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We might think that we have it pretty good in the Western world of software application availability: for messaging we could use WhatsApp or Facebook Messenger; for sharing instant moments we go to Snapchat; and for sharing photographs we use Instagram. Not to mention the wide variety of applications we have available to us for transportation, food delivery, or fitness – so what is the problem?

While the issue does not lie in the functionality of each individual application, but rather the fact that there are just so many of them. Would it not be more efficient to just have one ‘super-app’ that encompasses all these different applications?

The Chinese application WeChat allows its users to do just that. This monopolistic application allows its 700,000,000+ users to chat and video call with their contacts, order food, shop, advertise, and pay – just to name a few of its functions (Wang, 2016). While what makes WeChat so powerful in China is due to a number of reasons, to me, the most critical success factor is the Great Firewall of China (Lee, 2016).

While this Firewall has blocked Western (and thus foreign) sites like Facebook and Google in China, it allowed the Chinese WeChat to thrive and grow quickly despite being a relatively young social media application. The low number of alternatives meant that WeChat has few competitors, as these potential threats are blocked and unable to pose a threat to the powerful platform WeChat has become. By locking in a large number of users, the application has achieved high switching costs, meaning that it is better for companies to have an active appearance on the application, rather than creating their own application. The high switching costs are accompanied by the now strong network effects within the application. This is driven by both the supply- and the demand-side. Companies offering their services on the platform (supply-side), and the users on the platform (demand-side) create benefits for each other and strengthen the network effects as a result – which further contributes to the overall success of the application. The more users on the platform, the greater the number of companies that that want to be on the application to benefit from the large number of potential customers that are active on the application.

Given the success of the WeChat in the Chinese market, it got me thinking about why Facebook hasn’t achieved or created such a similar application, and if it should. If Facebook opens up the development of this ‘super-app’ to third parties, I think it would not only benefit Facebook, it would add value to the average Facebook user as more services are offered to them.

 

References:

Wang (2016). It’s Time For Facebook To Copy WeChat. [online] Forbes. Available at: https://www.forbes.com/sites/helenwang/2016/08/11/its-time-for-facebook-to-copy-wechat/#2e76dfc74d05 [Accessed 21 Oct. 2017].

 

Lee (2016). 5 Reasons Why WeChat is Successful in China. [online] Hongda. Available at: http://www.hongdaservice.com/blog/5-reasons-why-wechat-is-successful-in-china [Accessed 21 Oct. 2017].

 

 

 

 

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With the launch of the new iPhone X coming up next month, it is hard not to get excited about its most defining feature: the facial recognition software that can be used to unlock the phone (Macro, 2017). But while the Western world is still getting used to the idea of unlocking phones with faces instead of fingerprints, it seems that companies in China are way ahead of the game.

For example, it is now possible to pay for your order at KFC with your face. Ant Financial, an affiliate of Alibaba, already presented the necessary technology back in 2015 and is now running its first commercial trial (Horwitz, 2017). The payment system allows customers to order on a digital menu and when they are ready to pay, customers can opt to use the so-called ‘Smile to pay’ method. A 3D camera scans a customer’s face which is used to log-in to their mobile payment app (Alipay) and the payment is completed after the customer has provided their mobile number as an extra verification method (Russell, 2017).

As the technology has already proven that it works successfully, it is probably only a matter of time before facial recognition as a payment method becomes adopted in the Western world as well. It will be interesting to see which companies will collaborate to make this a reality, and whether this method will entirely replace the QR code payment method that banks like ING use, or if it will become an additional payment method. With Apple now using facial recognition purely as a method to unlock the iPhone X, the company will soon have an entirely new set of valuable data. The opportunities Apple has with this data are, in theory, endless. From potentially being the first Western company to enable facial recognition as a payment method, to allowing third party users to more advertise to specific user groups more accurately should they be granted access to this sensitive data. (Brandom, 2017)

However, whether facial recognition software is used as new payment method or as a way to unlock your mobile device, it is important to think about some of the possible dangers that this development may bring along. One question that comes to mind is: ‘Could my face get stolen?’. While facial recognition is argued to be safer than finger print identification, it is hard to ignore the possibility of someone hacking your mobile device, and essentially copying your face (Brandom, 2017). The potential consequences of identity theft mean that companies who are looking to use facial recognition software will have to regularly update their security system and enforce a very strict privacy policy to protect their users against hackers.

All in all, it will be exciting to see which companies will collaborate next to begin commercial trials with facial recognition as a payment method, and how these companies will ensure that their users trust the system enough to actually use it.

