Summary ‘Technology of the Week’: Digital Transformation Business Models Sharing Economy (Airbnb) vs. Long-Tail (Netflix)
We evaluated and compared two different business models of two successful companies. Both have used technological transformation to reach success. We looked at Airbnb, which is using the sharing economy model, and Netflix, which is using the long-tail business model.
The sharing economy concept means the optimization of resources through the redistribution, sharing and reuse of excess capacity in goods and services. The rise of mobile internet and social media has reduced the threshold to borrow resources from others enormously. Benefits for sharing economy include: saving costs, reduce negative environmental impact, stronger communities, etc. (https://en.wikipedia.org/wiki/Sharing_economy).
The long-tail concept means selling small amounts of a relatively large number of unique or less well-known products. It is very common in the industry of online internet retail.
Airbnb is an example of the sharing economy concept: it is a digital platform which allows local renters to rent out their free rooms to worldwide travelers. The business model is built on sharing of resources in the community. In earlier years, travelers booked their night stays at hotels, hostels, etc. Now, it’s also possible to stay at local houses through the platform of Airbnb, for mostly cheaper prices. IT plays an important role, in creating and maintaining platforms that are supporting the idea of the sharing economy (http://www.triplepundit.com/series/rise-of-the-sharing-economy).
Netflix is an example of the long-tail concept. It is the world’s largest company in online movies and series streaming (https://help.netflix.com/help). They offer a monthly subscription that allows unlimited access to movies, series and documentaries. Members can search for any movie; also less popular content is available as this is a characteristic of the long-tail. In the years before Netflix, they were just physical video libraries, where someone could rent a video for a limited period of time. Netflix made the transformation by offering online movie rentals. Internet is the critical factor to implement the long-tail business model, which most of the time resulted from digital transformation (http://bizshifts-trends.com/2015/02/04/chasing-tail-business-anatomy-long-tail-business-model-taste-obscurity-overwhelm-choice/)
In our paper we have used the business model canvas in order to show the business models of Airbnb and Netflix in a very simple way. The canvas model is easily understandable and shows every key aspect of a business. We have also used Porter’s Five Forces to show the competition within the industry of the chosen companies. In our paper we try to make future predictions based on the results of the Five forces analyze.
When we compare the business models, we see these similarities:
- Very few physical assets.
- Range is quite large, internationally oriented.
- Cost leadership plays big role.
- Very dependent of the internet.
- Customers around the sharing economy model are more price conscious
- The sharing economy is more dependent of their customers (suppliers at same time). Long- more dependent of suppliers (companies).
For the future, we expect the markets around these business models to grow. Because of people getting more price conscious, and getting more aware of the fact they can compare everything at the internet, the sharing economy will be more popular in time. The long-tail model is already getting popular, with all current possibilities of buying from the internet. A threat for Netflix will be that due the fact that downloading movies for free is so easy, people doesn’t want to pay anymore. Maybe more focusing on placing advertisements in films, and possible upgraded accounts to avoid the advertisements?
Vera Crijns – 374956
Pervin Demirtekin – 370681
Özlem Karakuş – 357166
Harm-Jan Rijneveld – 370370
Oscar Chong – 384993