32 posts tagged “game”
Users become more dependent on them for their central data storage.
[+] An ignored project of opening user profiles
A few days before the 512 earthquake in Sichuang, China, MySpace announced its plan of MySpace Data Availability, which was to open its users' profiles. A few days later, Facebook follow suit by launching Facebook Connect. The two companies, after the phase of opening their platforms for one year, have entered a new stage of open user profiles. Their plans were supposed to arouse extensive attention, yet they didn't draw too much attention of the press because it was overwhelmed by earthquake news.
What is open user profile? It is about allowing users the freedom to carry their social network profiles to other websites. One simple example: you can post your photo from your MySpace album on your Yahoo Messenger. Users are able to do so if Yahoo Messenger links to MySpace platform.
Such openness breaks the barriers between websites even further. As far as small- and medium-sized websites are concerned, open platform is about social network websites inviting them in to develop applications, while open user profile is about opening user profiles for them to do applications from the outside. The former is a centralized system with a social network website at its core, and the latter concerns exchange among websites on relatively equal terms.
What has been opened includes not only user registration data (e.g. names and addresses), blogs and photos but also users' friend lists - so that you can see if your MySpace friends log on the same website. Users can carry not only static data but also living relationships. The Internet has got to a point where the rules of the game have been constantly overwritten.
[+] Why open user profile?
Some people may think that these social network websites must have gone crazy to unconditionally open millions of their user profiles, and most important of all, the social network of users, they have accumulated for years. It is within users' discretion if they want their profiles open and to be accessed from other websites, yet should social network websites allow their users such an option that makes their user profiles available to other websites?
From the viewpoint of users, many of them have been fed up with filling personal registration data repeatedly. Web 2.0 websites in particular would ask you to provide loads of information of interests, hobbies and things, upload photos and most annoyingly, set up friend lists and invite your friends to join. Users may think: why can't I just use my MySpace friend list?
To streamline user registration process, small- and medium-sized Web 2.0 websites even encourage you to use the same ID you use to log on bigger websites. They, on one hand, access big social network websites' open platforms and develop small widgets to be embedded in big websites; on the other hand, they link to these social network websites' open profile plans so that users can carry their profiles with them.
It looks like small- and medium-sized Web 2.0 websites are getting more dependent on big social network websites. Indeed, the trend of opening up - both the platform and user profiles - has been pushing smaller Web 2.0 websites to lean on bigger social network websites. Smaller websites will find it harder to survive and get more attached to large social network websites which control the valuable and critical asset of user profiles.
[+] Demand for central storage of personal data
So, don't social network websites worry about small- and medium-sized websites stealing the data? Firstly, Westerners have high respect to users' privacy and it is a serious issue to access personal data without the owner's permission. Yet, even if the small- and medium-sized websites don't steal but just access and use the data normally, users may at the end turn to stick to them instead of the social network websites where they are from. Are these big websites not concerned?
The core of social network websites has been users' profiles and social relationships. Look at the illustration below that shows the four layers of the concept of social network websites. We can say that it is feasible for website operators to have third parties develop applications for them as long as they have good control of the core. As a matter of fact, users prefer to store their data in one single place, so social network websites will be taking up the role of data centers.
Imagine there is one place on the Internet where it is safe for you to store all your personal data. You can user your own discretion to access this data from other websites to save the effort to repeatedly fill in the same data, and when you move house, you only need to change your contact address once at this once place and the data at other websites will be automatically updated. Such convenience is beyond understanding in the Web 1.0 era.
No small- and medium-sized websites will be able to steal user profiles from big social network websites, and the significance of social network websites will not be reduced whatsoever. In fact, as social network websites are opening their user profiles to more other websites, their users become more dependent on them for their central data storage. The more you open, the better chance you have in the competition - this is the true meaning of online openness.
At the same time, what problems there will be when social network websites are becoming a personal data platform?
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Prev : Openness, where is it going to take us? (3)
Next : Openness, where is it going to take us? (5)
- Today in History
Openness, where is it going to take us? (4) - 2008/11/30
How Did Tablet PC End up in Failure - 2003/11/30
After open platform comes the matter of profit share.
It is predictable that the open platform would change the existing dynamics of the industry. For example, we have seen many third parties developing applications for the social network websites in China - 51.com and Xiaonei. They can of course do the same thing for bigger players like Baidou or qq.com if they decided to open their platforms. Yet, is it possible that 51.com and Xiaonei develop applications imbedded in Baidou and qq.com?
Moreover, what if 51.com and Xiaonei develop applications to be imbedded in each other's websites? In that case, which is the big brother, and which is the little one? The relationship will become so complicated that in the end there will surely be many tangible and intangible clauses and terms made to prevent competitors from cutting ground by using imbedded applications. However, as far as social network service providers are concerned, to what extent should they open their platforms?
Some social network websites make it clear in their contracts with third party developers that applications in specific areas (such as recruitment and travel services) are not to be opened because the big brothers want to do it themselves, now or later. These areas are not supposed to be touched by little ones. Such cherry picking mindset is rather paradoxical - can this be called open?
In fact, social network websites need not to be afraid of opening themselves, as long as they get a good hold of their core value. The internet was born to be open, and online service providers should embrace this reality. They should open themselves except for their core. Yet, eventually what is the core value of social network?
[+] Only the core that should not be opened
From the surface, the tangible products of social network services are blogs, photo upload, friend lists and so on. Yet we should know clearly that the value of social network underneath these products lies in two parts - data storage and social relationship. The former is users' tangible asset and the latter the intangible.
A social network website's user may store blog articles s/he has been working for threes years and photos for one year at the website. Guess if s/he would run away from that website? Many people see the glamorous part of social network service providers but hardly their efforts in providing basic data storage functions. To be a platform operator or a big brother in social network services, data storage is the basic work, which needs to be under full control.
In addition to basic data storage, the intangible asset of users' social relationship needs to be taken good care too. The key for social network services to become sticky and irresistible for users lies in interpersonal interaction, which allows users to know what their friends are doing online easily. As long as social network service operators have god hold of users' social relationship, they don't need to be afraid of opening up.
In other words, it is OK to have third parties to develop applications except in areas involved in basic data storage or in ways intended to steal or transfer user's social relationship. This can be compared with the opening up of state-owned enterprises. It takes thorough consideration to decide which parts are about basic applications that should not be opened and which parts can be opened in moderation.
[+] Five tasks for open platform
After open platform comes the issue of profit share. A social network website operator should help third-party developers revolve problems and earn profits in the following areas:
1) Promotion. A social network website operator should provide a mechanism through which new services or applications can promote themselves while those not favored by users can be naturally weeded out.
2) Advertising revenue. For instance, a website can work with Google Adsense, a popular online advertising solution to web publishers in China, and let third-party developers keep all of the advertising revenue they bring in instead of sharing with them.
