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More on Web 2.0, price discrimination, and commoditization
My continuing discussions with search industry participants at Where 2.0 about the business case for offering your data for free.
Sections: Business Emerging Practice
Topics: google IP microsoft where20 where2005 yahoo
As announced at O'Reilly's Where 2.0, Google released their mapping API as did Yahoo. Microsoft is also mentioning that their Virtual Earth will be for free. I'll leave it to others to discuss the key elements of these APIs. From my perspective, the kicker is the licensing terms. For instance, Google is offering their API for free as long as people can use your mapping web application for free.
I had a chance to follow up a bit with Mark Law from Microsoft's Virtual Earth on their licensing terms. In particular, what does it mean to be non-commercial? According to him, non-commercial means you are not making money off the map data, so it sounds like Google. They plan to introduce a tiered pricing structure for access to the data for commercial use, based on volume and number of services used.
The interesting question then becomes how the services differ. Could I just substitute one for the other? Mark Law's response to this question was that the services of all of these competitors would likely differ based on focus. Microsoft is really trying to emphasize community and additions of community data to their location (read mapping) service. They are going to make money off of targeted marketing based on the data you add and request. I'll note in passing that their API will only come later. Their putting forth the mapping and your ability to add data to it in their system first.
So, this sounds like a confession that the mapping (location) data by itself is not all that unique or at least not unique enough to warrant charging just for it from the get-go. All search players seem consigned to paying their map providers or cutting them in the deal. What will they pay users for their data? Probably nothing because once there is enough user data, it is very interchangeable.
So, there are a few unanswered questions in all of this. Are search providers making a clever price discrimination play in offering services for free, or are they simply backed into a corner from the get-go? If you invent a value-adding service that you can charge for or monetize, is there really a licensing model that will work for all parties concerned? Or, will search players just incorporate the best of these services themselves and monetize them through targeted marketing?
Bud posted this on June 29, 2005
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