21 posts tagged “ecommerce”
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
The Internet in the future will become a place for group therapy.
[+] Emotional products in the physical world
There are many ways to sell "happiness." One is to write a book on "happiness" (hedonics), turn it into some kind of study and sell it in bookstores. Or, you can package it in a mineral water advertisement and represent the bottle of water as an indispensable thing when families and friends get together happily.
In a fiercely competitive car market, a car dealer seeks to boost sales by presenting its car as "the only car that equipped happiness." In a trendy sitcom, the leading actor would win the heart of thousands of female audience by calling," I swear I'll bring you happiness."
This is the power of "emotional products," Marketing experts in the traditional business world have long noticed that the key to a consumer's purchasing decision, sometimes, is not the function or price of the product, but something that can trigger certain memory or emotion deep inside the mind of a consumer.
For those who buy the book/mineral water/car/trendy sitcom DVD, do they then live happily ever after? No. More precisely, their feeling of happiness reaches completion right at the moment of consumption. Emotional products that cannot achieve such effect would definitely fail.
Certainly you can say that emotions are added value to the above mentioned products; they are not the products themselves. Yet after ten years of development of the Internet, we begin to see that "emotion" per se can become a product and has the potential to change the look of the business world.
Yes, the dawn of emotion economics is upon us. In the past, "It" is the added value of some products; now "It" will become a product and will revel "Its" value through the form of Web 2.0. Strong emotions will become a kind of belief, so the reference for emotion economics will be religion.
[+] Internet from physical to spiritual
I sort out the characteristics of traditional Internet, Web 2.0, and Web 2.0 Next in the following chart. Simply put, the mission of the Internet will evolve from "carrying information" to "carrying emotion."
From eCommerce to emotion-centric websites, ordered from left to right of the chart above, we can see that during these 10 years, the Internet has evolved from more physical to more virtual and from material to spiritual.
Though eCommerce is an important business of the Internet, 70% of the operation, such as warehousing, logistics and payment processing, is done in the offline world in a way similar to that of mail order or brick-and-mortar retail stores.
Information processing is a critical issue in Web 1.0. The lessening of the problem of product information asymmetry has led to the emergence of eCommerce. Users can compare prices online with just a click, and they can easily find product information or even other people's experience of the product before making purchasing decisions.
Web 1.0 media have moved a lot of content online and even produce their own in order to reduce the cost of acquiring information. Too much information however creates the problem of overload. Then there is the search engine that provides precision to help filter undesired information.
In this phase, the trait of the Internet as a "tool" is very obvious. People use the Internet to make their life more convenient, with a focus on how to "improve efficiency." As a result, many traditional business models are gradually replaced by the Internet for better efficiency.
[+] Web 2.0 Next: the emergence of "emotion centric websites"
Blog ushers in the era of Web 2.0, empowered people to publish their own work - the so-called "individual publishing" - for the first time. There is no problem for us to download information anymore; now it's time for us to upload and express our voice.
Such characteristic then starts to push Blog to the way of Social Networking. People of similar interests and tastes are gathered and get to know each other through well-designed guidance. Content on Blogs only provide an excuse for people to start a talk.
Well, the kind of blogs mentioned above are only those that are focused on content sharing. The number of bloggers is increasing, and it is impossible that every one of them is good at writing or photography. As a result, a lot of bloggers are just letting off their feelings of these days. Normally there are only a few words on the Blogs.
Yes it's about emotions. So what to do next is to lead the people who have similar or opposite emotions to get gather and allow their emotions to vent and thus reach completion through some kinds of rituals or activities.
Just like the one who buys "the only car that equipped happiness" - his desire for a happy family reaches completion at the moment when he pays for it. It is easier for us on the Internet than in the physical world.
What kinds of (good and bad) emotions and desires do people have? They may include:
- Hope. (It's said that among all living beings, only humans will have hopes.)
- Happiness. (Longing and expectation for happiness that one lacks or desires.)
- Hatred. (To smooth it away through some kind of ritual.)
- To be loved, cared and blessed (and thus gain strength).
- To know if there are other people in the world who have similar weird thoughts or particular experience or so on.
- To enjoy solitude (while keep in touch with the world!)
- To fulfill the desire and enjoy the excitement to peep and to be peeped.
