The transition to a global digital economy in 2014 was sporadic – brisk in some countries, choppy in others. By year’s end, the seven biggest emerging markets were larger than the G7, in purchasing power parity terms. Plus, consumers in the Asia-Pacific region were expected to spend more online last year than consumers in North America. The opportunities to serve the e-consumer were growing – if you knew where to look.
These changing rhythms in digital commerce are more than a China, or even an Asia, story. Far from Silicon Valley, Shanghai, or Singapore, a German company, Rocket Internet, has been busy launching e-commerce start-ups across a wide range of emerging and frontier markets. Their stated mission: To become the world’s largest internet platform outside the U.S. and China. Many such “Rocket” companies are poised to become the Alibabas and Amazons for the rest of the world: Jumia, which operates in nine countries across Africa; Namshi in the Middle East; Lazada and Zalora in ASEAN; Jabong in India; and Kaymu in 33 markets across Africa, Asia, Europe, and the Middle East.
Private equity and venture capital money have been concentrating in certain markets in ways that mimic the electronic gold rush in Silicon Valley. During the summer of 2014 alone $3 billion poured into India’s e-commerce sector, where, in addition to local innovators like Flipkart and Snapdeal, there are nearly 200 digital commerce startups flush with private investment and venture capital funds. This is happening in a country where online vendors largely operate on a cash-on-delivery (COD) basis. Credit cards or PayPal are rarely used; according to the Reserve Bank of India, 90% of all monetary transactions in India are in cash. Even Amazon localized its approach in India to offer COD as a service. India and other middle-income countries such as Indonesia and Colombia all have high cash dependence. But even where cash is still king, digital marketplaces are innovating at a remarkable pace. Nimble e-commerce players are simply working with and around the persistence of cash.
To understand more about these types of changes around the world, researchers developed an “index” to identify how a group of countries stack up against each other in terms of readiness for a digital economy. The Digital Evolution Index (DEI) is derived from four broad drivers:
- supply-side factors : including access, fulfillment, and transactions infrastructure;
- demand-side factors : including consumer behaviors and trends, financial and Internet and social media savviness;
- innovations : including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset;
- institutions : including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem.
The resulting index includes a ranking of 50 countries, which were chosen because they are either home to most of the current 3 billion internet users or they are where the next billion users are likely to come from.
As part of the research was to understand who was changing quickly to prepare for the digital marketplace and who wasn’t. Perhaps not surprisingly, developing countries in Asia and Latin America are leading in momentum, reflecting their overall economic gains. But the analysis revealed other interesting patterns.
Take, for example, Singapore and The Netherlands. Both are among the top 10 countries in present levels of digital evolution. But when considered the momentum – i.e., the five-year rate of change from 2008 to 2013 – the two countries are far apart. Singapore has been steadily advancing in developing a world-class digital infrastructure, through public-private partnerships, to further entrench its status as a regional communications hub. Through ongoing investment, it remains an attractive destination for start-ups and for private equity and venture capital. The Netherlands, meanwhile, has been rapidly losing steam. The Dutch government’s austerity measures beginning in late 2010 reduced investment into elements of the digital ecosystem. Its stagnant, and at times slipping, consumer demand led investors to seek greener pastures.
Based on the performance of countries on the index during the years 2008 to 2013, researches assigned them to one of four trajectory zones: Stand Out, Stall Out, Break Out, and Watch Out.
- Stand Out countries have shown high levels of digital development in the past and continue to remain on an upward trajectory.
- Stall Out countries have achieved a high level of evolution in the past but are losing momentum and risk falling behind.
- Break Out countries have the potential to develop strong digital economies. Though their overall score is still low, they are moving upward and are poised to become Stand Out countries in the future.
- Watch Out countries face significant opportunities and challenges, with low scores on both current level and upward motion of their DEI. Some may be able to overcome limitations with clever innovations and stopgap measures, while others seem to be stuck.
Break Out countries such as India, China, Brazil, Vietnam, and the Philippines are improving their digital readiness quite rapidly. But the next phase of growth is harder to achieve. Staying on this trajectory means confronting challenges like improving supply infrastructure and nurturing sophisticated domestic consumers.
Watch Out countries like Indonesia, Russia, Nigeria, Egypt, and Kenya have important things in common like institutional uncertainty and a low commitment to reform. They possess one or two outstanding qualities — predominantly demographics — that make them attractive to businesses and investors, but they expend a lot of energy innovating around institutional and infrastructural constraints. Unclogging these bottlenecks would let these countries direct their innovation resources to more productive uses.
Most Western and Northern European countries, Australia, and Japan have been Stalling Out. The only way they can jump-start their recovery is to follow what Stand Out countries do best: redouble on innovation and continue to seek markets beyond domestic borders. Stall Out countries are also aging. Attracting talented, young immigrants can help revive innovation quickly.
What does the future hold? The next billion consumers to come online will be making their digital decisions on a mobile device – very different from the practices of the first billion that helped build many of the foundations of the current e-commerce industry. There will continue to be strong cross-border influences as the competitive field evolves: even if Europe slows, a European company, such as Rocket Internet, can grow by targeting the fast-growing markets in the emerging world; giants out of the emerging world, such as Alibaba, with their newfound resources and brand, will look for markets elsewhere; old stalwarts, such as Amazon and Google will seek growth in new markets and new product areas. Emerging economies will continue to evolve differently, as will their newly online consumers. Businesses will have to innovate by customizing their approaches to this multi-speed planet, and in working around institutional and infrastructural constraints, particularly in markets that are home to the next billion online consumers.
We may be on a journey toward a digital planet — but we’re all traveling at different speeds.
Short video about this article : http://bcove.me/nbmmm7et
As part of the Digital Transformation Project, we are proposing the implementation of a pre-ordering smartphone application for McDonalds Netherlands. On the base of our study conducted with university students living in Rotterdam, a pre-ordering application would be very well perceived at a fast-food chain like McDonald’s. Respondents indicated that, even they associated McDonald’s with quick service, they still had to wait up to 10 minutes for their food. The implementation of an app, that would take care of the ordering, as well as the payment in advance, would highly increase time-efficiency at the restaurants for consumers, as well as employees.
This digital transformation would go in line with McDOnald’s business model in terms of a reciprocal relationship since the implementation of a pre-ordering service would increase time-efficiency, which is a big part of McDonald’s business model. Being an IS Innovator (as they typically are one of the first companies to apply new technologies, as it was the case with NFC bank card payment), the prer-ordering app would moreover enable McDonald’s to secure its market leadership through fostering a relatively new type of innovation. Few companies in the industry have already applied such applications, however, more and more are joining the trend. In order to reassure its market position, McDonald’s should join the trend rather sooner than later.
The application is proposed for the Dutch market, where consumers are very much focused on time efficiencies and are very familiar with the use of smartphones, which leads to the assumption that the application will be accepted and anticipated by consumers. According to McDonald’s, the Dutch market furthermore shows great potential for growth, making it the ideal starting point for the introduction of such an application. The conducted survey confirmed these assumptions since a great majority of respondents indicated that they would make use of such an application if this would mean they would not have to wait for their ordered food.
