Amazon.com quietly unveiled on Tuesday a new online-payment services it will offer to other online merchants--a move that puts it in direct competition with eBay's PayPal and Google's Google checkout.
The Seattle-based e-tailer describes it Checkout by Amazon as a "complete checkout solution" with features such as Amazon's "one-click" payment option and tools for managing shipping charges, sales tax and promotions. Google introduced a similar online payment processing system called Google Checkout in 2006, but analysts say it has been slow to catch on with merchants and consumers.
Amazon also unveiled Amazon Simple Pay, a service that allows consumers to use their Amazon account information to pay for purchases on other Web sites. However, as a competitor of PayPal, it's unlikely that Simple Pay will be accepted for purchases on eBay. In 2006, eBay banned its customers from using Google Checkout, according to its accepted payments policy.
Tuesday, July 29, 2008
'Scrabble' app on Facebook crashes in wake of 'Scrabulous' takedown
When Scrabulous, a popular game on Facebook's developer platform, was shut down earlier on Tuesday because of copyright infringement issues with the manufacturer of the Scrabble board game, word game fans weren't totally left in the dark. After all, Electronic Arts (which handles the digital rights to Scrabble for the game's parent company, Hasbro) had recently created an official beta version of Scrabble for the platform.
Problem is, the servers that were hosting the "real" Scrabble app couldn't handle the load of new migrants, and the application crashed on Tuesday afternoon. Oops!
"We'll be back up shortly," an apologetic error message read. "We're working on some tech problems and Scrabble will be ready to play as soon as possible!" The game is slated to exit the beta phase in the middle of next month, and some (my colleague Rafe Needleman among them) initially found it to be a better-quality game experience than Scrabulous had been.
But in the wake of a server crash, Facebook users weren't too pleased, as the message wall for the Scrabble application revealed. "Wow, does this suck," one Facebook user wrote. "Why can't you guys work out a licensing deal with the Scrabulous boys? Now we're back to square one and have to go through all of your debugging process."
Well, to be fair, rumor has it that Hasbro put out an acquisition offer for Scrabulous, only to have it rebuffed because its creators thought the amount offered was insufficient.
"Sucks, sucks, sucks," another Facebook user said. "Locks up at 30 percent loading. Sucks. Oh, did I mention it sucks? Get a grip, Hasbro."
Too bad "FAIL" will net you only seven points.
Problem is, the servers that were hosting the "real" Scrabble app couldn't handle the load of new migrants, and the application crashed on Tuesday afternoon. Oops!
"We'll be back up shortly," an apologetic error message read. "We're working on some tech problems and Scrabble will be ready to play as soon as possible!" The game is slated to exit the beta phase in the middle of next month, and some (my colleague Rafe Needleman among them) initially found it to be a better-quality game experience than Scrabulous had been.
But in the wake of a server crash, Facebook users weren't too pleased, as the message wall for the Scrabble application revealed. "Wow, does this suck," one Facebook user wrote. "Why can't you guys work out a licensing deal with the Scrabulous boys? Now we're back to square one and have to go through all of your debugging process."
Well, to be fair, rumor has it that Hasbro put out an acquisition offer for Scrabulous, only to have it rebuffed because its creators thought the amount offered was insufficient.
"Sucks, sucks, sucks," another Facebook user said. "Locks up at 30 percent loading. Sucks. Oh, did I mention it sucks? Get a grip, Hasbro."
Too bad "FAIL" will net you only seven points.
'Scrabble' app on Facebook crashes in wake of 'Scrabulous' takedown
When Scrabulous, a popular game on Facebook's developer platform, was shut down earlier on Tuesday because of copyright infringement issues with the manufacturer of the Scrabble board game, word game fans weren't totally left in the dark. After all, Electronic Arts (which handles the digital rights to Scrabble for the game's parent company, Hasbro) had recently created an official beta version of Scrabble for the platform.
Problem is, the servers that were hosting the "real" Scrabble app couldn't handle the load of new migrants, and the application crashed on Tuesday afternoon. Oops!
"We'll be back up shortly," an apologetic error message read. "We're working on some tech problems and Scrabble will be ready to play as soon as possible!" The game is slated to exit the beta phase in the middle of next month, and some (my colleague Rafe Needleman among them) initially found it to be a better-quality game experience than Scrabulous had been.
But in the wake of a server crash, Facebook users weren't too pleased, as the message wall for the Scrabble application revealed. "Wow, does this suck," one Facebook user wrote. "Why can't you guys work out a licensing deal with the Scrabulous boys? Now we're back to square one and have to go through all of your debugging process."
Well, to be fair, rumor has it that Hasbro put out an acquisition offer for Scrabulous, only to have it rebuffed because its creators thought the amount offered was insufficient.
"Sucks, sucks, sucks," another Facebook user said. "Locks up at 30 percent loading. Sucks. Oh, did I mention it sucks? Get a grip, Hasbro."
Too bad "FAIL" will net you only seven points.
Problem is, the servers that were hosting the "real" Scrabble app couldn't handle the load of new migrants, and the application crashed on Tuesday afternoon. Oops!
"We'll be back up shortly," an apologetic error message read. "We're working on some tech problems and Scrabble will be ready to play as soon as possible!" The game is slated to exit the beta phase in the middle of next month, and some (my colleague Rafe Needleman among them) initially found it to be a better-quality game experience than Scrabulous had been.
