Information is fulcrum to push a service to the next level, which obtains a certain amount of business fundamental in the internet service industry. As described on the previous post, crowd sourcing is a very effective method if it works well as it was intended. Sometimes companies give freebies to users or promote services to refresh their strategy to get information even though they keep boosting users to post comments or reviews. After the success of Foursquare, there were a lot of copycat services globally. This leaves us a lucid lesson that crowd sourcing does not work well by and large.
Interestingly, there is a clearer way to gather information for a service. Creating the information oneself is the traditional and easier method to build up contents if there are enough resources. Internal build-up method gets us down to the nitty-gritty of information based service. Sometimes independence and reliability of information are worth paying huge money to accumulate contents internally. Google still gathers geographic information and restaurant reviews by probe vehicles and by acquired companies (i.e. Zagat Survey). Underneath these actions, some information that is usually difficult to make up with can be a good differentiator, which leads companies to a leading player. Given that huge investment to obtain information makes an entry barrier, this method looks audacious to big companies with sufficient capital.
Also, some people are suspicious of the reliability of crowd sourcing data. Although a lot of people acknowledge that Wikipedia is a trustworthy and reliable tool for research, some do not believe in the reviews or star ratings of restaurants in Trip Adviser. Even people who work for crowd-sourced data think this type of information is fraught with danger, which harms the credibility or objectiveness of information.
Regarding internal information build-up, we need to look into a phenomenon that occurs globally. As in the book of “The World is Flat” by Thomas L. Friedman, outsourcing changes the trend of global macroeconomics. Capital moves anywhere and the market keeps finding efficient points to create services as well as manufacturing goods. When you make a phone call to inquire about problems related to your credit card in America, your call is often directed to Indian call centers in Bangalore. Furthermore, Indian software companies write source code by the request of Western IT companies. It demonstrates that companies in developing countries can raise information-oriented service by leveraging their low labor cost. At least they can compete with global companies with this asset that they have already filed up. The reason Naver in Korea makes up for the majority of search service in the country is that they have built abundant information based on their Jisikin service, which means ‘intelligent people’.
Also outsourcing based information business can change the paradigm of competition. In the US, ProCD released its phonebook CD made by Chinese workers who typed the entire information manually, resulting in a big success of the business. Although the service rapidly lost its initiative from severe price competition with other companies which adopted the same strategy, this strategy is still useful. If there is additional competitiveness to this strategy, the success of a business can be more sustainable for the long term. Additionally, the company should change its data sourcing method to crowd sourcing for the long term. Internet industry is mainly based on advertisement and it means that it is difficult to meet the balance investment cost for contents sourcing with profits from contents sales. There are more efficient players that threaten incumbent players. As Waze or Open Street Map alliance does, maybe cost effective or innovative players can break through the entry barrier anytime. Even though it is successful and profitable to do a business based on internal data build-up, it is better to use this method as an approach to enter a highly data-intensive market in the first time.