The peer-to-peer business model, Part IV

“Peer-generated, peer-consumed”

Part I           What is the peer-to-peer business model?

Part II          How does it work?

Part III         Relating the p2p model to the internet business model

Part IV       Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

Impact

Let’s look at the impact of the p2p model; positives and negatives.

A company can use p2p to lowers costs, improve productivity, innovate and to improve sales.  Perhaps augment its core business by tapping on the consumer economy or simply use it to improve business.  Primarily though, it is used to engage potential clients.  These were covered in part II and III.  Evidently, it cannot be applied to everything.  Those in the consumer space and where information is involved are candidates.

P2P creates a new class of business based on consumers, not consumption but production - the sharing economy.  This is good for the economy and jobs.  A new sector, there is much room to grow especially in Asia.  And for a change, the consumer benefits as well, monetisation of consumer resources can only be good for the populace.  P2P has given rise to a new consumer economy that should benefit any country.

But it threatens traditional businesses because they are being reimagined.  Not always though.  Because p2p creates an entirely new category of consumer-derived business, a luxury hotel chain could spin off a unit to handle less moneyed clients ala AirBnB model, thereby expanding its business footprint.  Similarly a restaurant could facilitate enterprising home cooks, perhaps by first accrediting them, to offer private cooks.  I’m sure there are better applications.  But some types of businesses will be affected, perhaps those in the traditional consumer businesses especially in the services sector to do with consumer resources; travel, tourism, banking, consumer services (taxi, real-estate, car rentals, insurance, home services).  The book industry could transform again, beyond the long arms of Amazon.

The middlemen sector, the basis of so many businesses and a huge part of any economy are especially affected.  While the internet is already causing them pain (it makes direct trade easy), the p2p business model in particular will transform it another level.  In a way, the new-generation middlemen are the online marketplaces but as this post explained (part I), they now serve mainly as an information business, not trading (but some still do).  That’s redefinition.

There is no doubt we are still in a period of great change.  We are moving away from the industrial age deeper into the information one.  And as anything to do with change, it is disruptive.  The sharing economy is another agent of change.  This consumer-to-consumer business will have many sectors reimagined.

Economically speaking, there must be transformation since p2p adds an entirely new producing class, the consumers.  One day it may contribute to the computation of a country’s GDP.  But this can be taken advantage of, even now.  The jobless youth, a seeming recent phenomenon in many parts of Asia would have another option for work.  And to further the domestication of the economy, the middle class and below who have the most to benefit can earn extra.  But first they must be given the opportunity.  With p2p marketplaces still a novelty in Asia, agencies could promote this sector while the lawmakers take an enlighten touch ie.mostly keep out of the way for these firms.  Besides production, monetisation of consumers’ spare resources can only be good as it better allocates use of resources.  Previously unusable personal resources can now be put to productive use.

In the next post, we'll look at how p2p can be applied by companies.

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

The peer-to-peer business model, Part III

Part I          What is the peer-to-peer business model?

Part II          How does it work?

Part III         Relating the p2p model to the internet business model

Part IV        Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

Contrarian but it works

applicable internet methods, rules and systems

Following from the previous post, the internet is the common link for p2p business models and enabler as it reduces friction to carry out business activities and scaling it to commercial quantities.  But it is contrarian.

The p2p method of production and business model based on the wimp of consumers is not obvious to a common person or to most businesses, not least in Asia. It seems to be based on hope and not something certain like Hertz stocking up cars for rent.  Managers like certainly and a level of control.  The internet model seems to be based on chance but in fact it relies on the 0.001% effect over the huge number of internet-connected owners of, say, cars.  This law of large numbers is based on probability.  And it works.  You only need a very small percentage of the like minded among the huge number of people online to kick something off.  [Previously they find it hard to find one another.]  Then the networking effect takes over, at least for those who got the approach right.  That 0.001% result in sufficient volumes to make p2p firms viable as going concerns and workable for conventional companies.

Directness, an effect made easily possible through the internet made the p2p business model viable.  A peer with spare resources is found and connected directly to another who wants to use it.  This effect reduces prices by removing layers off the traditional middleman who depended on non-transparency of indirect trade.  Each layer brings the price up.

Co-creation is a calculated method of crowdsourcing where a company can deliberately engage the crowd to co-create a better specification of a widget, for example.   Co-creation depends on a niche crowd around a platform fashioned to seed their engagement.  A firm could use co-creation for example by seeding chatter between peers and then mine, say, their likes.  Obviously this cannot be used on everything and initiatives should be around consumers.  Things that appeal to passion are more likely to work.  Fans of an author discussing his works could lead to more sales for a publisher.

The following, while not specific to p2p models are nevertheless universally deployed by them.

