Walled Gardens of Web

Reference: http://www.koreatimes.co.kr/www/news/biz/2008/06/123_25952.html

Quantity Is Key in Wisdom of Crowds: So Why Not Open Your Datebase to Others?
By Kim Chang-Won Web 2.0 Asia

In the world of information technology, the ``walled garden'' is a term that refers to a closed set of content or information provided by service providers. Japan's i-Mode mobile content service is a good example of a walled garden service. In itself, i-Mode is a very compelling service, but as it is not compatible with other carriers or mobile phones in general, i-Mode remains largely an island unto itself at this time. In some cases, this walled garden can be an effective way to get a product or service off the ground quickly. Apple is well-known for keeping things to itself, rather than working openly with the outside community, until the very moment of unveiling a new product. But since the outcome of such a walled-garden approach is usually jaw-dropping awesome, Apple has worldwide fans who revere the high-tech company almost fanatically. However, as creating innovation becomes a more and more complex process that requires open collaboration among diverse parties, walled garden as a business model is facing challenges, and sometimes even criticism. Perhaps the best living example of a company going through this walled-garden paradox is Korea's number one web portal, Naver. Collective Wisdom in ``The Republic of Naver''Naver, the leading Korean Internet portal, is so dominating in the Korean market that some news media coined the term, ``Republic of Naver." In the first quarter of 2008, NHN (the company that operates Naver) posted operating profit of 128 billion won (approximately $128 million), 15 times higher that that of Daum Communication, the closest runner-up. The stark contrast shows in the market value as well ― at some 9 trillion won ($9 billion), NHN is worth more than ten times that of Daum. But the company have not had this much market dominance for that long. As recently as 2005, its Internet search market share was just 36 percent, which today, in retrospect, looks surprisingly modest. Compare that to its current market share of around 76 percent, and one can appreciate how much progress Naver has made in recent years. Google would be much more likely to be called a Goliath than a David in many countries, but at least in Korea, Google's 2 percent search market share is sharply dwarfed by Naver's 76 percent. So what catapulted it into the country's top portal site? Among industry experts, there seems to be an almost unanimous consensus that it all started with the introduction of Knowledge iN, a knowledge search service that enables web users to ask questions or answer ones posted by other users. Knowledge iN allows users to ask just about any question ― be it the best French restaurant in Seoul, why toenails grow faster than fingernails, or how to dump boyfriends in a cool way. Then almost instantly, answers come from other web users, often driven by Knowledge iN's internal reward system. When your answer gets chosen as the best advice by the asker, you earn 10 points; as your points go up, your level within Knowledge iN changes progressively, such as ``Superhuman'' level at 65,000 points. Though the quality of its contents are sometimes questionable, Naver's Knowledge iN now has roughly 10 times more entries than Wikipedia. It is used by millions of Korean web users on any given day. Some people say Koreans are not addicted to the Internet but to Naver. The key success factor of the sites knowledge search is that it effectively models human research behavior. When we want to know more about something, usually the first thing we do is to ask people around us. Want to buy a new digital camera? Chances are you will first turn to Tom or Jean or Satoshi, whoever among your friends is called "the gadget guy." As the information overload continues, searching has become the most important application of the web. But one limitation to it is that search engines can only return the results that already exist. This is where Naver's knowledge search outshines traditional search engines, which just index and organize existing web documents. Knowledge iN, by asking web users to provide answer to a question, fosters the creation of new content. NHN CEO Chae Hwi-young says: ``Naver knowledge search is like oozing out knowledge from the human brain to the Internet ― people who know about something better than others can present their know-how, skills, or knowledge.'' If traditional search engines are ``knowledge brokers,'' Naver knowledge search is a knowledge broker and producer. The market-proven success of the portal's knowledge search also inspired other web giants in the United States and Japan. Yahoo Answer, launched in December 2005, is one of the fastest-growing service properties at the rather slumping Internet portal. Yahoo Japan's Chihe Bukuro (``knowledge pouch'') and NTT's Oshiete (``teach'') both adopted similar question-and-answer formats and are rapidly growing in terms of usage. Escaping From The MatrixThe problem is that Naver has been putting a walled garden around its content database. Currently, it does not allow other search engines to index its content. Often its users cannot embed content hosted on other services either. It almost appears it wants to keep its users believing that Naver is The Internet. The company's proprietary database built through Knowledge iN and other services is now viewed as a threat as much as it is a success factor. As more and more Korean people realize Naver is not equal to the entire Internet, however far-reaching the portal might be, they switch and turn to open web-based services, such as blogs running under their own domain names. Some compare this switch to the movie The Matrix, where people start realizing there is a bigger space outside of the world they live in. ``Naver should not dwell on its past laurels. It is required to find innovative services to remain ahead of the curve,'' said Kang Rok-hee, an analyst at Daishin Securities. One way of remaining ahead of the curve, these days, seems to be to open up and leverage the collective intelligence of the many. Many industry experts claim with conviction that the walled garden is out, and open is in. Umair Haque, a well-known blogger who also runs Havas Media Lab, says ``Open beats closed anytime - you only have to close when your DNA isn't quite there yet.''Ajit Jaokar, a blogger dedicated to evangelizing open environment for mobile Internet, also says: ``It appears that walled gardens do not stand the test of time and become irrelevant as the medium matures." It seems that open is quickly becoming the name of the game for the Web and mobile Internet industry, and this trend forces even highly successful companies like Naver to tear down their walled gardens. It will be interesting to observe how companies that succeeded using the walled garden approach ditching their old paradigm and readjust to the changing needs of the times, thereby evolving into a long-term sustainable businesses.

Kim Chang-won is a technology entrepreneur. He can be reached at his blog www.web20asia.com.