- To satisfy the sense of vanity or accomplishment (or to find motivation to catch up) through comparing with others.
- To do good and help others (everyone wants to do a little good as long as s/he has a chance.)
- A secret whim to "kuso" or to do non-sense reckless doings (and enjoy the pleasant sensation to break the rules and customs of the society).
- Greed (and jealousy and desire to monopolize that comes along.)
- Innocence and the desire to be like a kid. (This is why Little Prince is so popular.)
- The hobby to collect things (We are all more or less obsessed with collecting some things.) and fetishism.
- Hesitation when faced with choices and desire to pry into the future. (This is why fortune telling is so popular.)
- ...
The more subtleness of human nature you observe, the more you can grasp the essence and spirit of emotion economics. What will people get gather for, and what kind of emotion will they pay for its completion? Through creative packaging, the items listed above can be developed into interesting and colorful "emotion centric websites."
Simply put, the Internet in the future will become a place for group therapy.
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Prev : The Spirit of Web 2.0 New Media Lies in "Inter-personal Communication"
- Today in History
The Next Step for Web 2.0 (1) The Dawn of Emotion Economics - 2007/08/26
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
I see the light of hope: this could be used to have people subscribe to newsletter.
[+] Another way to replace email marketing
When email becomes a very unreliable communication tool, is there any effective way to distribute information besides RSS? Look into your daily life, are there any other common communication tools?
You may immediately think of Instant Messenger (IM). Yes, in this prospering Internet age, everyone has at least one IM open on his desktop. In some sense, the use of IM even has replaced email.
Just think, if you can inform your clients via MSN Messenger or Yahoo! Messenger as soon as your website has new products or new services to be released. It could be much more efficient than email or RSS.
For emails and RSS, they have to wait for people to receive them. However, if you send information through IM, a message box will pop up directly on the user's desktop. Normally, people will take a glance at the IM message that pops up while leaving email unread for a while.
In August 2006, when I was thinking hard about the alternative solution to the newsletter marketing, MSN Messenger came up to his mind very soon. Almost every white collar was using it, and the user group was pretty much the same with that of Digital Wall. I then started to look for a feasible plan.
[+] The possibility to use MSN Bot
The most awkward way is to register an MSN Messenger account and ask the newsletter subscriber to add this account into his MSN Messenger contact list. Each time the website is updated, messages with the URL of new articles will be sent to those readers.
But that will bring about several problems: 1) Obviously, the messenger contact list is going to be extremely long. I have over 140,000 readers. But what is the maximum number of contacts Microsoft allows? It is not possible there is no such a limit, isn't it? 2) It's never going to happen to send IM messages to readers manually! How much time will that costs! 3) If I send out thousands of notification messages to subscribers within a certain period of time, how could it be possible that Microsoft's servers would not block me as a spam message publisher?
Many people may know that such kind of IM has robots, so does MSN Messenger, which is called 'MSN Bot'. MSN Bot is actually a program-controlled account. You may chat with it after you add such account into your own MSN Messenger contact list.
Some MSN Bots have rich functions. For example, if you ask it an English word, it will give the translation in other language. And some other MSN Bots can do map searching, etc.
Microsoft also encourages the development of Bot. If you are interested, you can take a look at this interesting MSN Bot developing contest:
https://www.robotinvaders.com/main/Default.aspx
I see the light of hope: this could be used to have people subscribe to newsletter.
[+] Limitations by using MSN Bot
Website operators can release MSN Messenger accounts which are actually MSN Bot programs. Subscribers then add that kind of account to their MSN Messengers. Message publishing is accomplished by sending messages to everyone's IM by the program.
However, that solution is not perfect. Microsoft still blocks large amount of message publishing. Sending messages separately in separate hours may be a way to get around. However, problems still exist when the number of readers is huge, because it might be a week later when the last reader receives the message.
It then comes to my mind that, would logon notification work instead of IM message publishing? As we all know that MSN Messenger will give out notification when contacts log on. Therefore, as long as operators set up logon and logoff time schedules for the MSN Bot, subscribers will be notified automatically.
The effect is much worse than sending messages directly. Since Microsoft still has maximum limit on the number of contacts, this method is not suitable for the case of large number of subscribers. If those limitations could not be solved, this method will be restricted.
