Opportunities of Globalization and New Business Model for Mobile Technology in Healtcare

Introduction

Despite the tremendous advances in medial research and technology there are still a number of factors like social and geographical barriers that prevent the exploitation of full potential in various health care industries and segments.

For example in tracking and stopping disease outbreaks we still heavily relies on epidemiologists painstakingly back tracking patients to identify the source of an outbreak. Just like Dr. Snow in 19th century London who for his work is seen as the "faster of epidemiology".

Health Statistics (OECD, 2013) shows that the annual average growth rate per capita for health expenditures continue to grow steadily. People started to care about their health more than before and also for the next generation.

Healthcare practitioners, for better judgment, have to rely on medical devices to capture more data, wireless communication technology allows data to be transmitted through network between different end users across the globe. What will be the business opportunities when mobile technology meets healthcare? We attempt to go through the four sub-sectors of mHealth industry and mainly focus on the impact on business model.

M Health (source: http://mhealthwatch.com/infographic-mobile-healthcare-faces-the-future-19218/)



The Opportunities of Globalization

PublicHealth

Infectious disease tracking is essential for the outbreak to be contained. Public health authorities and WHO are responsible for tracking diseases. Therefore, even though it is not an industry in itself, it is vital to the public.    

Public health (source:https://www.youtube.com/watch?v=oy1CAMObRzc)

With the increase in mobility, outbreaks are no longer confined to a city and its neighborhood (like in the 19th century). Within 24 hours any infected patient can fly to any place in the world. As more and more people are carrying smartphones it is possible to trace their movements, where they have been, who they have contact with very easily. This speeds up the process of epidemiological tracking considerably, stopping the wider spreading of diseases and potentially     saves lives. Mobile technology can also help doctors treating infected patients by capturing information about the status, treatment, etc. and immediately shared it with experts that might be thousands of kilometers away that are helping in coordinating an effective response (WHO n.d.).

MedicalEquipment

Medical Devices (source:http://www.bizreinvention.com/2013/05/24/

doctors-in-your-palm-will-mobile-health-care-help-reduce-medical-bills/)

Medical equipment is designed to aid in the diagnosis, monitoring or treatment of medical conditions. Globalization has greatly increased the demand for medical technology. The globalization of design, sourcing, manufacturing, distribution, and sales of medical technology has accelerated the transformation of the Med-Tech industry; the emergence of new economies as key marketplaces for the sale of medical devices has forced executives to pause as they consider how to serve these markets as well as the developed economies that have long been the principal revenue drivers for their companies. Moreover, these concerns are emerging just as the industry’s business model shifts from “selling products” to “providing integrated solutions” that improve care and enhance health across population.



MedicalNetwork

Net Work (source: http://acolyst.com/wp-content/uploads/2011/04/)

A mobile phone in the hands of an individual is an extension of the wireless communication network. Companies within the sector put emphasis on (in general) maximizing the efficiency and effectiveness of healthcare organization. Specifically, the links between healthcare practitioners and patients and caregivers are enhanced. Not many of the companies within the sector who would like to go global can benefit from globalization. The provision of service is limited by infrastructure maturity of regions. It is also limited by regulations on data privacy protection. Therefore, social network service providers operate principally within North America. However, companies can locate their research center to places where qualified personnel are available and the costs cheaper.

MedicalResearch





 Research Data (source: http://pathfindersoftware.com/medical/)

Medical research needs tremendous amount information to study and the medical research are very often bounded by the geography. The traditional way of gathering volunteer and data is defined as time-consuming, high cost and limited information, while mobile medical research overcomes these shortages with real-time, digital, high-frequency data support. Under globalization, with easy access and contribution for the study, researchers could get frequent data from worldwide in high diversity and large population, which help to lead to more accurate results. While there are some challenges as well. The regulations vary from region to region, the data input precision are different. Private information protection is also an important determinant of the success under globalization

New Business Models

In a globalized world, new cooperation model between the various nations, new ways to define and fund technological standards to be able to compare and share mobile data need to be defined, agreed and implemented. Such standards would have to then flow into the manufacturing process of any mobile services to be able to gather and analyze the data.

Co-work   (source:https: //organizationsandmarkets.com

/2014/01/29/the-soft-underbelly-of-business-model-innovation/)

Capitalizing on newly emerged technologies, the business models of healthcare research, healthcare social network, and medical devices/supplies have brought us changes in the way revenues are generated. Generally speaking, companies have increased customer base, expanded channels/platforms, enhanced efficiency and decreased costs. Due to changes brought about by technology, markets become highly segmented, companies within the sector can better assess and predict the needs of customers. As a result, companies can serve customers better.

List of References

Medical Technology Industry Faces a Balancing Act in Globalization, By Manufacturing Geek on November 29, 2012 http://manufacturing-geek.com/medical-devices/2012/11/medical-technology-industry-faces-balancing-act-globalization/

Athena Health company website http://www.athenahealth.com/ retrieved on 19th of April, 2015.

