Web Entrepreneurship

1. Web Entrepreneurship Dr. Ken Cosh Lecture 1

2. The Description • A practical study of starting and running a Web based enterprise. Topics will include developing a business model and plan, securing business funding, designing, building and promoting a website, Search Engine Optimisation techniques and strategies for improving conversion rates.

3. The Definition • Web: • A system of extensively interlinked hypertext documents: a branch of the Internet. • Entrepreneurship: • (From Entrepreneur) • A person who organises and manages any enterprise, esp. a business, usually with considerable initiative and risk. Dictionary.com

4. So, what is this about? • A practical experience in setting up a web enterprise. • Examining web business models. • Preparing and presenting a business plan to venture capitalists. • Studying (or developing) web skills. • Marketing Websites • Search Engines • S.E.O. • Social Media Marketing and Web 2.0 • And maybe a chance to earn a bit of money! ;)

5. Considerable Initiative! • While we’re going to be talking about all the skills you’ll need to set up your web enterprise, it’ll take ‘considerable initiative’ for you to be successful! • So, what do I mean by Successful? • In the course? • Or, in the enterprise? • The two are inextricably linked!

6. Grading • Project - 30% • Based on the quality of the site that you produce. • Midterm oral exam - 30% • No written oral exam, but you will have to make 2 presentations to a team of venture capitalists; first to present your business plan, and second to present your progress. • Final exam - 40% • A written exam testing what you’ve learnt during the course. • Needless to say, I think you can get a very good grade if you ‘get into this’ (show considerable initiative).

7. Initiative • “The power or ability to begin or to follow through energetically with a plan or task.” American Heritage Dictionary.

8. So we’re going to start a business? • If we’re going to start an online business, we need to cover the basics of business. • This isn’t IBM100, it’s simpler than that! • Our Business is about;

9. Making Money • Simple Question: • How do we make money in business?

10. Business for Beginners • Businesses make money by • 1) Adding value to a product or service. OR • 2) Gaining economies of scale or scope.

11. A Business Model • The method of doing business, such that an enterprise can generate revenue and sustain itself. • Business Models can be simple; • I buy something and sell it for more. • Or Complex; • I broadcast my radio show, and the record producer pays me to play their songs... • In each case, the enterprise operates in some position within a Value Chain.

12. The Value Chain R & D Marketing & Sales After Sales Service Procurement Production Support Activities e.g. HRM, I.T.

13. The Value Chain 2 Data Information Information Knowledge R & D Core Operating Activities Marketing & Sales After Sales Service Procurement Production HRM, I.T. Infrastructure

14. Evolving Business Models • With the introduction of the web (and related technologies), there has been a lot of discussion about the way business models have been changed. • Consider the music and film industry? • Consider Airline and Hotel bookings? • Consider Auctions vs Online Auctions? • Lets take some time to investigate generic business models.

15. Classifying Pre Web Business Models • Each business chooses a position within the value chain, which leads to certain recurring business models. • 2 Key Business Models; • Producer • Build Products / Services to meet the market demand • Distributor • Link Buyers to Sellers

16. Producers • Designers and Makers of Products and Services; • Manufacturers • Service Providers • Educators

17. Producers : Manufacturers • E.g. Ford, Proctor & Gamble • Physical product producers (and designers) • Effects of Web: • Improvements in streamlining, integration and co-ordination of the physical production lines. • Both within firm, and extending to suppliers and customers. • E.g. SCM / CRM / ERP systems. • Facilitating direct access to end users.

18. Producers : Service Providers • E.g. American Express, THAI airways • Provide a service • Effects of Web: • For Physical Service Providers (such as car rental agencies or restaurants), the effect is the same as for Manufacturers. • For Information Based Service Providers (such as Banking), the effect is to digitise service delivery. • Consider the ‘value’ of digitised information.

19. Producers : Educators • E.g. Chiang Mai University • Create and deliver education programs • Effect of Web: • E-Learning potential • Distance Learning potential • Consider the value of face-to-face education mediums.

20. Distributors • Link Buyers and Sellers, with different levels of involvement; • Retailers • Market Places • Aggregators • Infomediaries • Exchanges

21. Distributors : Retailers • E.g. Tesco Lotus, Big C. • Assume control of inventory, setting a non-negotiable price with consumer. • Effects of web: • Provides an alternative distribution channel. • Brick ‘n’ Mortar, moves to Bricks ‘n’ Clicks. • Consider difference between a University Bookstore and Amazon.

