Archive by Author | svensabel

How computers can make you look good – Ipsy

Last Monday (14th of September) the beauty products start-up Ipsy of YouTube celebrity Michelle Phan raised about 100 million dollars.

Even though being an online celebrity with almost 8 million subscribers (Youtube, 2015) gives you a great edge in starting up a beauty company, it was not because of Michelle that they raised this dazzling amount of money. For a long time already, beauty and fashion startups are trying to create software that learns and anticipates on what people want to wear. Ipsy believes the future is super-intelligent software that knows your tastes so well it will send you products that you’re guaranteed to like. (CNET, 2015)

Customers are paying a monthly $10 subscription fee to receive a so-called ‘glam bag’ full of beauty products. The fun thing about Ipsy is that the content of the bag is customized for the individuals. Customers have to fill out a quiz with 12 personal questions (think of skin color, eye color, etc), after which software will analyze their answers and determine which beauty products they probably like. Customers can review their products online, which is taken into account for their next order. (Ipsy, 2015)

michelle-phan-glam-bag-2

You may recognize this kind of business model, because Netflix did exactly the same in the movie industry, by offering recommendations based on what users liked to watch. I think we all know what kind of movement they have started. (CNET, 2015)

Ipsy is not the only company trying to use software to recommend products in the beauty industry. Competitor Birchbox is also shipping boxes of beauty products for a $10 monthly fee. The only thing that sets them apart except the boxes they arrive in. is the market they are aiming for. Birchbox is more aimed towards body/skincare and Ipsy is distributing make-up. (Brooke, 2015) With worldwide revenue for beauty care products expected to grow towards $461 billion in 2018, the market may be large enough for both.

Even though raising $100 million dollar and having three profitable years shows us that the algorithm they are using is getting pretty good, it is not fool proof yet. Problems range from products for the wrong skin color to inaccurate product descriptions. (Penninipede, 2013) Ipsy’s CEO says that there are still a lot of problems to work out: “That’s where the algorithm is not foolproof”. (CNET, 2015)

Author: Sven Sabel (354240ss)

References:

https://www.youtube.com/user/MichellePhan/about

http://www.cnet.com/news/f-u-n-d-e-d-silicon-valley-bets-100-million-that-its-computers-can-help-you-look-good/

http://help.ipsy.com/customer/en/portal/articles/1465221-what-s-a-glam-bag-

http://www.thesmallthingsblog.com/2013/06/battle-of-boxes-ipsy-versus-birchbox/

http://www.sammithebeautybuff.com/2013/09/why-i-cancelled-my-ipsy-subscription.html

The Individual Stock Trader

With the invention of the internet and the ongoing digital transformations, many everyday practices changed. I believe that one many of us can relate to, is stock trading for individual investors and the business models of the brokers we use.

In the traditional setting, we notice that a lot of communication is needed for buying or selling stocks. The brokers must actively seek to acquire a client base and then do research about the financial market to generate stock ideas. They will then communicate buy/sell recommendations to clients over the telephone and finally the brokers would then use their systems to order the stocks with their people on the trading floor. With this much communication and systems needed, cost for placing orders were high. This means that stocks had to rise (or fall) a lot before a profit was made. (Beattie, 2015)

Stock exchange

Because more and more people started connecting through the internet a new type of stock brokers emerged: Online Traders. The first company to offer this online trading was K. Aufhauser & Company in 1994 (!). On its website “WealthWEB” individuals were now able to order stocks directly and therefore minimizing the role of the agent they had to contact in the past.

With this development there was also a big change in the business models of brokers. In the traditional setting, brokers generated revenues from mostly payments for orders and trading commissions. They generated a lot of revenue on relatively few people.

The quality of traditional brokers varied dramatically across individuals, making it hard for investors to choose the best among them. Also, it is difficult for investors to discern whether or not the brokers have made a well-informed recommendation after only having had a brief telephone conversation. (Wu et al, 1999)

According to Wu, the online trading model however, is much more dynamic. Because of the huge amount of data available the investor got a much more active role in his own portfolio. With the Internet serving as an information gateway, the investor can do everything that the retail brokers used to do. With online trading, they can make their own decisions, and trades are executed instantaneously, at essentially the same price.

The business model for online brokers today is about delivering service and value. Convenience, control, accessibility and low commissions make online investing very attractive to individual investors. They generate revenues mostly from trading commissions, net interests from margin accounts, and (sometimes) payments for orders. Their goal is to generate highest possible traffic through an effective system with quality service. So in contrary to traditional brokers, they try to make profit through volume. (Investopedia, 2015)

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To conclude, through digitalization and a change business models we can now trade stocks faster, cheaper and more convenient than ever before.

Author: Sven Sabel
S.I.D.: 354240ss

References

Beattie, A. (2015) ‘The birth of stock exchanges’, http://www.investopedia.com/articles/07/stock-exchange-history.asp, last visited: 9-9-2015.

Wu J., Siegel M., Manion J. (1999). ‘Online trading: An internet revolution’, Sloan School of Management Institute of Technology (MIT) Cambridge.

Investopedia Staff (2015) ‘Brokers and online trading: Full service or discount’, http://www.investopedia.com/university/broker/broker2.asp, last visited: 9-9-2015