19 posts tagged “broadband”
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 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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Prev : The Web 2.0 Revolution (7) Death of the Intermediaries Next : The Web 2.0 Revolution (9) New ECommerce
- 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
Search engine itself is a product of Web 1.0; it is so not Web 2.0.
[+] Search is a product of Web 1.0
In my last article, I talked about the business paradigm for Internet media and online advertising brought forth by Google. It is about "many a little makes a mickle," which is very Web 2.0 in every way. Now it looks like Google will become the new paradigm which is going to last happily for ever. Yet, is it really so?
Let's not forget that search engine is a product of Web 1.0 and has been there for over ten years. The logic of search engine is to have everyone connected to a certain website, where there is a central host that does all the computation and comes up with search results. This is so not Web 2.0.
In addition, although Google has managed to enhance the accuracy of keyword search to an extraordinary degree, very often users still get a chunk of irrelevant results. The next generation search technology thus becomes the target eagerly pursued by all major Internet giants.
Many people, however, think that the weak link of technology can be compensated by "social search," as Web 2.0 is characterized by "sharing and participating by the public." After all, computers are driven by programs or a fixed logic, which can never keep up with the flexibility of human brains. As such, it seems to make sense to improve search accuracy by human assistance.
A practical solution is to let an Internet user define the keywords (the so-called "tags") for her/his own content when posting articles or pictures. This will make it easier for other people to find the user's content when they search by the same keywords.
[+] It is the search cost that matters
This is what is called "social search." By having people define the keywords or tags for their own content, and search engine index and compute these tags, the degree of accuracy can be further enhanced. After all, these keywords are defined by human brains and may be more likely to fit in with other people's way of thinking.
This search method - we may call it Search 2.0 - may not appear very relevant to technology. It is also the result of the ever-declining storage and bandwidth cost, which makes it possible for everyone to produce content on the Internet. Ten years ago, it was unlikely for such a search method to emerge and diffuse, let alone to become the mainstream.
Yet "social search" is not the ultimate solution. In fact, practically all search methods will have to face the problem of cost in addition to accuracy. This problem can be roughly represented by the following equation:
[+] Every search you make online costs money.
"Every search you make online costs money." In the past few years, the explosive growth of searches has been driving search engine operators to purchase new equipment and to expand the space for settling such equipment from time to time, so that operators can provide accurate and fast search service.
From the above equation, we can see that if an operator fails to control its cost properly, the average cost per search will increase. However, if reduction of cost will sacrifice the performance of accuracy and response time, the average search cost will drop but users may start to leave.
[+] Towards Search 3.0
Thanks to the decreasing storage and bandwidth cost on the Internet, equipment is not as costly as before. Hardware size has been shrinking, which has made it possible to accommodate more appliances in the same data center. Therefore, the cost of data center may be economized and the financial pressure on operators may be somewhat relieved. However, in spite of the many efforts, it has been very challenging to drive the computation cost down.
Google is one of the search engine websites which has a clear understanding about this point, so it has attended to the cost of equipment very carefully. It rarely purchases host computers from external vendors - tens of thousands of its servers were designed and developed by it and assembled from low-cost PC components. That is how it keeps cost down.
Still, Google needs to deploy data centers in order to provide better quality of service. Its new Oregon data center, built along the bank of Columbia River, is as big as the area of two football courts, and has all sorts of hosts and servers.
There is nothing wrong about such way of thinking; it is only very Web 1.0. No matter how deep the pockets of search engine operators can be, it can only own a limited quantity of servers. Be it ten thousand or one million, it can only be fraction of the hundreds of thousands of PCs globally.
I would like to reiterate the spirit of Web 2.0: "many a little makes a mickle." When a search engine user clicks on "Search", which mode do you think will be the faster to get what s/he wants? Through the Oregon Data Center in the U.S., or through a huge number of PCs all over the world?
[+] P2P search: the next generation search method
In fact, Google has developed many technical innovations including parallel processing, which is to divide a single query into several ones to be sent to several servers. This technology may have been applied to Google's search engine. Every search you make may involve several servers.
The question is, when will the above mentioned "several servers" become "all PCs connected to the Internet globally." Instead of Google's host, every search of yours involves thousands of home PCs, like the one you are using now, at different households the world over.
