Teaching Support Materials
For E-business(TAFE)
9744C
Evaluate e-business models
Peter Wang
April. 2007
Contents
BUSINESS MODELS ON THE WEB .............................................. 1
Brokerage Model – Priceline.com.............................................. 8
Advertising Model - CRAIGSLIST ............................................ 11
Infomediary Model - DOUBLECLICK ........................................ 14
Community Model - Flickr Case Study ..................................... 16
Key Success Factors .......................................................................16
Launch Strategy ............................................................................18
Exit Analysis .................................................................................18
Subscription Model - Classmates.com ..................................... 18
Interview conducted by Nathan C. Kaiser ..........................................19
Utility Model- Slashdot.com .................................................... 23
About This Site ......................................................................... 23
Disclaimer .............................................................................. 23
About SourceForge, Inc. ......................................................... 24
Final Assessment Events ........................................................ 24
BUSINESS MODELS ON THE WEB
author: Michael Rappa
Business models are perhaps the most
discussed and least understood aspect of the web.
There is so much talk about how the web changes
traditional business models. But there is little
clear-cut evidence of exactly what this means.
In the most basic sense, a business model is
the method of doing business by which a company can sustain itself -- that is,
generate revenue. The business model spells-out how a company makes money by
specifying where it is positioned in the value chain.
Some models are quite simple. A company produces a good or service and sells
it to customers. If all goes well, the revenues from sales exceed the cost of operation
and the company realizes a profit. Other models can be more intricately woven.
Broadcasting is a good example. Radio and later television programming has been
broadcasted over the airwaves free to anyone with a receiver for much of the past
century. The broadcaster is part of a complex network of distributors, content creators,
advertisers (and their agencies), and listeners or viewers. Who makes money and
how much is not always clear at the outset. The bottom line depends on many
competing factors.
Internet commerce will give rise to new kinds of business models. That much is
certain. But the web is also likely to reinvent tried-and-true models. Auctions are a
perfect example. One of the oldest forms of brokering, auctions have been widely
used throughout the world to set prices for such items as agricultural commodities,
financial instruments, and unique items like fine art and antiquities. The Web has
popularized the auction model and broadened its applicability to a wide array of goods
and services.
Business models have been defined and categorized in many different ways. This
is one attempt to present a comprehensive and cogent taxonomy of business models
observable on the web. The proposed taxonomy is not meant to be exhaustive or
definitive. Internet business models continue to evolve. New and interesting variations
can be expected in the future.
The basic categories of business models discussed in the table below include:

Brokerage
1
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Advertising
Infomediary
Merchant
Manufacturer (Direct)
Affiliate
Community
Subscription
Utility
The models are implemented in a variety of ways, as described below with
examples. Moreover, a firm may combine several different models as part of its
overall Internet business strategy. For example, it is not uncommon for content driven
businesses to blend advertising with a subscription model.
Business models have taken on greater importance recently as a form of
intellectual property that can be protected with a patent. Indeed, business models (or
more broadly speaking, "business methods") have fallen increasingly within the realm
of patent law. A number of business method patents relevant to e-commerce have
been granted. But what is new and novel as a business model is not always clear.
Some of the more noteworthy patents may be challenged in the courts.
Type of
Model:
Brokerage
Model
Description:
Brokers are market-makers: they bring buyers and sellers together
and facilitate transactions. Brokers play a frequent role in
business-to-business (B2B), business-to-consumer (B2C), or
consumer-to-consumer (C2C) markets. Usually a broker charges a
fee or commission for each transaction it enables. The formula for
fees can vary. Brokerage models include:
Marketplace Exchange -- offers a full range of services covering
the transaction process, from market assessment to negotiation and
fulfillment. Exchanges operate independently or are backed by an
industry consortium. [Orbitz, ChemConnect]
Buy/Sell Fulfillment -- takes customer orders to buy or sell a
product or service, including terms like price and delivery.
[CarsDirect, Respond.com]
Demand Collection System -- the patented "name-your-price"
model pioneered by Priceline.com. Prospective buyer makes a final
(binding) bid for a specified good or service, and the broker
arranges fulfillment. [Priceline.com]
2
Auction Broker -- conducts auctions for sellers (individuals or
merchants). Broker charges the seller a listing fee and commission
scaled with the value of the transaction. Auctions vary widely in
terms of the offering and bidding rules. [eBay]
Transaction Broker -- provides a third-party payment mechanism
for buyers and sellers to settle a transaction. [PayPal, Escrow.com]
Distributor -- is a catalog operation that connects a large number of
product manufacturers with volume and retail buyers. Broker
facilitates business transactions between franchised distributors and
their trading partners.
Search Agent -- a software agent or "robot" used to search-out the
price and availability for a good or service specified by the buyer, or
to locate hard to find information.
Virtual Marketplace -- or virtual mall, a hosting service for online
merchants that charges setup, monthly listing, and/or transaction
fees. May also provide automated transaction and relationship
marketing services. [zShops and Merchant Services at
Amazon.com]
Advertising
Model
The web advertising model is an extension of the traditional media
broadcast model. The broadcaster, in this case, a web site, provides
content (usually, but not necessarily, for free) and services (like
email, IM, blogs) mixed with advertising messages in the form of
banner ads. The banner ads may be the major or sole source of
revenue for the broadcaster. The broadcaster may be a content
creator or a distributor of content created elsewhere. The
advertising model works best when the volume of viewer traffic is
large or highly specialized.
Portal -- usually a search engine that may include varied content or
services. A high volume of user traffic makes advertising profitable
and permits further diversification of site services. A personalized
portal allows customization of the interface and content to the user.
A niche portal cultivates a well-defined user demographic. [Yahoo!]
Classifieds -- list items for sale or wanted for purchase. Listing fees
are common, but there also may be a membership fee.
[Monster.com, Craigslist, Match.com]
3
User Registration -- content-based sites that are free to access but
require users to register and provide demographic data.
Registration allows inter-session tracking of user surfing habits and
thereby generates data of potential value in targeted advertising
campaigns. [NYTimes]
Query-based Paid Placement -- sells favorable link positioning
(i.e., sponsored links) or advertising keyed to particular search
terms in a user query, such as Overture's trademark
"pay-for-performance" model. [Google, Overture]
Contextual Advertising / Behavioral Marketing -- freeware
developers who bundle adware with their product. For example, a
browser extension that automates authentication and form fill-ins,
also delivers advertising links or pop-ups as the user surfs the web.
