; and 3) people who have never used a handset. The experience of 3G operators in Japan indicates that, for any 3G operator, most of the 3G subscribers would come from its own 2G customer base, with only a small portion from rival operators.
[+] The speed and the fee rates are the key
If operators do intend to migrate their 2G customer bases to 3G, there would be a peaceful market in the initial stage. As each operator is engaged in migrating its own 2G subscribers to 3G, no one would bother to launch an attack before it has had a strong foothold in the market.
As a matter of fact, each of these operators has more than 100 million subscribers to deal with. The one who completes all this first would take the lead in launching an attack. Therefore, the key to success would be speed, nothing else. Despite the strong brand of New China Mobile, which allows it the luxury of more waiting time, subscribers are realistic and impatient. They would switch to any other operator that offers the most favorable terms.
To retain existing subscribes and launch an attack toward other operators, the fee rate packages for voice services would be a powerful weapon. The advent of 3G has led to the emergence of a number of call modes: including 3G-to-3G and 3G-to-2G. As there are 3 different systems for both 3G and 2G, the situation could become more complicated. For example, a 3G subscriber of New China Telecom would call a 2G subscriber of New China Unicom.
With such a complexity, a compelling fee rate package would be helpful to retain and migrate existing subscribers while attracting new subscribers from other operators. As to whether it would reduce the revenue of the operator, there's no guarantee. Anyway, 3G is not something intended to help operators earn more.
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Prev : New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer? Next : New Landscape in China's Telecom Market (5) Fee Rates of 3G Services
- Today in History
New Landscape in China's Telecom Market (4) Dealing with Existing Subscribers is Key - 2008/07/06
Ultimate Mobile Device (3) Video, Storage, Copyright Management - 2005/07/03
There is only one price killer in the market.
[+] New China Unicom has had a good start
Through the restructuring, China Unicom finally is able to get rid of its long-time burden, the CDMA network. With both the GSM network and the CDMA network, it has had troubles in operating costs and branding. Even its dual-mode phones, which boasts "duel network standby" arouses skeptics among the consumers. If one network is good enough, why should I have two networks?
In fact, for operators, upgrading either CDMA or GSM to 3G would be easier and more cost-effective than building a TD-SCDMA network from scratch. Particularly, operators of the first two modes around the world have mature experience in business operations, the key is to make oneself focused on one thing. In terms of the extent of easiness for upgrading to 3G, getting rid of either the GSM network or the CDMA network would be an intelligent choice.
According to the latest data, as of June, 2008, China Unicom had 120 million GSM subscribers, and a much smaller CDMA user base: only 40 million. For the post-restructuring New China Unicom, which is posed for the 3G market, getting rid of the CDMA network is not a big loss anyway. If it were the GSM network that's split off, New China Unicom would have big trouble in attracting new subscribers in the future.
New China Unicom could easily upgrade existing GSM to WCDMA. In addition, there are numerous handset models available around the world for the standard. What's more, today, WCDMA has stepped into 3.5G, i.e., HSDPA, which enables download speed several times faster than the original target of 384k.In Taiwan, operators have even launched HSUPA, which offers faster uploading speed to enable the uploading and sharing of images and videos.
[+] The hot potato of New China Telecom
In spite of a much smaller customer base, the above technical infrastructures and the 120 million GSM subscribers make New China Unicom a respectful rival of New China Mobile, so long as it could develop and execute correct strategies in the 3G time. With TD-SCDMA, New China Mobile would carry the burden for a while, which might be an opportunity for other operators.
New China Telecom, the operator based on the existing China Telecom and part of China Unicom, would have two major assets, i.e., the 40 million CDMA customer base and the 50 million PHS customer base. However, it is a well-known fact that the PHS customer base has been shrinking each year. Incapable of upgrading directly to CDMA, PHS is feeling the pressure of market competition.
In addition, with its original market position as mobile local phone service, PHS has been offered at a low fee rate since its introduction. To persuade existing PHS subscribers to switch to CDMA, New China Telecom will have to compromise its fee rates. In addition, there's the problem of changing PHS phones with more expensive CDMA handsets. Therefore, the compromise would involve not only the fee rates, but also the entire handset packages.
The key is to migrate existing PHS subscribers to CDMA. The problem is: will the discount rate package be available to the existing 40 million CDMA subscribers? If not, won't they be hurt? If yes, doesn't that mean a decrease of revenue from the existing CDMA subscribers? That's the dilemma.
[+] Vying to be the price killer
If New China Telecom hasn't made up its mind and continues to depend on landline-bound packages for building its CDMA customer base, the result won't be surprising, in which case, price cut would be inevitable. In addition, any price killer would have only one chance. If it cannot be a hit in the market in the first time, any follow-on price cut would be useless.
If New China Telecom doesn't use the weapon of "price cut", it will be used by New China Unicom. By then, there would be no way out for New China Telecom, for there could be only one price killer in the market. Maybe we want to ask: "why should both operators use price cut in market competition? Why can't they target at high-end business people instead?"
It depends on a few factors. First, how fast could New China Mobile launch its TD-SCDMA services? With the leading-edge brand of New China Mobile in services targeted at business people, it is not easy for the other two operators to compete. The only chance for them would be to build their own networks fast enough to seize the business people market before the launch of TD-SCDMA by New China Mobile.
