7 posts tagged “c2c”
Why open platform? The root cause is to address the problem of inactive users.
[+] open platforms for big brothers only
The idea of open platform is about a big website releasing its API and allowing others (individual users, small groups or small or medium-sized websites) to write programs in accordance with its API standards and embed the programs in this big website for its users. For website application developers, this mode can be called "follow the big brother."
Why open platforms? The fundamental reason is to solve the problem of inactive users. Social network services are driven by pressure of interpersonal relationships, so in the beginning users would feel compelled to log on the services. After a while, the pressure wanes and about two thirds of users would quiet down. One way to resolve this problem is continue to offer new applications. Yet it is too slow for a website operator to develop applications solely on its own, so it can only open its platform and let others join.
There are several key points in the definition of open platform mentioned in the first paragraph. Firstly, only the major players of the industry have the power to attract others to join. The open platforms of 51.com and Xiaonei.com, two independent social network websites in China, can only work well when they are turning into major players. Yet, keep in mind that the most powerful open platform would be that of Tencent (qq.com), a major Internet Instant Messenger Service provider in China, which can afford to wait for its best chance.
Why do companies follow the big brother instead of striving to be a big brother? This is because the market conditions three years ago could support a startup to grow into a big player. Now it has become difficult for startups - many of them can't even secure financing. Attaching to a major player for a chance to survive is straightforward thinking. Therefore we see a process of industry consolidation.
[+] Benefits for followers
Secondly, applications, after all, are for users of major websites. It is necessary to figure out what kind of applications major users would need. News for Sina, search for Baidu, C2C trade for Taobao, - major websites have their distinct product positioning. In a word, big websites of different types would have open platforms of different kinds; so small players must have different ways to work with them.
Social network services websites have no specific product positioning, which, however, give unlimited space for imagination. They are most powerful in spreading information. Although this type of websites offers specific functions such as blog, photo album, friend list and communities, their actual core product - relationships and networking - is relatively abstract. For applications to be successful, this core must be taken into close consideration.
Thirdly, followers must have benefits. The odds may be poor for a small developer to grow into a big brother, but at least it must be able to support itself. A big brother cannot make smaller developers keep working with it if it does not take care of them. Unless the big brother is the one and only player in the business, otherwise small developers can always turn to other big brothers.
Contrary to the real life, followers on the Internet enjoy certain freedom. They can join different camps at the same time. Developers certainly would like their applications to be used at many occasions without restrictions and make them good money. It would be a lot of trouble if one has to follow different rules (APIs) when joining different camps. Wouldn't it be a lot more convenient if all big brothers have the same set of rules?
[+] Battle for open standards
So we've seen the emergence of a standard that all big brothers are supposed to follow. This is the Open Social standard advocated by Google - a universal standard for open platform. If all big brothers abide by the standards, life would be a lot easier for small followers. They can join different camps freely, and someday they may even become big by being able to benefit from working with many big players.
This scenario is very much like vertical and horizontal alliances in the era of Warring States in China. Google's performance in social network services is only average. But if you look at the list of Open Social partners, you'll find that Google, with this alliance, looks like ready to contend with Facebook. However, what is Googls's intent to develop a standard for all to use, free of charge? What benefits, after all, will it be able to reap?
Overall, the core of Google is search. Google would wish that its Spider and Adsense could reach where there is traffic on the Internet. Nevertheless, social network services websites are very special - they have heavy traffic, yet they, particularly personal profiles, can only be access by logged-on users. Search engines have trouble indexing web pages of these services.
So Google has to open them up, and Open Social can be seen as a product of such thinking. Actually, baidu.com can take the same approach and come up with an open platform standard that suits Chinese social behaviors. It can encourage other social network services providers to adopt this standard, and independent players such as 51.com and xiaonei.com are very likely to join.