Contextual advertisers can sell targeted advertising based on an
individual user's surfing activity. [Claria]
Content-Targeted Advertising -- pioneered by Google, it extends
the precision of search advertising to the rest of the web. Google
identifies the meaning of a web page and then automatically
delivers relevant ads when a user visits that page. [Google]
Intromercials -- animated full-screen ads placed at the entry of a
site before a user reaches the intended content. [CBS MarketWatch]
Ultramercials -- interactive online ads that require the user to
respond intermittently in order to wade through the message before
reaching the intended content. [Salon in cooperation with
Mercedes-Benz]
Infomediary
Model
Data about consumers and their consumption habits are valuable,
especially when that information is carefully analyzed and used to
target marketing campaigns. Independently collected data about
producers and their products are useful to consumers when
considering a purchase. Some firms function as infomediaries
(information intermediaries) assisting buyers and/or sellers
understand a given market.
Advertising Networks -- feed banner ads to a network of member
sites, thereby enabling advertisers to deploy large marketing
campaigns. Ad networks collect data about web users that can be
4
used to analyze marketing effectiveness. [DoubleClick]
Audience Measurement Services -- online audience market
research agencies. [Nielsen//Netratings]
Incentive Marketing -- customer loyalty program that provides
incentives to customers such as redeemable points or coupons for
making purchases from associated retailers. Data collected about
users is sold for targeted advertising. [Coolsavings]
Metamediary -- facilitates transactions between buyer and sellers
by providing comprehensive information and ancillary services,
without being involved in the actual exchange of goods or services
between the parties. [Edmunds]
Merchant
Model
Wholesalers and retailers of goods and services. Sales may be
made based on list prices or through auction.
Virtual Merchant --or e-tailer, is a retail merchant that operates
solely over the web. [Amazon.com]
Catalog Merchant -- mail-order business with a web-based catalog.
Combines mail, telephone and online ordering. [Lands' End]
Click and Mortar -- traditional brick-and-mortar retail establishment
with web storefront. [Barnes & Noble]
Bit Vendor -- a merchant that deals strictly in digital products and
services and, in its purest form, conducts both sales and distribution
over the web. [Apple iTunes Music Store]
Manufacturer The manufacturer or "direct model", it is predicated on the power of
the web to allow a manufacturer (i.e., a company that creates a
(Direct)
product or service) to reach buyers directly and thereby compress
Model
the distribution channel. The manufacturer model can be based on
efficiency, improved customer service, and a better understanding
of customer preferences. [Dell Computer]
Purchase -- the sale of a product in which the right of ownership is
transferred to the buyer.
5
Lease -- in exchange for a rental fee, the buyer receives the right to
use the product under a “terms of use” agreement. The product is
returned to the seller upon expiration or default of the lease
agreement. One type of agreement may include a right of purchase
upon expiration of the lease.
License -- the sale of a product that involves only the transfer of
usage rights to the buyer, in accordance with a “terms of use”
agreement. Ownership rights remain with the manufacturer (e.g.,
with software licensing).
Brand Integrated Content -- in contrast to the sponsored-content
approach (i.e., the advertising model), brand-integrated content is
created by the manufacturer itself for the sole basis of product
placement. [bmwfilms].
Affiliate
Model
In contrast to the generalized portal, which seeks to drive a high
volume of traffic to one site, the affiliate model, provides purchase
opportunities wherever people may be surfing. It does this by
offering financial incentives (in the form of a percentage of revenue)
to affiliated partner sites. The affiliates provide purchase-point
click-through to the merchant. It is a pay-for-performance model -- if
an affiliate does not generate sales, it represents no cost to the
merchant. The affiliate model is inherently well-suited to the web,
which explains its popularity. Variations include, banner exchange,
pay-per-click, and revenue sharing programs. [Barnes & Noble,
Amazon.com]
Banner Exchange -- trades banner placement among a network of
affiliated sites.
Pay-per-click -- site that pays affiliates for a user click-through.
Revenue Sharing -- offers a percent-of-sale commission based on
a user click-through in which the user subsequently purchases a
product.
Community
Model
The viability of the community model is based on user loyalty. Users
have a high investment in both time and emotion. Revenue can be
based on the sale of ancillary products and services or voluntary
contributions; or revenue may be tied to contextual advertising and
subscriptions for premium services. The Internet is inherently suited
to community business models and today this is one of the more
fertile areas of development, as seen in rise of social networking.
6
Open Source -- software developed collaboratively by a global
community of programmers who share code openly. Instead of
licensing code for a fee, open source relies on revenue generated
from related services like systems integration, product support,
tutorials and user documentation. [Red Hat]
Open Content -- openly accessible content developed
collaboratively by a global community of contributors who work
voluntarily. [Wikipedia]
Public Broadcasting -- user-supported model used by not-for-profit
radio and television broadcasting extended to the web. A community
of users support the site through voluntary donations. [The Classical
Station (WCPE.org)]
Social Networking Services -- sites that provide individuals with
the ability to connect to other individuals along a defined common
interest (professional, hobby, romance). Social networking services
can provide opportunities for contextual advertising and
subscriptions for premium services. [Flickr, Friendster, Orkut]
Subscription
Model
Users are charged a periodic -- daily, monthly or annual -- fee to
subscribe to a service. It is not uncommon for sites to combine free
content with "premium" (i.e., subscriber- or member-only) content.
Subscription fees are incurred irrespective of actual usage rates.
Subscription and advertising models are frequently combined.
Content Services -- provide text, audio, or video content to users
who subscribe for a fee to gain access to the service. [Listen.com,
Netflix]
Person-to-Person Networking Services -- are conduits for the
distribution of user-submitted information, such as individuals
searching for former schoolmates. [Classmates]
Trust Services -- come in the form of membership associations that
abide by an explicit code of conduct, and in which members pay a
subscription fee. [Truste]
Internet Services Providers -- offer network connectivity and
related services on a monthly subscription. [America Online]
Utility
Model
The utility or "on-demand" model is based on metering usage, or a
"pay as you go" approach. Unlike subscriber services, metered
7
services are based on actual usage rates. Traditionally, metering
has been used for essential services (e.g., electricity water,
long-distance telephone services). Internet service providers (ISPs)
in some parts of the world operate as utilities, charging customers
for connection minutes, as opposed to the subscriber model
common in the U.S.
