[This is a re-post
(originally posted on 25 Dec 2012) with minor edits, deleted the original post
by mistake.]
This is the first
post of seven that postulates a set of internet ‘rules’ ie. methods, systems, driving
the internet economy that makes up part of its operating system. This post is about values, what it is and how are values created in the internet economy.
In a meeting
between a newspaper and Apple a few years ago in which the newspaperman tried
to argue for better terms for news publishers, Apple’s response was something
like this "I don't think you understand. We can't treat newspapers or
magazines any differently than we treat FarmVille". Similarly, phone calls will be free in time
because it is no different to emails.
The internet, a
vehicle of the information age, engenders its own operating model. It is not obvious…yet. It is different. The iconic large web companies are visible
but there are also many other smaller online companies, innovative, using the
new ‘rules’, what I refer to as internet business rules, to remake industries,
create new ones. Airbnb (‘hotel’
booking), Gilt Groupe, Yelp (review), MMC
(music), Quora (reference), Vayable (travel agent) are some examples. There are local success stories too but they
are less visible. The Gilt Groupe has a
market capitalisation of USD1 billion in fours years and in the process
redefining online retailing by “tapping cutting-edge viral and social marketing
techniques to scale the customer base quickly” in an interview with Open Forum.
They exploit the
internet business model with its unique set of
‘rules’.
Google Adwords is
today’s best example of a new model for revenue generation. Advertisements pop up when a search is made
based on the words used in the search.
Advertisers pay Google based on the number of clicks on the words chosen
such as Kenlen hotel. Unlike traditional advertisements, Adwords is
‘direct’. It’s nirvana for oriental
advertisers who eschew waste and wants more certainty. The consumer is more likely to look at an
advertisement for Phuket hotels if his search is on holidays in Phuket. There is also ‘immediacy’ if the consumer not
only sees the advertisements, but place orders within the same hour maybe
because it was compellingly easy to do so.
In Internet 2.0 firms’ parlance, this is about user experiences. More of this later but it is not what we are
used to traditionally although it sounds obvious. And of course the reason you use Google to
search in the first place is because they have a lot of content. These were mostly ‘crowdsourced’.
The terms ‘crowdsource’,
‘direct’ and ‘immediacy’ are among a slew of the internet’s characteristics,
methods, ‘rules’, systems and economic models which will be deliberated
throughout these articles. I shall not
differentiate much because it is evolving.
Some of these like ‘direct’ and ‘immediacy’ are common terms but in the
context of the online business, they have been deliberately used in powerful
new ways, in ways only the vastness and connectivity ability the internet
allows. They are all part strategy, part
economics, part ideology, part culture, part techniques and part business
model. We will do this by first
exploring how the internet model creates, captures and delivers values be it
economically, socially or values of other forms.
What is value? Here it is financial and things of importance
to people. Financial is the easy
bit. You make money through the internet
by selling unwanted items through eBay or become a sub-merchant there, use
sites like online classified for your small business, use eCommerce to sell,
trade in shares of internet companies, work in one or start one. Wish you were an early staff of
Facebook! If you are a good gamer, you
acquire online assets and sell them for real money. Write a well followed blog and watch Google
contact you to share advertisement dollars.
There is even a cottage industry where you get paid to hoodwink Google
by posting links to selected websites to increase their search ratings but
that’s a bit like some Wall Street bankers.
You can use online publishers to try to sell books you have written or
go viral like Justin Beiber on YouTube and then monetising it. There are a thousand more ways but you get
the idea of leaching on the internet for financial benefit.
There is indirect
value of our using the internet. What is
the value of using Skype to video chat with your granddaughter in Beijing? Besides cost savings since it is free, which
also make the conversations more frequent, what is the value of family
cohesion? It is the characteristics of
the internet and how it operates that new worth is formed. Looking for a job or being found for a better
paying job through LinkedIn? I
personally know a friend who found an investor through a friendship first
forged through his fung shui blog. I
think most of you have similar personal experiences as well.
