via Peterme, an Economist article argues that Yahoo's business strategy is contradictory -- they want to provide content, and to provide tools for user-generated content.
The Economist's analysis misses two key points about networked business models.
The Economist quotes John Battelle to make its point:
Yahoo!'s “business model is necessarily in conflict,” says John Battelle, the author of a forthcoming book on the search industry. With so much content owned by Yahoo! or generated within its site by users, the quandary for the firm will be: “Do you point people to your own stuff or to the most relevant stuff?” If the former, Yahoo!'s reputation as a trusted internet search and navigation brand may evaporate; if the latter, its content may not earn the returns to justify Yahoo!'s investments in it. By contrast, says Mr Battelle, Google, which has chosen not to make content, does not face this conflict.
Jeremy Zawodny says that Yahoo is becoming less of a "walled garden" because they are opening up to more user-generated content. More user-generated content is good, but they're not actually in conflict with each other.
In a world of infinite shelf space, Britney Spears doesn't crowd out obscure bluegrass. Battelle is concerned that Yahoo will favor popular commercial content. But that would be self-defeating -- Yahoo will make more money if they use the "head" to help cultivate business in the "tail." Amazon discovered the opposite of the "Battelle effect". Amazon makes more money when it sells gear from merchants than its own gear. So it adds feature to recommend third party goods.
So, I don't think there is a conflict between popular content, niche content, and peer content. The more the better, with search and community tools to find and share.
There is a conflict, I think, but it's different than the tension between popular content and peer content -- and Google has just as much of a conflict as Yahoo.
For both companies, part of the product line is software, not just content. Google provides its own search software which is optimized for mass use. And it provides APIs for developers to extend searching to a million niches.
The conflict between central provider and developer is perhaps greater with software. Google and Yahoo owns their own mapping APIs. Its developers don't. The big kids have some benefit from keeping its APIs stable to gain network effects. But if they choose to change the APIs, developers are stuck rebuilding.
Posted by alevin at August 19, 2005 09:35 AM | TrackBack