Physical goods, information goods, & neurological goods(?)

17

September

2024

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I am fascinated by the idea of information goods – firstly introduced during the start of the 1950s, they prevail to be an incredibly profitable and state of the art product type.1 My fascination arises from the impressive difference between information and physical goods. If the gap between information goods and the next product type is equally big or even larger, which products could we think of?

Imagine, all a person knows is physical goods – the world hasn’t developed non-object (information) goods yet. This fictitious individual is used to buy products, which need to be newly produced, whenever an item is ordered. Additionally, personalizing a product takes a lot of extra work, as the product needs to be adjusted physically, by steps in a manufacturing process not being standardized. Ultimately, the product will break down sooner or later. Telling this person, that there will be another kind of product, being transformable and customizable easily, without any massive extra costs, would leave this person stunning. Further, explaining that the product could be reproduced an unlimited amount of time, without any significant additional cost as well, and that this product wouldn’t be subject to wear and tear over time, would sound unimaginable for this person. This whole process left me thinking: How could the next tremendous product development look like?

Upcoming trends show that this could be cognitive or even neurological goods. In my understanding, both enable physical or knowledge enhancements to be directly bought. On the one hand, cognitive goods would include obtaining knowledge, being entailed in a book, directly (without reading the actual book), by buying and transferring it. Neuralink, for instance, tries to develop enhanced communication between the brain and computers.2 Accelerating this communication to real-time speed, would enable a market for cognitive goods. On the other hand, neurological goods could include all types of physical capabilities. This could not only be skills, which otherwise would need to be learnt over time (e.g., playing the piano), but also those, which can not be learnt anymore, for example because of paralyzation (e.g., walking even though being paraplegic). The precision, with which neuronal activity can be surveilled, replicated, and even stimulated, becomes comprehensible, when considering experiments such as the one of Takagi and Nishimoto (2022), in which they tried to measure neuronal activity of people seeing things, in order to replicate the objects they have seen.3 The results, visualized in the graphic, should leave us stunning and maybe realizing that a market for neurological as well as cognitive goods is not too far away anymore.

  1. Timothy Williamson (2023). History of computers: A brief timeline. Retrieved from: https://www.livescience.com/20718-computer-history.html ↩︎
  2. Ben Kendal (2024). Was wollen Neuralink und Musk mit ihrem Gehirnchip erreichen – und ist er überhaupt sicher? Retrieved from: https://www.rnd.de/wissen/neuralink-was-ist-das-und-was-will-elon-musk-mit-dem-chip-im-gehirn-erreichen-ZFEHGH2WDVDZ3AGVYXP6OOWYU4.html#; https://neuralink.com ↩︎
  3. Sarah Kuta (2023). This A.I. Used Brain Scans to Recreate Images People Saw. In: Smithsonian Magazine, retrieved from: https://www.smithsonianmag.com/smart-news/this-ai-used-brain-scans-to-recreate-images-people-saw-180981768/ ↩︎

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News on the move

3

October

2017

5/5 (25)  

Are you unsure which newspaper has the best content, or fits the best to your interest? Are you unable to decide which subscription you should take? Do not worry, Solutions are on the rise!

Times are changing. The expansion of digital technology has enabled media to use fixed and wireless network connectivity to reach users with new methods. Altering the industry structure in production, distribution and the methods to monetize content. Existing competitors have initially adopted some of the technological changes trying to cope with it. Now however, new entrants are disrupting the industry completely.

Rising stars like Blendl are centralizing most media stories and interviews in one application (Blendl.com, 2017). Also the rise of intelligent personal assistants Amazon Echo and Google Home who are able to consult online sources for news and other information. This broadens the offer of one single Platform giving the possibility to reach niche markets and the general public with one platform. These smart personalized solutions open the door to long tail strategies adding value to the industry as a whole (Brynjolfsson, 2011).