Mechael, Patricia; Kwan, Ada; and Kern, Dayle. Chapter 9: Mobile Health. in Global Mobile: Applications and Innovations for Worldwide Mobile Ecosystem. by Bruck, Peter A. & Rao, M. (eds.) New Jersey: USA, Information Today, Inc.

Motion Computing company website https://www.motioncomputing.com/ retrieved on 19th of April, 2015.

CDC (n. d.). 2014 Ebola Outbreak in West Africa. Retrieved on 23 April 2015 from http://www.cdc.gov/vhf/ebola/outbreaks/2014-west-africa/

Rojahn, S. J. (2012). Pakistan Uses Smartphone Data to Head Off Dengue Outbreak. Retrieved on 22 April 2015 from http://www.technologyreview.com/news/506276/pakistan-uses-smartphone-data-to-head-off-dengue-outbreak/

WHO (n. d.). Global Alert and Response (GAR). Retrieved on 22 April 2015 from http://www.who.int/csr/en/

Wikipedia (n. d.), Timeline of the SARS outbreak, Retrieved 23 April 2015 from http://en.wikipedia.org/wiki/Timeline_of_the_SARS_outbreak

Willingham, E. & Helft, L. (2014). Tracking Disease Outbreaks. Retrieved on 22 April 2015 from http://www.pbs.org/wgbh/nova/body/disease-outbreaks.html

 

When Mobile Technology meets Health Industry – A marriage made in heaven?

Introduction – Health Crisis Looming?

Macro and socio economical forces are driving the expenditures per capita steadily higher and higher and are shaping the health industry. OECD Health Statistics for 2013 (OECD, 2013) show that the annual average growth rate per capita for health expenditures has come down on average (OECD, 2013; see Figure 1) but is still growing.

Figure 1: Annual average growth rate in per capita health expenditures (OECD, 2013, p. 155)

The OECD average for health expenditure per capita and year is over 3'000 USD (OECD, 2013; see Figure 2).

Figure 2: Health expenditure per capita, 2011 (OECD, 2013, p. 155)

Advances in medicine have increased the life expectancy over that last 40 years by ten years on average (OECD, 2013; see Figure 3).

Figure 3: Life expectancy at birth, 1970 and 2011 (OECD, 2013, p. 25)

As more deceases can be treated or even cured, modern time lifestyle deceases like obesity are increasing health expenditures steadily and continuously (Bouysen, 2010, see Figure 4).

Figure 4: The Casual Loop of Rising Health Costs (Bouysen, 2010)

As a result the health spending per capita is increasing not linearly but exponentially as the life expectancy increases (OECD, 2013; see Figure 5).

Figure 5: Life expectancy at birth and health spending per capita, 2011 (OECD, 2013, p. 25)

This increased demand is not met with increased supply of medical personal. As OECD statistics show (OECD, 2013) the number of practicing nurses per population has been decreasing in the first decade of this millennium by more than 1.5% on average (see Figure 6).

Figure 6: Practicing nurses per 1'000 population, 2011 and change 2000 and 2011 (OECD, 2013, p. 77)

All these factors are not only increasing the health costs but if not addressed can result in a health system that is very expensive and has not enough capacity to take care of all the people needing medical help. A health crisis is the making.

How can technology - especially mobile technology - help in avoiding this looming future for patients needing medical help and health care services? This article will provide some of these answers.

The Impact of Mobile Technology on Health Care

To understand mobile health industry, we first need to understand what is meant by 'mobile health'. According to World Health Organization (WHO), mHealth is "the medical and public health practice supported by mobile devices such as mobile phones, tablets, patients monitoring devices, personal digital assistant, and other wireless devices." (Bruck & Rao, 2013) For the purpose of this research, we aim to examine mobile health industry in the context of north America, where a group of 20 mHealth companies, most of which were founded around 2000, are the focus of our investigation.


Healthcare is an enormous industry that includes homogenous and heterogenous areas of inquiry. The advent of mobile technology, on the other hand, is also something that needs to be watched closely. The combination of these two areas of human achievement has brought with us some radical changes we now witness in our everyday life.

Figure 7: Players moving into mobile health industry (Source: own graphic)

The birth of mobile healthcare promises us with more accessible, cost-effective and individual-oriented care. The general areas of mobile health industry (alternatively known as mHealth) can be grossly devided into Wearables and Informationalized Hospitals.

Wearables target people who are not in perfect health and yet not terminally ill. Wearables monitor blood glucose level, heart rate, blood pressures, etc. When used in combination with smart phones, and/or computers (with pre-installed apps), consumers get professional health advice on when and what they should do to keep health (One brand, Sotera Wireless, goes even further to monitor the vital signs of patients under intensive care). Generally speaking, these methods are preventative in nature. And therefore save costs. Companies that specialize in the production of wearables includes, Nike, Fitbit, Apple, Jawbone, and Sotera Wireless.

Informationalised Hospitals are as commonly seen as the wearables medical devices. This is more complicated than wearables in the sense that it involves more stakeholders. Furthermore, complicated technology that deals with data processing (and subsequently Big Data/decision support systems/business intelligence), in addition to cloud computing, computer programming, and wireless communication (which are already used in wearables) is required. Companies that engaged in this area of business include, Athenahealth, Qualcomm Life.

