Online & New MediaBusiness of Digital

SNC-MKTG350August 26, 2013

Tonight’s Agenda: Business of Digital• Web sales vs. brick and mortar retail• Fee for service vs. ad sales subsidizing free • Online advertising sales vs. magazine, radio and

newspaper sales• Size of mobile phone and tablet ad sales,

mobile/web app production

Time Spent Online

Web Sales

Brick & Mortar Sales, Gen Merch

Brick & Mortar Sales, Clothing

Brick & Mortar Sales, Furniture

3 Key Ideas

• Web sales = 8% retail sales• $216B projected 2013• Economies bounce back

The Internet is FREE!

The cost of FREE!

• Domain name $12-20 per year• Hosting/Servers $10-150 per year• Site build $0-100,000 one time• Site design $0-50,000 one time• Site content $0-5,000 per month• Site maintenance $0-10,000 per month

The Internet is FREE!

• Google made $14Billion in 2012 (1)• Apple Apps generated $9Billion in 2012 (2)• Facebook made $5Billion in 2012 (3)• Craigslist grossed $126Million in 2012 (4)• Fandango estimated $72Million in 2012 (5)

Fee-for-Service Types

Business models differ based on which assets are captured online:– Customer transaction: to capture revenue

• Ie., eBay, Amazon, Gap.com, HP.com

– Customer data: to capture data about customer’s purchasing needs• Ie., Facebook, Amazon’s recommendations, Google

– Customer relationship: ability to influence customer’s behaviors • Content providers like NewYorkTimes.com, Fandango, Salon.com

Online Service ModelsBusiness Model Description Revenue Source

Content Provider Provides content Advertising model or subscription or both

Direct-to-Customer Sells goods or services to consumer

Direct revenue

Intermediary Creates a marketplace, brings buyers and sellers, facilitates transactions

Per transaction percentage, advertising model or subscription

Virtual Community Facilitates online community, common interest, typically doesn’t engage with users

Advertising model or subscription or both

3 Key Ideas

• Multiple paths to revenue• Does advertising have to

be intrusive?• Is money the only value

you can get from a customer?

Media Sales Volume

Media Audience Growth

Source: Pew Research Center, State of the News Media, 2012

Digital Media Sales Volume

Mobile Revenue

Mobile Mindset

Mobile Mindset

Suggests people want to experience news and events and shows in

multiple ways: programmed and

unstructured

TV Producers and Internet site publishers want to move that 27% up:TV use ratings can only tell you if the TV is “on”. Online engagement tracking can tell you how many people are talking about a show or event, so “layered” engagement is better for attracting advertisers.

3 Key Ideas

• Which media generated $65B in revenue in 2012

• Which media grew -4% in 2012?

• Why is mobile important to digital?

Next session:

• Read Chapter 5: Don’t Make Me Think• Writing for the web:– Short and sweet– Verbs first– Use images– Descriptive linking

• Using our blog site