Accessing all information through one platform has decreased the switching costs between different news media. Increasing the power of customers and decreasing the power of suppliers who have to participate in applications and systems like these. Changing the direct web channels of media partly back to centralized platforms. The suppliers will have to change dramatically to adapt (Hagiu, 2014). It seems certain that the revenue from the traditional market will shrink, shifting from multiple sources towards more centralized platforms with contributions of different parties.

I think, and I follow therewith the general opinion, that due to these developments the news industry has become a vulnerable market. Where the scale-based advantages of incumbents are weakened and new entrants possibly have great opportunities to succeed. Currently the different companies within the industry are experimenting with pricing strategies. Varying from versioning, to group pricing and personal pricing or even completely free. Only time can tell whether the news industry will regain it’s profitability, by changing the prevailing Information Strategy while adopting the newly developed technologies successfully within new sustainable business models.

References
Blendl.com (2017) via Blendl.com

Brynjolfsson, E., Hu, Y., & Simester, D. (2011). Goodbye pareto principle, hello long tail: The effect of search costs on the concentration of product sales. Management Science, 57(8), 1373-1386.

Evans and Wurster (1997). Strategy and the New Economics of Information. Harvard Business Review. September-October, 70-82.

Hagiu, A. (2014). Strategic decisions for multisided platforms. MIT Sloan Management Review, 55(2), 71.

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Technology of the Week – What happened to my newspaper?

29

September

2017

5/5 (2) VPblog

Creating, distributing and receiving news has tremendously changed over the past decades – and is likely to change throughout the next ones.

Why has it changed so drastically?

The rise of new (internet-) technologies have disrupted various markets and have especially changed all information goods markets. Information goods are goods that contain information such as books, cds, newspapers and these are now all digitised into intangible versions that can be replicated indefinitely and cheaply distributed via the Internet. The newspaper industry is one of many which has been completely reshaped.

Due to the rise of internet and online news websites, the amount of printed newspapers has decreased globally since the beginning of this century. This meant an enormous decline in printing revenues and in the amount of existing newspaper firms due to bankruptcies and unavoidable mergers. To stay alive in this industry, newspaper firms have gone digital but how has this changed the newspaper market? To answer this question, let us take a look into the market dynamics.

Strong forces cause shifts

The buying power has increased significantly as there are no switching costs for customers who do not longer need subscriptions. On the supply side, freelance journalism has made incumbents more reliable on external sources but also gave them the freedom of working with various journalists on an ad-hoc base. Hence, this force remains more or less equal. An interesting industry dynamic which influences both the supply and demand bargaining power in Porter’s model is the long-tail phenomenon. Due to the increase in news-sources, the popularity for mainstream news declines and the supply and demand of ‘niche market news’ has dropped. This results in a more even distribution of products and hence the name ‘long tail’. Incumbent newspapers see their reach decline as not all customers can be reached with mainstream articles anymore.

Next to this, it is now easier than ever for potential new entrants to buy a website domain, create so-called ‘news’ and spread them globally through social networks. This does improve brand value of some incumbents in the market who have differentiated themselves but at the same time barriers to enter have significantly been lowered. Related to this, substitutes have become more powerful in the newspaper market. Social Media has become the new main substitute which offers even more channels for people to receive their news from.
In a nutshell, Porter’s forces tell us that the newspaper market has become even more competitive due to the formation of the world-wide web, the increase in the data storage capacity and the ability to access information from the cloud as well as that the dynamics have changed a lot over time.

New players

As expected, especially new market entrants seem to take advantage of the change in industry dynamics and customer preferences. For example, the company Blendle, which is a digital newsstand that offers on demand articles from various newspapers, used this new business environment to enter the market.

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(Blendle uses different technologies to drive the change)

Blendle is able to compete in the market as it’s making use of most of the SMACIT technologies which enable business transformation.

The S stands for Social. Blendle is incorporating a network effect by showing people trending topics or things that their friends found interesting and giving them the possibility to directly share articles via different social media platforms.

The M stands for Mobile, Blendle is accessible via Mobile phone which allows users to have a quick-read on the go, instead of carrying around a whole newspaper.