Second, it is impossible to beat New China Mobile's brand among the business people in a short period of time. Sooner or later, TD-SCDMA would catch up. Therefore, for New China Telecom and New China Unicom, price cut is only a matter of time. Particularly, if New China Telecom falls behind New China Unicom in offering a price cut, it would be difficult to launch follow-on marketing programs. Since a price cut is inevitable, why not taking it up earlier as a weapon?
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Prev : New Landscape in China's Telecom Market (2) Opportunities and Burdens for New China Mobile
- Today in History
New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer? - 2008/06/29
New Landscape in China's Telecom Market (2) Opportunities and Burdens for New China Mobile - 2008/06/22
Web 2.0 Think Again (5) Unearth the Value of "People" - 2007/06/24
Ultimate Mobile Device (2) Competition of Handheld Game Console - 2005/06/26
Would existing GSM subscribers be its assets or liabilities?
[+] New China Mobile as the forerunner
In a winner-takes-all market, the forerunner would have considerable leading edge. The New China Mobile with its TD-SCDMA, the New China Unicom with its WCDMA and the new China Telecom with its CDMA2000, which is going to be the forerunner? The bargaining for mergers between operators will last for some time, but the one who completes the merger first might not end up being the forerunner.
Yesterday, I was surprised to see a 3G ad of China Mobile on a Focus Media LCD in an office building in Shanghai. The ad has two implications: 1) 3G video phone is really cool; and 2) at the end of the ad, it is mentioned that TD-SCDMA is being tested, implying that it will be launched soon. The ad indicates that China Mobile is taking the lead.
The ad gives me a few inspirations. First, telecom operators around the world have a common idea in mind when they launch their 3G services: "video phone is a selling point." It seems that Chinese operators are no difference (but they do not know, as a matter of fact, consumers resist the service). The 3G war once waged among telecom operators in Taiwan seems to be about to start once again in the mainland.
Second, it seems that TD-SCDMA would be the last 3G version worldwide. Other versions, including WCDMA and CDMA2000, have been in commercial operation for years and very mature by now. The 3G ad of China Mobile seems to be a forerunner. However, when they could introduce compelling TD-SCDMA offerings is another thing.
[+] New China Mobile faces the same challenges that Hutchison once did
Hutchison is the 3G forerunner worldwide. When Mr. Li Ka-shing tried to develop Three, the telecom operator in Europe, he encountered a lot of challenges from the very beginning. First, with only 3 cell phone models, Three offered consumers very limited choices. We have to admit that consumers need very simple reasons to buy things. Cell phones with appealing appearances are a big reason for switching to 3G. Limited choices would affect sales.
In addition, its initial market positioning toward business people was another problem. Among the 3 models, one was focused on the video phone function, and another one on the email feature. While capable of satisfying some of the requirements, these phones ignored the most fundamental requirement of the business people "making phone calls successfully". As a new entrant, WCDMA had only limited coverage. That means there were a lot of places where its signals could not reach.
In addition to the coverage of signals, there was also the problem of the compatibility between cell phones and telecom networks. Although both telecom equipment suppliers and cell phone manufacturers complied with standards, it was the first time for the two to collide head on in the business environment. Three's cell phone supplier NEC sent a team to Europe dedicatedly to assist Three to adjust the cell phones in line with the 3G networks.
The clumsy process resulted in customer complaints and damage to the Three brand. As TD-SCDMA has been away from the public sight before, its business operation ability is much doubted. Assuming the mission of promoting the Chinese standard, New China Mobile might become the last operator to launch 3G. Therefore, it is necessary to learn from existing experience and lessons, so as to avoid mistakes of other operators.
[+] Would existing GSM subscribers be its assets or liabilities?
At the new start line, do the 3 operators each carry a burden on its back? The GSM customer base of New China Mobile is both an asset and a liability. It is an asset because New China Mobile could attract those with higher value among the existing customers to become its 3G subscribers. New China Mobile has undoubted edge to promote 3G at its own existing outlets.
On the other hand, it is a liability because discounted rates will have to be offered to attract existing subscribers to use 3G services. Of course, it would be better to attract subscribers of other operators. However, if its 3G subscribers are derived from the existing GSM customer base, the total revenue would decrease. In general, with the launch of 3G, the operator would earn less, instead of more.
In summary, New China Mobile would face 3 challenges: 1) how to attract more cell phone manufacturers to make TD-SCDMA phones, ideally with enough models to cover different price levels; 2) how to maintain the existing GSM rates while attracting more users of 3G; 3) how to ensure the quality of 3G calls, i.e., how to ensure the roaming of the calls to its GSM network in areas beyond the reach of TD-SCDMA signals.
Appealing as they are, other value-added services, such as mobile Internet, won't be available before overcoming the above challenges. The much hated video phone might be only a selling point for advertising. At the late stage of the 3G war, operators around the world are no longer boasting about their value-added services. Instead, they begin to focus on voice fee rate discounts.
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Prev : New Landscape in China's Telecom Market (1) Winner Takes All Next : New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer?
