What the hell is Web 2.0 all about anyway?

Web 2.0 has heralded a shift. Existing wisdom on the net on which previous generation products were based has been rudely challenged and effectively proven to be outdated.

Catering to the Long Tail

Niche websites are on the rise and account for the majority of websites out there now. Initiatives like blogging have just spurred on the trend. The long tail has vital implications for advertisers since niche sites are visited by a very specific user group and provide great targeting opportunities and better ROI on the eyeballs.

Data as a differentiator

The Internet is built around specialized databases today. Whether it is an index of crawled websites or digitized offline data, the web is driven by data and comprehensiveness and searchability of the same differentiates products and services on the net. The need for control and ownership of data is so critical that online media players have even started backward integrating into content creation.

The importance of the User Base

In today’s internet economy, the user base is the key to success. In the past, a user base was all about eyeballs and advertising money. However, users are fast changing from being mere content consumers to being content creators as well. With the growth of annotations and what is popularly known as ‘folksonomy’, the user base has fast come up as a vital source for data enrichment. The era of categorization taxonomy is in the past now and online companies are fast moving towards an "architecture of participation" to allow users to actively help grow the data and hence the business.

Goodbye IPR

The days of IPR are fast coming to an end. IPR restricts users and makes the content economy very centralized. Web 2.0 is all about a distributed economy as epitomized by wiki-based products which thrive on user-generated content and have no issues with IPR promoting regeneration and reuse. The growing discontentment against DRM in the case of online music may herald a similar era in that field.

The Phased-out Launch

Online Products are no longer released one fine day as fully-tested fool-proof products. Phased out launches are common and the beta phase typically extends to almost the entire life-cycle with users actively chipping in as testers too. Features are added incrementally and the product stays in a perpetual state of Beta.

Mash-up era

Mash-ups are the order of the day. Take existing products and come up with an entirely new product, a new user experience, and hence a new way to get money, all this, without having to invest too much on the product creation itself.

Delivery on multiple platforms

Delivery platforms for the internet have extended beyond the PC to include a variety of handhelds. Products that launch well across all platforms go down well with the consumer. Consumers love freedom of use and portability and multiple platform compatibility is the thing for the future.

The Challenge of Content Management

A large number of online media companies source their content from the traditional content-producing media companies like news agencies, recording labels etc. Consequently, handling content and presenting it in a particular common format is a major challenge for these companies especially when content is sourced from several providers with differing presentation patterns. Content management at this level involves two broad tasks:

• Mapping all content to a common format for presentation and for ease of mining.
• Categorization of content by user intent.

Storing content in a common schema is essential if content mining is to be automated to some extent. However, the bigger challenge surfaces after this when the content is to be categorized. Categorization is normally done to aid the user in browsing the content and also in presenting relevant search results.

Categorization can be done based on several parameters. In case of music, the problem is simplified to a great extent since most of music is categorized by genre and further by artists where an artist can fall under several genres. In this case, the categorization can be fully automated once the taxonomy of genres and artists is in place. However, in case of language content which needs to be categorized by subject matter, a good deal of social intelligence is required to understand the topic to which a certain item belongs. In such cases, machine learning and classification will always yield errors. Errors may dip with increased machine learning but will always remain. Hence, some amount of manual effort is essential in such categorization. The trick then is to figure out which parts should be automated and which parts manual since there is a trade off between cost and accuracy here.

Categorization essentially can be broken down into two further tasks:

• Finding categories ‘related’ to an item.
• Deciding which of those categories is/are actually ‘relevant’.

In the case of every item being mapped to only one category (one-to-one mapping), the second problem can essentially be combined with the first. However, in a one-to-many mapping, one needs to use social intelligence (possible with a manual workforce) to determine which categories are relevant.

To provide a general rule (with exceptions), finding related categories should be automated, especially in a one-to-many mapping since an algorithm will do a more exhaustive job than a human. However, in deciding which of these categories are relevant, manual workforce alone can bring in the level of social intelligence that is required to determine the subject matter of a certain item and accordingly categorize it.

Dogster: Thinking outside the Kennel!

I stumbled upon Dogster on an idle afternoon while trying Google’s search results for some weird queries. Just when you thought you’d seen it all, you land up at a social networking site for dogs! Or, to be technically correct, for Dog Lovers! The very idea seems incredulous and you might wonder who’d be goofy enough to pose as his own dog and write blogs form his dog’s perspective.

That is, until you realize that it is actually a neat business idea to target and serve a distinct segment of the consumer population. By catering to a niche segment, this provides the $36 bn pet industry advertisers with highly relevant eyeballs. And the results speak for themselves.

Dogster and Catster are community sites for owners to share pictures and diaries of their pets. The founders of Dogster Inc apparently started up the sites as a parody of Friendster, and the like. Dogster's advertising rate at around $5 cpm is almost 40 times that of MySpace, a much more general SN. Dogster makes 95 % of its revenue from advertising and sponsorships and the rest from premium subscriptions. Advertisers include names as big as Disney, Target, PetSmart, Gap and Warner Brothers.