The A stands for Analytics, Blendle uses big data to show articles you might find interesting based on your previous reading-behavior

The C stand for Cloud, Blendle uses cloud storage to show people all articles published by the 40 biggest newspapers in the Netherlands what also allows them to scale up and provide their service in different countries all over the world.

And IT stands for Internet of Things, the only thing Blendle is not making use of yet – not yet. Because, hardware like Beacon Technology provides interesting use-cases that could further empower Blendle’s usage with the help of micromapping.

A glimpse into the future

People will always need news and feel the want to stay informed. That is why also in the future, newspapers will most likely stay relevant.

Amazon Holds News Conference

(Jeff Bezos buys Huffington Post)

Nevertheless, future innovations and new technologies are likely to further reshape the industry. Incumbents have to act on these changes in order to stay relevant. Those who act fast on new technologies will grow and consolidate the market through a range of mergers and acquisitions.

One can also expect digital native companies from outside of the newspaper industry to buy struggling players of the industry. These outsiders are able to utilize their digital knowledge and assets to restructure classic newspapers. This has already been shown in the example of Amazon buying the Huffington Post, doubling Huffington’s digital subscription revenues within a short period of time.

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How Digitization is Destroying Your Emotions

26

September

2017

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Remember that book you loved reading? How you felt when you opened it and started a new chapter? Or that one professor that used to talk so interestingly you could not not pay attention to him?
When you imagined these things, you probably thought of a physical book and a professor in a physical lecture room, not about an e-book or an online course, right?

Products like books – aside from required lecture books maybe – are usually categorized as hedonic or experiential goods; people purchase them for the pleasure they get from the product (Chen & Granitz, 2010). Also, people tend to attach more emotional value to physical experiential goods than the digitized versions of those products (Waheed, Kaur, Ain & Sanni, 2014). Nowadays  digitized versions of a wide variety of products exist, called digital information goods (Goh & Bockstedt, 2013). To give an example: sure, you can purchase a Beatles album straight from iTunes as a birthday present for your Uncle, but wouldn’t he be so much happier if you would give it to him on vinyl – given your cool uncle has a record player, of course.

Now, the question here is: How can digitized goods provide just as much emotional value (if not more) as physical products?

Note that the question is not whether hedonic products should be digitized at all, because, of course, it is way more efficient to carry around 500 songs on your phone, instead of carrying them around on CD’s. So, when we look at efficiency, digitization is a big help. Also, selling information goods like these can be very beneficial for companies. Creating that first product might be expensive and takes some time, but creating the second version is just a matter of making a copy and, consequently, takes very little time and resources. In other words, marginal costs of information goods are very low, meaning companies can enjoy a big profit marge (Brynjolfsson & Bakos, 1998).  However, wouldn’t it be nice to be able to be just as happy about digitized products as you are about physical ones? If this can be achieved, this could have major effects on companies still producing physical goods that can be digitized, think of DVD’s – which have already lost a huge chunk of market share because of Netflix, HBO, etc. –  postcards and even schools may be at risk somewhere in the unforeseeable future.

Efficiency of digital information goods. Source: https://theecoguide.org/books-vs-ebooks-protect-environment-simple-decision
Efficiency of digital information goods. Source: https://theecoguide.org/books-vs-ebooks-protect-environment-simple-decision

One thing that can be done is to offer more customer value in the case of digitized products. For example, if you purchase that Beatles album – or any other album – through iTunes you get free extra’s such as little video fragments of behind the scenes footage. In this way, consumers get more value for their money, which might increase their happiness.
Although there is no solution to this problem yet, companies selling digitized hedonic/experiential products should try to get consumer happiness to the same level as consumers get from physical products in one way or another.

So, next time you’re thinking of sending someone an e-card, remember that they’ll probably be happier to see one on their doormat.