- Today in History
New Landscape in China's Telecom Market (3) Who's Gonna Be the Price Killer? - 2008/06/29
New Landscape in China's Telecom Market (2) Opportunities and Burdens for New China Mobile - 2008/06/22
Web 2.0 Think Again (5) Unearth the Value of "People" - 2007/06/24
Ultimate Mobile Device (2) Competition of Handheld Game Console - 2005/06/26
What's the difference between Yahoo! MDP and Google Android?
[+] Isolated and multi-standard industrial environment
If you have developed a PC-based website, what you are most concerned about would be how to attract users, instead of whether your web pages fit the sizes of your users' screens. With regard to browser brands, you only need to consider a few versions for the program you use to build your website.
You don't have to bother about what operating systems your users use, or whether your users access the Internet through ADSL or Cable, or via which telecom operators. However, with a mobile Internet environment, all these are issues you have to think about.
Providing value-added mobile Internet services via handsets is extremely painful. For example, Yahoo! has a searching box on an operator's WAP portal. It wasn't launched until passing telecom network test, value-added platform test, billing platform test and handset compatibility test.
If it wants to cooperate with another telecom operator, it will have to do these tests all over again, as each operator has its own telecom network and platforms. Just consider how many telecom operators there are in the world? Such a service deployment speed makes it almost impossible to duplicate the Internet revolution on handsets.
In the world of mobile communication, each industrial leader wants to develop its own standard. Leaving alone the various platforms of telecom operators, is it possible to have a uniform software development environment in the first place to make it easier for the developers to support a wide range of handsets?
Now we have a crowded market. In addition to Symbian and Windows Mobile, there are the reverend Java and Qualcomm Brew, joined by new comers like Adobe Flash Lite. Even Yahoo! has introduced Yahoo! Mobile Developer Platform.
If you are a handset service developer, what would you feel at the sight of so many standards you have to support?
[+] Handset operating systems are getting increasingly unimportant
These development platforms have everything from operating systems to software deployment environments. Now that none of the handset operating systems could monopolize the market, all will have to seek survival in the long run. What consumers care most about are only services, not operating systems. It would be increasingly unimportant to fight for market shares of handset operating systems.
In my view, therefore, the key to the success of platform development is not the operating system, but the software deployment environment. As a matter of fact, Java, which is best positioned to build a terminal-independent development environment, has not been able to achieve its vision of "write once, run anywhere".
Flash Lite, a product of Flash that holds an admirable share in the computer-based Internet market, is another development environment irrelevant to operating systems. Theoretically, any handset, regardless of its operating system, could use the environment so long as it supports Flash.
If it could really enable "write once, run anywhere", the development platform will be embraced by developers. Yahoo!'s Mobile Developer Platform (MDP) could be regarded as a development platform similar to Flash Lite but more irrelevant with operating systems.
Simply speaking, website operators that write Widget in accordance with the development specifications (simple scripting, instead of binary codes) will be able to deliver existing services of their websites to handsets, so long as these handsets have installed Yahoo!Go.
The goal of Yahoo! is to get Yahoo! Go into every handset, so that more and more websites would support MDP and join Yahoo! This, of course, would include Google's phone - if GPhone has built-in Yahoo! Go.
[+] The Mobile Internet needs a common leader
Any Internet player that plans to provide handset-based service will have to face a variety of handset operating systems, the special functions of different brands, the different browser brands in the handsets and the different telecom operator platforms.
Such a complicated environment would often be a headache for small Internet companies. Investing resources to solve all the problems is, obviously, not in line with their economic interests. Large Internet companies could make such investments and get economic benefits, but then they will have to fight a battle all by themselves.
Computer-based Internet is a large eco-system. Unless there is a platform that enables all Internet companies to deliver their services to handsets, the entire eco-system would not be able to bargain with telecom operators, who control user resources.
So there appears the mainstream requirement for an open platform different from existing software development platforms such as Java or Flash. The former is a development tool customized for small Internet companies to address the compatibility of different handsets.
In addition to compatibility, the platform should be supported by an industrial leader powerful enough to deal with telecom operators or handset manufacturers. In other words, the mobile internet needs a common leader with a sufficiently large user group.
The key is who the leader will be? Yahoo! and Google, both with large user basis, have chosen different approaches. Ignoring other standards, Google chooses to develop its own platform. Yahoo! chooses to co-exist with other standards.
[+] What's the difference between Yahoo! and Google?
What's the difference between Yahoo! MDP and Google Android? Simply speaking, Android is a platform that includes everything - from the operating system to the software deployment environment and even the browser. Leaning more toward handsets and developers, it hopes to build a brand new underlying technical platform in the mobile Internet industry.
Google does not care what operating system is used on a handset, or what impact the browser has on the presentation of web pages, because it has prepared its own. It wishes to persuade handset manufacturers, Internet companies and software developers to use its standards and get rid of all others.
Yahoo!, on the other hand, focuses more on the provision of a front-end environment to enable existing website operators to deliver their services into handsets easily, regardless of underlying technologies. To achieve this goal, however, Yahoo! has to overcome compatibility problems itself.
To be applicable in every handset, Yahoo!Go must be compatible with all handset operating systems (including, of course, the operating system of Google). It has to adapt to handsets or browsers of different manufacturers to ensure normal functionality and display quality.
With all these pains-taking efforts of Yahoo!, medium and small Internet companies will be able to provide handset versions of their services on their websites easily. No more fuss about standards, just follow the leader.