Greater challenge brings greater benefits. Informationalised Hospitals are more connected than the traditional hospitals. Pharmacists, family members, home nurse, physician, and patients are connected through smart phones/tablets on an integrated online platform (such as Canvas/Aims at Cityu). The service strives to ensure that patients receive continuous care after they are discharged from hospitals. This will be especially helpful to people with chronic conditions that need to on habitual medication.

There are other services that combine mobile and health. One particular digital platform promises to collect the health record of patients and then match them with healthcare professionals with specializations. The platform then charges a fee from the hospitals for successful matching.

Another way that values are generated are through the knowledge accumulated in the decision support systems, so called Big Data. Research agencies could utilise information for research on epidemic control. Practing doctors could gain insights on the cause of an illnesses and the best treatment plans.

Figure 8: Picture adapted from Gartner, "Hype Cycle of Telemedicine" on 15th of April, 2015

Mobile Health Industry (mHealth) Analysis

The Mobile health has a lot of opportunities now and will increase more in the future. According to the PwC and GSMA report (PwC & GSMA, 2012) global mHealth revenues will increase nearly six-fold by 2017, with monitoring services and applications representing 65% of the market. Based on this finding, mHealth has the potential to make a great impact on the healthcare industry, yet organisations are still uncertain on how to capitalist on the technology.

The regions and market segments for mHealth industry are various and different and the impact of mobile technology on the health service industry will vary. 
Also due to the various national health regulation and approving entities it is not easy to transfer successful products and offering from one country to another.
Smartphone applications (needed to regulatory approval) are according to Jahns (2010) the killer applications for moving into mHealth.

Figure 9: mHealth market 2015 (Jahns, 2010)

As mentioned in the introduction various socio and macro economical forces are impacting mHealth:

Aging population

Aging populations and chronic illness are driving regulatory reform. Public sector healthcare is seeking better access and quality, and it's looking to the private sector for innovation and efficiency. mHealth improves access and quality, and offers dramatic innovation and cost reduction.

Foundations already in place

The foundations of industrialization of healthcare are already in place — electronic medical records, remote monitoring and communications. ‘Care anywhere’ is already emerging. The platform for mHealth is set.

Personalization

Healthcare, like other industries, is getting personal. mHealth can offer personal toolkits for predictive, participatory and preventative care.

The emerging economics developing very fast in the last few years, and it will be a great market for mHealth industry. In the emerging markets surveyed, patient awareness and expectations of mHealth are, on average, far higher than in developed countries (see Figure 10 and Figure 11)

Figure 10: Patients are more aware of mHealth in emerging markets (Economist Intelligence Unit, 2012)

Figure 11: Emerging market patients have greater expectations of mHealth (Economist Intelligence Unit, 2012)

More importantly, far more patients are already using mHealth. 59% of emerging-market patients use at least one mHealth application or service, compared with 35% in the developed world, and among those who do not, emerging-market residents are more interested in starting.

New approaches are also being used for delivery health services in more cost effective way.
In Mexico, for example, a telephone-based health care advice and triage service is available to more than one million subscribers and their families for $5 a month, paid through phone bills.
In India, an entrepreneur has proved that high-quality, no-frills maternity care can be provided for one-fifth of the price charged by the country’s other private providers.
In New York City, the remote monitoring of chronically ill elderly patients has reduced their rate of hospital admissions by about 40 percent (McKinsey report).

As an emerging economic country, China will be a large market  for mHealth industry. After team member Connie Liu graduated from my college in US, she went back to China in 2012, and she could feel the developing shift away form just looking at the economic growth. People started to care more about their health more than before and also for their next generation. From organic food to mobile health equipment, people increase their awareness for all the things good for health.


However, other than the great opportunities, this industry also have some threats. The most important one is the products, and products need innovation.  Unfortunately, health care can be an isolated and local activity also due to local regulation: innovations are not widely known across different systems or beyond sector boundaries. Merely identifying and promoting innovations isn’t enough, however—leaders need to understand whether, and how, the lessons of innovators can be replicated elsewhere.

Cardionet – A new mHealth Player

Build a concept

Cardionet Inc. was founded in 1999 with the clear strategy to eliminate the limitation of traditional cardiac monitoring by integrating mobile technology.

Data in 2009 shows that there are over 4 million Americans having cardiac arrhythmia, and 78 million patient need to keep monitoring their heart rate at hospital according the same data. This at a cost of nearly 26'500 USD per person. Cardionet's Mobile Cardiac Outpatient TelemetryTM ("MCOT™") can do the same at a fraction of the costs of only 1'300 USD, i.e. at about 5%!

Source: Cardionet on YouTube

Make it happen

The traditional way for monitoring the heart rate are Holter Monitor, Event Monitor or In-Hospital cardiac telemetry. None of them are wireless, and the disadvantages include short duration of measurement, delay in reporting, symptoms driven measurement  limitation in recording, need of manual intervention and transmission. The resulting diagnostic yield (% where the heart measurements can be used to diagnose a heart condition) is 7% and 15% for Holter Monitor and Event Monitor respectively.

