Sunday, October 16, 2005

Another Picture of Digital Home Market

The home server will not be so marvelous as manufacturers have imagined.








[+] Mistake an industrial demand for the consumer demand.

Marketing staff in high-tech industry often have this headache: when a new product is introduced, it might create user experience which consumers never had before. How do you know that consumers will accept and buy it?

Because of that, however, the development of high-tech products is full of fun (of course, for manufacturers involved, it might be a tormenting life-and-death bet). Whatever it might be, the least a manufacturer should not do is to mistake a demand of the industry itself for the demand of consumers.

One example is the WAP Mobile Internet in 2000. In the midst of the dotcom tide, telecom equipment and handset manufacturers, in an effort to stop their sales from further declining, successfully persuaded telecom operators to enter the mobile Internet market. Eventually, an industrial demand is disguised into the demand of consumers, who won't come to pay the bill.

Today, another industry-hyped high-tech sector is about to move. The sector is called digital home, whose mobilization has extended to the hardware/software manufacturing, as well as the media sector, and caused the opposition and alliance of the traditional consumer electronics industry and the IT industry.

While manufacturers involved believe firmly that the vision is eventually going to become true, there are arguments about how it looks like. Here I would like to warn once again: it is dangerous for businesses to mistake their own demands for the demands of consumers. It is impossible to get a look at the real picture of the future development without knowing the difference of the two first.

[+] Now, the demand for the digital home is just from manufacturers.

The origin of the digital home sector is very simple: the slowdown in the market growth of the IT hardware and software industry. The practice of driving the market performance with product functions, which was effective in the past, is at a standstill, at least for now.

Consumers are no longer desperate about the CPU speed or upgrading software. A desktop with Windows XP would be good enough for at least two or three years, so long as it could enable Internet access and offer Office software.

Manufacturers, however, are trying to create space for consumers to buy their second computer, for example, a desktop at home and a notebook for use on the move. Essentially, the digital home is an attempt to create a market segment of a second computer in the sitting room.

For traditional consumer electronics manufacturers who have been tied to sitting rooms and kitchens so far, the market has been saturated for a long time. If, in this new digital home tide, they could booster their sales, or even introduce new changes to the long-stagnant sales rank list, that would be a good opportunity, wouldn't it?

For every additional computer installed in the sitting room, Intel will be able to sell one more CPU and Microsoft one more Windows system, not to mention all the other suppliers—the graphic card, sound card, hard drive, and memory manufacturers can all benefit from a share.

[+] Does the digital sitting room need a control center?

Hence the concept of the home server is proposed, holding that, in the future, all digital appliances will need a host computer, which can not only access the Internet, but also connect all the appliances (through wired or wireless links), store and deliver digital contents. The home server, of course, will allow remote control.

Obviously, this seemingly inevitable vision is a demand of manufacturers. The question is: is it a demand of consumers too? So far, there has been such user experience of connecting all other appliances into one, which is the TV set (it connects the audio system, the DVD player and the game player).

Is the home server going to take the place of the TV set, or becomes a peripheral product of the latter, or to turn the TV set into just a display panel? If it is the first case, the home server must have a built-in TV. So far many products have been introduced with the aim of integrating the TV with the computer, but none is successful because of the problem of the operating interface.

For the second and third cases, the home server is nothing but a network hub plus a keyboard. It doesn't matter at all whether it is placed at the sitting room or not. Let's take another viewpoint. It is better to connect the computer in the study with the TV in the sitting room through wireless links, isn't it? If so, there's no reason for consumers to buy a home server.

In addition, we all believe that digital appliances should be networked. Yet there is another scenario: the digital appliances are networked, but not through a host. In other words, if there's a standard that enables the networking and data exchanging among the digital appliances, there's no need for a host.

[+] The imagination of a digital home

IT manufacturers have made a lot of efforts to make the computer an essential part of the sitting room. In the first place, the interface is reduced to contain only icons. And then the keyboard and mouse are replaced by the remote controller, in an assumption that this would be easier to use and fit better with the habits in the sitting room.