Both players are trying to become the leader, although with different approaches. Who's got the better chance? As of this point of time, we can only say that Google is taking a bigger bet. It will have a big success or a big failure. Both, however, have chosen the approaches best fit themselves. We can hardly imagine Yahoo! to develop a platform like Android.
However, they are not the only ones aiming at the leadership. Nokia has noticed the trend, too.
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Prev : Great Changes in Wireless Internet Industry (1) Google's Strategy
Next : Great Changes in Wireless Internet Industry (3) Nokia's Strategy
- Today in History
Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy - 2008/03/09
Great Changes in Wireless Internet Industry (1) Google's Strategy - 2008/03/02
Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05
Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06
Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07
3G Time Comes (1) What Is 3G? - 2003/03/09
"Dear, we have been apart for too long. So you're here. We are as one from the beginning. Let me hold your hand once again."
[+] Collective spiritual power
This is the third article of the series. I spent two weeks thinking how to put it into words because, as the series goes, we will inevitably talk about issues related to philosophy and religion, which is of much greater complexity and diversity than the sociological topics regarding Web 2.0 we previously mentioned.
If you cannot see what philosophy and religion has anything to do with the future of Web 2.0, or even feel offended, I can only regrettably admit that my attempt is a failure. Every religion has its god(s), and it is difficult to use a single theory to cover everything while avoid offending other people. May I ask for your pardon in advance.
Almost every religion in the world, wherever it comes from, has the ritual of group worship (or chanting and the like). Such ritual implies that we all believe that the collective spiritual power of a group of people can change the way the world runs. We call it divine power. When changes do happen because of the power, we call it a miracle. At bottom, it's the collective will of man. The source of the power to change is blessing, especially collective blessing.
Blessing is a kind of tremendous spiritual energy endowed by god to man. Amazingly, when you give your blessing to other people, you'll receive even greater positive energy than that you give. Similar effect happens to hatred. Therefore we realize that one cannot get happiness by cursing others.
Such spiritual energy exists not only in religion, but in our daily life and in our mind. Just think about it: how many thousands of millions of people in the world that bears hatred towards the U.S. over the past few decades? At the end there was the 911 incident. So who is to blame for the evil summoned? Don't point fingers at others.
[+] The world as one
"Collective will" is the cornerstone on which the world operates. Some thoughts buried deep in your subconsciousness are unknowingly taken as true. In the Bill Clinton era, there had been considerable progress towards world peace; yet later the Americans' collective will summoned a belligerent president onto the stage.
In the area of religion, it is easy to see how collective will works. If you look around, you can also see how people's collective will changes the fate of a country - good leaders always work on forging collective will that is positive and uplifting . Moreover, the fate of humans is summoned by themselves collectively. There is no exception to that.
How can humans uplift themselves collectively? The ultimate truth behind the "collective will" is "the world as one." The hell exists only where this truth is blinded.
The country that inflicts violence on another will receive the evil consequence in the end, because to do harm to others is to do harm to oneself. We all feel sorry for victims of 911 incident, but we cannot ignore what the Americans had done in the Middle East before. That may be one reason for this hostility to American people.
Similarly, the group of people that send blessings to another will receive the positive energy of the blessings as well, because we are as one. You may say that I am talking about Buddhist causality, but more simply, it's just "what you get is what you give."
So smart people are never sparing in giving. The Bible tells us that, "It's better to give than to receive." To give you something does not mean that something will be taken away from me because you and I are as one. On the contrary, the positive energy created by sharing will ultimately benefit you and me.
[+] The desire that lies deep inside our hearts
I hope that what I just mentioned above reminds you of the Internet. Indeed the Internet is a giant network that carries the collective will of all human beings. In the previous Web 1.0 era, "Its" purpose was to carry all kind of information and make our life more convenient. In Web 2.0, "It" starts to carry the shared will of people increasingly.
The original spirit and the essence of the Internet are openness and sharing. Through the connection of networks, people are getting closer to one another. In Web 2.0, with the emergence of various services such as Blog and social networking services (SNS), people are exchanging not only information but also emotions.
I once wrote to my colleagues that, "Think about it: our users shed tears when reading their own Blog articles, behind which is the platform, tens of thousands of lines of program code, constructed by you. There is nothing more significant in your work than this."
If a Web 2.0 website operator does not know how important "emotions" are, or how Web 2.0 can help people communicate and exchange feelings, then s/he doesn't know what else s/he can do, so to speak. Nowadays people are not looking for information tools or operation platforms.
Major Web 2.0 websites like MySpace in the US have every capability to facilitate global exchange. Moreover, through proper guidance, maybe they can allow users to enhance themselves a little bit and positive thoughts to generate during interpersonal interaction. Just imagine how people have shared will flows on the giant network of the Internet….
I do not intend to preach about "website operators' social responsibility." Internet companies are not charities. They are not obliged to do charity. However, everyone wants to bless and be blessed. If website operators do something about it, it's just to 'satisfy consumers' needs." Isn't business opportunities come from fulfilling consumers' demands?
[+] Collective enhancement of all humans
In Web 1.0, we think about how to promote the exchange of information; in Web 2.0, we think about how to establish relationship and to increase interpersonal interaction. In Web 2.0 Next, we need to think about "what can touch our hearts." What we need to connect is people's hearts but not information.