Metered Usage -- measures and bills users based on actual usage
of a service.
Metered Subscriptions -- allows subscribers to purchase access to
content in metered portions (e.g., numbers of pages viewed).
[Slashdot]
Brokerage Model – Priceline.com
By James Maguire
November 27, 2002
Although
many
e-commerce
businesses were hurt by the events of 9/11,
discount airfare site Priceline took a double
blow. In the first few months after the terrorist attacks, air travel was viewed as
favorably as a trip to the dentist. But even as air travel has rebounded, says Priceline
spokesperson Brian Ek, the company's business "continues to be affected by the
prolonged practice of airlines to discount their own retail tickets."
"Consequently, the difference between an online retail ticket and a Priceline ticket
is not as great as it once was," he says.
This makes it tough for Priceline's "name your own price" model, a
groundbreaking development in e-commerce. Shoppers enter their desired travel
dates, destination, and the price they're willing to pay. Their bid is accepted only after
they've committed to it with a credit card. Purchases cannot be cancelled.
With a ticket bought through Priceline, you might have to fly at 6:15 a.m. and
enjoy a 3-hour layover in Dubuque, and you won't get to choose your carrier. However
- and here's the Priceline advantage - fares are usually far below retail. If you've got
some flexibility, offers Priceline, we can save you a bundle.
The business model benefits not just consumers, says Ek. It's also "a very potent
way for airlines to fill seats without harming their retail fare structure."
But now that airlines are discounting, "It has an effect on the trade-offs that
certain people are willing to make for a Priceline ticket," he says. Furthermore, he
8
adds, "As soon as there's a trend of airline prices to go up, [an airline] jumps in and
undercuts."
Not that travelers have stopped loving cheap seats. In the third quarter of 2002,
Priceline received 1.2 million bids, and sold 645,000 tickets.
However, in the third quarter of 2001, the site received 1.5 million bids, and sold
1.2 million tickets. (In the fourth quarter of 2001, after 9/11, ticket sales fell to
840,000).
The Online Travel Market
Priceline has positioned itself as the cheapest outlet among the four online airfare
channels. The most expensive outlet (until recently, that is) has been the airlines
themselves, whose sites offer a mix of retail and discounted fares. Less expensive are
sites like Expedia and Travelocity, essentially online travel agents, which help
shoppers by displaying prices across many airlines. They also offer some discounted
fares. Below them in price is what's referred to as "gray marketers," sites that buy in
bulk to offer discounts. Like the Expedia-style sites, these sites publish fares.
At the cheapest level, the "opaque providers," are Priceline and its chief
competitor, Hotwire. These sites won't publish full flight information until after a
consumer has committed a credit card. Hotwire publishes prices but won't reveal what
flight you're on; Priceline doesn't publish prices.
Forrester analyst Henry Harteveldt notes that Priceline is far ahead of Hotwire in
the battle for online airfare dollars - at this point. Priceline is #8 among top travel sites;
Hotwire is #24, according to recent Forrester research that measures both site traffic
and total dollars spent. But Hotwire is still new, Harteveldt points out, having launched
in late 2000, and has not been aggressively marketed. And he says that Hotwire may
enjoy a competitive advantage because it's partially owned by the airlines themselves.
Because Hotwire publishes its fares, "It takes the guess work out of the process,"
Harteveldt says, but adds that there may be better rates available on Priceline.
The competition between these two sites is "fiercely contested" says Harteveldt,
who expects the competition to extend over the next couple years. "It's going to be fun
to watch it play out."
Changing Rankings
"Priceline has a very strong reach," says Harteveldt, citing recent research that
says 26 percent of all online travel shoppers visited the site to explore travel options.
But this same research demonstrates Priceline's struggle in the face of airline
discounting. Priceline's current rank of #8 represents a steep fall from last year's #2
rank.
In contrast, many of the airline sites - fueled by discounted fares - saw increases.
American, Southwest and Delta are each ranked higher. United Airlines cracked the
Top 10 for the first time.
"The prices out there are almost absurdly low in the retail market," Harteveldt
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says. Consequently, "the benefit of a Priceline or a Hotwire is diminished."
A Shifting Model
Priceline creates revenue using the spread between the price at which airlines
sell discounted tickets and consumers buy them. Unseen by shoppers at the site,
Priceline monitors changing airline pricing and availability on a minute-by-minute
basis.
"We have tickets at multiple price points, depending on the restrictions on the
ticket," Ek says. "When you put in an offer, we try to match you up with the ticket that's
closest to what you put in."
The advantage of Priceline's e-commerce model is that the site owns no inventory,
it merely facilitates transactions. The site purchases each ticket only after a consumer
has paid for it with a credit card.
Priceline is expanding its model using LowestFare.com, a retail site it acquired
this spring. With LowestFare, Priceline competes with Expedia and other sites that
sell retail tickets, though at this point shoppers can only view these fares at the
LowestFare site. But in what Ek refers to as "selective integration," Priceline plans on
displaying LowestFare offers at the Priceline site by early next year.
If a Priceline shopper makes a bid that's not successful, Priceline will offer them
fares from LowestFare. The plan is to keep customers from going away
empty-handed, Ek says. "If we can offer you the same price as the other guy, why not
buy the retail ticket from us?"
Harteveldt's says the acquisition of LowestFare is a strong move, which could
allow Priceline to address all a travelers needs, increasing the company's income by
expanding its market niche beyond deep discount. He also sees great value in
Priceline's recent alliance with eBay, in which Priceline uses the popular auction site
as an additional "name your own price" sales outlet.
Hotels and Cars
While Priceline was originally founded as an airfare discounter, at this point it sells
more hotel rooms. The site sold more than a million rooms per quarter for the last two
quarters, Ek says.
