Web 2.0 Finale (2) Websites With a Specific Culture Can't Grow Big

The user-base size of a Web 2.0 website is determined by the social class it targets at.

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[+] The social class a website targets at determines its size

The take-off of Web 2.0 has drawn in a huge number of startups; however, the prospects no longer look so rosy. Lots of websites are on the verge of closing down and are struggling to survive and make a profit. It becomes more difficult to get funding because venture capital in Asia is losing interest in this business.

The market situation has generally settled. In China, websites with over ten million users can expect to get funding in the third round, but they are also facing the challenge brought by major Web 1.0 websites interested in the Web 2.0 market. For those with only several million users, it's unrealistic to expect fast user growth; operators must strive to make profits.

In Taiwan, the no. 1 portal in the market, Yahoo! Taiwan, is playing a very powerful role, making it difficult to survive and prosper for small Web 2.0 websites in the already cramped market. Yet, at the same time, there are some established online community websites that are successful and making good profits.

Why is it so? I mentioned before that the rationale of Web 2.0 development is based on sociology. As such, the size of a Web 2.0 website's user-base is very much determined by the social (or cultural) class it targets at.

Web 2.0 websites grow along with the expansion of user's social networks. Users bring in other people whom they meet in their daily life, including strangers or acquaintances. As more and more people of the same class gather at the website, it will become more difficult for those who belong to other classes to join.

Once the initial user-base is formed, a website operator would study these users' way thinking and social behaviors more carefully so as to retain and encourage them to bring more new users. This consequently reinforces its focus on a specific cultural ambiance or social class, and the cycle then goes on and on.

[+] The management team's social class determines the size of user-base

To observe the development of a Web 2.0 website, one needs only to look at its initial user-base. Google's social networking service (SNS) website Orkut has got very popular in Brazil unexpectedly and this has made it difficult for users from other countries to join. Look around and you can hardly find anyone using Orkut, even though we are all Google users.

The biggest online community website in Korea, Cyworld, attempts to enter the US market. Its initial target users are white Americans; however, it turns out that the website is more appealing to young Asians. The reason is simple: the design of the website's interface, including functions and the overall feel, is more friendly and attractive to Asian users.

Another example is Friendster, a SNS website, which is very popular among Philippine users. Again, users from countries outside the Philippines would find it not easy to become a part of the community. You can call it cultural barrier. Look closer and you'll find that although transnational Web 2.0 website can reach users all over the world, it is always those who share something in common would flock together.

In China, 51.com, a Web 2.0 website, started from Internet cafes in provincial cities to build its user-base, and now it is struggling to draw in white-collar users in major cities. On the other hand, other Web 2.0 websites also meet difficulties in entering provincial cities. The above cases illustrate the effects of cultural ambiance and social classes in the real world on the user composition of Web 2.0 websites.

Those Web 2.0 websites targeting at the "upper classes" (the white collars) are sure to have limitations 0n user growth. Particularly in China, white collars, mostly living in coastal areas, make up only a fraction of the population. It would be a tough challenge for Web 2.0 websites aimed at this particular group of people to grab more than ten million users.

In Taiwan, two leading social bookmarking websites, HEMiDEMi and funP, have very different user communities in terms of their cultural ambiance. While the former is more attractive to elites, the latter is more proletarian. Yet both websites are focused on the class of white collars, and their performance is not as good as established grassroots online community websites in terms of traffic and profits.

If you move a step forward, you'll find that by looking at the founders of a Web 2.0 website, you can almost tell what the website will be like. Founders will naturally apply their way of thinking, which is surely conditioned to the social class they belong to, to developing online communities.

[+] Cultural products are for niche markets that never grow too big

Instead of aiming at a specific social class, some Web 2.0 websites would target at a group of people who share the same interests. There are online communities devoted to subjects of comics, sports, literature, book reviews, or food and restaurants.

These communities will definitely be conditioned by the size and scope of these social groups. For example, how many comic fans can you find in China? How many people in Taiwan love good food? What about the market prospects? In China, it may be feasible for website operators to cater for a specific niche market, but it may not be sustainable in Taiwan.

Why are there growth limits on Web 2.0 or online community websites? In addition to the conditioning of social classes, cultural products are for niche markets instead of for mass markets. A website that has specific cultural ambiance can never grow too big.

Does it mean that only websites that have "no particular culture" can grow big? By "no particular culture" I mean that there are no specific cultural features that can be attached to the websites. It is not about high culture versus vulgar popular culture. What I am trying to say is, as long as a website can be linked to a specific culture, there will surely be people who don't like it. You cannot please all and, as a result, the website will never be able to grow too big.

This is such a dilemma: an online community is always formed by people who are attracted to its cultural ambiance and who share similar interests. These people gather and stay and naturally develop a certain culture. Consequently, people who don't like its cultural ambiance go away. Many established online community websites remains the way they have always been for years without much change.

Surprisingly, you may find the solution in Web 1.0. (
2007/12/30 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Web 2.0 Finale (2) Websites With a Specific Culture Can't Grow Big - 2007/12/30

Web 2.0 Finale (1) An Inherent Problem Unsolved

Why the user churn rate of Web 2.0 websites is so high?

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[+] Users' typical Web 2.0 experience

Mr. X is an ordinary white-collar worker. He uses the Internet to search information and contact customers at work, and after work he may spend some time on the Internet for leisure. The Internet is a medium he uses frequently in his daily life, but it is not particularly important in his life. At least he is not a person who hangs on the Internet everyday.

Recently though he has been getting emails with subjects like "you have been added to somebody's friend list" and the like. Clicking the hyperlink he found that it's by a friend on MSN. How could you decline a friend's invitation? So he signed up that social networking service.

By this way, Mr. X has joined Facebook, MySpace, Friendster, LinkedIn and a bunch of local Chinese language websites. Registering at these websites is a lot of pains. Every website asked him to fill in his profile, upload photos and even contribute his MSN contact list.

At first he was worried that if these friends would visit his personal blog, and it would be impolite if he didn't call at theirs in return. Such relationship pressure was such that he spent two hours after work to reply these messages online for a period of time.

(Interestingly, he didn't know that his friends were tied up on the Internet for the same reason.)

First it was acquaintances, then a bunch of strangers, who added him to their friends list. In the beginning it was fun and nice to socialize with these people online, checking out their newly updated blogs and photos and leaving messages to each other.

After about three months, Mr. X started to get bored socializing with these people online. As the number of friends kept growing, he could not but spend more time on the Internet visiting these websites. At the end two hours a day was not even enough.

He finally decided to quit such Internet services that he had been addicted to when he had almost reached the verge of breakdown. What was the meaning to spend so much time on this stuff? Life should not be like this, and he had to get things back under control.

[+] Typical experience of Web 2.0 website operators

All Web 2.0 websites operators are asking why the user churn rate is so high, and there is seemingly no way to remedy this problem as if it is inherent in Web 2.0 websites. New businesses planning to ride on the force of social networking, which continues to wane, are declining.

These Web 2.0 websites are like a big sieve, trying to capture a large number of users at a time; yet after three months, it always turns out that only half of them remain as effective users, and the rest simply disappear. The size of users may seem big but it is not substantial at all.

For a Web 2.0 website to enjoy growth, its social networking expansion needs to be faster than its user churn, so that, overall, its scale would be increasing. Yet what about when the growth of user numbers slow down?

