Webzing the economy & economizing the Web

1. Webzingthe economy&economizing the Web 4/4/2013 MichalisVafopoulos vafopoulos.org

2. Do you believe it? • That a mathematician made an online call to solve important and difficult mathematical problems by coordinating many researchers through the Web?

4. Public spending in Real time?

5. It is the economy, stupid! How long takes to have 50 million users? • 38 years for telephone • 13 years for television • 4 yearsfor Internet • 3 years foriPod • 2 years for Facebook • <1 year for Google + • the next: Linked Data company???

6. Main issues • Web economics & business • Goods in the Web • Users • Consumption and Production in the Web • The Web of Data emerging industry • Student evaluation & how to work

7. the Web Science perspective • Internet economics: the predecessor • Partial analysis of the Web economy • e.g. network economics, digital goods etc. • Mainly focus on business implications • Issues: Auctions, e-commerce, search engines • Lately, net neutrality & excessive market power • Web science perspective • Standalone artifact • How the Web transforms economy and business

8. Web economics • Introduction • Economy after the Web • Existing theories and missing tools • Goods in the Web • Information goods • Digital goods • Network goods • Web goods • The Web Economy • Network Effects • Peer & non-market production • Market Structure • Antitrust regulation • Web-based development • The Web Business • E-commerce • Business models • Advertising & sponsored search • User behavior analysis

9. Goods in the Web • Data, information, knowledge • Information goods • Knowledge goods • Digital goods • Web goods

10. Information goods: definitions Definition I the good, which main market value emanates from the information it contains. Definition II anything that can be digitized (Varian)

11. Information goods: characteristics • high fixed cost of production • low marginal cost of reproduction • increasing returns to scale • experience good • public or a private good • non-rival and sometimes non-excludable

12. Knowledge goods exogenous or endogenous inputs in production as: • know-what (facts) • know-why (scientific knowledge) • know-how (skills) • know- who (networks) 1, 2 easily reproducible 3, 4 not easily reproducible 4 more important in the Web era

13. Digital goods Bits with economic value, which are (Quah): • nonrival • infinitely expansible • (Initially) discrete or indivisible • aspatial • recombinant

14. Externality • analyzes the impact that individual decision-making has on the other agents • comparison of how decision-making involves others without exchange • Positive (i.e. education) or • Negative (i.e. profiling)

15. Network externality Network externality: • Some goods/services create more value when more users consume the same goods and services • They have little or even no value if they are used in isolation(e.g. telephony)

16. Network externalities in the Web Source of externalities =linking • Web 1.0: documents (demand) • Web 2.0: Users (supply) • Web 3.0: structured data (?)

17. Network externalities in the Web Linked Data • bidirectional and massively processable interconnections among online data • enabler for existing infrastructures

18. Network externalities in the Web Negative: • lack of trust • security, • identity theft • clickjacking • Spamndexing • spoofing • …

19. The basics of network modeling

20. You see a product…

21. And some reviews

22. And some recommendations…

23. The Amazon co-purchasing network Item X co-purchased most frequently with products Y1, Y2,..

24. Amazon: the book-based multi-store • The Amazon co-purchase network for all item categories

25. hidden complementarity saves MS MS (purple) & Apple (orange) communities are “mediated” by compatibility like VMware Fusion, Parallels Desktop and compatible products like Office for Mac.

27. Triad analysis: Winners in Product wars Analysis shows that co-purchase links not only manifest complementary consumption, but also reveal competitive relations among products that are perfect substitutes.

28. Switching to best sellersthe case of Internet security market Ass: if products A, B & C are perfect substitutes (authority triad), then A has higher sales rank consumers who bought Internet security s/w, more often, also bought Norton Internet Security than related products

29. Paychecks…

30. bankruptcy…

31. Why networks? • To be self-contained(actor)—and to be thoroughly dependent(network)—is to say twice the same thing. (Actor-Network theory) • Easy to model and visualize relations • Easy to calculate major statistics • The study of the Web network help us to conclude that most of real networks are: • Self-similar (Scale-free) • Small worlds

32. Networktheory and related fields Financial Network Analysis Web Science Social Network Analysis NETWORK THEORY Computer Science Graph & Matrix Theory Biological Network Analysis Initial source Soramaki

33. how? • Define: • Node (e.g. person, business) • Link [directed or not] (e.g. friendship, commerce) And if necessary: 3. Evaluation of node (e.g. score, potential) 4. Evaluation of link (weight) (e.g. trust) 0.54 4 5

34. Web Goods: definition Existing approaches fail to both capture the digital and the network dimension (aka virtualization)

35. Web Goods: definition sequences of binary digits that • are identified and communicated by an exclusively assigned URI and • affect the utility of or the payoff to some individual in the economy.

36. Web Goods Their market value stems from the digital information they are composed from and a specific part of it, the hyperlinks, which connect resources and facilitate navigation and editing over a network of Web Goods with minimum cost.

37. Web Goods: categories • Pure: basically exchanged and consumed in the Web and are not tightly connected to an ordinary good or a service (pre-) existing in the physical world. • Non pure (e.g. car’s photo in the Web)

38. Web Goods: categories • commercial (e.g. sponsored search results) • non-commercial (e.g. Wikipedia entries) ---- • public (e.g. Linked Open Data) • private (e.g. subscription to online magazine) • financial fee • “personal data” fee • “social” or “membership” fee

40. Web economy

41. Consumption in the Web • More energetic and connected consumption • search and review, collaborative filtering • what connected consumers create is not simply content (e.g. product reviews) but context. • Consumer coordination at large in the Web: the Amazon co-purchase network

42. Consumption in the Web • Personal data abuse and regulation challenges • Joint consumption of information and advertisements in massive scale • Moving the borders between production and consumption

43. Moving the borders between production and consumption

44. Production in the Web • Inputs: information and knowledge reloaded • Incentives: from property to commons • Peer Production: decentralized inter-creativity outside the classic market • From mass to networked media

45. Incentives: from property to commons Property rights can be further analyzed to 4 parts: i. The right to use economic resources. ii. The right to modify form and substance of resources. iii. The right to benefit from use of resources. • The right to transfer resources. • Traditional economy: 1st consumers, the rest producers • Web? • the 4th P: Property, Procurement, Patronage and Peer Production (commons)

46. Web business • IT vs. Web economy • Google model • The Sponsored-search market • Who’s the data? • App vs. Web economy • patent’s war • Apple: the digital zombie • HTML5 effect • The Web of Data emerging industry • Discovering the market sentiment in the Web

47. Types of network externalities • Direct (e.g. mobile phones) • Indirect (e.g. mobile phone accessories) • Two-sided network effects (or multi-sided platforms) (e.g. hardware-software platforms and the Google’s advertising platform)

48. Issues in network markets Network monopoly (e.g. Microsoft, Google) Possible regulatory policies: • Divestiture of the monopoly into separate firms. • Unbundling or wholesale access to incumbent’s facilities (e.g. Internet explorer). • Licensing of proprietary interfaces to potentially competing platforms.

49. Web Goods vs. Digital Goods • restricts non-rivalry and infinite expansibility (concurrency capacity) • initially discrete and indivisible, but • Web 2.0: micro-chunks consumption • easily edit, interconnect, aggregate and comment • extends aspatiality and atemporalityfrom local (e.g. personal HD) to global level (e.g. downloadable file link)

50. Web Goods as commodities information and knowledge: multiple and controversial definitions Web Goods: qualify as commodities (Debreu, 1959) • stable identity (URI) • completely specified physically • temporally and spatially (reside physically in a Web server during a specific period of time)