But in the wake of a server crash, Facebook users weren't too pleased, as the message wall for the Scrabble application revealed. "Wow, does this suck," one Facebook user wrote. "Why can't you guys work out a licensing deal with the Scrabulous boys? Now we're back to square one and have to go through all of your debugging process."
Well, to be fair, rumor has it that Hasbro put out an acquisition offer for Scrabulous, only to have it rebuffed because its creators thought the amount offered was insufficient.
"Sucks, sucks, sucks," another Facebook user said. "Locks up at 30 percent loading. Sucks. Oh, did I mention it sucks? Get a grip, Hasbro."
Too bad "FAIL" will net you only seven points.
Internet censorship plagues journalists at Olympics
With the opening of the Beijing Olympic Games a mere 10 days away, members of the media have learned that there is at least one thing they can expect not to be open: the Internet.
Despite earlier assurances that journalists would have unfettered access to the Internet at the Main Press Center and athletic venues, organizers are now backtracking, meaning that the some 5,000 reporters working in Beijing during the next several weeks won't have access to a multitude of sites such as Amnesty International or any site with Tibet in the address, according to an Associated Press report.
When Chinese officials were bidding for the right to hold the games seven years ago, they assured international organizers that there would be ''complete freedom to report.'' In April, Chinese organizers told International Olympic Committee members that Internet censorship, which is routine for China's citizens, would be lifted for journalists during the games.
However, IOC members issued a clarification Tuesday, saying that Internet freedom applied only to Web sites related to ''Olympic competitions.'' Some journalists expressed frustration at the slow download rates and even voiced suspicion that it was deliberate and intended to discourage use.
''This type of censorship would have been unthinkable in Athens, but China seems to have more formalities,'' Mihai Mironica, a journalist with ProTV in Romania, told the AP. ''If journalists cannot fully access the Internet here, it will definitely be a problem.''
This development is only the latest in a long string of headaches the media have suffered in China while preparing to cover the games.
When a senior vice president for NBC Sports, which paid about $900 million to broadcast the games, asked organizers last month to lift broadcast and interview restrictions at Tiananmen Square, the response was reportedly clear: "Don't push the issue."
Having the Chinese government telling you where you can and can't go on the Internet is not only frustrating but a bit unnerving as well. You can bet they are also watching journalists very carefully. Considering the way China dealt with YouTube during the Tibet crackdown earlier this year, what kind of "journalism freedoms" will reporters have if their stories offend Chinese officials?
Despite earlier assurances that journalists would have unfettered access to the Internet at the Main Press Center and athletic venues, organizers are now backtracking, meaning that the some 5,000 reporters working in Beijing during the next several weeks won't have access to a multitude of sites such as Amnesty International or any site with Tibet in the address, according to an Associated Press report.
When Chinese officials were bidding for the right to hold the games seven years ago, they assured international organizers that there would be ''complete freedom to report.'' In April, Chinese organizers told International Olympic Committee members that Internet censorship, which is routine for China's citizens, would be lifted for journalists during the games.
However, IOC members issued a clarification Tuesday, saying that Internet freedom applied only to Web sites related to ''Olympic competitions.'' Some journalists expressed frustration at the slow download rates and even voiced suspicion that it was deliberate and intended to discourage use.
''This type of censorship would have been unthinkable in Athens, but China seems to have more formalities,'' Mihai Mironica, a journalist with ProTV in Romania, told the AP. ''If journalists cannot fully access the Internet here, it will definitely be a problem.''
This development is only the latest in a long string of headaches the media have suffered in China while preparing to cover the games.
When a senior vice president for NBC Sports, which paid about $900 million to broadcast the games, asked organizers last month to lift broadcast and interview restrictions at Tiananmen Square, the response was reportedly clear: "Don't push the issue."
Having the Chinese government telling you where you can and can't go on the Internet is not only frustrating but a bit unnerving as well. You can bet they are also watching journalists very carefully. Considering the way China dealt with YouTube during the Tibet crackdown earlier this year, what kind of "journalism freedoms" will reporters have if their stories offend Chinese officials?
E-commerce business models
The merchant
A merchant is a wholesaler or retailer of goods and services. The merchant provides a website with product information and an online ordering mechanism. Users select the products they want to buy and place an order. The product price can be fixed or negotiable. The merchant makes his money the same way as traditional "brick-and-mortar" shops: through the profit margin in the product price. This model is mainly suited for physical goods and services, such as books, computers or a pizza delivery service. The merchant can directly reach end users and sell to them without needing wholesalers or retailers.
Click-and-mortar merchants
"Click-and-mortar" shops, combining a website with a physical store, have the additional advantages that they (usually) already have an established brand name, and that they can use their physical store to promote the website. Further, users can return unwanted or defective products simply by going to the store, rather than mailing it to a web site operator.
Traditional mail-order businesses (catalog merchants) already have the necessary facilities to process orders over the Internet (basically, orders come in by e-mail rather than by letter or phone, the shipping and handling is the same).
Build to order merchants
A manufacturer such as a computer vendor can use this model by not only offering his goods or services for sale, but also by offering the ability to order customized versions. The customized product is then assembled individually and shipped to the customer (US 6,167,383). This provides added value to consumers and allows the manufacturer to create only those products that will be sold.
The service provider
For some services, the merchant model is quite appropriate. A pizza delivery service can operate on a pay-per-item basis. However, many Internet-based services cannot easily be handled this way. It is often difficult to define the "product" that is sold, or to set a price for this product. For instance, a news site can offer the service of access to its archive, but even one dollar is probably too much for retrieving one article. Some service providers provide advertising-based access to their service, hoping to recover the costs through revenue from the advertisers. However, this appears to be a doomed strategy, since few ad-driven sites are able to get sufficient income (Yahoo! being one of the very few successful ones).
