Module 8

network effects

the value a user derives from a network relates to the number of users in the network; the value of network is proportional to n2 users: Metcalfe's Law -> two network users can make 1 connection, 5 can make 10, number of possible connections n(n-1)/2

e-commerce

use of the Internet and Web to transact; began in 1995 and grew exponentially; moved from desktops to smartphones; three major segments: retail goods, travel and services, online content

e-commerce in different contexts

social, mobile, local

two types of network externalities

positive - an additional network user increases value to all other users; negative - an addiotnal network user decreases value to all other users

plaftorm ecosystems

platforms actively encourage third-party providers to integrate products and services with their software, creating ecosystems -> exchange of value, platforms increases the value it offers to users

one-sided market

large share of value is derived from a single class of users; messaging services, telephone networks

two-sided market

value is derived from two categories of network users, more complex as firms must consider interaction between the two sides; payment services, video game consoles, airBnb, Uber

same-sided network effects

increasing value to a class of users resulting from an increase in the number of users from that class; example: the added value fro. your friends joining WhatsApp

cross-side network effects

increasing value to a class of users resulting from an increase in the number of users from another class; example: greater choice on AirBNB, a vendor offering a certain payment option, video game players and developers

positive feedback loop

an increase in A leads to an increase in B which leads to an increase in A

collaborative consumption or sharing economy

use of under-utilised assets; car sharing, tools sharing

servitization

business model in which companies move from selling products to selling integrated products and services with the aim of: better meeting customers' needs, improving business results and competitive position

Drivers for newer/better services

economic (harder to compete with prices, lower wages and increased productivity); market (focus on core competencies, customers looking fro flexibility and risk sharing); sustainability

e-commerce

the use of the internet and the web to enact business

unique features of e-commerce

ubiquity, global reach, universal standards, richness, interactivity, information density, personalisation, social technology

ubiquity

available everywhere anytime; it reduces transaction costs for the customer

universal standards

all computers can link with each other and have no problem in collaborating -> lowers the market entry costs

richness

complexity and content of a message

information density

quality and amount of information available

social technology

networking

key concepts of e-commerce

reduced information asymmetry; lowered menu costs; reduced or increased switching costs; products selling don't require a middleman

types of e-commerce

Business-to-consumer (B2C); Business-to-Business (B2B); Consumer-to-consumer (C2C)

B2C

a business unit selling its products to individual shoppers

B2B

a business unit selling its products to other businesses

C2C

consumer directly selling to other customer; eBay

New Business Models

Portals; E-tailers; Content providers; Transaction brokers; Market creator; Service provider; Community provider

Portals

provide initial point of entry to the web along with specialised content and other services; usually a homepage

E-tailers

online retail stores

Content providers

distribution of information content over the internet

Transaction brokers

process transactions

service provider

Saas

community provider

social network, social media

E-Commerce Revenue Models

Advertising, Sales, Subscription, Free/Freemium, Transaction fee, Affiliate

Advertising Revenue Model

website generates revenue through showing ads

Sales revenue model

revenue comes from selling products

Free/freemium revenue model

initially free, but charges customers for advanced features

transaction fee revenue model

company receives a fee for perfuming a transaction for the customer

affiliate revenue model

a person or a business gets paid as a result of them referring a customer to other websites

New Ways of Marketing

Behavioural Targeting; Social E-Commerce, The Wisdom of Crowds

Behavioural targeting

identifying and collecting information on the clicking behaviour of individuals -> may lead to an invasion of privacy

social e-commerce

according to social graphs, you are statistically six social clicks away from every person on earth -> viral marketing

The Wisdom of Crowds

gather a lot of customers and ask them about the problem you are encountering

Business-to-Business Transactions

Electronic Data Interchange (EDI); New Ways of B2B Buying and Selling