Showing posts with label B2C. Show all posts
Showing posts with label B2C. Show all posts

Sunday, June 3, 2007

Web 2.0 Think Again (3) A Reason to "accost" Someone Online

Think again on how relations are built and maintained.








[+] Challenges for social networking websites

The only thing that matters in Web 2.0 is relations and the build-up and maintenance of relations. However, to expect that relations will happen just by giving users relation-building tools is going to cause troubles. We need to have good understanding of human nature.

The most striking examples are some social networking (or business networking) websites like Linkist or OpenBC (currently Xing.com). These services, based on the well-known Six Degrees of Separation, are aimed to fulfill the needs of business people to extend their networking.

I know you and you know your friends, and these friends have their own friends. So by following these relation chains, I should need six intermediaries at most to get to know anyone in the world, according to the theory of Six Degrees of Separation.

People who have tried such services may be excited about their ability to help you get in touch with a huge number of strangers, who are your friends' friends, within a short time. However, when the number of people on my contact list of one of these services exceeded 200, I quit it.

A year or so passed, I found that there were only two or three names on my list remained active, and most of them rarely used the service. Undoubtedly, social networking is in great demand for business people. There must be some reason why these people became indifferent to the service.

[+] Think again on how "relations" are built and maintained

Think about your daily business life. You should see that "social networks" are build upon interests, which would normally exist where there are business relations. Take a look at your business cards holder or address book: those you contact most often should very likely be your clients or partners because you have common interests with these people.

Think about the various kinds of business gatherings you've been to. How many business cards you've got there are of any use to you in making business contacts? Some people would spend time and efforts to scan and file business cards (the so-called digital business network management), but at the end of the day the only thing they can do was forward jokes to these people once in a while.

Let's face the reality! When the relations between two persons would not last if they can find no business to do with the other. When accosting somebody, you would need a reason. The biggest problem for social networking websites is users can't find good reasons to start a talk and maintain relations with others.

Business people are very pragmatic. They will not spend time in building connections that are meaningless to them. The people you meet in social networking websites are practically total stranger who do not have any business to do with you, so your relations are doomed to be short-lived. Frankly, business people are already too busy managing their social networks in their off-line life.

Some social networking websites discover that their users have become lukewarm, so they develop tools like social bookmarking, which allows users to submit and digg news articles or videos for others to view and make recommendation. It indeed brings pleasure to some people during their boring working hours, but how much it can help establish relations is a question.

[+] Contact methods, a sure way to relationships?

10 years ago I was as a well-known "social butterfly" flitting from one industry gathering to another exchanging business cards. Now when I attend this kind of event, I would just sit quietly in some corner and leave unnoticed when it's over.

It is of no use even if you get 100 business cards in such circumstances because you don't have any business to do with them. Even if you keep these business cards very carefully and you do make a phone call to one of these names, s/he may never remember where or when s/he has met you. Is this the kind of relations you need?

If you want to meet certain people, you can always find someone to introduce you instead of attempting to meet them in public occasions. On the other hand, those who want to do business with you can always find some way to find you. The only thing that matters is whether there is any business to do or not.

There is also a scenario in such gatherings: you can always see some unimportant people busy exchanging business cards with big shots. Do you know how important people deal with the business cards stuffing into their hands? No, you don't want to know.

What will you do with the business cards of these big shots? Will you forward jokes to them? No. Will you talk about business opportunity worth of some thousand US dollars? No. Will you call him/her for some chitchat? No. Add him/her to your MSN, but are you sure it's not his/her secretary who is replying your message?

[+] Business networking: no business, no relations!

Same things happen on social networking websites where there are people busy in collecting business cards and knowing big shots. To a certain extent, social networking websites are very much like virtual business cards holders - though you may have as many as 700 contacts, none of them is in good use.

The variety of users on the Internet is practically the representation of the scenario you'll bump into in any typical public events in the business world. The kind of social contacts happening in such public occasions are not very helpful in establishing and maintaining relations if there are no business opportunities involved.

Yes, it is a bleak truth. Technology evolves but human nature remains the same. Web 2.0 entrepreneurs may create perfect websites sometimes, but they tend to forget that "Web 2.0 business is driven by human nature,' and all functions need to address to the wants and needs of the humanity.

Presently, social networking websites allow users to categorize and manage their connections, enable them to get in contact with certain persons by means of search functions or though common acquaintances and provide online forums for exchange of opinions. The point is this is never the way business people establish and maintain their relations.

If social networking websites cannot assist users to "establish" and "maintain" relations, and they are but virtual business cards holders with no storage limits. Such contacts are not connections. Our observation is that, for the very pragmatic business people, "no business, no relations!"

[+] Bottlenecks of friends making services

Social networking services can be divided into the following categories - business networking, friends making, interests communities and dating websites. Among these friends making websites may be familiar to you for such websites have existed since the time of Web 1.0.

Typically these websites would have a search engine for users to enter criteria such as gender, age, locations and so on, along with advanced search functions to filter results based on specific terms like education, personal interests and hobbies. They are to provide friends making service with very specific targets.

Yet as we all know, friends making websites are constantly faced with the problem of retaining their users, so they need to budget for "buying" new users by means of advertisements. Website operators are very clear how much they need to spend to acquire a new user.