It is still possible to get around the limitations posted on the amount of MSN message publishing and the number of contacts. In fact, Microsoft has special authorized enterprises across the globe. As long as operators pay them for sending large number of messages, those limitations could be overcome. However, small websites need cheaper solutions.
[+] The twilight for IM marketing
Either developing MSN Bot or paying for sending messages is beyond the capability of ordinary website operators. At least the cost is much higher than the relatively low-cost email marketing. However, the situation is changed with the advent of Microsoft Windows Live Alerts.
This service is for the content subscription service through Windows Live Messenger (the former MSN Messenger). For example, the user will be informed by the Messenger when MSNBC news is updated.
Windows Live Alerts：http://alerts.live.com
Subscribers can set up time slots to keep from beiing disturbed by messages during work. They can also set messages to be forwarded automatically to their email boxes when they're offline. Finally, the role of IM has been shifted from a communication tool to a content publishing tool.
If you are a content provider, you can apply to become a Microsoft content publisher in order to be assigned a unique subscription URL. By simply clicking the URL, users will get into the subscription process and receive messages from you.
The instructions for how to become a content publisher can be found at: http://signup.alerts.live.com
This service is still on test. Therefore, all applications are sent to the U.S. headquarters. Processing one application needs a little time. It's not known yet whether there is any limit for the number of subscribers allowed for individual content providers.
[+] The Fourth Generation of Internet marketing: Rights in the users' hands
We can imagine that content subscription through IM will increase rapidly. We are more excited to see that Internet companies have opened such platform for website or Blog operators. IM will become the channel for the new generation of content aggregation and publishing.
If you run an eCommerce site, as long as people are willing to subscribe to your Windows Live Alerts, why not sending out discount information through this channel? Of course, it will become more competitive because every website runner can send messages to Internet users through it.
Internet marketing has evolved to its fourth generation with RSS and IM subscription as the major tools. We should keep in mind that from the first to the fourth generation, the power of choice has been gradually transferred to Internet users' hands, and that is an everlasting marketing law in the Internet age.
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Prev : The Fourth Generation of Internet Marketing (2) RSS Tracking Next : The Mist of 3G in China (1) 3G Makes No Profit
- Today in History
The Fourth Generation of Internet Marketing (3) IM Marketing - 2007/01/07
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
Compete against the leader with further customer segmentation in the crowded market.
[+] The income from the coummunication service nurtures a community
Today, online communication services mainly include the earliest services, such as email and instant messenger (e.g., QQ and MSN), and the follow-on VoIP messenger (e.g. Skype) and P2P file transmission (e.g. BitTorrent).
When we review the figure raised by me which shows the community profit model, we can see that, in addition to the advertisement, the communication service revenue is also a key component of the Web 2.0 profit model.
Some companies started their business with free communication services and made profits from community services later. For example, Tencent QQ, the number one instant messenger service provider in China, develops its business operation from the right circle of the above figure to the left one, while those who ran free community services at the beginning have to depend on communication services, for example, the wireless value added service like SMS to make a profit. In this case, their business moves form the left to the right of the above figure.
From communication to community, or the other way round, it seems that those are two conflicting concepts. As a matter of fact, there is no conflict at all. The key lies in the “heavy user” I mentioned in previous sections. Users of the community service must be the heavy users of the communication service.
[+] Iron rules for the profitability of the communication and community service
Most QQ users, as instant messenger service subscribers, do not want to pay. Yet those who are willing to do so are just in its communities. The purpose of QQ Show, a community service based on QQ subscribers, sells virtual items to those heavy users. In other words, the iron rule for the profitability of the Internet-based communication and community service is:
“A% of the users of the communication service (most of them use the service to communicate with acquaintances) use the community service (and are willing to communicate with strangers), while B% are willing to pay for a greater rights to show themselves, including buying the larger storage, virtual items and wireless value added service.”
For both the communication service (among acquaintances) and community service (among strangers), there is another possible profit model: VoIP. For services like QQ, the VoIP service call to a landline of mobile phone could prove to be a revenue source just like Skype, although the policy in China is still not clear at the present time.