Why? Because for independent social network services providers, it would be too risky to rely on a third party standard and too inefficient to develop its own one. The solution then is to "compatibility with all standards." For them, the point is to attract more developers to come up with more applications to stimulate user activities. It does not matter which standards they choose.
In a standardized and transparent Internet world, what can website operators do to retain their users?
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Prev : Openness, where is it going to take us? (1)
- Today in History
Openness, where is it going to take us? (2) - 2008/11/16
Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody - 2007/11/18
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
Easy profits from virtual business are what Web 2.0 should aim at.
[+] Changes in money flow, logistics flow and information flow
After 10 years of development of the Internet, people have become very familiar with the terms of "money flow, logistics flow and information flow." Especially in the area of eCommerce, the three flows can generate much business value. Some businesses are very successful by taking advantage of only one of the three flows.
Although "logistics flow" is a bridge between the Internet and the physical world, its importance has reduced with the introduction of Web 2.0. On the other hand, "money flow" and "information flow", though remain unchanged in forms, have experienced significant change in essence.
In Web 1.0 era, we spent great efforts to enable the money flow to move smoothly between the Internet and the physical world, so that financial tools in the physical world, such as credit cards or ATM cards, can be applied online, and that there are C2C payment tools such as Paypal.
We think a lot about how information should be transmitted (results are e-mails and real-time massaging tools) and gathered (results are portals and content websites) and how to cope with information asymmetry by inventing new business models (results are online job site and online auction).
The Internet has driven the cost of information transmission down. The revolution in money flow, logistics flow and information flow has made the Internet world as it is today. Yet we have sensed an emerging force of the fourth flow - the emotion flow -, which is about to change the three flows.
[+] Emotion flow will bring forth "the emotion highway" and "the media of emotion"
In the past, when you were done with a piece of online news, you were done with it. Maybe there were some people who would leave a comment below the news, but most people left quietly. Then some website operators made some changes to allow readers to score the importance of the news from one to ten points. Yet few people chose to leave a score.
The scoring system has finally been simplified to two options: "push" and "bury." If you are in favor of an article, you push. That is how the news article popularity website, digg.com, in the US succeeds. Then, we start to see news websites provide a function to allow readers to express their feelings about news articles like " happy," "sad," "confused" and so on.
The dawn of the Internet Next is upon us. Indeed, what really matters is not information per se, but what people think of the information and furthermore, how they "feel" about it. A simple "agree" or "disagree" is not enough.
You must have seen in commercials a network of beaming cables through which information flows freely. The so-called "information superhighway" has embodied people's imagination of the Internet. Now what is ahead of us is "emotion superhighway."
There must be many ways to reflect people's emotions flowing around global networks and represent these emotions on websites. Blog have been seen as grassroots media, and social networking websites a tool for social networking or meeting friends. Web 2.0 Next application will be "emotion media."
[+] Emotion: the next thing Web 2.0 is to deal with
Wanna know the moods flowing on the Internet globally? Check out http: //worldmood.info/. This service simplifies moods into smiley face and frowny face. Maybe it can be used to predict stock market performance - isn't it the sum of investors' confidence and moods?
In the time of emotion economics, the ability to control a tremendous amount emotional data will be highly valuable. We do know that emotions affect our consumption behaviors, but we do not have a chance to quantify the relations between emotions and consumption. Web 2.0 may provide a solution.
Indeed, it is very difficult to control a huge amount of personal emotional data. Yet it may work if we focus only on a specific kind of emotion and develop an emotion-centric website. Instead of attracting heavy traffic and drawing revenues from advertising, the strategy of focus survives by selling virtual products. Examples are:
Flowers for Hope: http: //www.flowersforhope.com/garden/ This website allows you to make a wish. Each wish is represented by a flower. Other people can water your flowers, while you can also check out other people's wishes. You know that you are not alone. Your wishes are being taken care of.
Secret: http: //secret.moumentei.com/ This is a very simple website in terms of technology and interface design. Yet it offers thrills to peepers and exhibitionists and even the peeped. I marveled at my first sight of this website.