3) User payment. Users may be willing to pay for applications such as games, and social network websites should provide a solution to help application developers with user payment.
For the points mentioned above, 51.com has taken the initiative to provide solutions. 51.com opens its virtual money API to third-party developers, and by working with the sales channel of prepaid game cards of the game developer, Giant, users can top up easily. This is an attractive advantage for developers.
4) Basic web hosting. For developers to start offering their services at a lower cost, provision of basic web hosting may be necessary.
5) Investment or acquisition opportunity. A good application can be a good potential investment target; especially if it can be applied in a number of various social network websites and accumulate a huge amount of users. By provide funding opportunities at the initial stage, the website operator can help a application developer to grow and reserve a good investment opportunity for the future.
Open platform unveils a new competition for users. Social network websites wish to grow bigger, but at the same time they are worried to lose their turf. The top priority is to know yourself well. Your best chance lies in opening up yourself to the outside but preserving your core, and for this you need a good profit share system. At the end, you may even need to open up your user data to others to ensure lasting growth.
Yet, why do social network websites need to open their user data which they have made every effort to gather?
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Prev : Openness, where is it going to take us? (2) Next : Openness, where is it going to take us? (4)
- Today in History
Openness, where is it going to take us? (3) - 2008/11/23
Mobile TV Market (2) the Subtle Role of Telecom Operators - 2007/11/25
Great Future of Wireless Broadband (3) Scarce Resources - 2006/11/26
Google's Choice (2) Lessons for the Software Giant - 2005/11/20
VoIP (1) It's a Fool Not to Make Telecom Money - 2004/11/28
Nokia must turn itself into a platform, which must be more open than existing ones.
[+] Handset operating systems are getting increasingly unimportant.
In the mobile communication industry, Nokia is a legend of invincibility. According to the data released at the end of January, Nokia sold 134 million handsets in the 4th quarter of last year, with a market share as large as 40%, way ahead the 15% of Samsung, the closest follower.
If you were the CEO of Nokia, you would think: "can I further do something with these users?" when you see the data. Lucrative as the handset business is, isn't it better to squeeze something more out of the users? Internet becomes a target.
For years, Nokia has been dedicated to the development of its handset operating system Symbian and a series of smart phones to battle with Microsoft - with eye-catching sales. Worldwide, 60% of the smart phones are driven by Symbian. Only 11% use Windows Mobile.
What's clear is, however, amid the tide of wireless Internet, handset operating systems are getting increasingly unimportant. It is not that players on the stage will give up operating systems, but they have found that the ability to provide services is even more important.
If, as described in the previous section, Yahoo! introduces Yahoo! Go to enable service delivery across operating systems on the wireless Internet, and Google's operating system becomes available to handset developers for free. Where is the value of those different operating systems? The users would care nothing else but the services available.
Apple iPhone is an amazing product. But the central topic is not the operating system iPhone uses. In terms of sales, it would have a long way to go before becoming a threat to the market leader Nokia. However, iPhone's ability to drive sales with its music service is something that Nokia cannot afford to ignore.
[+] Nokia moves into the Internet market.
According to data released by Google internally in January 2008, during the 2007 Christmas season, page views of Google through iPhone was next only to that through the Symbian smart phones. iPhone's share of the smart phone market was as low as 2%, while that of Symbian was 63%.
What's the reflection it would give Nokia? Obviously, iPhone offers better Internet experience than Nokia - easier to use, more user-friendly browser functions. Maybe Apple is better able to attract users with high demand for Internet accessing to buy its smart phones.
To Nokia, both the improvements to the interface and the selling model of handsets bound with Internet services are shockingly new. A player that has been traditionally regarded a computer manufacturer is now one step into the telecom industry after a successful transformation into an Internet service provider and a consumer electronic product manufacturer.
What will be the right move for Nokia to infiltrate into the territories of its rivals? The first idea would be to provide proprietary contents, which could be obtained through M&A or through partnerships. Fortunately, many Internet players are interested in getting their services available on Nokia phones.
Therefore, Nokia introduced a series of services, including Nokia Search, Nokia Maps and Nokia Music. Most of the services, however, require download of special software into handsets in prior, and are not compatible with all Nokia handset models. Therefore, pre-installation of the software becomes a necessary means to sell handsets.
Nokia Search is a service offered jointly with search engines such as Google, while Nokia Music is a fee-based online music store through partnerships with leading labels - something similar to the iTunes music store of Apple. To Internet players, Nokia is both a partner and a rival.
Nokia service list: http://europe.nokia.com/A4496273
[+] WidSets: an open platform that pulls together the Internet world
It takes time to build such services. To establish itself in the Internet world as soon as possible, Nokia will have to pull the entire Internet over to its side. Don't forget that the Internet is a huge eco-system that needs a common leader to open the gate to the world of wireless Internet.
Nokia must turn itself into a platform, which must be more open than existing ones, to enable the upload of any service, regardless of the handset operating system - Symbian, or whatever else. If the handset operating system is no longer important, sticking onto Symbian would become Achilles' heel.
To Internet players that Nokia wants to pull over to its side, the prospect of handset-based Internet services available on any handset is a deadly attraction. Perhaps it was based on this idea that Nokia introduced its open platform WidSets.
For handsets, this open platform is a small Java program. Any handset that supports Java can run the software. Theoretically, Internet players would be able to provide services to all Java-enabling handsets, so long as the services are developed on the basis of the small program.
In terms of operation logics, what WidSets offers is similar to that Yahoo! Go does. Internet service providers could ignore the specifications of various handsets and make their services available on the wireless Internet through simple programs, so long as the receiving handsets have WidSets.
Currently, a number of leading Internet players, such as Wikipedia, Blogger and Flickr, as well as news media including Routers and BBC have started to develop applications on the Widsets platform. In addition, many amateur players are developing small games on it for downloading by users. Obviously, application development has become an easy thing.
Download WidSets at: https://www.widsets.com/widgets
[+] Can handsets be free?
Theoretically, Nokia's WidSets can be installed into a GPhone, or an iPhone, so long as it supports Java. In this regard, what operating system a handset uses is really unimportant. Why then is Google still sticking on the development of its own handset operating system?
What's really in the mind of Google, perhaps, is to extend its advantages in online advertising. By knitting Google services closer with handset functions, it would be able to continue its leadership in the handset-based advertising market as the wireless Internet population grows, or even use the income to offer cheaper or free handsets.
Of course, Nokia and other handset manufacturers would hate the idea. Instead of selling products, they would have to depend on advertising to make money. Will this wild dream of Google become true? First of all, handsets will never really be free. They are just paid by somebody else.
