Web 2.0: the process of user involvement, connecting and sharing to achieve the economies of scale.
[+] What's new for Web 2.0?
The so-called Web 2.0 has its origin from the community service. However, in terms of its definition, different people have different versions and none of them can convince any other. Actually, the "user involvement, connecting and sharing" spirit of Web 2.0 claimed by some people has already been there in the Web 1.0 time. Therefore, it is neither a new concept, nor something to be marveled at.
Opponents could always say: "you guys belong to the 1.0 era are out of date in this new time. You are knocked out by the DotCom tide, so you cannot see 2.0 is an unprecedented innovation. " However, when it comes to where on earth the innovation is, they just murmur in a way as if their mouth is full of stuff.
That is why at the very beginning of this series, I used the term community, instead of the so-called Web 2.0. Despite some of its innovations on technology, Web 2.0 is not an invention spiritually, because it is within the coverage of a simple concept: the community service.
Nevertheless, there must be something new; otherwise there could not be excitement around. As most versions of the definition of Web 2.0 are based on the spirit and process of user interaction, no significant difference can be told from 1.0. In my view, Web 2.0 should be defined as:
"Web 2.0 is the process of user involvement, connecting and sharing to achieve the economies of scale."
[+] Collective production, joint property ownership
If not for the smell of money, no player would be so excited. In the past, community services (e.g., forum, chart room and BBS) are regarded merely as only accessory parts, or unavoidable operating costs. (The bandwidth cost of such service is very high.)
Collective involvement is not the key point. For business operators, there is an opportunity now to turn such involvement into the economies of scale which are the foundation of the expansion and development for Web 2.0 in the long run. To give a more vivid description of this economic activity in the cyber space, I would simply say:
"The Web 2.0 economy is communism."
From the viewpoint of Web 2.0 service providers, it's just like "I provide the land and you plow it." The difference lies in the harvest: the product is the intellectual property right (e.g. texts, graphs and audio files). The property right cannot be private in this context. Otherwise how could Microsoft request the users of MSN Space to give up their intellectual property rights with a swagger?
If the property right cannot be privately owned, then what do users get? As I mentioned before, the task of the community website runners is to create applause for users, which could be seen as a part of the reward. Users work with sweats and efforts on Web 2.0 sites not for a living, but for expressing their feelings, relieving themselves and earning reputation.
[+] Web 2.0 users are "heavy users"
For Web 2.0 business operators, the most important task is to find the involvement of content producers with high production capability. To achieve this goal, the business operators have to provide good tools (for example, large-capacity photo albums). Of course, the cost will not grow without limits. Users have to pay for better tools.
That is why users or participants of the community service are called heavy users in marketing theories. Compared with ordinary Internet users, that group of people is lot more active and energetic in many aspects, including the Internet surfing hour and consumption power.
It is also the reason why I believe, for Web 2.0 business operators, the key of their revenue lies in the minority (the heavier users). The vibrant energy of those people will spread out to other people around them and, therefore, produce the economies of scale.
However, that leads to another question: since the users of Web 2.0 are content producers, should they, in addition to applause, get something real in return, which would directly or indirectly stimulate their enthusiasm for production, so that they could produce something better?
[+] Cases related to the profit model of Web 2.0
Can anyone making a living by writing Blogs? The Bloggies 2003 Lifetime Achievement Award winner Jason Kottke resigned in 2005 to be a professional Blog writer. One year later, he gave up the public money-supported career and admitted that he could not attract enough readers. How many readers, then, does it take to support a Blogger?
On the Internet, some people are willing to pay, and some are not. In fact, the proportions of both types are largely fixed. For example, if one in every 1,000 readers is willing to pay a monthly fee of 1 dollar, guess most professional bloggers will not be able to support themselves.
If readers' payment is not enough, then how about ad income? Hong Bo, titled as "The Top One Blogger in China", signed an advertisement sponsorship contract with hexun.com, which became a classic case, although he decided to quit later on.
When companies started to contact Xu Jinglei, the first blogger in China obtaining a visits of over 10 million, to post advertisement on her blog, her blog service provider Sina.com said they had no plan for commercials on the blog.
The "landlord" does not give the "peasant" the green light for making money like that, because the landlord can get nothing from it.
[+] The advertising model is one of the best models
So many cases, so many trials, each one of them hits the contradictory point of Web 2.0's economies of scale: the user is actually the producer, but his/her production value cannot be measured; the economic system is dotted with vulnerabilities which render it impossible to be perfect.
The advertising model is said by some people to be one of the many models that reflect the value of Web 2.0, but with the lowest value. I could not agree, for the advertising model is the only and best model to enable the segmentation of the benefits and risks among the producers, landlord and advertiser.
As a producer, would Xu Jinglei be willing to assume the responsibility related to the effect of the advertisement? Or, even if she is assured that she does not have to, would she sit at ease if the subject of the advertisement does not sell well? Could she write as freely as she does when she is paid for it? The most fundamental question is, does she has the right to make deals with the intellectual property right that she has no idea whether it belongs to her or not?
There needs to be a third-party organization to assume all those risks, responsibilities and even psychological burdens. When selling blog ads, the organization does not need to tell the producer (blogger) who buys the advertisement right of which blog. It could be a new organization, or the "landlord" itself.
[+] Let the market decide the price of blogger's works
How to decide the price of blog ads? The best option is to give the power back to the market and let the market decide the price. In this case, the rank bidding advertising model, which first appeared in western countries, is the most ideal means.
Advertisers would decide themselves how much they want to pay for each click of the ads they post on Xu Jinglei's Blog. As there are many companies vying to buy, just let them bid for it and see how much they are willing to offer. As all companies have their ad budgets and operation cost considerations, the price would eventually fall into a reasonable range.
The one responsible for collecting the money is the third-party organization just mentioned, who, at the same time, is also responsible for ad sale. After deducting its own portion, the organization should share the rest with the blogger and the "landlord". To make a realistic comparison, the organization is just like an agent that is responsible for handling everything of a movie star.
How about millions of other producers of Web 2.0 who are not lucky enough to get into the spotlight? Well, they could still depend on the income from the keyword advertisement. The practice has already been taken by Google's Blogger.com. Of course, it is difficult for writers with a tiny reader base to make a living through this means.
[+] Production is converted into consumption with virtual currencies
What the producer gets is not always real money. In addition to the feeling of success and fame, the accumulation of virtual wealth is a kind of reward too. That is why the virtual currency is needed for the community service. The Mop Currency of mop.com, one of the Top 100 Web 2.0 companies, is a good example.
Such a seeming rewarding means proves to be effective. Users would have the momentum to accumulate the virtual currency so long as a web site could develop more functions for them. For example, one of the methods that some web sites adopt is to allow the access to some functions or zones of the web site only for those with a certain amount of virtual wealth.
However, an economic system that allows popular bloggers to get their shares from ad revenues, while leaving the majority out in the cold with only marginal cash and virtual currencies is not a healthy one. Virtual currencies would be nothing unless they could be used in the real world, for example, converted into coupons for online shopping.
Therefore, users are transformed from producers to consumers, who, with the consumption power derived from their virtual wealth, would eventually stimulate the development of the economy. That is the Web 2.0 economies of scale system that I have envisioned. Only in that way could Web 2.0 be a business, instead of a mere concept.
2006/04/16 - By Digitalwall.com - Way to
China Internet/Telecom )
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Predictions on China Internet Market (7) Web 2.0 Economy - 2006/04/16
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