Social networking websites MySpace and Facebook have shown strong performance and they are yet to hit the growth ceiling with the whole world as their market. (MySpace should reach its growth limit sooner than Facebook as the former has more users.) Therefore, seeking to expand foreign markets seems to be a solution to sustain growth.

Nevertheless, an inherent problem remains unsolved.

Another amazing effect of Web 2.0 websites is that, heavy users are very committed. They are very active and they remain so for a very long period. They visit the websites and stay there everyday.

From registered users to effective users to active users, the number of users continues to get smaller. Is it normal? I would say yes. In terms of online community, it's just the way it is. Just as I mentioned years ago, online communities are where "people of similar attributes gather to warm each other. And these people are the so-called "heavy users," such as active bloggers.

The characteristic of Web 2.0 is high interactivity, which means highly demanding for users. Those who are willing to interact with others and write blog articles are not normal people. They have stronger achievement motive and desire to express themselves, and they find their stage at some community website and feel a sense of belonging.

The question is, while these heavy users are having fun, what are the ordinary netizens doing?

[+] People can get sick of Web 2.0

As to those who quit some Web 2.0 website, do they turn to similar services of competing websites? Some of them (well, the heavy users) do, but for most people who leave, they just won't touch such kind of services and they leave forever.

Only a few people who, after quitting Facebook, would turn to MySpace. Most people would just quit social networking services (SNS) for good. It's the same for blogging. Only a limited number of people would migrate from one blog service provider to another and continue writing. Most would simply stop blogging.

Quitting a website is totally different from quitting a kind of service. For example, we know very clearly the difference between "turning to sohu.com from sina.com because of getting tired of the latter" and "quitting new websites for good."

Woops! It turns out that people can lose interest in Web 2.0 services.

Woops! So what's next when all netizens have become users of my Web 2.0 website?

If market development is like a chess game, then Web 2.0 websites that have been so popular for the past couple of years are entering the endgame phase. These websites operators may appear successful, but in fact they are getting uneasy. How to get away from the doomed path of Web 2.0 websites is an inevitable challenge.

Surprisingly, you may find the solution in Web 1.0. (
2007/12/23 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Web 2.0 Finale (1) An Inherent Problem Unsolved - 2007/12/23

The Fourth Generation of Internet Marketing (2) RSS Tracking - 2006/12/24

Dream of "Digital Furniture" Store - 2003/12/28

Mobile TV Market (3) Terminal Manufacturers & Content Providers

If so, telecom operators would be shut out of the mobile TV market.

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[+] The past experience of cell phone manufacturers

From the tide of WAP-based Internet accessing in 2000 to the crazy bid for 3G licenses, and then to the bet on MMS for promoting sales of camera phones and music phones that enable music downloading, and finally to 3G phones with audio/video services, cell phone manufacturers have had thrilling experiences over the years.

The world cell phone market started to show signs of saturation in 2000. To maintain their growth, manufacturers had to motivate consumers to replace their phones with newer products. All of the thrilling experiences in the past 7 years seem to be a quest for what really are the selling points. Fortunately, the result so far has been satisfactory.

In summary, there are a few observations:

1)Mobile Internet is a hard-to-handle concept. The key is consumers tend to compare their expectation for mobile Internet with their PC-based Internet experience, which, in most cases, ends up in disappointment, as cell phones are not so easy to handle as PCs. Mobile Internet has been successful in Japan, only because of the low PC penetration rate there.

2)Telecom operators wish that new cell phones be bound with particular services, so that they could benefit from their sales, instead of being un-paid sales reps of the manufacturers. However, it turns out that consumers buy camera phone only because they can use it to take pictures, and anyone seldom uses MMS service.

3) There's no concern for the shortage of content accessing channels. Despite the hot sale of music phones bound with download service offered by telecom operators, most users choose to transmit music from their computers to cell phones, instead of downloading them from the WAP portal provided by telecom operators. Although it is more troublesome, but it is free.

4)3G audio/video services, including IP-based audio/video streaming and video phone, have not brought satisfactory user experience. It is a very simple concept to allow both parties of a phone call to see each other. However, due to privacy concerns, it has not been able to become a killer application.

[+] Telecom operators might be ignored

With the above experience, cell phone manufacturers finally realized that their business is to make and sell handsets. The simpler their products are the better. There's nothing simpler than the concept of mobile TV.

Consumers no longer have to bother whether the TV programs are downloaded from the Internet, nor cell phone manufacturers to care about whether their phones are bound with particular services offered by telecom operators, so long as they free themselves from the troublesome 3G audio/video experience.

In fact, a hi-tech company in mainland China has developed a sort of chip, which can be built in cell phones to receive traditional analog TV signals. In other words, with such a chip, you will be able to watch wireless channel with your cell phone, regardless of its specification or standard.

The only shortcomings are the mobility and fidelity. As analog TV signals are not intended for mobile environments, the fidelity cannot be compared with that of digital programs of mobile TV. However, it would be good for some people, if the programs are played on small-screen cell phones.

In most cases, however, people watch mobile TV on static environments, e.g., bus or subway stations, or in offices. It explains a fact that cell phone manufacturers will be able to sell their products without binding themselves with telecom operators.

The only thing that those manufacturers have to worry about is where programs would be, once new standard-based mobile TV is launched? Will telecom operators become content aggregators as we discussed in the previous section? If not, they'd better establish connections with content providers right away.

[+] Charging or not, it's a matter about the structure of the industry

The high production costs of movie/TV programs turn out to be a big obstacle for traditional value-added service providers to produce contents themselves. Imaginably, a big part of contents for mobile TV will come from traditional TV stations.

An interesting cooperation mode is that after consumers buy a mobile TV-enabling cell phone, they will get a set of passwords from TV program providers. Upon activation, the cell phone will be bound with the passwords to enable watching programs. The fee is charged each month through the phone bill from telecom operators.

That mode is designed for charging fees. If mobile TV programs are offered for free, and program providers depend on ads for their incomes, the passwords and the additional lines in the phone bills of telecom operators would be unnecessary. If so, telecom operators would be shut out of the mobile TV market.

With regard to the mobile TV services, the only way for telecom operators to gain the favor of cell phone manufacturers is to persuade content providers to charge fees, in which case, they would become the largest content aggregators and channels for charging fees. Otherwise, they would be easily abandoned in the game.

In addition to traditional TV stations, will website operators (e.g. Yahoo! and Google), which are gaining influence in the mobile Internet sector be able to get a share in the market? Those players do not have program-producing ability themselves. However, through audio/video content sharing, they will have some opportunities.

Audio/video content sharing sites, such as YouTube, has a lot of interesting programs. In spite of the low fidelity (as most programs are produced by non-professionals, after all), such programs might be good enough for cell phone-sized screens.

Currently, the mobile TV market is still a virgin land for a lot of players, including telecom operators, cell phone manufacturers, traditional TV media and emerging Internet media. The future will be interesting and full of expectations. Eventually the biggest winner will be consumers. The distribution of audio/video contents will be fast and convenient as never seen before. (
2007/12/02 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02

Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03

Internet and Books (1) Dilemma of Online Publishing - 2005/12/04

VoIP (2) Who Depends on Whom - 2004/12/05

VoIP Gives out the First Cry - 2003/12/07

Mobile TV Market (2) the Subtle Role of Telecom Operators

"Killing time" is the core for the development of mobile TV.

