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Building on Existing Networks: Videoconferencing

In class, we discussed the concept of network effects, which explains that some new technologies are only useful is a certain portion of the population is willing to adopt.  Some classic examples include fax machines and text messages, both of which are to a single user unless others have also adopted the technology.  Furthermore, given a certain price for the product, the seller needs to get a certain fraction of the population to adopt their technology in order to reach a stable equilibrium and develop a consistent user base.  Getting past this “tipping point” is a something that any new company, particularly fast paced internet start-ups, must worry about.

http://www.informationweek.com/news/telecom/unified_communications/231902764

The article I have shared provides information about a company called Blue Jeans Network that is competing in the online videoconferencing market.  Blue Jeans does is not doing anything to actually improve the act of video calling, but instead their service seeks to connect current video users from different platforms.  Specifically, they claim to have connected Skype, which is one of the most popular personal video calling applications, with Microsoft Lync, a common business option.  They also plan to connect these personal computing solutions with conference room systems from Cisco, Polycom, LifeSize and Logitech.  This is a direct attack on Microsoft, who recently purchased Skype with the intention of integrating it with Lync.

Blue Jeans has taken an interesting approach to acquiring the critical mass of users required to reach the tipping point in the online communications market.  Instead of promoting a new platform and starting from the ground up, they have simply tapped multiple existing platforms and brought them together.  This technique gives them the potential to acquire a huge user base while still allowing the customers to use their software of choice for videoconferencing.  The article states that the network of current video call users has over 1 billion end points globally.  If they price their service properly, it looks they have the potential to achieve rapid success on a massive scale.

Of course, even with an extremely favorable position in networks effects, there are still a number of things that could slow the growth of Blue Jeans.  For one, instead of paying for this new service, some users may just choose to change or use multiple video calling applications based on who they need to talk to.  Secondly, even with the ability to tap these markets, if the price of the service is too high then it will not be adopted.  Lastly, if Microsoft follows through with their initiative to integrate Lync and Skype then they could become a huge competitor in the same market.  Overall, this case provides an interesting look at one way to utilize existing markets and their network effects for a new product.  We will have to watch Blue Jeans Network and see how it plays out!

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