Archive for the ‘Business models’ Category

Fundamental Forces of the Internet

Lately I’ve been thinking about the common motivations behind all internet usage. I’m trying to design a taxonomy – the “fundamental forces” if you will, of internet usage motivation.

All internet services cater to one or more of the following core motivations:

  • Communication
  • Education
  • Entertainment
  • Self-expression
  • Utility

Communication

This is the original use for the internet, pre-dating the web. Email, instant messaging, site mail, forums, right up through twitter. Communication is still one of the most compelling motivations around.

Education

I mean education in a broad sense – gathering information. From maps to weather to news, technical articles and specs, product review sites, and informational blogs. A big reason people go online every day is to learn something.

Entertainment

Arguably the biggest driver overall for internet usage. Don’t believe me? Try games + porn + YouTube. That’s a pretty big chunk of activity! Obviously entertainment is a big aspect of lots of services even where that is not the service’s primary function.

Self-expression

This is perhaps the newest core-motivation to drive people online. But it’s growing every day. The ability for people to express themselves online (from commenting on a video to writing a blog to building your Second Life avatar) is a core motivation behind many of today’s most popular sites.

Utility

This is a bit of a catch-all, capturing all the services that just help you get some job done. Utilities range from finding stuff (Google) to buying stuff (Amazon) to replacing desktop apps (Google Docs).

I would argue that every web site and online service can be classified by which of these motivations it primarily and secondarily serves:

Communication - Gmail, Meebo, Skype, Twitter, Yahoo Groups, Flickr

Education - Wikipedia, Yahoo Portal, BBC, Scribd, Google Maps, Digg

Entertainment - Online gaming, porn, YouTube

Self-expression – Myspace, Facebook, YouTube, WordPress, Flickr

Utility - Google, Amazon, eBay, Craigslist

Many of the most popular and sticky services combine multiple motivations. YouTube combines self-expression and entertainment. Myspace and Facebook combine self-expression and communication. This is great if you can achieve it, but I suspect that newer sites need to focus on a single motivation. At vodpod.com the clear dominant motivation for our users is self-expression. People come to us to build a collection of their favorite videos. Entertainment (watching videos) is very much a secondary motivation. although we hope to grow its importance over time.

When you’re building your service or designing a new one, I recommend considering how your service maps to this taxonomy of motivation. Are you trying to serve too many different motivations? Consider: why do people prefer Google search to Yahoo search? One big reason is that Google search exists as a single-purpose utility, while Yahoo search is mixed in with entertainment. Clearly defining the motivations of your users is key to building the features you need, and eliminating the features you don’t.

Web 2.0 Insanity

Maybe it’s just me, but it definitely feels like there’s a funding bubble around web 2.0. Not that I’m complaining! Just a few examples:

We now have two companies, Cooliris and Browster that make browser plugins for popup-previewing of search results pages. Ok, so maybe that’s a cool feature that will save people a few clicks to find what they’re looking for. But do we really need two whole free-standing companies to do nothing but build these browser features? Can’t this thing be done by one person as a Firefox plugin? Shouldn’t these smart people be trying to solve some bigger problem? I think Russell Beatie already wrote the classic post about this.

While we’re on the subject of browsers, I just want to vent a little about Flock. Now I don’t dispute that they’ve built a cool product. But I just wish they would stop. Here we are, years after Mark Andreessen predicted that the browser would replace MS Windows as the primary application platform, and it’s finally happening! JotSpot, Writely, Zoho, web mail, Google Spreadsheets and many others are actually realizing the dream of letting me do all my computer work through the browser. I run very few desktop apps today, and I don’t miss hasseling with software installs.

But here comes Flock, trying to bundle applications into the browser itself. This is the classic MS strategy which got them sued by the DOJ, but moved to the browser platform. Guess what? I don’t want it! I don’t want Flock deciding that Flickr, Photobucket and Myspace are now the defacto standards and so they can support those out of the box and screw everybody else. I want my new operating system, the browser, pure and unadulterated and not pre-tied to a bunch of chosen services. “But they support plugins!” you say. Sure, and anyone can download and run FF on their new PC, and yet IE 6 still has 85% plus market share. Forget it. I’m not going to use it. And for those services that are happy about their Flock plugin, just wait till Flock stops activating your plugin by default and picks your competitor’s service instead.