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[+] Consumers are spending less time watching TV day by day.

Being optimistic about the mobile TV market, chip makers, cell phone manufacturers, telecom operators, media operators and value-added content providers have been making preparations in advance. However, is mobile TV really what consumers want? An unspoken doubt is: will anyone really watch TV on the go?

First of all, a trend is crystal clear. Consumers are spending less time watching TV through TV sets. Statistics show that at least in mainland China and Taiwan, the number of people surfing Internet after 8 p.m. at night are increasing steadily, so is the time spent.

Each person has only limited hours in a day. As more and more people choose to spend their off hours in front of computer screens, the TV audience group would diminish. IPTV has not been successful, largely because it is still trying to bring people back in front of TV screens, ignoring the fact that nowadays people hardly watch TV anymore.

The correct way to attract today's TV audience is to move audio or TV programs onto the screen of computers and cell phones. However, the decrease of the time for watching TV and the increase for using computers do not mean that the hours spent on watching cell phone screens would increase.

Here we have two questions to think about: 1) Consumers' hours on the go are fixed (on their way to work/home, or weekend outdoor trips, etc.), so what are their requirements for TV programs during those hours? 2) Is it possible to stimulate the enthusiasm of consumers for mobile TV even in room?

Will consumers buy if we successfully address the user experience challenges for watching video programs on 3G cell phones, and enable press-and-play, fast and effective channel switching and easy, simple billing?

[+] "Killing time" is the core for the development of mobile TV.

Product managers of mobile TV programs might have been racking their brains for clues about consumer requirements. The fact is they don't have to. What consumers want is just to kill time. It would be so boring at bus or subway stations that consumers would like to have something to watch; they may just want to snatch a little rest during busy office hours to steal a look at the cell phone, or they want to take a look at some important news.

Killing time, by all means, is the most critical application of mobile TV. There's no need for complicated interaction programs. Previously, 3G cell phone-base audio/video programs were so troublesome to operate that the "interaction" eventually turned "killing time" into "killed by time".

"Killing time" is also the key to mobile TV billing. One simple question: how much are you willing to pay for killing time? Currently in Taiwan, cable TV bills are about NTD 600 per month. How much, then, is reasonable for mobile TV? 200? Or 100?

DVB-H-based mobile TV offers one-way broadcasted digital programs, which, in theory, don't have to be received only with cell phones. Special terminal devices would be developed in the future for receiving such wireless digital programs. And there might be USB terminals for computers, too.

If digital TV itself is offered for free, there's no need to bother with which terminal device to use (ideally, of course, it's more convenient to be built in cell phones). In view of the current situation, however, monthly billing modes such as those adopted by the cable TV sector will be considered by operators. Therefore, integrating the fee into cell phone bills seems to be a natural choice.

If so, telecom operators would be put into a very subtle position. They might have nothing to do with mobile TV program provider, or become just a billing solution provider for the later, or even play a role similar to cable TV system operators.

[+] The subtle position of telecom operators in the mobile TV industry

In the first case, where telecom operators have nothing to do with digital TV content providers. TV-enabling cell phones bought by consumers (or other terminal devices) will be able to receive TV programs by design. If the programs need charges, consumers can make payment to TV program provider directly to get user IDs.

To get a simpler picture, just imagine binding a cell phone with a digital TV terminal. Each device functions independently without the interference of the other. If TV program providers want to charge the users, they could choose a number of channels, but would have to print and send the bills themselves.

Program providers can also choose to cooperate with telecom operators, if they do not want such troubles. That leads us to the second case: fee collection through cell phone bills. A more deep cooperation model could make interactive programs together with mobile operators and enable real-time program balloting through GPRS.

Trouble, however, is at door. There would be numerous program providers and TV channels. Say, there might be 5, and a consumer could choose to pay one for the program he watches, but he would not be able to afford all 5 if he wants to watch them all.

Generally speaking, that is not good news to the mobile TV sector. The real solution to maximize the interest of program providers is to build a single platform to enable free switching of channels. Yes, there are always competitions. However, if competitions lead to obstacles for consumers, that's no good to anyone.

More over, consumers have been accustomed to the monthly billing mode of one package for watching over 100 channels, which will not change in a short time. Therefore, a player capable of integrating all programs, which is similar to a cable TV system operator, is highly expected. Who will assume this role? It seems to be telecom operators.

That turns out to be the third case. However, everybody wants to dominate. The TV industry does not want their channels to be controlled by others, while the telecom industry will not give up the opportunity of entering the media market. Ironically, the fate of this scenario depends on whether mobile TV is fee-based or not. (
2007/11/25 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Mobile TV Market (2) the Subtle Role of Telecom Operators - 2007/11/25

Great Future of Wireless Broadband (3) Scarce Resources - 2006/11/26

Google's Choice (2) Lessons for the Software Giant - 2005/11/20

VoIP (1) It's a Fool Not to Make Telecom Money - 2004/11/28

Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody

Press a button and the programs are popping up on your screen, with high fidelity and no worry for the cost of data transmission.

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[+] Press the button and no program comes on your screen

Watching movies on handsets has been the dream of every telecom operator since the beginning of 3G (of course, they keep telling the consumers through TV ads: "this is what you have been dreaming for"). Fixed line operators, in the meantime, have been doing everything they can to sell IPTV to their customers.

Unfortunately, there have been only a few successes worldwide for those two dreams, which should largely be accredited to their particular geographic or social environments, for example, mobile Internet in Japan, mobile TV in Korea and IPTV in Hong Kong. In other countries or regions? Hardly heard of.

Nevertheless, technological progresses are being made continuously. The development of mobile TV is bringing in a new light of hope into the industry. In fact, "mobile TV" is just a general term, which covers any technology that enables consumers to watch TV on their cell phones.

By that definition, mobile TV has been a reality in CDMA/WCDMA-based 3G cell phones. However, before we go further into the development of the mobile TV sector, we need to take a look at what actually happened to 3G cell phones.

First of all, 3G has 3 major goals: high-speed Internet access, streaming media and video phone. With IP-based Internet access, users cannot get the streaming media movie they want by just pressing a button. Instead, they have to select a set of hierarchical menus.

Throughout the interaction process, users have to send requests and receive responses through the cell phone. A program has to be buffered before being played. This is a sheer difference from our experience with TV, where we get programs by just turning on the TV set. It is this difference that shapes everything.

[+] Billing modes stop consumers

In short, with conventional TV, you get the program as soon as you turn it on, not to mention the fast and effective channel switching through the remote controller. With Internet-based IPTV, you turn it on, but have to wait for a while; you switch a channel, but have to wait for a while; you press the play button, but also have to wait for half a minute. For that reason, IPTV has not been able to replace cable TV, nor has 3G cell phone-based streaming media.

Telecom operators had hoped to graft video phone to movie/TV programs to get better interactive experience (for example, allowing users to watch football games by dialing 123456). However, with the 64K bandwidth and poor transmission quality of video phone (maybe you cannot even see where the ball is), they had to give up.

In addition, there's a billing problem. For decades, telecom operators have been accustomed to billing by minutes or by transmitted data volume, as they say, such billing mode could better reflect their costs (they need to be paid so long as there're data flowing through their telecom equipments). However, consumers are loath to pay. Have you seen anyone who pays his TV bills by minutes?

