USERS CREATE VALUEAMY SHUEN, CHAPTER 1

How’d they make money?

How is Web 2.0 different from the Web 1.0 dot-com boom and bust?

How does Google offer "the world's knowledge" to searchers for free and still make more than $10 billion in revenue,[1] grow 68%, and have a stock market valuation of close to $200 billion?

What could possibly make Flickr—a two-year-old photo-sharing startup—worth $40 million to Yahoo!, a video-sharing YouTube worth $1.6 billion to Google, a social networking site called Facebook worth the equivalent of $15 billion to Microsoft?

Is Web 2.0 about corporate blogging, wikis, and podcasting, or something else entirely?

The Long Tail: A Business Model for Web 2.0 Sell a large number of unique items in

small quantities

The Long Tail

“With no shelf space to pay for and, in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit. A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. Suddenly, popularity no longer has a monopoly on profitability.” Chris Anderson, “The Long Tail”

(Wired Magazine, Oct. 2004)

http://www.wired.com/wired/images.html?issue=12.10&topic=tail&img=2

Flickr

Flickr Capabilities

Tagging / Searching Ratings (“Interestingness”) Online Community Syndication / RSS Easy upload from cell phones Digital Ecosystem

Schmap.com

Web 2.0 Business Models

Subscription Fees Advertising

( PPC ) Transaction Fee

(ebay, target) Volume based Licensing /

Syndication Sponsorship

Loss Leaders Freemium

Strategy Network Effects Long Tail

Cost Drivers

Inventory Payroll IT Marketing/CRM Create

partnerships with 3rd party developers

Open API’s

What’s Flickr Worth?

2 million users $20 / user per

year in revenue?? Yahoo buys Flickr

for $30-$40 Million in 2005

How does Web 2.0 change things? Customer acquisition costs start small Product costs are reduced Development costs shifted Iterations change the shape of the curve Exponential effects play a greater role

Strategic Questions

How can users add value? Risks of being a leader or a laggard How to measure collective user value? How can quantifying customer

acquisition costs provide valuation information?

How can collective user value be applied to project management?

Tactical Questions

Can users participate? Connect with others?

How to attract and retain visitors? Reuse: RSS / APIs / Widgets / Mashups Licensing / Creative Commons Can you charge / make money? Who

pays?