This is the destiny of friends making websites. Singles come to these websites to look for their Mr./Miss right and leave when they get the contact methods. There are even more people who invest two months leave disappointedly with no gain.

Typically, a user would first register at these friends making websites, enter their personal information such as interests, occupation or even income level, search for someone "with photos uploaded to the websites" and then attempt to start a talk. How likely can s/he succeed in building up relations in this way?

[+] Sharing common feelings is the first step to build up relations

When you search for a female aged 25-30 in the bustling downtown area, you would have some idea about what kind of figure and look she should have in your mind. When you finally find one, you may just come forward and ask to make friends with her. Yet this is not a very effective approach and you are very likely to be rejected.

Yet a tougher situation may be what you should do if you get a green light from her. Many men are hesitant to accost women not because they are afraid of being turned down but because they don't know "what to do next if they succeed." This is the problem friends making websites need to work out.

You need a reason to accost a stranger. Advanced search engines may provide users with specific results from, but at the end they still need to know "what they should do to make the first move." It does not promise a happy ending when accosting someone simply because you know what she looks like, her birthday, age, interests and occupation and so on.

This is why many friends making websites are thinking about providing Blog services. These operators find that matching service won't work by just relying on external criteria, which alone are not enough for developing relations.

In fact, personality may be a stronger factor when in comes to relations building. The key is how to present the personality of each user. Blog services may be a good idea - let users share their diaries online! You may be able to find something in common to start a talk with others by reading their blogs.

"Sharing common feelings" is the first step for users to build relations with each other and a good way to maintain relations.

[+] The issue of relations building for traditional online services

A friend who's running an online learning website for years asked me about Web 2.0 the other day. He sensed that this should be a trend and he was thinking to introduce online community features to his website. In addition, friends in the e-commerce business also wrote me about the same issue.

Still, we need to look at "relations!" What kinds of relations are there between the shoppers on a B2C shopping websites? Is it necessary to build up relations? What would lead to the first contact between them? What kind of relations would there be? Can such relations last for long?

"Relations" are the key that demands our attention when talking about Web 2.0, including online learning websites. As a matter of fact, online learning service providers may think it a good idea to build up online learning communities for their websites. Yet we are yet to see successful examples for such communities.

Similarly, we need to ask is there any need for students attending to the same class to establish relations? On what circumstances do they feel the need to do so? What about forming relations with lecturers? How long can the relations last? Only when the linkage between these questions is found can we expect the emergence of online communities.

The same logic can be applied to many other scenarios. For example, do the people looking for similar kind of jobs on job search websites have the need to establish relations? Do those who watch the same video online feel the desire to form relations? How can they do so and how the relations can be maintained?

Not all Web 2.0 services will have to provide social networking features, yet it is true that the establishment and maintenance of relations are the basis of Web 2.0. At the end of the day, it is surely helpful to spend more efforts in figuring out how relations come into being and what lies behind relations. (
2007/06/03 - By Digitalwall.com - Way to
China Internet/Telecom
)






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- Today in History



New Landscape in China's Telecom Market (1) Winner Takes All - 2008/06/08

Web 2.0 Think Again (3) A Reason to "accost" Someone Online - 2007/06/03

Sunday, November 5, 2006

The Web 2.0 Revolution (10) the Big Future of Web 3.0

Web 2.0 is not the end of the revolution; it is but an evolution.








[+] Web 2.0 is a confusing term

On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.

In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.

The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.

This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.

[+] The survival condition for Internet services: Cost

Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.

Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.

For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.

Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.

[+] Cost shifted back to Internet users

It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.

One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.

The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.

Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.

[+] Cost conditions for web-based software to prevail

Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.

Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.

At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.

AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?

The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.

[+] Take the advantage of low interpersonal communication cost

When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.

When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.

This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.

As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.

[+] What does Web 3.0 look like? When will it arrive here?

For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.

I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.

As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time. (
2006/11/05 - By Digitalwall.com - Way to
China Internet/Telecom
)






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- Today in History



The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05

Sunday, October 29, 2006

The Web 2.0 Revolution (9) New ECommerce

The B2C model won't disappear, so we need to think about how business patterns are likely to change when the cost of bandwidth, of online user communication more precisely, is in a downward trend.








[+] C2C eCommerce is in line with the Web 2.0 spirit

Among all the various applications rising with the diffusion of the Internet, eCommerce, particularly the B2C model, has the least to do with the Internet. While a consumer does place an order online, the vendor conducts the following procedures completely in the physical world - there is little to do with the Internet.

So we finally come to realize that Amazon is actually a retailer. It focuses on reducing stock and operational cost, lowering the cost of goods through bulk purchases, and lifting sales by promotion campaigns, just like any traditional retailers. Its gross margin is practically at the same level of the traditional retailing business - nothing much to expect here.

On the other hand, C2C model is more relevant to the Internet world. What operators like eBay provide was simply a transaction platform for numerous small buyers and sellers. Apparently, the model of e-market, which is formed by gathering many individual users, can expand at a much faster rate.

This was the time when Internet forerunners first learned about the power of the Internet. In the C2C model, the most costly problems, i.e. inventory stocking and logistics, of the B2C model is thrown back to small buyers and sellers.

By matching buyers and sellers, B2C operators are able to collect fees of posting items or advertisements. Online auction services have been in full bloom these days. At the time when it's just sprouted, there was no such term as Web 2.0, but who would say it's not Web 2.0?

