Wednesday, November 02, 2011

Building a Network Over Transactions

The new meaning of customer value: a systemic perspective analyses providing value to customers from a systems perspective.

I had a thought, a little while ago, that Google is probably one of the first companies where the users and content providers are basically the same people and that they make money, through adverts, between connecting these two together using search.

It's probably not a new thought but at the time I started to draw a diagram of how it all works.  I happened across this diagram (on the left) in this paper (page 4). 

A perverse example is when you search for something and the first hit is your own blog.  You're now both the producer and consumer of the same content - with adverts sandwiched in the middle - hmm value sandwich.

In the paper they use Google and Apple as examples:
"Google has indeed realized the usability of systemic value-creation principles in building its offering. In contrast to Apple, it uses the value network to generate the revenues. Google provides free, easy-to-use tools for customers to use on the internet, the aim being to generate “eyeballs” for the ads of the advertising customers. In collecting these “eye balls” it has or it creates a product for every internet activity that attracts lots of traffic. From the firm's perspective, the offering elements are integrated to provide the audience for the ads, information being gathered in order to better scope the ads or just to make the customers happy and to promote other products."
There's an old idea, for the Web anyway, of building a network of customers above extracting value out of each transaction. Over-valuing the creation of the network lead to the whole dot com bubble and I have been thinking about how business models have progressed since then.
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