Telecom operators were once bill payers that made handsets free through bound service contracts with consumers, who were thereby requested to pay subscriptions, which they had no way to cancel for a given period of time. With the subsidies of telecom operators and Google, it is indeed possible to further drive down the prices of handsets.
If the appearance of GPhone means that telecom operators would pay less subsidy, that's absolutely good news for them. The problem is it will have to be paid, either by telecom operators, or by Google, because handset manufacturers such as Nokia will not sell handsets at prices below costs.
If Google pays the subsidy to make handsets free, it will have to earn the money back from follow-on handset-based ads. To spend the money before there's an income, is this a good deal? Google will have a huge amount of cash to give away as subsidy. It seems exactly what powerful telecom operators did in the previous years.
Compared with those of Yahoo! and Nokia, Google's wireless Internet plan seems more like a big bet.
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Prev : Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy
Next : Great Changes in Wireless Internet Industry (4) Apple's Strategy
- Today in History
Great Changes in Wireless Internet Industry (3) Nokia's Strategy - 2008/03/23
Predictions on China Internet Market (5) Search Engines - 2006/03/26
Media, Community, and Blog (4) Production-Marketing Relations - 2005/03/27
Media, Community, and Blog (3) Deconstruct Blog - 2005/03/20
Stop Internet Marketing (3) All Determination; No Distribution - 2004/03/21
3G Time Comes (3) SMS, Email and MMS - 2003/03/23
Why the user churn rate of Web 2.0 websites is so high?
[+] Users' typical Web 2.0 experience
Mr. X is an ordinary white-collar worker. He uses the Internet to search information and contact customers at work, and after work he may spend some time on the Internet for leisure. The Internet is a medium he uses frequently in his daily life, but it is not particularly important in his life. At least he is not a person who hangs on the Internet everyday.
Recently though he has been getting emails with subjects like "you have been added to somebody's friend list" and the like. Clicking the hyperlink he found that it's by a friend on MSN. How could you decline a friend's invitation? So he signed up that social networking service.
By this way, Mr. X has joined Facebook, MySpace, Friendster, LinkedIn and a bunch of local Chinese language websites. Registering at these websites is a lot of pains. Every website asked him to fill in his profile, upload photos and even contribute his MSN contact list.
At first he was worried that if these friends would visit his personal blog, and it would be impolite if he didn't call at theirs in return. Such relationship pressure was such that he spent two hours after work to reply these messages online for a period of time.
(Interestingly, he didn't know that his friends were tied up on the Internet for the same reason.)
First it was acquaintances, then a bunch of strangers, who added him to their friends list. In the beginning it was fun and nice to socialize with these people online, checking out their newly updated blogs and photos and leaving messages to each other.
After about three months, Mr. X started to get bored socializing with these people online. As the number of friends kept growing, he could not but spend more time on the Internet visiting these websites. At the end two hours a day was not even enough.
He finally decided to quit such Internet services that he had been addicted to when he had almost reached the verge of breakdown. What was the meaning to spend so much time on this stuff? Life should not be like this, and he had to get things back under control.
[+] Typical experience of Web 2.0 website operators
All Web 2.0 websites operators are asking why the user churn rate is so high, and there is seemingly no way to remedy this problem as if it is inherent in Web 2.0 websites. New businesses planning to ride on the force of social networking, which continues to wane, are declining.
These Web 2.0 websites are like a big sieve, trying to capture a large number of users at a time; yet after three months, it always turns out that only half of them remain as effective users, and the rest simply disappear. The size of users may seem big but it is not substantial at all.
For a Web 2.0 website to enjoy growth, its social networking expansion needs to be faster than its user churn, so that, overall, its scale would be increasing. Yet what about when the growth of user numbers slow down?
Social networking websites MySpace and Facebook have shown strong performance and they are yet to hit the growth ceiling with the whole world as their market. (MySpace should reach its growth limit sooner than Facebook as the former has more users.) Therefore, seeking to expand foreign markets seems to be a solution to sustain growth.
Nevertheless, an inherent problem remains unsolved.
Another amazing effect of Web 2.0 websites is that, heavy users are very committed. They are very active and they remain so for a very long period. They visit the websites and stay there everyday.
From registered users to effective users to active users, the number of users continues to get smaller. Is it normal? I would say yes. In terms of online community, it's just the way it is. Just as I mentioned years ago, online communities are where "people of similar attributes gather to warm each other. And these people are the so-called "heavy users," such as active bloggers.
The characteristic of Web 2.0 is high interactivity, which means highly demanding for users. Those who are willing to interact with others and write blog articles are not normal people. They have stronger achievement motive and desire to express themselves, and they find their stage at some community website and feel a sense of belonging.
The question is, while these heavy users are having fun, what are the ordinary netizens doing?
[+] People can get sick of Web 2.0
As to those who quit some Web 2.0 website, do they turn to similar services of competing websites? Some of them (well, the heavy users) do, but for most people who leave, they just won't touch such kind of services and they leave forever.
Only a few people who, after quitting Facebook, would turn to MySpace. Most people would just quit social networking services (SNS) for good. It's the same for blogging. Only a limited number of people would migrate from one blog service provider to another and continue writing. Most would simply stop blogging.
Quitting a website is totally different from quitting a kind of service. For example, we know very clearly the difference between "turning to sohu.com from sina.com because of getting tired of the latter" and "quitting new websites for good."
Woops! It turns out that people can lose interest in Web 2.0 services.
Woops! So what's next when all netizens have become users of my Web 2.0 website?
If market development is like a chess game, then Web 2.0 websites that have been so popular for the past couple of years are entering the endgame phase. These websites operators may appear successful, but in fact they are getting uneasy. How to get away from the doomed path of Web 2.0 websites is an inevitable challenge.
Surprisingly, you may find the solution in Web 1.0.
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Prev : Mobile TV Market (3) Terminal Manufacturers & Content Providers Next : Web 2.0 Finale (2) Websites With a Specific Culture Can't Grow Big
- Today in History
Web 2.0 Finale (1) An Inherent Problem Unsolved - 2007/12/23
The Fourth Generation of Internet Marketing (2) RSS Tracking - 2006/12/24
Dream of "Digital Furniture" Store - 2003/12/28
If so, telecom operators would be shut out of the mobile TV market.
[+] The past experience of cell phone manufacturers
From the tide of WAP-based Internet accessing in 2000 to the crazy bid for 3G licenses, and then to the bet on MMS for promoting sales of camera phones and music phones that enable music downloading, and finally to 3G phones with audio/video services, cell phone manufacturers have had thrilling experiences over the years.
The world cell phone market started to show signs of saturation in 2000. To maintain their growth, manufacturers had to motivate consumers to replace their phones with newer products. All of the thrilling experiences in the past 7 years seem to be a quest for what really are the selling points. Fortunately, the result so far has been satisfactory.
