…and the Network Economy

The Network Economy

The Industrial Revolution shifted the economy from agriculture to industrial manufacturing…

The Information Age has again shifted the focus of the economy. This time from industrial manufacturing to the Network Economy…

Rules of the Network Economy

• Organisations must innovate continuously in the marketplace. Value is created not by refining a product to perfection but by bringing new products to market quickly;  

• Organisations must leverage the dynamics and agility of networks to deliver their products;

• The environment is fickle, “in the thickening web of the Network Economy, the cycle of "find, nurture, destroy" happens faster and more intensely than ever before”, (http://www.wired.com/wired/archive/5.09/newrules_pr.html)

“The Internet creates value by reducing the costs of transmitting information. That, in a nutshell, is all the Internet does”, (Liebowitz, S. 2002). 

• In 2003, following the lead of Goto.com , Google, with its AdWords program, was one of the few companies that understood how to make money out of search engines.

• Revenues from Internet advertising have been growing over the last few years at around 20%-25%, (Laudon & Traver 2008), creating the new industry of search engine marketing and allowing Google to create an ever increasing portfolio of online applications and services.

Unlock the value of the Internet

Google is a dominant player in the search engine market.

• Google aims to monetize the traffic to its sites and not the content contained therein.

• Services offered to Google customers serve not only to provide rich functionality to those users, but also allows Google to learn more about their behaviours and thus in turn increasing value further by being able to categorise these users and provide targeted advertising.

• YouTube illustrates this monetization model. The platform attracts content providers and content seekers. Relevant advertising is then displayed as well as ecommerce affiliation with sites such as iTunes and Amazon.

“Google wants to become the ‘social data’ search engine and to monetize this data leveraging network effects”, (http://www.slideshare.net/misteroo/all-about-google-presentation)

Monetizing the Internet

Google is synonymous with Internet searches and its portfolio so rich and functional that users find it both convenient and comprehensive and other companies find it difficult to compete against it.

  

Network Effect

http://www.calvin.edu/~dsc8/images/NetworkEffect.gif

• Google also creates applications that are both free, and ad-free, and does this to externalise some, usually developmental, task to its users.

• In 2007 Google launched Google Voice Local Search in the US, a free an automated telephone directory service.

• This application helps Google to better its speech to text technologies, using its user base as a large testing environment.

Externalising Tasks

• Interestingly, with the release of its Android operating system, we see Google attempting to change the mobile world and apply its monetisation models to that industry also.

Find, Nurture, Destroy