Chapter 1. Users Create Value
WEB 2.0 TAKES A FUNDAMENTALLY DIFFERENT VIEW of how businesses, customers, and partners interact, and in doing so, it opens up a range of new business models. Back in 1980, Alvin Toffler’s bestseller The Third Wave (Bantam) predicted a new type of “pro-sumer,” someone who is a mix of a DIY (do-it-yourself) producer and consumer in offline marketplaces. It was a great vision, but without the recent advances in web and digital technologies, most online broadband and mobile users could not make the quantum leap from being passive viewers and readers to becoming actively participating, socially engaged, and collaborative uploaders—personal contributors and creators of the Web.
Web 2.0 turbocharges network effects because online users are no longer limited by how many things they can find, see, or download off the Web, but rather by how many things they can do, interact, combine, remix, upload, change, and customize for themselves. This online DIY self-expression benefits businesses and other users, not just individual uploaders.
Flickr, a Web 2.0 photo-sharing site, illustrates the business and financial impact of uploaders and their remarkable collective user value. We’ll analyze Flickr’s multiple revenue streams and cost structures, making you familiar with how to evaluate the customer profitability and financial valuation pros and cons of moving to a Web 2.0 business model.
We’ll also contrast it with Netflix, an online video rental company founded during ...
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