Subscription-based access
Many service operators provide subscription-based access to their service. A user pays a fixed amount per month or year and in return gets unlimited actions to the service. Alternatively, a base fee can be paid per month and all access beyond a certain limit is subject to a surcharge. This model is typically used when accessing databases with articles, news, and patents but also for online games or adult websites. However, the viability of subscription-based models is doubtful. A 2000 survey by Jupiter Communications found that almost half of all Internet users would not pay to view content on the web.
To entice users into subscribing, "teasers" or selective portions may be made available for free. For example, showing headlines for articles in a news archive or allowing access to patent documents one page at a time.
Prepaid access
Some services, in particular telephony, require payment by the minute. This can be handled via a subscription, but a viable alternative is prepaid access. In this scheme, users pay a certain amount of money, which gives them access to the service for a certain amount of time, or access to a certain amount of content. When the amount is spent, the user can prepay another amount for further access.
Often, implementations involve a smartcard on which the available credit is stored. Payment is realized by buying such a smartcard. The available credit on the smartcard is reduced during usage of the service. Prepay schemes have the advantages that they do not require subscription details to be maintained, and that they give users greater control over how much to spend on the service.
The broker
Brokers or intermediaries create markets by bringing buyers and sellers together and facilitating transactions between them. Those can be business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. A broker makes money by charging a fee for every facilitated transaction, for instance as a percentage of the price of the transaction. Some special types of brokers are:
Group buying - bringing individual potential buyers together in order to buy as a group, which should result in a lower price for each buyer (volume discounts, etc).
Classified ads - sellers can advertise their product on a site where buyers can find it. The broker makes money in various ways: the seller pays a placement fee, or the broker receives a portion of the price paid by the buyer.
Bounties - the broker offers a reward for finding a person, thing, idea, or other desired, but hard to find item. The broker may list items for a flat fee, or charge a percentage of the reward if the item is successfully found. An interesting example is BountyQuest, which offers rewards for uncovering prior art for particular patents (WO 00/77691).
The sales representative
Sales representatives often work on a commission basis: they sell an item for someone else and get a percentage of the price. On the Web, this model has developed into what is known as affiliate programs or referral fees. Someone creates a website on a particular topic and adds links to products on a merchant site which are related to his topic, so his visitors can buy those. For example, a music reviewer can add a link in a review to an online music store where the CD being reviewed can be ordered. If the reader likes the review, he can following the link and buy the CD. The merchant then pays the reviewer a commission or referral fee to the reviewer for referring to his site (US 6,029,141).
This model is realized as follows. The reviewer registers at the merchant site and receives a unique code. He adds this code to all the links to the merchant site whenever he links to a product at that site. When a reader follows the link, the merchant site sees the code and couples the reader's actions to the code. When the reader buys something the site registers the sale together with the code. Later all sales matching that code can be collected so the percentage can be computed and credit to the reviewer.
There are many variations on this theme. A fixed percentage can be paid to all sales resulting from the referral or a high percentage can be given to the actual product to which he linked, possibly with a low percentage on other sales that resulted from the link. This model is used by Amazon, Proxis, CD-Now and others. Some book authors link to their own book this way, making more money to the referral fee than to the royalties they get in. Subscription-based services also sometimes offer a referral fee to anyone who brings in a new subscriber.
It is easy and safe to participate in an affiliate model, even for individuals. Anyone who can set up a website can link to a product, and if things go well, make money. If not, then no effort or investment is wasted. This explains the popularity of the model on the World-Wide Web.
The advertiser
Advertising-driven sites are currently one of the cornerstones of E-commerce. The principle is simple and well known. A site offers free access to something and shows advertisements on every page. When a user clicks on an advertisement, he goes to an advertiser's page. The advertiser pays the site operator for showing his advertisement (eyeballs) or for every time someone clicks on the advertisement (click-through).
The same idea is popular in computer programs. Users can download and use the program for free but advertisements are shown during operation or startup of the program. In particular, advertisements can be shown when the user needs to wait for some time-consuming operation, such as printing or scanning (US 5,781,894).
Targeted advertising
It is well known that an advertisement related to the topic at hand on the site will get higher exposure and click through since such advertisements are targeted to the site visitors. So, the site operator earns more money if he places targeted advertisements (US 6,026,368). When displaying advertisements in a computer program, it is possible to target the advertisements to the purpose of the program, e.g., a spreadsheet shows advertisements for a stock brokering service (US 6,141,010). Racing games, soccer games and the likes commonly show billboards in the game to emulate the look of the real playing field. The advertisements thereon can be chosen as "real" advertisements (US 5,946,664).
Search engines use this idea as well, but relate the advertisements to the keywords entered in a query. For instance, if someone searches information on holidays, an advertisement is shown for a hotel chain on the page with search results (US 6,098,065). The advertisement can further be targeted based on the user profile for the user doing the search (e.g., if the profile shows the user likes to swim, an advertisement is shown for a beach hotel).
The existence of advertising-driven sites created a business opportunity for companies such as DoubleClick, which collects advertisements from many sources and arranges for placements on different sites. The sources pay DoubleClick for placing their advertisements, and this revenue is then shared with the site owners. Additionally, DoubleClick tracks the users that view all the advertisements, which allows it to built a user profile. This profile can then be used to more accurately target advertisements to these users (US 5,948,061).