For community services, the simplest profit model is making friends via VoIP service. It is a brand new field, where a lot of models could be tried. For example, eBay, which has merged Skype, is trying to introduce the VoIP service into its auction service. To make profits out of VoIP services will become an important trend for community services.
[+] Unshakable leadership of QQ
Compared with the community service market, where numerous Web 2.0 companies are involved in the fierce competition, the instant messaging service sector has another landscape: the leader is far too strong to be shaken. The following figure shows the market share of the leading instant messenger commonly used in China.
With its admirable achievements during the recent years, Tencent QQ has proved to be unshakable, leading MSN Messenger, even the nearest competitor, by miles. It is remarkable that China’s Internet market is still witnessing fast growth of the subscriber number; therefore QQ has far better ability to attract new users than its peers obviously.
It is a characteristic of the instant messenger. Most users will follow their friends or acquaintances to choose the same instant messenger, producing a “Member Gets Member" effect. Eventually, the strong gets stronger.
However, the so-called “friends and acquaintances” is only a relative term. An Internet user might get into an environment, for example, the office where all those around use MSN Messenger, instead of QQ. In fact, MSN has been a favorable tool for office workers. Maybe that could be an opportunity.
[+] Instant messenger for making friends
The following figure lists the purpose of using instant messenger. Notably, 83.8% of the users use the service to communicate with friends and family members, proving my statement that “the communication service is used mostly among acquaintances.” That turns out to be an unshakable advantage for QQ, as most of the acquaintances of a person are using it.
Then there are 61.6% of the users use the service for job-related communications, which is the base of MSN, as well as a field that Tencent is trying to infiltrate. Although the proportion of QQ-loving young students has been on the rise during the recent years, they will get a job sooner or later, and then they would switch to MSN. That is an intolerable loss for Tencent.
Surprisingly, as many as 42.3% of the users wish to make new friends, i.e., get to know strangers through instant messenger. Let us ask ourselves this: among the 10-plus instant messenger brands, which one has the most powerful ability to “enable users to make new friends fast”?
If the answer is still QQ, it would render QQ almost invincible! If the answer is not so definite, there might be room for those instant messenger which position themselves as a “powerful friends-making tool” in this market. Let us wait and see which one will be the best.
[+] Compete against market leader with new market positioning.
We should not forget what we have discussed at the very beginning of this series: there is still a growth room of 60 million subscribers expected in China’s Internet market, for which every Internet company is posed to take a bite. What, then, is the profile of that group? My simple answer is: female subscribers.
Male subscribers have been the dominating force of the Internet market in China. However, with the saturation of the market, the proportion of female users will rise. Companies that cater for the taste of female subscribers (who have particular preference for beautifulness, artistic conception and feeling) will be able to control the steering wheel in the next round of development.
The market positioning, be it “special for office”, “special for making friends” or “special for lady”, is just an attempt to compete against the market leader through re-segmentation. The previous problem with the instant messenger market is the over-similarity of the functional positioning of every brand, which leaves users little impulse to change their service providers.
Besides, we can see that 42% of the IM users use the service to save their phone tolls. Obviously, to save the long-distance phone call expense is a great enticement and great enough for IM venders to add in the VoIP functionality.
[+] A large user base could be the core competence.
When Microsoft starts to beef up its MSN Messenger in China and Google announces its strategy to stride into this market by relying on Google Talk, Tencent start from a IM service provider, is continuing along its path of diversification to dig deeper in the fields of online game, eCommerce and even portal website.
Maybe the question should be asked this way: “if you were Ma Huateng, the CEO of Tencent, held 400 million QQ users in your hand, what would you do? Would you just let them chat to death?” For me, the answer is self-evident. I do not think there is anything wrong with Tencent’s diversification.
In the contrary, as I have stressed repeatedly, community service users are heavy users. Please remember it! Thanks to that characteristics, QQ users have greater interests in shopping, are more deeply addicted to online games and show higher usage rates of other online services than general Internet users.
From another viewpoint, we can see that, it is because of its huge user base that Tencent has been able to surpass the original leaders in many fields in the shortest time possible. When QQ is no longer the synonym of the instant messenger alone, the leadership of Tecent will be extremely hard to shake.