[+] Craigslist replaces eBay, not newspaper classifieds

After ten years of development of the Internet, users now are able to get more bandwidth with less money. This is beyond question. As discussed earlier, when the cost of bandwidth drops to a critical point, new intermediaries will arise and old ones be challenged. Let's never forget the true meaning of Web 2.0:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

Following the step of auction websites, classifieds websites such as Craigslist in the U.S. has become a popular new paradigm. The success factor of Craigslist is that, it shares with users the savings obtained from the declining bandwidth cost over the past decade.

Ebay's users will be charged for making transactions on it, but most Craigslist's users don't need to pay for their classifieds posted on the website. Yet Craigslist, a high-traffic C2C website, can still survive without being beat down by the massive bandwidth consumption. This tells us how much the bandwidth cost has dropped these days that it has affected the way business is done on the Net.

Most reports about Craigslist center on its huge influence on traditional newspaper classifieds. Yet to me Craigslist is indeed a newer breed of intermediary which challenges the position of auctions websites like eBay, an once-new intermediary that took the place of traditional businesses many years ago.

[+] How the Web 2.0 spirit is infused into eCommerce

So, does it mean that all old B2C websites need to start doing C2C business in order to adapt to Web 2.0? Not at all. ON the contrary, this is exactly what we should avoid, because B2C model will not disappear. Instead we need to think about how the way of doing business may change when the bandwidth cost, or the cost of communication among Internet users, continues to fall.

Take the tourism for example. We all know that selling air tickets or tour packages online has been the most popular line of eCommerce. Yet we also know that a group tour can be a torture to many of us, because the tourist agency can only offer an ordinary tour plan with very few characteristics. It is almost impossible to offer a tailor-made package, since it is very costly to gather a group of people who have similar requirements to travel together.

Well, this is exactly where we see an opportunity for Web 2.0. The "declining cost of communication among people" has made it possible for an agency to find a group of similar interests and age to tour together.

Through proper execution, it is likely to find enough people who would like to join a tour, even for not very popular routes, in a very short time at a fairly low cost. This will lead to the downfall of discounted packaged tours and the rise of unique boutique tours. Who in the tourism business will be able to seize the power of web2.0?

[+] Apply Web 2.0 to reduce the cost of B2C eCommerce

B2C eCommerce is characterized by low gross margin similar to traditional retailing business, therefore B2C operators will care more about cost control than those running other types of websites. If the introduction of Web 2.0 services will only lead to the increase of bandwidth cost, then it's really not a good idea to go after Web 2.0.

Let's recall the case of eBay. Are there any things other than the costs logistics and warehousing that we can throw back to online shoppers? How can we make the best use of the trend of Web 2.0 to lower the operational cost in the name of consumer participation, and achieve a win-win situation for both operators and consumers?

Take the example of tourism mentioned above. Wiki applications may be very suitable for sharing individual travel experience. So, is it possible that a travel agency can reduce the number inbound calls for customer service and further lift its online sales through these applications that enable consumers to share their content voluntarily?

Here I would like to leave these questions to B2C eCommerce operators. If you still think that Web 2.0 means those terms like Blog, or RSS, or SNS, and you have no idea how these terms can be associated with your own business, then please allow me to remind you once again: the key is cost. (
2006/10/29 - By Digitalwall.com - Way to
China Internet/Telecom
)






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- Today in History



The Web 2.0 Revolution (9) New ECommerce - 2006/10/29

The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22

Sunday, October 22, 2006

The Web 2.0 Revolution (8) Transformation of the Telecom Industry

The P2P technology enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.








[+] The operational cost of email service

The lowering of communication cost is the best gift brought by the commercialization of the Internet. Most people can't even remember when is the last time they wrote a letter with a pen on paper to friends afar, but they write emails to colleagues next desk in the office everyday.

Emails are sent through a central mail server from a sender's PC and forwarded through another mail server that link to the receiver's PC. This method has completely replaced paper letters that are more costly and slowly.

Emails may have eliminated traditional paper letters, but it is also facing the challenge from yet another communication tool. In fact, since there must be a mail server in between to deliver emails, an email service provider has to afford a significant amount of storage and bandwidth cost.

If the delivery of electronic messages can be completed by connecting two PCs directly without servers involved in between, and thus shifting the storage and bandwidth cost to the sender and receiver, then the financial burden of communication service providers may become lower.

Instant messaging (IM) software like QQ, MSN Messenger is such kind of service, the provider of which is only responsible for connecting the communicating parties. After the connection is established, all messages are transmitted from one individual user to another, with no server involved.

[+] The low operational cost of P2P model

In fact, IM software has partly replaced email tools. As those we contact frequently are mostly acquaintances or partners at work, IM is more convenient and responsive. Many times we choose IM, instead of emails, to communicate with others.

Users of these communication tools users may not be aware of the technology involved, but for communication service providers, P2P is more cost efficient than Client-Server architecture.

Though the use of these tools has nothing to do with Web, but the emphasis on peer-to-peer (C2C) rather than client-server (B2C) communication is in accord with Web 2.0. In fact, let's keep in mind the true meaning of Web 2.0:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

Finally, the new generation IM service provider has brought a radical and unprecedented change to the application of P2P technology: the arrival of Skype is the consequence of P2P architecture introduced to the Internet telephony service which used to be dominated by client-server technology.