Yet underneath this mindset is a fundamental contradiction: to become the control center of the household, the home server should have powerful function, far more powerful than what a remote controller could handle. Too simple to enable the complicated functions, remote controllers have become a big trouble for digital appliance users.

One crucial challenge is the fact that the user will have to handle the computer two meters away, which makes it difficult to read things on the screen. I tried such a product before and was very eager to throw away the remote controller and grab a keyboard. But I found soon that I had to look down at the remote controller and up at the screen two meters away again and again. That is enough to drive the user mad.

There are two possible solutions. The first is to move the host back into the study, give it the keyboard and mouse back, keep it at an appropriate distance from the screen and get it wirelessly connected with other appliances. The second is to make a full-functional remote controller with a keyboard, a wheel (to replace the mouse and be handled with a finger), and a LCD display, as a mini-sized PDA.

In other words, consumers may control other digital appliances by looking at the display of the remote controller. As a matter of fact, we have seen such remote controller interface on air conditioners, and they fit perfectly with consumers' experience of using the appliance. The key of the digital home is the remote controller in consumers' hands, not a host at a remote end.

The home server will not be so marvelous as manufacturers have described. They will be nothing but a carrier capable of storing digital contents. It does not matter where they are placed. If digital appliances could be networked without a host, what consumers hold in their hands would be the real control center with preliminary computing powers. (
2005/10/16 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : It All Boils Down to Brand Names


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- Today in History



The Web 2.0 Revolution (7) Death of the Intermediaries - 2006/10/15

Another Picture of Digital Home Market - 2005/10/16

Corporate Website a Handful (3) Strategic Alliance Why? - 2003/10/12

Sunday, October 9, 2005

It All Boils Down to Brand Names

Competition in eCommerce will emerge from endless price warfare and head back to brand name cultivation.








[+] There will always be a lower price

Some while ago, on the occasion of a speech, I acquainted myself with an Internet start-up mom, who got her business up and running by auctioning maternity dresses on the Internet. She has got herself a reputation for good service and is doing just fine. Now this Madam Entrepreneurial is on route to operating a website that she can call her own.

In the world of online start-ups, this route, in fact, is a well-treaded one. Naturally, most would start with very little capital. After all, that's the beauty of Internet-based business. Business owners get to operate on a stripped-down platform to get access to a large number web surfer. That's how it goes. They start trading on the Net first using whatever platform already there and then picture having one of their own online store in the wake of some success.

Interestingly enough, maternity apparel as a product is not required either in large quantities or on a long-term basis. That is, she gets to do business with each of her clients during pregnancy only. The fact that each client has a business life expectancy of only 10 months gives her a hard time holding out as she is in constant need to locate new clients.

Besides, selling via e-Bay and the likes used to incur less cost as sellers could choose to sell their products one at a time, meaning they can back out anytime they want. Things get a bit tricky when one runs his or her own online store website as there is an underlying commitment for perennial operations. (Read: more choices provided, faster delivery, and higher inventory cost).

As if it's not bad enough, going it alone also means having to fend off price competition from new individuals conducting online auctions, to the surprise of many who have chosen marketing on the Net exactly having stripped-down cost and flexibility in operations in mind, just like this friend of mine before. It's a story of rags-to-riches turning against rags. Ironic, isn't it?

What happened to this friend of mine epitomizes what the eCommerce is like right now. The fact of life is that once on the Internet, nobody, be it large-scale online stores or small-fry auctioneers, can even get close to shaking price competition off their backs. Is eCommerce doomed? One can't help but wonder.

[+] Online shopping means low tag prices

Marketing people specialize in making simple things complicated unnecessarily so that they can squeeze more values out of a product. Dishonest as it may seem, it's what marketers must do to steer clear of price competition. If what's left of competition is pricing, what worth is of marketing professionals?

In the world of tangibles, pricing is less of a problem for shop owners as it's way too much trouble for consumers to even want to go store to store, aisle to aisle, or even rack to rack checking prices. That simply is not going to happen.

But that happens on the Internet as even those seeking to get a car can afford the time to go through the specs of all the cars within budget on the market before making the trip to local dealership or showroom for the actual buying. It makes a lot more sense time-wise.