We need to turn the Internet into a medium of emotions, a platform of exchange of souls, so that users will feel more emotions when using it. This echoes to the desire deep inside our hearts. When that desire is fulfilled, we feel close to god.
Some friends wrote to me, saying that online emotions are not real. Some are worried that spending too much time on the Internet may impede the emotional exchange with other people in our daily life. Think about it: in your daily life, the number of people you are familiar and share feelings with may be within five. This is your social network, much more lonesome than you may think.
And these few people constitute the world you recognize. You never think there is any relationship between you and African people, nor do you understand what is "the world as one." The Internet Next brings forth a brand new chance that we've felt 10 years ago. Now it's finally mature with full energy.
Web 2.0 Next will seek to satisfy users' emotional needs (love and blessing), and encouraging sharing (open oneself) and exchange (global integration). It will need an upgrade from information exchange to emotion exchange. Human beings need to enhance themselves collectively, and they should start from getting in touch with each other. The Internet can make all of this possible.
"Dear, we have been apart for too long. So you're here. We are as one from the beginning. Let me hold your hand once again."
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Prev : The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow Next : Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody
- Today in History
The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything - 2007/09/16
The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17
The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10
Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11
Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19
Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12
The meaning of "new media" is about giving up traditional broadcasting media and enabling interactive, inter-personal communication in a world that is turning into an intimate global village.
[+] Social networks become a new channel for branding
In the earlier stage of online advertising, website operators would ask advertisers to pay for 1.3 million exposures. Soon the CPC (cost per click) model became popular, and website operators started to tell advertisers to pay for 1.3 million clicks.
In the case of traditional advertising, it is aimed to produce an impression of the brand on you by repetitive exposures, so that you'll remember to buy this product when you do shopping in a store. In the earlier stage of the Internet, online advertising followed this thinking, and advertisers were told that the branding effect existed even if users did not click on the advertisements. Although it does not sound very persuasive, it still sells to big brand advertisers having huge budgets.
In spite of the growing popularity of CPC model, which has taken a good share of the market of medium and small advertisers, advertisements sold on the basis of exposures still can pull the money out of big advertisers' pockets.
Now we are entering the era of Web 2.0, yet major brand advertisers and website operators still stick to the old-fashioned concepts and 1.0 mindset. In fact, online marketing has entered the era of "pay for 1.3 million users' in-depth participation."
The point here is "inter-personal communication," which is exactly the strength and spirit of Web 2.0. Simply put, traditional advertising is about "I play and you watch," while Web 2.0 advertising is about "I tell you, you tell her/him, and the brand quickly spreads in the social networks."
[+] The Pepsi case
Here I'm going to share with you a recent case, which is classic in Web 2.0 marketing. The event in this case lasted for one month, attracting 1.3 million users to register, 120 million votes in total, and 6.8 bulletin board messages posted by users.
This event was the annual online event of Pepsi, which was called "Your Picture Appear on a Can." That is, contestants submitted their pictures and got selected by consumer votes. Those who garnered the highest votes can put their pictures on the Pepsi can.
The competition was divided into two stages. At the first stage, Pepsi together with five participating websites held tryouts respectively. One participating website, 51.com, attracted as many as 1.3 million users, which was more than twice as many as the total of the other four websites, to join the competition.
Such contrast was largely because that 51.com is completely a Web 2.0 website, which is characterized by real-time interaction. Therefore we need to look at the difference between this particular website and other traditional blogs websites.
First of all, 51.com is a kind of Social Networking Service, including blogs, photo albums and online communities. Users write their online diaries while reading others', and they can set up their own "friend list."
[+] How brands spread in a Web 2.0 website?
Not like traditional blog websites, 51.com does not emphasize on content. For many blog websites, the first page after logging in is the user's own article, but for 51.com, the first page tells you who have visited, who on your friend's list are online or have posted a new article.
This increases user interaction on 51.com. The system will inform you about who visits your article shortly. If you link to a visitor's blog and leave a comment, the system will inform that visitor about your visit, which may trigger another visit to your blog. This is how spontaneous personal interaction begins.
Because of such real-time interactivity strengthened by immediate system alerts about your friends' activities, users of 51.com almost get hooked on the website. This makes 51.com a robust platform for "inter-personal communication." An online campaign can spread very quickly on this platform.
In this Pepsi campaign, 51.com first pushed the news of this campaign through various channels to draw people in. For everyone signed up for the competition, there would be an article with a big picture "Vote Me for Pepsi Star" automatically produced by the system on the front page of the contestant's blog.
The posting of this new blog article would trigger a notification to those on the blogger's friends list. When these people came to visit, they would learn about Pepsi's new event. Some of them might become contestants and thus set off another round of notification....
[+] Interaction and alliances among social networks amplify the effects of communication
As such, the spread of inter-personal communication takes place in 51.com with a terrifying speed. Here we see the manifestation of "Six Degree of Separation," which is a popular theory normally associated to social networking, particularly for a business purpose.
At the first stage of the Pepsi star competition, there were also other participating blog service providers. Yet they did not take the advantage of real-time interaction; instead, they relied on the traditional method of one-way broadcasting, which is much less effective in spreading the message and drawing in more users.
