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Online marketing. Dr Tim King 15 th May 2008. Business models. Free Web sites for the fun of it or to gain early users Part of a wider service (BBC, cars) Free software, pay for maintenance (Linux, AVG) Free funded by adverts Land grab - lots of users means lots of adverts displayed

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online marketing

Online marketing

Dr Tim King

15th May 2008

business models
Business models
  • Free
    • Web sites for the fun of it or to gain early users
    • Part of a wider service (BBC, cars)
    • Free software, pay for maintenance (Linux, AVG)
  • Free funded by adverts
    • Land grab - lots of users means lots of adverts displayed
  • Shareware
    • Guiltware
  • Try before you buy
    • Poor quality short clips
    • Licence key cracks (Macromedia)
  • Pay per use
    • Software as a service
    • UK 1901 Census
    • Betting
  • Licence / subscription / price per item
    • Digital Rights Management (everlasting vs annual)
    • Physical fulfilment
market fit
Market fit
  • Different versions for different market subsections
  • Many examples
    • Travel
      • First class vs coach
    • Cars
      • Audi vs Skoda
    • Software
      • “lite” versions with hardware
  • Psychology
    • Brand awareness

Price p

Quantity

lock in
Lock-in
  • Buying something commits you to buying more
    • Services
      • Car services
      • Mobile phone subsidy
      • Frequent flyer
    • Consumables
      • Ink-jet printers
      • Yoghurt makers
    • Complimentary products
      • Camera lenses
      • Operating systems
lock out
Lock-out
  • Incumbent tries to maximise switching cost
  • Loyalty programs
  • Technology control
    • Nintendo game cartridges
    • Sony Playstation DVD formats
  • Crypto and tamper resistance
  • Community – its where your friends are
      • MySpace, YouTube
  • Hassle
    • eg email address change
personalisation 1
Personalisation (1)
  • Know your customer
    • Profile typical users when they visit a web site
      • Purchase history
      • Time to make purchase decision
      • Amount of research done
    • Profile users through loyalty cards
      • Nectar
        • They know everything you have ever bought
    • Keep in touch with customers
      • Collect email addresses
      • Email newsletters
        • Lastminute, Maplin
      • Cookies
        • Welcome back Tim
personalisation 2
Personalisation (2)
  • Know your customer type
    • User database
      • Address/postcode -> socio economic indicator
      • Gender
      • Age -> Register with Data Protection Registrar
      • 60 “bins” 5 classes x 2 genders x 6 age groups
        • (kids, teens, dinky, married with kids, empty nesters, retired)
        • Disposable income
        • Disposable leisure time
    • Recommendation
      • People who bought this also bought that
        • Data from your own site
          • Amazon really can recommend music or books you might like
      • Data mining
        • People who buy this on cold winter Fridays in Slough also buy that
customer support
Customer support
  • Identify meaning of email
    • Auto-respond with the answer
  • Classify once human response given
    • So next time it will auto-respond
  • Expose database as FAQ
    • So they don’t send the email at all
  • Always give the option of human interaction
brand awareness
Brand awareness
  • Single most important piece of data
  • People buy from a known name
    • Sense of trust
      • Marks and Spencer
    • Perceived value
      • Cheap reliable airline => Cheap reliable mobile
    • Peer pressure
      • Nike, Rolex, Dolce and Gabanna, Ferrari
  • Brands can expand
    • Virgin
      • Active, Atlantic, Books, Brides, Broadband, Cosmetics, Credit card, Drinks, Galactic(!), Games, Holidays, Limobike, Megastore, Mobile, Trains, Wines
    • Apple
      • From computers to iPods
community
Community
  • YouTube
    • TV adverts
      • Recycle TV adverts
      • People send copies of your advert to each other
      • Risqué adverts not acceptable on TV
    • TV shows
      • Trail shows
      • Repeat the best bits
    • Music
      • Shareable
      • Do-it-yourself MTV
advertising
Advertising
  • Google
    • Buy your brand name
      • Coke
        • Careers
        • Corporate Responsibility
        • The Coca-Cola company
        • Press Centre
    • Buy your supplier’s brand name
      • Nike
        • JDSports
    • Buy your competitors’ brand name
      • Ford
        • Adverts for Seat dealer
    • Buy your target
      • Nike (Boycott Nike), Coke (KillerCoke)
successful business models
Successful business models
  • Google
    • Acquiring DoubleClick gives it over 80% of web advertising
    • Acquiring YouTube gives it millions more viewers
    • Providing a simple way to advertise gets it plenty of customers
    • Has Microsoft Office firmly in its sights
  • PlentyOfFish
    • Run by a single guy from his apartment
    • Free dating site
    • In the global top 40 web sites
    • Runs Google AdSense adverts
    • Gets paid over $5m per year by Google
successful exits
Successful exits
  • MySpace
    • Bought by News Corp for $580m July 2005
  • YouTube
    • Bought by Google for $1.65bn in October 2006
  • Friends Reunited
    • Bought by ITN for £175m in December 2005
  • Bebo
    • Bought by AOL for $850m in March 2008
  • Valued by
    • Number of users
      • Potential income, possibly over several years
      • Cost (or impossibility) of getting there yourself
    • Value of brand (what market will bear)
    • Asset base (users who can’t leave)
    • Capital already invested (but the money may well have been squandered)
conclusion
Conclusion
  • Continuous evolution
    • 28K/s -> 8M/s
    • Still pictures -> movies
    • 2D -> 3D
    • Newsgroups -> online communities
    • Games -> Second Life
  • Evolving economics
    • Many people make a living online
      • Buying and selling on ebay
      • Property developer in Second Life
  • What’s next?