In summary, there are a few observations:
1)Mobile Internet is a hard-to-handle concept. The key is consumers tend to compare their expectation for mobile Internet with their PC-based Internet experience, which, in most cases, ends up in disappointment, as cell phones are not so easy to handle as PCs. Mobile Internet has been successful in Japan, only because of the low PC penetration rate there.
2)Telecom operators wish that new cell phones be bound with particular services, so that they could benefit from their sales, instead of being un-paid sales reps of the manufacturers. However, it turns out that consumers buy camera phone only because they can use it to take pictures, and anyone seldom uses MMS service.
3) There's no concern for the shortage of content accessing channels. Despite the hot sale of music phones bound with download service offered by telecom operators, most users choose to transmit music from their computers to cell phones, instead of downloading them from the WAP portal provided by telecom operators. Although it is more troublesome, but it is free.
4)3G audio/video services, including IP-based audio/video streaming and video phone, have not brought satisfactory user experience. It is a very simple concept to allow both parties of a phone call to see each other. However, due to privacy concerns, it has not been able to become a killer application.
[+] Telecom operators might be ignored
With the above experience, cell phone manufacturers finally realized that their business is to make and sell handsets. The simpler their products are the better. There's nothing simpler than the concept of mobile TV.
Consumers no longer have to bother whether the TV programs are downloaded from the Internet, nor cell phone manufacturers to care about whether their phones are bound with particular services offered by telecom operators, so long as they free themselves from the troublesome 3G audio/video experience.
In fact, a hi-tech company in mainland China has developed a sort of chip, which can be built in cell phones to receive traditional analog TV signals. In other words, with such a chip, you will be able to watch wireless channel with your cell phone, regardless of its specification or standard.
The only shortcomings are the mobility and fidelity. As analog TV signals are not intended for mobile environments, the fidelity cannot be compared with that of digital programs of mobile TV. However, it would be good for some people, if the programs are played on small-screen cell phones.
In most cases, however, people watch mobile TV on static environments, e.g., bus or subway stations, or in offices. It explains a fact that cell phone manufacturers will be able to sell their products without binding themselves with telecom operators.
The only thing that those manufacturers have to worry about is where programs would be, once new standard-based mobile TV is launched? Will telecom operators become content aggregators as we discussed in the previous section? If not, they'd better establish connections with content providers right away.
[+] Charging or not, it's a matter about the structure of the industry
The high production costs of movie/TV programs turn out to be a big obstacle for traditional value-added service providers to produce contents themselves. Imaginably, a big part of contents for mobile TV will come from traditional TV stations.
An interesting cooperation mode is that after consumers buy a mobile TV-enabling cell phone, they will get a set of passwords from TV program providers. Upon activation, the cell phone will be bound with the passwords to enable watching programs. The fee is charged each month through the phone bill from telecom operators.
That mode is designed for charging fees. If mobile TV programs are offered for free, and program providers depend on ads for their incomes, the passwords and the additional lines in the phone bills of telecom operators would be unnecessary. If so, telecom operators would be shut out of the mobile TV market.
With regard to the mobile TV services, the only way for telecom operators to gain the favor of cell phone manufacturers is to persuade content providers to charge fees, in which case, they would become the largest content aggregators and channels for charging fees. Otherwise, they would be easily abandoned in the game.
In addition to traditional TV stations, will website operators (e.g. Yahoo! and Google), which are gaining influence in the mobile Internet sector be able to get a share in the market? Those players do not have program-producing ability themselves. However, through audio/video content sharing, they will have some opportunities.
Audio/video content sharing sites, such as YouTube, has a lot of interesting programs. In spite of the low fidelity (as most programs are produced by non-professionals, after all), such programs might be good enough for cell phone-sized screens.
Currently, the mobile TV market is still a virgin land for a lot of players, including telecom operators, cell phone manufacturers, traditional TV media and emerging Internet media. The future will be interesting and full of expectations. Eventually the biggest winner will be consumers. The distribution of audio/video contents will be fast and convenient as never seen before.
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Prev : Mobile TV Market (2) the Subtle Role of Telecom Operators
- Today in History
Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02
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
A user's activities in a Web 2.0 website has to be able to turn into assets.
[+] Desire of the humankind to establish relations
A Web 2.0 website, whatever type it may be, is founded on the basis of communities, or small societies. For communities to develop, operators must pay attention to improving and regulating interpersonal interaction, so that the chain of relations among users can be formed. Otherwise, users won't stay for long.
Take social networking services: the offering of Blog and relevant services cover only the first two layers of the psychologist Maslow's "Hierarchy of Needs," referring to people's basic needs to exist.
Everyone in the society has different needs. Some are happy as long as their basic needs are satisfied without caring too much for developing complex relations with others. Social networking service providers can meet the needs of these people by offering basic tools and functions and large storage space.
Yet people, after all, have the need to associate with others, and service operators have to be able to guide users to do so. Otherwise, users will leave even if they have to desert the places they have created because they can find no one to share.
This is a major difference between Web 2.0 and 1.0, yet people rarely notice it. While Web 1.0 addresses the instrumental needs people may have, Web 2.0 focuses on the psychological needs which are invisible yet no less real.
[+] More attention to everyone
People choose to keep their diaries online while they can do it with their PCs; people would rather store bookmarks online than offline in their browsers. Let's face it - people like to be known, and such urge is overwhelming and has been clearly observed during the past few years.
Bloggers will lose their impetus to continue writing if no one cares. Enthusiastic responses will encourage Bloggers to keep on writing. If you are a Blog service provider, it is very critical that you know the driving force behind the scene.
Some Blog service providers would feature certain Bloggers by means of "editor's picks" or the like, yet such method can only help about 5% of Bloggers. Therefore we've seen self-help services such as MyBlogLog emerge to allow Blogs to forge links with each other so as to increase their exposure.
It is the responsibility of the service providers to raise the chances for Bloggers to visit each other. Quite a few Blog service providers have introduced the feature like "add this person to my favorites," so that users will be notified of any updates in the Blogs they subscribed, which significantly increases the visits to users' Blogs.
Here we have to admire the vision of operators of 51.com and Mixi in Japan and the like. They've started doing so since two years ago and have succeeded in letting users feel that "they are not alone." It is the sense of belonging they've fostered among users that leads these websites to success.
[+] Virtual assets as a criterion for self-assessment
Yet getting attention is only the first step. People in any society would have the desire to climb up the social ladder and seek self-realization, the highest layer in Maslow's "Hierarchy of Needs." Despite that only 5% of the people will succeed, yet everyone wants to be among the 5%.
How do you know if you are successful? This is another important point in Web 2.0: you need to accumulate results of your efforts to reach success. Such results have to be quantified and displayed to make known. This is parallel to the concept of "private property," which can be divided into visible and invisible assets.