Figure 12: Differences in Diagnostic Yield (Source: https://www.cardionet.com/media/pdf/evolutionofmonfinal.ppt)

Cardionet launched MOCT that could be used in diagnosis and the treatment of arrhythmias. It offers ambulatory, continuous, real-time outpatient management solutions. What surprises us more is the diagnostic yield of more than 65%, i.e. it is not only cheaper but also more effective. Cardionet saw the possibilities mobile technology offered as one of the early ones in 1999 and spend a lot of effort to get it approved by the U.S. FDA in 2003. MOCT is a revolution in monitoring devices and profits from the first move advantage in developing it and getting FDA approval. Mobile technology is the key element to realize the long-distance monitoring.

Figure 13: The CardioNet System (Source: http://wenku.baidu.com/view/b1caab4c767f5acfa1c7cdda.html)

Consolidating the market

There is no doubt MCOT is an advanced and beneficial device at the core of Cardionet's business. But patient may not use this kind of product if it can’t be reimbursed by their health insurance even though FDA license  It’s smart that Cardionet quickly found its successful business model and way of marketing which is cooperating with health insurance company. For instant, Cardionet announced a three-year-cooperation agreement with one of the biggest insurance company United Healthcare insurance in 2013. This is a win-win situation ensuring Cardionet a stable income cash flow. Since MCOT built up a good reputation on detecting and treating heard conditions early, the insurance company also saves money for treating cardiac arrhythmia in the long run. The revenue grows 33% in 2014 compared to 2013, and the net loss is in a decreasing trend. Cardionet serviced approximately 550,000 patients in 2014.

Continuing Effort

Currently, Cardionet has a positive strong growth trend, and they are implementing the following strategy: To solidify company’s position as the leading provider of outpatient cardiac monitoring services, expand presence in the research services market and leverage monitoring platform into new markets.

1. There is a strong market demand for a smaller and lighter devices. The new generation of MOTC Cardionet devices is 45% lighter and 30% smaller.

   

   Figure 14: New Cardionet MCOT device (Source: https://www.cardionet.com)

2. Market requests a device with multiple functions. After reviewing the last generation of Cardionet, it enriches devices' new functions, patient video support, multi-language, a large OLED color touch screen and power switch, send and received text message.
3. Previous devices where isolated and could not share data beyond with other mobile devices. Cardionet developed an application in Apple store, with which patients could access the data on their iPad.

   

   Figure 15: Cardionet iPad access (Source: https://www.cardionet.com)

4. After being renamed to Biotelemetry, the company is working on providing more bio-related devices and services, not just cardio monitoring.

As a new player in the mHealth industry, Cardionet is facing a heating competition. The company keeps strengthening its competitive advantage through a serious of acquisitions in various areas. 

• Healthcare devices manufacturer: Cardionet designs and manufactures the devices and facilities on its own. The acquisition of ECG Scanning & Medical Services makes company more productive. 
• Health services provider: After setting up its own medical subsidiary, Cardionet further enriches its capabilities on the research side with the acquisition of Agility Centralized Research Services.
• Mobile hardware, software & network providers: With long and close cooperating with AT&A, Cardionet stabilizes its mobile services. The acquisition of Biomedical Systems Corporation's all assets in 2014 gives company access to internally develop Holter software.

Overall, Cardionet is a good example of innovation, together with the mobile technology creates MCOT, and keeps improving the quality and efficiency of devices and services. But we believe Cardionet still needs to explore more on providing better user-experience for their devices and make their devices easily connect with other mobile devices (not just the iPad). A further direction to move into could be to just manufacture the sensor part of a heart monitoring device and link with a smartphone or smartwatch. Cardionet could also explore further ways to better collect, store and utilize the data it is collecting. Advances in cloud technology and big data analytics offer new opportunities.

Conclusions and Outlook

Mobile technology and health services are a marriage made in heaven and having a huge impact on health industry while changing the way health services are provided and received.

Many challenges and questions remains and provide new opportunities for further innovation.

• How can the national regulation be harmonized or standardized to allow for easier access across national mHealth markets?
• As mHealth devices are more connected, how can the security be maintained, e.g. from hacking and manipulating the device's sensors?
• Can the health data be standardized so that it's easier to share between devices and its ecosystems?
• How can further technological advances be used further improved mHealth services?
• Are there limits on how the collected health data can be used?
• Etc.

Many socio-ethical impacts still need to be discussed.

• Who is the owner of your health data?
• Who has access to your health data? How is access granted? How is the data protected?
• How long will the health data be stored?
• Would it be acceptable for a health insurance to reduce your premium your have to pay if you give the insurance access to your health data?
• etc.

More questions than answers but one thing is sure, mHealth is here to stay and to evolve further. More offsprings of this marriage can be seen along the digital path (see Figure 16).

Figure 16: More disruptive forces along the Digital Path (Source: own graphic)

New technology like cloud computing and big data analytics and new players move into the health services market. For example IBM is working together with a health care company McCale to how see IBM’s technology could help doctors make better use of clinical data. (Orcutt, 2015).

