Managing Internet Portals

1. Managing Internet Portals Jan Damsgaard Dept. of Informatics Copenhagen Business School http://www.cbs.dk/staff/damsgaard

2. Internet Portals • Portals are a World Wide Web sites that originally were starting sites for users but they have developed into ending points or walled gardens • Horizontal portals focus on general issues and include Yahoo and America Online's AOL.com. • Vertical portal focus on specific topics and include Garden.com (for gardeners), Fool.com (for investors), and WebMD (for health related issues) Jan Damsgaard, 2004

3. Portal markets • If you join the wrong portal • High switching costs & Low network externalities • The winner is not necessarily better • Expectations are important • Control over the installed base of users is crucial • Evolution • Compatibility with installed based • QWERTY • Black and White Vs Color TVs, Intel Processors Jan Damsgaard, 2004

4. Competing for a prize • The winner can make extremely large gains • A monopoly is hard to challenge because of high switching costs and network externalities • Since the prize is so tempting, there is often very fierce competition • which actually sometimes may lead adopters to wait and see The prize is tempting but the contest itself may not be Jan Damsgaard, 2004

5. Four forms of competition • Adapted from Besen and Farell (1994) • Pesky Little Brother • Wants to join larger and established bigger brother • The Battle of the sexes • Each prefers its own, but also prefers compatibility • Tweedledum and Tweedledee • Firms prefer to compete • …and Avoid Pesky Little Brother aka Big Brother • Wants to stay solo Besen, S. M., & Farrell, J. (1994). Choosing How To Compete: Strategies and Tactics in Standardization. Journal of Economic Perspectives, 8(2),117-131. Jan Damsgaard, 2004

6. Tweedledum and Tweedledee • Tweedledum and Tweedledee agree to have a (standard) battle • Building on early land • Attracting the suppliers of complements • Product pre-announcement • Price commitment Jan Damsgaard, 2004

7. Battle of the sexes • Both agree that there should be only one! • Possible outcomes • Agreement, industry standard, persuasion • Adoption of a hybrid standard • Commitment to joint future development Jan Damsgaard, 2004

8. Pesky Little Brother • Firms are asymmetric • One firm has • an installed base, a good technology, and a powerful reputation • Three cases • Nothing can be done to prevent compatibility • Asserting intellectual property rights or changing technologies frequently • Partial compatibility (Apple running DOS) Jan Damsgaard, 2004

10. Content phase • Focus • In the content phase the focus is for the portal to attract customers to the portal and sample its services. • Degree of lock in • Low • Strategy • Marketing  • Stance towards competitors and established networks • Pesky little brother • Key part of the organization • Marketing department • Crisis to handle • Get users to return Jan Damsgaard, 2004

11. Community phase • Focus • In the community phase the focus is for the provider to facilitate the building of a community that exhibit high network externalities. • Degree of lock in • Moderate • Strategy • Build community out of users • Stance towards competitors • Battle of the sexes • Key part of the organization • Sales department • Crisis to handle • Build a critical mass of users Jan Damsgaard, 2004

12. Customization phase • Focus • In the customization phase the focus is for the portal to make the customers adopt and use a service that is owned/controlled by the provider • Degree of lock in • High • Strategy • Bundle open with proprietary services. Extend open services. • Stance towards competitors • Tweedledum and Tweedledee • Key part of the organization • Research and development • Crisis to handle • Establish proprietary service Jan Damsgaard, 2004

13. Compatibility phase • Focus • In the compatibility phase the challenge is keep the evolution going, stay backward compatible, and incorporate new services and technologies. • Degree of lock in • Monopoly • Strategy • Incorporate and embrace innovations. Block for gateway innovations. • Stance towards competitors • Avoid pesky little brothers • Key part of the organization • Market researchers and R&D • Crisis to handle • Avoid revolution Jan Damsgaard, 2004

14. I II III IV Focus Attract users and get them to return Attract a critical mass of users and build a community Install proprietary service to the community Keep evolving and avoid revolutions Degree of lock in Low Moderate High Monopoly Strategy Pesky little brother Battle of the sexes Tweedledum and Tweedledee Big Brother Overview of PMM

17. Building a community • Traditional wisdom • Build the community wide to increase the likelihood of including someone that will be active in building the community • However it is far better to be more to a few people than little to many people • Club theory • The more member the less the perceived value of active participation Jan Damsgaard, 2004

18. Managing the community • Traits of an online community • Roles - from new comer to old timer • The membership life cycle • Leadership and managing leaders • Official and unofficial • Etiquette • Events • Rituals • Subgroups – clans, clubs and committees • All these will evolve regardless of you being active in inscribing them or not A. J. Kim: Community Building on the Web Jan Damsgaard, 2004

19. Challenges • Mobile communities • threat or opportunity • Ad hoc communities • Smart mobs • Access technologies • Network: WLAN, UMTS, DVB etc. • Gadgets: PDA, Mobile phone, TV etc. • What is the real value of Internet portals • Historical examples of Radio and TV Jan Damsgaard, 2004