Web – an information market and its market makers

Web – an information market and its market makers

As every market, the web market is ruled by supply and demand. The major product in demand & supply is information.

A huge number of web sites compete in attracting the web user’s attention, by offering information or service content of high interest. In the book ‘Economics of Attention’, by Lanham the following is mentioned: the most successful artists and companies are the ones that grab attention and shape it, in other words, that exercise influence. With so much information, simply paying attention is the equivalent of consuming a meal’. It is like a continuous voting process in which millions of Internet Users vote on the sites which host the most valuable content according to their individual interests. The results appear on the most visited web sites. Moreover web sites ‘vote’ each other by referencing and linking their content to the content of another site. This voting process is very much influencing the search & ranking process of content, by major search portals. A content that is ‘voted’ by other sites of high quality, is considered of high quality (also called high link popularity). Some sites have tried to develop artificially high link popularity, in order to receive high search engine rankings. This is part of what is called web spam, a problem of increasing severity to the search engines.

The higher the demand for this content, the more visitors are attracted. The more visitors & clicks, the more attractive the site becomes for those interested to advertise relevant to the content products & services. Because advertisement revenue becomes an increasing part of the revenue structure of many portals. This rivalry becomes more and more intense, as information floods the Internet (infoglut). The identification of valuable information to the user and the ‘relevance ranking’ is almost impossible to be done manually, even if the user spends a lot of time reviewing material. That is why the role of the Big 3 search engines has become so central on the Internet. The ability of a site to appear in the top 10 list of a search, very much affects its chance of being visited by a user looking for a specific information (the importance of search engine optimization is clearly identified). A page’s Google Pagerank is like a maturity and acceptance ranking, which affects substantially its ability to appear ahead of other pages in search results.

As soon as a portal manages to attract a User, the aim is to stay on the site as long as possible in order to maximize the user exposure to the material advertised. Therefore info is frequently presented in small chunks and cannot be downloaded in one piece.

The more specialized the content they present, the more specific the target group they aim at. The ability to tackle a specialized subject (e.g. food recipes) can attract advertisement from market players on this area (food & beverage providers).

New market makers appear (offering search engine optimization services, automated software for domain submission to numerous search engines, search marketers, web affiliate programs promoters, mail marketing etc), which offer to increase the revenue potential of a web site. Sometimes the extreme use of such services may lead to the opposite result. There is no substitute for quality content.

On the other hand, the on-line search industry’s Big Three are trying to fight search engine spam – the effort by some sites to fool search engines on their content and link popularity and to lure the search engine users into visiting their sites. The Big Three are spending billions to supply higher quality search results. Google’s BigDaddy project aims to refine the way web pages are crawled, in order to reduce web spam.

The ability to reserve a catchy & concise domain name is also gradually decreasing.

Moreover companies apply brand management techniques on the web in order to manage their web reputation (see paper).

Search engine - a winner take all market - Describe reasons that a single search engine shall prevail – On the other hand, a single search engine dominating the search industry may cause monopoly market conditions which should be prevented.

Search marketing is increasingly positioning itself as a central demand pull approach. Businesses have to prepare for the day, when the on-line search engines shall be ubiquitous.

Size of the web and economies of scale (needed network & computational capacity of Linux server 10000 by Google).

The ability to build long lasting relationships with the Users – registration - Email marketing – gradual disposal of material.

Web content market analysis

Should one apply the five forces model of M. Porter to the web content market. (web content providers are considered those sites that do not act as an additional customer touch point for a conventional business)

Providers are web hosting providers, software providers, web page designers, market makers, (in certain cases major search engines act also as providers of SEO services). Providers do not hold substantial power given that the same services of comparable quality are offered by many.

Competition: heavy competition exists by many content providers. The heavy supply of information creates a very competitive environment, in which the ability to attract Internet users becomes increasingly difficult. Certain publishing or media organizations with well known brands and revenue sources from conventional publishing or media activity (e.g. magazines), achieve economies of scales by producing content and automatically distributing it in the different channels.

Web content providers have potentially thousands or millions of small (in revenue potential) customers (the few big customers concept is not common).

Web content supply activity is primarily regulated by the Big 3 on-line search, which hold substantial power.

Barriers to entry. Capital expenditure is less of a barrier compared to other activities. The ability to produce rich & innovative content (brainpower), cannot be fully controlled by any major market players, therefore there is no such major barrier. However, the presence of many competing content portals, as well as the inherent difficulty to identify a subject of high interest and limited content supply, creates a ‘knowledge barrier’.

Regarding the threat of complement products, the web content market is rather positioned as offering highly promising complement products to the conventional publishing and media market ones.

The web content market is one of the most globalised markets, given that the only barrier to global reach, is the language barrier. Should we assume that English is the global language, this barrier exists only to the extent that certain parts of the population do not understand English. The increased Internet penetration contributes to the increased globalisation of the market.

Opportunities exist given that one can argue that free information content supply is still limited. Information on many subjects exists, but many sites offer only introductory content while trying to promote products.