E Commerce Business Models and Concepts Tweet Tweet!

New Trends and Technologies  2010 – 174 Million people would use search engines to conduct 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 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

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

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

Monetization  Promotional Trends  what’s hot, what are people talking about?  Twitter promotes this as reflective of what people are tweeting bird accounts  Users follow for special offers … twofers for films, fashion, beauty products  “flash marketing” to influentials

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 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 effecti  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, knowledgable 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