E COMMERCE BUSINESS MODELS AND CONCEPTS TWEET TWEET!

NEW TRENDS AND TECHNOLOGIES 2,161,530,000,000 searches occurred in 2013; 5,992,000,000 searches done daily. 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?

GOOGLE STATS Google Annual Search Statistics Statistic Verification Source: Google Official History, Comscore Research Date: Google began in January 1996 as a research project by Larry Page and Sergey Brin when they were both PhD students at Stanford University in Stanford, California. The first funding for Google was an August 1998 contribution of US$100,000 from Andy Bechtolsheim. In 2012 Google hit $50 billion in revenue. Year Annual Number of Google Searches Average Searches Per Day ,161,530,000,000 5,922,000, ,873,910,000,000 5,134,000, ,722,071,000,000 4,717,000, ,324,670,000,000 3,627,000, ,700,000,000 2,610,000, ,200,000,000 1,745,000, ,000,000,000 1,200,000, ,000,000,000 60,000, ,600,000 *Googles official first year 9,800

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TWITTER Is the buzz social network that is the web-based version of cell phone based texting 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 555M registered users 80% Tweets generated by 10% users and their churn rate is 60% … 40% users remain a month or more

Churn rates – high.. People feeling too connected to acquaintances? Unique users Number of tweets Investors include Amazon founder Benchmark Capital Spark Capital Company Valuation $20B end of 2013… why?? TERMS FOR DETERMINING BUSINESS AND COMMERCIAL USES

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 COMPANY VALUATION

NEWS REPORTS VIA TWITTER The World Reports one individual at a time ….

TWITTER AND NEWS … great for updates during the World Cup, ISIS, death of Steve Jobs … 200 M tweets sometimes dispatched almost simultaneously

HOW DO I MONETIZE THESE ASSETS? Advertising!! Promotional Tweets – Red Bull and Starbucks

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

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 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) 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 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 effective MarketSpace and Market Opportunity in the Software Training Market Instructor Led Training $49 Billion (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) ex: Coke vs. Pepsi Indirect Competitors – different industries but still compete because products can substitute for one another ex: Coke vs. Red Bull (when benefit sought is an energy or caffeine boost) ex: Coke vs. Iced Tea (when benefit sought is thirst quenching)

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?

COMPETITIVE ADVANTAGE First Mover advantage – first entry into the marketplace, can lack complementary resources to maintain advantage (financial assets, marketing, management, reputation) Unfair competitive advantage – advantage based on something others cannot purchase (i.e., brand name). Brands are built upon trust, loyalty, reliability, and quality. Followers often reap significant benefits.. Learn from production and manufacturing problems of early entrants and pioneers.

COMPETITIVE ADVANTAGE Perfect markets have no competitive advantages – Full access to information regarding production, research, etc. Competitive Advantages hard to sustain – i.e., Coke … now being encroached upon by flavored waters, sports drinks, etc. Some companies leverage their competitive advantages such Amazon using its data base of customers and e-commerce experience to enter the grocery market.

MARKET STRATEGY AND ORGANIZATIONAL DEVELOPMENT Plan that the business puts together that lays out how the company will enter a new market ( new customers) or develop a new product. Focus on each element of the 4Ps Organizational Development is the plan that describes how the company will organize the work that needs to be completed Divide work into functional areas, define jobs within these areas, hire accordingly. In small companies or young firms, generalists are often early hires Initially the eBay founder, Pierre Omidyar, started an online auction site to help his girlfriend trade Pez dispensers.. Soon growth required hires, then functional departments and large numbers of employees!

MANAGEMENT TEAM Single most important element of the business model How many managers do you need? How does experience balance against education? How do you identify leaders? What jobs should be filled first? Marketing, finance, production and operations young companies may need managers with experience in raising money

BUS MODEL VARIATIONS EXAMPLES DESCRIPTIONS REVENUE MODEL PortalHorizontal/ General Vertical/ Specialized Search Yahoo AOL MSN FB Sailnet Google, Bing Offers an integrated package of content, content-search, social network services, , downloads, video, calendars.. Home base Offers services and products to specialized mkt Search services Advertising, subscription fees, transaction fees Same Advertising, affiliate referrals E-tailerVirtual Merchant Bricks and Clicks Amazon iTunes Bluefly.com Walmart.com Online version of retail store, where customers can shop at any hour of the day/night without leaving their office/home Online dist channel for co with phys stores Sale of goods Same Catalog Merchant Manufacturer -Direct LLBean.com Lillianvernon. com Dell.com Mattel.com Online version of direct mail catalog Manuf uses online channel to sell direct to cust Same B2CMODELS

BUSINESS VARIATIONS EXAMPLES DESCRIPTION REVENUE MODELMODEL Content ProviderWSJ.comInformation and ent providers such as newspapers, sports sites Advertising, subscript fees, affiliate referral fees Transaction Broker E*Trade Expedia Monster Travelocity Hotels.com Processors of online sales transactions – increase productivity and decrease costs Transaction fees Market Creator Service Provider Community Provider eBay - (97M active) $2k a second in sales/$62B Priceline VisaNow.cvom xDrive.com PayPay (100M active)(190 markets) FB, MySpace, Twitter, iVillage Web-based businesses that use Internet technology to create markets that bring buyers and sellers together Companies that make money by selling users a service, rather than a product Sites where individuals meet online Transaction fees Sales of Service Advertising, subscription, affiliate referral fees B2CMODELSB2CMODELS

BUSINESS MODELS IN EMERGING E-COMMERCE AREAS BUSINESSEXAMPLESDESCRIPTION REVENUE MODEL Consumer to Consumer eBay.com Half.com Craigslist.com Helps consumers connect with other consumers to conduct business Transaction fees Peer to PeerThe Pirate Company, Cloudmark Technology enabling consumers to share files and services via Web without a common server Subscription fees, advertising, transaction fees Mobile CommerceeBay mobile PayPal mobile Checkout AOL Mobile-Moviefone Extending business applications using wireless technology Sales of goods and services