eCommerce Blog

eCommerce Blog – Opportunities in US and India (by Darpan Munjal)

Competitive advantage in the digital world

Posted by Darpan Munjal On March - 14 - 2008
1 Star2 Stars3 Stars4 Stars5 Stars (9 votes, average: 3.78 out of 5)
Loading ... Loading ...

Recently I got an invitation from an old colleague to join Plaxo. I thought to myself – I don’t need another social network to maintain professional contacts, I already have LinkedIn! Within the next 3 days, I suddenly started receiving Plaxo invitations from my other LinkedIn contacts – it almost felt like some sort of evil spam! As much as I hate to sign up for a new site I don’t intend to use, my curiousity got the best of me, and I indulged in accepting the invitation to see what all the hype was about. Moments after clicking through the registration process, I realized how easy Plaxo made to import contacts from my other sources – Gmail, Outlook and most surprisingly from LinkedIn!!

These are the initial signs of what is changing in the digital world. Information created by users is following them from one site to another. This is particularly timely now that the users have started feeling the “network fatigue” that comes from maintaining multiple social-networking profiles, e-mail accounts, blogs, address book applications and the like. Things are changing, really changing in the social web. Initiatives such as Dataportability group are all about making the web more free flowing in terms of user data – most of the key players such as Google, Facebook, Microsoft and Yahoo have already signed up. If things pan out the way they are intended by the Dataportability initiative, the user’s data can almost flow like a river across various social destinations as opposed to being locked in the confines of individual sites scattered in an unmanageable forest. This video does a great job of explaining what Dataportability initiative is all about. Until now, we have seen the social networking sites as the hubs and the users as their spokes. By making the data portable, the scenario will change – the users will become the hubs and the social sites will be spokes – users getting full access and control of the data they create on these social sites and they can take it anywhere they go.

This is exciting – however, it does raise some questions. If the data becomes so easily portable, will the social networking sites lose some of their competitive advantage, because the switching costs for users will get significantly smaller? Even in the case of Facebook, one of the key competitive advantages is the “social graph” – which means the network of connections and relationships between people on Facebook. Only future will tell if this will have a negative impact on some of the existing social networking sites, but one thing is clear – Social sites that just rely on “data lock-in” as the only competitive advantage will have to think harder about creating better products for users.

This is good news for the Indian context. Good, because it is still too early and there is only a handful of social networks in India that have seen meaningful adoption. This opens up various opportunities where new web 2.0 ventures can be built to ride on already established social graphs such as Orkut to offer unique capabilities for the Indian community. Now I am not saying that this will result in an increased adoption of the social networks in India – most of the barriers to internet and web 2.0 adoption in India still remain. However, I do believe that if you offer unique capabilities that add value for the Indian community, it will be much easier to bring people into your network because of data portability – riding on an already established social network is a lot easier to build one from scratch.

So what are some of the strategies to improve the likelihood of success for new or existing social networking ventures in India? The first and foremost, in my opinion, is to open up your “walled garden”. In other words, if you already run a social networking site or if you are intending on building a new one, you should make it easy for your users to take their data with them if they decide to move to a different platform. Ok, this does sound bad, after-all we are in the business of protecting our user base as opposed to giving it away. Now, I am not suggesting that we should start promoting the competitors on our site – all I am saying is that the user should come to your site ,not because he or she is “locked in”, but because they see something of value that they don’t see elsewhere. On the other hand, if they see that they have the option to easily move to a different platform in future, they might in fact contribute more content to your site. This is because they see less concerned about the risk of losing all their hard work associated with content contribution, in case a better platform becomes available tomorrow. Having said that, this does raise the stakes for your business. This means that remaining competitive will be more about proactively understanding what the customer is looking for, and offering products and capabilities that remain unique in the marketplace. Easier said than done, but it is possible – and besides, isn’t that what being on the edge is all about!

Another shift in focus should be from acquiring the user to retaining the user. It is always good to focus on building the site’s user base, and establishing some goals around where it needs to go. We have started to see a lot of stories and celebrations even in India for web 2.0 portals reaching a certain user base – like this one from BigAdda . Nothing wrong with that, infact it is good to see the Indian web 2.0 portals reaching a decent amount of scale. However, what is generally not talked about is how many of those users come back for the second time. It is easy to acquire new users (expensive, but easy). However, the real question is how many of those users stick around to contribute something to the social network. Isn’t that what defines a social network? I am not saying size doesn’t matter – however, in the end what makes a social network successful is how actively communities are participating in that network. Therefore, it is more important to think about what would make the user come back for the second time. That’s because there are a lot of reasons a user would have landed up on your portal for the first time –by advertising, by word of mouth or simply by accident. However, there is only one reason for users to come back for a second time – they see something of value that is worth their time.

Ok, so we open up the “walled garden” and we build some capabilities that make the user come back for the second time. How do we make the user stick and build a long term relationship with us? Is there any way to still “lock-in” the user for the lack of better words? The one way I believe we can still keep the users from switching is by offering some kinds of phased incentive program. I am not suggesting that we offer users monetary incentive to stick around – even incentives such as a better social status on the site as the users make more contributions will make it less attractive for them to switch to a different platform. Even if the users can easily carry their own data or content to other platforms, they may not be able to take the social status that they achieved on the current platform. There are a lot of sites which promote users to “Experts” or “Style leaders” and depending upon the context of the social network, some of these incentives can help maintain the stickiness with the platform.

I do think that initiatives such as DataPortability will eventually change the dynamics of online businesses – and will actually create significant new opportunities especially in the social networking space. However, there is an active debate going on about the pros and cons of DataPortability – especially concerns related to data privacy and security which I didn’t cover in this article. It is perfectly ok if you disagree with above view points, as long as you don’t post your comments on this blog! Ok, that was bad joke! I would in fact be very interested in your comments, especially if you disagree! Because having a balanced discussion on this trend will actually help establish the real opportunities.

Like this post? Share with your network:
  • Twitter
  • Facebook
  • LinkedIn
  • Google Bookmarks
  • del.icio.us
  • Digg
  • Blogplay
  • Add to favorites
  • IndianPad
  • StumbleUpon
  • Technorati
  • Reddit
  • Sphinn
  • Tipd

One Response to “Competitive advantage in the digital world”

  1. Janet Wood says:

    Darpan, I am doing research on the implications of DataPortability and stumbled upon your blog recently. I have to say your article is very well written and articulates what data portability is about. This is a significant change because it requires a different way to think about creating value for the customers. Although it will be a while before we see a global adoption of this phenomenon, it is good to see blogs such as yours creating awareness around it!

Leave a Reply

Get Adobe Flash playerPlugin by wpburn.com wordpress themes