As for any innovation, financial factors are important to be considered. The cost of the application, including the creation costs, the costs oft he IT expert team, the neccessary machines, and the marketing costs in order to raise awareness about this new ordering channel, are estimated to be approximately US$ 4,650,000. However, McDonald’s can be assumed to have enough financial resources to finance the development and implementation of the suggested application. Furthermore, its in-house tech team can decrease the costs for most kinds of technical issues.
In the end, there are also risks associated with the implementation of a new app, primarily stemming from its development, launch, user surface, and technical quality.
Those risks could involve no interest of acceptance by customers, and therefore more losses than revenues financially. There is furthermore the risk that franchisees will go against the company and not want to buy a license and install the use of the application. Finally, problems could surface due to technical issues, feasibility, and ease of use for certain smartphone operating systems and due to the competitors being further along in the innovation process which applications already further developed, which would turn McDonald’s into a laggard for innovation.
However, overall the implementation of such information technology has great potential and should not be offset because of the possible risks. McDonald’s should implement this application in order to not fall behind in the Industry, where other companies are already successfully employing such technology, and to improve their time efficiency, which is a crucial part of their business.
When talking about the future of transportation, the last company you would think of is Suzuki. This Japanese company specializes in designing and manufacturing passenger cars, motorcycles and several other non-vehicle related machines. While we get many signs that the transportation industry is changing with companies like Mercedes-Benz, Tesla, Google and Apple making headlines about electronic and self-driving cars. However Suzuki has not announced any change in its business model and is threatened to get left behind in this changing environment.
Most of Suzuki’s revenue comes from its automobile sector, the company’s strategy is clearly focused on the production of small and subcompact vehicles. The management however is more focussed on its current organizational structure and not on future innovations.
As the automobile market is changing and Suzuki is forced to make a descision on how to proceed onward. We proposed a solution that allows Suzuki to manufacture their own self-driving cars.
The technology behind the autonomous car is not an easy one and its success is dependant on many technical, political and social factors. For an autonomous vehicle to actually function, changes in road infrastructure and vehicle composition is vital. The so called V2I (Vehicle-to-Infrastructure) and V2V (Vehicle-to-Vehicle) communication technology is used by the self driving car to be able to calculate risks and take pre-emptive action to avoid and mitigate crashes as well as detect stop signs, signal status’, speed limits, surface conditions and pedestrian crosswalks. Besides this the car itself will need to have the Light Detection And Ranging (LIDAR) technology, which is the main source of how self driving cars will ‘see’ the world they operate in. By projecting dozens of laser beams around 360 degrees of the car. Through this it is able to create 3D images of objects, which helps the car see potential obstacles in its way. For the self-driving car to have any chance on commercial success, government legislation concerning liability limitation will have to be created, so that car manufacturers are not wholly responsible whenever an accident occurs with an autonomous vehicle.
The automobile industry is very likely to have its most dramatic shift in history. Many of Suzuki’s competitors are already very advanced with this technology so Suzuki will not have the first-mover advantage. However even with this fact we recommend that Suzuki does in fact start developing its own self-driving car. They should be an ambidextrous company, which means that to protect the traditional business and develop disruptive innovations simultaneously. If Suzuki fails to adapt to this shift in the industry, they will likely suffer tremendously. Lets hope Suzuki heeds our advice and does not end up like Kodak of the automobile industry.
Siva, S.R.K. (2013),’The Evolution of Connected Vehicle Technology: From Smart Drivers to Smart Cars to… Self-Driving Cars.’ ITE Journal, Volume 83, no. 7, pp 22-26.
The Boijmans van Beuningen museum aims to provide its visitors with an exciting experience by showing them inspiring, amazing world class art collections. In order to achieve this, a considerably high budget is needed, from which almost 50% is funded by the government. Given thefact that the government has announced that the amount of subsidy will decrease dramatically in the coming years, the museum is forced to find an extra stream of revenue that could cover up for this future income loss. This is essential both for customer satisfaction and future business growth.
In this report, a potential solution that could generate additional sources of revenue is proposed. Currently, the museum has around 300,000 visitors on a yearly basis, with entrance fees accounting for 20.3% of the generated revenue. The number of visitors could be increased by embracing the latest technologies that could enhance the current museum experience significantly. Augmented reality, one of the latest but most developed technologies to date, would serve this purpose perfectly. Using augmented reality technology inside the museum enables visitors to easily access additional multimedia information about artefacts, explore 3D models of augmented artworks and access archived artworks that used to be not displayed due to space constraints. In order to make the museum experience even more revolutionizing, the museum could integrate beacon based technology, it is a Bluetooth enabled tracking technology that allows visitors to instantly receive relevant information as soon as they get close to a specific artefact. Apart from the improved customer experience, the museum also gains insight in visitor behavior, since it can track the paths that visitors follow through the museum and which areas are visited most. These insights can then be used to improve future museum experience, of course these insights will only be used with permission from the visitors.
In terms of technical feasibility, the augmented reality technology in combination with the beacon based technology have already been developed and tested in the museum industry, so it has also been proven that it is technically feasible. Having looked at the IT facilities present at the museum, an Augmented Reality app would fit into their future plans. Additionally, the Boijmans van Beuningen museum has already had experience with augmented reality, since they used it for a one-day exhibition that was perceived well. Therefore, it can be stated that the willingness to cooperate from the organization in this project is very likely. In addition to the numerous benefits this technology entails, the financial part also plays a significant role in the deployment of this augmented reality technology. However, the implementation of this technology is expected to pay off within a short time span of a few years, since not only the visitor numbers are increasing, but it is also expected to lead to an important boost in terms of press and media attention, which improves the museum’s brand image.
To conclude, the benefits of adopting augmented reality greatly outweigh the costs that also come along. Therefore Boijmans van Beuningen museum is advised to embrace this technological transformation.
By Group 5
Sjaak Meeuwsen – 437156
Claude Zwicker – 437277
Yinuo Jin – 373227
Hidde van Heijst – 436800
Ruud Schippers – 441698
Elsevier is a world-leading scientific publishing company and offers over 2,500 unique journals and more than unique 33,000 book titles (Elsevier, 2015). These offerings are unique and therefore differentiate them from the competition. Additionally, Elsevier offers web-based, digital solutions, such as ScienceDirect, Scopus, and Reaxys. These unique services enable researchers, students and other individuals to better consult the content made available by Elsevier (and other publishers). These solutions are just an example of all the Internet features Elsevier tries to implement into their business fundamentals. Currently, Elsevier’s business is shifting from scientific publisher towards a professional information solutions provider. Elsevier’s CEO Ron Mobed is encouraging the business to ‘Lead the way’ (Mobed, 2014). From this corporate vision, we can infer that Elsevier is striving to implement new technologies in order to disrupt the publishing industry.
To generate revenue, Elsevier mainly sells access to scientific journals to its customers. The value proposition Elsevier offers is that they consult the institution how to generate revenue with their services. The demonstration of this value proposition is done on a yearly basis by Sales directly to the institution. However, these business-to-business negotiations are transforming due to emerging technologies, which for example result in the increase of consumer informedness (Li et al., 2014).