Monthly billing could be a compromise. However, telecom operators have not been able to introduce total monthly billing packages. For example, they might pack a few programs into one package. However, there are usually many such packages (as each telecom operator would cooperate with a number of content providers). Want to get all the packages? Well, pay for them all!

What's more, the monthly packages only cover the transmission costs of telecom operators. To ensure the reasonable income for content providers, consumers have to pay for contents separately. How could a consumer possibly understand, or withstand so many layers of charges?

Are telecom operators ready to become media companies? It seems not. For example, how about offering completely free mobile TV programs and leaving telecom operators and content providers to earn their bread solely from ads? For telecom operators, that is horrible.

[+] The turmoil of standards

In addition to telecom operators, closely related with the sector are traditional cell phone manufacturers. The global cell phone market has been saturated for years, and the years of fast growth gone. Yet leading cell phone manufacturers are still there and thriving - thanks to continued innovations.

The first innovation might be the camera phone introduced a few years ago, followed by the music phone. New technologies, combined with successful marketing, have triggered tides of changing handsets among consumers. What would be the next innovative application? Obviously, it would be cell phone + TV. And the next? Cell phone + GPS.

Over the years, telecom operators and cell phone manufacturers have learned that consumers favor individual cell phone applications over mobile Internet access. Such applications should be easy and simple, and have nothing to do with Internet accessing.

Now, there are new technologies coming to us. Digital files are transmitted mainly through broadcasting technologies. You will no longer have to wait like you did with 3G or IPTV. Press a button and the programs are popping up on your screen, with high fidelity and no worry for the cost of data transmission.

For the industry, however, the war is just beginning. There are too many standards for using the cell phone as the carrier to play TV programs. While some standards, e.g., DVB-H are derived from the TV industry, others, e.g., MBMS, have their origins in the telecom industry.

TV-derived standards alone have already seen Japanese, Korean, European and Chinese standards, not to mention 3G-based digital TV broadcasting technologies developed by the telecom industry. The turmoil seems to have cast a shadow over the outlook of the sector. (
2007/11/18 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody - 2007/11/18

Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19

Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12

Google's Choice (1) Lessons for Portals - 2005/11/13

A Word of Advice for Small Online Stores - 2004/11/14

The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything

"Dear, we have been apart for too long. So you're here. We are as one from the beginning. Let me hold your hand once again."

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[+] Collective spiritual power

This is the third article of the series. I spent two weeks thinking how to put it into words because, as the series goes, we will inevitably talk about issues related to philosophy and religion, which is of much greater complexity and diversity than the sociological topics regarding Web 2.0 we previously mentioned.

If you cannot see what philosophy and religion has anything to do with the future of Web 2.0, or even feel offended, I can only regrettably admit that my attempt is a failure. Every religion has its god(s), and it is difficult to use a single theory to cover everything while avoid offending other people. May I ask for your pardon in advance.

Almost every religion in the world, wherever it comes from, has the ritual of group worship (or chanting and the like). Such ritual implies that we all believe that the collective spiritual power of a group of people can change the way the world runs. We call it divine power. When changes do happen because of the power, we call it a miracle. At bottom, it's the collective will of man. The source of the power to change is blessing, especially collective blessing.

Blessing is a kind of tremendous spiritual energy endowed by god to man. Amazingly, when you give your blessing to other people, you'll receive even greater positive energy than that you give. Similar effect happens to hatred. Therefore we realize that one cannot get happiness by cursing others.

Such spiritual energy exists not only in religion, but in our daily life and in our mind. Just think about it: how many thousands of millions of people in the world that bears hatred towards the U.S. over the past few decades? At the end there was the 911 incident. So who is to blame for the evil summoned? Don't point fingers at others.

[+] The world as one

"Collective will" is the cornerstone on which the world operates. Some thoughts buried deep in your subconsciousness are unknowingly taken as true. In the Bill Clinton era, there had been considerable progress towards world peace; yet later the Americans' collective will summoned a belligerent president onto the stage.

In the area of religion, it is easy to see how collective will works. If you look around, you can also see how people's collective will changes the fate of a country - good leaders always work on forging collective will that is positive and uplifting . Moreover, the fate of humans is summoned by themselves collectively. There is no exception to that.

How can humans uplift themselves collectively? The ultimate truth behind the "collective will" is "the world as one." The hell exists only where this truth is blinded.

The country that inflicts violence on another will receive the evil consequence in the end, because to do harm to others is to do harm to oneself. We all feel sorry for victims of 911 incident, but we cannot ignore what the Americans had done in the Middle East before. That may be one reason for this hostility to American people.

Similarly, the group of people that send blessings to another will receive the positive energy of the blessings as well, because we are as one. You may say that I am talking about Buddhist causality, but more simply, it's just "what you get is what you give."

So smart people are never sparing in giving. The Bible tells us that, "It's better to give than to receive." To give you something does not mean that something will be taken away from me because you and I are as one. On the contrary, the positive energy created by sharing will ultimately benefit you and me.

[+] The desire that lies deep inside our hearts

I hope that what I just mentioned above reminds you of the Internet. Indeed the Internet is a giant network that carries the collective will of all human beings. In the previous Web 1.0 era, "Its" purpose was to carry all kind of information and make our life more convenient. In Web 2.0, "It" starts to carry the shared will of people increasingly.

The original spirit and the essence of the Internet are openness and sharing. Through the connection of networks, people are getting closer to one another. In Web 2.0, with the emergence of various services such as Blog and social networking services (SNS), people are exchanging not only information but also emotions.

I once wrote to my colleagues that, "Think about it: our users shed tears when reading their own Blog articles, behind which is the platform, tens of thousands of lines of program code, constructed by you. There is nothing more significant in your work than this."

If a Web 2.0 website operator does not know how important "emotions" are, or how Web 2.0 can help people communicate and exchange feelings, then s/he doesn't know what else s/he can do, so to speak. Nowadays people are not looking for information tools or operation platforms.

Major Web 2.0 websites like MySpace in the US have every capability to facilitate global exchange. Moreover, through proper guidance, maybe they can allow users to enhance themselves a little bit and positive thoughts to generate during interpersonal interaction. Just imagine how people have shared will flows on the giant network of the Internet….

I do not intend to preach about "website operators' social responsibility." Internet companies are not charities. They are not obliged to do charity. However, everyone wants to bless and be blessed. If website operators do something about it, it's just to 'satisfy consumers' needs." Isn't business opportunities come from fulfilling consumers' demands?

[+] Collective enhancement of all humans

In Web 1.0, we think about how to promote the exchange of information; in Web 2.0, we think about how to establish relationship and to increase interpersonal interaction. In Web 2.0 Next, we need to think about "what can touch our hearts." What we need to connect is people's hearts but not information.

We need to turn the Internet into a medium of emotions, a platform of exchange of souls, so that users will feel more emotions when using it. This echoes to the desire deep inside our hearts. When that desire is fulfilled, we feel close to god.

Some friends wrote to me, saying that online emotions are not real. Some are worried that spending too much time on the Internet may impede the emotional exchange with other people in our daily life. Think about it: in your daily life, the number of people you are familiar and share feelings with may be within five. This is your social network, much more lonesome than you may think.

And these few people constitute the world you recognize. You never think there is any relationship between you and African people, nor do you understand what is "the world as one." The Internet Next brings forth a brand new chance that we've felt 10 years ago. Now it's finally mature with full energy.