 

 

Sources

  1. Brynjolfsson, E. & Bakos, Y. (1998). Bundling Information Goods: Pricing, Profits and Efficiency. Management Science, 45(12), 1613 – 1630.
  1. Chen, S. & Granitz, N. (2010). Adoption, rejection, or convergence: Consumer attitudes toward book digitization. Journal of Business Research, 65(8), 1219 – 1225.
  1. Goh, K. H. & Bockstedt, J. C. (2013). The Framing Effects of Multipart Pricing on Consumer Purchasing Behavior of Customized Information Good Bundles. Information Systems Research, 24(2), 334 – 351.
  1. Waheed, M., Kaur, K., Ain, M. & Sanni, S. A. (2014). Emotional attachment and multidimensional self-efficacy: extension of diffusion theory in the context of eBook reader. Behaviour & Information Technology, 34(12), 1147 – 1159.

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Technology of the Week – Theme: Information Goods – Mobile Payment

9

October

2016

No ratings yet. In this Tech of the Week we have taken a closer look into mobile payment technologies and seen how this information good (mobile device) has innovated the way we pay. First of all we have shown the evolution of payment since the beginning of human existence. And conclude that today’s payment methods exist of either cash, credit or debit card or newly enabled the mobile device.

Paying with your mobile device is highly interesting since our society nowadays is carrying such a device around all day long, therefore it is actually quite straightforward to think of using it as a payment method as well. Recent technology innovations have made it possible to add this feature to your mobile device. With QR-codes and Near Field Communication (NFC) chips your mobile device is ready to exchange information and especially ready to exchange payment informations. In the movie we explain how these two technologies could work in your daily life. The QR-code is a readily available technology as this technology has already been used for more in-depth brand exposure (Soon, 2008). Consumers are directed to webpages, applications or other information-savvy materials. But what if you are in a restaurant, you ask for the bill, you scan the QR-code that is printed on the bill and voila the bill has been paid! No cash, no cards, no wallet needed. Just a mobile device with a camera (and an internet connection) and the transaction is fulfilled.

The NFC chip is probably also familiar, although you might never have heard of the name of the chip. Think of your debit or credit card, nowadays you can just put the card against the pin device and the transaction is completed. These chips are now built into many smartphones available on the market (Harrop, Das and Holland, 2014) making it possible to let your phone do what your credit or debit card can do. To have a transaction fulfilled with the NFC chip, both devices need to be equipped with NFC software and held within a maximum of 10 cm from each other.

In the video we have taken a closer look into both technologies and compared their strengths and weaknesses. We have identified four main areas; user interaction, costs, technology widespread and security.

User Interaction

As explained above, with the QR-code you have to scan the code, with NFC you have to “tap” your device near the NFC receptor. Both technologies work very differently and as from the user interaction it is clearly the NFC tech which is the easiest to use. We therefore attributed the first point to NFC.

Costs

Regarding the costs, the QR-code is clearly the winner. Generating a code requires few resources (a code can even be generated for free through the internet) and can be placed everywhere. As for NFC, a special chip needs to be developed and implemented in two different devices which includes high costs.

Technology widespread

The NFC technology is becoming more and more popular and Samsung or Apple starting to implement the chip in their phones. However, mainly due to the low costs, QR-codes are available everywhere and the technology already exists within all mobile devices with a camera.

Security

This time NFC is the clear winner, to fulfill a transaction the chip has to be brought into the connection range (10cm). While a QR-code as soon as it is generated can be scanned by anyone and thus exposing the customer’s payment details.

From the comparison, a clear winner cannot be found. However, we know now where the strengths and weaknesses of both technologies lie.

One certain conclusion that can be drawn is that cash and payment cards will disappear as these new technologies are taking over their share in the market.  

References

Euromonitor International Blog. 2016. NFC – what is it and how can it help retailers? – Euromonitor International Blog. [ONLINE] Available at: http://blog.euromonitor.com/2011/04/nfc-what-is-it-and-how-can-it-help-retailers.html. [Accessed 09 October 2016].

Harrop P, Das R, Holland G 2014, IDTechEx. 2016. Near Field Communication (NFC) 2014-2024: IDTechEx. [ONLINE] Available at: http://www.idtechex.com/research/reports/near-field-communication-nfc-2014-2024-000363.asp?viewopt=contents. [Accessed 16 September 2016].