To control this transformation (e.g. consumer informedness) and provide other complications regarding technology development, we propose an online application driven by cloud computing. It is an online platform where the institution can login, create and adjust similar metrics as currently shown by Sales. This innovation will further expand the current concept of Elsevier’s value to the institutions, but will introduce risk since institutions are not required to contact Elsevier anymore for these metrics. The same focus will remain, where not only the value of their investment in Elsevier is presented, but also how Elsevier’s services contribute the institution‘s revenue through an increased institutional competitiveness and collaboration among researchers. Competitiveness will help the institution to gain a better market position and earn more out of four sources: block funding, project funding, commercial monetization, and tuition and endowment. Collaboration among researcher will improve the quality of their research, which will lead to better publications and will result in more value for the institution. In conclusion, the online application will lead to more captured value for Elsevier and lead to more value and revenue for the institution.
Elsevier, 2015. At a Glance. [Online] Available at: https://www.elsevier.com/about/at-a-glance [Accessed 7 October 2015].
Li, T. et al., 2014. Consumer Informedness and Firm Information Strategy. Information Systems Research, 25(2), pp.345–63.
Mobed, R., 2014. Elsevier’s vision. Amsterdam, Netherlands: Elsevier. Internal employee presentation.
Without any doubt, everyone within this blog has already heard about the concept of outsourcing. In this post, I am going to write about a particular product, that has incredible potentiality: the thin client.
I firstly got in touch with the concept of thin client when I was reading the book: The Big Switch written by Nicholas Carr. In its book, the author does an interesting parallelism between the diffusion of the electricity and the computers, forecasting the computing to become soon an utility. According to him, the next big change will be the outsourcing of the computers, as a matter of fact he predicts a bright future for the so called as-a-service-models (in particular in his book he speaks of SaaS and HaaS). In its chapter 4, called: Goodbye, Mr. Gates, he explains how this is going to be possible: through the use of thin clients. Thin clients are stateless, fanless desktop terminal that has no hard drive. They works thanks to a connection with a data centre (which could be proprietary or also outsourced), which allow the users to have all features typically found on the desktop PC, including applications, sensitive data, memory, etc. In other words, the thin client allow users to perform, in most of the occasion, as they would do with a personal computer. The only case in which normal computers are better, is when it comes to very intensive and demanding applications, such as AutoCAD, this is due to the absence of hardware.
Thin clients are linked to a single powerful host machine, which can run multiple operating systems and multiple applications on the same server at the same time. This is possible only thanks to the use of virtualization, i.e. a software that separates physical infrastructures to create various dedicated resources.
Creating such an infrastructure has several benefits for a company:
1) Lower Operational Costs: An office environment where several workstations are involved can access a single server unit, thereby reducing the operational costs covering these related actions:
- Setting up the device takes less than ten minutes to accomplish.
- The lifespan of a “client” unit is very long, since there are no moving parts inside. The only parts that need constant replacements are the peripherals that are external to the PC. This means that when something breaks at the “client’s” end, it can be as easy as taking a replacement unit to replace the broken one. Even wear and tear is considerably unnoticeable.
- Energy efficiency – A slim unit is said to consume 20W to 40W as opposed to the regular thick PC, where power consumption during operation mode consumes 60W to 110W. In addition, the thin PCs need little or no air conditioning at all, which literally means less operating costs. Whatever air conditioning needed is demanded and supplied at the server area.
- Work efficiency – Its work environment can be far-reaching and extensive; as it can provide quick access to remotely located workers simultaneously operating on server-based computing.
2) Superior Security: Since users will only have access to the server by network connections, security measures like different access levels for different users can be implemented. That way, users with lower access levels will not be able to see, know, or in worst case scenarios, hack into the confidential files and applications of the entire organization. They are all secured at the server’s end, which is also a way of securing data files in the event of natural disasters. The servers will be the only machines that need to survive the disaster as the main location of all the saved data. Immediately after the disaster, new “clients” can easily be connected to the server, for as long as the latter remains intact.
3) Lower Malware Infection Risks: There is a very slim chance of getting malware on the server from a thin client because inputs to the server only come from the keyboard, mouse actions, and screen images. The PCs get their software or programs from the server itself; hence, patches, software updates and virus scanning applications are being implemented only on the server’s end. It follows that the servers will be the one to process information and store the information afterwards.
4) Highly Reliable: Business organizations can expect continuous service for longer durations since thin clients can have a lifespan of more than five years. In as much as these units are built as solid state devices, there is less impact from wear and tear through constant use.
5) Space Savings: the small dimension of a thin client allow to have a better workplace with more space for the normal working activities.
Figure 2: An HP t420 Thin Client
Of course the thin clients have some downsides such the fact they have to be always connected and that a powerful central host machine is needed, but for companies which have to bear expenses for setting up an IT infrastructure the thin clients could be a real revolution.
Carr, N. G. (2008). The big switch: Rewiring the world, from Edison to Google. WW Norton & Company.
Maybe you have heard about EatWith, the technology platform that brings the travelers to discover the delicious part of the destination at the chef’s house. EatWith was founded in 2010 by Guy Michlin and Shemer Schwarz and since then, it connects tens of thousands people together over one meal. Inspired by EatWith, Fan Zhang (Lamy), the former Managing Director of DigitasLBi, left the advertising industry he had worked for almost 10 years to start the dining sharing platform HomEat early this year. HomEat is the sharing service platform for chefs and diners and it connects chefs who are enthusiastic cooking and diners. HomEat invites anyone who would like to share his/her dishes to be the chef and to provide unique dining experience at his/her place. Chefs could publish the meal and list the menu on the platform; diners, on the other hand, could search for chefs and meals to reserve the ones they would like to join. Besides chefs’ places, HomEat also launched a common kitchen where meals could be held, so diners would not be concerned about eating at strangers’ places.
When asked how he came up with the idea, Lamy said traditional restaurant industry is facing bottleneck due to high costs, while eating is a frequent and diverse rigid demand. In China, there is no other platform helping people to find great food than Dianping and with increasing popularity of P2P, platforms like Airbnb and Uber meet users’ needs quite well. Known as the Airbnb in dining industry, HomEat aims at higher level of sharing platform – common interest in food and extraordinary dining experience.
HomEat not only brings chefs and diners together on the platform, but establishes online payment, standardizes the process of reservation, payment, occurrence and feedback, optimizes the experience of chefs and diners, and build the mutual rating system for both chefs and diners. Lamy said there would be an internal meal testing before any chef start offering the first meal to diners. HomEat would give chefs advice on menu and pricing based on the testing and also help chefs understand their characteristics and unique selling point in order to better promote and advertise themselves on the platform.
HomEat connects online and offline and this is how Lamy sees restaurants in the future. The revenue of HomEat comes not only from traditional commission but the common kitchen. In addition, when the platform obtains large amount of users, the value of advertising and e-commerce could also be explored. HomEat started A round of funding besides the angel investment of more than one million dollars. Lamy also plans to achieve 200 private/common kitchens and 500 chefs in October 2015 and introduce more functions, e.g. cooking lessons and chefs competitions, to the platform.