Web 2.0 Next will seek to satisfy users' emotional needs (love and blessing), and encouraging sharing (open oneself) and exchange (global integration). It will need an upgrade from information exchange to emotion exchange. Human beings need to enhance themselves collectively, and they should start from getting in touch with each other. The Internet can make all of this possible.

"Dear, we have been apart for too long. So you're here. We are as one from the beginning. Let me hold your hand once again." (
2007/09/16 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow


Next : Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody

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- Today in History

The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything - 2007/09/16

The Web 2.0 Revolution (4) the Google Paradigm - 2006/09/17

The Web 2.0 Revolution (3) Advertising Revenue is Not Enough - 2006/09/10

Envisioning China's 3G Market (3) Systems & Markets - 2005/09/11

Three Musts of Digital Content Biz (2) Stop Selling "Containers" - 2004/09/19

Three Musts of Digital Content Biz (1) Content is Cheap - 2004/09/12

The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow

Easy profits from virtual business are what Web 2.0 should aim at.

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[+] Changes in money flow, logistics flow and information flow

After 10 years of development of the Internet, people have become very familiar with the terms of "money flow, logistics flow and information flow." Especially in the area of eCommerce, the three flows can generate much business value. Some businesses are very successful by taking advantage of only one of the three flows.

Although "logistics flow" is a bridge between the Internet and the physical world, its importance has reduced with the introduction of Web 2.0. On the other hand, "money flow" and "information flow", though remain unchanged in forms, have experienced significant change in essence.

In Web 1.0 era, we spent great efforts to enable the money flow to move smoothly between the Internet and the physical world, so that financial tools in the physical world, such as credit cards or ATM cards, can be applied online, and that there are C2C payment tools such as Paypal.

We think a lot about how information should be transmitted (results are e-mails and real-time massaging tools) and gathered (results are portals and content websites) and how to cope with information asymmetry by inventing new business models (results are online job site and online auction).

The Internet has driven the cost of information transmission down. The revolution in money flow, logistics flow and information flow has made the Internet world as it is today. Yet we have sensed an emerging force of the fourth flow - the emotion flow -, which is about to change the three flows.

[+] Emotion flow will bring forth "the emotion highway" and "the media of emotion"

In the past, when you were done with a piece of online news, you were done with it. Maybe there were some people who would leave a comment below the news, but most people left quietly. Then some website operators made some changes to allow readers to score the importance of the news from one to ten points. Yet few people chose to leave a score.

The scoring system has finally been simplified to two options: "push" and "bury." If you are in favor of an article, you push. That is how the news article popularity website, digg.com, in the US succeeds. Then, we start to see news websites provide a function to allow readers to express their feelings about news articles like " happy," "sad," "confused" and so on.

The dawn of the Internet Next is upon us. Indeed, what really matters is not information per se, but what people think of the information and furthermore, how they "feel" about it. A simple "agree" or "disagree" is not enough.

You must have seen in commercials a network of beaming cables through which information flows freely. The so-called "information superhighway" has embodied people's imagination of the Internet. Now what is ahead of us is "emotion superhighway."

There must be many ways to reflect people's emotions flowing around global networks and represent these emotions on websites. Blog have been seen as grassroots media, and social networking websites a tool for social networking or meeting friends. Web 2.0 Next application will be "emotion media."

[+] Emotion: the next thing Web 2.0 is to deal with

Wanna know the moods flowing on the Internet globally? Check out http: //worldmood.info/. This service simplifies moods into smiley face and frowny face. Maybe it can be used to predict stock market performance - isn't it the sum of investors' confidence and moods?

In the time of emotion economics, the ability to control a tremendous amount emotional data will be highly valuable. We do know that emotions affect our consumption behaviors, but we do not have a chance to quantify the relations between emotions and consumption. Web 2.0 may provide a solution.

Indeed, it is very difficult to control a huge amount of personal emotional data. Yet it may work if we focus only on a specific kind of emotion and develop an emotion-centric website. Instead of attracting heavy traffic and drawing revenues from advertising, the strategy of focus survives by selling virtual products. Examples are:

Flowers for Hope: http: //www.flowersforhope.com/garden/ This website allows you to make a wish. Each wish is represented by a flower. Other people can water your flowers, while you can also check out other people's wishes. You know that you are not alone. Your wishes are being taken care of.

Secret: http: //secret.moumentei.com/ This is a very simple website in terms of technology and interface design. Yet it offers thrills to peepers and exhibitionists and even the peeped. I marveled at my first sight of this website.

[+] As emotional products get more popular, micro payment becomes a challenge

With the emergence of emotion flow applications, the selling of virtual products will become a major revenue source for Web 2.0 websites mentioned above. Some people are willing to spend 1 US dollar for a virtual object to express their detestation or some small money just to play kids online. "Emotion" has become a real product.

At the time of purchasing a virtual emotional product, the expression of an emotion, or psychological therapy, is completed. That is the magic of emotional products. A successful design of emotional products is really a test of creativity and understanding of human nature.

However, how do you pay small money like 1 US dollar, by credit card or ATM card? Virtual emotional products are absolutely linked to impulsive spending. Entry of long credit card numbers and repetitive confirmation can kill that impulse of spending.

In Web 2.0, micro payment becomes a challenge, because the profit from each virtual product is too small to make up for the credit card processing fee. Those who can solve the problem of micro payment will be able to reap the profits of the long tail of virtual emotional products.

Emotion flow will get even more important in Web 2.0 Next. Before, people discuss on whether online users would be willing to pay for information or the use of information processing tools. Now, people who can control the emotion flow of online users will have a chance to pull the money out of users' pockets.

As virtual emotional products get more popular, dependence on logistics would only decrease. Why? Because it is all about psychological satisfaction, and there is no physical thing involved - no delivery, no guarantee and no product return. Easy profits from virtual business are what Web 2.0 should aim at. (
2007/09/02 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : The Next Step for Web 2.0 (1) The Dawn of Emotion Economics


Next : The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything

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- Today in History

The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow - 2007/09/02

Envisioning China's 3G Market (2) 3G License & Market Strategy - 2005/09/04

The Next Step for Web 2.0 (1) The Dawn of Emotion Economics

The Internet in the future will become a place for group therapy.

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[+] Emotional products in the physical world

There are many ways to sell "happiness." One is to write a book on "happiness" (hedonics), turn it into some kind of study and sell it in bookstores. Or, you can package it in a mineral water advertisement and represent the bottle of water as an indispensable thing when families and friends get together happily.

In a fiercely competitive car market, a car dealer seeks to boost sales by presenting its car as "the only car that equipped happiness." In a trendy sitcom, the leading actor would win the heart of thousands of female audience by calling," I swear I'll bring you happiness."

This is the power of "emotional products," Marketing experts in the traditional business world have long noticed that the key to a consumer's purchasing decision, sometimes, is not the function or price of the product, but something that can trigger certain memory or emotion deep inside the mind of a consumer.

For those who buy the book/mineral water/car/trendy sitcom DVD, do they then live happily ever after? No. More precisely, their feeling of happiness reaches completion right at the moment of consumption. Emotional products that cannot achieve such effect would definitely fail.

Certainly you can say that emotions are added value to the above mentioned products; they are not the products themselves. Yet after ten years of development of the Internet, we begin to see that "emotion" per se can become a product and has the potential to change the look of the business world.