Updating advertisements
It is desirable to be able to present the user fresh advertisements periodically, even when he is not connected to the network. To this end, his browser or other client can download multiple advertisements simultaneously and display them one at a time when he is offline (US 5,809,242). A screensaver can also be used to present advertisements when the system is idle (US 5,740,549). The screensaver periodically downloads new advertisements and/or news messages, and presents them to the user.
Portal sites
A portal offers one-stop access to different content and services, such as searching, news, e-mail, stock information, message boards or chat. By offering the option to personalize the interface and presented content (see, for example, my.cnn.com or my.yahoo.com), the portal is made more attractive to the user. The portal site can target its advertisements based on the personalization information.
Attention/incentive marketing
In this model, a user downloads and views many advertisements and clicks on them, which generates revenue for the intermediary which provided these advertisements to the users. This revenue is then shared with the users in proportion to the number of advertisements they viewed and clicked on. Often, the user is asked to enter demographic information, which the intermediary shares with the advertisers (US 5,794,210; US 5,855,008).
A difficult problem in this area is how to guard against fraud. A user could employ a computer program that automatically clicks on all advertisements sent by the intermediary. This way, he collects a large amount of money without actively seeing the advertisements. Thus, it is recommended to measure the time between showing the advertisement and the user's reaction. If that time is too short, or the same every time, it is likely that something is amiss.
If the advertisement is in the form of a video or audio fragment, the user could also be asked to press a particular button or answer a question at some point during the advertisement.
Another solution involves the use of a smartcard. The user must insert a smartcard in a television system or the like, and the reward (usually in the form of credits, although digital cash can also be used) is recorded on the smartcard. When the advertisement has been shown, the card is ejected, so that the user must re-insert the card for the next advertisement.
Free access
Users are given something for free, but the something comes with advertisements. A few examples: free web space providers typically provide advertising banners at the top or bottom of its users' sites (or as a separate, pop-up window). Free Internet access providers show advertisements on the starting page its users see when they go online. Electronic greeting cards are sent with a personal message and an advertisement. Since the user base is very diverse, it is hard to accurately target advertisements, making the expected revenue low.
The auction room
In an auction, the price of a product is made dependent on what buyers are willing to pay. There are a number of models for performing an auction, the two most well-known being the "open" auction and the "reverse" auction.
Open auctions
In the "open" auction, participants repeatedly place higher bids for a product under auction. The person who places the highest bid is awarded the product. Networks such as the Internet make it possible for a large number of bidders to participate simultaneously in one auction. Handling bids can even be automated, so that no human auctioneer is necessary (US 5,835,896).
Famous auction site eBay offers the option to participate in an auction automatically. The bidder enters an initial bid, an amount with which to increase the bid and a maximum amount. The system then automatically raises the bid with the indicated amount whenever someone else places a higher bid, until either the bidder has won the auction or his maximum is reached (US 6,044,363; US 6,151,589).
Reverse auctions
In a "reverse" or "Dutch" auction, the price is initially set at a very high level, and drops at regular intervals. Participants can pick the price at which they want to buy, and have to determine the chance that someone else will find a higher price acceptable.
In a variant of the reverse auction, customers indicate a product or service and a price, which they are willing to pay. Suppliers indicate a price at which they are willing to provide that product or service, and the auction service tries to match customers and suppliers. The intermediary pockets the difference between the price paid by the customer and the price paid to the supplier (US 5,797,127; US 5,794,207). This model is popular with high-priced items like automobiles or airline tickets.
The virtual mall
A virtual mall is a site that hosts many merchants, service providers, brokers and other businesses. The virtual mall operator typically charges a fee for setting up and maintaining the merchant's "booth", and for including him in the site-wide catalog. Additionally, he may charge a fee for every transaction the merchant performs. Virtual malls can operate within the context of a larger site, such as a portal.
The virtual mall can act as an intermediary between individual customers and the business it hosts, for instance by facilitating payment and guaranteeing a full refund if a merchant does not deliver in time.
When the virtual mall offers services such as payment facilitation or catalog browsing, it has the ability to create aggregated user profiles on the customers that visit any of the businesses in the mall. This can lead to the development of highly specialized malls (e.g., oriented at kids or sports lovers).
The virtual community
A virtual community is a website which has gathered a group of users with a common interest who work together on the site. Typically, users will share information and make contributions in other ways. Since they have contributed to it themselves, users feel highly loyal to the site and will visit it regularly. This offers possibilities for advertising.
Probably the largest virtual community can be found on Slashdot, a Linux-oriented site on which users share interesting news articles and websites (which invariably fail under the load of hundreds of thousands of people visiting it shortly after its URL got posted on Slashdot - this is called "slashdotting").
A specialized type of virtual community is the knowledge network or expert site, where people, layman and expert, share their expertise and experiences. These sites are typically ran like a forum where participants can get questions answered or raise topics for discussion. Long-time participants often meet together in real life. Usenet newsgroups are a good example of such a community.
When a knowledge network is devoted to a particular product or company, the active participation of employees of that company is often very much appreciated and can offer a great PR opportunity for the company.
A simple way to monitor a virtual community is to require registration for access to the website, preferably for free. This allows inter-session tracking of users' site usage patterns and thereby generates data of greater potential value in targeted advertising campaigns. Registration can be made more attractive by offering limited access or "teasers" to unregistered users, by offering the option to customize the site after registration, or by allowing only registered users to actively participate in chat or message boards.
