Rudelle Blogging

The exponential growth of mashups should lead to a sharp increase of destination sites. As a result, tens of new exciting Web sites will mushroom daily in the coming years.
However, despite this major trend, let’s bear in mind that there is another wave pushing in an opposite direction.
The idea behind this new wave is as follows: to get their favourite contents, why surfers should be obliged to browse around dozens of different web sites? Wouldn't it be more efficient to get all this content directly pushed in one central place?
This is how was born the idea of personal aggregator. At the beginning, it was just about getting all your RSS feeds on a single page. But this new ecosystem quickly became much more sophisticated. Now, you can easily and freely aggregate thousands of contents from all different sources ranging from weather forecast, email notification, auction tracking, stocks alerts…
The current battle is about who will control this personal aggregator: either a central supplier (as Google and Yahoo! or even Netvibes as a challenger) or either it will be directly integrated in the web browser (Microsoft and Firefox strategy).
In this new world, the challenge for content providers changes radically. It is mo more a question of how to attract surfers on the most beautiful site of the world. Now it’s about making its content accessible on each personal aggregator. As space on this personal aggregator is inevitably limited, the battle for space between content providers will be fierce. Each inch gained on competition will be a victory!
2007 will be an exciting and key year in the field. Comparing mahsups and personal aggregator, we should see which force proves to be the more dynamic.

What is a mashup? To fully understand mashups, it is necessary to go back to another concept: public API. An API is an interface which makes it possible for two software programs to communicate together. Public API simply means an API published on the web and available for public usage.
To offer a public API became a must for any Internet site which claims to be Web 2.0. But why did this become so fashionable?
Well, it is related to the structure of the Internet. In a broad picture, one can consider Internet as a kind of giant publication tool.
You have this great content you want to share with other people. For that, you create an application to publish this content on a Web site. It looks simple, but in real life it can get very complex. Indeed, the issue is to present this content in the most appealing, intuitive and efficient way. The trouble of course is that these three characteristics are most often contradictory. Searching for the perfect balance, web publication results into eternal creative compromises. From a given piece of content, there are plenty of different marketing choices, resulting into a very large variety of concepts.
This issue has brought the following idea: I have some great content which I wanna share with the public. Potentially, there are thousands of different ways to publish this content. Sure, I can try to test myself all kinds of marketing ideas. But why not delegate this huge task to others?
For that, I just need to publish on line a public interface which gives free access to my content. In this way, a great number of independent developers will be able to publish my content each one with its own creative approach. Clearly, I no more control the whole value chain. But who cares? Collective intelligence has such a power that among all these pilots, there is a strong probability that some very good idea for my content will prevail.
For this reason, public API became very popular, especially among web 2.0 sites. Leveraging on the net community, it is likely to create more value than by controlling verything. Today, content accessible through a public API is huge. It ranges from Amazon cultural product catalogue to Google Maps geographical layouts, including also Flickr personal pictures and sophisticate predictive calculations for Criteo (yes, yes, you can check our public and free API!).
public API to produce a completely original service. A smart example of a mashup is the combination of Flickr + Navx + Google Maps which makes it possible to position pictures from a ski trip on a map using a GPS tracker.
Mashup potential seems endless. This is why in the coming years, you will see more and more of those smart hybrid applications launched every day on the web.

Despite the fact that traditional e-commerce assets are becoming a commodity, it does not mean necessarily that all large e-retailers will be excluded from the game. As a matter of fact, it might be quite the opposite. In this new web 2.0 ecosystem, mainstream large e-retailers will have a key role: to become the trusted third party for a given category.
In any case, this is the fascinating bet of Amazon which is reinventing its business with at an impressive pace (still badly understood by the vast majority of financial analysts).
The underlying idea is the following: in two or three clicks, I almost always manage to find a certain Joe who will offer me a book $3 lower than my usual e-bookseller. The only thing which retains me to deal with this Joe (unknown to me), it’s the fear (perfectly justified) that Joe will badly perform (or worse will cheat on me) this very transaction.
Now if Joe is registered on Amazon market place, the picture is very different. Amazon’s brand should guarantee transparency, effectiveness and reliability of the transaction. As a result, I can now buy Joe’s book with very little to worry about. And of course, Amazon prefers to gain a 5% commission on the transaction between me and Joe that nothing at all.
The idea of Amazon is simple: better to integrate all the Joes in Amazon’s ecosystem rather than let them develop out of control in the cyberspace. With this trusted third party role, Amazon hopes to stay in the financial transaction loop. Eventually, it is the only important thing for Amazon.
In this frame, Amazon took two years ago an amazing decision: to offer free of charge of its entire product catalogue (through Web services) to the developers’ community. When one knows that for a retailer, its product catalogue is supposed to be one of its main assets, one measures how radical this decision was.
But the logic is always the same: better to have all the Joes developing their revolutionary merchandising concepts using Amazon catalogue, rather than with others. This open API concept opened to all kinds of mashups is clearly one of the main features of these new Web 2.0 sites. Still, it remains extremely rare for e-commerce sites.
This shows that e-commerce 2.0 is still lagging well behind Web 2.0 in general. For this reason, 2007 is likely to be a crucial year where the most dynamic e-retailers will widen the gap with their followers.

