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 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 9 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 11 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