Soon T J 2008, “QR code.” Synthesis Journal 2008 (2008): 59-78.

 

Estateqrceodes, 2016 ‘Advantages and disadvantages of QR code’. [ONLINE] Available at: http://www.estateqrcodes.com/advantages-disadvantages.html[Accessed 16 September 2016].

 

Abdul, R 2015, ‘QR code advantages and disadvantages’. [ONLINE] Available at: http://www.robabdul.com/marketing/qr-code-advantages-and-disadvantages/ [Accessed 16 September 2016].

 

Ideal, 2015, ‘QR code’ [ONLINE] Available at: https://www.ideal.nl/ontvangen/aan-de-slag/qr-code/[Accessed 16 September 2016].

 

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Technology Of The Week – The Succes And Risks Of The Innovative Business Models Of Netflix And Blendle

1

October

2016

5/5 (2) We all know the old fashioned way of watching movies. You had to rent a movie, insert the movie in your video player, skip the annoying parts and enjoy the movie. It was annoying, time consuming and a lot of trouble to just watch a movie.

Nowadays an internet connection, a compatible device and a few clicks are enough to sit back and enjoy your media. Netflix and Blendle made these kind information goods available by ease of replication and distribution. Netflix is a digital movie service where people get a monthly subscription to stream movies and series without commercials. Blendle is a digital news platform that gathers articles from all kinds of newspapers and magazines. You only pay for the articles you read. Articles can be shared, people can react on the articles and comment on these reactions. It is a combination of an online kiosk and a social network.

These business models show us the perfect form of information goods. (1) The information provided by the two organizations are costly to produce but cheap to reproduce. (2) Once the first copy of a good had been produced, most costs are sunk and cannot be recovered. (3) Multiple copies can be produced at constant per-unit costs. (4) There are no natural capacity limits for additional copies. Articles and movies can be sold over and over again. Besides these points the business models version in their pricing. However, in a different way. Netflix offers three subscriptions and therefore gain from extremeness aversion. Humans tend to choose the average option, this Goldilock pricing will increase revenue. Blendle on the other hand prices their articles based on the supplier and the length of the article.

Both business models have a couple of similar strengths:

  1. The services can be easily used on all necessary devices,
  2. They provide much content,
  3. They have low costs compared to the old fashioned way,
  4. They can establish pricing arrangements that capture as much of that value as possible. Done by (a) the registration of the customers, (b) observing queries and clickstreams and (c) through behavioural targeting

Besides these matching strengths, Netflix and Blendle have individual strengths and weaknesses as well:

Table 1

The future shows some interesting opportunities and threats for Netflix and Blendle and for de information goods market as a whole:

Table 2

Overall we can see that Netflix and Blendle are operating in a very interesting market. Offering great opportunities. Both Blendle and Netflix can gain a profit of this fast growing industry.

Group 42 – https://www.youtube.com/watch?v=W_a-XZJ7tnM

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Technology of the Week – User created content on Youtube, Amazon..?

22

September

2016

4.9/5 (10) There has been a tremendous transformation of the video technology from black and white movies to today’s latest technology of smartphones that live stream from all over the world. This transformation has fundamentally changed the way we consume videos.

Nowadays, creating video content and watching it on demand has become the standard. One of the largest and most popular video platform of the world is YouTube. The content on this platform was offered initially by amateur filmmakers, who shared scenes about their hobbies or important moments in their life. Surprisingly, the described user-created content achieved a popularity that back in the day was only reached by rock stars or famous actors. The audience reached by some of the most popular Youtubers today are millions of Users. As an example, the most popular Youtuber “Pewdiepie” has 48 million active subscribers that love watching him playing computer games. With him and other content creators, YouTube counts an astonishing number of 1.3 billion monthly visitors. This resulted in revenue of $9bn in 2015. The secret to the success of Youtube are undoubtedly many factors, e.g. Google as parent company, but especially the sheer number of content satisfies literally any curious video consumer. Gaming, Cooking or Make-up tutorials are just a few keywords that offer an exhaustive number of user generated content for everybody on this video platform.

