E Commerce Business Models and Concepts

E Commerce Business Models and ConceptsTweet Tweet!

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?

Twitter 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

Terms for Determining Business and Commercial uses

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??

Company ValuationValuation based on the commercial uses just as is Facebook … but what does Twitter produce of commercial value?

Primary Asset – user attention and audience size

1. “get it now” access

2. database of information from Tweets!

Additionally … powerful tool for news

News R

epor

ts V

ia Tw

itter

Click icon to add picture

The World Reports one individual at a time ….

How do I Monetize these Assets? Advertising!! Promotional Tweets – Red Bull and

Starbucks

MonetizationPromotional

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

Temporal Real Time SearchesTwitter 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

Revenue Model 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)

Revenue Model 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 Opportunity The 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

Market Opportunity 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 effect

MarketSpace and Market Opportunity in the Software Training Market

Market Opportunity

Instructor Led Training $49 (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)

Indirect Competitors – different industries but still compete because products can substitute for one another

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? First Mover advantage – first entry into the

marketplace, can lack complementary resources to maintain advantage

Unfair competitive advantage – advantage based on something others cannot purchase (i.e., brand name).

Perfect markets have no competitive advantages