According to Lamy, there are many foodies in China and many of them have restaurant/café dreams. HomEat offers the platform to lower the entry of owning restaurant and helps them fulfill their dreams.
Imagine sitting in a train. Take a look at the person on your left hand side. Meet Bob. You don’t know Bob, and you will never get to know Bob, as Bob is staring out of the window with his headphones on. Look straight ahead again. There is a couple sitting opposite of you, sharing a set of earphones and head-banging on music you cannot hear. At the back of the train, you suddenly see your friend Denise, and you call out her name; unfortunately, she does not seem to hear you as she is fully engaged in a new Spotify playlist she just discovered. You decide to pull out your headphones and put on the new album of Mumford & Sons.
Music is everywhere. Music has been everywhere for decades, yet recently, a new technological development disrupted the entire industry; streaming services. Companies such as Spotify, Rdio, Apple Music, Pandora and Tidal are all engaged in fierce competition to attract most paying customers. However, these companies face two problems. Firstly, although customers seem to grow very fond of music streaming services – almost 15 billion numbers were streamed in the United Kingdom in 2014 (The Guardian 2015), and United States music streaming revenues surged to over 1 billion dollars in the first half of 2015 (Statista 2015) -, these services still do not make enough revenue to become profitable. Secondly, artists do not love streaming services as much as users do. We all can recall the moment that Taylor Swift decided to withdraw her music from Spotify, and other artists as Beyonce and Ed Sheeran have also attempted to get around the influence of these streaming services. As can be derived from the ongoing discussion regarding streaming royalties, it seems that artists do not feel treated fairly by these businesses (The Economist 2015).
However, yesterday Pandora announced a takeover that might mark a change in the relationship between artists and streaming services. With its takeover of Ticketfly, an online concert ticketing service similar to Ticketmaster, Pandora will soon be able to directly sell concert tickets to music listeners. Whilst services as Pandora and Spotify were already promoting the sales of tickets through ads leading the listener to third-party websites, Pandora has now decided to move the entire purchase process to within its own ecosystem.
Pandora can use its experience in data collection to specifically target customers that might be interested in concert tickets from a certain artist. Apart from strengthening the ties between listening to music and visiting a concert hence increasing the music experience for users, Pandora also strengthens bonding with artists by this takeover. As concert tickets sales is still booming business (Techcrunch 2015) and has even become the main source of income for artists (Forbes 2015), artists will eventually be able to leverage the enormous user database of Pandora and even specifically target their ideal customer, without having to pay any additional promotion costs.
For Pandora itself, the acquisition of Ticketfly might also create more opportunities to generate revenue, and perhaps turn into a profitable business on the long-run. Pandora seems to have found a unique way to use its massive amounts of data to increase value for both parties simultaneously in its two-sided market, therefore increasing pressure on competitors such as Spotify and Apple Music.
Do you think that with this step, Pandora has revolutionised the music streaming service industry once again, ensuring that Bob can get involved even further with his favourite bands? Do other music streaming services have to follow? Or do you think there is another answer to low profits and weak bonds with artists?
The Economist 2015, The dry stream of musicians’ royalties. Viewed 9 October 2015. Accessible via <http://www.economist.com/blogs/prospero/2015/09/music-business>.
Forbes 2015, Pandora’s purchase of Ticketfly finally good news for shareholders. Viewed 9 October 2015. Accessible via <http://www.forbes.com/sites/bobbyowsinski/2015/10/08/pandoras-purchase-of-ticketfly-finally-good-news-for-shareholders/>.
The Guardian 2015, Streaming: the future of the music industry, or its nightmare? Viewed 9 October 2015. Accessible via <http://www.theguardian.com/technology/2015/jan/02/streaming-music-industry-apple-google>.
Statista 2015, Music streaming revenues surpass physical format sales. Viewed 9 October 2015. Accessible via <http://www.statista.com/chart/3852/us-music-industry-revenues/>.
Techcrunch 2015, Pandora Acquires Ticketfly for $450m to sell concert tickets. Viewed 9 October 2015. Accessible via <http://techcrunch.com/2015/10/07/pandora-acquires-ticketfly-for-450m-in-a-bid-to-sell-tickets-to-live-music-shows/#.db6ey8:pyx4>.
There are thousands of apps around. For multiple platforms (iOS or Android) or in multiple browser. You probably use them on many devices: Your phone, tablet or laptop. But all those applications have very limited functionality on their own. Only by communicating to their user, connecting them between each other and swapping all kinds of information they become powerful.
And that’s where APIs come in. API stands for Application Programming Interface and describes the information and rules software programs interact with each other.
The traditional way of development focusing on web frameworks (e.g. Microsoft .NET, Ruby on Rails, PHP) can require costly integration into other software when not set up properly. Adaption to special needs can easily amount to a project in middle five figures.
An API centric piece of software executes most or all functionality through API calls. So why is this important?
With API-Centric Design the core function of a software (for example the Twitter Stream of new Tweets) is build separately from the way a user accesses it (in our example Twitter can be accessed through a browser, an iOS app from an iPhone, iPad, Android devices, aso.). There is only one core product running in the background and then many different customized front-end ways of accessing the core product running in the back-end. All the communication between those parts happens over? You guessed it: APIs!
No more changing and tweaking the core product because on a windows phone was a display error. You just handle that over the windows phone front-end client.
Bah…. that was a lot of techie talk. So what?! Well that brings us to our next big thing:
The Internet of Things
There are estimates that until 2020 there will be more than 50billion connected devices. That’s a lot! And it will shift who and what communicates over the internet. Today people communicate with people or people communicate with machines and systems. But in the age of the internet of things systems mostly communicate directly with systems. And they don’t care about pretty graphical interfaces on some gadget with touch screen. For those systems to work you need solid APIs connecting many back-ends fast and in a reliable way. And what would be more suitable for this task than software created through API Centered Design?
Oracle recently released an API Management Tool. So did IBM and Intel. These big corporations undertake those steps to be well prepared for what is about to come: The internet of things. It’s gonna be a paradigm shift.
But Where is the Money?
APIs aren’t new. And there are a lots of them. In the Programmable Web Database are more than 14’000 APIs registered. But with the emergence of mobile and the internet of things, they’re in the spotlight again. API centered software enables micro services that fit a specific need an solve a well detailed problem. Other programs can build upon existing APIs using their functionality to expand and build their own. This layer structure can help to automate tedious tasks by integrating and arranging the right APIs. There are many offerings already that allow fast creation of API-based back-ends (e.g. Treeline or Stamplay). APIs therefore build a solid foundation others can build upon. Google does that for a while already and offers a ton of APIs for others to use (e.g. Google Maps). But if you and especially your users call them regularly you have to pay for them. And they’re not cheap:
This example brings us to our first business model with APIs: If you’re providing some service that is of value to others, you can charge for every time a user or program is calling your API and uses its functionality. Even if it’s just a couple cents per call, if your API gets used thousand times a day, that’s steady income.
Another business case is to offer your API for free and animate other developers to build upon your existing API. Through referrals from that software you then generate additional sales. Uber does this with success: By offering their API for free they animate developers to build upon their core product. If someone signs up for Uber through another program that uses the Uber API, they pay the developer who build the new product a commission of $5-10.