[+] Revolution can not succeed by mimicking your competitor

In the case of traditional telephone service, a call is initiated by a caller, who dials a number, and switched by a telecom operator, which sets up the connection with the receiver; the switch continues to take care of the transmission of the conversation that follows. Every word you say will first enter the telecom operator's switch then be forwarded to the receiver - what we see here is a client-server relationship.

Telecom operator thus needs to invest in costly equipment to provide such service. As the subscriber base continues to swell, the investment will grow in a relatively linear manner. Operators are constantly driven and by the demand for bandwidth by new subscribers - this difficulty is intrinsic to the client-server technology.

Internet phone emerged ten years ago when the operators were thinking about lowering their cost by providing voice communication service via the IP technology. Yet their thinking was still centered on a client-server approach: users purchased an Internet phone set and had it installed at home; users' conversation was still transmitted through operators' switch.

Such way of thinking is no different than that of the traditional operators and has kept the cost of bandwidth and equipment high for Internet phone service providers. To compete with operators they have to set their rates lower in order to attract subscribers, which has capped the growth in their revenue. That is why the Internet phone business remains lukewarm for these years.

Obviously, it is a naive idea to try to compete with traditional telecom operators by mimicking their business model. The telecom market is characterized by severe barriers to new entrants because of the huge investment needed in building up the client-server type telecom infrastructure. To challenge telecom giants, the only way is to come up with a new business model.

[+] The achievement of Skype: challenging the cost structure

Skype, as an IM tool, didn't bring too much surprise to the world at its debut, but it did leave good impression to users by its good sound quality. Its focus on providing Internet phone service was a refreshing approach.

When users using Skype, all communication data is transmitted directly to and from the both parties without any Skype server in between. This P2P model enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.。

This is what really upsets the telecom operators. Telecom operators are not particularly concerned about of potential competitors with deeper pockets as long as the market barrier remains high. Now even small companies can join the business, which has shaken the fundamentals of the industry.

Why Skype's Internet phone model didn't show up ten years ago? As a matter of fact, the broadband service was costly and not very popular then. But now people can enjoy the benefits of high-speed access with relatively less money, so that it is possible now for Skype to shift the bandwidth cost to users themselves with the help of P2P technology.

When the Internet phone service will succeed in revolutionizing the telecom industry? It is when users are able to benefit from higher bandwidth with even less money. At the initial stage, the high perpetration of ADSL and Cable broadband service has paved the way for the scene, now we are expecting FTTB (Fiber to the Building) with stronger broadband capabilities to drive the progress.

In terms of wireless communication, we've already seen 3G on the stage, and we have high hopes for WiMax which promises even high bandwidth. It may take five to ten years to see the results of these developments. Yet we should always keep in mind the big question: what would happen to the world when people can get ten times the bandwidth at the same price they are paying now? (
2006/10/22 - By Digitalwall.com - Way to
China Internet/Telecom
)






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- Today in History



The Web 2.0 Revolution (9) New ECommerce - 2006/10/29

The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22

Sunday, October 15, 2006

The Web 2.0 Revolution (7) Death of the Intermediaries

When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses.








[+] Online job sites has taken the place of newspaper job advertisements

There are two major sources of classified revenue for traditional newspapers: one is job advertisements, and the other is real estate advertisements. Both have been encroached by the Internet during the Web 1.0 period. Online job sites, which has grasped a significant share of job advertisements from newspapers, has managed to reap profits very soon and has become a model.

Long time ago, a job seeker needed to buy newspapers, and those companies in search for employees could only afford to post job advertisements on newspapers for usually several days. It took some luck to find a good job or a good employee. In other words, the cost for both parties to find their counterpart was relatively high.

Newspaper as media could charge higher for advertisements since they monopolize the channel for both parties to access information. Yet the emergence of online job sites has changed the phenomenon of information asymmetry. Companies looking for talents need only to pay a relatively small fee to post job advertisements even for months.

Through the automatic matching service by the system, a large number of CVs will be sent to you everyday for your screening. For job seekers, they can get the employment information from many companies. The cost to match jobs seekers and talent seekers used to be high, but the low matching cost on the Internet has changed this.

In the Web 1.0 period, we first tasted the cost-saving benefits brought forth by the Internet. Old intermediaries have been replaced with new ones coming onto the stage. The key behind this is that new intermediaries can provide more efficient matching service with a lower cost. And the information is liberated completely.

[+] Head hunters still good in business

Yet, after ten years of development, online job sites still can't make any breakthrough in one area - the market for middle and senior positions. Generally, companies will seek the assistance of online job sites when looking for basic level employees; but if they want to find suitable people for a position like vice president, online job sites are not their preferred channel.

For job seekers above a certain age or senior position, it is practically impossible to find a job through online job sites. This is because the market for senior positions has the following characteristics: First, senior level people don't like to be exposed, and they do mind their CVs being browsed freely by some companies.

Second, Companies too don't like to expose the information about their recruiting middle and senior level people, because competitors may detect their future developments. Third, as both sides are very cautious, recruitment for senior positions is often done through acquaintances.

So far online job sites can only address to the demand for basic level positions. Some online job sites have moved up to the segment of middle positions (like senior managers or experts with good salaries), yet they haven't posed a threat to head hunters that have been dominating this segment.

