Profile - TiEcon Kerala 2014

Report
Dr. Naveen C Amblee
Indian Institute of Management Kozhikode
TIECON 2014
 A business model is a method of doing business by which a firm can generate
revenues
 Also know as “architecture of the revenue”
 Describes how a firm creates, delivers and captures value
 Specifies location within the value chain
Source: Chesbrough & Rosenbloom 2002; Osterwalder et al. 2005; Rappa 2010;
Activity Model
Revenue Model
 Merchant
 Advertising
 Manufacturer Direct
 Commission
 Brokerage
 Margin
 Infomediary
 Subscription
 Affiliate
 Utility
 Community
 Many firms use a hybrid model
 But one model is often dominant
 Content
 Business models change over time
 Service
 Making the change can be tricky!
Source: Rappa 2010
 Wholesale and Retail sales online, essentially being a
merchant, but in an online environment
 Virtual Merchant
 Amazon.com, Flipkart.com, HomeShop18.com (TV and online)
 Click and Mortar
 FutureBazaar.com
 Pure Play Digital Vendor
 iTunes store
Source: Rappa 2010
 Manufacturer reaches customers
directly
 Potentially huge cost savings by
cutting out middlemen
 Best example – Dell Computers
 Other examples  Big Skinny Wallets
 Some handicraft websites
 Dell Computers
 Revenue $B 57 (2013)
 India
 Changed model
 38 Retail Stores in 2010
 150+ stores in 2014
 Now making products available in
electronic goods stores worldwide
Source: Fortune.com 2011; Rappa 2010
 Market-Makers, bringing buyers and sellers together
 Facilitate transactions
 Full range of services covering the transaction process or just partial
 Examples
 B2B: Alibaba.com
 B2C: Amazon Marketplace, eBay, Redbus.in, Yatra.com
 C2C: eBay
 Revenue model
 Almost always based on commission and other transaction related fees
Source: Rappa 2010
 Auction Broker
 Ebay.com
 Transaction Broker
 Third-party settlement mechanism
 Paypal.com
 Information broker
 Search agents
 Shopping agents / bots
 Google shopping tool
 Virtual Marketplace
 Virtual shopping mall
 Amazon.com 3rd party vendors
 Service Broker
 Connecting customer and service providers
 Makemytrip.com
Source: Rappa 2010
 Information Intermediary
 Assisting buyers and sellers understand the market
 (In some ways, it is a variation of the brokerage model)
 Providing comprehensive information to buyers and sellers and facilitating
exchange
 No involvement in actual transaction
 Carwale.com
 Quikr.com, Olx.in, Craigslist.org
 Magicbricks.com, 99acres.com
Source: Rappa 2010
 Involves financial incentives to partner websites
 Differs from merchant model in that the consumer is redirected by partner site
 Transaction is completed on the original (not parner) website
 Commission is paid to partner website upon completion of transaction
 Also known as a pay-for-performance model
 Good source of supplementary income
 Banner Exchange
 Pay-per-click
 Revenue sharing
Source: Rappa 2010
 Amazon.com Associates
 Commission for selling Amazon’s products
 Product Link-through
 Varying commission
 Promotes Amazon.com family of websites
 15% on Myhabit.com
 Based on leveraging the community and selling ancillary products
 Open Source
 Linux vendors such as Red Hat
 Open Content
 Wikipedia (donations)
 Social Networking Sites (SNS)
 Facebook
 Twitter
 LinkedIn
 Google+
Source: Rappa 2010
• 120 million registered users (2010)
• Revenue 358 million USD (2010)
• 300 million in 2014
• Revenue 1.5+ billion USD (2014)
• 33 million unique visitors a month
• Pre IPO value of 1.5B USD
• IPO in Jan 2011
• Post IPO value 7.3B USD in 2011
• Profitable
• Revenue sources:
• Membership features
• Banner Ads
• Job listings
• Market cap 20.31 billion USD in 2014
Source: Rappa 2010
 Model involves providing content to consumers
 Differs from infomediaries; content can be consumed by a single party
 Usually involves information and /or entertainment (infotainment)
 Can vary from very simple (blog with Google ads) to complex (digital
entertainment system (Netflix)
 The most widely used e-business service model
 Newspapers, Magazines, Blogs (nytimes.com)
 Streaming video service, entertainment portals (netfix.com, hulu.com)
 Knowledge bases (stackexchange.com)
 Businesses that provide service solutions