The infomediary
An infomediary collects, analyzes and sells information on consumers and their buying behavior to other parties who want to reach those consumers. Typically, the infomediary offers the consumers something for free, such as free hardware or free Internet access. The later is especially useful, since it allows the infomediary to control and monitor the user's online activities. After all, the consumer connects through the infomediary's network. The information which the infomediary collects is extremely valuable for marketing purposes. Often the infomediary makes money with an advertising-based model, in which the advertisements are targeted based on the information it collected itself.
The infomediary needs to keep track of its users. A simple way to achieve this is to require registration for access to the website, preferably for free. This allows inter-session tracking of users' site usage patterns and thereby generates data of greater potential value in targeted advertising campaigns. Registration can be made more attractive by offering limited access or "teasers" to unregistered users, by offering the option to customize the site after registration, or by allowing only registered users to actively participate in chat or message boards.
The infomediary model is useful in combination with a virtual community model or virtual mall, since those models offer the ability to collect the necessary information.
A merchant is a wholesaler or retailer of goods and services. The merchant provides a website with product information and an online ordering mechanism. Users select the products they want to buy and place an order. The product price can be fixed or negotiable. The merchant makes his money the same way as traditional "brick-and-mortar" shops: through the profit margin in the product price. This model is mainly suited for physical goods and services, such as books, computers or a pizza delivery service. The merchant can directly reach end users and sell to them without needing wholesalers or retailers.
Click-and-mortar merchants
"Click-and-mortar" shops, combining a website with a physical store, have the additional advantages that they (usually) already have an established brand name, and that they can use their physical store to promote the website. Further, users can return unwanted or defective products simply by going to the store, rather than mailing it to a web site operator.
Traditional mail-order businesses (catalog merchants) already have the necessary facilities to process orders over the Internet (basically, orders come in by e-mail rather than by letter or phone, the shipping and handling is the same).
Build to order merchants
A manufacturer such as a computer vendor can use this model by not only offering his goods or services for sale, but also by offering the ability to order customized versions. The customized product is then assembled individually and shipped to the customer (US 6,167,383). This provides added value to consumers and allows the manufacturer to create only those products that will be sold.
The service provider
For some services, the merchant model is quite appropriate. A pizza delivery service can operate on a pay-per-item basis. However, many Internet-based services cannot easily be handled this way. It is often difficult to define the "product" that is sold, or to set a price for this product. For instance, a news site can offer the service of access to its archive, but even one dollar is probably too much for retrieving one article. Some service providers provide advertising-based access to their service, hoping to recover the costs through revenue from the advertisers. However, this appears to be a doomed strategy, since few ad-driven sites are able to get sufficient income (Yahoo! being one of the very few successful ones).
Subscription-based access
Many service operators provide subscription-based access to their service. A user pays a fixed amount per month or year and in return gets unlimited actions to the service. Alternatively, a base fee can be paid per month and all access beyond a certain limit is subject to a surcharge. This model is typically used when accessing databases with articles, news, and patents but also for online games or adult websites. However, the viability of subscription-based models is doubtful. A 2000 survey by Jupiter Communications found that almost half of all Internet users would not pay to view content on the web.
To entice users into subscribing, "teasers" or selective portions may be made available for free. For example, showing headlines for articles in a news archive or allowing access to patent documents one page at a time.
Prepaid access
Some services, in particular telephony, require payment by the minute. This can be handled via a subscription, but a viable alternative is prepaid access. In this scheme, users pay a certain amount of money, which gives them access to the service for a certain amount of time, or access to a certain amount of content. When the amount is spent, the user can prepay another amount for further access.
Often, implementations involve a smartcard on which the available credit is stored. Payment is realized by buying such a smartcard. The available credit on the smartcard is reduced during usage of the service. Prepay schemes have the advantages that they do not require subscription details to be maintained, and that they give users greater control over how much to spend on the service.
The broker
Brokers or intermediaries create markets by bringing buyers and sellers together and facilitating transactions between them. Those can be business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. A broker makes money by charging a fee for every facilitated transaction, for instance as a percentage of the price of the transaction. Some special types of brokers are:
Group buying - bringing individual potential buyers together in order to buy as a group, which should result in a lower price for each buyer (volume discounts, etc).
Classified ads - sellers can advertise their product on a site where buyers can find it. The broker makes money in various ways: the seller pays a placement fee, or the broker receives a portion of the price paid by the buyer.
Bounties - the broker offers a reward for finding a person, thing, idea, or other desired, but hard to find item. The broker may list items for a flat fee, or charge a percentage of the reward if the item is successfully found. An interesting example is BountyQuest, which offers rewards for uncovering prior art for particular patents (WO 00/77691).
The sales representative
Sales representatives often work on a commission basis: they sell an item for someone else and get a percentage of the price. On the Web, this model has developed into what is known as affiliate programs or referral fees. Someone creates a website on a particular topic and adds links to products on a merchant site which are related to his topic, so his visitors can buy those. For example, a music reviewer can add a link in a review to an online music store where the CD being reviewed can be ordered. If the reader likes the review, he can following the link and buy the CD. The merchant then pays the reviewer a commission or referral fee to the reviewer for referring to his site (US 6,029,141).
This model is realized as follows. The reviewer registers at the merchant site and receives a unique code. He adds this code to all the links to the merchant site whenever he links to a product at that site. When a reader follows the link, the merchant site sees the code and couples the reader's actions to the code. When the reader buys something the site registers the sale together with the code. Later all sales matching that code can be collected so the percentage can be computed and credit to the reviewer.