Based on the above characteristics, it may cost companies big money to find people for middle or senior positions. A head hunter may charge a company as much as several times the monthly pay of the talent it helps recruit as reward. This handsome reward comes from another form of information monopoly and is pretty.

[+] Personal references instead of head hunters

Companies are prepared to pay a good deal for recruiting people for middle and senior positions. Yet when the cost of storage and bandwidth continues to drop so as to enable the staging of Web 2.0, head hunters will start to be affected. Let's never forget about what really means by Web 2.0:

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

We have seen such a service launched by online job sites: users are encouraged to refer candidates for a specific middle or senior positions and will be rewarded for successful reference. Some social networking websites have launched trial runs of similar service. They also offered rewards for successful reference.

Instead of paying handsome money to head hunters, now companies need only to give away a reward of about one tenth the money for recruiting people. Everyone has her or his own network; to get the reward or to introduce good jobs to friends, s/he will refer suitable candidates naturally.

The reason why this model can work is that "the cost of interpersonal communication continues to fall," so it will cost less to find the people through people than through head hunters! As I have mentioned earlier, the arrival of Web 2.0 will force many B2C companies to be conquered by C2C.

[+] New business models and new intermediaries

As we have just entered the period of Web 2.0, it is still not clear whether the above models can work or not. The trend is clear, but there may be many ways to implement an idea. Yet it can be expected that middle level positions will be the first to be affected, and senior positions above the level of vice president will still be dominated by head hunters.

The most critical factor is the quality of people referred through social networking websites. Head hunters as intermediaries are responsible mainly for quality assurance as so to save the time of both parties - this is the value of their existence.

For online job sites or social networking websites, if they want to play a role in the middle level manpower market via their offering of C2C social networking service, they will have to work on the above mentioned details and ensure the quality of the talents recommended via this channel, so that companies will not have to cope with a large number of unqualified applicants coming through these websites.

Furthermore, online job sites or social networking websites may establish upstream/downstream relations with conventional head hunters in a supply chain. In other words, these websites will not directly charge companies seeking talents, but they can charge head hunters for offering a talent pool. Head hunters may do a preliminary screening and provide a shortlist to companies in need.

Head hunter can spare a part of their rewards earned for successful matching from the company, the talent seeker, to these online job sites. This business method is taking place in the current transition period. It may become a workable business model. But in the long run, this will surely have impact on the business of head hunters.

[+] Web 2.0: it's all about cost

Most people, when looking at Web 2.0, are dazzled by many fancy terms, among which social networking websites and classifieds websites are two most popular categories. The former attempts to practice the so-called Six Degrees of Separation, which is to allow any people to meet other people on the Internet and thus to expand their social networks.

The question is, how can social networking websites generate revenues once they succeed in helping people know each other? One critical factor behind the scene is: "the cost of personal communication keeps dropping." So it is a lot less costly to find a certain type of people through social networks of people.

Recently in the U.S. there comes a kind of loan websites which are to help people borrow money from other people instead of acquaintances or banks. Rules are set up to ensure the quality of both parties and to lower the risks of lending money to strangers. Imagine how high the cost would be to find a reliable stranger and borrow him money when such service is not available?

In fact, there are quite a few loan brokers who help people borrow money from banks and charge commission from loan takers for successful cases. If there is a website that can help matching individual loan borrowers and lenders at a lower cost, this will definitely affect the business of brokers.

Thanks to the falling cost of computer storage and network bandwidth, the cost of personal communication continues to decline as well. When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses. This is the approach to take what we think about Web 2.0. (
2006/10/15 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : The Web 2.0 Revolution (6) Struggle of the Press Industry


Next : The Web 2.0 Revolution (8) Transformation of the Telecom Industry








- Today in History



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

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

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

Sunday, August 20, 2006

The Web 2.0 Revolution (1) the Root Cause is Cost

All discussions about Web 2.0 should be centered around the axis of the question: what will happen when person-to-person connection and transaction cost continues to drop?








[+] Always have a critical mind about the Internet

I have always felt that it is more or less a pity that people nowadays are unfamiliar with the train of thought and experience developed during the evolution of the Internet. The Internet has become a "fact", yet there are quite a lot of people who have no idea why it has become what it is today.

During these ten years, we have experimented various kinds of seemingly wild ideas, and we have experienced moments of excitement and confusion. These thoughts have been scattered in every article of mine completed all these years. After a good deal of contemplation and numerous trials, we have finally come to realize what is feasible and what is not.

I had a plan to organize this collection of thoughts and publish it under the name of "the ABC's of the Internet". Yet after having a look at the guidelines just put together, I am surprised to find that much of the stuff is being challenged by the new developments of the Internet and is very likely to be over-written.

Web 2.0, this very popular word, is not as simple or confusing as what is portrayed in the media. Only those who have experienced the intense exchanges and experiments of ideas in the days of Web 1.0 are able to understand that Web 2.0 is really a silent revolution.

For terms such as Blogs , Social Networking Service, participation economy and others, there should be a more straightforward rationale behind. In front of the Internet, the vast crystallization of the wisdom and ideas of the mankind, we should always have a critical mind with devoutness.

[+] The declining cost of storage and bandwidth

There is only one root cause of the Internet revolution - the declining cost of computer storage and network bandwidth. In the social context, it would mean "the declining cost of the interpersonal connection or communication"; in the business context, it is "the disintegration of corporations which thrive on the monopoly of information and of capital".