The Blogs you write and pictures your uploaded are visible assets and invisible assets are something like "credit," or the degree of recognition by the society. For example, the ranking system employed by community websites for years can be seen as a kind of credit rating system accepted by community members.
Activities of a user in a Web 2.0 website need to be turned into assets to be accumulated with time so that s/he will be tied up by these virtual assets, in addition to the chain of relations developed here. In other words, moving away becomes not so easy.
Yet very often the ranking system is not being executed properly, and scores or rankings become irrelevant. Operators somehow fail to notice that the existence of "the poor guy" and "class inequality" is a key to stimulate the progress of community websites. This is also true in our real society.
[+] Class inequality drives the society to move forward
The ranking system has created the distinction between "the rich" and "the poor." The point is to make sure that these two groups of people appear in the same place so that the difference in their strength is clearly shown and perceived by each other.
"The poor" can thus be mustered to work harder as long as they would not have the feeling that "it's impossible to become one of the rich." Many more affluent people engage in charities because they see there are so many poor people in the world. The contrast between the rich and the poor is what prompts the behaviors mentioned above.
Why not aim to create an equal society? We should know that the idea of "equality" means more of "less variation", instead of "no difference," in wealth." While a huge gap between different groups may discourage "the poor" to strive for improvement, moderate degree of difference can stimulate the development of Web 2.0 websites.
In other words, if "the poor" see only the people as poor as they are, they would not feel inferior and hence no achievement motives. But if they can see "the rich" everywhere, they would feel being marginalized.
The management of such contrast is an art. If you are good at it, you can make good money just like some community service operators. The Avatar service, which has proved a huge success in Korea and China but suffered a setback in Taiwan, is a good example that shows how it works.
[+] The key is also "class inequality"
As is commonly known, the Avatar service enables users to decide how her/his virtual image should look like - the head shape, hair style, eyes, nose and costume and even including pets. These objects are for sale. Those who don't want to spend money would have a "fig leaf," a default setting by the system.
For Avatar service to succeed, the operator needs to give users the stage to show off. They spend on their Avatars, and they want to display the results. There would not be many people spending money on this service. When most users are wearing a fig leaf only, no one would feel embarrassing and have any desire to buy an Avatar clothes.
The critical success factor of Avatar services is the ability to properly expose the difference between the rich (who buy the virtual items) and the poor (who don't buy). The disparity between the two groups should be vivid enough so as to make the poor feel stimulated to buy one, but not to the extent that the poor would instead be discouraged because the gap between the two groups is too wide to cross.
The above explains why QQ Show (qq.com) running by Tencent in China makes good money, while the Avatar service introduced by Yahoo! Taiwan from Korea would end up closing down. The key to success is to present class inequality between "the poor" and "the rich" in an community in front of users with an appropriate way.
[+] Human nature prevails in the real society as well as in virtual communities.
In fact, we have seen similar practices in the case of online games, which are miniature virtual communities. In the beginning, users would need to purchase credits or pay monthly fee to play games; gradually, the rule has become that all players (the poor) can play for free, but if they (the rich) want to equip themselves with virtual items, they need to pay. The logic of the former is equal footing, and the latter is those who are able and willing to pay for virtual items can enjoy a higher status.
Paradoxically, class inequality does not drive users away - the number of concurrent online users of free games has been reaching new heights - and the money online game operators have made from virtual items is more than the monthly subscriptions they have let go. How well operators can manipulate class inequality between the poor and the rich determines how successful they can become.
Generally, for entertainment communities like online games or Avatars, paying users are about 5% and the rest are non-paying ones. Yet can we drive these 95% of users away?
Remember, the 5% users spend money are paying to consume the 95% non-paying users; the existence of the latter is necessary for revealing the affluence and status of the former in the virtual society! This is all about human nature.
You may think online games and Web 2.0 are two separate things, yet my experience is that: human nature prevails in the real society as well as in virtual communities. You may deplore the dark side of human nature, or you may wonder how human nature prompts the society to move forward.
[+] Web 2.0 is a business driven by human nature
The last one important point about virtual property is that it has to be consumable. There is no way that credits can get increased and rankings enhanced endlessly. The fortune you have can only be real to you when you have to make great efforts to accumulate it or when you can feel the excitement to throw away a big chunk of it. It is this sense of reality that makes users stick to your communities.
What operators should do is to define the virtual fortune, both tangible and intangible, your users can have in your communities. Should it be based on how active you are, how many chains of relations you're involved or how many references you get? How credits should be accumulated and rankings promoted?
Moreover, how credits and rankings should be presented or consumed so that users can feel the value of credits and rankings created in the process and the reality of class inequality? How to present this inequality appropriately so that it can turn into a driving force to prompt the communities to move upward and enter into a virtuous circle?
If Web 2.0 businesses are to make money, the key is to realize the working of human nature. It is absolutely helpful to have close observation of our society in the real life and human nature. The Web 2.0 business is driven by human nature.
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Prev : Web 2.0 Think Again (3) A Reason to "accost" Someone Online Next : Web 2.0 Think Again (5) Unearth the Value of "People"
- Today in History
Web 2.0 Think Again (4) "Private Property" and "Class Inequality" - 2007/06/10
Ultimate Mobile Device (1) Age of Hybrid Handset - 2005/06/19
Pricing is a Handful for Internet Business - 2005/06/11
How the two classes represented in Web 2.0 websites determines the websites' business model.
[+] Class barrier in the brick-and-mortar world
As the core of Web 2.0 is community, which is a topic related to sociology, we may need to talk about the concept of upper-class and lower-class societies. It is an important concept because how the two classes are reflected in Web 2.0 websites would determine how websites should shape their business models.
The two classes mentioned above can be associated with "white-collar" and "blue-collar" classes according to the nature of work, or "non youth (particularly those at work)" and "youth (those at school)" with respect to age.
Please pardon me if such definition appears a bit too rough. I do not intend to work out an exact definition, as it does not make much sense here. The distinction mentioned above may be imperfect but is easy to understand and practical for observation.
In the real world, the blue-collar and the white-collar classes do not usually mingle with each other. They do not belong to each other's social networks. In particular, young people are often seen as a special group. They do not care about mortgage or car loans as adults do, and they have their unique consumption behaviors.
Social classes determine our social networks, because our daily life decides the topics we would be interested in, and these topics are critical in our social network. The patterns are attached to us and have direct influence on what class of people we would share sympathetic responses with on Web 2.0 websites.
To put it simply, is there any social networking website similar to MySpace that can attract people of every class in the society? Moreover, since the ultimate goal of Web 2.0 is to build up the connections among people, then is it possible to break the class barrier in the real world so that exchanges between different classes can become possible in virtual world?