When consumers can easily find something in all online shops, price becomes the only thing that makes a difference. In this day and age, loyalty is in near inexistence. The only thing you can count on is price, and that does not draw a smile from virtual shop owners.

Over time, shopping on the Net has become synonymous with shopping at bargains. That explains why one can hardly find any LV, Gucci, you name it, on the Net, since these brand names do not even go on sales much, not to mention debase themselves by rubbing elbows with cheap knockoffs on the Internet. They have brand name values to protect after all (They have got a lot to lose brand-wise).

Luxury items (garment, handbags, shoulder bags) are highly sought after on auction websites, but they are in extremely small quantity as marketers can scrape together only so many (or little, to be exact), and they are swept off by buyers the minute they appear on the Net for, again, lower prices than in the brick-and-mortars.

The truth is we have never seen producers/distributors of any of these elite brand names bother to supply to eCommerce runners. There is nothing you can click on to buy stuff s on their official sites. This is how much these elite vendors distrust the Internet.

[+] Say goodbye to price competition

For those who run small eCommerce businesses, steering clear of price war on the Net is easy, at least in theory. The key term is product differentiation. As long as your product is different, your price can be different. Period. The problem is it's hard to get something that different to sell on the Net. When you do, competitors imitate as soon as they can.

That leaves one with the sole choice of creating one's own brand. Many have been able to do so and build a reputation for which people come back to shop again. What's better, having one's own brand name means you get to name your own prices.

This strategy worked for another friend of mine, who started up a business on the Internet four years ago, when he chose to create a new aromatic essence oil brand name in stead of representing foreign ones. In just two short years, he was able to establish an unchasable lead ahead of peers.

For prestigious fashion brand names who take a dim view of Internet sales in the form of either fear or contempt, there is a way out. That is, there are answers to one's fear of what selling on the Net could do to harm channel prices, brand name values or outlet sales.

I suggest setting up a brand new sub-brand especially for the operations on the Internet. These products shall only be accessible on the Net, and yes, they should be cheaper to meet web shoppers' expectations. If anything else, they should take on a younger look to appeal to the supposedly young web-surfing generations.

All marketing activities boil down to brand names. It's just that simple. With a convincing brand name, you can thrust one type of shampoos down consumers' throats at a higher price than most and they won't even make a sound. That how magical brand names can be, and there is no reason why they won't work on the Net. (
2005/10/09 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : Crime and Punishment of P2P (2) Fire of Greed


Next : Another Picture of Digital Home Market








- Today in History



The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08

It All Boils Down to Brand Names - 2005/10/09

Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03

Corporate Website a Handful (2) Division of Labor How? - 2003/10/05

Sunday, October 2, 2005

Crime and Punishment of P2P (2) Fire of Greed

P2P is inherently decentralized, born with the possibility of infringement. And the records companies can never put up with this.








[+] P2P should remain non-commercial

With legal determinations around the world getting more adverse, it is expected that commercial P2P software companies which ignorantly claim that, "I have no idea about users' infringement and no obligation to stop them from doing so," will soon falling away.

If P2P software remains non-commercial, and anonymous engineers around the world keep on volunteering to update the software and open the source, the music/records industry can hardly find a real target of complaint. Just like in the myth, Prometheus continued to suffer on the mountain, but men can never stop using fire.

Is the records industry, which has the mighty power to wreak torture on the Promethean culprit, a victim or an inflictor? It is an interesting question. In the past the records industry considered itself the victim and accused that illegal music download had caused it tremendous loss.

The deep-pockets who are capable of dominating the world not only choke the development of P2P but also direct their charges to search engines. August 2005, seven major records companies in Hong Kong sued the biggest search engine in China: Baidu.com.

The reason: Baidu as a search engine, provides information of and links to illegal MP3 download websites. China has been the paradise of free music and movies, and Baidu just went public in the U.S., which made it a conspicuous target.

[+] Who should check on infringement?