[+] As emotional products get more popular, micro payment becomes a challenge
With the emergence of emotion flow applications, the selling of virtual products will become a major revenue source for Web 2.0 websites mentioned above. Some people are willing to spend 1 US dollar for a virtual object to express their detestation or some small money just to play kids online. "Emotion" has become a real product.
At the time of purchasing a virtual emotional product, the expression of an emotion, or psychological therapy, is completed. That is the magic of emotional products. A successful design of emotional products is really a test of creativity and understanding of human nature.
However, how do you pay small money like 1 US dollar, by credit card or ATM card? Virtual emotional products are absolutely linked to impulsive spending. Entry of long credit card numbers and repetitive confirmation can kill that impulse of spending.
In Web 2.0, micro payment becomes a challenge, because the profit from each virtual product is too small to make up for the credit card processing fee. Those who can solve the problem of micro payment will be able to reap the profits of the long tail of virtual emotional products.
Emotion flow will get even more important in Web 2.0 Next. Before, people discuss on whether online users would be willing to pay for information or the use of information processing tools. Now, people who can control the emotion flow of online users will have a chance to pull the money out of users' pockets.
As virtual emotional products get more popular, dependence on logistics would only decrease. Why? Because it is all about psychological satisfaction, and there is no physical thing involved - no delivery, no guarantee and no product return. Easy profits from virtual business are what Web 2.0 should aim at.
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Prev : The Next Step for Web 2.0 (1) The Dawn of Emotion Economics
Next : The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything
- Today in History
The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow - 2007/09/02
Envisioning China's 3G Market (2) 3G License & Market Strategy - 2005/09/04
Web 2.0 is not the end of the revolution; it is but an evolution.
[+] Web 2.0 is a confusing term
On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.
In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.
The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.
This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.
[+] The survival condition for Internet services: Cost
Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.
Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.
For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.
Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.
[+] Cost shifted back to Internet users
It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.
One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.
The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.
Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.
[+] Cost conditions for web-based software to prevail
Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.
Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.
At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.
AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?
The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.
[+] Take the advantage of low interpersonal communication cost
When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.
When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.
This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.
As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.
[+] What does Web 3.0 look like? When will it arrive here?
For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.
I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.
As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time.
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Prev : The Web 2.0 Revolution (9) New ECommerce Next : Great Future of Wireless Broadband (1) Living in the WiFi City
- Today in History
The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05
The B2C model won't disappear, so we need to think about how business patterns are likely to change when the cost of bandwidth, of online user communication more precisely, is in a downward trend.
[+] C2C eCommerce is in line with the Web 2.0 spirit
Among all the various applications rising with the diffusion of the Internet, eCommerce, particularly the B2C model, has the least to do with the Internet. While a consumer does place an order online, the vendor conducts the following procedures completely in the physical world - there is little to do with the Internet.
So we finally come to realize that Amazon is actually a retailer. It focuses on reducing stock and operational cost, lowering the cost of goods through bulk purchases, and lifting sales by promotion campaigns, just like any traditional retailers. Its gross margin is practically at the same level of the traditional retailing business - nothing much to expect here.
On the other hand, C2C model is more relevant to the Internet world. What operators like eBay provide was simply a transaction platform for numerous small buyers and sellers. Apparently, the model of e-market, which is formed by gathering many individual users, can expand at a much faster rate.
This was the time when Internet forerunners first learned about the power of the Internet. In the C2C model, the most costly problems, i.e. inventory stocking and logistics, of the B2C model is thrown back to small buyers and sellers.
By matching buyers and sellers, B2C operators are able to collect fees of posting items or advertisements. Online auction services have been in full bloom these days. At the time when it's just sprouted, there was no such term as Web 2.0, but who would say it's not Web 2.0?