There will be many more business models emerging around API. Especially connected to the Internet of Things. The paradigm shift opens up new business opportunity ready to exploit.
What business models including APIs do you see? I’m very interested in reading about them, so please leave a comment!
On 9 September, Tim Cook (CEO Apple) says: ‘the future of television is Apps‘ (Apple, 2015). Not everyone will agree, but it is almost certain that this industry is on the brink of a huge transformation. The only challenge left for television is the input problem, where people primarily pay for traditional, linear, pay-television services and besides that own a secondary device (e.g. DVD player, Apple TV) for additional content (Yarow, 2015). However, it is unclear if or when the ‘secondary’ service can be a substitute for the conservative primary services. Some predictions state that these new devices (e.g. Apple TV) could turn the television into a dumb piece of glass (Yarow, 2015), since many companies are making a bet that the largest screen in our homes is going to become an operating system like the ones that power our computers and phones (Hempel, 2011).
Many things have changed since devices are connected to the Internet. Millions of independent developers have got the chance to create great applications for multiple devices. The television is next and many start-ups will look for opportunities to offer video experience via applications on products such as the Apple TV (Yarow, 2015). Besides that big companies are forced to adjust their content as well. For example, Jeff Bewkes (CEO of Time Warner) spoke about the company’s plan to move its vast catalogue of movies and TV shows onto the Web (Lyon, 2011). Besides that, products like the Apple TV provide opportunities for all kinds of businesses (e.g. Netflix, HBO) to broadcast their content in a new way on the biggest screen in the house.
To convince the consumer, the only way to win it digital is to keep it simple (Lyon, 2011). Then if the new platform works, the prediction is that the traditional, linear, pay-television services will become secondary, because people will start to wonder why they are wasting money on this conservative service (Yarow, 2015). To make this transformation from traditional television to the Internet happen, some things need to be taken into consideration. Especially content expectancy, social influence, facilitating conditions, hedonic motivation and habit have significant effects on behavioral intention on (mobile) television (Wong et al., 2014). Additionally, Wong et al. (2014) claims that gender and other demographics tend to have a moderating effect on this television behavior. The question remains if online television is better in serving the needs of users than the traditional television service. And will suppliers be able to adapt new technologies to capture value? Research implies that this adaption is needed. For example, the viewer engagement actually is greater when social media is involved (Pynta et al., 2014), and new social possibilities come along with Internet on television.
From the supplier side, the web has the power to make media distribution cheaper and more efficient (Hempel, 2011). On the other hand, the current business model heavily relies on the revenue they earn from licensing. In each country there are able to capture value since it is legally possible to capture value in each geographic region. The web is breaking this business model. Ad rates are much lower on the Internet. Networks cannot collect their fees. Cable companies fear losing our business. Someone has to pay for all that bandwidth we are using to stream our shows (Hempel, 2011). This means that the suppliers must look for new opportunities to generate their revenue. The Internet on television not only brings opportunities, but also big challenges for the current participants, if they want to stay alive.
Vincent Laduc (417658vl)
Apple, 2015. Apple Special Events. [Online] Available at: http://www.apple.com/apple-events/ [Accessed 1 October 2015].
Hempel, J., 2011. What the hell is going on with TV?. [Online] Available at: http://fortune.com/2011/01/03/what-the-hell-is-going-on-with-tv/ [Accessed 1 October 2015].
Lyon, D.W., 2011. JEFF BEWKES AND THE APPLE TRAP. B-School Connection.
Pynta, P. et al., 2014. The power of social television: Can social media build viewer engagement? A new approach to brain imaging of viewer immersion. Journal of Advertising Research, pp.71-80.
Wong, C.H., Tan, G.W.H., Loke, S.P. & Ooi, K.B., 2014. Mobile TV: A new form of entertainment? Industrial Management and Data Systems, 5 August. pp.1050-67.
Yarow, J., 2015. The new Apple TV will blow up the TV industry. [Online] Available at: http://uk.businessinsider.com/the-new-apple-tv-is-going-to-blow-up-the-tv-industry-2015-9?r=US&IR=T [Accessed 1 October 2015].
On 9 September 2015 Apple presented the iPhone 6S, where they claim: ‘The only thing that has changed is everything’ (Apple, 2015). On the other hand, Samsung claims that ’The next big thing is (already) here’ with their new smartphones (Samsung, 2015). Since I need to buy a new phone very soon, I am starting to doubt how different these products actually are.
The acknowledgment must be made that these companies do not make these phones by themselves. For example, Apple has over 200 suppliers to create their products (Apple Inc., 2015). Besides that Samsung aims to strengthen its position as worldwide computer chip manufacturer (ANP, 2015), which implies that they supply other firms to make their electronic devices (e.g. iPhones).
According to Kaufman et al. (2010) these business networks emerge because customers are more informed and therefore increasingly demanding products and services tailored to their specific needs. This results in business networks, which are able to break up their value chain into independent modules (Kauffman et al., 2010) and thereby are able to add more value to the final product (Ketchen Jr. et al., 2004). One of the reasons to participate in a business network is that it accomplishes more as a whole than the value it can capture by its individual parts (Kauffman et al., 2010). Another reason, especially in this technology driven industry, is that business networks tend to be more innovative (Möller & Rajala, 2007) (Gnyawali & Park, 2011). Therefore all these firms help to grow their entire business network (Gnyawali & Park, 2011), to motive more external parties to join the network (Gallaugher, 2014) and further improve their competitive advantage with their final product (Ketchen Jr. et al., 2004).
The uniqueness of Apple’s business network is that a direct competitor (e.g. Samsung) is a supplier for their products (e.g. iPhone). Scientific literature names this phenomenon co-opetion, where end-product competitors are contributing in each other’s value chain. As aforementioned a reason to embrace co-opetion is more innovation (Gnyawali & Park, 2011), but this still does not clarify why for example Samsung might cannibalize its own products. An explanation is that co-opetition is only beneficial when businesses are still able to differentiate with their value adding activities (Ketchen Jr. et al., 2004). Therefore if end-product competition is growing, businesses are trying to further protect their differentiating activities (Ritala & Hurmelinna-Laukkanen, 2009). A good example from Apple and Samsung are the patent wars they are having for the past few years. They are blaming each other for copying each other innovations to protect their differentiating activities. However, co-opetition will still be beneficial for both parties, since another observance states that it results in less vertical integration and more diversification (Gnyawali & Park, 2011). For example, this ensures that Samsung can further grow as a chip manufacturer without the interference of Apple. Additionally, the suppliers of companies such as Apple benefit from the demand they generate (Zhang & Frazier, 2011). Therefore the question about co-opetition should be: do we as a business want to capture value from competitors or establish a greater competitive advantage? (Park et al., 2013)
To be honest I really admire the research done about this phenomenon named co-opetition. However I still can’t figure out my personal issue. Therefore I would like to ask you: what phone should I buy? Since I can’t see the difference between the products of Apple and Samsung anymore after this study.