"The trade-offs for hotel rooms are so much less than with airline tickets," Ek says,
explaining that shoppers - still naming their own price - can chose dates, location, and
number of stars; everything but brand of hotel. He claims hotels rooms can be
discounted 50 percent or more.
The site offers the same amount of choice in rental cars; travelers chose
everything but brand of vehicle. Ek claims car rental discounts range around 20
percent.
10
Flying in the Future
Harteveldt suspects that market conditions will improve markedly for Priceline.
"We'll continue to see fewer planes flying, and the average number of seats per
departure will be smaller next year, so there will be fewer cheap seats out there," he
says.
Consequently, Harteveldt says, "Airline pricing will creep back up, at which point
Priceline's value to the consumer becomes higher."
Advertising Model - CRAIGSLIST
Founded in 1995 by Craig Newmark in San Francisco,
craigslist is an unconventional, down-to-earth web site with a
mission of providing a trustworthy, efficient, relatively
non-commerical place for people to find all the basics in their
local area. The site offers local community classifieds and
forums free to individuals. It handles more than 5 million
classified ads and 1 million forums postings each month in 175 local craigslist sites
throughout the US and 34 countries worldwide. In August 2004, eBay acquired a 25
percent ownership stake in craigslist. [Source: craigslist, August 2005]
written by Nisan Gabbay, posted on July 16th, 2006
http://www.startup-review.com/blog/craigslist-case-study.php
Craigslist.org is not like other companies profiled on this site, mainly because it is not
really run like a typical company. Craigslist fashions itself more of a public service than a
for-profit entity, eschewing many opportunities to monetize its user base. However,
Craigslist has clearly established itself as one of the leading online brands and the
dominant presence in the US online classifieds market. According to Alexa, Craigslist’s
traffic is up greater than 5X in 2006 over 2005, as it has expanded its geographic
presence to ~200 cities. At over 10M monthly unique visitors and 3B pages views per
month, Craigslist is the number 7 ranked site in the US (and 25th globally) according to
Alexa. Craigslist is also one of the earliest examples of a site built through word of mouth
marketing.
Key success factors
Craigslist became successful largely by following certain guiding principles, rather
than by following an explicit strategy. I believe that Craigslist’s success can be boiled
down to three key points, which I did more or less confirm with Craig himself.
Culture of trust
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Craigslist creates a culture of trust around the site in many ways:
•
Craig and the Craigslist staff actively respond to user e-mails.
•
Craigslist does not make any major changes to the site without first announcing
and testing response from users.
•
Craigslist actively incorporates user feedback into the product. Craig told me that
there has not been any popular suggestion that they have not incorporated into the site.
•
No banner advertising on the site contributes to the perception that Craigslist is
“not in it for the money”
•
Users are the primary mechanism for filtering inappropriate/miscategorized
content. Craigslist has some mechanisms for preventing the posting of inappropriate
content, but for the most part, it is up to the users to flag content.
•
Lastly, the .org domain name contributes to a non-profit perception (Note: Craig
did not feel that many users care or think about this)
Social aspects of site are key to driving the commercial aspects
To characterize Craigslist as just a classifieds site is a big understatement. I would
argue that the entertainment value of the site to users is a key aspect to the Craigslist
consumer experience. I often peruse the site to read the outlandish posts in the “Casual
Encounters”, “Rants and Raves”, and “Missed Connections” sections. My friends also
e-mail me entertaining Craigslist posts from time to time. These non-commercial sections
of the site are important for several reasons. While I rarely post or respond to these
sections, they keep me coming back to the site even when I am not looking for an
apartment or job. Others find it fulfilling to have a forum to air their thoughts, thereby giving
users a voice in their community. This creates a pattern of usage that is more frequent
than buying or selling an item. Secondly, these posts foster the sense of community and
trust that give consumers greater confidence in the commercial-oriented classifieds.
Site ease of use
Craigslist has done a terrific job of removing barriers for users to post and browse the
site. Perhaps the key product decision was not requiring user registration, thereby
allowing anonymous posting and browsing. A simple, text-based format was also
important in the age of dial-up connections to keep site performance fast. The user
self-service site publishing tools are also intuitive and core to the site.
Launch strategy
Given that Craigslist initially started as an e-mail distribution list, it was indeed
marketed solely through word of mouth – if you can even call it “marketed”. Craig originally
started Craiglsist to tell friends about upcoming tech or art events in SF. Once the number
of people on the list grew too large, Craigslist became a formal website. Craig originally
thought to call the site “SF Events”, but friends encouraged him to use “Craig’s list”, since
that was how it was already being referred to. The content expanded from events to
classifieds, to the full range of categories offered on the site today. Craigslist will add a
12
new city to Craigslist when there are enough requests from users to add that particular city.
Craigslist does not (nor did not) specifically target “social influencers” or conduct any
pre-launch marketing in a new market that they enter.
Much of Craigslist’s recent growth has to be attributed to an amazing amount of
positive mainstream PR, in addition to word of mouth.
Exit analysis
Craigslist stands by the self-proclaimed “nerd values” of its founder, happy to make a
good living for the employees of Craigslist without the need to make an extravagant profit.
Craigslist is generating anywhere from $10-20M per year in revenue and employs just 19
people. Craigslist makes money by charging for job listings in a few major cities (San
Francisco, LA, NY).
Craig has turned down many acquisition offers for Craigslist that would by any
measure make him a very rich man. Craigslist’s CEO Jim Buckmaster has stated that
Craigslist could probably make 10 times the revenue it makes today if they tried. So what
is Craigslist worth? Assuming they could make $200M in revenue at a 40% net margin,
and applying an Ebay-type EBITDA multiple, that would place the value of the company at
~$2.4B. I have no doubt that if Craigslist were to sell, it could command more than a $1B
purchase price as is today, and probably significantly more (Note: Craig is a better man
than I!)
eBay would be the most logical acquirer, given that they already own a 25% stake
through a rather dubious stock sale by a former trusted employee of Craig’s. FYI – I did
not ask Craig to comment on the history of that transaction. Assuming that those were
common stock shares, it seems unlikely that eBay as a minority shareholder has any real
influence over the strategic direction of the company.