[+] Craigslist replaces eBay, not newspaper classifieds
After ten years of development of the Internet, users now are able to get more bandwidth with less money. This is beyond question. As discussed earlier, when the cost of bandwidth drops to a critical point, new intermediaries will arise and old ones be challenged. Let's never forget the true meaning of Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
Following the step of auction websites, classifieds websites such as Craigslist in the U.S. has become a popular new paradigm. The success factor of Craigslist is that, it shares with users the savings obtained from the declining bandwidth cost over the past decade.
Ebay's users will be charged for making transactions on it, but most Craigslist's users don't need to pay for their classifieds posted on the website. Yet Craigslist, a high-traffic C2C website, can still survive without being beat down by the massive bandwidth consumption. This tells us how much the bandwidth cost has dropped these days that it has affected the way business is done on the Net.
Most reports about Craigslist center on its huge influence on traditional newspaper classifieds. Yet to me Craigslist is indeed a newer breed of intermediary which challenges the position of auctions websites like eBay, an once-new intermediary that took the place of traditional businesses many years ago.
[+] How the Web 2.0 spirit is infused into eCommerce
So, does it mean that all old B2C websites need to start doing C2C business in order to adapt to Web 2.0? Not at all. ON the contrary, this is exactly what we should avoid, because B2C model will not disappear. Instead we need to think about how the way of doing business may change when the bandwidth cost, or the cost of communication among Internet users, continues to fall.
Take the tourism for example. We all know that selling air tickets or tour packages online has been the most popular line of eCommerce. Yet we also know that a group tour can be a torture to many of us, because the tourist agency can only offer an ordinary tour plan with very few characteristics. It is almost impossible to offer a tailor-made package, since it is very costly to gather a group of people who have similar requirements to travel together.
Well, this is exactly where we see an opportunity for Web 2.0. The "declining cost of communication among people" has made it possible for an agency to find a group of similar interests and age to tour together.
Through proper execution, it is likely to find enough people who would like to join a tour, even for not very popular routes, in a very short time at a fairly low cost. This will lead to the downfall of discounted packaged tours and the rise of unique boutique tours. Who in the tourism business will be able to seize the power of web2.0?
[+] Apply Web 2.0 to reduce the cost of B2C eCommerce
B2C eCommerce is characterized by low gross margin similar to traditional retailing business, therefore B2C operators will care more about cost control than those running other types of websites. If the introduction of Web 2.0 services will only lead to the increase of bandwidth cost, then it's really not a good idea to go after Web 2.0.
Let's recall the case of eBay. Are there any things other than the costs logistics and warehousing that we can throw back to online shoppers? How can we make the best use of the trend of Web 2.0 to lower the operational cost in the name of consumer participation, and achieve a win-win situation for both operators and consumers?
Take the example of tourism mentioned above. Wiki applications may be very suitable for sharing individual travel experience. So, is it possible that a travel agency can reduce the number inbound calls for customer service and further lift its online sales through these applications that enable consumers to share their content voluntarily?
Here I would like to leave these questions to B2C eCommerce operators. If you still think that Web 2.0 means those terms like Blog, or RSS, or SNS, and you have no idea how these terms can be associated with your own business, then please allow me to remind you once again: the key is cost.
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Prev : The Web 2.0 Revolution (8) Transformation of the Telecom Industry Next : The Web 2.0 Revolution (10) the Big Future of Web 3.0
- Today in History
The Web 2.0 Revolution (9) New ECommerce - 2006/10/29
The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22
The P2P technology enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.
[+] The operational cost of email service
The lowering of communication cost is the best gift brought by the commercialization of the Internet. Most people can't even remember when is the last time they wrote a letter with a pen on paper to friends afar, but they write emails to colleagues next desk in the office everyday.
Emails are sent through a central mail server from a sender's PC and forwarded through another mail server that link to the receiver's PC. This method has completely replaced paper letters that are more costly and slowly.
Emails may have eliminated traditional paper letters, but it is also facing the challenge from yet another communication tool. In fact, since there must be a mail server in between to deliver emails, an email service provider has to afford a significant amount of storage and bandwidth cost.