The possibilities are endless....

Dear commenters, the possibilities are endless.
What do you think the future for mHealth will bring?
Where do you see the opportunities, challenges and threats?

Share your thoughts and let's start a discussion.

References

Athenahealth company website. Retrieved from http://www.athenahealth.com/ on 17th of April, 2015.

Bouysen, A. (2013), Why healthcare costs are hijacking childhood, http://afterthemillennials.com/2013/02/28/why-healthcare-costs-are-hijacking-childhood/. Retrieved 16 April 2015.

Cardionet, Concept = Win, Strategy = Epic Fail. (2010, August 31). Retrieved from http://singularityhub.com/2010/08/31/cardionet-concept-win-strategy-epic-fail/

CardioNet-A case study smart services leadership summit.(2008) Retrieved from http://wenku.baidu.com/view/b1caab4c767f5acfa1c7cdda.html

CardioNet Annual report 2015. Retrieved from
http://quote.morningstar.com/stock-filing/Annual-Report/2014/12/31/t.aspx?t=XNAS:BEAT&ft=10-K&d=05177547e5ad07391dd53f91a4b06d51

Economist Intelligence Unite (2012) Emerging mHealth: Paths for growth. Retrieved from www.pwc.com/mhealth.

Fitbit website. Retrieved from http://www.fitbit.com/cn on 17th of April, 2015.

Guangzheng hangseng investment report on Bio telemptry.(2013, August 6). Retrieved from
http://dln.gzs.com.cn/mail/201307/Attachment/8696ff7e-7cb3-464d-b7d5-7702d95c6ab7.pdf

Jahns, R-G. (2010), 500m people will be using healthcare mobile applications in 2015.

Jawbone website. Retrieved from https://jawbone.com/ on 17th of April, 2015.

Mechael, Patricia; Kwan, Ada; and Kern, Dayle. Chapter 9: Mobile Health. in Global Mobile: Applications and Innovations for Worldwide Mobile Ecosystem. by Bruck, Peter A. & Rao, M. (eds.) New Jersey: USA, Information Today, Inc.

Mobile Cardiac Outpatient Telemetry (MCOT) - Cardiac Telemetry | CardioNet Event Monitors. (n.d.). Retrieved from https://www.cardionet.com/

OECD (2013), Health at a Glance 2013: OECD Indicators, OECD Publishing, Paris.
DOI: http://dx.doi.org/10.1787/health_glance-2013-en.

Orcutt, M. (2015), Meet the Health-Care Company IBM Needed to Make Watson More Insightful, http://www.technologyreview.com/news/536751/meet-the-health-care-company-ibm-needed-to-make-watson-more-insightful/. Retrieved 17 April 2015.

PwC & GSMA (2012), Touching lives through mobile health Assessment of the global market opportunity.

Qualcomm Life company website. Retrieved from http://www.qualcommlife.com/ on 17th of April, 2015.

Sotera Wireless website. Retrieved from www.soterawireless.com on 17th of April, 2015.

Friendster - The Rise and Fall of the Online Social Network Pioneer

1 - The Dawn of the Online Social Network Revolution

The social networking site Friendster was a pioneer in the area of online social networking and revolutionized it. It was launched in late 2002 for the purpose of allowing people to connect on more of a friendly basis rather than a romantic one. Friendster was founded by Canadian programer Jonathan Abrams.

Even though there had been several others online social networking sites before (see Section 2 later in this blog), Friendster was the first one reaching over one million users and at its peak totaled more than 100 million users.

Illustration 1: Friendster login page in 2004 (Internet Archive, n.d.)

In 2003 Friendster declined Google’s 30-million dollar offer and instead took money from high-profile venture capitalists. In 2004 Jonathan Abrams (founder of Friendster) was removed as CEO and an interim CEO was appointed. Various senior management changes followed in short intervals (Rivlin 2006).

Soon after Abrams was removed Friendster started loosing users to first MySpace and then to Facebook. More and more users were attracted to the competitor's social networking sites.

Illustration 2: Search Traffic For Friendster (Chappell 2011)

In December 2009, Friendster was acquired by an Malaysian businessman (PR Newswire, 2009). From then on Friendster moved its focus to the markets  in Southeast Asia and the users numbers continued to tumble. In 2010 Facebook bought over all of Friendster's social network patents (Gannes, 2010).

Illustration 3: Top Regions For Friendster (Chappell 2011)

Presently, Friendster is a online gaming website based in Malaysia. A long distance away from the Online Social Network pioneer it used to be.

Illustration 4: Current Friendster website (www.friendster.com 2015)

How could the pioneer of Online Social Network fail and disappear in way less than a decade?
This blog sets out to analyze and answer this question. Let us start with a short and concise story of Online Social Network.

2 - A Short History of the Online Social Network

Illustrataion 5: History of Social Media (adapted from http://www.webanalyticsworld.net/wp-content/uploads/blogger/10-socialMediaTL_05.png)



The origins of social network can be traced all the way back to the Bulletin Board Services, AOL and CompuServe in the 70s, before the internet as we know it today was available to all. Around 1997, online social platforms were established based on the six degrees theory proposed by Kevin Bacon (cited in Anonymous, 2010). The theory states that "no person is separated by more than six degrees from another." (Anonymous, 2010).

