Compete against the leader with further customer segmentation in the crowded market.
[+] The income from the coummunication service nurtures a community
Today, online communication services mainly include the earliest services, such as email and instant messenger (e.g., QQ and MSN), and the follow-on VoIP messenger (e.g. Skype) and P2P file transmission (e.g. BitTorrent).
When we review the figure raised by me which shows the community profit model, we can see that, in addition to the advertisement, the communication service revenue is also a key component of the Web 2.0 profit model.
Some companies started their business with free communication services and made profits from community services later. For example, Tencent QQ, the number one instant messenger service provider in China, develops its business operation from the right circle of the above figure to the left one, while those who ran free community services at the beginning have to depend on communication services, for example, the wireless value added service like SMS to make a profit. In this case, their business moves form the left to the right of the above figure.
From communication to community, or the other way round, it seems that those are two conflicting concepts. As a matter of fact, there is no conflict at all. The key lies in the “heavy user” I mentioned in previous sections. Users of the community service must be the heavy users of the communication service.
[+] Iron rules for the profitability of the communication and community service
Most QQ users, as instant messenger service subscribers, do not want to pay. Yet those who are willing to do so are just in its communities. The purpose of QQ Show, a community service based on QQ subscribers, sells virtual items to those heavy users. In other words, the iron rule for the profitability of the Internet-based communication and community service is:
“A% of the users of the communication service (most of them use the service to communicate with acquaintances) use the community service (and are willing to communicate with strangers), while B% are willing to pay for a greater rights to show themselves, including buying the larger storage, virtual items and wireless value added service.”
For both the communication service (among acquaintances) and community service (among strangers), there is another possible profit model: VoIP. For services like QQ, the VoIP service call to a landline of mobile phone could prove to be a revenue source just like Skype, although the policy in China is still not clear at the present time.
For community services, the simplest profit model is making friends via VoIP service. It is a brand new field, where a lot of models could be tried. For example, eBay, which has merged Skype, is trying to introduce the VoIP service into its auction service. To make profits out of VoIP services will become an important trend for community services.
[+] Unshakable leadership of QQ
Compared with the community service market, where numerous Web 2.0 companies are involved in the fierce competition, the instant messaging service sector has another landscape: the leader is far too strong to be shaken. The following figure shows the market share of the leading instant messenger commonly used in China.
With its admirable achievements during the recent years, Tencent QQ has proved to be unshakable, leading MSN Messenger, even the nearest competitor, by miles. It is remarkable that China’s Internet market is still witnessing fast growth of the subscriber number; therefore QQ has far better ability to attract new users than its peers obviously.
It is a characteristic of the instant messenger. Most users will follow their friends or acquaintances to choose the same instant messenger, producing a “Member Gets Member" effect. Eventually, the strong gets stronger.
However, the so-called “friends and acquaintances” is only a relative term. An Internet user might get into an environment, for example, the office where all those around use MSN Messenger, instead of QQ. In fact, MSN has been a favorable tool for office workers. Maybe that could be an opportunity.
[+] Instant messenger for making friends
The following figure lists the purpose of using instant messenger. Notably, 83.8% of the users use the service to communicate with friends and family members, proving my statement that “the communication service is used mostly among acquaintances.” That turns out to be an unshakable advantage for QQ, as most of the acquaintances of a person are using it.
Then there are 61.6% of the users use the service for job-related communications, which is the base of MSN, as well as a field that Tencent is trying to infiltrate. Although the proportion of QQ-loving young students has been on the rise during the recent years, they will get a job sooner or later, and then they would switch to MSN. That is an intolerable loss for Tencent.
Surprisingly, as many as 42.3% of the users wish to make new friends, i.e., get to know strangers through instant messenger. Let us ask ourselves this: among the 10-plus instant messenger brands, which one has the most powerful ability to “enable users to make new friends fast”?
If the answer is still QQ, it would render QQ almost invincible! If the answer is not so definite, there might be room for those instant messenger which position themselves as a “powerful friends-making tool” in this market. Let us wait and see which one will be the best.
[+] Compete against market leader with new market positioning.
We should not forget what we have discussed at the very beginning of this series: there is still a growth room of 60 million subscribers expected in China’s Internet market, for which every Internet company is posed to take a bite. What, then, is the profile of that group? My simple answer is: female subscribers.
Male subscribers have been the dominating force of the Internet market in China. However, with the saturation of the market, the proportion of female users will rise. Companies that cater for the taste of female subscribers (who have particular preference for beautifulness, artistic conception and feeling) will be able to control the steering wheel in the next round of development.
The market positioning, be it “special for office”, “special for making friends” or “special for lady”, is just an attempt to compete against the market leader through re-segmentation. The previous problem with the instant messenger market is the over-similarity of the functional positioning of every brand, which leaves users little impulse to change their service providers.
Besides, we can see that 42% of the IM users use the service to save their phone tolls. Obviously, to save the long-distance phone call expense is a great enticement and great enough for IM venders to add in the VoIP functionality.
[+] A large user base could be the core competence.
When Microsoft starts to beef up its MSN Messenger in China and Google announces its strategy to stride into this market by relying on Google Talk, Tencent start from a IM service provider, is continuing along its path of diversification to dig deeper in the fields of online game, eCommerce and even portal website.
Maybe the question should be asked this way: “if you were Ma Huateng, the CEO of Tencent, held 400 million QQ users in your hand, what would you do? Would you just let them chat to death?” For me, the answer is self-evident. I do not think there is anything wrong with Tencent’s diversification.
In the contrary, as I have stressed repeatedly, community service users are heavy users. Please remember it! Thanks to that characteristics, QQ users have greater interests in shopping, are more deeply addicted to online games and show higher usage rates of other online services than general Internet users.
From another viewpoint, we can see that, it is because of its huge user base that Tencent has been able to surpass the original leaders in many fields in the shortest time possible. When QQ is no longer the synonym of the instant messenger alone, the leadership of Tecent will be extremely hard to shake.
2006/04/23 - By Digitalwall.com - Way to
China Internet/Telecom )
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