[+] Virtual communities are where people with similar attributes get together and share feelings
A magazine editor, a 35 female with a son, has just started to Blog on a social networking website. It is not easy for her to find people on SNS website at her age. She feels uncomfortable about the photos of young and beautiful people appearing on the homepage of the site.
She is not sure who are reading her baby-nursing diary. Are the visitors really interested or they just drop in by chance? Once she got a request to add her to the Friend List, and she found out it was sent by an 18 year-old guy. She has no idea what to talk about with him.
I believe that many people have similar experience of bumping into some gathering place of a unique group or class of people without staying for too long. Web 2.0 communities have their own characteristics. As I said many years ago: communities are where people with similar attributes get together and share feelings.
Despite that there are few exchanges between upper and lower classes, still they belong to the same society. The challenge for Web 2.0 operators is to first attract different classes of people and then distinguish them through proper guidance, so that they can form their respective communities they should belong to.
However it is so difficult that many Web 2.0 operators consciously or subconsciously choose to focus on a specific class in their operation. This has great impact on the websites' style and business model. I illustrate the characteristics of the two classes of netizens below:
For example, social networking websites like Linkist are targeted at white-collar class. Such websites do not attempt to charge their users as they are reluctant to pay, even though they are better off. Affordability is one thing, and the willingness to pay is another. Fortunately, advertisers are interested in this group of users.
[+] Impact of social classes on business model
I suppose you, my dear reader, access the Internet from home or office rather than from an Internet cafe, and live in some big city like Beijing or Taipei. You actually have no idea about how people away from big cities get onto the Internet.
People of different social classes are used to their specific ways of thinking. Therefore we can find a certain niche market for a certain class. If you look into Alexa's website traffic ranking in Taiwan, you'll find ek21.com outdoing many well-known websites.
This website provides the so-called Avatar services, including chat-rooms, voice chatting, personal web-pages, personal web space and icons and so on, which are all potentially profitable services. If you look closer, you will find out that active users on this website are mostly those you don't usually associate with, such as waiters, drivers, part-timers, and people living outside metropolitan cities.
Before the emergence of Web 2.0 website startups, ek21.com has been making money for years by charging users. Of course most of its users do not pay, but still it has enough paying users to sustain itself very well.
Hard to imagine, isn't it? Because you are a white-collar worker unwilling to pay, it is difficult for you to understand the behaviors of the lower-class people. These people spend money out of impulse. As long as your offering is attractive and does not cost much, you can siphon money from their pockets. However, advertisers are not interested in these people.
The population of the lower-class society is huge, and it is even more so in China. There are some very profitable Internet companies thrive on providing service to the lower-class people, such as qq.com. This company has more than 400 million accounts, and their major revenue source is user charges.
[+] Consumption behaviors of the lower class
If your Web 2.0 website is targeted at lower-class (ex. students or younger people), but you are putting efforts on advertising sales, then I have to tell you that you have missed an important revenue stream: user charges.
What services can you charge users for? Look at qq.com and ek21.com, and you'll find easy answers. The point is to sell virtual items rather than sell real world products electronically. The latter is against the nature of Web 2.0. In Web 2.0, it is interpersonal interaction that can help you make money.
If you want to know more about the other class, try online games. A few years ago, through playing a then very popular online game "legend," I got to know truck drivers, beetle nut girls, housewives and gangsters - people I would never have the chance to know otherwise.
Many of these people do not have an email account; they access the Internet at an Internet cafe, have few ideas about what Google is, and never use MSN. Their favorite online activities are playing games and chatting. This is a blue-collar market, which is beyond your imagination.
Similarly in China, young people, students, laborers and residents in towns and small cities consist of the biggest group of users in the market. These people log on the Internet at the Internet cafes where they can play games or chat at just RMB 1 per hour.
In small cities where there is little entertainment, online games and chatting can serve as some kind of affordable leisure activities. Any Web 2.0 website which can seize the mass lower-class population is sure to succeed. Even though these people do not make much money, they tend to spend money out of impulses and they are quick payers.
[+] Break the class barrier
Web 2.0 entrepreneurs are often constrained by the barrier of their class background. When developing online communities, very often they can only base on the life style of the class they are familiar with. Most people cannot do business targeted at a different class of people who live a different life.
Yet, many Web 2.0 entrepreneurs confined themselves within an even smaller circle. I once told a startup entrepreneur that it did no good to maintain the elite atmosphere in his website. My suggestion to him was to develop a product that is aimed to be very popular in the market but disgusted by famous Bloggers.
In the US where there are over 100 million online users, it takes as few as 100 recommendations to digg a bookmark onto the front-page of the famous social bookmark website del.icio.us. This is pseudo democracy, which is an exclusive game within a bunch of elites.
Things like RSS, Tag, Trackback, Wiki, Widget are nonsense created by elites in the upper-class society. When I first saw Web 2.0 technical documents, I thought these things should all go to the trashcan because they were too perplexing for the public.
They may not be the root cause for class barriers in the virtual society, but they are surely responsible for making them more difficult to cross. They keep the elites within a wall from the general public, which may lead to restrictions on business.
These techniques are still too primitive to be generally accepted by either upper or lower class societies. To make Web 2.0 more accessible, we may need to hide these things or package them in a more friendly way.
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Prev : Web 2.0 Think Again (1) It's All about Relationships Next : Web 2.0 Think Again (3) A Reason to "accost" Someone Online
- Today in History
Web 2.0 Think Again (2) Upper-class Society and Lower-class Society - 2007/05/27
Web 2.0 Think Again (1) It's All about Relationships - 2007/05/20
Brief Study at Portable Multimedia Player (PMP) - 2005/05/29
It's not wise for telecom operators to sell 3G only to the elite who are extremely small groups of the billion populations.
[+] The first stage of 3G in China
The previous articles by me are not to look down upon 3G value added services or to support the voice service. Instead, I am trying to point out that telecom operators are industrial leaders, what kind of strategies they will take on 3G decides in what kind of strategic thinking value added services will be placed.
An SP (Value Added Service Provider) probably can live on 3G with only millions of value added service users. However, for a telecom operator, it is far from enough if the number of subscribers attracted from value added services (which are the primary selling points of 3G) is just the same. The two points of view are different.
However, it is the general atmosphere to hold high expectations on value added services in China's 3G market. Including telecom operators, there is a stir of emotions in related industries including SP, CP (Content Provider), and even the Internet industry.
The common opinion is, in such a big market, not only can we define system standards, but telecom operators are also able to define mobile phone specifications. According to the successful 3G development experience in Japan and Korea, customized mobile phones can increase telecom operators' revenue by optimizing the user experience with value added services.
Therefore, at the first stage of China's 3G market, we will see a lot of TV ads promoting value added services, telling you that you can watch movies, listen to music, play games and access the Internet anytime anywhere via 3G.