In the era of Web 1.0, the shrinking cost of online publishing had resulted in drastic changes in the media and publishing industries. However, as the cost was not low enough, we had not seen in other industries such revolutionary changes centered around the idea of common participation.。

How low can the cost go? It is not easy to show with real statistics. Yet I have the impression that in 1999, SINA, a Chinese portal, launched its free email service offering "huge" storage of 50MB. Considering that at that time the storage of a hotmail account was merely 2 MB, it was 'huge" undoubtedly because SINA even bought TV commercials to publicize it.

But now you can easily apply a free email account with 2GB storage, which is 1000 times as big as that of a Hotmail account in 1999. In other words, the storage cost now is one thousandth of that in 1999.

And it means more than just the decline of the storage cost. With the increasing mailbox capacity, users have started to send emails attached with big files. It has led to the growing traffic or growing bandwidth consumption, or more practically growing cost to the email service providers. The providers today are able to afford such cost, meaning there has been staggering reduction in the bandwidth cost during this decade.

[+] Web 1.0: reduction of cost has impacted traditional B2C businesses

In 1999, free online hard-disk services were quite popular for some time. Users can upload files to the host machine for free. After the bust of the Internet bubble, these all turned to be paying services, and Xdrive, an renowned U.S. Service provider, is one of these providers.

Yet today you can get 5 GB storage with a monthly fee of USD5 or so, and 1GB storage can cost you nothing. Due to fierce competition, Xdrive is now planning to offer 5GB storage for free, to be launched this September.

By raising these examples I am not intending to explore the competition in and development of the business of free email or online hard-disk services. Rather, I am trying to point out how low the cost of storage and bandwidth has gone in these ten years. What can really stun us is the changes of the industries driven by the reduced cost the bandwidth and storage.

In the Web 1.0 era, we saw the rising of Internet media, which later developed into portals; this had impacted on the traditional capital intensive and seriously concentrated media industry. Also there was the emergence of online job sites, which greatly reduced the employment/recruitment cost and impacted on the related industries.

The shrinking of cost has triggered significant changes in the above mentioned B2C business models. While the cost continues to drop, the B2Cs are either encroached or even replaced by C2Cs. Some businesses are dying away, and some are forced to move upstream.

[+] Web 2.0: cost continues to drop, and C2Cs are impacting B2Cs

C2C business models are not a new idea. Person-to-person trading or payment service such as eBay and PayPal in the U.S. has been there for years. Online classified advertisement website Craigslist is seen as a good model for Web 2.0 participation economy, yet it came into being long before the appearance of the term Web 2.0.

In the U.S. there are now some websites providing a platform for person-to-person loans. Normally people will only lend money to reliable acquaintance, because the cost to find a reliable stranger is too high. Now the cost to identify a reliable stranger has dropped to such a low level, so guess which traditional industries will get shocked?

From 1.0 to 2.0, the revolution is a gradual one, because the cost of storage and bandwidth is not plunging overnight but declining step by step. There must be quite a few websites or business models with the label of 2.0, but actually they have been there since the days of 1.0. They just become more outstanding in the time of 2.0 when the cost has gone a lot lower.

So all discussions about Web 2.0 should be centered around the axis of the question: what will happen when person-to-person connection and transaction cost continues to drop? If in the future there comes the so-called Web 3.0, just think what kind of revolution there can be with the cost approaching to zero. (
2006/08/20 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : New Era of Online Advertising (3) toward Decentralization


Next : The Web 2.0 Revolution (2) the Emergence of New Media








- 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

Sunday, July 31, 2005

What to Invest When It Comes to Internet Business?

Internet is in dire need of being rejuvenated. Keyword: innovation.








[+] Internet business have exhausted all new ideas in a matter of a decade

The past few months have seen local media taking an inventory of what Internet has gone through in the past decade. On that basis, media have also suggested a couple of routes that Internet might embark on. By all means, a number of IPOs of local Internet companies in Taiwan during the past six months and the revealing of some quite appealing operating results have, too, been responsible for the re-ignition of media interest in Internet.

Compared to the ruins when the Internet bubble burst, the current Internet fervor should come as a solace to those who have fallen in those early battles. While I do not claim to be among those most fitting to make a stand on this topic, some media have approached with questions I had to respond to out of a concern for courtesy.

Interestingly enough, these interview questions revealed some discrepancies between the ways I and the media see things, explaining why my opinions have not been too successful in currying favor with the chief editors – more than one occasions. I could say proudly that I have been quite philosophical about the fact that media did not take a special liking to my remarks as I was not exactly a stranger to how media worked, and I call myself lucky to have the Internet as a free channel through which to express my views.

When it comes to the Internet, what comes to mind for most investors is extremely large fluctuations of stock prices and young entrepreneurs with their dotcom companies that last only months or even weeks. While there are endless reports and analysis on the media telling investors which to invest in and which not to, one can not help but wonder if Internet stocks' soaring prices are based on anything concrete.

Around late 1990s, the Internet that had just turned commercial was pinned on with so much hype in a very short period of time and had seen stock prices hitting the stratosphere before year 2000. The overnight boom could be ascribed to two types of innovation, one of technology and one of business mode.

