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Web Business Models

Web Business Models. Agenda. Case analysis for CNET 2000 Case presentation and response Different classifications of business models Purpose Function Source of income A closer look at the online portal business model Analyzing a Web chain of events

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Web Business Models

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  1. Web Business Models

  2. Agenda • Case analysis for CNET 2000 • Case presentation and response • Different classifications of business models • Purpose • Function • Source of income • A closer look at the online portal business model • Analyzing a Web chain of events • From viewing a paid link through Web site visit • From Web site visit to buying online/offline • Payment approaches

  3. Classification by Corporate Purpose • Corporate presence – information provided for a range of constituencies • Promotional presence – promote products and services • Transactional presence – transactions can be the main purpose of a site or part of a site • Conversational presence – foster communication between firm and visitor or between visitors

  4. CNET 2000: What is their business model?Function • How would you characterize CNET’s business model? • Vertical portal – portal focused on single thematic area or demographic group (a portal provides navigational assistance and links to content developed by third parties) vs. • Online content provider – produces or repurposes content for Internet distribution vs. • Online broker – represents client in a transaction (e.g., identify appropriate trader); may have conflicts of interest

  5. Product magnet – product concentration Amazon.com – ranked #10 with over 18 million visitors Service magnet – information service about the Internet Horizontal portals like Yahoo! – ranked #3 with 57.5 million visitors Customer segment magnet – premiere electronic channel for well-defined segment Vertical portals like ivillage.com – ranked #29 with 8.7 million visitors Industry magnet – brings suppliers together for customers to compare and purchase offerings Online brokers like travelocity – ranked #41 with 6.9 million visitors Business model magnet – take advantage of interactive nature of Internet eBay – ranked #12 with 16.9 million visitors CNET 2000: What is their business model?Function

  6. CNET 2000: What is their business model?Source of Income • How would you characterize CNET’s business model? • Improvement-based business models • Enhancement (brand or category building) • Efficiency (cost reduction) • Cost elimination model (e.g., www.fedex.com/us/tracking) • Effectiveness (dealer or supplier support) • Revenue-based business models • Provider pays (sponsorship, alliances, prospect fees) • Advertising support model • User pays (subscriptions, product sales, pay per use) • Subscription support model (e.g., www.wsj.com) • Sales revenue model (e.g., www.amazon.com)

  7. CNET 2000: Good decisions? • Do you agree with CNET’s decisions to: • Avoid entering other vertical markets? • Avoid direct participation in online retailing? • Avoid licensing CNET’s reviews and articles to portals and online retailers? • Increase ad spending to $100 million?

  8. CNET 2000: The process • Do you think the company did a good job running the CNET 200 process? Why or why not?

  9. CNET 2000: Acquire a recognized shopping bot? • If given the opportunity, should CNET acquire a “shopping bot” website such as mySimon.com given the strategy articulated by the CNET 2000 team?

  10. CNET 2000: Update • January 2000 – purchases mySimon.com for $700 million. Changes name to CNET Networks • March 2000 – Shelby Bonnie replaces Halsey Mino as CEO • July 2000 – acquires ZDNET in stock deal valued at $1.6 billion • Feb. 2001 – ranked #9 in Media Metrix’s Top 50 U.S. Web and digital media properties • Over 18 million unique visitors during this month

  11. Portal’s Three Step Business Model: Step 1 • Acquire new customers (the “trial” problem) • “Utility” services – to improve personal productivity • E.g., free Web-based file storage, calendaring, address books • Internet access enablers – partner with PC makers or ISPs to become the “start” page • Integrate with destination sites • Offline promotion with affiliated media companies

  12. Portal’s Three Step Business Model: Step 2 • Retain traffic (the “retention” problem) • Quality of information and services - comprehensive, high quality directory/search engines • Community building – e.g., GeoCities • Personal productivity applications – e.g., Yahoo chat and email services • Content based on personal interests – e.g., MyYahoo • THE CATCH for users: most features require user registration, which may be used or sold to “push” content at the user

  13. Many Portal Users Remain “Promiscuous” Secondary Site Primary Site Nielsen NetRatings, 6/30/00

  14. Registered Users = Portals Most Valuable Asset

  15. Registration Requires Trust

  16. Portal’s Three Step Business Model: Step 3 • Monetizing user traffic • 90% of portal revenue from advertising – typically each page carries approximately 2 ads; able to sell 25-30% of inventory • “Run of site” banner: CPM = $5-$25, CTR = .1% to 1% • Keyword banner: CPM = $20-50, CTR = 1%-5% • Sponsorship/co-branding = $30-100, CTR = 3%-20% • Balance: fees from commerce offerings Numbers from 6/00

  17. Horizontal vs. Vertical Portals

  18. Portal Power Varies

  19. Amazon.com’s Associates Program“Joining is free!”

  20. Analyzing a Web Chain of Events: Part I Viewing a page with a paid link through Web site visit.

  21. Analyzing a Web Chain of Events: Part II Web site visit through offline/online buying.

  22. Payment Approaches and Who Bears the Risk Advertiser Risk Assumed By Web Site Exposure/ Awareness Interest/ Desire/ Trial Action Fixed payment CPM/CPI Prospect fees Sales commission Figure 5.8, p. 137 of Hanson text

  23. Case Study Questions for Sothebys.com • Contrast Sotheby’s live auctions to auctions on the Sothebys.com site, considering all elements including those before and after the actual auction. • Has the process of auctioning a lot changed? • Has it changed what makes an auction successful? • Does the level of importance of customer support differ for online versus live auctions? • How do live and online customer support compare? • What do you think of Sothebys.com’s customer support strategy? • How does Web site quality relate to other components of service quality for a business like Sothebys.com? • Does the online auction strategy make sense for Sotheby’s? If so, why, and under what conditions?

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