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Prev : Predictions on China Internet Market (7) Web 2.0 Economy Next : New Era of Online Advertising (1) from Media to Channels
- Today in History
The Mist of 3G in China (4) The Way to Survival for SP - 2007/04/22
Predictions on China Internet Market (8) War of Instant Messenger - 2006/04/23
3G Time Comes (7) 3G Is Nothing to Do with WLAN - 2003/04/27
3G Time Comes (6) Phones Don't Need to Be Smart - 2003/04/20
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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- 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
Thinking on marketing strategies of industry players, start-ups and foreign competitors.
[+] The strategy for winning out in a saturated market
The Internet market in China is still fascinating today because it has not been possible to predict who will win and who will loose in the end. Currently, the first echelon has the control of subscribers and capital. However, the advent of the next 60 million subscribers will be the key to the final result.
In terms of marketing initiatives in a saturated market, companies usually have to face a dilemma: is it better to retain client contributing high value (i.e. digging deeper and increasing the revenue), or to continue to attract subscribers contributing lower value (i.e. expanding wider and increasing the subscriber number).
There's always the problem of limited resource. For example, if a dotcom possesses 10 dollars, it has to decide which end to lean to: the retention of existing subscribers or the acquisition of the new one? The decision will eventually shape the mode of its new services (or products).
Obviously, the existing players in the market have more or less benefited from the first round of Internet enclosure movement. Some have got high website traffic or large subscriber numbers, some high revenues, others, who might be lagging behind in both fields, but high profits. Each company has a different strategic mindset.
[+] Eventually, subscriber number is king.
The question is: what's next? In my opinion, eventually the subscriber number is king. This is the nature of the Internet. Without a sufficiently large subscriber base, there could be no maximum value to talk about. When an Internet company increases its subscriber number from 10 million to 20 million, it more than doubles its power.
Externally, the subscriber number will decide whether you enjoy a strong position or a weak one in time of forming strategic alliances. Those with a large subscriber number could even sit at home and receive proposals from others. Internally, as the Internet is an industry that connects people, a large subscriber number means more opportunities of contacting one another, which, in turn, brings additional revenues.
From the perspective of products and services, those with the largest subscriber numbers could always have a larger time window in introducing new value added services or products. They could easily surpass rivals so long as their services or products are equal to those of their rivals. In other words, a large subscriber base is the key to competition.
At the beginning of a saturation stage, I suggest that large Internet companies continue to focus their resources on attracting new subscribers. They are going to feel gradually that the growth of new subscriber number is slowing down and they will have to take care of old subscribers. However, the enclosure movement should not stop, otherwise they would regret for it in a few years.
[+] The formation of market segments
Another identity of a saturated market is the formation of market segments, which mean groups of special subscribers, but not subscriber minorities. In other words, a segment does not necessarily mean a small subscriber base. For example, the female market is a segment, but the subscriber number is not small at all.
Due to the restriction of resources, when a large Internet company tries to address the demands of most people, it is hardly able to cover subscribers with special demands, as it is always difficult to both dig deeper and expand wider. In such cases, new market room appears.
By focusing on subscribers with special demands, smaller or industrial portals may have the chance to survive. Sometimes segments turn into small subscriber bases, but with the massive size of the Internet market in China, most segments could have sufficient subscribers, which will be able to support the operation of Internet companies.
The situation will become more prominent with the surge of the eCommerce market, such as websites that provide shopping services exclusively to women, or offer luxury goods, or even interior decoration services. Players will be able to survive so long as they provide comprehensive and professional services for their respective segments.
[+] The last chance for overseas players
Thanks to its eye-opening size, China's Internet market, which has been in a high-speed growth stage in the past years, has attracted many international Internet giants. Through direct investment or M&A, those overseas players have been flooding into China. 2005 was a particularly busy year, which saw the entrance of Yahoo!, Microsoft, Google and Amazon.
By choosing to enter at the starting point of the saturation stage, those Internet giants at least smell what the last chance is for them. Those that are going to enter the market after 2006 will have to face extremely tough battles with players already in China.
In face of acquisition offers by overseas companies, some local players choose to accept and some to refuse (some even claim that they have purchased a foreign giant while in fact they are actually purchased by that giant). All those, to me, are reasonable. As the focal point for portals will be eCommerce in the next few years, Yahoo! China has made a right decision to merge with local player: alibaba.com.