The innovation with business mode, in particular, is the key. Before year 2000, whatever mature or nutty business ideas people might have had, other people have thought of them and have started up a company for them, for that matter. In fact, you'll be amazed how crazy some of these ideas were if someone would just collect them all and put them in a book. That, in its own right, would be a good idea, too.

[+] There is nothing cutting-edge about the Internet anymore

One thing we must recognize is that the bulk of innovations that have come with the Internet had come of age before 2000. Some made it; other didn't, while others are still struggling. That's about the status quo of most current Internet companies, without any news ideas, just seeking improvement on the basis of their innovations in the past.

The search engine, for one, is in very aspect an innovation. That is, nothing of the kind has ever been with us since the dawn of day. This is what I call a technology innovation, which has brought about the equally innovative business mode of keyword search advertising.

At this moment in the US, search engines companies have lock themselves up in a fiery battle over market shares. And their ways of going about gaining an edge are simply attempts to improve accuracy or expand scope of services base on the innovations 10 years ago. They are again fighting a war of technicalities, though.

VoIP, as the latest 15-minute fame holder, has in fact been in existence years ago when 56k modem Internet access was considered chic, and what powered it up from rags to the current riches was no other than much-improved penetration of broadband acess and improvement of VoIP technology headed by Skype.

One might question the importance of discerning innovation from improvement. But this discernment makes perfect sense, since any industry can improve on what it already has while innovation from scratch is few and far between and by any standard a matter of sheer luck, and only full-fledged innovation can produce millionaires overnight.

As such, it would be rather unrealistic for investors of Internet stocks nowadays to look forward to multiple-fold earnings seen prior to 2000, since Internet sector as it is has achieved the same level of maturity as the "traditional industries," which typically grow more on improved profitability of incumbent business model and less on major innovations.

[+] High returns go hand in hand with high levels of chaos and uncertainty

On more than one speech occasions I have posed to the audience the question, "what line of business is an online store in?" Most people were speechless. Stripped own, online stores are doing retail business. In this sense, online stores are no different from convenience stores. The same question can be asked of portal sites, and the answer would be just as simple. That is, portal sites are in the media business, just like TV stations.

Easy as I may sound when answering these questions, things were not exactly crystal clear prior to 2000, when portal website owners were feeling their way forward themselves. Even the management of these Internet companies had no idea where their companies were headed.

I was amazed at how quickly the business platform could change for those Internet start-ups, who started out saying they would focus on being an Internet-borne media featuring search engines before they would try their hand at Internet advertising at that time. But before you knew it, they had their hands full with the Internet community service. That is, portal sites began buying up all the community websites they could find once the knowledge that community websites were all the rage hit them.

In 1999, it was eCommerce's turn on center stage. Like a moth to the fire, Internet companies swarmed to the front of "commodity," and that's when they realized how little they knew about commodity. Terms like souring and inventories simply blew their mind. Later on, in a strikingly similar fashion, these Internet wild geese simply felt inspired by eBay and the likes. They figured eBay would be the way to go since there was no inventories whatsoever. With that, dotcoms got all busy again, this time fussing over online auction websites.

The next chapter of the Internet fickleness began when B2C eCommerce encountered difficulty converting consumers who remained suspicious, forcing those who stuck around to push for B2B instead. That didn't last very long either before ASPs ran its own full circle of boom and bust. By late 2000, eBook stores had showed up and disappeared, just like clockwork.

The point I aim to make with the above elaboration on Internet evolution is that all the thinkable innovations have been thought of and put to trial before 2000. One can only imagine how chaotically dotcoms ran their business and how often they changed organizational structures and personnel. For Internet start-ups, there was no such thing as stability, and profitability proved a total stranger.

However, if a daredevil had risked one dollar with one of these start-ups and stayed put, chances are he/she will be a reaping some profits from their venturous moves right now. I, myself, for instance, once bought Sina.com at US$3 per share. Now the shares are trading at US25 per share. But if you ask me, such windfalls are growing rarer by the day.

[+] Next big thing: technology innovation and operating abilities

Back when Internet was at a time comparable to Mayflower docking in US history, it's not hard to imagine a scenario in which your boss asked you to handle Internet advertising this day and eCommerce the next, which worked like a free pass to total chaos. Here and now, Internet companies are characterized by better-observed division of labor, with the entire kit of guidelines and standard operating procedures (SOP) to boot, in the process giving rise to more recognizable corporate cultures.

Under the circumstances, it is rather hard to initiate a new business pattern. To avoid disappointment, we might want to pin our hopes on technology improvement or innovations. That, however, does not mean that investors should skip all existing Internet companies as components of their portfolios. It's just that timing of engagement and exit is all the more important right now and that one should refrain from high hopes of multiplying earnings.

For Internet companies involved in services characterized by less capacity for innovation and a higher degree of maturity, such as eCommerce, what can they do? I suggest that they work on their operating ability. That is, see it as a race of who can get more clients and who can sell more products at lower cost. In this sense, however, running an online store would be no different from running a department store.