If the delivery of electronic messages can be completed by connecting two PCs directly without servers involved in between, and thus shifting the storage and bandwidth cost to the sender and receiver, then the financial burden of communication service providers may become lower.
Instant messaging (IM) software like QQ, MSN Messenger is such kind of service, the provider of which is only responsible for connecting the communicating parties. After the connection is established, all messages are transmitted from one individual user to another, with no server involved.
[+] The low operational cost of P2P model
In fact, IM software has partly replaced email tools. As those we contact frequently are mostly acquaintances or partners at work, IM is more convenient and responsive. Many times we choose IM, instead of emails, to communicate with others.
Users of these communication tools users may not be aware of the technology involved, but for communication service providers, P2P is more cost efficient than Client-Server architecture.
Though the use of these tools has nothing to do with Web, but the emphasis on peer-to-peer (C2C) rather than client-server (B2C) communication is in accord with Web 2.0. In fact, let's keep in mind the true meaning of Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
Finally, the new generation IM service provider has brought a radical and unprecedented change to the application of P2P technology: the arrival of Skype is the consequence of P2P architecture introduced to the Internet telephony service which used to be dominated by client-server technology.
[+] Revolution can not succeed by mimicking your competitor
In the case of traditional telephone service, a call is initiated by a caller, who dials a number, and switched by a telecom operator, which sets up the connection with the receiver; the switch continues to take care of the transmission of the conversation that follows. Every word you say will first enter the telecom operator's switch then be forwarded to the receiver - what we see here is a client-server relationship.
Telecom operator thus needs to invest in costly equipment to provide such service. As the subscriber base continues to swell, the investment will grow in a relatively linear manner. Operators are constantly driven and by the demand for bandwidth by new subscribers - this difficulty is intrinsic to the client-server technology.
Internet phone emerged ten years ago when the operators were thinking about lowering their cost by providing voice communication service via the IP technology. Yet their thinking was still centered on a client-server approach: users purchased an Internet phone set and had it installed at home; users' conversation was still transmitted through operators' switch.
Such way of thinking is no different than that of the traditional operators and has kept the cost of bandwidth and equipment high for Internet phone service providers. To compete with operators they have to set their rates lower in order to attract subscribers, which has capped the growth in their revenue. That is why the Internet phone business remains lukewarm for these years.
Obviously, it is a naive idea to try to compete with traditional telecom operators by mimicking their business model. The telecom market is characterized by severe barriers to new entrants because of the huge investment needed in building up the client-server type telecom infrastructure. To challenge telecom giants, the only way is to come up with a new business model.
[+] The achievement of Skype: challenging the cost structure
Skype, as an IM tool, didn't bring too much surprise to the world at its debut, but it did leave good impression to users by its good sound quality. Its focus on providing Internet phone service was a refreshing approach.
When users using Skype, all communication data is transmitted directly to and from the both parties without any Skype server in between. This P2P model enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.。
This is what really upsets the telecom operators. Telecom operators are not particularly concerned about of potential competitors with deeper pockets as long as the market barrier remains high. Now even small companies can join the business, which has shaken the fundamentals of the industry.
Why Skype's Internet phone model didn't show up ten years ago? As a matter of fact, the broadband service was costly and not very popular then. But now people can enjoy the benefits of high-speed access with relatively less money, so that it is possible now for Skype to shift the bandwidth cost to users themselves with the help of P2P technology.
When the Internet phone service will succeed in revolutionizing the telecom industry? It is when users are able to benefit from higher bandwidth with even less money. At the initial stage, the high perpetration of ADSL and Cable broadband service has paved the way for the scene, now we are expecting FTTB (Fiber to the Building) with stronger broadband capabilities to drive the progress.
In terms of wireless communication, we've already seen 3G on the stage, and we have high hopes for WiMax which promises even high bandwidth. It may take five to ten years to see the results of these developments. Yet we should always keep in mind the big question: what would happen to the world when people can get ten times the bandwidth at the same price they are paying now?