22. Distributors : Marketplaces • E.g. Orbitz, InsWeb. • Marketplaces facilitate purchases entirely, but without taking control over the inventory. • Effects of web: • Purchasing process can be hidden from customer, with the marketplace integrating their systems with their suppliers.

23. Distributors : Aggregators • E.g. Autoweb • Aggregators provide information about products or services, but the customer completes the purchase elsewhere, relying on referral fees and advertising. Consider the Affiliate model. • Effect of web: • Enables model to generate money through advertising or referrals. • Extends producers distributions channels to ‘neutral experts’.

24. Distributors : Infomediaries • E.g. Online news, stock reports. • Similar to the aggregation model, except here the product is information based, such as news, weather, sports etc. • Effects of web: • Information when digitised loses value – the information is available elsewhere (perhaps for free!) • To generate money, infomediaries often charge subscription fees – if they can persuade customers to pay for it. • Normally infomediaries have to provide some unique value added content, or analytical tools to keep customers. • Often the model is linked with other business models.

25. Exchanges • E.g. Ebay • With exchanges the price is not set – it is negotiable between the buyer and seller at time of purchase. • Effects of web: • The auction model gets popular! • Sellers can reach a global market – physical presence is not necessary. • Anyone can be a buyer, anyone can be a seller!

26. Other models • As well as the producer / distributor models, other models have emerged – importantly the ‘Portal’ model. • Horizontal Portals • Vertical Portals • Affinity Portals

27. Portal : Horizontal Portal • E.g. Yahoo! • Provides a gateway to the vast array of content on the web. They often provide tools for searching or cataloguing the content. • Horizontal Portals will normally generate revenues from advertising, or by building relationships with ISP’s.

28. Portal : Vertical Portal • E.g. Covisint or WebMD. • Provide more content focussed towards a specific industry or topic. As well as searching tools these sites may provide the tools required to communicate or do business. • Vertical portals often generate revenues by creating a combination of business models. • Quicken.com is an example of how companies can create vertical portals to direct traffic to their core business model.

29. Portal : Affinity Portal • E.g. Realtor. • Affinity Portals take the vertical portal model a step further, by targeting their site to a more specific market or market segment. • Therefore the revenue generation model is similar as for the vertical portal.

30. Community Models • Another key business model existing on the web, is a ‘community model’. • Examples include ‘Open Content’ communities, like wikipedia, or ‘Open Source’ communities like Red Hat. • Social Networking services, like Flickr, Del.icio.us, Facebook, myspace… are popular community sites • But how do they make their money?

31. Overview of the Effect of Web • Traditionally (pre web) the power base was with the producers. • With the advent of the web, many thought that the distributors could regain power by utilising the new distribution channel. • Gradually the producers have regained their power, by directly accessing their customers through the web.

32. Evolution • There has been a lot of changes as enterprises have discovered how the web can function. • New Business Models attempted • Some successful, some failed, some attempted too early, and retried later. • Existing Business Models evolved • Some traditional models struggle to transfer into an electronic environment (consider record producers).

33. Business Model Evolution • It’s likely that your business model will change over time; • Enhance • Add functionality or features to current product/service offerings or improve performance of existing business. • Extend • Enter a new line of business and/or add new business models. • Expand • Add new product/service offerings or enter new geographic markets. • Exit • Exit a business or market or drop a product/service offering.

34. Amazon.com • Launched an online Bookstore in 1995 • Enhance • Continuous enhancement, adding features such as 1-Click shopping, sophisticated personalisation, wish lists, greetings cards, wireless shopping. • Extension • Launched a couple of auction stores, also entered partnerships with a variety of retailers, such as Drugstore.com. More recently has developed an ASP business model. • Expansion • New product categories including music, DVDs, Videos. Also entering new markets, such as Europe. • Exit • Living.com declared bankrupcy

35. Evolution Note • Although we should accept that evolution will happen… • …we still need a starting point!

36. Starting Point • The Art of the Start

37. Starting Point • What are you interested in? • What are you good at? • What connections do you have? • What is your business model?