Discussion Starter
It will be interesting to see what type of impact new competitors will make on the
popularity of Craigslist. Everyone from the big boys (eBay, Google, MSN) to start-ups
(LiveDeal, Edgeio, Oodle) has an online classifieds offering. Many of these new offerings
are employing Web 2.0 technologies and strategies, while Craigslist has continued to
maintain its relatively simple philosophy and design.
I do not believe that these other companies will be successful in dethroning Craigslist
for the simple reason that the community element around Craigslist is a difficult one to
replicate. It is not just a more robust classified post or search feature that makes for a
more compelling user experience. The consumer loyalty that Craigslist has developed
over the last 10 years is highly defensible. How many people out there owe finding the
place they live or work to Craigslist?
There seems to be four main ways that the competition is trying to differentiate itself
from Craigslist: 1) incorporate user reputation and feedback into the classifieds, 2) make it
easier for users to submit classified listings (especially power users), 3) adjust the
business model away from a straight listing fee per classified, and 4) offer a larger
selection of items/postings. Of the four strategies listed above, I think that incorporating
13
user reputation into a classifieds site might be a possible winning strategy. Is
reputation/feedback of higher value than user anonymity? For some categories I think it
will be, and that’s where Craigslist might be vulnerable to a competitor.
In addition to commentating on what made Craigslist successful, anyone care to
comment on where the weaknesses might be? How will a new entrant make an impact?
Infomediary Model - DOUBLECLICK
DoubleClick is the leading provider of solutions for
advertising agencies, marketers and web publishers to
plan, execute and analyze their marketing programs.
DoubleClick's marketing solutions - - online advertising,
search engine marketing, affiliate marketing and email
marketing, - - help clients yield the highest return on their marketing dollar. In 2005,
DoubleClick was acquired by Click Holding Corp., a subsidiary of private equity
investment funds affiliated with Hellman & Friedman LLC and JMI Equity.
[Source: http://digitalenterprise.org/cases/doubleclick.html]
About DoubleClick
DoubleClick enables agencies, marketers and publishers to work together
successfully and profit from their digital marketing investments. Its focus on innovation,
reliability and insight enables clients to improve productivity and results.
Since 1996, DoubleClick has empowered the original thinkers and leaders in the
digital advertising industry to deliver on the promise of the rich possibilities of our medium.
Today, the company DART 1 and Performics divisions power the online advertising
marketplace. Tomorrow, we will continue to enable clients to profit from opportunities
across all digital advertising channels as consumers worldwide embrace them.
DART for Advertisers Features & Benefits
Feature
Description
Benefit
Hosted Service
DART for Advertisers (DFA) is accessible
from any web browser; all hardware,
infrastructure, staff and ISP relationships are
centrally managed by DoubleClick.
Focus on developing compelling campaigns
and reaching customers instead of software
installations, repair and training. Reduces
costs and increases control of ad
management and serving processes.
Customer-Centric
UI
Based on feedback from 2,000+ DART users,
DFA uses a more intuitive navigation,
straightforward naming and fewer steps to
create new campaigns or modify in-progress
campaigns.
Adds speed and efficiency to ad
management for even the most complex
campaigns. Reduces training time.
Customer Service
Account representatives, technical services
team and Customer Service Center provide
swift support for account, technical and
Provides fast answers and an online
knowledge base to make online advertising
successful
1
DART [简明英汉词典]
=Daily Automatic Rescheduling Technique 每日自动再调度技术
14
customer service issues.
Online customer support is also available 7
days a week (24x7), through our Customer
Resource Center. It includes an up-to-date,
easily searched knowledge base of frequently
asked questions, technical updates and
product documentation.
Creative Library
Maintain and manage creative assets for
campaigns in a central repository; batch
upload and assign assets to multiple ads
easily; schedule creative start and end dates
for campaigns and testing period.
Saves time trafficking campaigns
deactivating creatives for multiple ads.
Site
Placement
Groups
Rolls up multiple ad placements into a single
unit or "roadblock" for pricing and reporting
purposes.
More accurate pricing and reporting for
roadblock type campaigns.
Advanced Pricing
Support for CPA, Flat Rate, CPC, CPM pricing
models for campaigns.
More accurate campaign costs reflected in
flighting and reporting.
Streamlined
Trafficking
Reduces extraneous workflow steps and
provides context-sensitive help functionality to
assist users throughout the trafficking
process.
Enhances ad management efficiency
Extensibility
Through its XML base, DART is open to
customization, expansion and rapid scaling.
Integration with existing in-house billing and
other operational systems not typically
offered through hosted services
Permissioning
Permission management features enable
precise control over users' level of access.
Ensures privacy control and thorough
management of how information is shared
Change Logs
Enables users to view the trail of changes
made for any aspect of the system.
Saves time by reducing record-keeping and
documentation administration
Reporting
ReportCentral, DFA 抯
comprehensive
reporting tool, provides marketers with one
centralized tool to track key campaign metrics
including
click-through
rates,
costs,
conversions,
and
ROI.
ReportCentral
easy-to-use user interface dramatically
streamlines the time it takes to generate
reports, creating dynamic, customizable
reports in just 1 step. Advanced reporting
options include: cross-site duplication,
frequency to conversion and timelag to
conversion. Additional reporting features
include Network level reporting, which
enables trend analysis across advertisers and
campaigns; and Planned Media Query, which
compares actual campaign costs against what
has been planned.
Quickly assess campaign performance,
including creative, sites, placements, costs,
and audience, in terms of conversions (view
and click-through), ROI and overall
effectiveness in one easy step.
Creative
Optimization
Optimize creative rotation based on
user-defined criteria including: click rate,
post-click
conversion
activities,
post-impression activities, or a combination of
post-click and post-impression activities for
each ad in a campaign.
Improves results; Provides control, flexibility
and greater efficiency; saves time and
money.
Integrated
Rich
Media Advertising
with DART Motif
DART Motif is the most effective and efficient
rich media advertising solution for all aspects
of creating, managing, and reporting on rich
media advertising, jointly developed by
DoubleClick and Macromedia.
Saves time at every step in the process
including easy creative authoring, testing
without
trauma,
trafficking
made
trouble-free,
one-stop
reporting
and
low-stress billing.
Rich
Media
Certification
DART provides a seal of approval to vendors
whose rich media technologies satisfy
specified functionality and reporting standards
used by both advertisers and publishers. See
list of certified vendors and certification
requirements.