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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
When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses.
[+] Online job sites has taken the place of newspaper job advertisements
There are two major sources of classified revenue for traditional newspapers: one is job advertisements, and the other is real estate advertisements. Both have been encroached by the Internet during the Web 1.0 period. Online job sites, which has grasped a significant share of job advertisements from newspapers, has managed to reap profits very soon and has become a model.
Long time ago, a job seeker needed to buy newspapers, and those companies in search for employees could only afford to post job advertisements on newspapers for usually several days. It took some luck to find a good job or a good employee. In other words, the cost for both parties to find their counterpart was relatively high.
Newspaper as media could charge higher for advertisements since they monopolize the channel for both parties to access information. Yet the emergence of online job sites has changed the phenomenon of information asymmetry. Companies looking for talents need only to pay a relatively small fee to post job advertisements even for months.
Through the automatic matching service by the system, a large number of CVs will be sent to you everyday for your screening. For job seekers, they can get the employment information from many companies. The cost to match jobs seekers and talent seekers used to be high, but the low matching cost on the Internet has changed this.
In the Web 1.0 period, we first tasted the cost-saving benefits brought forth by the Internet. Old intermediaries have been replaced with new ones coming onto the stage. The key behind this is that new intermediaries can provide more efficient matching service with a lower cost. And the information is liberated completely.
[+] Head hunters still good in business
Yet, after ten years of development, online job sites still can't make any breakthrough in one area - the market for middle and senior positions. Generally, companies will seek the assistance of online job sites when looking for basic level employees; but if they want to find suitable people for a position like vice president, online job sites are not their preferred channel.
For job seekers above a certain age or senior position, it is practically impossible to find a job through online job sites. This is because the market for senior positions has the following characteristics: First, senior level people don't like to be exposed, and they do mind their CVs being browsed freely by some companies.
Second, Companies too don't like to expose the information about their recruiting middle and senior level people, because competitors may detect their future developments. Third, as both sides are very cautious, recruitment for senior positions is often done through acquaintances.
So far online job sites can only address to the demand for basic level positions. Some online job sites have moved up to the segment of middle positions (like senior managers or experts with good salaries), yet they haven't posed a threat to head hunters that have been dominating this segment.
Based on the above characteristics, it may cost companies big money to find people for middle or senior positions. A head hunter may charge a company as much as several times the monthly pay of the talent it helps recruit as reward. This handsome reward comes from another form of information monopoly and is pretty.
[+] Personal references instead of head hunters
Companies are prepared to pay a good deal for recruiting people for middle and senior positions. Yet when the cost of storage and bandwidth continues to drop so as to enable the staging of Web 2.0, head hunters will start to be affected. Let's never forget about what really means by Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
We have seen such a service launched by online job sites: users are encouraged to refer candidates for a specific middle or senior positions and will be rewarded for successful reference. Some social networking websites have launched trial runs of similar service. They also offered rewards for successful reference.
Instead of paying handsome money to head hunters, now companies need only to give away a reward of about one tenth the money for recruiting people. Everyone has her or his own network; to get the reward or to introduce good jobs to friends, s/he will refer suitable candidates naturally.
The reason why this model can work is that "the cost of interpersonal communication continues to fall," so it will cost less to find the people through people than through head hunters! As I have mentioned earlier, the arrival of Web 2.0 will force many B2C companies to be conquered by C2C.
[+] New business models and new intermediaries
As we have just entered the period of Web 2.0, it is still not clear whether the above models can work or not. The trend is clear, but there may be many ways to implement an idea. Yet it can be expected that middle level positions will be the first to be affected, and senior positions above the level of vice president will still be dominated by head hunters.
The most critical factor is the quality of people referred through social networking websites. Head hunters as intermediaries are responsible mainly for quality assurance as so to save the time of both parties - this is the value of their existence.