Yes, the dawn of emotion economics is upon us. In the past, "It" is the added value of some products; now "It" will become a product and will revel "Its" value through the form of Web 2.0. Strong emotions will become a kind of belief, so the reference for emotion economics will be religion.

[+] Internet from physical to spiritual

I sort out the characteristics of traditional Internet, Web 2.0, and Web 2.0 Next in the following chart. Simply put, the mission of the Internet will evolve from "carrying information" to "carrying emotion."

From eCommerce to emotion-centric websites, ordered from left to right of the chart above, we can see that during these 10 years, the Internet has evolved from more physical to more virtual and from material to spiritual.

Though eCommerce is an important business of the Internet, 70% of the operation, such as warehousing, logistics and payment processing, is done in the offline world in a way similar to that of mail order or brick-and-mortar retail stores.

Information processing is a critical issue in Web 1.0. The lessening of the problem of product information asymmetry has led to the emergence of eCommerce. Users can compare prices online with just a click, and they can easily find product information or even other people's experience of the product before making purchasing decisions.

Web 1.0 media have moved a lot of content online and even produce their own in order to reduce the cost of acquiring information. Too much information however creates the problem of overload. Then there is the search engine that provides precision to help filter undesired information.

In this phase, the trait of the Internet as a "tool" is very obvious. People use the Internet to make their life more convenient, with a focus on how to "improve efficiency." As a result, many traditional business models are gradually replaced by the Internet for better efficiency.

[+] Web 2.0 Next: the emergence of "emotion centric websites"

Blog ushers in the era of Web 2.0, empowered people to publish their own work - the so-called "individual publishing" - for the first time. There is no problem for us to download information anymore; now it's time for us to upload and express our voice.

Such characteristic then starts to push Blog to the way of Social Networking. People of similar interests and tastes are gathered and get to know each other through well-designed guidance. Content on Blogs only provide an excuse for people to start a talk.

Well, the kind of blogs mentioned above are only those that are focused on content sharing. The number of bloggers is increasing, and it is impossible that every one of them is good at writing or photography. As a result, a lot of bloggers are just letting off their feelings of these days. Normally there are only a few words on the Blogs.

Yes it's about emotions. So what to do next is to lead the people who have similar or opposite emotions to get gather and allow their emotions to vent and thus reach completion through some kinds of rituals or activities.

Just like the one who buys "the only car that equipped happiness" - his desire for a happy family reaches completion at the moment when he pays for it. It is easier for us on the Internet than in the physical world.

What kinds of (good and bad) emotions and desires do people have? They may include:

- Hope. (It's said that among all living beings, only humans will have hopes.)

- Happiness. (Longing and expectation for happiness that one lacks or desires.)

- Hatred. (To smooth it away through some kind of ritual.)

- To be loved, cared and blessed (and thus gain strength).

- To know if there are other people in the world who have similar weird thoughts or particular experience or so on.

- To enjoy solitude (while keep in touch with the world!)

- To fulfill the desire and enjoy the excitement to peep and to be peeped.

- To satisfy the sense of vanity or accomplishment (or to find motivation to catch up) through comparing with others.

- To do good and help others (everyone wants to do a little good as long as s/he has a chance.)

- A secret whim to "kuso" or to do non-sense reckless doings (and enjoy the pleasant sensation to break the rules and customs of the society).

- Greed (and jealousy and desire to monopolize that comes along.)

- Innocence and the desire to be like a kid. (This is why Little Prince is so popular.)

- The hobby to collect things (We are all more or less obsessed with collecting some things.) and fetishism.

- Hesitation when faced with choices and desire to pry into the future. (This is why fortune telling is so popular.)

- ...

The more subtleness of human nature you observe, the more you can grasp the essence and spirit of emotion economics. What will people get gather for, and what kind of emotion will they pay for its completion? Through creative packaging, the items listed above can be developed into interesting and colorful "emotion centric websites."

Simply put, the Internet in the future will become a place for group therapy. (
2007/08/26 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Next Step for Web 2.0 (1) The Dawn of Emotion Economics - 2007/08/26

The Web 2.0 Revolution (2) the Emergence of New Media - 2006/08/27

The Web 2.0 Revolution (1) the Root Cause is Cost - 2006/08/20

Envisioning China's 3G Market (1) 3G Will Not Increase ARPU - 2005/08/28

PDA in Siege (2) Bottlenecks of the Smart Phone - 2004/08/22

The Spirit of Web 2.0 New Media Lies in "Inter-personal Communication"

The meaning of "new media" is about giving up traditional broadcasting media and enabling interactive, inter-personal communication in a world that is turning into an intimate global village.

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[+] Social networks become a new channel for branding

In the earlier stage of online advertising, website operators would ask advertisers to pay for 1.3 million exposures. Soon the CPC (cost per click) model became popular, and website operators started to tell advertisers to pay for 1.3 million clicks.

In the case of traditional advertising, it is aimed to produce an impression of the brand on you by repetitive exposures, so that you'll remember to buy this product when you do shopping in a store. In the earlier stage of the Internet, online advertising followed this thinking, and advertisers were told that the branding effect existed even if users did not click on the advertisements. Although it does not sound very persuasive, it still sells to big brand advertisers having huge budgets.

In spite of the growing popularity of CPC model, which has taken a good share of the market of medium and small advertisers, advertisements sold on the basis of exposures still can pull the money out of big advertisers' pockets.

Now we are entering the era of Web 2.0, yet major brand advertisers and website operators still stick to the old-fashioned concepts and 1.0 mindset. In fact, online marketing has entered the era of "pay for 1.3 million users' in-depth participation."

The point here is "inter-personal communication," which is exactly the strength and spirit of Web 2.0. Simply put, traditional advertising is about "I play and you watch," while Web 2.0 advertising is about "I tell you, you tell her/him, and the brand quickly spreads in the social networks."

[+] The Pepsi case

Here I'm going to share with you a recent case, which is classic in Web 2.0 marketing. The event in this case lasted for one month, attracting 1.3 million users to register, 120 million votes in total, and 6.8 bulletin board messages posted by users.

This event was the annual online event of Pepsi, which was called "Your Picture Appear on a Can." That is, contestants submitted their pictures and got selected by consumer votes. Those who garnered the highest votes can put their pictures on the Pepsi can.

The competition was divided into two stages. At the first stage, Pepsi together with five participating websites held tryouts respectively. One participating website, 51.com, attracted as many as 1.3 million users, which was more than twice as many as the total of the other four websites, to join the competition.

Such contrast was largely because that 51.com is completely a Web 2.0 website, which is characterized by real-time interaction. Therefore we need to look at the difference between this particular website and other traditional blogs websites.

First of all, 51.com is a kind of Social Networking Service, including blogs, photo albums and online communities. Users write their online diaries while reading others', and they can set up their own "friend list."

[+] How brands spread in a Web 2.0 website?

Not like traditional blog websites, 51.com does not emphasize on content. For many blog websites, the first page after logging in is the user's own article, but for 51.com, the first page tells you who have visited, who on your friend's list are online or have posted a new article.

This increases user interaction on 51.com. The system will inform you about who visits your article shortly. If you link to a visitor's blog and leave a comment, the system will inform that visitor about your visit, which may trigger another visit to your blog. This is how spontaneous personal interaction begins.