With TV commercials, you will see the elite image of a middle-aged man in a nice suit that has a successful career holding a 3G phone; the cool image of young people watching movies or listening to music on 3G phones; or the touching image of family members seeing each other from the video phone.
[+] The second stage: use the voice service as the bait
The four telecom operators who will have obtained 3G licenses will boost value added services to a considerable height. As previously stated, operators who obtain WCDMA and CDMA licenses are based on the best interests of their own. While the operators with the TD-SCDMA license do so just because they do not want to believe their doomed fate.
With multi-functional and high-price mobile phones (probably the customized mobile phones provided by telecom operators), low-price data service rate plan (the voice service rate remains the same with 2G) and the TV ads promotion, 3G service will immediately attract a group of customers through its eye-catching value added services.
These users are just like the characters in the TV ads - business people and young white-collars. However, the number of that user group is limited and increases slowly. When the stacked mobile phones and value added services can't win more 3G subscribers, the loss from the price reduction of handset together with the telecom equipment amortization charges will drive operators mad.
Shortly after, the price war of voice service rates plans and mobile phones will start. The reality will stop us from dreaming. Do not forget that there are hundreds of millions of mobile phone users in China. Most of them are not elite or young white-collars. They don't want to understand 3G. What they want are immediate benefits.
But have 3G value added services been sentenced to death? No! The fact is that those 3G users attracted by the low voice service calling rates use value added services a lot! I conclude the 3G telecom operators' actual operating experience in the past four years as below:
- It's much faster to attract 3G users by offering low voice service rates plans than promoting value added services.
- To make up for the revenue loss from the voice service, operators have to highly invest on value added services.
- Even those 3G users attracted by low voice service rate plans will use value added services a lot.
- The premise is that user experience with value added services must be made good. Some degree of handset customization is inevitable.
[+] The outlook of China's 3G market
China's 3G market will show several features:
1) The 3G mobile phones with simple functions. Fully functional 3G phones may mean higher prices, especially for the TD-SCDMA system. To be simplest, a mobile phone that can make phone calls and support WAP is enough. Other functions such as camera, video, etc. can be left out at the initial stage.
2) Promote packages of low-price mobile phones and cheaper voice service rates plans (of course, WAP service rate is the key point as well), leading to a situation of rapid sales at cheap prices. It was difficult to do so several years ago, because the cost of 3G phones was still high and price reduction meant that telecom operators had to pay a lot of subsidy.
But when China's 3G market starts, the cost of WCDMA and CDMA 3G phones will be largely reduced. Bulk purchases by telecom operators will make the price even lower. With the help of smuggled mobile phones in this market, it is not difficult to buy cheap WCDMA and CDMA 3G phones.
3) Rapid sales at low prices means that 3G users will quickly turn to low-end customers, who are different from the elite or young white-collars in our imagination. Users of 3G value added services at this stage will be workers in big cities in addition to residents (primarily students) in second-tier cities.
Those people's standard of living is relatively low, so they can not afford high-end entertainment. They spend a lot of time in Internet cafes because that is the entertainment they can afford. Those who don't go to Internet cafes will use mobile phone WAP. They are willing to pay for value added services because a single mobile phone can meet their demands for communication and entertainment at the same time.
They are the primary users of 3G value added services, even though they adopt 3G services just because of the cheaper voice service rate plan! This is the outlook of China's 3G market in my expectation. It is not wise for telecom operators to sell 3G only to the elite who are extremely small groups of the billion populations.
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Prev : The Mist of 3G in China (2) TD-SCDMA is a Hot Potato Next : The Mist of 3G in China (4) The Way to Survival for SP
- Today in History
The Mist of 3G in China (3) Low-End Customers Are King - 2007/04/15
Predictions on China Internet Market (7) Web 2.0 Economy - 2006/04/16
How to Sell an Apple: A Classic Case of High-tech Marketing - 2005/04/10
3G Time Comes (5) Content - Killer App of Video Phone - 2003/04/13
The rule of the game in the media business is monopolization, yet it is impossible to monopolize the Internet.
[+] The diluted advertising revenue
In February 1999, I wrote the first article to point out that portals could not survive only on advertising revenue (, which was contrary to the mainstream opinion at that time and has been proved true for the next five years until Google created a new model). My view was based on the following formula.
I guess you will agree with me that the growth rate of the denominator in the equation "Total Pageview" is much higher than that of the numerator "Total Ads Revenue". So you should be very clear about what is total advertising revenue divided by the number of web pages worldwide.
The conclusion is that the selling unit price of online advertising will continue to fall! When buyers' advertisement budget, which is usually fixed, is allocated to web pages around the world, each page can only get a slim portion of the money. This is exactly what the Internet is – a distributed network.
The cost of online advertisement is calculated on a CPM (cost per thousand impressions) basis, which is derived from the traditional media industry standard. In fact, the figure of CPM has been declining since 1999.
When is average unit price of online advertisement worldwide keeps falling, it becomes very dubious whether a website can survive solely on advertising revenue or not - especially when each of the websites continues to produce a vast amount of web pages to dilute the advertising revenue.
[+] The rule of the game in the media industry is monopolization
Gradually, the increasingly dire conditions start to press hard upon the portals. Judging from the above equation, there are only two ways to survive. One is to snatch the limited online advertising budget of the buyers and starve the competitors:
That is why we see major players take the initiative to lower their price. The formula shows that when the selling unit price drops, the websites with fewer visits will not be able to generate sufficient revenue to support their operation. In fact since 2000, there have been quite a few similar cases in which major operators voluntarily reduced their prices, causing smaller players to exit the market.
The second tactic is to attract all online users around the world to my website so as to maximize the number of pageviews. As long as the number of total pageviews is high, even the advertisement unit price is low, the total revenue accumulated can be phenomenal as well:
Either of the two methods points out one substantial fact that, only a monopoly or oligopoly on the global Internet pageviews will likely be able to survive solely on online advertisements. Yet, is it possible to concentrate all the pageviews in one single website?
This is what the media business is like. For all traditional media from newspapers to television, only a monopoly or at least an oligopoly will have a chance to enjoy profits. However, when the cost of storage and bandwidth on the Internet keeps falling, and the number of webpages globally continues to grow in an explosive rate, it is unrealistic to talk about monopoly.
[+] Low click rate and high cost of online advertising by community services
In addition to the above mentioned conflict between the characteristic of the Internet and that of the media business, there are also quite a few problems in the aspect of operation. Traditional media start to charge for the news content borrowed by Internet media to fill in the space. Traditional newspapers are not happy about the declining circulation and revenue. They now ask the users to pay for the content and to share the cost of content production, which is after all reasonable.