Most interestingly, there were quite a few voluntary activities going on among the user communities of 51.com, which was beyond expectation. Here are some examples:
1) Those who did not join the competition tried to canvass for their friends who were contestants on their blogs. This helped increase exposure of the event.
2) Users of 51.com can start their own groups. Some group owners can be very powerful, as the size of these groups can reach some tens of thousands under good management. Group owners could ask members to vote and canvass for them.
3) Groups can form alliances. For example, First Alliance of 51.com has as many as 2 million members. Each group within the alliance could select its own candidate to compete for representing the entire alliance, with the support of its 2 million members, to compete in the Pepsi contest.
[+] Web 2.0 marketing is about inter-personal communication
Many people argued that such competition was nothing more than beauty contest. However, to everybody's surprise, the winner of 51.com tryout was a monk nicknamed "silly hermit." In fact, his picture has been on the Pepsi can before you read this article.
Yet it is not that surprising. Firstly, 51.com with 80 million registered users of various kinds is a small society of itself. Moreover, users' voluntary concerted action as shown in the above-mentioned example can be applied in many aspects.
For those participated in this event through joining the competition or voting or canvassing for contestants, together their friends within six degrees of separation, the brand of Pepsi will remain imprinted in their mind for a long time. What Pepsi got in this campaign was 1.3 million heavily engaged users, which had much greater effect than 1.3 million banner clicks.
Did you notice that the model of Web 2.0 marketing is basic inter-personal communication! Inter-personal communication works very slowly in the real world, so we need mass media such as television to do mass communication.
Yet, because of the birth of Web 2.0, the cost for inter-personal communication has dropped substantially and the efficiency has increased. Therefore we see a very paradoxical thing that marketing communication will go back to the basic model of inter-personal communication from traditional "broadcasting" media of mass communication.
These days we hear a lot of "new media" things from the media and people in the industries. What this term really means is about giving up traditional broadcasting media and enabling interactive, inter-personal communication in a world that is turning into an intimate global village.
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Prev : From Idea to Business (2) How to Estimate Your Income and Cost? Next : The Next Step for Web 2.0 (1) The Dawn of Emotion Economics
- Today in History
The Spirit of Web 2.0 New Media Lies in "Inter-personal Communication" - 2007/08/05
The Good Old Days of ECommerce - 2005/08/08
The Web 2.0 websites know more about you than yourself.
[+] You are putting labels on yourself for everyone to see
In the first article of this series, I already mentioned that people are the only thing that Web 2.0 is trying to sell. Yet how people can become a product for sale, or, to put it in a simpler way, how information about people can produce values, which ultimately can be attached with a price?
When we realize that the core of Web 2.0 services is relation building, the way we describe people will become more diversified. For example, you may be asked to provide information such as sex, age, residence area or even annual income when you register at some websites.
Such statistics can be employed by website operators in running their businesses. For instance, content websites can analyze the age distribution of their users of different content channels, and e-commerce websites can examine the shopping frequency and expenses of users of different sexes.
Yet very often website operators would feel unsatisfied with the clarity of such information. They would only wish that users would put labels on themselves, declaring: "I am interested in whitening skincare products," "I am a fan of some pop singer," "I am obsessed with Nike sneakers." Nice and clear, and no wild guess any more.
Actually, all of us can find quite a few of these labels to describe ourselves. You can give a try as well, and I assure you that you'll end up with a lot of labels. Yet you probably don't know that these labels are very valuable and craved by many people.
Now you may want to keep these labels to yourself. Unfortunately they are already exposed. I once said that the bookmarks you collected online and the tags you attach to your Blog articles are all descriptions about yourself instead of the "subjects" concerned. You are putting labels on yourself for everyone to see.
[+] Web 2.0 is a huge miner for personal data
Through content and tags contributed by every Web 2.0 user, it is easy to find "potential buyers for Nike sneakers" through preliminary analysis. So what would you think whether sports shoes suppliers would want such information? In a word, Web 2.0 is a huge miner for personal data.
You may say it sounds like Google's Adsense. If a Blog article contains key phrases, say, "sports shoes," then advertisements related to sports shoes would appear at the side. However, Adsense targets at Blog visitors, but what we are talking about here is Bloggers.
It's very likely that you do not know who these Blog visitors are. You show them the advertisement simply because they are viewing an article about sports shoes. Because of this correlation, you can still expect a click-through rate of above 1% over the advertisement.
Yet, the Blogger may have written 10 articles about sports shoes, which can be known from his tags. Why not target on this Blogger as well as many others, or to set up a Nike fan club specifically for this group of Bloggers?
Big Blog service providers have huge database of Blog tags or the like. In fact, you can find similar things in any Web 2.0 services such as sharing of photo albums or bookmarks or social networking websites. The deeper you dig into the data, the higher value you'll find in the data.
In addition to user data statistics in Web 1.0 and tag analysis in Web 2.0, there are still two critical factors that lead us into an even higher level in mining the value of personal data: psychological qualities and behavioral qualities.
[+] Psychological quality indexes will soon play an important role
Birds of a feather flock together. We can tell what kind of person one is from the friends one makes. Furthermore, one's activities in a Web 2.0 website, including the number of Blogs one visits in a month, the number of messages one leaves in those Blogs and the types of tags one uses, also reveal how active one is as well as other psychological qualities.