If one day the impact of technological innovations and the ever declining average cost of home broadband access and storage worldwide have got to a certain critical point, the existing search method on the Web may be overturned! Due to the technological bottleneck and security concern behind such expectations though, it is not easy to have significant breakthroughs in the short term.
In addition, there is also an economic problem: why do I need to offer my PC and home broadband connection to process your search? Maybe "one day I may need your help with my search" is a good reason, which sounds even more advanced than Web 2.0. We may as well call it P2P Search.
With the continual reduction of the cost of online storage and broadband access, will there be one day when it is cheaper to throw a query to PCs worldwide than to proprietary servers? This is an issue that search engine operators on the globe need to think over seriously.
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Prev : The Web 2.0 Revolution (4) the Google Paradigm Next : The Web 2.0 Revolution (6) Struggle of the Press Industry
- Today in History
The Web 2.0 Revolution (5) Search 3.0 - 2006/09/24
Crime and Punishment of P2P (1) Liberalization of Power - 2005/09/25
Three Musts of Digital Content Biz (3) Redefining Ownership - 2004/09/26
Corporate Website a Handful (1) Accountability Where? - 2003/09/28
The most important thing for content providers is to take control over the "Channels of Contens".
[+] Key target of online recruitment: the student market
For some segments, leap developments are only possible after the Internet market enters its saturation stage. Online recruitment is one of such segments. As a matter of fact, online recruitment companies are barely off the start line in a competition to attract users.
In face of the continued growth of the Internet market in China, the top priority for existing online recruitment companies is to attract more resumes. Those in possession of more and better resumes will gain the favor of potential employers. The following figure shows very obviously that students have been the prime source of resumes.
One of the prominent identities of the Internet market in China is the growth of student users each year (which has produced profound impact on the eCommerce market too). Students are usually more familiar with the computer and the Internet. Some even have longer Internet experience than many adults. Therefore, it is very natural for them to seek job opportunities online after graduation.
Offline enclosure movements do help online recruitment companies to increase their revenue and influence (for example, 51job.com's collaboration with a number of newspapers to print and publish 51job Job Weekly, which contributes 57.9% to the company's revenue). However, there's no means for such enclosure movements to achieve a speed as fast as their online counterparts.
[+] Online enclosure is much faster.
In May 2005, ChinaHR.com set up a three-year-termed job channel on Sina.com, and agreed to share its revenue with the latter. That, in essence, is to buy resumes. But it's worthwhile. In fact, Sina.com is unable to provide the users with job services. Once the agreement is terminated and the job channel on Sina.com is closed, those who use the channel on Sina.com to look for a job will come back to ChinaHR.com again.
That was also one of the reasons behind Yahoo!'s acquisition of HotJobs. To portals, this kind of cooperation through specific channels could only bring short-term income, and might not prove to be a lucrative deal in the long run. When the online recruitment companies have built their brands, they will break away sooner or later. A better way is to acquire the online recruitment company for good.
In May 2005, globehr.com, a search engine focus on job search appeared, claiming that it had collected information from more than 200 recruitment websites around the country to provide users with one-stop job services. In addition, it also offers resume delivery services, which allows users to deliver their resumes in a large number and automatically to potential employers within a set range. Since the birth of the website, its user base has grown rapidly.
Unlike traditional online recruitment companies whose main revenue sources are potential employers, this service model, based on the information collected from other traditional job site, generates its revenue from bid-ranking ads. Since the revenue streams are different, and the job search engine brings more exposure for the information on traditional job sites, it seems that both models could co-exist peacefully. However, once such search engines start to request users to leave their resumes, conflicts might arise.
[+] Portals need to pay attention to this market
In addition, job search engines are not supposed to directly contact potential employers, otherwise the conflict would be even sharper. In the United States, there are similar search engines (e.g., indeed.com) too, but they all play the game strictly by the rules. Sticking to the key word advertising as their prime revenue source, they do not ask users to leave their resumes.
As a matter of fact, I believe the best model is to allow portals to operate such search engines. Portals could bring additional visitors to job sites and increase the chance of each job vacancy's being found. The bid-ranking advertising is also a revenue model suitable to portals.
What kind of bid-ranking ads is most suitable for job search engines? My first response is the education and learning information. As some job vacancies require high ability of English and others professional training background, such ads would be pulled out along with the job searches.