There are many variations on this theme. A fixed percentage can be paid to all sales resulting from the referral or a high percentage can be given to the actual product to which he linked, possibly with a low percentage on other sales that resulted from the link. This model is used by Amazon, Proxis, CD-Now and others. Some book authors link to their own book this way, making more money to the referral fee than to the royalties they get in. Subscription-based services also sometimes offer a referral fee to anyone who brings in a new subscriber.
It is easy and safe to participate in an affiliate model, even for individuals. Anyone who can set up a website can link to a product, and if things go well, make money. If not, then no effort or investment is wasted. This explains the popularity of the model on the World-Wide Web.
The advertiser
Advertising-driven sites are currently one of the cornerstones of E-commerce. The principle is simple and well known. A site offers free access to something and shows advertisements on every page. When a user clicks on an advertisement, he goes to an advertiser's page. The advertiser pays the site operator for showing his advertisement (eyeballs) or for every time someone clicks on the advertisement (click-through).
The same idea is popular in computer programs. Users can download and use the program for free but advertisements are shown during operation or startup of the program. In particular, advertisements can be shown when the user needs to wait for some time-consuming operation, such as printing or scanning (US 5,781,894).
Targeted advertising
It is well known that an advertisement related to the topic at hand on the site will get higher exposure and click through since such advertisements are targeted to the site visitors. So, the site operator earns more money if he places targeted advertisements (US 6,026,368). When displaying advertisements in a computer program, it is possible to target the advertisements to the purpose of the program, e.g., a spreadsheet shows advertisements for a stock brokering service (US 6,141,010). Racing games, soccer games and the likes commonly show billboards in the game to emulate the look of the real playing field. The advertisements thereon can be chosen as "real" advertisements (US 5,946,664).
Search engines use this idea as well, but relate the advertisements to the keywords entered in a query. For instance, if someone searches information on holidays, an advertisement is shown for a hotel chain on the page with search results (US 6,098,065). The advertisement can further be targeted based on the user profile for the user doing the search (e.g., if the profile shows the user likes to swim, an advertisement is shown for a beach hotel).
The existence of advertising-driven sites created a business opportunity for companies such as DoubleClick, which collects advertisements from many sources and arranges for placements on different sites. The sources pay DoubleClick for placing their advertisements, and this revenue is then shared with the site owners. Additionally, DoubleClick tracks the users that view all the advertisements, which allows it to built a user profile. This profile can then be used to more accurately target advertisements to these users (US 5,948,061).
Updating advertisements
It is desirable to be able to present the user fresh advertisements periodically, even when he is not connected to the network. To this end, his browser or other client can download multiple advertisements simultaneously and display them one at a time when he is offline (US 5,809,242). A screensaver can also be used to present advertisements when the system is idle (US 5,740,549). The screensaver periodically downloads new advertisements and/or news messages, and presents them to the user.
Portal sites
A portal offers one-stop access to different content and services, such as searching, news, e-mail, stock information, message boards or chat. By offering the option to personalize the interface and presented content (see, for example, my.cnn.com or my.yahoo.com), the portal is made more attractive to the user. The portal site can target its advertisements based on the personalization information.
Attention/incentive marketing
In this model, a user downloads and views many advertisements and clicks on them, which generates revenue for the intermediary which provided these advertisements to the users. This revenue is then shared with the users in proportion to the number of advertisements they viewed and clicked on. Often, the user is asked to enter demographic information, which the intermediary shares with the advertisers (US 5,794,210; US 5,855,008).
A difficult problem in this area is how to guard against fraud. A user could employ a computer program that automatically clicks on all advertisements sent by the intermediary. This way, he collects a large amount of money without actively seeing the advertisements. Thus, it is recommended to measure the time between showing the advertisement and the user's reaction. If that time is too short, or the same every time, it is likely that something is amiss.
If the advertisement is in the form of a video or audio fragment, the user could also be asked to press a particular button or answer a question at some point during the advertisement.
Another solution involves the use of a smartcard. The user must insert a smartcard in a television system or the like, and the reward (usually in the form of credits, although digital cash can also be used) is recorded on the smartcard. When the advertisement has been shown, the card is ejected, so that the user must re-insert the card for the next advertisement.
Free access
Users are given something for free, but the something comes with advertisements. A few examples: free web space providers typically provide advertising banners at the top or bottom of its users' sites (or as a separate, pop-up window). Free Internet access providers show advertisements on the starting page its users see when they go online. Electronic greeting cards are sent with a personal message and an advertisement. Since the user base is very diverse, it is hard to accurately target advertisements, making the expected revenue low.
The auction room
In an auction, the price of a product is made dependent on what buyers are willing to pay. There are a number of models for performing an auction, the two most well-known being the "open" auction and the "reverse" auction.
Open auctions
In the "open" auction, participants repeatedly place higher bids for a product under auction. The person who places the highest bid is awarded the product. Networks such as the Internet make it possible for a large number of bidders to participate simultaneously in one auction. Handling bids can even be automated, so that no human auctioneer is necessary (US 5,835,896).
Famous auction site eBay offers the option to participate in an auction automatically. The bidder enters an initial bid, an amount with which to increase the bid and a maximum amount. The system then automatically raises the bid with the indicated amount whenever someone else places a higher bid, until either the bidder has won the auction or his maximum is reached (US 6,044,363; US 6,151,589).