 

References:

Brandom, R. (2017). The five biggest questions about Apple’s new facial recognition system. [online] TheVerge. Available at: https://www.theverge.com/2017/9/12/16298156/apple-iphone-x-face-id-security-privacy-police-unlock [Accessed 8 Oct. 2017].

 

Horwitz, J. (2017). In China, facial recognition is used to buy KFC, board planes, and catch drug users. [online] Quartz. Available at: https://qz.com/1067460/in-china-facial-recognition-is-used-to-buy-kfc-board-planes-and-catch-drug-users/ [Accessed 8 Oct. 2017].

 

Macro, A. (2017). iPhone X news: release date, price, new features & specs. [online] MacWorld. Available at: http://www.macworld.co.uk/news/iphone/iphone-x-news-release-date-price-new-features-specs-3639808/ [Accessed 8 Oct. 2017].

 

Russell, J. (2017). Alibaba debuts ‘smile to pay’ facial recognition payments at KFC in China. [online] TechCrunch. Available at: https://techcrunch.com/2017/09/03/alibaba-debuts-smile-to-pay/ [Accessed 8 Oct. 2017].

 

 

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Group 42: Jessica Arts (405053), Lilith van der Hulst (405346), Jesco Colsman (416165), Thomas de Vos (412155)

Platforms take a mediating role between the exchange of several involved parties (Eisenmann et al, 2009). For the music industry, the supply-side contains the artists and record labels, and the demand-side the customers.

Characteristics

• Same-side positive network effect: collaborative filtering. Music platforms offer suggestions based on user preferences and preferences of other people that are similar to the user.
• Same-side negative network effect: the more artists are active on the platform, the more competitive rivalry there will be amongst artists.
• Cross-side positive network effect: the more artists there are, the better it is for users as music variety increases. Contrarily, more users means more money for artists.
• Cross-side negative network effects: third party advertising might lead to customer dissatisfaction. (Eisenmann et al, 2009)

Long-Tail

Product variety in physical music stores are limited to storage space capacities. However, platforms offer digital products, meaning a larger variety of niche products to customers can be offered – the long tail.

Porter’s Five Forces

Music distribution was no longer limited to physical stores and their geographic location, meaning rivalry among existing competitors like Tower and Virgin increased as they tried to establish online presence.

The number of potential new entrants increased as newcomers were able to scale their online business quickly, as they did not have to make investments into physical stores to reach customers.

CD sales started to decrease as new ways of listening to music started to rise, and thus threat of substitute products increased rapidly, as music became available to consumers through both illegal downloads and legal streaming platforms.

The power of suppliers increased, as artists (and record labels) could now upload music on platform mediated markets and not be limited by physical stores as their only method of distribution.

Power of buyers increased as consumers could now access music through online stores, or download music for free. They are therefore able to demand cheaper prices and had multiple ways of accessing music.

(Gallaugher, 2015)

Business Model

Platforms such as Spotify operate under a freemium business model, with two distinct service options (free or premium). Spotify captures revenues from users without a subscription through advertisements, and captures revenues from subscription fees, meaning both service options are profitable for the company. (Spotify, 2017)

Pricing Challenge

Determining the right pricing structure is a challenge as platforms need to identify and subsidize the user group creates most value. For example, students are a valuable group of users, and can be subsidized by offering premium discounts. (Spotify, 2017).

Future Predictions

Since videos influence user opinions about music, and considering that adoption of Virtual Reality and Artificial intelligence is growing, music videos could be viewed through VR goggles. This could be part of a new premium package. Furthermore, music could be integrated into user’s homes by linking sound to lighting. This means more industries become connected, which opens up many opportunities.

These predictions need a focus on detail, including audio, movement, resolution and creativity, which will have implications on overall music experience if not captured correctly.

Video link: https://www.youtube.com/watch?v=PfRKVC3-koA&t=2s

References

Eisenmann, T., Parker, G., & van Alstyne, M.W. (2009). Opening Platforms: How, When and Why? Platforms, Markets and Innovation, Gawer, A. (ed.), Northampton, MA: Edward Elgar, 131-162 

Gallaugher (2015). Information Systems: A Manager’s Guide to Harness Technology. Minneapolis; MN. University of Minnesota Libraries Publishing.

Nicolaou (2017). How Streaming Saved the Music Industry. [online] Financial Times. Available at: https://www.ft.com/content/cd99b95e-d8ba-11e6-944b-e7eb37a6aa8e [Accessed 2 Oct. 2017].

Spotify (2017). Available Subscriptions. [online] Spotify. Available at: https://support.spotify.com/us/account_payment_help/subscription_information/subscription-

levels/ [Accessed 3 Oct. 2017].