Week 3 - Digital Business Models and Advertising Flashcards
What is a Business Model?
- Description of an Organisation and How that Organisation Functions in Achieving its Goals (e.g., Profitability, Growth, Social Impact
- Identify 3 Interpretations i.e. the business model…
1) as an Observable Attribute of a Real Firm
2) as a Cognitive or Linguistic Schema or (tacit) Interpretations of Real Systems Held by Managers
3) as a Formal Conceptial Representation Describing the Acitivies of a Firm - Example of Simple Business Model : Producing Goods or Service and Selling Directly to Customers
- Example of More Complex Model : Media Broadcasting
Explain VALUE CREATION
- about How to Create and Capture Value
- Value Creation is both a Supply-Side and Demand-Side Phenomenon
- Value can be Created Not Only by Producers, but Also by Customers and Other Members of their Value Creation ‘ecosystems’
Explain the Internet’s Impact on Business Models
changed Business Models by :
- Giving Rise to New Kinds of (digital) Business Models , e.g. Google, Facebook
- Reinventing Tried and True models , e.g. eBay
- New Business Model Dimension of Innovation that Complements Traditional Ones (e.g. Product, Process or Organisational)
- Many of these new, digital Business Models are Referred to as “Disruptive Models”
State the Template to Help Dissect the Different Aspects of a Business Model and it’s 9 Components
Osterwalder’s BUSINESS MODEL CANVAS
- Key Partners
- Key Activities
- Value Proportions
- Customer Relationships
- Customer Segments
- Key Resources
- Distribution Channels
- Cost Structure
- Revenue Steams
Explain a Way to Classify Business Models
Into Different Categories or Look for Common Patterns
e.g.
- Brokerage
- Referral
- Subscription
- Rental
- Freemium
Explain the Business Model Category : BROKERAGE
- Brokers are Market-Makers : they Bring Buyers and Sellers Together and Facilitate Transactions
- Usually a Broker Chargers a Fee or Commission for Each Transaction it Enables
takes place on many forms : - B2B e-marketplace - Online Auction Sites etc
Explain the Brokerage Example : ONLINE AUCTION SITES
- Match Sellers and Buyers through Sequential Bidding Process ; Auction Broker may Charge Listing Fee and Commission Scaled with Value of Transaction
Different Types
- Forward Auctions : Sellers place Items for Auction and Buyers Bid for the Items ; item Goes to the Highest Bidder
- Reverse Auctions : have 1 Buyers, Usually an Organisation that Wants to Buy a Product/Service ; Suppliers are Invited to Submit Bids
to Make Auctions Work in Online Setting, need ‘Proxy’ Bidding
- Bidder states Maximum Bid for an Item
- Place New Bids Without actually being In Front Of their Computer
Explain Example of Business Models - DIRECT MODEL
- Company that Produces a Product or Service Reaching Consumers Directly and thereby Compressing the Distribution Channel
Explain Example of Business Models - CONTNET PROVIDER
- provides Digital Content (e.g. News Service)
- Very Often Advertising Provides Revenue
- Customer can Also be Charged a Periodic Fee to Subscribe to (premium) service
Explain Example of Business Models - SOCIAL MEDIA
- e.g. Facebook, LinkedIn, Instagram etc
- Members Upload and Share Content, may comment on eachothers entries
- the Real Value is In Its Users, the Content they Create and the Time they Spend on the Platform, Not the Software
–> network effects - Business Model Based on Opportunities for Targeting Advertising or Additional Services
Explain Business Models using “freemium” pricing model
- a Product/Service is Provided Free of Charge to a Large Number of Users but a Premium is Charged for Advanced Features
- e.g. Skype, Dropbox etc
Explain the common trait that digital business models share - Multi-Sided Platforms
- are “technologies, Products or Services that Create Value Primarily by Enabling Direct Interaction Between 2 or more Customer or Participant Groups
- e.g.
‘Sharing Economy’ platforms (Uber, Airbnb etc) Enable Interactions Between those Willig to Share an Asset or Offer a Service and Those who Want to Make Use of It
Explain Common Properties of MSPs (Multi-Sided Platforms)
- Create Value by Reducing Search and/or Transaction Costs for Participants or Even Product Development Costs (e.g. by providing APIs for App Developers
- often Cross-Side (indirect) Network Effects - Value to Participants on One Side Increased with Number on Another Side - “chicken and egg” problem –> High Barriers to Entry
- Economies of Scale
- Potentially High Switching Costs or High Costs to Belong to More than 1 Competing Network
Explain Challenge for Multi-Sided Platforms
How many sides to bring on board?
- More –> mean Greater Cross-Side Network Effects, Large Scale and potentially Diversified Sources of Revenues, but..
- Viable Proposition for Each Party?
- Greater Complexity/Conflicts of Interest
- Ability to Bring in Innovative Features?
Decide on Pricing Structure
- Different Prices for Different Sides (perhaps free or subsidised for some) Depending on Price Sensitivity or Value Created
Governance : Whether/How to Regulate 3rd Party Actions
- Who can Join and What are they Allowed to do?
- “Outsource” environment to Users? (e.g. User Rating Systems)
State 6 Reasons why Online Advertising is Important
- Consumers Spend ever More Time Online
- Powerful Mechanisms to Target Ads to the Right Audience, at the Right Time
- Generates Data used to Measure Return on Investment and Optimise ad campaigns
- the Lifeblood of Much of the Digital Economy, Providing a Revenue Stream for Lots of Services
- Increasing Programmatic Control Over Whole Process (“programmatic ad buying”)
- Different forms Available, Each with their Own Attractions to Advertisers