Because of such real-time interactivity strengthened by immediate system alerts about your friends' activities, users of 51.com almost get hooked on the website. This makes 51.com a robust platform for "inter-personal communication." An online campaign can spread very quickly on this platform.

In this Pepsi campaign, 51.com first pushed the news of this campaign through various channels to draw people in. For everyone signed up for the competition, there would be an article with a big picture "Vote Me for Pepsi Star" automatically produced by the system on the front page of the contestant's blog.

The posting of this new blog article would trigger a notification to those on the blogger's friends list. When these people came to visit, they would learn about Pepsi's new event. Some of them might become contestants and thus set off another round of notification....

[+] Interaction and alliances among social networks amplify the effects of communication

As such, the spread of inter-personal communication takes place in 51.com with a terrifying speed. Here we see the manifestation of "Six Degree of Separation," which is a popular theory normally associated to social networking, particularly for a business purpose.

At the first stage of the Pepsi star competition, there were also other participating blog service providers. Yet they did not take the advantage of real-time interaction; instead, they relied on the traditional method of one-way broadcasting, which is much less effective in spreading the message and drawing in more users.

Most interestingly, there were quite a few voluntary activities going on among the user communities of 51.com, which was beyond expectation. Here are some examples:

1) Those who did not join the competition tried to canvass for their friends who were contestants on their blogs. This helped increase exposure of the event.

2) Users of 51.com can start their own groups. Some group owners can be very powerful, as the size of these groups can reach some tens of thousands under good management. Group owners could ask members to vote and canvass for them.

3) Groups can form alliances. For example, First Alliance of 51.com has as many as 2 million members. Each group within the alliance could select its own candidate to compete for representing the entire alliance, with the support of its 2 million members, to compete in the Pepsi contest.

[+] Web 2.0 marketing is about inter-personal communication

Many people argued that such competition was nothing more than beauty contest. However, to everybody's surprise, the winner of 51.com tryout was a monk nicknamed "silly hermit." In fact, his picture has been on the Pepsi can before you read this article.

Yet it is not that surprising. Firstly, 51.com with 80 million registered users of various kinds is a small society of itself. Moreover, users' voluntary concerted action as shown in the above-mentioned example can be applied in many aspects.

For those participated in this event through joining the competition or voting or canvassing for contestants, together their friends within six degrees of separation, the brand of Pepsi will remain imprinted in their mind for a long time. What Pepsi got in this campaign was 1.3 million heavily engaged users, which had much greater effect than 1.3 million banner clicks.

Did you notice that the model of Web 2.0 marketing is basic inter-personal communication! Inter-personal communication works very slowly in the real world, so we need mass media such as television to do mass communication.

Yet, because of the birth of Web 2.0, the cost for inter-personal communication has dropped substantially and the efficiency has increased. Therefore we see a very paradoxical thing that marketing communication will go back to the basic model of inter-personal communication from traditional "broadcasting" media of mass communication.

These days we hear a lot of "new media" things from the media and people in the industries. What this term really means is about giving up traditional broadcasting media and enabling interactive, inter-personal communication in a world that is turning into an intimate global village. (
2007/08/05 - By Digitalwall.com - Way to
China Internet/Telecom )

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- Today in History

The Spirit of Web 2.0 New Media Lies in "Inter-personal Communication" - 2007/08/05

The Good Old Days of ECommerce - 2005/08/08

From Idea to Business (2) How to Estimate Your Income and Cost?

If you begin to think about expenses right after your income prospect, congratulations, your idea is one step closer to real business.

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[+] Pageview-based advertising income

As a matter of fact, your income and cost are known as soon as you get the most critical information: user number. With regard to income, the most important thing is the business mode: are you choosing advertising-based or subscription fee-based (e.g., VIP subscription fees or virtual items sales income) revenue model, or both?

The fact is, in some sectors, charging your users (e.g. white collars), would be very hard, while in other sectors, your users (e.g., blue collars) would be of high value in terms of fee charging, but little appeal to advertisers. It is hardly possible to develop both, particularly for highly sector-specific Web 2.0 sites.

What's more, there are often conflicts between catering for your users and your advertisers. Obviously, the later prefer large-size, eye-catching ads, while the former hate the disturbance of such ads. If you decide to cater for your advertisers, the possibility of charging your users would diminish, or vice versus.

Therefore, instead of rough estimation of the proportions of income from both modes, we might better start the process from the very beginning. First of all, we need to estimate the average pageviews per user each month. Then we could multiply it by the average user number to get the total pageviews of your website of the month.

For example, your website has 100,000 users as of April 30 and 140,000 as of May 31 (obviously, you get 40,000 new users in May), and you have 20 pageviews per user, then your total pageviews in May would be:

[ ( 100,000 + 140,000 ) / 2 ] x 20 = 2.4 million pageviews

If 80% of your webpages are used as the ads inventory of Google Adsense, or if you have a known click-through rate of 0.1%, you could easily get the total number of clicks each month. As the price of each click is no secret in the industry, you can easily get an estimate of your advertising income.

[+] Estimating the proportion of fee-based subscribers in total users

This advertising income is just a bottom line. If you are an Internet startup, and you do not have the budget to hire an ad sales person at this stage of business, or you have too few users to attract large advertisers, you have at least this amount of income. You could expect to launch ads at higher prices later when you grow big enough.

The key is: how to estimate pageviews per user per month? Similarly, it depends on whether your website is a tool site, or a content site, or a community site. Data for these sites are no secret in the Internet industry.

The total pageviews of different types of websites might be close, but they do have different meanings. A user might view only 2 web pages on a search engine, e.g., Google, but would come back a lot of times each day. For a community site, however, it is just the opposite.

Now let's discuss the possibility of charging your users. The simplest way is to divide your features into free ones and fee-based ones. For the later, you can offer different grades, such as platinum subscribers and diamond subscribers and charge them at different rates.

In this case, what you need to estimate is "the proportion of subscribers in total users". Generally, you should be satisfied with 3%. Then you should estimate "how much each subscriber spends per month". Multiply the two and you will be able to get your income from the subscribers each month.

As an Internet business operator, you would then begin to weigh how much resource you need to invest in your subscribers? Is it feasible to offer free contents and bet your income completely on ads? Why not increase your income by securing more users, since the proportion of subscribers is fixed? However, securing more users means more costs?

[+] The estimation of marketing and expenses

If you begin to think about expenses right after your income prospect, congratulations, your idea is one step closer to real business. In fact, the expenses of an Internet company usually include a few parts: marketing, bandwidth and others (including personnel and office expenses, which are beyond the scope of discussion here).

One cost-effective marketing approach might be to purchase ads from Google Adwords or some other ad networks. The best modes for startups are to charge by clicks or by results. Multiply your clicks by your conversion rate, and you would get your user number, and then a clear picture of how much you need to spend each month.

As to the bandwidth cost, the first thing you need to figure out is the total data volume your users would consume each month. Multiply the known pageviews per user per month by the average Kbytes per page, and then by the number of users per month, and the result is here (should be in GB).

ISPs offer two types of bandwidth prices. Perhaps we can explain them better with a comparison to water pipes and water volumes. You can either limit the total volume of water each month, e.g. to 120GBytes, or limit the diameter of the water pipe, e.g., to 1M Bits. The thinner your pipe is, the slower the speed.