Vincent Laduc (417658vl)
Anderson, A., Park, J. & Jack, S., 2007. Entrepreneurial social capital: Conceptualizing social capital in new high-tech firms. International Small Business Journal, 25, pp.245-72.
Anon., 2014. In Gallaugher, J. Information Systems: A Manager’s Guide to Harnessing Technology. Saylor.
ANP, 2015. Samsung wil verder groeien als toeleverancier. [Online] Available at: http://www.nu.nl/mobiel/4132940/samsung-wil-verder-groeien-als-toeleverancier.html [Accessed 25 September 2015].
Apple Inc., 2015. Supplier Responsibility. [Online] Available at: https://www.apple.com/supplier-responsibility/our-suppliers/ [Accessed 23 September 2015].
Apple, 2015. iPhone. [Online] Available at: http://www.apple.com/iphone/ [Accessed 1 October 2015].
Gnyawali, D.R. & Park, B.-J.(., 2011. Co-opetition between giants: Collaboration with competitors for technological innovation. Research Policy, 40(1), pp.650-63.
Greve, H.R., Baum, J.A.C., Mitsuhashi, H. & Rowley, T., 2009. Built to Last but Falling Apart: Cohesion, Friciton and Withdrawal from Interfirm Alliances.
Hitt, L.M., 1999. IT and firm boundaries: Evidence from panel data. Information, 10(2), pp.134–49.
Kauffman, R.J., Li, T. & van Heck, E., 2010. Business Network-Based Value Creation in Electronic Commerce. International Journal of Electronic Commerce, 15(1), pp.113–43.
Ketchen Jr., D.J., Snow, C.C. & Hoover, V.L., 2004. Research on Competitive Dynamics: Recent Accomplishments and Future Challenges. Journal of Management, 30(6), pp.779-804.
Möller, K. & Rajala, A., 2007. Rise of strategic nets — New modes of value creation. Industrial Marketing Management, 36(7), pp.895-908.
Park, B.-J.R., Srivastava, M.K. & Gnyawali, D.R., 2013. Walking the tight rope of coopetition: Impact of competition and cooperation intensities and balance on firm innovation performance. Industrial Marketing Management , 43, pp.210-21.
Ritala, P. & Hurmelinna-Laukkanen, P., 2009. What’s in it for me? Creating and appropriating value in innovation-related coopetition. Technovation, 29, pp.819-28.
Samsung, 2015. Homepage. [Online] Available at: http://www.samsung.com/us/ [Accessed 1 October 2015].
Zhang, J. & Frazier, G.V., 2011. Strategic alliance via co-opetition: Supply chain partnership with a competitor. Decision Support Systems , 51, pp.853-63.
It´s not the first time that the German based company Aldi is tackling an industry with a low competitive price. This time it is the fast growing music streaming industry. What sounds like a curious sideline business could be a central element for changing the brand in the next years.
Two weeks ago Aldi launched on own music streaming platform in cooperation with Napster. For only 7.99€ per month, Aldi offers more than 34 million songs and audio books. At first it seems to be nonsensical to enter a highly competitive market in which already big competitors such as Spotify, Apple Music, Deezer or Ampya exist. And even that Aldi is cooperating with Napster has only limited benefits, as this brand is only partly known by the young target group.
However, Aldi has a good timing for this launch. The pioneer Spotify has demonstrated that music streaming in a performing and lucrative market. And Apple Music and Deezer are currently highly investing in advertisement and thereby keeping this topic continuously at customer awareness. This enables an opportunity for a low-cost provider.
Aldi has already proven in the past that they provide good multimedia products. In the hardware market they have a very fruitful cooperation with Medion, and in the mobile communication market AldiTalk is very successful as well. These two examples have shown that selling products or service at a low price but with high sales number can be profitable. Additionally, Aldi can use synergies and offer bundles, as mobile services as music streaming are closely connected. For example they can exclude the data volume for Aldi Life from the monthly data volume. Furthermore, they already have an existing customer (data) base. Therefore, the success prospects for Aldi Life are high and it is very likely that this discount strategy will be successful for music streaming as well.
This new tender is strengthening the retail competence within the field of digital and virtual products, a topic that is becoming more and more important in the future. Currently price and quality are the crucial factor which grocery story the customers favor. But, especially in the e-commerce these boarders are diminishing. Amazon Fresh is a good example: It is very likely that customers that had a good (service) experience are getting to know Amazon as a retailer much better then Aldi & Co.
For traditional retail companies the only counter strategy is the development of digital products and thereby getting contact to young customers who have high potential for their core business. And nevertheless, soon or later e-commerce is becoming a non-negligible topic for every stationary distributor.
Additional note: Aldi Life is currently not available in the Netherlands, but it is very likely that is will be available here so pay attention.
- Aldi Life (20159. Aldi Life. Available at: https://www.aldilife.de
- Campillo-Lundbeck. S. (2015). Warum sich der Discounter in der digitalen Welt so wohl fühlt. Horizont. Available at: http://www.horizont.net/marketing/kommentare/Aldi-life-Musik-Wo-die-Musik-bei-Aldi-wirklich-spielt-136540
- Kerksmann, C. (2015). Aldi wird zum Musik-Discounter. Handelsblatt. Available at: ewww.handelsblatt.com/unternehmen/it-medien/streamingdienst-gegen-spotify-und-apple-aldi-wird-zum-musik-discounter/12358744.html
- Vincent, P. (2015). Aldi teams with Napster to launch music streaming service. The Sydney Morning Herald. Available le at: http://www.smh.com.au/entertainment/music/aldi-teams-with-napster-to-launch-music-streaming-service-20150929-gjwwtp.html#ixzz3nV7aeukv Follow us: @smh on Twitter | sydneymorningherald on Facebook http://www.smh.com.au/entertainment/music/aldi-teams-with-napster-to-launch-music-streaming-service-20150929-gjwwtp.html
Electronic Markets, Computing Power and the Quants: Volatility & High Frequency Trading
Markets can be – and usually are – too active, and too volatile”
Joseph E. Stiglitz – Nobel prize-winning economist
As some of you might have noticed, the oil market is currently showing wilder fluctuations at a higher frequency than before: volatility has increased. This happened after the market enjoyed relative stability price stability during the last few years. Of course, this is partly due to U.S. shale oil production, quite high supply and lower demand due to the financial crisis aftermaths, and growing demand and supply uncertainties. However, another factor affecting volatility is the increased usage of trading indicators in combination with changes in trading practices: an increasing number of players in the financial markets tend to use algorithmic and high-frequency trading practices (HFT).
Like other derivative based markets, also the crude oil market has a wide range of market players of which many are not interested in buying physical oil. HFT traders are probably drawn towards oil futures due to the market’s volatility. Because, the greater the price swings, the greater their potential profit. HFT is not an entirely new practise, but as technology evolves it is increasingly present in today’s electronic financial markets.