In the same time not only user created videos were on the rise, but also Hollywood content found its way on the internet. One of the most popular platforms nowadays, where you can find your favorite movies is Amazon’s streaming service, Amazon Prime Video.
The business strategy of Amazon is different from Youtube. The company began to first make movies available online to be rented or purchased and later added a streaming service. This strategy showed to be fairly successful, considering that Amazon’s core business is not video streaming but retailing. Interestingly enough, Amazon went one step further than its competitors by diversifying its strategy and adding a service that allows semi-professional creators to upload and monetize their own content on Amazon. The emphasis here lies on the content being created by neither total amateurs, nor Hollywood level video creators. This way Amazon lets people post videos to the so called Amazon Video Direct and earns money from advertising and other sources, putting the business in direct competition with YouTube. Given that Youtubers like the above mentioned “Pewdiepie” are hugely successful, placing a bet on user generated content as cornerstone of the video streaming business is definitely a promising business endeavour.

In the future it will be interesting to see how both services, Amazon and Youtube will evolve. Analysts predict a steady rise in revenues for Youtube over the next years, whereas Amazon and its competitors only predict moderate growth. Netflix, for example achieves growth by expanding internationally, whereas Amazon has yet to do the same, as they are only operating their video services in 8 countries as of now.

 

Group 36

(Jan Holst, Hendrik Hagedorn, Lukas Hirsch, Prabjot Jawanda)

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Technology of the Week – New age news

22

September

2016

No ratings yet. One of the most interesting developments in the field of information goods takes place in the news industry. With the introduction of the internet, free online news, social media, online newspapers and new business models, the news industry has dramatically changed. The number of payed printable copies has decreased from 4.5 million to 2.6 million subscribers in 20 years in the Netherlands alone. The research organization Future Exploration Network predicts that as soon as 2027, business models of newspaper publishers as we know them now, will be extinct.

In this blog we will discuss how the traditional newspaper NRC and the new digital initiative Blendle operate in the revolutionized news industry.

Blendle is an internet platform that allows its users to buy online articles from multiple magazines and newspapers. The main idea is that you no longer pay for a newspaper or magazine as a whole, but only for the articles that you actually want to read. On average, an article costs €0,20 of which 70% goes to the publisher.

NRC Handelsblad offers its members the choice between a digital format of the newspaper for €25,50 a month, and the combination of a digital and a paper format for €39 a month.

Both business models possess their own strengths and weaknesses. From a customer perspective, the strengths depend on customers preferences; if customers don’t read  a lot of articles and are interested in specific topics they prefer the non-committal option to pay per article and use Blendle. If, however, the customer reads a lot, about many different topics, they would want to have a subscription to NRC.

From a business perspective, Blendle and NRC are almost each other’s opposites. First of all, Blendle doesn’t have to pay a lot of employees because they get their content from other publishers, like NRC, who does have a full staff. This also implies the second strength and respective weakness: NRC is not dependent on third parties, whereas Blendle couldn’t exist without them. Third, because of the payment system, NRC has secure future cash flows because of the fixed subscriptions and Blendle has highly fluctuating cash flows. Fourth, NRC can gain extra revenue from newspaper advertisements but since Blendle offers an advert free experience, they can not. Lastly, Blendle can easily reproduce and distribute articles since they don’t have printing and delivery costs. One thing they do have in common is the fact that they can serve a big customer segment, even though they do this is different ways. Where Blendle offers a great variety of articles from different sources, NRC can serve the elderly who do not possess the technical skills or willingness to read online.

Between Blendle and NRC, you see a real trade-off. There are things Blendle does better than NRC, but also the other way around. Is there one best solution? After all, the one initiative needs the other to survive.

Link to movie: https://www.youtube.com/watch?v=2x5b-kFfE9Y

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