How to exploit the surplus value of billions of euros in the Internet

In the internet age, for consumers, all kinds of behavior on the Internet can bring great value to themselves, but since most of the costs are offset by advertising costs, so for consumers, the Internet does not involve the need to pay immediately the cost. These benefits are enjoyed every time we log on to social networking sites or watch free online video.

Well, think about how much these web apps are worth. recently surveyed 4,500 internet users in Europe and the United States, and conducted a joint analysis of their willingness to pay for various online activities, and we estimate that Web applications are worth about 150 billion euros a year, 1.

But consumers do pay for part: Consumers spend about € 30 billion a year, paying for services such as music and gaming websites. In a sense, consumers also pay for the "pollution" of their Internet experience, such as annoying pop-up ads and the ubiquitous risk of data privacy. By investigating how much they are willing to spend to eliminate the clutter of pop-up ads and exposure to privacy, we estimate that the cost is about € 20 billion. As a result, the Internet industry's consumer surplus value can reach an astonishing 100 billion euros a year. And with the global popularity of broadband and the emergence of new services and wireless devices, we expect this surplus value to increase to € 190 billion in 2015.

For Web service providers, this is a huge amount of value left on the desktop but not paid for. In fact, this residual value is more than 3 times times the cost of 30 billion euros of Web site advertising paid by companies to Internet service providers, and is almost equal to the cost of 120 billion euros in wireless and wired broadband access paid by consumers. The reason for such a large value is that once an Internet service is created, the cost of promotion is very low, and most Internet companies are content to offset the basic costs through advertising costs. Offline business logic is certainly very different: surplus value is more evenly distributed between consumers and providers, and in most markets, such as books, movies, and cable TV, consumers need to buy content.

Three possibilities of internet economic change

Internet companies can try to tap into this part of the huge and growing value stream. A less distant example is how broadcasters can turn services from free programs to pay-TV, thereby grabbing more value. While it is not yet clear how much more value can be tapped on the internet, at least three options are worth paying attention to.

Increase service Charges

One obvious possibility is that the network service provider will charge a higher service charge. They have taken similar measures for some high-end services, such as multiplayer video game sites and subscription access to a large number of music libraries. But consumers are still very resistant to this practice: only 20% of online users are willing to pay for the service, and our survey shows that if the scope of the charge is expanded to reach levels equal to the surplus value, Internet service usage will be reduced by 50%, This will have a devastating impact on the Internet services industry.

Increase advertising revenue

Another strategy is to dramatically increase internet advertising, and if so, the "pollution factor" will be key. Internet companies now receive more advertising revenue (€ 30 billion) than consumers are willing to pay for avoiding advertising (€ 20 billion). This imbalance means that today's advertising level has the potential to dig, there is room for more advertising and other means of liquidity, such as requiring consumers to provide more personal data to access the service.

But it is hard to say exactly how much space there is, because there is no data showing how consumers will react if the net pollution increases dramatically. Is there a turning point: consumers ' willingness to pay for the elimination of pollution has risen sharply, allowing the business model to change accordingly? For example, if advertising revenue increases to 40 billion or 50 billion euros, will the amount of money consumers are willing to pay to avoid advertising increase dramatically, Thus making it easier for Internet service providers to grab more of their surplus value by charging more, rather than selling more ads? The question still has no definitive answer.

Other ways to become a cash

Internet service providers are now facing a diverse market situation that allows them to gain double benefits from advertisers and users. They may be assured that by creating a large number of consumer surplus value through free services and a large audience, the impact of online branding can be expanded to achieve higher profits or market value. The logic of this approach is attractive, but the "walled garden" approach to this charge is only effective for high-end brands and services. Even for these markets, companies have limited access to customers, so the ability to use their own web platforms to launch other businesses is constrained.

Prepare for Change

Of course, we are still in the early stages of the Internet economy, and it is because of the recent rise of giants such as Facebook and the Internet connection that has led to a huge expansion in consumer surplus value. Obviously, the market is far from equilibrium, so enterprises should do their own planning, prepare for the great changes in the future, and actively plan the countermeasures.

If service providers want to move ahead of the market, they must adapt to rapid market consolidation: In 2010, the top 100 network service providers accounted for 45% of total network traffic, compared with 20% in 2007. To stay ahead, industry leaders have started to expand their service base on their own solid proprietary platforms, particularly low-cost services that can be delivered through cloud computing and mobile devices; Twitter and Facebook have been the first to open up this multi-purpose platform. Now, with more and more personal activities and businesses moving to the Web, the first-time people are dominant, able to grab more advertising revenue, and over time they may be able to charge higher service fees.

Advertisers may also naturally get more revenue from online innovation. Some advertisers are no longer satisfied with the advertising display of annoyance to consumers, they design brand promotion content to attract the attention of users, and elaborate marketing activities, promote marketing information in the social network "friends" spread like a virus, and thus make these marketing activities more easily acceptable to consumers.

For consumers, the benefits of net surplus value will continue to exist. In a diversified market, extensive contact with consumers is the core of value creation. Therefore, consumers can rest assured that service innovation will continue, advertising will be maintained at an affordable level, Internet access and access prices will continue to remain low.