In 2002 Friendster, LinkedIn and Myspace were launched one after another. They represented the blossom of social networking. Friendster, as in the words of its creator, was "a dating site that isn't really about dating"(Anonymous, 2010). Shortly after it was launched, three million users were attracted to the site.

After the fast rise however Friendster gradually lost its appeal starting with the U.S. first. Eventually, and little by little, both Myspace and Friendster were overtaken by Facebook. In 2010 Facebook announced that they had more than half a billion active users. Two years later in 2012 that number had double to 1 billion active users. End of last year Facebook was reaching 1.4 billion users dominating Online Social Networking (statista, n.d.).

3 - Archeological and Forensic Analysis of Friendster's Demise

Before answering the fundamental questions of why Friendster failed to maintain its lead and succumb to Facebook, we need to ask and get answers to more question such as the following:

• Why was Friendster able to attract some many users initially?
• Why did Friendster fail in keeping those users as well as attracting new ones?
• Why were MySpace first and later Facebook so successful in attracting and keeping Friendster users?
• What assumptions did the management make when they turned down the offer by Google?
• What contributed to the downfall of Friendster's user number in the U.S. market?

As all these events happened in the past and because Friendster as a social web site is dead we are going to perform a archeological and forensic analysis to get answers for these and other questions. Archeological because with the fast moving internet any remains of the Friendster's social networking web site can only be found in the Internet Archives. Forensic as the we also want to determine the factors that led to Friendster's demise.

The Onion's humorous take on "Internet Archeology" (Source: YouTube)

Investigative Tool

Helping us in this investigation we will be using the SWOT (Strengths, Weaknesses, Opportunities, Threats) strategic analysis model. Even though SWOT analysis has been questions for strategic analysis (Hill & Westbrook, 1997) for the Friendster case we are going to use the Customer-oriented SWOT Model by Pierce & Giles (1989) to help frame our analysis.

The Customer-oriented SWOT model is a matrix made up of external and internal analysis. The external part consists of Opportunities and Threats that exists in the environement and can not be influenced directly. The internal part consists of Strengths and Weaknesses that are recognized by customers directly or indirectly. By going though the analysis process internal Strengths are matched to external Opportunities (Matching Strategy). Strengths with no immediate Opportunities are of little value while highly ranked Opportunities for which there are no internal Strengths are food for fought. Converting Weaknesses into Strengths and Threats into Opportunities are called the Conversion Strategies. In some cases this conversion may be relatively straightforward in others cases a conversion may not be possible. While going through the process new innovative ideas are generated and recorded to help developing and expanding the business (Creative Strategy).

Illustration 6: Customer-oriented SWOT Model (Pierce & Giles, 1989)

For our archeological and forensic analysis we will be looking and doing the SWOT analysis at two points in time:

1. In 2003, when Friendster was launched in America and became very successfully.
2. Around 2006 when Friendster was at it's climax as a social networking site, but already having to fend off MySpace as well as increasingly Facebook.

The comparison of the analysis results of these two points in time will give additional insights in helping with our archeological and forensic investigation.

3.1 - SWOT Analysis for 2003: Lost Opportunities and Loosing Touch

Strengths in 2003

S1 First Mover - Friendster was the first modern Social Network website embracing new technology to allow users to easily set up their profile and link up with friends. Many of the technology underlying the unique features of social network websites were patented by Friendster and were subsequently acquired by Facebook (Gannes, 2010).

S2 Social Connectivity - When registering Friendster asked people to fill in detailed information such as: name, location, school, occupation, etc. This information made it easier for users to search and find friends they had lost contact to. This increased the perceived usefulness for Friendster users and the more people joined the more Friendster became useful to them.

S3 Increased Curiosity - The founder Jonathan Abrams had a clear vision for Friendster and he was able to stir up a large media attention for Friendster. People became curious and wanted to try a Online Social Network site for the first time themselves.

 Illustration 7: A profile of a friendster user (Unidentified writers, 2010)

Weaknesses in 2003

W1 Missing Social Interaction - After having set-up a profile in Friendster and having established contacts to friends the platform did not offer any further interaction capabilities (e.g. chats, various news feeds tailored to your interests, bulletin boards, etc.). Friendster also did not allow to set-up interest groups where Friendster users with the same interest could join and interact. Due to the lack active interaction possibilities existing users existing users lost interest in Friendster. The interactive social element got lost.

Illustration 8: Example of a Friendster user profile page layout (Unidentified writers, 2010)

W2 Lost Identity - Friendster allowed users to customize their user profile to their personality and mood using HTML. The fancy and colorful profiles quickly became a burden as Friendster started to loose its clarity of design and its visual identity.

W3 Technical Shortcomings - Friendster website became overwhelmed by the three millions of users that joined within months. As a result Friendster webpage took as long as 40 seconds to load, so users stopped using Friendster and moved to e.g. MySpace.



