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

CREATORSPRODUCERSDISTRIBUTORSUSERS EXPERTS INVENTORS ARTISTS ENTERTAINERS SERVICE PROVIDERS CONTENT 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) Pensare PensareEducators-PensarePensare Mainspring MainspringAdvisors-MainspringMainspring Please also check (Ernst & Young)

Producers- continued examples Custom Suppliers-The McGraw Hill Companies Please check Primis sevices Forrester ForresterInformation & News Services—ForresterForrester The Wall Street Journal

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 InsWebQuicken InsuranceInsWeb and Quicken InsuranceInsWebQuicken InsuranceInsWebQuicken Insurance services and products within the insurance industry LandsEnd.comLandsEnd.comLandsEnd.com distributor for clothing and accessories

Focused distributor Please check

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 ( INSWEB.com ( ( Freemarkets.com (

DIGITAL BUSINESS MODELS-LAB ASSIGNMENT I As a group, by obtaining information from the web sites, compare these businesses: Freemarkets.com Greyzone E-Loan.com 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-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: Autoweb 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, , 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: Identify 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

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