If the disclaimer that, "I supply the software only and will not be liable for users' infringement," can't prevent a commercial P2P software company from a legal action, then it is to nobody's surprise that a search engine is sued even if it claims, "I provide search results only and will not warrant the legality of such results."

Such thinking can continue to develop. Take a telecom operator offering ADSL service for example. It can claim that, "I offer Internet connection service only and will not be liable for the legality of users' online activities." But the record industry companies can still sue it, and precedents tell that they have a good chance to win.

So how to eradicate the root of illegal music, where to start? If there are loads of providers/software engineers/crazy downloaders everywhere, then to start with telecom operators seems to be a solution once and for all. In fact, telecom operators do have all the connection records.

But, telecom operators have their own trouble, too. It can cause huge burden to the system as well as extra cost if ADSL users hang on the Net and use P2P software to grab music and movies all day long. Not so long ago, there were even rumors that telecom operators in China were about to shut out one of the most popular P2P software: BitTorrent.

Telecom operators in China now plan to change the way they bill ADSL users. It used to be a flat fee per month for all, now they want to charge higher monthly fee from high volume users. Suddenly we realize that the flat monthly fee scheme is based on the calculation of telecom operators that we users will not need that much bandwidth at all.

[+] The true face of records companies

Will records companies work with telecom operators to take away the fire from men? The truth is, telecom operators have tried hard to avoid such an outcome, because it means they will have to bear the liability for users' infringement ever, which may lead to tremendous monitoring cost and endless trouble of lawsuits.

Yet the records companies will never give up. Before, the atmosphere was more favorable to P2P. Seeing that there was little hope to curb P2P, some records companies chose to work with P2P companies and sought to incorporate them into the legal music download business and "to get the child once gone astray back on the right track."

If you believe this benignant face, you can be very wrong. The records companies join your side simply because they are incapable of doing the opposite. Once they become strong enough to fight back, they will do so relentlessly. P2P is inherently decentralized, born with the possibility of infringement. And the records companies can never put up with this.

In addition to the legal actions employed to frustrate P2P software companies/websites, records companies are also encroaching on the area of legal music download. Apple has over 70% of the legal download market worldwide. It used to sell at 99 cents per song, but now it is under the pressure of price hike.

Apple's suppliers of music files say that their current offer is under-priced, and that they wish to have more flexibility in pricing. That is, some songs may be priced a bit higher, and some lower. Apple has helped generate magnificent profits for these records companies, and now they are asking to raise their prices.

[+] P2P will continue to survive

What the records companies are asking for is not really price hike but price differentiation theoretically. Yet for those who are familiar with the capitalist market know that, price differentiation is the start of exploitation of consumers. Through price differentiation, businesses are attempting to reap every cent they can out of the consumers' pockets.

Steve Jobs, Apple's CEO, is one of the people who are too aware of the essence of the game. Greed. He sees it through right away. It is quite natural that records companies would think about implanting the rules of their capitalist game in the traditional music industry to the digital world, as they have finally mounted on the throne of power for the first time.

In any case, there is already clear direction about how the digital world should run. In the future, all music files will be encrypted and copyright protected to ensure that every cent is safely collected. As to transmission of music and movies via P2P, it can only go underground. The two modes will co-exist, but there will be no gray area in between.

P2P per se is a communication technology, but once it gets involved with the distribution of copyrighted music, movies or software, it gets stained. Yet there is no lack of smart people. Like Niklas Zennstrom, the creator of P2P software Kazza, he went on and invented Skype. He applied P2P technology to VoIP and successfully got rid of the harassment of lawyers.

My memory brings me to the year of 2000 when the fire of revolution just broke out from AOL; I tried the very first P2P software with excitement and imagined the infinite possibilities behind it. It is true that Zeus could not take the fire back from men, but he did possess the power to have Prometheus chained to Mount Caucasus and tortured as punishment. Well I think we still have a long way to go, my friends. (
2005/10/02 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : Crime and Punishment of P2P (1) Liberalization of Power


Next : It All Boils Down to Brand Names








- Today in History



The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08

It All Boils Down to Brand Names - 2005/10/09

Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02

Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03

Corporate Website a Handful (2) Division of Labor How? - 2003/10/05