E COMMERCE BUSINESS MODELS AND CONCEPTS TWE ET T WEET!
Dec 14, 2015
NEW TRENDS AND TECHNOLOGIES
2010 – 174 Million people would use search engines to conduct 15-17 billion searches online
150 million people would watch 30 billion videos online
104 million people would read blogs
Are we this starved for communication options?
Twitter was the phenomena of the moment in which “tweeple” express themselves in 140 characters or less … “friends’ here are “followers”
Twitter has produced little revenue and zero profits although $160 million has been invested … how can this be exploited for commercial purposes?
Is the buzz social network that is the web-based version of cell phone based texting
Podcasting company Odeo got the idea in a search to increase revenues and eventually spun it into Twitter.com
The idea of Twitter is to marry the short text message with the Web to create social networks
No fees, no charges or installation – you just tweet a short update on your cell phone and your friends can keep up with your activities, locations, etc.
Over 145 M registered users … great for updates during the World Cup, Iranian /Egyptian rebellions, death of Steve Jobs … 200 M tweets sometimes dispatched almost simultaneously
80% Tweets generated by 10% users and their churn rate is 60% … 40% users remain a month or more
Churn rates – high .. People feeling too connected to acquaintances?
Unique users
Number of tweets
Investors include
Amazon founder
Benchmark Capital
Spark Capital
Company Valuation $1B … why??
TERMS FOR DETERMINING BUSINESS AND COMMERCIAL USES
Valuation based on the commercial uses just as is Facebook … but what does Twitter produce of commercial value?
Primary Asset – user attention and audience size1. “get it now” access2. database of information from Tweets!
Additionally … powerful tool for news
COMPANY VALUATION
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Promotional Trendswhat’s hot, what are people talking about?
Twitter promotes this as reflective of what people are tweeting
@early bird accounts
Users follow for special offers … twofers for films, fashion, beauty products
“flash marketing” to influentials
MONETIZATION
TEMPORAL REAL TIME SEARCHES
Twitter offers something none of the other sites really can .. Real time information .. Agreements with Google, Yahoo, Microsoft enable them to index tweets and enable Internet searches
Who is this service a benefit to and how does it morph into a commercial use?
Dell has opened an @DellOutlet to sell discontinued models and open box computers
E-COMMERCE BUSINESS MODELS
Set of planned activities (business processes) designed to result in a profit in a marketplace
A business plan is the document that describes the firm’s business model
An E-Commerce Model aims to use and leverage the unique qualities of the Internet and WWW to generate profits
Key Elements of the Business Model
Value Proposition – why should the customer by from you?
Revenue Model – How will you earn money?
Competitive environment – who else occupies your intended marketplace
Market Strategy – How do you plan to promote your products or services to attract your TA
Organizational development – what types of organizational structures within the firm are necessary to carry out the business plan?
Management team – what kinds of experience and background are important for the company’s leaders to have?
VALUE PROPOSITION
How does your product or service fulfill a need for the consumer?
What are your competitive advantages?
Why should the customer patronize your firm versus another?
personalization, customization, reduced information search, facilitation of transactions
REVENUE MODEL
Describes how the firm will earn money ..
Generate profits and produce an adequate ROI vs. alternative investments
Advertising Revenue Model – website offers a forum for advertisements and receives fees from advertisers. Site attracts high viewership, retain viewers (stickiness) therefore able to charge higher prices
Transaction Fee Revenue Model – fee for enabling or executing transactions (E*Trade)
Sales Revenue Model – derive revenue by selling goods and information or services to customers. LL Bean, Amazon, Gap.com
Subscription Revenue Model – offers users content or services but charges a subscription fee for access to all or some of the offerings. Requirements to be successful involve offering information with high value added (Match.com, consumerreports.com)
Affiliate Revenue Model – receive a referral fee or % of revenue from business resulting from referral. (MyPoints)
MARKET OPPORTUNITYThe company’s intended MARKETSPACE (i.e., an area of actual or potential
commercial value).
Market Opportunity is defined as opportunities available to the firm in that market space and is usually divided into smaller market niches.
Realistic market opportunity – revenue potential in each of the market niches where you hope to compete
EX: Your company creates software learning systems for sale over the Internet.
Software Training market is $70B – 2 major segments – Instructor led (70%) and Computer Based (30%). Within this 2 niches – small business and Fortune 500 .
