Digital Business Models
- Aneesh Zutshi
What is a Business Model?
• A representation of how an organization makes money!
Alexander Osterwalder’s Nine Building Blocks
Gillette Business Model
Bait
Hook
Business model has an element of innovation
1904
Elements of a Succesful Business Model
• Provides Value to customers– Cost Advantage – Betamax VOIP– High Quality – German cars?– Convenience – MiniPreço – Variety – Continente– Style and Status – Apple
• Beats competition– Continuous innovation– Lowest Costs– Bait and Hook– Brand Building– Network Effect (eg. Vodafone Closed User Groups)
Digital Business Characteristics
• Unique Characteristics– Low cost per user
– Large Network Effects
– Viral Marketing
Free
Freemium
• Information Overload • Reduced role of direct advertising• More Emphasis on word of mouth, social advertising
• Extremely short customer response time, quick word of mouth
• Potentially high competition
• Naturally Globalised Markets
• Network Effects- where even free adopters increase future adopter’s valuation of a product.
• Demonstration Effects - where software adoption significantly increases if users can try the software before buying.
• Free adopters help speed up the diffusion of a new product.
Digital Business Characteristics
Digital Business Characteristics
– User Generated information• Product Reviews• Blogs, Forums, Postings• Videos
– Eliminates intermediaries, shortens supply chain
– More Choice, variety, customizability
– Easy communication
Types of Digital Business Models based on Network Effects
• Provisioning of Online Services– Search, Saas, data aggregations, music, etc– Could be viral, especially in case of freemium
• Single Sided Platforms– With Network Effects– Eg. Facebook, Youtube
• Double Sided Platforms– App development platforms, e-commerce, network effects– Eg. Amazon, ebay
8
Types of Digital Business Models based on Client Type
• Business to Business (B2B) eg. Vortal, Amazon Cloud Services
• Business to Consumer (B2C) eg. Ebay
• Consumer to Consumer (C2C) eg. Youtube
Digital Business Models - VOIP
Freemium Business Model
Technology- Peer to Peer Communications
- Free Skype Calls
- Paid Skype Outs
Cheap, multiple front companies
Business Model
Are the the main revenue generators
- Google aims to promote usage of the Internet- Advertising generates enough revenue for all other products
&
Crowdsourcing
• Getting users to review Places, Hotels
• Open Innovation
• Crowdvoting
• Microwork
T Shirt Designs
Re-Captcha
Digital Pricing Models
• SaaS instead of selling software licenses• Smaller Units of Payment
– Monthly Subscriptions– Pay per user– Pay per use/hour/Mb
• Free/Freemium
• Gift Economy
Digital Business Models largely affected the following industries
• Traditional Print/Media• Flight Bookings• Hotel Bookings• Long Distance Calling• Posts• Traditional Retail• Music Industry