Update: Well, not to say “I told you so”, but here’s the Techcrunch coverage of a special version of Flock which excludes Flickr support in favor of Photobucket.

Will Meebo kill Myspace?

Ok, sure I know it sounds crazy. But hear me out. What's the only thing that teenagers spend more time doing online than hanging out at myspace? They use IM. IM is the defacto communication tool for teens online – they use email only to talk to parents and teachers.

Imagine if Meebo added super-cool web 2.0 social networking, plus maybe a bit of Second Life virtualization. Basically a Myspace killer based on features. The ingrediants are out there – something will supercede Myspace, just look how old and decrepit that site looks compared to what people are doing now. Someone will come along with something super interactive, immersive, and cool. As Danah Boyd puts it, the "next blinky shiny object".

The problem is, how do you launch a new social network site and actually grab any users? Answer – build on their existing IM buddy lists. This is what AOL plans to do. Given Meembo's growing base and Ajax cred, they could be in a good position to do this. Who knows, maybe that crazy valuation wasn't so crazy after all.

Is YouTube just Napster online?

Think about it. In one sense, YouTube (and every other video sharing site) is just a p2p network online. It’s a place you go to share and collect lots of copyrighted content – in this case video. Music videos, TV shows, clips from movies, it’s all on there. In fact, a lot of the video content on video sharing sites is in fact the same video that people have been trading on p2p networks for years.

But wait, it’s supposed to be *user generated* right? Sure, just like we were all supposed to be trading home-made garage band tapes on Napster. It’s pretty clear that lots of people in Hollywood are going to view YouTube, Revver, et al as simply enabling illegal copying. The rumours are already flying about the C&D letters on their way to offices ofYouTube.

Continue reading

Can P2P save VOD?

People have been predicting that Video On Demand would be the “next big thing” for about 87 years now. Ok, maybe only 10. But it hasn’t happened. The main reasons are pretty clear:

  • Fear on the part of the big media companies (fear of copying, fear of killing the DVD cash cow).
  • The “couch potato problem” – I don’t want to watch TV/Movies on my computer.
  • The cost problem. If you checked out my earlier post covering bandwidth costs, then you can see that $.75 – $1.50 in bandwidth charges to download a single video kills lots of business models like pay-per-TV-show or video rental.

The fear amonst the media companies is slowly starting to change. Just look at iTunes video downloads plus lots of other early initiatives. There’s a little more faith in the reliability of DRM systems now. Not so much that they won’t get cracked, but rather that common users won’t bother and will accept encrypted files.

The problem of getting content to your big screen has not gone away. However, there are more devices that help this happen, and portable players like the video iPod and video-capable cell phones are turning the third screen into a bigger market.

However, the bandwidth cost problem is still with us, even after the dramatic fall in costs over the last few years. There is lots of video content that simply isn’t valuable enough to be worth the cost to download. Very valuable content, like a Hollywood movie, can still only fetch a few dollars on a rental, which makes a $1 cost to download prohibitive. Shorter content is a lot less costly to download, but most of it much be ad supported because users won’t pay real money for it. All of which makes sense as to why iTunes would launch with first-run TV shows – the download cost is smaller, yet people (apparently) are willing to pay a couple bucks to download them. (Read Robert Cringely’s analysis of iTunes video costs and the advantages of p2p distribution).

So for a long time people have recognized that using peer-to-peer for video distribution could dramatically lower the costs. Warner Brothers is set to launch such a p2p vod system in Europe in March. But in fact the core p2p technology already exists, and it’s called BitTorrent. The problem is, that’s the same technology that people are using to pirate tons of video content right now. So while Vinton Cerf claims that Hollywood is interested in using BitTorrent for distribution, the MPAA is in fact filing lawsuits to shut down sites offering torrents for download.