Reverse auctions
In a "reverse" or "Dutch" auction, the price is initially set at a very high level, and drops at regular intervals. Participants can pick the price at which they want to buy, and have to determine the chance that someone else will find a higher price acceptable.
In a variant of the reverse auction, customers indicate a product or service and a price, which they are willing to pay. Suppliers indicate a price at which they are willing to provide that product or service, and the auction service tries to match customers and suppliers. The intermediary pockets the difference between the price paid by the customer and the price paid to the supplier (US 5,797,127; US 5,794,207). This model is popular with high-priced items like automobiles or airline tickets.
The virtual mall
A virtual mall is a site that hosts many merchants, service providers, brokers and other businesses. The virtual mall operator typically charges a fee for setting up and maintaining the merchant's "booth", and for including him in the site-wide catalog. Additionally, he may charge a fee for every transaction the merchant performs. Virtual malls can operate within the context of a larger site, such as a portal.
The virtual mall can act as an intermediary between individual customers and the business it hosts, for instance by facilitating payment and guaranteeing a full refund if a merchant does not deliver in time.
When the virtual mall offers services such as payment facilitation or catalog browsing, it has the ability to create aggregated user profiles on the customers that visit any of the businesses in the mall. This can lead to the development of highly specialized malls (e.g., oriented at kids or sports lovers).
The virtual community
A virtual community is a website which has gathered a group of users with a common interest who work together on the site. Typically, users will share information and make contributions in other ways. Since they have contributed to it themselves, users feel highly loyal to the site and will visit it regularly. This offers possibilities for advertising.
Probably the largest virtual community can be found on Slashdot, a Linux-oriented site on which users share interesting news articles and websites (which invariably fail under the load of hundreds of thousands of people visiting it shortly after its URL got posted on Slashdot - this is called "slashdotting").
A specialized type of virtual community is the knowledge network or expert site, where people, layman and expert, share their expertise and experiences. These sites are typically ran like a forum where participants can get questions answered or raise topics for discussion. Long-time participants often meet together in real life. Usenet newsgroups are a good example of such a community.
When a knowledge network is devoted to a particular product or company, the active participation of employees of that company is often very much appreciated and can offer a great PR opportunity for the company.
A simple way to monitor a virtual community is to require registration for access to the website, preferably for free. This allows inter-session tracking of users' site usage patterns and thereby generates data of greater potential value in targeted advertising campaigns. Registration can be made more attractive by offering limited access or "teasers" to unregistered users, by offering the option to customize the site after registration, or by allowing only registered users to actively participate in chat or message boards.
The infomediary
An infomediary collects, analyzes and sells information on consumers and their buying behavior to other parties who want to reach those consumers. Typically, the infomediary offers the consumers something for free, such as free hardware or free Internet access. The later is especially useful, since it allows the infomediary to control and monitor the user's online activities. After all, the consumer connects through the infomediary's network. The information which the infomediary collects is extremely valuable for marketing purposes. Often the infomediary makes money with an advertising-based model, in which the advertisements are targeted based on the information it collected itself.
The infomediary needs to keep track of its users. A simple way to achieve this is to require registration for access to the website, preferably for free. This allows inter-session tracking of users' site usage patterns and thereby generates data of greater potential value in targeted advertising campaigns. Registration can be made more attractive by offering limited access or "teasers" to unregistered users, by offering the option to customize the site after registration, or by allowing only registered users to actively participate in chat or message boards.
The infomediary model is useful in combination with a virtual community model or virtual mall, since those models offer the ability to collect the necessary information.
BT guns for Android and Skype with Ribbit buy
BT has bought internet-telephony company Ribbit, in a move that will bring the communications giant up against competitors ranging from Skype to Google's Android platform.
In the deal, announced on Tuesday, BT has agreed to pay $105m (£53m) in cash for Ribbit, which bills itself as 'Silicon Valley's first phone company'. Ribbit provides what it terms 'an open platform' — not to be confused with an open-source platform — to developers, who can create internet-telephony applications and services around this.
"Silicon Valley is emerging as a hotbed of telecommunications innovation," said BT's managing director of service design, JP Rangaswami. "With Ribbit, not only do we extend our presence in [Silicon] Valley, but we also gain a ground-breaking platform, a growing community of developers and a world-class team that share a common vision."
Ribbit's technology brings together communications over mobile phones, landlines, desktop applications and internet applications. For example, the company's Amphibian application — which is yet to launch — lets voicemail be managed like email on the desktop or phone, with audio messages transcribed into searchable text. Existing applications of Ribbit's technology have seen developers integrate voice into Salesforce.com and create voice applications to run within Facebook and iGoogle.
The company's multi-protocol softswitch, or software-based call-switching technology, can also handle calls from services such as Google Talk and Skype, a BT spokesperson told ZDNet.co.uk on Tuesday.
VIDEO
Dialogue Box 4.4: Dual-band 802.11n shoot-out
Which 802.11n frequency band goes fastest and furthest — 5GHz or 2.4GHz? Dialogue Box fires up its new router and takes a laptop on a wireless walkabout...
View full video
Ribbit's chief executive, Ted Griggs, said BT was "exactly the partner" his company had been seeking. "The communications industry is entering a new phase," he said. "Closed networks are becoming open platforms and developers are now driving innovation. By adding Ribbit's capability to the power of BT's global 21CN platform, we will now be able to give the development community the tools they need to innovate on a global scale", Griggs said in a statement.
