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Stuttgart Media University | Summer Term 2008 EXTERNAL NETWORK-EFFECTS DOMINIK OSWALD.

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Presentation on theme: "Stuttgart Media University | Summer Term 2008 EXTERNAL NETWORK-EFFECTS DOMINIK OSWALD."— Presentation transcript:

1 Stuttgart Media University | Summer Term 2008 EXTERNAL NETWORK-EFFECTS DOMINIK OSWALD

2 Integrated Marketing Communication | Stuttgart Media University | Summer Term SIDED-MARKETS 2-sided-markets are defined by some industries which are typically offering a platform for two market participants. These participants are able to collaborate or contract on this specific stage. Source: Management von Netzwerkeffekten/ Uni Zürich/ Helmut M. Dietl Chart 2

3 Integrated Marketing Communication | Stuttgart Media University | Summer Term 2008 WHAT ARE NETWORK-EFFECTS? Network-Effects are present if the consumer is willing to pay more because of an expected rising number of network participants. Example: The benefit of the telephone network increases with more consumers having a telephone and being connected with the others. This principle corresponds to the railway system or the internet. Source: Management von Netzwerkeffekten/ Uni Zürich/ Helmut M. Dietl Chart 3

4 Integrated Marketing Communication | Stuttgart Media University | Summer Term 2008 THE IMPACT OF NETWORK-EFFECTS Marginal costs Demand AmountCritical mass Source: Management von Netzwerkeffekten/ Uni Zürich/ Helmut M. Dietl Chart 4

5 Integrated Marketing Communication | Stuttgart Media University | Summer Term 2008 TYPES OF NETWORK-EFFECTS Direct The consumer benefits directly from the network he belongs to. Example: Telephone-Network, File-sharing networks Direct The consumer benefits directly from the network he belongs to. Example: Telephone-Network, File-sharing networks Indirect/ Extern The benefit is rising if the size of another connected network grows. (= 2-sided-market) Example: Advertiser - Audience Indirect/ Extern The benefit is rising if the size of another connected network grows. (= 2-sided-market) Example: Advertiser - Audience Source: Medienwirtschaft Sonderheft 2007/ Dr. Ralf Dewenter/ p. 07 Chart 5

6 Integrated Marketing Communication | Stuttgart Media University | Summer Term 2008 Spiral of Advertisement and Circulation Chart 6

7 Integrated Marketing Communication | Stuttgart Media University | Summer Term 2008 INTEGRATION INTO THE MEDIA-SIMULATOR Chart 7 External Network-Effects are quite difficult to integrate into an holistic plan because their estimations are based on pure experiences. The following abrasive suggestions might help: Defining how much markets are involved into the product and generating positive feedbacks between these participants. Creating something like a penguin-scale where it is possible to estimate the needed amount of critical masses / Demand-Index Persuading the old economy that network-effects are one of the most important indices to consider in the future / Globalization, etc.


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