MODELS

Creators, Producers, Distributors, Users

Business Models

Are defined along a continuum from creators to producers, to

distributors and users

BUSINESSES

E- AND M-BUSINESSES

CREATORS PRODUCERS DISTRIBUTORS USERS

EXPERTSINVENTORS

ARTISTSENTERTAINERS

SERVICE PROVIDERSCONTENT SUPPLIERS

INFORMATION& NEWS SERVICES

ADVISORS

Focused Distributors

Consumer

Portals Business

Business Models

• Revenue

• Cost

• Assets

CREATORS

• Develop new ideas, products or services and refine existing ones

Examples?

• Entertainers

• Authors and Artists

• Experts

• Inventors

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?

Producers

• Service Providers

• Manufacturers

• Educators

• Advisors

• Custom Suppliers

• Information & News Services

What is Microsoft?What is Nokia?

What is HP?What is IBM?What is Cisco?

Producers- Please visit these Examples

• Service Providers-Progressive

But check eCoverage!!!• Manufacturers-Ford Motor, Micron (Crucial)• Educators-PensarePensare• Advisors-Mainspring Mainspring

Please also check www.ey.com

(Ernst & Young)

Producers- continued examples

• Custom Suppliers-The McGraw Hill Companies

www.mhhe.com

Please check Primis sevices

• Information & News Services—Forrester Forrester • The Wall Street Journal

www.wsj.com

Distributors

Enable buyers and sellers to connect, communicate, and transact business

• Focused Distributors

• Portals

Focused distributors

• Provide products and services related to specific industry and market niche

Focused distributors-Examples

• InsWebInsWeb and Quicken InsuranceQuicken Insurance

services and products within the insurance industry

• LandsEnd.comLandsEnd.com

distributor for clothing and accessories

Focused distributor

• Please check

http://www.individual.com/http://www.individual.com/

Types of Focused Distributor Business

• Retailers

• Marketplaces

• Aggregators and Infomediaries

• Exchanges

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?

Assignment

• Compare these focused distributors by obtaining information from their web sites

E-Loan.com (www.eloan.com(www.eloan.com)

INSWEB.com (www.insweb.comwww.insweb.com)

Freemarkets.com (www.freemarkets.com(www.freemarkets.com)

DIGITAL BUSINESS MODELS-LAB ASSIGNMENT I

As a group, by obtaining information from the web sites, compare these businesses:Freemarkets.com www.freemarkets.comwww.freemarkets.comGreyzone http://www.greyzone.com/index2.htmlhttp://www.greyzone.com/index2.htmlE-Loan.com www.eloan.comwww.eloan.comINSWEB.com www.insweb.comwww.insweb.com

For each, if possible, identify these differentiators – Sell online– Price set online– Physical Product/Service– Likely Revenues– Likely Costs )

RETAILERS

• Assume control of inventory

• set a nonnegotiable price to the consumer

• sell physical products online

Example: LandsEnd.com

RETAILERS-continued

The primary revenue model is based on product/service sales

Cost model includes: procurement, inventory management, order fulfillment, customer service (including returns)

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

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

MARKETPLACE Companies

• Sell information based products and services

Example: Insurance

QuickenInsurance

Example: Loans

E-LoanE-Loan

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

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

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?

Aggregators

• Revenue model based on referral fees, advertising, and supplemental revenue sources

• Cost model?

Examples:AutowebAutoweb

InsWeb

Infomediaries-a special class of aggregator

• Unites sellers and buyers of information

• No physical product is involved

• Transaction can be completed online

Infomediaries-continued

B2C infomediaries may provide information services for free

B2B infomediaries may charge a company a corporate subscription fee

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

Infomediaries-continued

Infomediaries quickly evolve from simply brokering information

Example:

Individual.com

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

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

EXCHANGES -continued

Examples?

• eBay

• FreeMarkets Online

• Chemdex

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

PORTALS

• Horizontal

• Vertical

• Affinity

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?

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)

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.)?

Horizontal Portals

• Modeled on broadcast networks

Examples:

MSN

Yahoo!

AOL

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

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

Vertical Portals

Provide

• Deep content

• Place to conduct business

• Set of communication and community building tools

Vertical Portals-Examples

• Health--WebMD

• Travel--Travelocity

• Financial Services--Quicken.com

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

Affinity Portals-continued

• Can be targeted toward a specific event

Example:

theknot.com

Trends in the evolution of the portal model

• Emergence of wireless horizontal portals

• Vertical portals as possible destinations where business and consumers communicate, transact business, learn and play

•Enterprise portals

Trends in the evolution of the portal model

• Consequences for focused distributors?

Must establish strong portal relationships otherwise vulnerable to loss of power

E-business models lab assignment II As a group, by obtaining information from the web sites, compare these portals:

www.Yahoo.comwww.Yahoo.comwww.WebMD.comwww.WebMD.com

www.msn.comwww.msn.comIdentify model and model differentiators

–Control inventory–Sell online–Price set online–Physical Product/Service–Likely Revenues–Likely Costs

Prepare an oral and written report

Intel Perspective

Intel Perspective

http://www.intel.com/eBusiness/business/plan/