For online job sites or social networking websites, if they want to play a role in the middle level manpower market via their offering of C2C social networking service, they will have to work on the above mentioned details and ensure the quality of the talents recommended via this channel, so that companies will not have to cope with a large number of unqualified applicants coming through these websites.
Furthermore, online job sites or social networking websites may establish upstream/downstream relations with conventional head hunters in a supply chain. In other words, these websites will not directly charge companies seeking talents, but they can charge head hunters for offering a talent pool. Head hunters may do a preliminary screening and provide a shortlist to companies in need.
Head hunter can spare a part of their rewards earned for successful matching from the company, the talent seeker, to these online job sites. This business method is taking place in the current transition period. It may become a workable business model. But in the long run, this will surely have impact on the business of head hunters.
[+] Web 2.0: it's all about cost
Most people, when looking at Web 2.0, are dazzled by many fancy terms, among which social networking websites and classifieds websites are two most popular categories. The former attempts to practice the so-called Six Degrees of Separation, which is to allow any people to meet other people on the Internet and thus to expand their social networks.
The question is, how can social networking websites generate revenues once they succeed in helping people know each other? One critical factor behind the scene is: "the cost of personal communication keeps dropping." So it is a lot less costly to find a certain type of people through social networks of people.
Recently in the U.S. there comes a kind of loan websites which are to help people borrow money from other people instead of acquaintances or banks. Rules are set up to ensure the quality of both parties and to lower the risks of lending money to strangers. Imagine how high the cost would be to find a reliable stranger and borrow him money when such service is not available?
In fact, there are quite a few loan brokers who help people borrow money from banks and charge commission from loan takers for successful cases. If there is a website that can help matching individual loan borrowers and lenders at a lower cost, this will definitely affect the business of brokers.
Thanks to the falling cost of computer storage and network bandwidth, the cost of personal communication continues to decline as well. When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses. This is the approach to take what we think about Web 2.0.
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Prev : The Web 2.0 Revolution (6) Struggle of the Press Industry Next : The Web 2.0 Revolution (8) Transformation of the Telecom Industry
- Today in History
The Web 2.0 Revolution (7) Death of the Intermediaries - 2006/10/15
Another Picture of Digital Home Market - 2005/10/16
Corporate Website a Handful (3) Strategic Alliance Why? - 2003/10/12
All discussions about Web 2.0 should be centered around the axis of the question: what will happen when person-to-person connection and transaction cost continues to drop?
[+] Always have a critical mind about the Internet
I have always felt that it is more or less a pity that people nowadays are unfamiliar with the train of thought and experience developed during the evolution of the Internet. The Internet has become a "fact", yet there are quite a lot of people who have no idea why it has become what it is today.
During these ten years, we have experimented various kinds of seemingly wild ideas, and we have experienced moments of excitement and confusion. These thoughts have been scattered in every article of mine completed all these years. After a good deal of contemplation and numerous trials, we have finally come to realize what is feasible and what is not.
I had a plan to organize this collection of thoughts and publish it under the name of "the ABC's of the Internet". Yet after having a look at the guidelines just put together, I am surprised to find that much of the stuff is being challenged by the new developments of the Internet and is very likely to be over-written.
Web 2.0, this very popular word, is not as simple or confusing as what is portrayed in the media. Only those who have experienced the intense exchanges and experiments of ideas in the days of Web 1.0 are able to understand that Web 2.0 is really a silent revolution.
For terms such as Blogs , Social Networking Service, participation economy and others, there should be a more straightforward rationale behind. In front of the Internet, the vast crystallization of the wisdom and ideas of the mankind, we should always have a critical mind with devoutness.
[+] The declining cost of storage and bandwidth
There is only one root cause of the Internet revolution - the declining cost of computer storage and network bandwidth. In the social context, it would mean "the declining cost of the interpersonal connection or communication"; in the business context, it is "the disintegration of corporations which thrive on the monopoly of information and of capital".