Another reason for the decline of the online advertising unit price is that the CTR continues to fall. Ten years ago, there were about 50 out of 1000 visitors who would click on the advertisements; now the figure is less than one out of 1000. The effect of online advertising has been weakening, which inevitably drives buyers to bargain on the price. You can imagine what the situation has become now after these ten years.
Furthermore, the quality of the content of online community services, such as chatrooms and forums, produced by users during their interaction, as well as the volume of traffic generated, does not live up to common expectation. There are junk content or deserted forums everywhere on the Net.
On the other hand, when users concentrate on their discussions and exchanges, they will not click on the advertisements. As such, the CTR of advertisements provided by online community services is naturally low. What is worse, services characterized by user interaction normally consume more bandwidth, which would result in higher operational cost.
As regards the free personal homepage services, they were very popular at the initial phase of Internet development – GeoCity was among the first and most famous providers. Yet from 2000 on, Yahoo! started to restrict the maximum traffic allowed for personal homepages. Once the number of pageviews exceeds the cap, unless users pay for the service, additional accesses to the webpages will be denied as as way to control bandwidth cost.
[+] A rule overthrown
The high bandwidth cost which characterizes online community services was indeed a problem in the Web 1.0 era. At the end of 2004, Yahoo! announced the termination of its chatroom service for these chatrooms were flooded with porn or junk content. Insiders knew very well that this was all about closing down a costly but profitless service.
Services such as free email accounts and free online calendars all have similar difficulties. For example, there are few people who would bother to click advertisements when reading emails. Yet such services are so important that no portals dare to call them off.
Since operators can't rely on advertising revenue alone, it then becomes necessary for portals, which accommodate a huge number of services, to create income streams other than online advertising. Such a strategic imperative has gained very high priority among portals since 2001, and Yahoo!, one of the most determined, has endeavored to raise the percentage of non-advertising revenue. To this point, my prediction has come true.
By 2003, these operators had developed multiple sources of income. For those which had survived the chilling winter, it was expected that the Internet business would move on with these portals leading the way. To everyone's surprise, there came Google coming up with a brand new rule. We should not have made light of the Internet at all.
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Prev : The Web 2.0 Revolution (2) the Emergence of New Media Next : The Web 2.0 Revolution (4) the Google Paradigm
- Today in History
The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17
The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10
Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11
Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19
Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12
In the future, a number of advertising models, including the traditional online advertising, keyword advertising and commission-based advertising, will coexist on the Internet.
[+] Who on earth are viewing and clicking online ads?
Advertising, which, in a sense, is a joint game of the media and ad clients intending to fool consumers around, seems increasingly unable to adapt to the current time. With the rise of the interactive media led by the Internet, the say has been returned to consumers. As a result, raising the eyeballs of consumers is increasingly turning into a mission impossible.
Each time I give a lecture about online marketing, I always make a survey about the audience and ask those who have clicked any online ad within the past half year to raise their hand. There always have been very few hands raised in a large classroom. That explains why the ad click rate on portals' home page is lower than 0.1%.
Think about yourself: have you ever clicked any online ad within the past half year? Or, have you paid any serious attention to any online ad at any part of a web page, even though you never clicked it? Ask those around you the same questions.
If neither you, nor I, nor he, nor she is viewing ads, who on earth is? With my observation, I am able to provide a simple answer: "those who do view online ads are a strange group of people." Whenever I make such a conclusion, the audience would smile understandingly.
Yes, such people are born to view online ads. They have a gene inside their body to drive them to notice and click ads on web pages. Besides, advertising professionals view ads too, mostly out of job habits, instead of personal liking. Others just do not view ads, and there is no reason for that.
[+] Keyword advertising: the model that charges by results
The keyword advertising is the hope for online ads whose click rate is as low as 0.1%. This adverting model, which is Google's source of revenue, is one of the most important inventions in the history of the Internet. By linking ads with key words used by searching activities of Internet users, it raises the click rate to 5% and even higher.
The reason for the low click rate of traditional online ads is the irrelevance between the contents of ads and the web pages that the user is viewing. Channel-specific advertising (for example, ads for 3C commodities on a technology channel) might help to lock on the wanted users, but it is far less accurate than the keyword advertising.
The tide of the keyword advertising explains that the result is what ad clients really want. Brand building is very important, but whether it has to depend on, or even mainly on the Internet is another question. The building of a brand is not the accumulation of many ads displayed.
Companies which can directly satisfy that demand will win the favor of Internet users and ad clients. However, this does not mean that traditional online advertising models will disappear. They will manage to maintain a certain market share, but will not be able to stop the aggressive attacks of the keyword advertising.
According to Online Advertising Revenue Report 2005 released by the Interactive Advertising Bureau (IAB), the revenue achieved by the keyword advertising of search engines accounted for 40% of the industrial total, slight above the number of 39% in the previous year and indicating a stable trend.
[+] Turning to the channels: to pay in accordance with actual results
The most distinct feature of the keyword advertising is its click-based charging model. How much to pay for each click and where your ad will be put on the web page depends on the price you offer in an open bidding process. The higher your price is, the better the position will be.
This, however, is not exactly what ad clients want. They have never given up the idea of "pay in accordance with the number of deals resulting from the ad". Those who click the keyword ads and are led to the websites of an ad client might not do what the ad client wants them to do, such as buying products, registering as a member, and etc.
With the blood of innovation, Google is planning to cater for that call and start its trials. You might have already noticed that the banner or text ads of the FireFox browser or Google's Picasa (picture management software) are already available on many websites.
Ad clients are charged only when the software is downloaded and installed by users (who can use the service free of charge, as Google will pay the website owner). No charge for ad playing, or ad clicks-only for download and software installation.
That model can be further extended to allow charging only for products sold, or members registered or newsletter subscribed to. This is inevitably going to drive the focus of the online advertising to move from the media identity featured with exposure to the channel identity featured with real deals.
[+] Traditional online advertising is not going to be replaced completely.
This advertising model might not be suitable for some commodities, just like the keyword ads model is not suitable for every product. What can be predicted is the ad price for each deal will be higher than that for each exposure time or each click in traditional models.
As a matter of fact, there is a normal correlation between the click rate and the conversion rate (the number of clicks divided by the number of deals achieved). Both the ad client and the ad seller have something to gain. The key is whether the ad client is from an industry lucrative enough to pay the higher deal-based ad charges.
In the future, a number of advertising models, including the traditional online advertising, keyword advertising and deal-based advertising will coexist on the Internet. There's not such a thing as the best advertising model in the world, only the most suitable model for oneself. Anyhow, more options are not a bad thing for ad clients.
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Prev : New Era of Online Advertising (1) from Media to Channels Next : New Era of Online Advertising (3) toward Decentralization
- Today in History
From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22
New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23
Ultimate Mobile Device (5) Universal User Experience - 2005/07/24