In addition to offline education and learning information, online learning information will also become a major sector. With the leap development of the online recruitment sector, online learning will gain moderate acceleration too. The following figure shows that the proportion of Internet users that often use online learning services has increased substantially since the end of 2004.
[+] Thanks to the broadband's infiltration, online learning has had leap developments
During the recent years, the proportion of Internet users who use online learning services (the yellow curve in the above chart) has increased drastically, just as the proportion of those who sign up for paid education and learning services both online or offline (the orange curve). The interesting part is, form June 2001 to December 2004, both curves were on a declining trend.
That is because the increase of Internet users was so fast during the time period, that it diluted both proportions. It was not until the recent years when home broadband users increased substantially that the proportions began to rise.
It also reminds us that for online learning service providers, the fastest way to accomplish their enclosure movement could be to introduce bundle sales with broadband service providers (such as telecom carriers or cable TVs), who, to some extent, are "channels of contents". Services will enter households along with the broadband Internet access.
Of course, there are numerous types of online learning, among which, the largest segment is the accredited education (which holds an 85% market share according to the 2004 Annual Report of iResearch). However, the market is already starting in a number of other fields, including corporate training, E-learning, language training and child education.
[+] Online game market has taken structural changes with infiltration of broadband
Obviously, the online game market is not as promising as the online recruitment and learning markets. After years of development, this Internet segment now faces too many embarrassments, including the market saturation, doubts from investors, negative media coverage and the inability of many players to survive.
Yet this is not a really hopeless market. From the above figure we can see that the game player base has maintained a fast growing trend. Nevertheless, the extensive infiltration of the broad band into families has brought structural changes, for example, to the place for playing games. Today, about 70% players play games at home, instead of in Internet cafes.
Over the years, a lot of changes have taken place to the model of the online game. The following figure shows that, other than the ever-green role-playing and leisure games, two types of game are now in the course of decline: the real-time strategy and simulated business operation games. In other words, users that play games via the broadband at home are less interested in such games.
Many people believe that the next trend of online games would be free services, in which case, service providers would have to seek other revenue sources, for example, selling virtual items to game players or adding advertisements into the game. As a matter of fact, any content-related industry would end up offering free services once they move online. Now that it is the reality for portals, can the online game sector be an exception?
[+] "Shanda Box" (i.e. Shanda EZStation) is not a content strategy, but a channel strategy
What role do you think Shanda (NASDAQ:SNDA), the largest online game provider in China, which started its business success from the game The Legend of Mir II is playing the content or the channel of contents? In fact, it must be clarified that, for providers of whatever content, it would be impossible to grow big without the ability to control the "channels of contents".
To online game providers, Internet cafes are the "channels of contents". Channel is the king. Supposedly, Internet cafes should have controlled game providers. However, The Legend of Mir II is such a successful game that it enables tight controls of the channels with the help of Shanda's unique Point Card System.(a sort of prepay topup game card through which the player can buy game points for playing the game. The system has been built in Internet cafes).
Yet the things are changing. The most lethal part is the fact that more and more players are playing games at home, instead of in Internet cafes, and paying their monthly fees through telecom carriers' phone bill, not Point Card System in Internet Cafes. Shanda is no longer able to control those players by controlling the channels, i.e., the Internet cafes. With the emergence of broadband access, telecom carriers are today the largest channels of contents.
Without players, online game providers would be completely incapable of coping with telecom carriers. Lately, Shanda announced that The Legend of Mir II would be offered free of charge, out of the fact that its Point Card System is no longer able to keep a tight control over the channels. The top concern today is not to charge fees, but to retain users.
The way to launch a counter-attack for Shanda is to turn into a new channel. This is exactly the basis of the "Shanda Box" strategy: to compete with telecom carriers for living rooms. By selling a PC based box to consumers with pre-built games and contents and the ability to access the Internet, Shanda has to have new channels direct to the players at home to deliver contents to support its development in the long run. The purpose of the box is not to integrate contents, but to build a new channel.