As the most important element for eCommerce is the website traffic, it is a right for alibaba.com to choice to partner with a portal. Most importantly, one must have the support of resources to seize a share in the remaining 60 million Internet subscribers in China market. In this sense, a strong brand and a powerful financial stand will be the backing forces.
[+] The key is to respect local people and market
It was right, too, for the largest online shopping site in China, dangdang.com, to refuse the investment of Amazon. As I said years ago, eCommerce is Local Business. The fact is it proves hard for external rivals to shake the position of local Chinese eCommerce players.
As a shopping web site goes from the start-up stage to the saturation stage of Internet market in China, it has stronger footholds. Therefore, it would be unnecessary to introduce external capitals. On the other hand, there was nothing wrong for Eachnet to sell itself to eBay many years ago when it was still at the high-speed growth market stage . The problem is, with the money it got from the foreign capital, how much market is has enclosed? If it's too little, that would be a pity.
In general, foreign Internet companies need to respect local people and market. This has been proved by the Yahoo!'s success and eBay's failure in Japan and Taiwan. From the very beginning, both the general managers and management teams of eBay in those two regions were from the United States.
For me, it hardly makes sense that, instead of China, some U.S. companies choose Korea as the place to set up their Asian head offices. Some U.S. companies try to integrate local subscriber database in China into the global one after the merger with local Internet companies in order to centralized control in head quarter. The problem is, as there are more than sufficient local subscribers here in China to support the business, why bother to do the database integration? The only thing left is to bring troubles for their subscribers.
[+] Marketing strategies in the saturation stage
For companies that already have their subscriber bases, the most important strategy should be "acquiring new subscribers through existing ones", i.e., the frequently used Member-Get-Member marketing method, where old subscribers are rewarded for introducing in their friends. Such methods, when used properly, could multiply the subscriber number.
To Internet companies, that proves to be a faster and more comprehensive approach, as the network enables much faster dissemination than the offline channels do. In addition to marketing activities, it should be an element to be incorporated into the functionality design of web sites to enable Member-Get-Member effects.
The segment most suitable for this Member-Get-Member model is the community service, including instant messenger services (e.g. QQ), Blog, and Web 2.0 services (e.g. SNS). Other than Member-Get-Member, no other reasons could be persuasive enough for companies to introduce Web 2.0 services.
Each online service has its profound meaning to internet operators, who, among all things, shall refuse the enticement of fads. For any judgment, companies shall retake the standpoint of "which market stage I am standing at right now? Is the introduction of this service helpful to the acquiring/retaining of subscribers at this stage? "
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- Today in History
Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05
Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06
Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07
3G Time Comes (1) What Is 3G? - 2003/03/09
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
Be it physical or virtual, well-known writers lukewarm to online publishing.
[+] A controversial digital library project
At the end of 2004, emerging online company Google planned to scan book collections in New York public library as well as libraries at four universities - Harvard, Stanford, Michigan in the U.S. and Oxford in England - and indexed the material for online search. The Google Print project immediately caused a stir.
By stir it means that competitors (e.g. Microsoft) followed suit at once, and copyrighters rallied against what they thought massive copyright infringement with the Authors Guild and the Association of Authors Representatives in the U.S. raising an action respectively against Google.
Amid waves of criticism, Google announced that it would suspend the digitization of copyrighted books and would like to hear publishers' opinions and find out which books to be excluded from the digitization project. On the other hand, Microsoft sought to pace up and overtake Google in similar plans.
Libraries are the hubs of human knowledge and wisdom. Domestic or abroad, we have been seen destructive attempts in wars to burn book collections, which distressfully cause cultural faults. The digitization of libraries not only makes preservation easier, but facilitates the distribution of ideas.
If it is a right thing to do, it is to our common interest, and the competitors exclaimed, "Why we never thought of this before? Now let's follow suit," it is strange that the project did not get on well. Behind the scene it's actually a struggle of an industry.
[+] Selling books as a stepping stone to e-commerce
The development of the Internet has been tangled with words like "books" and "publication". First it was Amazon which initiated the fashion of online bookstores, and no sooner we'd seen successful eCommerce, starting as e-bookstores, emerge from the world over. (And those successful ones began to expand their selling lists with no surprise.)
