Wednesday, 29 May 2013

internet business model Part 3.1; of rules, methods, character, systems and economic models

[This is a re-post (originally posted on 29 Dec 2012) with minor edits, deleted the original post by mistake.]

How are the values captured?  Its globalness, huge user base and ease of use, its culture of openness, simplicity and of peering and the low cost nature of services on the internet are some of the fundamental manner of the internet that facilitates value capture.  Values are also wrought through connectivity, its speed to do this and the ability, easily and cheaply to create one-to-one, one-to-many, one-to-really many, many-to-many conversations.  They can be dynamic or static.  Specifically, methods derived from these characteristics such as crowdsourcing, websites, gaming, blogs, micro-blogs, wikis, social media, mostly free for consumers to use, does the work.  They are further enhanced through methods like mashables, web services.and open platforms. 

{In blog or book, dedicate a chapter to creating values….The values could be in terms of financial return, social capital, knowledge, better services, self-development, productivity, innovation and the like….economic value, economic production…}
Let’s now move on to the ‘rules’, starting with the obvious ones, realised during Internet 1.0, roughly a decade before 2000.

Directness and immediacy while really characteristic can be re-dressed as ‘rules’ in that they can explicitly be used for profit or value creation.  Directness was used during that first phase of commercialisation bypassing traditional middleman as demonstrated by Amazon, birthed in 1994.  Others such as peering will not be covered here except to mention that peer to peer sites like Napster also used directness in their business model but it is known more for using it to bypass existing laws! 

An aside.  While the lawyers have won, it does not mean this model is dead.  Obviously patents are still relevant today but many of these laws on copyrights and intellectual properties may prove to be archaic in the years to come for informational products.  Intellectual property was an invention of the industrial age to encourage innovation but hairline cracks are showing.  Referring to the patent war (among Microsoft, Apple, Google, Facebook, Yahoo), Steve Wosniak, co-founder of Apple in a recent interview with an international news channel found them incredulous.  In fact, they are now blatantly anti-innovation especially when applied to online creativity and runs counter to the very reason it was created in the first place.  It has to start breaking down at least with the online industry because many websites, including yours is likely infringing on some of the razor-fine patents awarded to the early players.  The patent lawyers, desperate companies and patent trolls are at a stage similar to the bankers of 2008 as they seek to exploit regulations, too close to the edges.  Do not be surprise if a troll come knocking at your door.  Have a leaf ready!  A newer open model may eventually win the war as we move deeper into the information age.  In this new world of openness, the original aim of such laws to foster innovations is now counterproductive.  Flames expected! 

Getting back to the rules, Amazon which started as a new generation middleman re-selling books is moving towards direct printing of books from authors through their catalogues.  Craiglist facilitates direct trade between the buyer and the seller without any commission except for job postings.  Immediacy is used by Foursquare as it encourages consumers to broadcast the restaurant they are dining in, for example.  With, consumer broadcast purchases via a "bought" button that advertises their shopping habits to friends instantly.  Twitter is of course the poster child for immediacy and directness.  News is fresh though sometimes flawed.  As a news source, it is work in progress.

{In the book, explain direct and immediacy since here examples are used to ‘explain’ them}

Post, internet 2.0 ‘rules’ such as crowdsourcing and co-creation became more obvious as content itself began to play a direct role compared to facilitating eyeballs for marketing dollars.

To crowdsource is to coerce consumers to do things, out of their free will and mostly at no cost for a website or a project.  They have to have a large enough scale, be easy to use and cheap to participate.  It has to have a compelling case.  Wikipedia for knowledge is a good example.  It is so effective that the results compares to the encyclopedias.   Facebook’s data is almost totally crowdsourced as we unwittingly feed data to its factory simply by posting comments and making social conversations.  Reddit crowdsource items of interest and lets the readers vote on the discussion topics, becoming a facilitator rather than the traditional business model of close engagement.  This in effect identifies issues that most interest the community, again against the wisdom of traditional models ‘we know better’, letting the crowds decide.  This leads to another sub-rule or rather method-like ‘intelligence of the mass’ that only the massively connected community of the internet can bring about.  I’ll leave details of this to the blog but it is self explanatory.  Most web 2.0 companies utilise crowdsourcing in one form or another.  So should the traditional companies and organisations; it improves productivity, enhances customer relationship, improves the product, lowers costs and innovates.

Applying it to hotels, crowdsourcing is not new.  Hotels traditionally use an evaluation form for rating.  But online, hotels have included online comments (increases the amount of comments because guest now have the time to do it at home), guests created videos and ratings for all to see.  Don’t ask me why they bother, maybe it is the 0.001% effect of masses or it is so easy to upload after capturing the videos for their own consumption that they might just think “let’s just do it”, others may as well benefit.  Instead of using it for internal planning, some hotels have now transformed it into a business activity as a marketing tool.  Many local hotel websites I have browsed are internet 1.0 design, essentially static with online booking and nothing much more, seeming an afterthought.  If the internet is fully engaged, they will improve their sales.

Crowdsourcing can be likened to Henry Ford’s creation of the factory moving assembly line.  Ford massively upped efficiency (8x) and as others adopted it, raised global productivity, one of the great innovations of the industrial age.  In the information era, factory lines are the internet lines, the factory workers are us, consumers of information globally.  Like-minded crowds create informational products for global consumption compelled by the sites.  The factories of today, Google, Facebook, Weibo are generating profits organising this though you would not think so after the crash with such an atypical business model.  For other forms of economic production, think social media and its thousand of clones.  Think Wikipedia and its thousand of clones.  Think of the blogosphere.  Think of the open source movement.  Instead of factory workers, we the consumers are creating vast amounts of content (conversations, knowledge, designs, software), mostly with no expectation of remuneration.  The beauty of this conundrum is that people will continue to consciously and inadvertently provide this freely because actually we do get something in return.  Will you stop using LinkedIn, Yahoo Messenger, free email?  This is an age where society (and websites) compels people to do things that are useful (advice, information, volunteerism) without being paid for it.  Society does derive value from it, just that they are not necessarily monetary.

But who owns these cooperative efforts and the data?  This is the subject of the next blog post.

LinkedIn – dr tommi chen 

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.

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