The BT spokesperson told ZDNet.co.uk in an email that the Ribbit acquisition would help BT "leapfrog competition and gain a strategic advantage in the Silicon Valley 'telco 2.0' platform race, which includes Google Android and Apple's iPhone [software-development kit]". On the unified-communications side, the acquired technology should also pit BT against services such as Skype and Google's GrandCentral.
Ribbit, which was formed in February 2006, will retain its name and management team as it becomes part of BT. The Mountain View-based company's platform will be integrated into BT's existing web services, BT said in its statement.
In the deal, announced on Tuesday, BT has agreed to pay $105m (£53m) in cash for Ribbit, which bills itself as 'Silicon Valley's first phone company'. Ribbit provides what it terms 'an open platform' — not to be confused with an open-source platform — to developers, who can create internet-telephony applications and services around this.
"Silicon Valley is emerging as a hotbed of telecommunications innovation," said BT's managing director of service design, JP Rangaswami. "With Ribbit, not only do we extend our presence in [Silicon] Valley, but we also gain a ground-breaking platform, a growing community of developers and a world-class team that share a common vision."
Ribbit's technology brings together communications over mobile phones, landlines, desktop applications and internet applications. For example, the company's Amphibian application — which is yet to launch — lets voicemail be managed like email on the desktop or phone, with audio messages transcribed into searchable text. Existing applications of Ribbit's technology have seen developers integrate voice into Salesforce.com and create voice applications to run within Facebook and iGoogle.
The company's multi-protocol softswitch, or software-based call-switching technology, can also handle calls from services such as Google Talk and Skype, a BT spokesperson told ZDNet.co.uk on Tuesday.
VIDEO
Dialogue Box 4.4: Dual-band 802.11n shoot-out
Which 802.11n frequency band goes fastest and furthest — 5GHz or 2.4GHz? Dialogue Box fires up its new router and takes a laptop on a wireless walkabout...
View full video
Ribbit's chief executive, Ted Griggs, said BT was "exactly the partner" his company had been seeking. "The communications industry is entering a new phase," he said. "Closed networks are becoming open platforms and developers are now driving innovation. By adding Ribbit's capability to the power of BT's global 21CN platform, we will now be able to give the development community the tools they need to innovate on a global scale", Griggs said in a statement.
The BT spokesperson told ZDNet.co.uk in an email that the Ribbit acquisition would help BT "leapfrog competition and gain a strategic advantage in the Silicon Valley 'telco 2.0' platform race, which includes Google Android and Apple's iPhone [software-development kit]". On the unified-communications side, the acquired technology should also pit BT against services such as Skype and Google's GrandCentral.
Ribbit, which was formed in February 2006, will retain its name and management team as it becomes part of BT. The Mountain View-based company's platform will be integrated into BT's existing web services, BT said in its statement.
HP, Intel and Yahoo study ways to make Web a utility
SAN FRANCISCO (Reuters) - Three tech giants -- Hewlett-Packard, Intel and Yahoo -- said on Tuesday they are teaming up on a research project to help turn Web services into reliable, everyday utilities.
The companies are joining forces with academic researchers in Asia, Europe and the United States to create an experimental network that lets researchers test "cloud-computing" projects -- Web-wide services that can reach billions of users at once.
Their goal is to promote open collaboration among industry, academic and government researchers by removing financial and logistical barriers to working on hugely computer-intensive, Internet-wide projects.
Founding members of the consortium said they aim to create a level playing field for individual researchers and organizations of all sizes to conduct research on software, network management and the hardware needed to deliver Web-wide services as billions of computer and phone users come online.
"No one institution or company is going to figure this out," said Prabhakar Raghavan, the head of Yahoo Research who is also a consulting professor of computer science at nearby Stanford University.
Cloud computing has become the industry's biggest buzzword. It is a catch-all term to describe how Internet-connected hardware and software once delivered as discreet products can be managed as Web-based, utility-like services.
"Potentially the entire planet will come to rely on this, like electricity," Raghavan said, referring to the push to make everything from daily communications to shopping to entertainment into always-available, on-demand Web services.
"We are all trying to move from the horse driving the wagon to a million ants driving the wagon," Raghavan said of the need to let computers manage millions of small jobs, adding that the available capacity on the Web would vary widely. "The challenge can be a billion ants one day and a million ants the next.
Big industry players from Google Inc to Microsoft Corp to IBM all jumped on the cloud-computing as a way to create Web services on an unprecedented scale -- in effect, forming barriers to entry for smaller companies.
By contrast, HP, the world's top computer maker, Intel, the biggest maker of semiconductors, and Yahoo, a Web pioneer with some of the biggest audiences for online services, are creating an open network run on data centres from many companies.
"It is an overstatement to say we have a firm grip on all the technical challenges involved," said Intel Research vice president Andrew Chien, adding: "It's not that easy for small innovators to do things" that run reliably across the Web.
Chien said Intel's involvement will help it learn how to build chips to power ever-larger Web tasks but use less energy. The chipmaker also sees a general benefit to the industry by encouraging the widest possible participation by researchers.
HP, Intel and Yahoo have partnered with the state-run Infocomm Development Authority of Singapore, the University of Illinois at Urbana-Champaign -- which 15 years ago gave birth to the Web browser -- and Germany's Karlsruhe Institute of Technology. The Illinois partnership also involves the U.S. National Science Foundation.
The test network will consist of data centres run by each of the six initial partners, and be based largely on HP hardware and Intel microprocessors. Machines at each location will dedicate 1,000 to 4,000 processor chips, backers said.
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