Marketers can traffic certified rich media
technology to sites with confidence that it
passed stringent requirements. Rich media
advertising has proven higher impact and
effectiveness rates.
15
and
Community Model - Flickr Case Study
written by Nisan Gabbay, posted on
August 27th, 2006
Why profiled on Startup Review
By financial measures, Flickr’s sale to
Yahoo was not a huge success, at least by
VC standards. Rumored to be sold for
~$20M-$30M, the company has certainly made a much larger impact on the Web 2.0
landscape than its valuation would indicate.
Regardless of how one views the size of the exit valuation or whether Flickr will prove
to be a large, successful business, I still think Flickr makes for an interesting case study.
Flickr got a lot of loyal users in a very short amount of time with no marketing spend, and
that’s something that many web entrepreneurs are interested in understanding.
Interviews conducted: There is plenty written in the blogosphere about what made
Flickr successful, and I have linked to quite a few of these references below. Most of what
I have written is based on a public discussion with Caterina Fake at Y Combinator’s
Startup School on April 28, 2006 and a subsequent follow-up interview. I have also
discussed Flickr with a Yahoo executive for a perspective on the motivation behind the
acquisition.
Key Success Factors
Flickr prioritized the development of viral product features.
Flickr might not have had a formal product roadmap, but they did explicitly focus their
limited development resources on product features that directly helped to grow their user
base. Features that have become synonymous with Web 2.0, like easy blog integration /
export and post to Flickr badges on people’s sites were developed early on. As a result of
these efforts, nearly 80% of new users found Flickr through the blogs of other Flickr users.
Flickr also gave incentives to its power users to actively promote Flickr to friends by
offering premium features (e.g. extra storage) in exchange for user referrals.
16
Emphasis on making a user’s first interaction with Flickr a positive
one.
The first time I came across Flickr was a friend sending me a link to a picture. Right
away I liked Flickr because it didn’t make you register just to view your friend’s photo,
unlike the major photo sharing sites at the time. This is just one aspect of the many things
Flickr did right to convert visitors into Flickr users, such as a simple user interface with no
intrusive advertising. But even beyond the product and UI, Flickr emphasized making new
users feel welcome. Caterina mentioned how there would be a member of the Flickr team
moderating the Flickr forum 24/7 just to make people feel part of the community. While this
might sound a bit exaggerated, you get the idea. Flickr put a tremendous amount of effort
into community development and support.
Flickr makes discovering and accessing quality photos easy.
When Flickr came on to the scene there were really two kinds of photosharing
services out there: those focused on efficiency around creating prints (Shutterfly, Ofoto)
and those focused on public sharing of photos (Fotolog, Buzznet, Webshots). Flickr was
really competing with that second group. What strikes me about Flickr is how easy it is to
find quality photos – the best quality pictures on a certain theme rise to the top. In all of the
talk about tagging and open APIs, what do these features really contribute to the service?
The APIs and tagging make it easy for professional, semi-professional, or other photo
enthusiasts to interact with the service in a way that casual users don’t.
The Flickr team targeted these professional and semi-professional photographers as
the core of the initial Flickr community. They worked very hard to nurture the development
of this community. Catering to the power users raises the quality of the photos, thereby
benefiting the entire community. Flickr, unlike the hobbyist sites (Fotolog or Buzznet),
emphasized that Flickr was indeed a for profit business. I think this perception of Flickr as
a company gave users, particularly the power users, more confidence in the service.
Rapid development cycles.
Flickr most definitely falls under the “release early, release often” theory of web
software development. Caterina said that Flickr does very little traditional usability testing,
instead preferring to get the product out quickly and listen to users. Flickr was able to build
a following with the techno-geek crowd because users didn’t have to wait long to see their
suggestions implemented. On a good day, Flickr would release a new version every half
hour!
17
Launch Strategy
I have discussed above how Flickr emphasized viral feature development to build its
user base. I think that Flickr also benefited from a general market need around photo
hosting for use in blogs and social networks – as witnessed by the success of services like
PhotoBucket and ImageShack. Flickr made a good decision by enabling this functionality,
but they clearly were riding a wave there, not the ones creating it.
Flickr was also the beneficiary of a great amount of mainstream PR, even if they did
not instigate it themselves. Flickr did not hire a PR firm to generate publicity early on, only
hiring a firm to help manage PR requests after the initial buzz created by viral marketing.
Exit Analysis
Flickr was acquired by Yahoo in March 2005, when Flickr was just on the border of
becoming cash flow breakeven. According to Alexa, Flickr’s traffic is up >10X since the
acquisition, so the company was able to extend its reach outside of its initial core user
community.
So what was Yahoo’s motivation to acquire Flickr? Flickr was acquired into the Yahoo
search group, thus indicating Yahoo’s intention to integrate Flickr photos into the general
image search engine. It’s interesting that the acquisition was not initiated by the Yahoo
Photos group, thus revenue, revenue growth, and profit were not the main motivations for
the acquisition. Secondly, Flickr had developed a robust tagging platform that could be
applied to other Yahoo products. Third, Yahoo was interested in acquiring the people
behind Flickr and absorbing their thinking and DNA into the company. The least important
factor in the acquisition was the user community that Yahoo acquired. While Flickr’s
growth and buzz were important in validating the technologies that Flickr pioneered, the
sheer number of Flickr users was not an important factor in the acquisition. Thus, at its
heart, the Flickr acquisition should be thought of as a technology and people acquisition.
I did not get a chance to ask Caterina about the decision to sell Flickr to Yahoo rather
than take venture financing. The valuations for Internet companies in early 2005 were not
nearly as robust as they are today, so perhaps Flickr would have gone the VC route if it
were executed in today’s environment. Perhaps we can get Caterina (or someone else
from the Flickr team) to comment on this below?
Subscription Model - Classmates.com
Classmates Online, Inc., founded in 1995 and
based in Renton, WA, is a leader in online social
networking. The company operates Classmates.com
(www.classmates.com),
connecting
millions
of
18
members throughout the U.S. and Canada with friends and acquaintances from school,
work and the military. Its Classmates International subsidiary also operates leading
community-based networking sites in Sweden, through Klassträffen Sweden AB
(www.stayfriends.se), and in Germany, through StayFriends GmbH (www.stayfriends.de).
