Sue Feldman, VP of search and digital marketplace technologies at IDC, spoke about taking the pulse of the digital marketplace. She started by defining the digital marketplace as an online gathering place of buyers and sellers, with particular relationships and dynamics between the types of participants. Users interact with 3 types of sites: gateways (a starting point or index to the web, funded by ad revenue; these are portals and search engines such as Yahoo and Google), hubs (aggregators with high-value tools and trusted content, funded by high-value ad networks because of their trusted position as selectors of content, such as eBay or Amazon), and nodes (communities with few outward connections, such as direct consumer-facing corporate websites).
They’ve created a model of the dynamics of feedback in the digital economy: why people visit certain sites, and why they move from one site to another. Along the way, they found a few surprises:
- The web is fragmenting, not consolidating
- More queries are happening on the web than are reported
- Only a third of queries go through web search engines (and hence are monetized); the rest are directly on destination and speciality sites
- More queries go to Baidu than to Google, Yahoo and Microsoft combined, but all are in Chinese (I have no idea why IDC would find this surprising, except she does admit that prior to hiring an analyst covering China, they had an “embarrassingly North American focus” — what I take to actually mean a US focus)
Looking at the trends that are emerging, they see increasing user sophistication, with users participating in social applications and expecting personalized and localized information. There’s a greater demand for selection on trust, as information overload drives users to speciality sites that pre-select information targeted at their needs. They’re seeing a rise in ad networks that provide context-specific and relevant ads, and a rise in social networks that filter the overwhelming amount of content through a trusted network of friends.
There’s some powerful new technology and infrastructure that’s underlying these trends in the digital marketplace, from personalization and recommendation engines to user data mining tools. To conduct business on the web, you need to exploit this infrastructure, as well as understanding the long tail effects that impact what you offer to your customers. For traditional businesses, the web is an additional channel, not a replacement for other media.
The dynamics of the digital marketplace are changing quickly, but the roles are becoming defined between the gateways, aggregators and nodes. The central role of the user cannot be overestimated, both on an individual level and as a group. Audiences are attracted not just by useful content, but also by compelling tools and usefulness. Selection and trust are key components for the aggregators and nodes, and targeted communities are replacing generic sites.