Your company is a startup – can’t compete for Fortune 500 …
Your realistic market opportunity is then $6B (smaller business looking for computer based software training that is cost effective
MarketSpace and Market Opportunity in the Software Training Market
Instructor Led Training $49 Billion (70% of the market)Small Business $19 Billion Fortune 500 $30 Billion
Computer Based Training (30% of the market)Small Business $6Billion Fortune 500 $15Billion
COMPETITIVE ENVIRONMENT
Composed of
Other companies selling similar products and operating in the same marketspace
Companies offering substitute products and services
New Entrants in the marketplace
Influenced by
# of active competitors
how large competitors operations are
market share of the competition
profitability
pricing strategy
COMPETITIVE ENVIRONMENT
Direct Competitors – similar products in the same market segment (brand competitors)
ex: Coke vs. Pepsi
Indirect Competitors – different industries but still compete because products can substitute for one another
ex: Coke vs. Red Bull (when benefit sought is an energy or caffeine boost)
ex: Coke vs. Iced Tea (when benefit sought is thirst quenching)
COMPETITIVE ADVANTAGE
Produce a superior product and/or bring the product to the market at a lower price than competitors
Does the firm have access to better production capabilities?
Does the firm have more experienced, knowledgeable and/or loyal employees?
Does the firm have a patent?
Superior shipping, supplier or distribution relationships?
COMPETITIVE ADVANTAGE
First Mover advantage – first entry into the marketplace, can lack complementary resources to maintain advantage (financial assets, marketing, management, reputation)
Unfair competitive advantage – advantage based on something others cannot purchase (i.e., brand name). Brands are built upon trust, loyalty, reliability, and quality.
Followers often reap significant benefits .. Learn from production and manufacturing problems of early entrants and pioneers.
COMPETITIVE ADVANTAGE
Perfect markets have no competitive advantages – Full access to information regarding production, research, etc.
Competitive Advantages hard to sustain – i.e., Coke … now being encroached upon by flavored waters, sports drinks, etc.
Some companies leverage their competitive advantages such Amazon using its data base of customers and e-commerce experience to enter the grocery market.
MARKET STRATEGY AND ORGANIZATIONAL DEVELOPMENTPlan that the business puts together that lays out how
the company will enter a new market ( new customers) or develop a new product.
Focus on each element of the 4Ps
Organizational Development is the plan that describes how the company will organize the work that needs to be completed
Divide work into functional areas, define jobs within these areas, hire accordingly. In small companies or young firms, generalists are often early hires
Initially the eBay founder, Pierre Omidyar, started an online auction site to help his girlfriend trade Pez dispensers .. Soon growth required hires, then functional departments and large numbers of employees!
MANAGEMENT TEAM
Single most important element of the business model
How many managers do you need?
How does experience balance against education?
How do you identify leaders?
What jobs should be filled first? Marketing, finance, production and operations
young companies may need managers with experience in raising money
BUS MODEL VARIATIONS EXAMPLES DESCRIPTIONS REVENUE
MODELPortal Horizontal/
General
Vertical/Specialized
Search
YahooAOLMSNFB
Sailnet
Google, Bing
Offers an integrated package of content, content-search, social network services, email, downloads, video, calendars .. Home base
Offers services and products to specialized mkt
Search services
Advertising, subscription fees, transaction fees
Same
Advertising, affiliate referrals
E-tailer Virtual Merchant
Bricks and Clicks
AmazoniTunesBluefly.com
Walmart.com
Online version of retail store, where customers can shop at any hour of the day/night without leaving their office/home
Online dist channel for co with phys stores
Sale of goods
Same
Catalog Merchant
Manufacturer-Direct
LLBean.comLillianvernon.comDell.comMattel.com
Online version of direct mail catalog
Manuf uses online channel to sell direct to cust
Same
Same
B2C MODELS
BUSINESS VARIATIONS EXAMPLES DESCRIPTION REVENUEMODELMODELContent Provider
WSJ.com Information and ent providers such as newspapers, sports sites
Advertising, subscript fees, affiliate referral fees
Transaction Broker
E*TradeExpediaMonsterTravelocityHotels.com
Processors of online sales transactions – increase productivity and decrease costs
Transaction fees
Market Creator
Service Provider
Community Provider
eBay -(97M active)$2k a second in sales/$62B
Priceline
VisaNow.cvomxDrive.comPayPay (100M active)(190 markets)FB, MySpace, Twitter, iVillage
Web-based businesses that use Internet technology to create markets that bring buyers and sellers togetherCompanies that make money by selling users a service, rather than a product
Sites where individuals meet online
Transaction fees
Sales of ServiceTransaction fees
Advertising, subscription, affiliate referral fees
B2C
MODELS
BUSINESS MODELS IN EMERGING E-COMMERCE AREAS
BUSINESS EXAMPLES DESCRIPTION REVENUE MODELConsumer to Consumer
eBay.comHalf.comCraigslist.com
Helps consumers connect with other consumers to conduct business
Transaction fees
Peer to Peer The Pirate Company,Cloudmark
Technology enabling consumers to share filesand services via Web without a common server
Subscription fees, advertising, transaction fees
Mobile Commerce eBay mobilePayPal mobileCheckoutAOL Mobile-Moviefone
Extending business applications using wireless technology
Sales of goods and services