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E Commerce Business Models and Concepts

E Commerce Business Models and Concepts. Tweet 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

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E Commerce Business Models and Concepts

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  1. E Commerce Business Models and Concepts Tweet Tweet!

  2. 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?

  3. 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

  4. 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??

  5. Company Valuation • Valuation 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

  6. News Reports Via Twitter The World Reports one individual at a time ….

  7. How do I Monetize these Assets? • Advertising!! • Promotional Tweets – Red Bull and Starbucks

  8. Monetization • Promotional Trends • what’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

  9. 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

  10. 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

  11. 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?

  12. 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

  13. Revenue Model • Describes how the firm will earn money .. • Generate profits and produce an adequate ROI vs. alternative investments

  14. 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)

  15. 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)

  16. 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

  17. 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 • MarketSpaceand Market Opportunity in the Software Training Market

  18. Market Opportunity

  19. 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

  20. 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

  21. 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

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