These players make extensive use of computing and information technology in order to develop complex trading algorithms, which are often referred to as the “quants”. HFT trading firms try to gain advantage over other competitors which are still using mostly human intelligence and reaction times. The essence of the game is to use your algobots to get the quickest market access, fastest processing speeds, and perform the quickest calculations in order capture profits which would have otherwise been earned by someone who is processing market data slower (Salmon, 2014). At essentially the speed of light, these systems are capable of reacting to market data, transmitting thousands of order messages per second, as well as automatically cancelling and replacing orders based on shifting market conditions and capturing price discrepancies with little human intervention (Clark & Ranjan, 2012). New trading strategies are formulated by using, capturing and recombining new information with large datasets and other forms of big data available to the market. The analysis performed to derive the assumed direction of the market makes use of a bunch of indicators such as historical patterns, price behaviour, price corrections, peak-resistance and low-support levels, as well as (the moving average of) trends and counter-trends. By aggregating all this information, the databases and its (changes of) averages are usually a pretty good predictor of potential profits for HFT companies.
This information technology enabled way of trading is cheaper for the executors, but imposes great costs on workers and firms throughout the economy. Although quants provide a lot liquidity, but can also alter markets by placing more emphasis on techniques and linking electronic markets with other markets (as well information as financial linking). In most cases, non-overnight, short-term strategies are used. Thus, these traders are in the market for quick wins and use only technical analysis in order to predict market movements instead of trading based upon physical fundamentals, human intelligence or news inputs.
Although, some studies have not found direct prove that HFT can cause volatility, others concluded that HFT in certain cases can transmit disruptions almost simultaneously over markets due to its high speed in combination with the interconnectedness of markets (FT, 2011; Caivano, 2015). For example, Andrew Haldane, a top official at the Bank of England said that HFT was creating a system risks and the electronic markets may need a ‘redesign’ in future (Demos & Cohen, 2011). Further sophistication of “robot” trading at decreasing cost is expected to continue in the foreseeable future. This can impose a threat to the stability of financial markets due to amplified risks, undesired interactions, and unknown outcomes (FT, 2011). In addition, in a world with intensive HFT the acquisition of information will be discouraged as the value of information about stocks and the economy retrieved by human intelligence will be much lower due to the fact that robots now do all the work before a single human was able to process and act on the information (Salmon, 2014). For those interested in the issues of HFT in more detail, I would like to recommend the article of Felix Salmon (2014).
However, it is important to mention that not only HFT and automated systems and technicalities do cause all the volatility. Markets have known swift price swings for centuries. For example in the oil industry, geopolitical risk can cause price changes as it is an exhaustible commodity. As most people know, also human emotions can distort markets as well as terrorist actions. Even incomplete information such as tweets from Twitter and Facebook posts can cause shares to jump or plumb nowadays. As markets are becoming faster, more information is shared and systems can process and act on this information alone quickly due to (information) technological advancements, which will in turn increase volatility. Therefore, it is more important than ever that there are no flaws in market data streams, e.g. the electronic markets and its information systems need to have enough capacity to process, control, and display all the necessary information to market players in order to avoid information asymmetries.
In my opinion, HFT is strengthened by the current state of computing technology and cost reductions of computing power now enable the execution of highly complex algorithms in a split-second. As prices go down and speed goes up, these systems will become more and more attractive as they outperform human intelligence. This can potentially form an issue in the future: volatility might increase and it is this volatility that provides many opportunities for traders, but not the necessary stability for producers and consumers which are more long-term focussed.
Therefore, in the future action is necessary to restrict, or at least reduce, HFT. Examples might be big data collection by regulators to monitor risk and predict future flash crash or volatility events. Another option can be the introduction of a “minimum resting period” for trading. So traders have to hold on to their equity or trade for a pre-specified time before selling it on, reducing the frequency and thus volatility. Also, widening spreads will help as it makes quick selling and buying more costly and thus HFT less attractive.
Given that the financial market’s watchdogs currently have difficulties with regulating automated trading. Some HFT firms have enjoyed enormous profits from their trading strategies (Jump trading, Tower Research capital, DRW). For example also during the last turmoil of August this year, a couple of HFT firms earned a lot of money (Hope, 2015). Due to these successes, new players enter the market and competition is growing. As speed is essential (even milliseconds matter) HFT firms try to place their servers physically near the exchanges (such as the NYSE), so they can increase their advantage. The HFT firms are expected to stay in the market, ultimately resulting in more price volatility (Hope, 2015).
What do you think, how far should we let our technology intervene with the financial markets? Do we really need to allow algobot’s or similar automated trading systems to influence our financial markets as they can perform the human job faster, fact-based and at a lower cost? Or should the financial markets be always human intelligence based, which might be ultimately better for the economy as a whole and also provides a richer knowledge base of the real world economy (as it this information remains valuable and numbers do not always say everything)?
In case you are interested in this dilemma, I can also recommend reading Stiglitz’ speech at the Federal Reserve Bank of Atlanta in 2014.
Author: Glenn de Jong, 357570gj
Nowadays there’s many more ways to make money on the internet than a simple webshop. As discussed in class, you can adopt a subscription model, an advertising model, a utility model (the cloud, like Dropbox), or one of many other options. Often the combination of several models is what leads to the biggest successes.
Since a decade, the ‘freemium’ model is the dominant business model among internet start-ups and app developers (Kumar, 2014). The term is mostly used to describe the combination of advertising and subscription models. Think of Spotify, which is free as long as you listen to the ads, or is without adds as long as you pay. LinkedIn is another company that offers additional benefits when the customer pays (a ‘premium’ membership). In the world of game applications, a successful app is not where one hás to pay, but where one cán pay. This refers to the in-app purchases, which is responsible for over 65% of iOs and Android appstores’ revenue (Valadares, 2011)!
So why are not all games that offer this model successful? When looking at my own mobile gaming behaviour, most apps are deleted within one month. I get tired of them or I have to pay for the next level and for these kind of reasons I just stop playing. Accept for one app that has been on my phone for over two years now: Candy Crush Saga. I would not usually describe myself as an addict, so that raised questions about my own behaviour: why is Candy Crush Saga so addictive – especially on the long term?
Many psychologists name several factors that contribute to Candy Crush’s success. First, people are responsive to the ‘sweetness’ of the game. Second, the fact that a user can only play for about half an hour, makes sure the user is still fond of the game on the long term (Dockterman, 2013).
But the success is not just about psychological factors. The integration with Facebook is probably the key factor of the game. First of all, this set up provides a cross-platform usage of the application, as this account can be opened on phone, tablet and computer. Another advantage is the communication to other Facebook friends, using Facebook’s network effects. The technology in the app shows users at what level their friends are. As competitive as people are, this makes them even want to play more. As it turns out, it might be a part psychological factor after all.
Another smart move of King, yet other developers do this too, is to increase switching costs for users. The in-app purchases can only be done with ‘golden bars’, Candy Crush’s currency. When users still have golden bars on their account, the human urge (yet another psychological flavour to this) is to continue playing, and so a virtual circle begins.
Many other factors can be described about this success within the mobile gaming industry, but I decided to stick to these few to stress my point. The IT departments are important, but not solely responsible for making a good social game. Users are people, and marketing and psychology need to be integrated into the information strategy to make sure the game is successful on the long term.