Image Source: http://www.windowserrorhelps.com/wp-content/uploads/2012/01/slow-pc-solutions.png

Opportunities in 2003

O1 Google's 30 millions - Google offered to buy Friendster for 30 million USD in 2003. The offer was rejected as Friendster thought that they were valued tool low. Instead private investors were brought in.

O2 Spread of the Internet - With the internet spreading fast more and more potential Friendster users came online every day. An almost unstoppable supply of new users.

Image Source: http://i1-news.softpedia-static.com/images/fitted/620x348/Google-to-Invest-1-Billion-in-Satellites-to-Spread-Internet-Across-the-World.jpg

O3 Technological Advances - Hardware and software were advancing at a break-neck pace. Computer got faster and easier to use while prices came down. Connecting to the internet got also easier and faster. This again was taping a new users groups and adding them as potential users for Friendster.

The browser technology was also developing and being standardized as the same time allowing for more interactive website that could be used by different browsers on different operating systems.

O4 Shift to Online Interaction - As the internet was spreading people started to get accustomed to interacting online. Especially the younger generations started authoring and sharing content on the web. Social Networking sites were providing the platform for that.

Threats in 2003

T1 Copy Cats - Friendster was the first modern social network site but the idea and concept of Friendster was easy to copy. Various competitors started to populate the social networking arena with MySpace starting to attract more and more users away from Friendster.

Image Source: http://cdn.business2community.com/wp-content/uploads/2011/09/3-ways-to-stave-off-digital-copycats.jpg

T2 Low Barriers for Move - Once other online social networking sites are up and gaining momentum there is almost no way to retain users if they decide to move. Once users have moved over they also tend to convince their Friendster friends to follow them.

T3 Advances in Technology - Advancements in web technology could make Friendster obsolete very quickly, especially if the competition adopts them at a much faster pace. 

Strategies in 2003

Matching Strategy: Strengths --> Opportunities
Friendster was successful tapping in the opportunities given by the spread of the internet with its first mover advantage in the modern social networking arena. As the media hype around Friendster started the user numbers went through the roof. The strategy would have been even more sustainable if they had addressed the technical difficulties by controlling the user numbers while addressing the technical problems. Instead after rejecting the offer by Google, the new management team started to loose touch and become complacent with the unexpected success.

Conversion Strategy: Weakness --> Strengths

There seemed to be a lock of awareness of the weaknesses Friendster was facing and no need of action was perceived. Instead of fixing the obvious technical shortcomings the management was focusing on what to do next. Friendster seemed also not able to understand how its users wanted to expand the usage of the platform (e.g. setting up of groups).
Even though Friendster was still going strong while not addressing these weaknesses it was laying the foundation for its future failure.

Image Source: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAmuBfsMXOBaV_cLtyiY7B2uwzKMp_g-bCvwPVYUZRHj9Jcjkfhlek_PHJx0ejx1WA-BqpGaRefVZTtTaQejwGe56TW5UOeDNxASKJaSrI0dCFzVwzncHkLzveCBhtjljDYS-Am8A6Cd8/s1600/Operations-management.jpg

Conversion Strategy: Threats --> Opportunities

Friendster saw the threats that their success formula was easy to copy and started patenting some the underlying technology used for their website. At the same though they did not seem to see the urgency of doing more than that and for example tapping in new possibilities the evolving technology was providing to them. We also think that they did not understand how easily users could move from one social network platform to another.

Creative Strategy
Friendster was creative and innovative in discussing possible extension of the Friendster platform to for example video calls. The failed though to execute on their creative strategy and prepare the Friendster for new innovative technology.

3.2 - SWOT Analysis for 2006 - Loosing the course

Strengths in 2006

S1 Patents - Event tough Friendster showing signs of disarray it still retained the patents to many of  the technology underlying social network design. This was giving Friendster still a marginal advantage over its competition. But for how long?

Image Source: http://hallingip.com/files/2011/06/US-PatentTrademarkOffice-Seal-300x300.png

S2 Loyal User Base - Despite all the technical difficulties earlier it Friendster still retained a loyal user base especially in Asia. This was a strong base to build on.

Weaknesses in 2006

W1 Legacy Issues - As Friendster delayed in addressing the technical difficulties and the user requirements for new functionality on the platform (like groups) it still was weakened by that perception in the eyes of many users.

W2 Lack of Consistency - With the many management changes and reshuffles since the founder Anderson was let go as the CEO, the staff at Friendster was experiencing a lock of consistency and direction. Many good people left Friendster as a result.

W3 Lack of Vision - With the founder Anderson gone and combination with the many management changes a lack of vision of Friendster emerged. The executive Friendster management themselves were not using Friendster and could not really formulate vision for Friendster's future. The investors who came in after Google's offer was rejected also had to be listened to.

Opportunities in 2006

O1 User Base - Friendster still have a substantial user base and especially in Asia. This presented an opportunity to remain relevant in the social networking space.

O2 A large Internet and still growing - The internet was still growing especially in Asia where Friendster was still maintaining a large user base. This growth offered opportunities to gain new Friendster users.