Classmates Online is a wholly owned subsidiary of United Online, Inc. (Nasdaq: UNTD).
For more information about United Online and its Internet subscription services, please
visit www.untd.com. Find out more about us in the Press Coverage and Press Releases
sections of the site.
Interview conducted by Nathan C. Kaiser
On Monday, July 29, 2002 in Seattle, WA.
Thank you very much for meeting with us today. Can you please provide an
overview of the Classmates.com model?
Classmates.com is a member supported online community, basically what that means is
that we have 30 million people who have joined Classmates and become members by
registering themselves with the website and we are adding about 1.5 million new
registrants every month.
Exactly what services and features do you offer those 30 million registered users?
It is really difficult to do a search for a person on the Internet, and have meaningful
results. If you were to type in a common name, such as John Smith or John Roberts into a
Yahoo or Google search engine you would get a stunning list of results. Many of these
results may or may not have anything to do with the particular person you are looking for.
Even if you put an uncommon name, such as mine into a search engine, you still receive a
stunning number of results. You also have the same problem, with results that return
Michael Schutzler, that have nothing to do with me. It is very unlikely that you find the
information you are looking for: contact information, history, etc. Classmates is a very
interesting way of finding a name, and the right John Roberts. If you know that you went to
school with John Roberts, and he was your college roommate, or maybe you graduated
with John from High School.
So you know some key personal detail that enables you to identify them.
Correct, one critical element of some point in time in the past. Now you can zero in on the
right John Roberts, and in addition to that, if John Roberts has registered with Classmates
you can now contact him directly. Current, accurate information, in that we have their
email address and when John Roberts tells us about himself, that he graduated from this
or that high school, graduated from the Wharton School of Business, served on a US
Coast Guard Cutter, etc. that is all information he is providing and allows others to know
more about John Roberts than they may have already known. Before they actually contact
him, they are learning more about him, and establishing that connection.
19
How did it all get started? How did the idea originate?
It all started about 7 years ago, when a Boeing engineer, Randy Conrad, who went to
high school in the Philippines was very curious about this whole Internet thing that was
coming to life. All the pundits at the time were talking about how it was the beginning of the
Global Village, and we were all becoming one wired web world. He happened to be a
member of Prodigy and looked up a high school buddy, whom he wanted to reconnect
with, and of course wasn?t successful. He sat down with his son, and said that there had
to be a better way for this to work. He and his son devised a lost and found for high school
alumni.
Can you go a little more about some of the key categories you referenced earlier;
schools, military, and work place, and how each of these areas address a specific
need?
The High School section of our site has been extremely successful aspect of our
business, and in our culture, High School is one of those extremely formative experiences
in the mid to late teens. You are learning an awfully lot about yourself and your place in the
world. That is such a heavy experience for most people that build friendships and
memories of those times that last forever. As people age, they become extremely
nostalgic for ?where did we come from?, ?how did we get here?, and ?I wonder if Bob is
as bald as I am?, etc. You want to reconnect with those people, and to some degree it is a
validation exercise of who you are. At some level it also becomes a comparative exercise
of I know what I have done with my life, what have you done with yours? We find out
sooner or later that we are all human beings, that we are all pretty normal, and that it is all
a cool experience after all. The High School directory is addressing this nostalgic pool,
and there are of course 10?s of thousands of High School reunions that are coordinated
through Classmates every year. It really is a huge pain in the neck to coordinate a High
School reunion the old fashioned way, by picking up the phone and sending out letters. It
is so much easier to have 30-40% of you High School alumni on Classmates and to just
push the button.
The reunions and the ability to facilitate them through Classmates, is there an
incremental charge associated?
Not at all, you just need to be a subscriber, which costs $3 per month. It just requires
someone to list themselves as the reunion coordinator.
Ever have any online dues, for people fighting to be the online coordinator?
On the contrary, online solicitation is always targeting someone to ?Please be the
coordinator?. It is not a sought after job, and is in fact a lot of work. In fact we promote the
use of professional planners, because it is a lot of work, and there are individuals who can
help. Class officers sometimes contract with professional party planners that do this type
of thing.
How does this relate to the college aspect of the site?
20
College is a logical extension of the High School section. College has a completely
different feel to it, and it is often college roommates, and specifically people who have
connected at Fraternities and Sororities.
Do the profiles from one section overlap with profiles in other sections as well?
Everything is completely overlapped. If you have served in the Marine Corp. during
Dessert Storm back in 1990, you also went to college at William and Mary, and you went
to a high school. All of this information is captured in your profile.
How does the Work Place section fit in with the Education and Military segments of
the Classmates site?
That is a totally different animal. While there is a nostalgic aspect associated with the
work place, but what we are finding is that people are using this aspect for professional
and career networking. Most of us are terrible at keeping our rolodexes current with prior
coworker information. Even if we do a good job of keeping in contact with previous
coworkers - the amount of job rotation and email rotation, especially in the last five year,
has been so severe, that it is very difficult, if not impossible to stay in contact with
everyone. People are finding the Work Place directories to get and stay networked, they
are also using them to find jobs as well.
What type of growth rates are associated with the three different segments?
They are all growing quite nicely. Even High School continues to grow, and we have over
30 million listings is still growing at a very strong clip. We have seen the largest growth in
the Work Place segments, primarily because we just launched it in April of this year. We
expect the Work Place segment to be one of the largest drivers of growth into the future.
Military is growing at the same rate, if not a little slower than High School, because we
have over a million in that directory. There isn?t that large of a base of online veterans to
begin with.
What type of penetration rate do you foresee in terms of overall subscribers in
relation to the population of the US?
That is a really good question. I think that the most important thing to remember about
Classmates is that it isn?t for everyone. You can?t go into Classmates unless you are
willing to be contacted. There is no way to get into Classmates and play with an unlisted
number. The only way to make it fair is that it requires the ability to be contacted, and
contact. We don?t think it will ever reach a 100% of the Internet we could see it around
80-90% of the online population.
What are your plans to expand outside of the US?
