Pattern eight: Lightweight models & cost effective scalability

Web 2.0 in this pattern

Web 2.0 application do not just mean the technology improvement and changes, it also means the software model and strategy reform. Traditional famous software development companies like Microsoft and Apple, they get thousand of staff work for them, meanwhile they may suffer higher cost for product production. Web 2.0 compaies like Facebook and Twitter; they have lower cost and lightweight model and effective scalability. As O’Reilly(2005) mentioned, “While high value B2B connections (like those between Amazon and retail partners like ToysRUs) use the SOAP stack, Amazon reports that 95% of the usage is of the lightweight REST service.” The benefits of this web 2.0 model are faster development, low risk and cost and good ROI.  To fulfill this goal:

  •  Scale with demand

Firms must have a clear vision to the demand of customer and themselves to decide scale of firm and software.

  •  Syndicate models

Web 2.0 application allow customer to plug in software into individual website and share the data by XML or using SOAP. This would be a key point for success model.

  • Outsource

Outsource is suitable for Web 2.0 application and firms, because they may not expert in all area of software from first line to data center. So Outsource is the best choice for keeping product quality and low cost, especially in globalized firm.

  • Revenue models

Every firm is aimed to gain revenue. There are some typical revenue models: Sponsorship advertising, subscriptions, transaction commissions, premium services and product licensing.

Some cons of the pattern

Exponential growth: Some successful web 2.0 firm may experience a exponential growth. Therefore, it is a big challenge for unprepared firm.

  • Low barriers to entry: low barriers to entry are the trap for some unprepared or inexperienced Web 2.0 application firm.
  • Advertising dependence: advertising should not be the only revenue model for lightweight model and small web 2.0 application.

Evaluating Web 2.0 application

Groupon (www.groupon.com) is a group shopping services website, which provide a new shopping business model with customer and supplier and totally different from traditional heavyweight B2C website. As Cohen(2009) motioned,  “The company offers one “Groupon” per day in each of the markets it serves. The Groupon works as an assurance contract using The Point’s platform: if a certain number of people sign up for the offer, then the deal becomes available to all” Customers do not need to search product anymore and just one product here every day for a unbelievable prices waiting to buy. Scale is very clear as well as the page. Meanwhile Groupon could embed into any devices and JavaScript page to share their product information. The team on-line is just for the software part and for the supplier negotiation part, they could outsource this business to some more professional sell company or agent.  Groupon’s revenues are mainly from the transaction commission and advertisement fee from supplier and customer. Groupon has a clear business model and lightweight application model with good scalability, comparing with other B2C web like EBay, EBay has a more complex business model as real-world shop to sell and buy goods, for Group on, simple business model could reduce risk and keep revenue consistently. In the future, Groupon could extend their business model and use data exchange with Facebook or Twitter to post goods.

 

Right now the group on has involved the SoLoMo concept based on their previous business relationship, it is real good to transfer from the each day deal to SoLoMo, good scalability

O’Reilly, T. 2005. What is web 2.0 http://oreilly.com/pub/a/web2/archive/what-is-web-20.html?page=4

Cohen, D. 2009. “Virtual “tipping point” leverages group deals”. Reuters.

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2 Comments (+add yours?)

  1. Wei-Hsuan Chien
    May 12, 2012 @ 13:56:58

    HI Peter,
    thanks for sharing the information of Groupon. It’s a pretty cool application! I visit Groupon after reading your post, it seems to attract me a lot. XD~
    Indeed, Groupon can be an example to show the pattern. Especially, the target market of it is really clear to know.

    Reply

  2. Bo Peng
    May 17, 2012 @ 08:40:39

    Thanks, yes it is real cool application and idea to involve real business entities to the mobile network based on social media and location services, it is real a good SoLoMo application, meanwhile Groupon’s business model is clear and not similar as eBay. I also feel cool ,when i see the group on now video. That would be one of the further directions of web 2.0 applications.

    Reply

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