Therefore, website operator can put a label on you accordingly, like "activity index: 8," "positiveness index: 6," "anxiety index: 3," "pressure index: 10" and so on. Here I have to point out that these psychological quality indexes will soon play an important role in Web 2.0, which develops on the basis of sociology.
Web 2.0 website operators have been managing online communities by predicting how user would interact with each other. Psychological quality indexes however are a different thing. Firstly, it's about how to quantify behaviors; secondly it needs to employ sociology to, for instance, define anxiety index.
Finally, it requires a brand new algorithm. In other words, the PageRank algorithm currently applied in search engines (to generate the importance index of a web page) can not be used to calculate complex psychological and behavioral qualities of people.
Why research on this subject? One reason is to provide a superior guidance for promoting user interaction in Web 2.0 communities; the other is to enable better targeted advertising. For example, users of a high pressure index may be a good target for "relaxing music."
[+] High precision marketing enabled by people search engines
All the top Internet companies in the world have noticed this development, but how to address it is a question. The most challenging part is the huge quantity - we are talking about tagging 100 million users with their psychological qualities and analyzing these tags. How many servers will be required to run the calculation?
Before there is any technical breakthrough, we've seen some Internet companies make their move by adopting the simplest yet most practical solution - the people search engine I mentioned earlier. Among them, Ucloo.com, the only one of the kind in China, has been running for almost three years.
The founder of Ucloo.com set up this technology-centric company because he sees the value of personal data. The company uses a program to search through web pages, collect personal data scattered everywhere and sort out the data belong to the same person.
Did you post messages on some forums? Was your name on some university recruits lists before? Have you left your mobile number or bank account number at action websites? Although you are anonymous, Ucloo.com can somehow figure out that these sets of data all refer to you.
Data such as companies you worked for, schools you studied at, classmates and colleagues you've had, stars you like, children, properties and so on, would all be collected under your name. According to the data you have made public online, Ucloo.com has put various labels on you all over.
Ucloo.com does not sell data; instead it uses data as the basis for advertising delivery. For example, if some advertiser wishes to deliver advertisements to young college grads, Ucloo.com can identify this group of targets and deliver advertisement. It has been proven that the response rate of Ucloo.com is much higher than that of traditional online advertisement.
[+] Privacy concern vs. desire to peek
People search engines have been a reality for years, with at least ten of them. Every one of them is making profits except for Spock.com, which has got funded by venture capital since last year. In addition to language, the biggest difference between Spock.com and Ucloo.com is where they think the data should come from.
Spock.com requires users to register and at the same time provide information of your account names and passwords at MSN, Yahoo!, MySpace, Facebook, Friendster and other social networking websites. Its intention is to associate these accounts and consolidate the data that belongs to you.
I was very hesitant when registering at that website and wondered why I should provide all this information. Spock.com asked me my email accounts at Hotmail, Gmail and Yahoo!, which I thought was outrageous.
On the other hand, Ucloo.com uses search engine technology to look for you, including photos and video files online. It is difficult to say which is better or worse, but apparently, users would feel reluctant to give away their personal data.
Users are very strange: none of them wants to be exposed by people search engine, yet each of them would try to search his name online and see what would come out. (I bet you would go to Ucloo.com to search your name quietly before finishing reading this article.)
Is there any technical obstacle that prevents Google or Microsoft from doing the same thing? In fact anyone with deep pockets can do it. However, there is critical difference between people search engine and PageRank algorithm. Moreover, it has been years since any people search engine started to accumulate personal data. It takes time to catch up.
[+] Summary of the series
The series of "Web 2.0, think again," which one of my good friends described as groundbreaking, has come to a period here. It has been exactly a year since I published the article confessing that I had neglected Web 2.0.
Over the year I have been groping after Web 2.0 and making up for what I had missed. The five articles in the series are the crystallization of my efforts, which I hope you find satisfactory and helpful in pointing out the trend.
Meanwhile I would like pose a question not necessarily related to business: with Web 2.0, the cost of interpersonal communication has been declining, yet are people getting closer to one other? Maybe people are still living within their small circles and, like I said before, getting together sharing feelings with others of similar attributes?
Is the world we know growing more open or closed? Are we getting clearer about ourselves, or quite the opposite? Will there be one day when marketers know better about you than yourself?
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Prev : Web 2.0 Think Again (4) "Private Property" and "Class Inequality" Next : From Idea to Business (1) How to Estimate Your User Number?
- Today in History
Web 2.0 Think Again (5) Unearth the Value of "People" - 2007/06/24
Ultimate Mobile Device (2) Competition of Handheld Game Console - 2005/06/26
Will we have a price war of voice service? The determinant is the persistence toward China's self-developed 3G standard: TD-SCDMA.
[+] 3G promoting model that best suits the benefit of 2G telecom operators
Let's look back to the competition strategies of telecom operators in the 3G market (figure shown as below). In conclusion, for those telecom operators who already have GSM or CDMA 2G subscribers, the most beneficial tactics for them are as below:
- Focusing on the deployment of 3G base stations on metropolitan areas, and doing small-scale deployment in suburban or rural areas at the beginning. Because WCDMA or CDMA 3G systems are easily compatible with 2G, subscribers can roam seamlessly on the 2G network in those areas where no coverage of 3G signal is available. Therefore, the cost for telecom operators is relatively low.
