Tuesday, 1 April 2014

Datarisation; an intriguing internet phenomenon

Noticed the phenomenon when the internet model is applied to businesses whose core products can be digitised?  Music, video, tv, radio, books, phone calls, sms, software all have their value reduced, transforming the sectors in the process.

·         phone calls/sms are now much cheaper than before the internet and heading towards free
·         eBooks are cheaper
·         software (open source) is gratis
·         since Napster, music prices have been re-priced lower, perhaps right-priced

When an article be it voice, video, music, text or code is transported over the internet, that item is data-rised into packets.  Once turned into packets, the network does not differentiate much between the types.  To the internet, they are all data.  Once datarised, the value drops.  It seems content is shorn of its makeup (it doesn’t care how it is made) turning it into simply data.  A different business model can then be applied.  Aereo seems to use this principle in its business model to stream tv over the internet, in the process reducing consumer cost.  And voice, valuable in traditional telco industry is now becoming free (in transition, the value is not zero but decreases).  The economics of the industry seem transformed.

The impact of datarisation is massive.

Once datarised, the product is instantly global, the potential reach considerable.  So are the competitors.  It is easily distributed so traditional distribution costs disappear.  Internet business ‘rules’ if applied can now transform entire industries.

Like the music industry.  Napster was a key perpetrator causing the price of music to go down using the peer-to-peer business model.  Music shouldn’t be free but it ought to be cheaper now that it is datarised, reducing the cost of distribution and reaching more.  Likewise the tv/video/movie industry is transforming right before our eyes.

The peer-to-peer business model explained:

The telco industry is another.  With traditional voice datarised and revenue disappearing, telcos is being transformed.  Very simply, the future telco is the ISP.  Somehow I don’t think the incumbents see it this way.  Instead of innovating in the new internet economy, they seem intent to turn the internet back to the old telco model so they can control the ecosystem!  Trouble is, whole economies are being held back by this act as surely the digital economy will increasingly take bigger chunks from a country’s GDP.

Datarisation of software in the form of open source software (and cloud computing) has been transforming the traditional software industry.  It is really a services business now.  The next few years will see re-sizing of the current giants of the old industry.

The traditional software industry is in the process of transformation.  Datarisation of software in the form of open source software, cloud computing and whatever else is coming is the cause.  The next few years will see re-sizing of the current giants of the old industry.

Even sectors dealing with physical products but are based heavily on information is similarly impacted such as travel agents.  Money is another.  But I’ll stop here and end with this. 

To the internet (network), they are all simply data.  It doesn’t know how they are gathered, created or processed or the size of the eventual recipients.  It doesn’t care.  It is agnostic!  So in this sense datarised content is like a newborn.  It depends on the caretakers to create more out of it or not.  So music is free through some sites.  These caretakers may not care about monetisation.  Or it can be priced cheaply through iTunes.  But unlike the past where music is tightly controlled, it isn’t now with datarisation.

Any traditional product that can be datarised will see its industry transformed.  More to come.

©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013, 2014).  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 internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.

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