Why can selling book be a stepping stone to eCommerce? Firstly, there is the demand from consumers. Secondly, the low unit price of books helps to lower the entry barrier to online shopping for consumers. In addition, there is little risk of damage caused by crashing during the shipping of books, and loose requirement for timeliness. All these conditions make it an ideal product for online shopping in its early stage.
For hardcopy books sold online, there is always an issue of delivery of physical goods, which is contradictory to the virtuality of the Internet. The margins for books are already thin, and profits are further eaten away by logistics cost. This is causing headaches for these online businesses. That's why we saw an upsurge for eBooks in around 2000.
In March 2000, the famous US horror writer Stephen King released his new novel on major online bookstores. This 66 paged short novel was priced as low as USD 2.5 and available in electronic version only. No paper books. This new release by the horror master had triggered a rush among fans.
For the sake of copyright protection, this book can only be read via specific software GlassBook. Even with the restriction, still there were a total of 400 thousand books sold on Amazon within 24 hours after its release. Afterwards, however, Stephen King publicly expressed his disappointment over the development of eBooks and declared that he would never publish any book in electronic version.
[+] The dilemma between virtual and physical publication
We may not be able to perceive the discontent of the horror master, but we can surely imagine what it means for a ordinary person like you and me to sell a volume of 400 thousand books online - this would very much equal to a reputation as a "popular online writer" and a royalty of USD100 thousand (estimated as 10% of the sales).
Yet this is exactly where the problem lies. Had Stephen King not been famous in the physical publishing world, there wouldn't be any interest in his eBooks. EBooks have long been a must on the sales list of online bookstores, yet you can hardly find a book by well-known writers on the list.
For if it is a book by a renowned author, you would rather pay for a hardcopy for its better reading experience. (It goes without saying that a computer monitor is not an ideal reading interface, which proves to be the hardest obstacle to the expansion of eBooks.)
And there is another trend that goes the other way around. In 1999, "Slicker Tsai", a writer, vaulted into prominence across the Taiwan Strait for his online novel "The First Intimate Touch," which had stimulated the birth of a new breed of online writers. So it seems likely to first grow publicity by writing free novels online and then to reap profits through selling paper books.
Across the Strait, we've also seen many websites for literary online communities, such as Yoshow.com in Taiwan and rongshuxia.com in China. But you can't trade articles for money in the virtual world. At the end of the day, you can only make money through the business of traditional publishing. All this must have made many business owners very exhausted.
[+] The old system encroached, the new one yet to be seen
It is no easy task to nurture a well-known online writer to the extent that her/his fame can be transformed into profits in the physical publishing world. For an article that has been posted all over the Net, it is questionable how much one would be willing to pay for it. And for writers that make a name for them on the Net, most of them will choose to turn to the physical publishing business for good.
From Google's digital library project to online publishing, my purpose is trying to point out that, while it is inevitable to go digital in terms of the distribution of books, there is a growing concern of publishers and authors that their rights will be sacrificed because they haven't seen any sustainable new business model.
Actually it is a common plague for all forms of digital content: Old rights are being encroached, while new income is far from a sure thing; only it's more so for music and movies and less for literary works. Yet, such phenomenon is expected to become more common with digitalization tools getting more popular.
Google's digital library project attempts to generate revenues by selling keyword advertisements. It seems to suggest that, to some extent, rights are always associated with money. If authors can be benefited from Googles' advertisement sales, will they become less resistant?
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- 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
Competition in eCommerce will emerge from endless price warfare and head back to brand name cultivation.
[+] There will always be a lower price
Some while ago, on the occasion of a speech, I acquainted myself with an Internet start-up mom, who got her business up and running by auctioning maternity dresses on the Internet. She has got herself a reputation for good service and is doing just fine. Now this Madam Entrepreneurial is on route to operating a website that she can call her own.
In the world of online start-ups, this route, in fact, is a well-treaded one. Naturally, most would start with very little capital. After all, that's the beauty of Internet-based business. Business owners get to operate on a stripped-down platform to get access to a large number web surfer. That's how it goes. They start trading on the Net first using whatever platform already there and then picture having one of their own online store in the wake of some success.
