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Class 5

Digital Business ModelsAno 2015

Sistemas de Informação

para a Indústria

António GriloProf. Auxiliar FCT-UNL

1Sistemas de Informação para Indústria© António Grilo 2015Departamento de Engenharia Mecânica e Industrial

ONLINE BUSINESS CHARACTERISTICS

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LowincrementalUsageCosts

Free

Freemium

NetworkedMarket

RapidWordofMouth

Globaliza on

NetworkEffects

ProductandMarke ngIntegra on

ToencourageonlineWordofMoutheg.Facebooklikes.

DirectIncen veforproductswithNetworkEffects

ViralMarke ng

RevenueModels

Freemium-Carefullydesignbaitandhook

Smallerunitsofcharge

Rebundlingfeatures

Differen alPricing

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FREE AND FREEMIUM SERVICE

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• Targeted Ad Supported – Indirect Revenue

• Increased Adoption

• Increased Word of Mouth

• Demonstration of Basic Version

• Increases Value for paying customers for products with Network Effects

EXAMPLE OF FREE SERVICE

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• Search Engine

• Every Third Party Site

• Google Maps

FREEMIUM

• A small percentage (usually less than 5%) paying

clients.

• Free clients act as marketing agents

• Critical Factor – What should be free and what

should be paid

– Too restricted free features – free users will

not find useful

– Liberal free features – Less incentives for

upgrades

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EXAMPLES OF FREEMIUM SERVICES

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• Gmail

• Google Drive

• Dropbox

- Charge for exceeding free space

• Spotify

– Free Ad Supported

– Monthly Fee for Unlimited Music

• Survey monkey

– Free for basic features/Paid for additional features

VIRAL MARKETING

• Use existing clients for spreading with their tacit approval

– Different from word of mouth

– Different from spam

• Hotmail- one of the first examples

• Plaxo – online address books

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VIRAL MARKETING CHARACTERISTICS

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• Gives away products or services;

• Provides for effortless transfer to others;

• Scales easily from small to very large;

• Exploits common motivations and behaviors;

• Utilizes existing communication networks;

• Takes advantage of others’ resources.

PRODUCT AND MARKETING INTEGRATION

• Marketing integrated into all aspects of product

• Incentivise users to invite friends during product usage

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HARNESSING WORD OF MOUTH

• Active Social Media Presence

– Promotion of new products

– Visible Addressing of user complaints

• Participation in Forums

• Actively scan for user issues

• Promotion of user blogs praising a product

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MARKET BUSINESS MODEL

• Develop a core product

• Allow third party app developers to create apps.

• Charge commission on the sale of apps or enhanced features.

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NETWORK EFFECT

• Utility of a product is enhanced when there are more users

• Needs a long term strategy, difficult to enter competitive markets

• Must be used to create lock in effects

• Must have low initial entry barriers – using freemium, viral marketing

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TYPES OF DIGITAL BUSINESS MODELS

BASED ON NETWORK EFFECTS

• Provisioning of Online Services– Search, Saas, data aggregations, music, etc

– Could be viral, especially in case of freemium

• Single Sided Platforms– With Network Effects

– e.g. Facebook, Youtube

• Double Sided Platforms– App development platforms, e-commerce, network effects

– Eg. Amazon, ebay13

DISRUPTIVE BUSINESS MODELS

• Unit Pricing to Subscription based

– Continued Revenue

– Hosted SaaS

– Myerp.com

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DIGITAL BUSINESS MODELS - VOIP

Freemium Business Model

Technology

- Peer to Peer Communications

- Free Skype Calls

- Paid Skype Outs

Cheap, multiple front companies

COMMISSION BASED PRICING

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COMMISSION BASED VS SUBSCRIPTION

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• B2C

• Commission Based• B2B

• Subscription Based

E-marketplaces

AUCTION

• Ebay.com

• Freelancer.com

• Elance.com

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CROWDSOURCING

• Getting users to review Places, Hotels

• Open Innovation

• Crowdvoting

• Microwork

T Shirt Designs

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