At the end of the day, I think the real problem is that all p2p clients require a desktop download right now. Given the big problems with spyware and viruses, that desktop install is a huge barrier to user adotion. Don’t believe me? Just compare the user base for Grouper to that for YouTube. (But don’t tell the folks at a recent Under the Radar conference who supposedly were wowed by Grouper). What we really need is the ability for a video web site like YouTube or my site gofish.com to be able to use p2p for distribution, but behind the scenes without requiring any software install. Now that’s what I call nirvana, but of course, it’s impossible…or at least, very difficult. Can you serve up file segments from your browser using just Javascript?!?! If you’ve got a solution, please drop me a line so we can go start a company tomorrow!

Maybe the AllPeers plugin for Firefox is the answer. At least they’ve got the right idea, which is to run inside the brower. Of course, they need to support IE in addition to FF. If they could do that, and make the install as easy as the Flash player, then maybe…

Or maybe Windows Vista, with it’s built-in p2p features. Maybe MS will integrate hooks to the p2p library into an upgrade to IE…now that would be interesting!

R.I.P. – “The Myspace of video”

Whoops – looks like one of the obvious models for bringing video to the web, that is to be "the Myspace of video", has now evaporated. Why? Turns out that Myspace will be the Myspace of video, as they are now supporting video hosting themselves. No doubt this was partly in response to the apparent popularity of people adding videos hosted at YouTube (and other sites like gofish.com).

It will be interesting to see what kind of uptake Myspace has for their video service, and whether it impacts YouTube or anyone else. More likely sites that were positioning directly using this model (see vidilife.com) will be in more trouble. This shows the danger of trying to use the "Hollywood mashup" model of business definition: "We're like 'Company X' meets video".

Of course, if YouTube has already established themselves as the de facto "Flickr of video", then what happens if Flickr themselves introduces video hosting?

Update: A few months on now. See this on growth of videos at Myspace

Overview of the video-on-the-web market

Here is a broad overview of the types of solutions and companies bringing video to the web. No doubt I’ve missed someone’s favorite category here…sorry about that.

Content Providers

These are traditional, mostly web 1.0 sites that offer lots of mostly commercial video. Notables here include the standard Yahoo portal, MSN Video, and iFilm.

Broadband Networks

These are companies trying to establish essentially TV networks on the web. I classify Brightcove as the most notable in this space. I’m sure there are a bunch of others here.

Hosting Services

These are the sites that I am most interested in. The early leader in this space is YouTube.com, but there are many, many others, including Google. These sites specialize in accepting videos uploaded by users and delivering that video back through their web sites. The interesting questions here are a)what features and services will appeal most to users, and b)what is the business model that works for these services.

The most obvious models that define this space are to be “the Flickr of video” or “the Myspace of video”. The Flickr model is essentially to be the utility service for publishing and serving video on the web. The Myspace model tries to add video as a key component of a social networking service. Google and Apple have taken an early lead in trying to create a marketplace for video, but I still think it’s early to tell how far that model goes given that people are so accustomed to ad supported models for video.

Video Search

There are a few solutions targeting video search in the marketplace now. These include Yahoo, Truveo (owned by AOL), and Singingfish. These services work like standard web search, returning you links to watch video off on other sites.

Other Services

There are a variety of other companies trying to get into the ecosystem here. Videoegg has a client-side app for helping with the encoding/uploading of video. Lots of companies (Instream, Broadband Enterprises) are trying to intermediate on video advertising.

Is there a cross-over model?
Currently most content sites are either commercial-only or user-gen only. The commercial content services have an obvious business model centered around showing pre-roll advertising. However, the user activity and growth seems to be squarely focused on user-generated video (see YouTube growth of late). The problem is that most user-gen sites have no revenue model other than a bit of banner advertising. So an interesting question is whether anyone can successfully mix commercial and user-gen content in the same service (you could argue that YouTube already does this by virtue of users uploading copyrighted content, but I think they will have to crack down on that going forward). If you could do it and gain user acceptance, then you might be able to find a profitable revenue model. One company trying to do this is my company gofish.com.

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