- In order to ensure that revenue is not affected when the existing 2G subscribers upgrade to 3G systems, operators will set the 3G voice service calling rate the same as or similar to 2G. Since this part is still the primary revenue of telecom operators, it won't affect much even if their 2G subscribers transfer to their own 3G systems.
- Because the voice calling rates of 3G and 2G are similar, the price plan for 3G mobile Internet service (data service) is largely reduced in order to differentiate from 2G as a selling point. Operator focus on the promotion of value added services together with multi-functional high-end mobile phones, targeting the metropolitan white-collars with higher incomes.
- Since the increase of 3G subscriber base is relatively slow at the beginning, the market will gradually expand to suburban or rural areas, 3G base stations spread to those areas and the price of 3G phone reduce. To prosper sales, telecom operators will consider to offer packages with reduced voice service calling rates.
Here comes the question, if as stated above, telecom operators who already have 2G subscribers do not hurry to sell 3G by reducing the voice service rate, how come the price war happens in China's 3G market? The determinant is the persistence towards China's self-developed 3G standard: TD-SCDMA.
[+] Is TD-SCDMA a killer or a lamb to be slaughtered?
The European 2G operators were not so familiar with the above concepts when they first obtained their 3G licenses. But as time went by, they more and more adopted the above concepts towards 3G. Almost all of them took the strategies in B, C and D segments when they started to promote 3G.
Even Hutchison Telecom, the so called "pure 3G system" who had no 2G subscribers, believed that value added services were the shining points of 3G. They tried to attract consumers with high-end mobile phones and various value added services when they started to promote 3G. But they encountered the dilemma of slow increase of subscribers.
Because of their "pure 3G" feature, the deployment of base stations had to start from scratch and was not able to be very comprehensive. Therefore, even the signal coverage in metropolitan areas was not good at the beginning. Consumers attracted by TV ads regarding 3G value added services bought 3G mobile phones. However, their complaints about the unstable signals did not work at all.
Afterwards, Hutchison signed roaming contracts with other 2G operators, allowing subscribers to roam on other operators' network when there was no 3G signal coverage. In order to obtain more subscribers, Hutchison started to promote by reducing the voice calling rate together with low-price mobile phones (with the high cost of handset subsidies). The number of subscribers thus started to increase rapidly.
We learn a lot from Hutchison's lesson. In conclusion, "It is very tough for telecom operators who have no 2G systems or subscribers to promote 3G." Look back to China's market, who comes into your mind from the story of Hutchison? The answer is the ones who will have obtained TD-SCDMA licenses.
The system of TD-SCDMA is incompatible with GSM or CDMA. The deployment of its base stations has to start from scratch. The cost is huge if the same level of coverage as 2G is offered at the very beginning. However, consumers who have already been accustomed to the coverage level of GSM will not forgive "the poor signal of TD-SCDMA".
[+] Market competition will inevitably drive the price war of voice service
In China's mobile communication market, when asked "which telecom operator's signal is poor?" I believe you will speak out the name of some operator without hesitation. Consumers' impression is appalling. It is hard for telecom operators to change their images once they have been put on some labels.
Since the system is brand new, telecom operators with TD-SCDMA licenses will inevitably carry out a lot of system and terminal optimization work during the commercial operation. As an early 3G practitioner, Hutchison used to spend many years in optimizing its system. The process of optimization will strengthen consumers' impression of "poor signal".
These problems, however, do not all exist in WCDMA and CDMA2000 systems. There are lots of telecom operators working on these two 3G systems worldwide, who have accumulated abundant experiences. In addition, the global-scale production reduces the average cost of the 3G mobile phones of those two systems, so that they can be sold cheaper.
From the consumers' perspective, the signal would be poor, mobile phone would be expensive and there would be many bugs in the early stage of TD-SCDMA. Telecom operators would not be able to attract consumers rapidly, although they spend huge amount of investment at the beginning. Finally, it would become inevitable to provide low-price mobile phones without value added services and to promote lower voice service rates.
This is the reason of the price war of voice service during the initial stage of China's 3G market. The starters of the price war, however, are those telecom operators who will have obtained TD-SCDMA licenses. Operators with other 3G system licenses will not respond to the price war in the initial stage. But in the long run, it's difficult for them not to be affected.
The second mist of 3G in China: who is the first largest user group of 3G? Many people would answer without hesitation: "metropolitan young white-collars". Is it true or false? I will say: the answer is workers and students with low income in cities instead.
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Prev : The Mist of 3G in China (1) 3G Makes No Profit Next : The Mist of 3G in China (3) Low-End Customers Are King
- Today in History
The Mist of 3G in China (2) TD-SCDMA is a Hot Potato - 2007/04/08
The Mist of 3G in China (1) 3G Makes No Profit - 2007/04/01
Predictions on China Internet Market (6) Community Services - 2006/04/09
Media, Community, and Blog (5) The Power of Media - 2005/04/03
3G Time Comes (4) Video Phone - the Killer Application - 2003/04/06