Threats in 2006

T1 Mushrooming of Social Networking - In 2006 social networking sites were mushrooming. Facebook after focusing on University campuses opened up to everyone and gaining quickly momentum. LinkedIn (founded at the same time as Friendster) had gone through its own ups and downs was focused on enabling business people to connect with other professionals. This strategy worked well two years later in 2008 when the economy was not doing well and job opportunities were scarce.

Illustration 10: Social Networking Wars (Unidentified writers, 2013)

T2 Micro Blogging - Microblogging emerged as another milestone towards "user-created content" (Anonymous, 2010). With microblogging everyone could become a broadcaster to the world. TwitterAn example of microblogging is Twitter. Below is an example of celebrity users that Twitter attracts.



Illustration 11: In comparison, Twitter was capable of attracting members with strong social influence

(Anonymous, 2010)

 

T3 Lack of Strong Connections - Garcia, Mavrodiev & Schweitzer (2013) analyzed the connections between the different users on Friendster and came to the result that many of the users weren’t connected to a lot of other members, and the people they had befriended came with just a handful of their own connections. So they ended up being loosely affiliated with the network and easy to loose.

Illustration 12: Friendster users gradually became less and less connected to one other another. (Image: Swiss Federal Institute of Technology adapted from McMillan, 2013)

Strategies in 2006

Matching Strategy: Strengths --> Opportunities

 

Strategy	Does the innovator have the required complementary assets	Likely height of barriers to imitation	Number of comparable competitors
Going it alone	Yes	High	Very few
Entering into an alliance	No	High	Moderate Number
Licensing the innovation	No	Low	Many

Table Adapted from Hill and Jones's 2010 book, Strategic Management, An Integrated Approach.

Based on this chart, we could see that the best thing for Friendster to do in 2006 was either to enter into an alliance or licensing the innovation. Given that the likely height of barriers to imitation was quite high, Friendster did the right thing to patent the technologies that support the operation of the social network site. Morever, there were only moderate number of comparable competitors, so the best thing Friendster could do was to enter into an alliance. Unfortunately, there were not many opportunity for Friendster to enter into alliance at that point in time.

 

Conversion Strategy: Weakness --> Strengths

The legacy issue had been solved but the lack of a clear vision and guidance did not produce new creative idea on where to move Friendster next. The competition was experimenting in new way to help people in interact and share, but Friendster was still stacked in their successful past. 

Conversion Strategy: Threats --> Opportunities
Friendster was busy not reacting or very slowly to the changing landscape in 2006 onwards. The still were not really fully aware of the threats looming and the continues success in Asia covered up for the mistakes they continue to make.

Creative Strategies

The lack of understanding of the users's need and the continuous changes in management an direction resulted in a lots of good staff and ideas lost over time. The founder figure of Anderson was gone and the management time was not able to give Friendster the needed creative ideas for new services and products hat could have halted the slow demise.

4 - Lesson Learned - How it could have gone differently

There is a tide in the affairs of men.

Which, taken at the flood, leads on to fortune;

Omitted, all the voyage of their life

Is bound in shallows and in miseries.

(Quoted from Shakespeare, Julius Ceasar)

Social network reflects "many of the wider changes in society"(Anonymous, 2010). Their popularity is linked to economic prosperity and "the rise of middle class consumers in emerging markets."

In order to seize this opportunity and get rich, it is necessary to note that timing is important for anyone and everyone who wish to make a fortune in the wave of prosperous online market. Friendster missed an opportunity, and lost its chance to become a more influential giant in the field of social networking service.

The prosperity of the internet-enabled social network service suggests that there is a real need from people to connect with one another. The challenge facing every company, therefore, is to balance between the profit-making and consumer demand satisfaction.

Illustration 13: This picture perfectly illustrates the state of the management when they reached 300 million users. (Illustration by Bruce MacPherson, adapted from Rivlin, 2006)

Moreover, as mentioned by Rivlin (2006), Friendster management felt they could relax when they had 300 million registered users. The founder of Friendster showed up in parties with beautiful women. The management stopped working hard. However, as pointed out by Peter Drucker (1998), "In innovation, as in other endeavor, there is talent, there is ingenuity, and there is knowledge. But when all is said and done, what innovation requires is hard, focused, purposeful work." This realization was particularly lacking in Friendster at that point in time.

 

5 - Verdict & Conclusions

After the archeological and forensic examination we can conclude that Friendster died slowly of a "success intoxication". The ultimate demise can be traced back the very beginning when Friendster missed to address the technical difficulties and respond to users needs to share and connect in various ways.

The user base in Asia kept Friendster alive a bit longer but the lack of vision by the new Friendster senior management after Anderson (the founder) had left, killed off the last opportunity they had to recover and survive.

Friendster failed to understand were the success was coming from, what the factors were that helped them to become successful and how those factors were changing due to their own shortcomings as well as the world changing around them.

The early success followed by Google's offer made Friendster very complacent and these can be seen as where the later failure was rooted.

Illustration 14: Picture adapted from "R.I.P.: Top 10 failed social media sites" (Wallace 2013)

Notes

Illustration 4 comes from http://www.friendster.com

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