Exploring the Business Model Continuum: From Creators to Users

1. MODELS

2. Creators, Producers, Distributors, Users

3. Business Models Are defined along a continuum from creators to producers, to distributors and users

4. BUSINESSES E- AND M-BUSINESSES

5. CREATORS PRODUCERS DISTRIBUTORS USERS EXPERTS INVENTORS ARTISTS ENTERTAINERS SERVICE PROVIDERS CONTENT SUPPLIERS INFORMATION & NEWS SERVICES ADVISORS Focused Distributors Consumer Portals Business

7. Business Models • Revenue • Cost • Assets

8. CREATORS • Develop new ideas, products or services and refine existing ones Examples?

9. Entertainers • Authors and Artists • Experts • Inventors

10. Producers • Package the work of creators into products, services, and solutions that meet a market need Note: they may sell and maintain the product or may share that role with others in the value chain Examples?

11. Producers • Service Providers • Manufacturers • Educators • Advisors • Custom Suppliers • Information & News Services

12. What is Microsoft?What is Nokia?What is HP?What is IBM?What is Cisco?

13. Producers- Please visit these Examples • Service Providers-Progressive But check eCoverage!!! • Manufacturers-Ford Motor, Micron (Crucial) • Educators-Pensare • Advisors-Mainspring Please also check www.ey.com (Ernst & Young)

14. Producers- continued examples • Custom Suppliers-The McGraw Hill Companies www.mhhe.com Please check Primis sevices • Information & News Services—Forrester • The Wall Street Journal www.wsj.com

15. Distributors Enable buyers and sellers to connect, communicate, and transact business • Focused Distributors • Portals

16. Focused distributors • Provide products and services related to specific industry and market niche

17. Focused distributors-Examples • InsWeb and Quicken Insurance services and products within the insurance industry • LandsEnd.com distributor for clothing and accessories

18. Focused distributor • Please check http://www.individual.com/

19. Types of Focused Distributor Business • Retailers • Marketplaces • Aggregators and Infomediaries • Exchanges

20. How to differentiate between different types of Focused Distributor Ask these questions • Does the business assume control of inventory? • Does the business sell online (mobile included)? • Is the price set outside the market, or is online price negotiation and bidding permitted? • Is there a physical service or product that must be distributed?

21. Assignment • Compare these focused distributors by obtaining information from their web sites E-Loan.com (www.eloan.com) INSWEB.com (www.insweb.com) Freemarkets.com (www.freemarkets.com)

22. DIGITAL BUSINESS MODELS-LAB ASSIGNMENT I As a group, by obtaining information from the web sites, compare these businesses: Freemarkets.com www.freemarkets.com Greyzone http://www.greyzone.com/index2.html E-Loan.com www.eloan.com INSWEB.com www.insweb.com For each, if possible, identify these differentiators • Sell online • Price set online • Physical Product/Service • Likely Revenues • Likely Costs )

23. RETAILERS • Assume control of inventory • set a nonnegotiable price to the consumer • sell physical products online Example: LandsEnd.com

24. RETAILERS-continued The primary revenue model is based on product/service sales Cost model includes: procurement, inventory management, order fulfillment, customer service (including returns)

25. Retailers-continued • Because e-ratailers assume control of physical goods their ratio of tangible to intangible assets is much higher than for a firm that does not assume control of physical inventory

26. MARKETPLACES • Do not take control of physical inventory • Sell products with a nonnegotiable price and complete the sale online • Procurement and inventory management costs often lower than e-retailer costs

27. MARKETPLACE Companies • Sell information based products and services Example: Insurance QuickenInsurance Example: Loans E-Loan

28. E-marketplaces • Revenue model includes commission on transaction fee on each sale Since sale transactions take place online- must electronically link to supplier databases and transaction systems to ensure that transactions can be completed and revenue recognized

29. E-marketplaces • Since must electronically link to supplier databases and transaction systems to ensure that transactions can be completed and revenue recognized this might be reflected in cost model

30. Aggregators • Provide information on products and services for sale by others in the channel-often enabling comparison of features and pricing- but do not complete the final transaction Any problems you foresee?

31. Aggregators • Revenue model based on referral fees, advertising, and supplemental revenue sources • Cost model? Examples: Autoweb InsWeb

32. Infomediaries-a special class of aggregator • Unites sellers and buyers of information • No physical product is involved • Transaction can be completed online

33. Infomediaries-continued B2C infomediaries may provide information services for free B2B infomediaries may charge a company a corporate subscription fee

34. Infomediaries-continued Because information is available elsewhere and the cost of packaging and delivering the information is relatively low, barriers to entry are low as well

35. Infomediaries-continued Infomediaries quickly evolve from simply brokering information Example: Individual.com

36. EXCHANGES • May or may not take control of inventory (tendency is to try to avoid assuming inventory carrying costs whenever feasible) • May or may not complete the final sales transaction online

37. EXCHANGES -continued • Key differentiating feature: price not set; negotiated by the buyer and seller at the time of the sale B2B, B2C, C2C auction exchanges

38. EXCHANGES -continued Examples? • eBay • FreeMarkets Online • Chemdex

39. TRENDS IN THE FOCUSED DISTRIBUTION MODEL • Creating hybrid businesses that combine several different business models- each of which generates separate revenue stream • B2B exchanges evolving to vertical and horizontal portals • E-retailers evolving to vertical portals

40. PORTALS • Horizontal • Vertical • Affinity

41. PORTALS -continued Can be differentiated by asking the following • Does the business provide gateway access to the full range of Internet information and services, including search, e-mail, instant messaging, chat, and other community building tools?

42. PORTALS -continued Can be differentiated by asking the following • Does the business provide access to deep content, products, and services within vertical industry(for example, financial services) or related industries (for example, travel)

43. PORTALS -continued Can be differentiated by asking the following • Does the business provide information and services for all types of users, or are the information services specific to a well defined affiliation group (for example, women, lawyers, etc.)?

44. Horizontal Portals • Modeled on broadcast networks Examples: MSN Yahoo! AOL

45. Horizontal Portals-continued • Provide gateway access to the Internet’s vast store of content • provide a broad range of tools for locating information , communicating with others and developing online communities of interest

46. Horizontal Portals-continued Trends • Extending the model to include multiple vertical solution channels, for example, finance, health, travel so that a new source of revenue is provided from transaction fees

47. Vertical Portals Provide • Deep content • Place to conduct business • Set of communication and community building tools

48. Vertical Portals-Examples • Health--WebMD • Travel--Travelocity • Financial Services--Quicken.com

49. Affinity Portals Provide • deep content, commerce, community features as in a vertical portal, but targeted at a specific market segment Examples: iVillage.com or oxygen.com Women.com wfn.com

50. Affinity Portals-continued • Can be targeted toward a specific event Example: theknot.com