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Prev : Predictions on China Internet Market (3) Online News & Blog Next : Predictions on China Internet Market (5) Search Engines
- Today in History
Predictions on China Internet Market (4) Job, Education & Games - 2006/03/19
Predictions on China Internet Market (3) Online News & Blog - 2006/03/12
Media, Community, and Blog (2) The Dream of New Media - 2005/03/13
Stop Internet Marketing (2) All Action; No Reaction - 2004/03/14
3G Time Comes (2) Mobile Internet Is Not the Killer Application - 2003/03/16
Both the surplus and shortage of contents can create new business opportunities.
[+] The four pillars of the Internet
As a matter of fact, the concept of "Four Pillars of Internet" was first raised back in 1999. Although many people insist that today we be already in the Web 2.0 time, we have not yet stepped out of the range of those four pillars. Therefore, in my view, Web 2.0 is only an improvement, not an innovation.
Specifically, the four pillars are known as four Cs, i.e., Content, Communication, Community and Commerce. So far, all Internet companies, without any exception, have been competing in those four fields.
Geographically speaking, competition modes can be divided into 2 major types. In continental markets such as the United States and P.R. China, Internet portals tend to be involved in all of the above four fields. However, these markets are so large that single-field-oriented websites are also able to survive and even compete with portals in specific fields too. For example, in the U.S. market, eBay has been standing up to Yahoo!
In island markets such as Taiwan and Hong Kong, which have much smaller sizes, each of the four pillars of portal websites is very strong and there is little room left for single-field-oriented websites, which, in most cases, end up to be taken over by or establish some kind of partnership with portals.
[+] Surplus and shortage of content
Talking about contents, online news is the first thing that the domestic Internet subscribers think of. With the occurrence of important domestic and international affairs during the years and the efforts in early years that portals have made toward their goals of becoming media companies, online news eventually grows to be a classic of China's Internet market.
The following figure shows the proportions of the Internet subscribers in China that search for news information on the Internet and of those who do not think online news could satisfy their needs. Obviously, the higher the demand for news gets, the higher the dissatisfaction rate is. That seems to be only normal human feelings.
However, the section of the curve for the past year or so shows that, as subscribers' demands for news rise, the dissatisfaction rate declines. That indicates in the field of news, online content has begun touching its ceiling. From the finding of CNNIC questionnaires, we can even see that subscribers are beginning to feel tired about massive information, which makes it only harder for them to find the contents they really need. In addition to highlighting the role of search engines, how to enable subscribers watch the news they really want (i.e., the My News concept) will be the next focal point of the online news sector.
[+] Personalization and broadband news: The focal points of the next stage
In addition, the drastic increase in broadband subscribers will drive online news toward its next milestone—live online broadcast. This is an indisputable trend given the fact that, so far, even in the most developed regions for the broadband, the percentages of subscribers watching live broadcasts online still remain low.
According to a report released by CNNIC in December 2005, as many as 37.1% of Internet subscribers have the experience of watching and downloading movies or TV programs online. However, I am rather inclined to believe that most of those subscribers only download the contents, but not watch them online.
Downloading, however, is also a form of news dissemination, as there's no rule specifying that only live broadcasts could be called news. Normal broadband news archive downloading could be a viable option. News editor staff of portals must develop and improve their broadband content editing abilities as well.
Compared with the digital TV or IPTV whose future is largely uncertain, I am more optimistic about live online broadcast which uses computer as the tool for watching. The report also reveals that, between 8:00 p.m. and 9:00 p.m., more than 60% Internet subscribers are surfing the Internet (instead of watching TV), and the percentage is still rising. Which one, then, do you think will become the mainstream?
[+] Myths about Blog
If there is enough, or even more than enough online news to meet our demands, what is the point for the existence of the massive information brought by Blog which is tagged as the grassroot media, and the numerous Bloggers? In its December 2005 report, CNNIC released that 14.2% subscribers used Blog frequently, 3.7% up from the level of June of the same year.
Will the figure exceed 70% (the proportion of Internet subscribers who often read online news)? If not, Blog will not become a mainstream media. In other words, Blog is not mass media, but demassified media for a niche market. It is impractical to expect a niche to take the place of mainstream media.
I often tell a joke that the so-called community service is "a group of people with the same identities gathering together to warm each other". Blog, which falls into the scope of community service too, cannot break away from that feature despite its distinct media characteristics. Of course, such a group of people could also support the business operation of an Internet company so long as the number is large enough.