Interestingly enough, maternity apparel as a product is not required either in large quantities or on a long-term basis. That is, she gets to do business with each of her clients during pregnancy only. The fact that each client has a business life expectancy of only 10 months gives her a hard time holding out as she is in constant need to locate new clients.
Besides, selling via e-Bay and the likes used to incur less cost as sellers could choose to sell their products one at a time, meaning they can back out anytime they want. Things get a bit tricky when one runs his or her own online store website as there is an underlying commitment for perennial operations. (Read: more choices provided, faster delivery, and higher inventory cost).
As if it's not bad enough, going it alone also means having to fend off price competition from new individuals conducting online auctions, to the surprise of many who have chosen marketing on the Net exactly having stripped-down cost and flexibility in operations in mind, just like this friend of mine before. It's a story of rags-to-riches turning against rags. Ironic, isn't it?
What happened to this friend of mine epitomizes what the eCommerce is like right now. The fact of life is that once on the Internet, nobody, be it large-scale online stores or small-fry auctioneers, can even get close to shaking price competition off their backs. Is eCommerce doomed? One can't help but wonder.
[+] Online shopping means low tag prices
Marketing people specialize in making simple things complicated unnecessarily so that they can squeeze more values out of a product. Dishonest as it may seem, it's what marketers must do to steer clear of price competition. If what's left of competition is pricing, what worth is of marketing professionals?
In the world of tangibles, pricing is less of a problem for shop owners as it's way too much trouble for consumers to even want to go store to store, aisle to aisle, or even rack to rack checking prices. That simply is not going to happen.
But that happens on the Internet as even those seeking to get a car can afford the time to go through the specs of all the cars within budget on the market before making the trip to local dealership or showroom for the actual buying. It makes a lot more sense time-wise.
When consumers can easily find something in all online shops, price becomes the only thing that makes a difference. In this day and age, loyalty is in near inexistence. The only thing you can count on is price, and that does not draw a smile from virtual shop owners.
Over time, shopping on the Net has become synonymous with shopping at bargains. That explains why one can hardly find any LV, Gucci, you name it, on the Net, since these brand names do not even go on sales much, not to mention debase themselves by rubbing elbows with cheap knockoffs on the Internet. They have brand name values to protect after all (They have got a lot to lose brand-wise).
Luxury items (garment, handbags, shoulder bags) are highly sought after on auction websites, but they are in extremely small quantity as marketers can scrape together only so many (or little, to be exact), and they are swept off by buyers the minute they appear on the Net for, again, lower prices than in the brick-and-mortars.
The truth is we have never seen producers/distributors of any of these elite brand names bother to supply to eCommerce runners. There is nothing you can click on to buy stuff s on their official sites. This is how much these elite vendors distrust the Internet.
[+] Say goodbye to price competition
For those who run small eCommerce businesses, steering clear of price war on the Net is easy, at least in theory. The key term is product differentiation. As long as your product is different, your price can be different. Period. The problem is it's hard to get something that different to sell on the Net. When you do, competitors imitate as soon as they can.
That leaves one with the sole choice of creating one's own brand. Many have been able to do so and build a reputation for which people come back to shop again. What's better, having one's own brand name means you get to name your own prices.
This strategy worked for another friend of mine, who started up a business on the Internet four years ago, when he chose to create a new aromatic essence oil brand name in stead of representing foreign ones. In just two short years, he was able to establish an unchasable lead ahead of peers.
For prestigious fashion brand names who take a dim view of Internet sales in the form of either fear or contempt, there is a way out. That is, there are answers to one's fear of what selling on the Net could do to harm channel prices, brand name values or outlet sales.
I suggest setting up a brand new sub-brand especially for the operations on the Internet. These products shall only be accessible on the Net, and yes, they should be cheaper to meet web shoppers' expectations. If anything else, they should take on a younger look to appeal to the supposedly young web-surfing generations.
All marketing activities boil down to brand names. It's just that simple. With a convincing brand name, you can thrust one type of shampoos down consumers' throats at a higher price than most and they won't even make a sound. That how magical brand names can be, and there is no reason why they won't work on the Net.
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- Today in History
The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08
It All Boils Down to Brand Names - 2005/10/09
Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02
Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03
Corporate Website a Handful (2) Division of Labor How? - 2003/10/05