 Solutions can range from email to design to productivity
 ConstantContact.com
 Pidoco.com
 Google Docs
 SalesForce.com
 Can include infrastructure as well
 Rackspace
 Amazon Cloud Computing Services
 GoDaddy.com
 Online extension of traditional advertising model
 Content or service is offered, usually for free
 Provider is supported by revenues from advertisements on the website
 Often banner advertisements, similar to a billboard
 This model works best when:
 There is high volume / number of eyeballs
 Highly specialized audience
 Geography, demographics, topic, etc
Source: Rappa 2010
 Advertising revenue model is most often used by:
 Infomediary model: Quikr.com, Carwale.com
 Community Model: Facebook.com, Twitter.com
 Affiliate Model: Goodreads.com
 Can also be used by the other models to varying degrees
 Service provided: book reviews
 Service model: Affiliate
 Revenue model: Commission,
Advertising
 Taking a commission / share of the proceeds, making a margin
 Can be a fixed cost, or a percentage
 Difference between the wholesaler price and the retailer price
 Works best for physical products being transacted
 Set up in 2007
 Offers books, electronics, apparel and many other categories
 2012-13 Revenue Rs 1180 Cr
 10,000 employees
 Approx USD 400 million in VC funding so far
 Acquired Myntra.com in 2014 for Rs. 2,000 Crores
 Rapidly expanding, dominant Indian online merchant
 Commission model is most often used by:
 Brokerage model: eBay.in, MakeMyTrip.com
 Margin model is most often used by:
 Merchant Model: Flipkart.com
 Manufacturer-Direct Model: Dell.com
 Customers charged a periodic fee
(daily/month/yr)
 NetFlix (North America)
 Pioneer in DVD-by-mail business
 Mix of free and subscribed is very
 20 million subscribers (2010)
 Content Services
 2B USD revenues in 2010
common (Versioning)
 NetFlix
 Computing Resources
 Trust Services
 TrustE
 Mobile Communications
 BSNL, Airtel
 33 million subscribers (2013)
 4.3B USD revenues in 2013
 Market cap over 5B in 2010
 26B in 2014
 Disrupted the market
 In India
 BigFlix.com
 Reliance Entertainment company
 Has separate streaming and DVD
rental services
 Streaming: $7.99 a month SD
 $8.99 HD, 2 screens
 Disc Rental: 1 DVD, $7.99 a month
 2 DVDs: $11.99 a month
 3 DVDs: 15.99 a month
 4 DVDs: 21.99 a month
 Upto 8 DVDs: 43.99 a month
 Streaming only
 Indian market
 Focuses mostly on domestic movies
 Includes few international films also
 Subscription Rates
 1week trial: Rs. 99
 1 month: Rs. 249
 3 months: Rs. 599
 6 months: Rs. 999
 1 year: Rs. 1799
 Subscription model is most often used by:
 Content model: Netflix.com, NYTimes.com
 Service model: Rackspace.com, SalesForce.com
 Used by some brokerage and community models
: offers stock photos
 On Demand model, or Pay As You Go
model
 Metered Usage
 3G data access
 News articles on Financial Times (ft.com)
 Case studies
 Metered Subscriptions
 3G data access packs
 Web server traffic
Source: Rappa 2010
 Utility model works best with:
 Service Model: Airtel Prepaid Mobile Services, Windows Azure
 Content Model: Fotolia.com, iTunes
 What activity will your firm perform?
 How will it generate revenue from this activity?
Kozmo.com
MaxDelivery.com
 Free delivery within 1 hour (no
 Former co-founder of Kozmo.com
minimum)
 No clear revenue model
 Raised $250m
 Expanded too quickly
 Collapsed with end of dot-com
bubble
 Free delivery within 1 hour
 Restrictions
 Minimum order $50, else $2.95 (2011)
 Now Minimum order $100, else $4.95
 Only NYC
 Excellent reviews online
Success
Failure
 Apple
 Eastman Kodak
 Switched from computing device firm
 Switched from firm to digital
to entertainment firm
 Cultural Icon
 Solid business model
 Entertainment, computing,
telecommunications
 However margins suppressed
 Attempted to reinvent as photo
services firm
 Filed for bankruptcy
 Back on its feet again, but old stock
wiped out
 Created new business model “DVD-
by-Mail”
 Now trying to redefine the business
model
 Attempted to split into 2
 Pure-Play Digital
 DVD-by-mail
•
•
•
•
Planned spin-off
Angry customers
Poor branding
Decided to revert, drop
Qwikster.com

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