What makes a seemingly crazy idea like Dogster click? Dogster creates a new user experience since it orients itself around dogs rather than actual people. Users can stay anonumous and yet identify with something as dear as their pet. Since users share a common interest, canine related nomenclature and puns are plenty. People love to talk about stuff they are really passionate about.

The site is doing great with more than 300000 registered users. CEO Ted Rheingold followed up Dogster’s success with launching Catster and now wants to extend this to cover every pet and ultimately every hobby.

Netflix: Success of Simplicity

Netflix is a potent example of simplicity working wonders. It operates on a very simple business model allowing subscription for home delivery of DVD movies. Why does it work? Primarily because it is an answer to the single biggest hassle to DVD rentals: sky-rocketing fines on returning the DVD late. Providing various schemes depending on period of subscription and number of rentals during that period, it allows the users to retain the DVDs as long as he wants to without worrying about late fines. The favorable consumer experience is extended by allowing online ordering and pre-paid return envelopes for the DVDs. Additionally, Netflix also mines user behavior to recommend movies to the user based on his previous choices.

The flexibility, ease of use and comprehensiveness of choices with Netflix have resulted in a faux ownership for the users. Any system which relaxes constraints on the user experience is going to achieve greater acceptance. Beyond this, a few eternal factors have also helped the company make hay. Sales of DVD players took off around the time Netflix switched to a subscription service in late 2000, and Hollywood studios signed deals with the company around that time to counter the growing power of Blockbuster.

Netflix’s business model has redefined the DVD rental industry in such a big way that retail giant Wal Mart has backward integrated to incorporate such a system and long time competitor Blockbuster has also worked towards a similar model. Back home in India, www.seventymm.com has worked on a similar model with some success.

The Social Networking romp in India!

Orkut has been going great guns in India with an ever-increasing membership base from this country. Despite it's failure in several other countries, it has been the Social Network (SN) with the greatest activity in the Indian Online Market. Hi5 tried to enter the picture and eat some "Orkut" share but that never really happened. In the world of Networking, the USP of an SN is not the array of services that it provides but the size of its membership base. A user, actively connected to all his friends through Orkut had no incentive to sign up on an entirely new community with not even a tenth of his friends, even if it claimed to provide better features. A classic case of Metcalfe's Law which states that the value of a network is proportional to the square of the number of users of the system.

Well, Orkut was sitting pretty with its lock-in of users until Gazzag happened. Gazzag realized that the only way they could eat Orkut's share was by replicating Orkut's membership base at breakneck speed. Well, that, 0r at least make the user believe that the replication was actually happening. So they wrote a cute little script which would spam every person's friends list when he added himself to Gazzag. So the user was happy since he could import his friends list from Orkut onto a new community with much better features. And a lot of those who got the spam mail did end up in Gazzag, be it out of choice or as a remedy to the frustrating spam problem.

Now that Orkut's greatest asset, its user base, is on the road to replication, it has suddenly swung into top gear improving the usability of the site. The site which had thus far remained fairly unchanged in terms of usability suddenly swung into action and made scrapping very user friendly. This was followed by its integration with Google Talk to answer Gazzag's messenger integration.I am sure Orkut could have included an in-built messenger but they chose to integrate with Google Talk instead. While this makes things slightly inconvenient while chatting on Orkut, it is a great way to get more people to sign on to Google Talk which isn't all that popular in India.The SN space in the Indian market is definitely in for a lot of dynamism in the near future.Somehow, the Community model in general and the SN model in particular looks like the perfect recipe for success in a country where relationships are valued a lot and where the strength of offline community bonds can actually spur the growth of online ones.

Online vs. Traditional Media: The Difference

Traditionally, the content production industries (read Music Recording, Movie Production) have had a very cordial relationship with the media using the latter as a distribution vehicle. The advent of the Internet changed equations and for the first time Media was actually considered a threat. Radio and Television were welcomed by content producers but the rise of the Internet has actually witnessed a slew of lawsuits and legal battles with the content producers. From its earliest days, the online media system was organized around the sharing of information between its users, an aspect where it differed significantly from its traditional counterparts. Things turned sour as consumers moved from sharing self-generated content to sharing a copyrighted content. The content industries survive on copyrights and a system violating the same in broad daylight with a different business model everyday is bound to hurt it bad.

The other aspect where Online Media brought in a new mindset was the way content was transmitted. Traditional Media had thrived on the Push model with providers and media houses deciding the content to be aired on radio and television and consumers simply picking from among what was available. With the advent of information sharing over the internet, the line separating the consumer from the provider grew thin and a Pull system came into effect. Consumers would ask for information (forums, chat rooms etc.) and get it within a few minutes. Such was the power of the network.

The content production industries never prepared themselves for such a change. Caught unawares, they could do little but resort to legal battles. The legal battles succeeded for some time till the Dot Com brains came up with new business models finding legal loopholes. With time, they’ve realized that the only way to master the online world is to join it with their own set of business models which try to balance the seeming opposites of Copyright Protection and Information Sharing. Online Music and Video Services are moving towards free access to music and more revenues from advertisements. Advertising is fast eating into Subscription’s share of the revenue pie.

The future has to move towards a pull model of information sharing. The organized industry just needs to figure out how to join the party and be profitable at the same time.