The Wal-Mart type large big retailers built up their amazing success mastering three key functions: sourcing, merchandising and logistics. This combination of factors allowed them to crush down traditional mum and dad retailers and to impose a new model.
The first generation of e-commerce sites adapted this wining model on line. After a difficult start in the late 90’s learning the specificities of the Internet channel, large on line retailers today successfully master the three key area of expertise: sourcing, logistics and merchandising. Thanks to a critical mass of increasingly mature buyers, most of them now experience high volumes and attractive profitability. With a 30% growth per annum which does not seem to slow down, e-commerce has a bright future.
However, this nice picture is likely to break into pieces in the coming years. First of all, in the flat world of the Internet, the fortress of sourcing is disaggregating with an amazing speed. The most obscure manufacturers are increasingly easy to spot on line. With little work and a good vertical specialization, almost anyone can source the best product in the most remote place of the virtual world.
Regarding logistics, the growth of Fedex, UPS and other large shipping companies also makes it easy for any individual to send anything anywhere, being as reliable as any big corporation.
Furthermore, the growing maturity of many Internet technologies (which belongs to the Web 2.0 wave) is combining with the collapse of band-width and storage costs. This opens the door to an exponential growth of innovative e-merchandising concepts. New tools make it possible to create on line shops are indeed becoming so simple and powerful. Any single individual entrepreneur can unleash his marketing creativity for a very low investment. As a result, new innovative merchandising concepts are launched every day on the web at a extremely rapid pace.
Without saying that price comparisons are so easy on Internet. This makes it is much more difficult for an e-merchant to replicate a classical tactic of brick and mortar retailers: lure customers with some huge discounts on a couple of very visible products, and generate fat margins derived from impulse purchases.
The combination of these strong trends has a crucial consequence: selling on the Internet has become a commodity. We see the rise of a huge world ecosystem of small entrepreneurs who invest into all possible e-commerce niches. This army of anonymous Joes whose cost structures are close to zero, represents a very serious threat for the large e-retailers. This had made the fortune of an eBay, but the phenomenon goes today well beyond auctions.
Nevertheless, in this second e-commerce revolution, the large e-retailers have a very smart card to play. I will get back to this in my next post.

The secret of Wal-Mart profitability lies into impulse purchases. I visit Wal-Mart to buy some butter and rice. After a dozen of minutes hanging in their premises, my cart is quickly filling up. While browsing around, I am visually strongly encouraged to add a whole bunch of various articles. And it works!
Wal-Mart marketing tactics rely on a complex of blend of products and its associated merchandising (put beers next to pampers). These tactics became so important that a whole marketing research domain has been growing under the name of category management.
On Internet, category management seems of lower interest. Thanks to the magic of Long Tail, e-merchants offer an almost infinite range of products. With a good search engine indexing its catalogue, e-merchants manage indeed to achieve spectacular results. As an example, more than 60% of all books sold by Amazon are rare books, which are not available in traditional bookstores.
The paradox of this Long Tail strategy is that it kills impulse shopping. To browse around these giant catalogues, users are required to enter very precise key words. As a result, they only buy only they were seeking for.
To combine (at last!) Long Tail and impulse purchases, e-merchants need to promote products that users would not have thought spontaneously.
The problem is that in most of the cases, these promotions are not relevant. This translate into very low rates of impulse purchases (on average, less than 2% of visitors). Tomorrow’s challenge thus consists in personalizing for each user specific products.
These techniques require very sophisticated mathematical tools. But they will have a crucial impact on bottom line of the industry. Amazon which understood this trend ahead of the pack, has invested a huge amount of money in this field.
“One fits all” easy strategy will be soon dead. Within the next two years, e-commerce sites which will continue to promote the same products to all their visitors are likely to be out of the game.