Having finished the main dish of mainstream media, subscribers may still have the appetite for a dessert of Blog to avoid being drawn by the massive information. Internet companies that run Blogs need to have a clear view of their competition situation with portals in two fields, i.e. content and community. It is impractical to brag about overtaking their rivals in all of the four fields.
[+] Information with low demand might survive in large markets
In addition to news, there are, of course, many other types of online information. Surprisingly, despite their low demands compared to online news, the demand is strong enough to support the listing of Internet companies at NASDAQ, for example, traffic and travel information, which facilitates the listing of Ctrip.com (NASDAQ: CTRP), the largest online travel agency in China.
It indicates that in a sufficiently large market, even the proportion of the people is small with the demand for the information of a certain type, it is still possible to gather them together and create value by leveraging the borderless Internet. Real estate, automobile and medical information in the above figure has that identity and, therefore, should be heeded by startups.
In the CNNIC reports over the years, three subjects keep attracting my attention: online recruitment, online education and online games. The first two are typical hot subjects in the saturation stage of the Internet. Take online recruitment for an example, the proportion of this sector among Internet usages has soared during the recent years:
Online recruitment has been one of the first fields in the development of the Internet industry. However, it has not gained sufficient media attention in virtually all markets around the world. In the meantime, as the first profit-making players in the Internet industry, online recruitment companies have kept a low profile in counting their money.
[+] Online recruitment will be one of the key fields
In 2005, Monster.com, the largest online job site in the United States purchased 40% shares of ChinaHR.com, the largest local online recruitment company. In the meantime, 51job (NASDAQ: JOBS) landed on NASDAQ, too. Nevertheless, I believe that, in China, this market segment is just off the start line and still has a large development room in the future.
According to a report released by CNNIC in June 2004, the No. 1 reason for using online job sites is "rich available recruitment information" (35.5%). On the other hand, the largest problem is "too much false information" (31%), followed by "recruiters care little about information delivered through the Internet (26.4%)".
As to the question: "Is it possible to find a satisfactory job through this means?", only 50% of the repliers give yes, 26.9% give no and 24.9% say they do not know or it is hard to say. Obviously, there are huge market demands that have not been satisfied. Also, there are many large players in this market, but few did a good job. Therefore, there is still a large room for the future development.
Content producers tend to believe that what they offer is invaluable. Sometimes they seek customer demands based solely on their own instincts. Through analysis on information needs and satisfaction rates of Internet subscribers, we are able to tell which fields have too much information, and which fields have unsatisfied information demands where business opportunities lurk.
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Prev : Predictions on China Internet Market (2) Subscriber Number Is King Next : Predictions on China Internet Market (4) Job, Education & Games
- Today in History
Predictions on China Internet Market (4) Job, Education & Games - 2006/03/19
Predictions on China Internet Market (3) Online News & Blog - 2006/03/12
Media, Community, and Blog (2) The Dream of New Media - 2005/03/13
Stop Internet Marketing (2) All Action; No Reaction - 2004/03/14
3G Time Comes (2) Mobile Internet Is Not the Killer Application - 2003/03/16
The number of Internet subscribers in China will not exceed 180 million.
[+] China's Internet market is about to enter its saturation stage.
Before I gave a speech at China Telecom Fujian about a year ago, I made a study on future trends of the Internet market in China. After I finished reading the Internet investigation reports released by CNNIC over the years, I had a feeling that China's Internet market was about to enter its saturation stage.
As I dug deeper into this subject in 2006, I was more convinced. Despite numerous reports in China and other parts of the world boasting about the strong momentum of China's Internet sector, I chose to support a different opinion in the hope of helping companies to find the right marketing strategies.
All data in this study series came from reports released by CNNIC. In addition, I used two time-proven strategic marketing methods, Market Growth Curve (MGC) and High-tech Marketing Curve (HMC) in my prediction of the stages of China's Internet market. With further investigation in consumer behavior, I was able to eventually form a set of marketing strategies.
The above figure shows the trend of MGC. With just a few points marked for the accumulated subscriber number of each stage, a continuous curve can be formed. The most important task is to find the turning point on the curve as marked with the green circle on the above figure. Once such points are identified, all market stages become clear immediately.
[+] The number of internet subscribers in China will not exceed 180 million.