In the era of Web 1.0, the shrinking cost of online publishing had resulted in drastic changes in the media and publishing industries. However, as the cost was not low enough, we had not seen in other industries such revolutionary changes centered around the idea of common participation.。
How low can the cost go? It is not easy to show with real statistics. Yet I have the impression that in 1999, SINA, a Chinese portal, launched its free email service offering "huge" storage of 50MB. Considering that at that time the storage of a hotmail account was merely 2 MB, it was 'huge" undoubtedly because SINA even bought TV commercials to publicize it.
But now you can easily apply a free email account with 2GB storage, which is 1000 times as big as that of a Hotmail account in 1999. In other words, the storage cost now is one thousandth of that in 1999.
And it means more than just the decline of the storage cost. With the increasing mailbox capacity, users have started to send emails attached with big files. It has led to the growing traffic or growing bandwidth consumption, or more practically growing cost to the email service providers. The providers today are able to afford such cost, meaning there has been staggering reduction in the bandwidth cost during this decade.
[+] Web 1.0: reduction of cost has impacted traditional B2C businesses
In 1999, free online hard-disk services were quite popular for some time. Users can upload files to the host machine for free. After the bust of the Internet bubble, these all turned to be paying services, and Xdrive, an renowned U.S. Service provider, is one of these providers.
Yet today you can get 5 GB storage with a monthly fee of USD5 or so, and 1GB storage can cost you nothing. Due to fierce competition, Xdrive is now planning to offer 5GB storage for free, to be launched this September.
By raising these examples I am not intending to explore the competition in and development of the business of free email or online hard-disk services. Rather, I am trying to point out how low the cost of storage and bandwidth has gone in these ten years. What can really stun us is the changes of the industries driven by the reduced cost the bandwidth and storage.
In the Web 1.0 era, we saw the rising of Internet media, which later developed into portals; this had impacted on the traditional capital intensive and seriously concentrated media industry. Also there was the emergence of online job sites, which greatly reduced the employment/recruitment cost and impacted on the related industries.
The shrinking of cost has triggered significant changes in the above mentioned B2C business models. While the cost continues to drop, the B2Cs are either encroached or even replaced by C2Cs. Some businesses are dying away, and some are forced to move upstream.
[+] Web 2.0: cost continues to drop, and C2Cs are impacting B2Cs
C2C business models are not a new idea. Person-to-person trading or payment service such as eBay and PayPal in the U.S. has been there for years. Online classified advertisement website Craigslist is seen as a good model for Web 2.0 participation economy, yet it came into being long before the appearance of the term Web 2.0.
In the U.S. there are now some websites providing a platform for person-to-person loans. Normally people will only lend money to reliable acquaintance, because the cost to find a reliable stranger is too high. Now the cost to identify a reliable stranger has dropped to such a low level, so guess which traditional industries will get shocked?
From 1.0 to 2.0, the revolution is a gradual one, because the cost of storage and bandwidth is not plunging overnight but declining step by step. There must be quite a few websites or business models with the label of 2.0, but actually they have been there since the days of 1.0. They just become more outstanding in the time of 2.0 when the cost has gone a lot lower.
So all discussions about Web 2.0 should be centered around the axis of the question: what will happen when person-to-person connection and transaction cost continues to drop? If in the future there comes the so-called Web 3.0, just think what kind of revolution there can be with the cost approaching to zero.
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Prev : New Era of Online Advertising (3) toward Decentralization Next : The Web 2.0 Revolution (2) the Emergence of New Media
- Today in History
The Web 2.0 Revolution (2) the Emergence of New Media - 2006/08/27
The Web 2.0 Revolution (1) the Root Cause is Cost - 2006/08/20
Envisioning China's 3G Market (1) 3G Will Not Increase ARPU - 2005/08/28
PDA in Siege (2) Bottlenecks of the Smart Phone - 2004/08/22