Relentless focus on user experience.  Businesses always say that customer service is critical but the new generation of internet companies seem to have taken it to another level...make it three.  Just compare the user interface of these online companies to the websites of traditional firms.  I think this is to do with the extreme competitiveness of the internet industry where your competitor is only a click away.  Or it is just the business culture of the internet economy since the pioneers of the sharing economy have little competitors.  Probably both!  This leads to another, the principle of simplicity.

Again notice the zen-like minimalist look of what I call web 2 companies.  It gives the impression that they are facilitating users who want to get in, execute then get out as fast as possible.  No distractions.  Compare this to the complex web designs popular with the first generation of web companies (and most of today’s corporate websites).  These were influenced by the traditional media design where white space cannot be wasted.  Web 1 firms’ design model is to ‘keep a viewer on the site as long as possible’.  Page hits so popular pre-2000 is no more the best means to value advertising rates and then this should only apply to media firms (but seems everywhere).  Strange that you still see the hit counters in many corporate websites even today in Asia.  Simplicity is an important aspect of user experience.

Because the environment now is voluminous, p2p marketplaces use the search model made popular by Google.  But this is inevitable.  Hertz could list the cars for rent because they have limited stocks.  Not so with peer owners since the mass means that the traditional directory (look up) model does not scale.

There are other internet eco-mechanisms relating to p2p that can be applied by companies including immediacy and open platform.  Understanding the culture of openness is another.  It is basic with the p2p model and many iconic web companies seem natural with it.   But I will end this topic here.

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

The peer-to-peer business model, Part II

“P2P has given rise to the consumer economy.  Rather than just consuming, the consumer now also produces”

Part I          What is the peer-to-peer business model?

Part II         How does it work?

Part III         Relating the p2p model to the internet business model

Part IV        Impact of p2p

Part V         How businesses can use p2p

Part VI        Issues and what’s next

In the beginning

My own recollection of peer-to-peer was during my early days designing computer communication systems in the 1980’s.  The excitement then was the invention of LANs (the networks now used in your office) that created an alternative to the then prevalent computing model of mainframe computers.  LANs work by allowing computers to interact among themselves as peers directly.  It is opposite to the mainframes which controlled everything through the centre.  It’s like walkie-talkie (direct) compared to mobile phones (through the telco).  This difference in approach, interestingly, is reflected in the counter culture that created the p2p model.  Recall that Napster was viewed by some as libertarian and liberation from the music honchos who controlled the music industry, through the centre.  This is mentioned because the emerging p2p model is challenging traditional businesses breaking down this old model.  AirBnB added a new category for travellers looking for cheaper accommodation (people’s spare rooms) and while not a direct challenge to hotels, it nevertheless reduces the market for hotel rooms.  Only six years old, they are now valued around USD 3 billion.

In fact the latest internet start-up wave today is p2p firms, the online marketplaces.  These entrepreneurs have brought p2p to mainstream businesses, disrupting them. 

No question, many traditional businesses will be transformed.

How does p2p work?

First, the p2p model uses information to achieve an objective.  With the marketplace, no stocks are involved (there are obviously exceptions).  Instead the peers (consumers) with spare resources other peers may want make the fact known and where to find them together with more information on the resource (physical assets, skill, a design, etc).  It is an information business.  Similarly Google’s PageRank method stores the links to content on websites, which are themselves peer ranked.

Second, p2p is a crowdsourced model.  The buyers, sellers, designers, users are from crowds of consumers.    In fact, in using p2p, firms use peer resources and peer production from these crowds to produce the deliverables, be they information about the goods or services to be sold, widget specifications or even influence.  This form of peer production has little of traditional costs and what is more, the ‘inventory’ is mostly self-organised but obviously into templates set up by the firm.  This use of crowdsourcing improves productivity, reduces manpower costs.

Third, it is the business for and between peers of consumers ie. consumer-to-consumer, of websites, etc..  And to be sure, it is different from the other C-to-C business, social media.  Facebook’s business model is based on social conversations while p2p is commerce, directly.  More specifically, the p2p business model is based on peer commerce that depends on peer resources, peer production then peer consumption.  Peers are even used in sales through peer ranking.

Fourthly, it relies on peers especially consumers with spare resources (this fact means there is wide input price elasticity and usually result in lower prices).  An unused car in an office car park can be monetised.  A passionate engineer may like to contribute his skills on worthwhile endeavours in his spare time like a hobby.  Napster uses the spare compute capability of peer PCs over the internet.

The internet is obviously the common link and enabler as it reduces friction to carry out these activities and scaling it to commercial quantities.   We’ll next take a closer look at this internet model by relating it to internet’s mechanisms.

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