Archive for May, 2012


It has come to the final pattern of Tim O’Reilly. Today’s blog topic will be focused on the last pattern of web 2.0 application, which is “Lightweight Models & Cost-Effective Scalability“.  Lightweight Models & Cost-Effective Scalability is defined as Agile software-development techniques are ideally suited to support rapid release cycles, so they have a readiness for change. Integrate lightweight development and deployment processes as complements to the perpetual beta. Combine this with low-cost, commodity components to build a scalable, fault-tolerant operational base. (Tim and John 2006)

To explain this pattern in the real world, I have chosen eBay as my example to demonstrate the benefits of this pattern. eBay is  an American multinational internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. (Wikipedia)

eBay is using Lightweight Models and Cost Effective Scalability in a great way. For example, eBay does not provide any products for sale, they just providing the facility to allow customers to sell to another customers. eBay does support million of users and making money of each transaction. Therefore, eBay does not have deal with storing products and their system scale to support as many users as it requires. eBay generates revenue from various fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells (Final Value Fee), plus several optional adornment fees, all based on various factors and scales.

Moreover, eBay did not develop their payment system. eBay sellers are allowed  to offer a variety of payment systems such as PayPalPaymateProPay, and Moneybookers. In addition, In October 2002, PayPal was acquired by eBay for $1.5 billion, so that eBay is having an entire payment system that they did not develop and can make sure all eBay users are using Paypal for their payments transactions. Paypal has three types of accounts which are personal, premier and business and all of them free joining and the user of paypal can upgrade the account at any time with free charge. Therefore, eBay has access and make revenue from Paypal services.

Like any other business models, there are also issues with eBay for the sellers. I will just provide a list of the issues and you can visit this page for more information.

1. Management
2. Feedback Policy
3. Small Businesses Get Shut Out
4. Lack of Communication
5. Payment Policies
6. Fees/Lack of Profitability
7. Unwarranted Account Suspensions
8. The Buyers Themselves
9. Glitches
10. Lack of Innovation

Here are 2 best practices that can be recognised from eBay business model and  for using Lightweight Models & Cost-Effective Scalability:

  • Design software so that it improves as more people use it: By embracing network effects, the best Web 2.0 software, such as eBay, becomes better as more people use it.
  • Facilitate emergenceIt: is often surprisingly difficult to predict the best design for a piece of software, the optimal interface, or the ways in which users will use the application. Every software application faces this challenge. Web 2.0 applications impose less upfront structure and minimize the number of hard-wired assumptions to let optimal use and structure emerge over time, based on real-world application and not unreliable predictions. This encourages unintended uses and allows user behaviour to influence everything from product direction to interface navigation.
here is a question to answer, even though this pattern is wonderful and interesting, what are the implications of having such models for your organisation?

Reference

Tim O’Reilly & John Musser. (2006). Web 2.0: Principles and Best Practices. Retrieved May, 11 2012

Wikipedia. (2012). eBay. Retrieved May, 11 2012

Chris Crum. (2009). Top 10 Frustrations for eBay Sellers. Retrieved May, 11 2012

Today’s topic will cover Leveraging the Long Tail in web 2.0 application patterns. Chris Anderson, Editor-in-Chief of Wired Magazine, has been discussing a concept he calls The Long Tail for quite some time now. “The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.”  (Anderson, 2004). The Long Tail is about focusing on the less popular content that previously couldn’t be accessed because of some physical limitation: most often shelf space. (Porter, 2005)

I will be using eBay as an example to explain what The Long Tail is really about, thus the graph being tailored to eBay. The dark grey portion of the market refers to those items that are main stream and are available from regular retail outlets such as brick mortar stores. This comparatively small range of items comprises “the head” of the graph and essentially controls a large portion of the market. However, the light grey portion, which is referred to as “the long tail” is comprised of all other items which, although individually do not sell much, as a whole, comprise a sizeable market share. This situation can be summarized below:

Dark Grey: Few types of products, each sell high number of units

Light Grey: Large types of products, each sell low number of units

Now, if it isn’t obvious, the reason why the Long Tail is of a comparable size is because of the sheer number of non mainstream products out there. Although each individual product will not have a big market, it will have a Niche Market. The number of such Niche Markets adds up considerably to form this concept of “The Long Tail”. As a business, eBay has done a rather excellent job of cultivating this.

Here is an example of a product that might be found in a retail store:

Harvey Norman – PS3 160GB Gaming Console

And the same product on eBay

eBay – PS3 160GB Gaming Console

Here is a video explaining how eBay is using the long tail on their products and how they are making money from leveraging the long tail.

This “potential” in the long tail had previously been left untapped. This was due to many reasons, such as the small physical reach of traditional Brick Mortar stores, cost of purchasing inventory, storing and distributing the products. Only recently have these factors become negligible in cost, and have therefore allowed the tail’s potential to be recognised and cultivated.

Reference

Anderson, C. (2004). The Long Tail. Retrieved May 2012.

Porter, J. (2005). Long tail and Web 2.0. Retrieved May 2012.

O’Reilly T (2005) What is Web 2.0: Design patterns and Business model for next Generation of Software

Wikipedia (2012). The Long Tail. Retrieved May 2012.