What I intend to do is rip the high-tech skin off Internet companies, which by any standard are just as conventional as it can get nowadays, so that investors can have more realistic expectations of investment in Internet stocks, instead of being conned into believing otherwise. The bottom line is that Internet business is not a high-tech business any more. In fact, it is now officially a traditional business and mass media can quit handing out false hopes already. (
2005/07/31 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : Ultimate Mobile Device (5) Universal User Experience


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- Today in History



New Era of Online Advertising (3) toward Decentralization - 2006/07/30

What to Invest When It Comes to Internet Business? - 2005/07/31

Sunday, November 14, 2004

A Word of Advice for Small Online Stores

Trust me, you don’t need password protected membership, shopping cart, or newsletter for your site.








[+] Don't take things for granted, please

With the re-emergence of eCommerce, many people find it a temping idea to set up a website to do business. To take advantage of this market demand, many system vendors have in store all-around eCommerce system, a.k.a. online store solution, which instantly becomes the choice for many as the cost is highly affordable.

Systems of this sort often come with such three features as newsletter, shopping cart, and online payment, whose presence is, obviously, for the shopping convenience of consumers. Behind the scenes, these three customer-friendly services correspond to three website management functions: membership management system, merchandise management system, plus online credit card payment system.

These three sets of services are must-haves for many beginners of online store operations. So much so that new comers order these three functions by reflex. So much so that system vendors have had these functions packaged into a ready-made item. It makes perfect sense. After all, who are we to challenge what world-renowned eCommerce companies have been doing successfully for quite a while. After all, it's only natural to copy.

What slipped the minds of these smaller online stores is that size matters, so does market position, when it comes to website designs. What works just fine with large websites like Yahoo! and Amazon does not always suit smaller ones.

For example, has it ever hit you why we need to provide an ID and a password to our customer when we sell stuff on the Net? If it has, do you know the answer to this question? If you don't, what makes you think your website needs them?

[+] Smaller online stores should give up ID and passwords

With accounts, login names, and passwords comes the requirement that consumers must register for membership before they can shop in online stores. This means consumers must take time to fill in details about their gender, age, income or even social security number. The question is: why are these hassles impossible in the real world but indispensable in the virtual one?

Has it ever occurred to you that many consumers go on to other online store just because they want no part in the filling-out process on yours? How many who managed to go through the process forgot their ID and password in their next visit and were shut out?

For large online stores like Yahoo!, whose services are aplenty, it makes much more sense to required mandatory registration because people re-visit the website a lot so that it is less likely for the vital info to slip their minds. That is only the kind of convenience that Yahoo and its likes offer and the brand image that they project can make all the intolerables somewhat endurable.

As a stark contrast, there is no way smaller online stores can offer those perks to justify their obsession with ID/passwords. Since hits are mostly flukes, there is no predicting when this particular consumer will come again. If he/she returns, say, six months later, I guarantee he will have forgotten all about his ID and password.

[+] What good are the ID and password

For B2C eCommerce website runners, IDs and passwords are what they need to identify customers on the Net. By tracking the same ID/password combination, online store owners will be able to analyze the combination holder's buying behavior. That understanding, in turn, helps runners decide what products to recommend.

For consumers, registration serves the sole purpose of not having to fill-in personal data every time one log onto an online store.

However, small online stores would be risking driving customers away every time they require registration of web surfers knocking on their doors. Hence the question, how can an online store balance its own need to keep track of consumer behavioral pattern and the convenience of a registration-free shopping environment for buyers? That's a question we should all think about.

[+] Ill-designed shopping cart feature

The one who invented the online shopping cart function must have been a genius, because he took advantage of the easy-to-grasp notion of a shopping cart, which works just as well in the virtual world of Internet as in the physical world. Those who have difficulty figuring it out right off the bat should pay the nearest clinic a visit.

Big or small, most current online stores are featuring ill-designed shopping cart functionality. Online shoppers will find that one has no instant on-screen access to the contents of one virtual cart. You must click on "check cart" link icon to find out.

That click will lead you to a new webpage on which the contents of your shopping cart will be shown. After that information, you will be presented with a choice between checking out or continue shopping. With the former, it is clear what it means. But with the latter, what does it really mean to "continue shopping" ? What is the next webpage if I go for this option? Back to the previous product page or to the homepage?

That's not how it works in the real world. In the real world, you get to see what's inside your cart any time you feel like it, down to every second. If that is any indication, a desirable virtual shopping cart should be able to show cart contents and products on display on every webpage at all times, instead of requiring users to jump between different webpages.

[+] What are newsletters for, exactly?

Many a small-fry online stores publish newsletters, hoping that those who don't buy will at least subscribe to the newsletters. The subscription will leave a trail that online stores can retrace by, say, sending promotion e-mail. But that's only wishful-thinking, considering that oftentimes the websites are so small that nobody even bothers to subscribe to their newsletters. This never fails to empty a good bowl of icy water all over whoever produces those newsletters.

Come to think of it. If you'd like your newsletter to enjoy a decent number of subscriptions, you might want to publish it on other larger website. That makes much better sense, doesn't it? After all, when few people visit a website, it's only natural that fewer will subscribe to publication on it. And that brings us back to the fundamental question of why does an online shopping owner need to publish a newsletter?

The above are three main frequently made mistakes on the part of small and relatively small online stores and my advice to them. For those who are set to enter eCommerce, remember this: imitation of past success in the ignorance of why your predecessors succeeded can be risky; innovation may not always pay off, but when it does, it does big-time. (
2004/11/14 - By Digitalwall.com - Way to
China Internet/Telecom
)






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Prev : Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget


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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