How thick does your water pipe need to be? Let's make an example. Assuming that your total data volume is 120GB per month, of which, 45% take place in 10 given days, while 50% of the volume each day happen in 8 given hours. To be able to handle the peak volumes, you need an instant bandwidth of 0.768M Bits per second.

{ [ ( 120 x 45% / 10 ) x 50% ] / (8 x 60 x 60 ) } x 1024 x 8

The above estimation is for general HTML web pages. If you offer upload/download of a lot of photos or movies, that's another case. The method is still to calculate the data volume of average photo/movie upload/download per user. However, if you are not able to get particularly favorable prices from your ISP, it is highly possible that your business end up in failure.

[+] The development of strategies - right in these calculations

So much estimation, would that work? As a matter of fact, hardly any winner in the Internet community relies on such estimation for his/her business success. Sometimes, what's behind a successful business is sheer guts, which might be what's appealing to adventurers.

However, if you intend to mortgage your house or your car to start your business, instead of just giving your ideas or comments on your Blog, thinking about it a little more will do you no harm. Yes, you are a hero if you burn your money and succeed. What if you burn your money and end up in failure? (It depends on whose money it really is….uhm).

The Internet is a semi-traditional industry. Using the experience of others to do the calculation and to improve your chance of winning is, after all, rewarding. Just think more about the way to reduce your bandwidth cost, or stunning viral marketing skills to save cost, or raise more money in the initial stage for advertising. The development of strategies lies in these calculations. (
2007/07/22 - By Digitalwall.com - Way to
China Internet/Telecom )

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Prev : From Idea to Business (1) How to Estimate Your User Number?


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- Today in History

New Landscape in China's Telecom Market (7) The Pricing of 3G Value-added Services - 2008/07/27

New Landscape in China's Telecom Market (6) Insight into 3G Price War in Taiwan - 2008/07/20

From Idea to Business (2) How to Estimate Your Income and Cost? - 2007/07/22

New Era of Online Advertising (2) from Exposure to Deal - 2006/07/23

Ultimate Mobile Device (5) Universal User Experience - 2005/07/24

From Idea to Business (1) How to Estimate Your User Number?

What's important is the process of estimation. You will get a clear picture about whether the business is worth your money, whether its outlook is as promising as you have thought and what's the right pace.

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[+] Estimation is for real war

Amid the tide of Web 2.0-driven online businesses, many young players can no longer sit tight. Weird ideas and comments on cliches of traditional online companies and new tricks of startups in the cyber space are emerging on Blogs across the Internet.

Making a comment is always the easiest thing to do. We can marvel the brilliant interface design of a website, or their understanding to the behavior of a user. Yet we have no way to understand the real thinking of an website operator, not to mention the compromise that he has to make.

It's easy to "have an idea", or even to set up a team to start your business right now. However, to turn your idea into real business, you need to make the right estimate. Particularly, in the Internet industry, where there's still not a definite answer to whether user number is a reflection of revenue or of cost, such an estimate could be not so easy to make.

Lately, a friend of mine, who's a member of a leading Internet company in the United States posed to enter the China market, asked me over MSN: "how should I estimate my user number right from zero?" Indeed, this is the right question for anyone planning to start a business on the Internet.

He showed me the user number growth curve of a few listed U.S. Internet company and said that he wanted to follow suit in China. What he failed to mention was that, none of those companies were more than 10 years, and they had particular backgrounds that could never recur. In fact, he was not able to find a company with a background similar enough for him to copy its business mode.

He used all his knowledge about statistics, including Bezier Curves and regression, which puzzled me even more. Finally, I had to let him know that such a purely academic approach might be good for the calculation of an accurate figure in theory, but would never work in field practice. For people engaged in field work - like me - there's another way.

[+] No marketing ads, no user

To prepare a budget for an Internet business, one has to have in mind a few key points. First of all, it need not and cannot be clock accurate. Then you need to know what's important is the process of estimation. You will get a clear picture about whether the business is worth your money or not, whether its outlook is as promising as you have thought and what's the right pace.

For the estimation of your user number, there are a few key aspects: 1) you cannot expect to have your first customers without an investment; 2) you might get your first customers without spending a cent, but you will be much slower than your rivals; 3) if you have an advertising budget, you should spend it in the first 3, instead of 12 months.

I was personally involved in the building of many websites. A terrible experience I got was that you got practically zero page view without advertising. Unlike the situation 10 years ago, in today's Internet world, users have numerous options. It is unpractical to expect them to just bump into your site.

With advertising, the cost of acquiring a user is much easier to estimate. For the simplest cases of some Internet ad network or Google Adwords, you can easily get the normal ad click-through rate, or conversion rate, or even the average cost of acquiring a user. Therefore, you would have a clear picture of how many users you would have - just look at your initial budget.

If you don't want to spend the money, you can attract a user group quickly through a PR event, too. In additions, there're cases in the market to attract visitors to a website through PR press coverage, or a TV report or a headline in Sina News, or the recommendation of a popular Blogger.

Therefore, the number of new users each month you get depends on your marketing activities in the month. Isn't this a burning of your money or merely a hype show? Fortunately, there's one unique feature about Internet businesses that could provide you a touch of comfort: Network Effect.

[+] Identities of Network Effect

Existing users of yours might strongly recommend your site to their friends, or bring them there by casually clicking the "send to a friend" button. They can also be mere victims of the trap you have prepared and promote your site without knowing it, the way they are caught in the transmission chain of a "viral marketing".

I define the factor that helps you to attract new users without advertising "Network Effect Coefficient (NEC)". For example, with an NEC of 1.1 and 100,000 users at the end of this month, you can expect to increase 10,000 new users by the end of next month without advertising.

Therefore, by the end of next month, you will have 110,000 users plus the new users you have secured with marketing/advertising efforts. Multiplying the sum by the NEC, you could estimate the number of new users by the end of the month after next.

See? The more users you have, and the earlier you have them, the stronger the momentum of your business development would be - thanks to the exponential growth enabled by the NEC each month. This is just like the way your money grows in the bank: you deposit 100,000 and you get 10,000 in interest; you put 20,000, and you get only 2,000.

Now you understand why I say if you have an advertising budget, try to spend it in 3 months! The faster you get your users, the better. In fact, for two similar websites, the one with more users has higher NEC. In other words, the more money you have, the more you earn.

Generally, the NECs of content sites, e.g., news portals, and tool sites, e.g., search engines are estimated to range between 1.0 to 1.1, while those of online communities (as most Web2.0 sites are) could be anywhere from 1.2 to 1.4, depending on the ability of viral marketing of your site.

[+] Estimation, the gap between ideas and businesses

When you have only a few users, your NEC is practically 1. For most sites, an explosive growth (steep rise in user number curve) comes only after their user numbers break a critical point, which is also the start point for the sharp rise of their NECs.

For a saturated market or a reverend Internet company, the change in NEC could be stable and minor, which, however, is beyond the scope of this article, as its focus is how to estimate the increase of user numbers for Internet startups.

If you, having read all above, can't help opening your Excel spreadsheet to see how much you need to spend to secure one million users in the next 12 months, believe me, you will faint at the result. The reality is to start a business on the Internet, you need some extraordinary means.

Is securing users something to be happy for? As a matter of fact, user number is an underlying factor of both revenue and cost. I am not writing this series to scare you. In fact, anyone preparing a budget for a new business would become more realistic. (
2007/07/15 - By Digitalwall.com - Way to
China Internet/Telecom )

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