The social aspect
is harder to articulate but things of meaning to people are a good start. There is value in connecting with other
people, finding new friends, new relationship or maintaining old ones. We all know of friends who found spouses
while chatting online. There is much
value with communities of families, many spread across the globe and
maintaining family ties to several degrees.
How many of you have asked old friends for their Facebook handle during
old boys gatherings, the previous means for large scale social gatherings of
former school buddies? Getting back in
touch with a large group without social media would have been difficult. There is value in expressing oneself or
gaining other people’s attention, once a difficult endeavour and now only a few
keystrokes away. There is personal
satisfaction contributing to society by joining a volunteer organisation but
those who prefer something less physical could contribute to
onlinevolunteering.org (of the United Nations) and a whole host of similar
online initiatives where you sit at your home computer . In the process you are
self developing. Share your experiences
online so others can learn from you. And
an active retiree is less of a burden medically. While these are mostly everyday activities,
online or offline, the social experiences are magnified through the ease of
connectivity, low cost and the networking effect of the internet. Values created through social behaviour have
been around ever since the hunter gatherers but over the internet, it has taken
a worth of its own.
Then there is
indirect career advancement. When a
contributor of an open source software project downloads its code to check for
errors and scrutinise its performance, he is actually making himself a better
programmer. Partly it is his
interactions with the other volunteers.
Because by nature only the passionate will ‘waste’ such time, it normally
attracts higher performers. Merit begets
merit which increases his career worth and thus salary. With the open source model being adopted
beyond its software roots to producing other goods and services for companies
such as BMW and Goldcorp, a Canadian Gold mine, it is evolving into an economic
model of the information age. A future
column will examine this.
There is
symbiosis. Today when you carry out a
search, access a portal, pin something to pinterest, blog, create an entry in
wikipedia, make a comment on social media or even use a free email service,
value is created for the websites, the vendor, while consumer benefits from the
free service. We gain even more for if
done in masses it produces a richer online experience for everyone. Quality of content in a wiki is improved,
better search results, better chances of finding someone, a better package tour
deal or find better bak kut teh. If you
were an early Google investor, you would already have monetised such
values. These activities lead to Big
Data, briefly described in the first article of this column and a whole new
area for economic activities. Big Data
will transcend online service providers to any organisation using the internet
to reach out to its customers.
Interestingly because data now has value, the traditional relationship
between the consumer and the vendor is altered.
Consumer value has increased.
Previously it was more a one way street, whatever the marketers say; the
vendor produces a product, we simply consume.
Would this change how marketing is carried out?
The ease to ‘let
fly’ online is probably the single most important producer of value. Don’t like something or think something is
missing, create it yourself. There may
even be an audience for it. Unlike
pre-internet, the connectivity means the like minded 0.001% among the billions
can locate your site and finds it interesting, however strange someone else may
think of it. Ideas are weird only
because it is not yet common. There is a
difference with 0.001% of Singaporeans compared to 0.001% of the global
population. If it doesn’t, so what, the
cost and effort to do this is low. This
dictum has created billionaires.
Just-do-it captures its essence.
The 0.001% may turn out to be 10%.
Citizen cameramen bother to do so because it is simple to post videos of
anything that catches the eye of a passer by onto YouTube so why not?
They are all
greased in part by the open culture of the internet which provokes a sense of
freedom to do things. Or simply to be
entertained, any time (unless you are working), in anonymity or authenticated
that is so liberating, fuelling creativity, a high value activity. Volunteerism was the bedrock during the
formative years of the internet, now this culture pervades the online
consumers. Of course there is also a
dark side (subject of a later post) or negative value, since society is
interwoven into it but the openness is a defining character of the internet and
thus defines its business model.
The treatment of
values has been lengthy. This is because
the internet business model is able to monetise social and the other
non-financial values. While such values allude
to benefit businesses, such methods can as easily be used by governmental and non
governmental entities.
The next post
discusses how values are captured.
LinkedIn – dr tommi
chen
©Chen Thet Ngian, InternetBusinessModelAsia.blogspot.com
(2012, 2013). Unauthorized use and/or
duplication of this material without express and written permission from this
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