The following is a figure of Internet subscriber numbers based on data released by CNNIC over the years. The deep blue curve indicates the actual number of subscribers. A notable turning point appeared in December 2001, after which, the number of subscribers grows rapidly.
The subscriber number that corresponds to that point is 33.7 million, which, on MGC, is the point of 16%. With reverse calculation, it is able to predict that: 1) the market will enter its saturation stage after the subscriber number reaches 105.31 million; and 2) the market will touch its ceiling when the subscriber number reaches 176.92 million.
According to a CNNIC report on January 2006, the number of Internet subscribers has reached 111 million, which means the market already entered its saturation stage at the end of 2005. The following are some of the predictions that I have made on the Internet market in China:
1) The number of Internet subscribers in China will not exceed 180 million; 2) the room for the market growth for the next 5 years would be as small as 60 million subscribers; and 3) in the broadband (ADSL and Cable Internet) sector, the growth room is also limited to 30 million subscribers.
[+] Price sensitivity in a saturated market
Companies need to be aware that the 60 million subscribers they are about to face would be extremely sensitive to prices and less contributive to their revenues. For telecom operators that usually means they have to lower the Internet subscription fees to be able to attract this group.
High price sensitivity is one of the identities of a saturated market. Unfortunately, given the brag of the telecom carriers in China about the No.1 subscriber number in the world and the fast growth, the market has entered its saturation stage, as indicated in the following figure.
From the above figure, it can be seen that the broadband sector entered its high-speed growth stage back in December 2003 when the subscriber number reached 17.4 million. Calculations indicate that the sector would enter its saturation stage when subscriber number reaches 54.37 million. Checking the CNNIC reports, we can see that the broadband sector also entered its saturation stage after 2005.
Telecom operators are on the verge of a price war, as they will increasingly feel that the same amount of marketing efforts are not bringing in new subscribers as fast as they did in the old days. Under the pressure of subscriber number growth, price cut or covert price cut (for example, the offering of all-you-can-eat packages with a great discount of annual fee would be the fastest approach.
[+] The impact of broadband on value added services and Internet cafes
The spread of broadband has brought unimaginable benefits to the Internet industry. The data show that, in addition to more Internet surfing hours per week, it also allows subscribers to carry out more online activities, for example, more online shopping, more online advertisement contact and more exposure to broadband contents.
For telecom operators, the promotion of value added services to make up for their losses incurred in the cut of broadband subscription fees has become an inevitable task. Unlike the early mindset of "attracting consumers to subscribe broadband access by providing broadband value added services or contents", value added services will become the key revenue generator and the form will be increasingly diversified.
In addition, broadband is infiltrating fast into families. However, despite the rise in the rate of accessing the Internet at home, the rate of people who access to the Internet at Internet cafes has, surprisingly, gone up too. Obviously, home broadband has not substituted for Internet cafes.
Internet cafes might respond to the fast spread of the home broadband with price cut. However, with continued drops in subscription fees and with home subscribers continue rising by additional 30 million, Internet cafes are going to suffer setbacks sooner or later. In the next few years, a massive Internet cafe merge and acquisition tide will be expected. Eventually, the weak is going to be washed out and the strong get stronger.
[+] The Internet market in China: a dual-horse carriage
Despite the fast growth of the Internet subscriber number during the past years, the ratio of high-income subscribers (above RMB 2,000/month) and low-income ones has not been changed substantially, which indicates the infiltration speeds of the Internet among these 2 groups have been very close.
In other words, most of the new low-income subscribers have been Internet cafe frequenters, while high-income subscribers have been switching to broadband. This is the dual-horse carriage characteristics of the Internet market in China, which has affected many other sectors, for example, the online shopping.
A "saturated market" is not something to cause panic, because, in the first place, saturation is not going to happen immediately, but gradually (currently, the market is only at the start line of saturation); second, some sectors, for example, eCommerce, are going to see leap developments only in a saturated market. Therefore, a "saturated market" also means new opportunities.
In addition, despite the relative low attractiveness of the 60 million new subscribers, the number itself is still stunning. It could cause the collapse of industrial leaders overnight, or enable those lagging behind to enter the first echelon. It could be the last chance for startups. Therefore, companies should be very careful.
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- Today in History
Predictions on China Internet Market (1) Saturation Stage - 2006/02/26
The PDA Trilogy: A Story of Evolution - 2004/02/22
