Digital Business Models

- Aneesh Zutshi

What is a Business Model?

• A representation of how an organization makes money!

Alexander Osterwalder’s Nine Building Blocks

Gillette Business Model

Bait

Hook

Business model has an element of innovation

1904

Elements of a Succesful Business Model

• Provides Value to customers– Cost Advantage – Betamax VOIP– High Quality – German cars?– Convenience – MiniPreço – Variety – Continente– Style and Status – Apple

• Beats competition– Continuous innovation– Lowest Costs– Bait and Hook– Brand Building– Network Effect (eg. Vodafone Closed User Groups)

Digital Business Characteristics

• Unique Characteristics– Low cost per user

– Large Network Effects

– Viral Marketing

Free

Freemium

• Information Overload • Reduced role of direct advertising• More Emphasis on word of mouth, social advertising

• Extremely short customer response time, quick word of mouth

• Potentially high competition

• Naturally Globalised Markets

• Network Effects- where even free adopters increase future adopter’s valuation of a product.

• Demonstration Effects - where software adoption significantly increases if users can try the software before buying.

• Free adopters help speed up the diffusion of a new product.

Digital Business Characteristics

Digital Business Characteristics

– User Generated information• Product Reviews• Blogs, Forums, Postings• Videos

– Eliminates intermediaries, shortens supply chain

– More Choice, variety, customizability

– Easy communication

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– Eg. Facebook, Youtube

• Double Sided Platforms– App development platforms, e-commerce, network effects– Eg. Amazon, ebay

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Types of Digital Business Models based on Client Type

• Business to Business (B2B) eg. Vortal, Amazon Cloud Services

• Business to Consumer (B2C) eg. Ebay

• Consumer to Consumer (C2C) eg. Youtube

Digital Business Models - VOIP

Freemium Business Model

Technology- Peer to Peer Communications

- Free Skype Calls

- Paid Skype Outs

Cheap, multiple front companies

Business Model

Are the the main revenue generators

- Google aims to promote usage of the Internet- Advertising generates enough revenue for all other products

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Crowdsourcing

• Getting users to review Places, Hotels

• Open Innovation

• Crowdvoting

• Microwork

T Shirt Designs

Re-Captcha

Digital Pricing Models

• SaaS instead of selling software licenses• Smaller Units of Payment

– Monthly Subscriptions– Pay per user– Pay per use/hour/Mb

• Free/Freemium

• Gift Economy

Digital Business Models largely affected the following industries

• Traditional Print/Media• Flight Bookings• Hotel Bookings• Long Distance Calling• Posts• Traditional Retail• Music Industry