Well, we aren?t limited culturally. The research we have done, has found that there is a
version of this for every culture in the world. The biggest constraint is the resident
expertise in other cultures. Our initial forays internationally will be to go into Canada in a
big way, and then into the United Kingdom. Once we have the English speaking countries
down, then we will expand to other countries.
21
Of your 30 million members, what number are subscribing to Classmates?
We have 1.6 million paying subscribers.
Of those 1.5 million new monthly registrants, are you seeing a corresponding
subscription rate?
It is increasing. We have 1.5 new members registering every month, with 10% of that
population paying monthly, whereas the overall rate of subscribers to total members is
5.3%. To date, all of this has been nostalgia driven and we are heading more toward the
corporate networking aspect.
So you see the majority of the growth coming from the corporate market.
Well, not all about the Work Place, but also, when someone moves to a new city they are
interested in finding new contacts, and establishing a base of friends.
What types of conversion rates do you see; from impressions to click-throughs,
click-throughs to new members, and from members to subscribers?
We do not provide that information publicly.
What other types of segments are you looking to target in addition to Education,
Military and the Corporate Market?
We see the ex-pat community being very large, as well as a certain focus around the
sports. We will most likely focus less on pre-structured searches and more about
goal-oriented searches.
More towards networking aspects.
How do you find a CPA, how do you find a Dentist, a Broker? Some people go to the
Yellow Pages, but most people ask someone they know! Because of the vast amount of
data we have on people, we will be able to offer our members the ability to network with
people they know about people they need to know.
Very similar to a referral service. Would that include any additional subscriptions or
fees?
It is likely. Whenever there are demand points, there is the ability to up-charge. Think of
the cable industry, which offers basic cable, and up-charges for additional
services/channels. As we come up with premium services, they may be either subscription
or per use.
What was the most critical lesson learned online from 1997 through today?
The most critical lesson of all was that if the customer wasn?t willing to pay for it, then it
wasn?t worth doing. The notion that we were going to be able to survive on advertising
alone didn?t make any sense. A site like Classmates is almost the exact business model
as a magazine. We have editorial content, which in this case user driven, and we need
revenue from both subscription and advertising in order to be a viable company. If you are
22
going to be a content site, then you are going to need multiple forms of revenue.
Utility Model- Slashdot.com
About This Site
In the beginning there was no Slashdot. Bored and
confused geeks would scribble "First Post" in the sand. Grits
were strictly for consumption and there wasn't a place to get
nerd oriented news. Then in September of 97 Rob "CmdrTaco" Malda changed all that.
With the help of Jeff "Hemos" Bates and others, Slashdot has stumbled forward with the
simple mission to provide 'News for Nerds. Stuff that Matters'.
Today Slashdot is owned by SourceForge, Inc., but it is still run by many of the same
people as it was 'Back in the Day'. Today we serve millions of pages to hundreds of
thousands of readers. But the goal is still the same.
You can read more about each of the authors, including contact information, and
figure out who to blame for what by reading The Authors Page. But the majority of the
work is done by the tons of people who use the Submission Form to send in the stories
that we post every day. Thanks go to them for helping make this site the cool place that it
is.
If you like this site, feel free to steal some of the various pretty pictures we've got here
and post them on your homepage, your moms homepage, or even your employers. You
can see the whole collection at The Slashdot.org Supporters Page.
If you're confused about any of this, it might help you to read The Slashdot FAQ to
find out all the secret bits of information about how things function and what they mean.
If you are seeking advertising information for Slashdot, or other SourceForge, Inc.
sites, you should visit The SourceForge Advertisement Introduction for all sorts of
information on how your ads can be seen by our hundreds of thousands of daily readers.
Disclaimer
Principals of Slashdot and SourceForge, Inc. may have investments in the stocks of
the companies discussed on this site and will disclose any interest if they are posting a
story about those companies or their products. Contributors to this site may or may not
have an interest in a company or product they are discussing. The decision to disclose
that information is theirs to make. We do not guarantee the veracity, reliability or
23
completeness of any information provided on our site or in any hyperlink appearing on our
site.
About SourceForge, Inc.
SourceForge’s media and e-commerce web sites connect millions of influential
technology professionals and enthusiasts each day. Combining user-developed content,
online marketplaces and e-commerce, SourceForge is the global technology community’s
nexus for information exchange, goods for geeks, and open source software distribution
and services. The network of web sites enables advertisers to efficiently reach a large,
highly qualified audience of buyers. SourceForge’s network serves more than 33 million
unique visitors each month from around the world.*
It includes top web sites, like SourceForge.net, the world’s largest open source
software development and distribution environment; Slashdot, the web destination that
pioneered community generated content; and ThinkGeek, the online bazaar that features
cool stuff for techno-enthusiasts. Other sites in the network, include: Linux.com,
freshmeat.net, ITManagersJournal and NewsForge. SourceForge’s unique combination of
user-developed content, clever e-commerce and online marketplaces make it the most
trusted, credible venue for dialogue and exchange with the global technology community.
[Source: Google Analytics and Omniture, April 2007]
Final Assessment Events
Assessment Events:
In addition to an overall pass in the module, students must pass each assessment
event where there is a "yes" in the "must pass" column.
Number
1
2
Name
Written Report
Written Report
Outcomes/Timing
LO1
LO2
Weighting
40%
60%
Must Pass
Yes
Yes
Assessment Events
Event 1:
The first assessment should focus on breadth of knowledge. The learner
should research a wide variety of companies (5+) and assess primary
sales channels, fulfilment channels, customer groups etc. If the
24
learner has access to a workplace scenario, they could select
competitors or suppliers & distributors.
Ensure breadth of selection of companies from different sectors with
different models.
The learner should identify types of models, popularity of models, how each
model relates to the target audience (primarily its suitability - why was a
particular model selected for a particular audience).
Event 2:
The second assessment should make use of the same scenario or workplace
situation used in event 1.
The learner should select and perform a detailed analysis on (2) models
listing advantages, disadvantages and risks of adopting a particular model.
The risk analysis should demonstrate assimilated knowledge of selected
business models through inclusion / consideration of target market /
dependencies / changing market conditions etc.
The learner should identify a model(s) suitable for application to their
scenario and identify critical success factors. The findings of the group
should be presented to the class with adequate justification of model choice
using supporting material.
25