Dockterman, E. (2013) ‘Candy Crush Saga: The science behind our addiction’. Accessed at 27 September 2015 through http://business.time.com/2013/11/15/candy-crush-saga-the-science-behind-our-addiction/
Kumar, V. (2014) ‘Making Freemium Work’, Harvard Business Review, Mei 2014: 27-29
Valadares, J. (2011) ‘Mobile Freemium Games: Women Thrifty, Men Binge’. Accessed at 27 September 2015 through http://www.flurry.com/bid/72755/Mobile-Freemium-Games-Women-Thrifty-Men-Binge#.VPWucvmG-So
YouTube and Vimeo are part of the electronic market of online video hosting. They operate in the same market and offer the same services, albeit at different levels of quality and at different prices. The cost structures are very similar, as are their distribution channels. But why is YouTube so much bigger then Vimeo, if their business models are so similar? First, both companies will be introduced, thereafter we will explain the differences in performance.
YouTube is a video sharing platform, primarily based on user-generated content. Since its foundation in early 2005, it has grown into the largest online video streaming service in the world, with a staggering 71.5% market share – measured in terms of unique users – in June 2015 (Statista, 2015). Today, YouTube accounts for billions of views by millions of users daily (YouTube Press, 2015). YouTube was taken over by Google in 2006.
Vimeo, founded in 2004 and bought by IAC in 2006, situates itself as a video sharing website, rather than a hosting website. Its focus is on sharing creative work and personal moments with a supportive community (Vimeo, 2015a). With a US market share of 0.9% (Statista, 2015) Vimeo satisfies a small niche market, compared to larger competitors such as YouTube.
The initial focus of both companies differs: YouTube is focusing on the viewers, by providing them with as much content as possible. The focus of Vimeo is different: they focus on the uploaders and constructive feedback for them. This difference may explain why Vimeo is charging their uploaders, while YouTube does not. This focus of Vimeo led to a higher quality of video’s on Vimeo’s platform. Despite this, the price-sensitivity of the consumer makes YouTube more attractive, as shown in the market shares (71.5% vs. 0.9%).
Another difference between the companies is the corporate structure. YouTube is a part of Google and can therefore rely on the deep pockets of the parent company. The parent company of Vimeo is IAC, which is much smaller than Google.
While YouTube and Vimeo have access to the same distribution channels, the usage is ultimately dependent on their users and uploaders. With YouTube enjoying a larger market share, the company has a stronger brand awareness and will be used most often by the users through those distribution channels, despite the fact that Vimeo is available too.
Taking into account these fundamental differences, we believe that YouTube has a distinct advantage over Vimeo, despite the fact YouTube’s operations are not profitable. We believe that in the long term, YouTube will continue to grow and erode the profitability of competitors through their predatory pricing, supporting further growth and the conquering of additional market share. Vimeo may be able to satisfy the long tail of the market for another while, backed by increased network effects and electronic brokerage effects, stronger brand awareness and increasing price sensitivity, YouTube will inevitably steal away Vimeo’s users in time.
Euclid Haralambidis (313081eh)
Joey Kortram (344951jk)
Ivar van der Lugt (418691il)
Arjan de Winter (372092jw)
Statista. (2015). Statista. Opgeroepen op September 20, 2015, van Statista: http://www.statista.com/statistics/266201/us-market-share-of-leading-internet-video-portals/
Vimeo. (2015a). Vimeo. Opgeroepen op September 22, 2015, van Vimeo: https://vimeo.com/about
YouTube Press. (2015). YouTube Statistics. Opgeroepen op September 20, 2015, van YouTube: https://www.youtube.com/yt/press/statistics.html
In our technology of the week project we took a look at two services that target the “modern day’s customer” who demands to get things done fast, with as little trouble as possible, in a convenient and as much as possible fun way.
When watching the commercials (below) of both HelloFresh and Amazon Dash it really stands out much they resonate with what bothers the customer. They build their messages on how they provide solutions to the pains of everyday busy people. Both services aim to make a task that is a regular and time consuming part of everyday life “easy” or “simple” (Their taglines are extremely similar: “Cooking made easy” and “Shopping made simple”)
HelloFresh, a three year old start-up, which currently operates in seven countries (the Netherlands being one of them) promises to give customer everything that they need for a delicious, healthy, home-made dinner except the chef. They create easy step-by-step receipt, select organic, seasonal ingredients from local providers, and send the exact amounts needed from those ingredients for a meal that can be ready in a maximum of 30 minutes. Apart from the convenience piece HelloFresh also builds on the very common desire of today’s customers to eat healthy and on the environmental friendly packaging and recycling trend. They use word of mouth in an extremely smart way by on one hand providing customers and their friends discounts if they start using the service based on recommendation and on the other hand encouraging the users to share their ready meals on social media. HelloFresh operates in a market where the bargaining power of the buyer is high and of the suppliers low, where – the threat of new entrants is high, given the low barriers to entry, and the lack of switching cost, and last, but not least, where the threat of substitutes is also high so the number of competitors is high and that is one of the reasons why they build a loyal community of customers. After certain amount of meals cooked with HelloFresh users get certificates, can attend breakfasts and dinners where they get to know the providers and share their opinion about the receipts and ingredients.
Amazon Dash is the newest innovation of Amazon, it is a wand with which customers can scan the barcode of anything that runs out in their household or simply just say the missing item “into” the device. These orders are automatically recorded in the user’s AmazonFresh account and once the customer clicks approve it is delivered within 24 hours. In very simple words the Dash ’s promise is that you will never run out of morning coffee or toilet paper ever again. When providing this service Amazon builds on it’s reliable brand, extremely streamline processes and more than 20 years experience in online shopping. On the long run Amazon’s goal with the Dash is to completely eliminate brick and mortar stores and moving shopping entirely online.
Despite being quite different at first look the Amazon Dash and HelloFresh target almost the same customer segment, and both the channels in which they reach their users (delivery and online platforms), their key activities (finding and managing suppliers, storing perishable goods, delivering) key resources (drivers, carriers, packaging, IT systems) and basic cost structure are comparable. Even in their value proposition they both aim to create a convenient experience and save time for their customers, their main difference lies in what exact problem they want to solve for their customer: making it possible to cook home healthy food without the hassles around cooking or never running out of the basic groceries and never forgetting anything during shopping again.
Both have a strong market presence but while HelloFresh has many similar competitors, the Dash has no direct competitor currently. Amazon Dash and HelloFresh work with a business to customer model currently and have the potential to expand to the business to business sector. Although the discussed business models are both innovative, have the potential to decrease or almost eliminate the importance of brick and mortar stores and change the relation we have to shopping, the Amazon Dash has potential to do even more than that and disrupt whole sectors in the future.
Authors: Group 15
Ekaterina Marinova – 436554
Anargyros Michaletos – 436750
László Nedeczky – 416837
Lina Nota – 440733
Gabriella Pimpão – 437021
Everyone wants to stay up to date, and wants to be aware of the latest news. This results in a booming market of news applications. We are all familiar with NU.nl for the basic news and funny facts, NOS.nl if we would like to have some more insights and a lot of people have installed Bright nowadays to be able to get to know the latest innovations and lifestyle trends. All these news applications are slightly different and we want to have access to them all on our mobile phone to stay up to date. But is there no easier way to read this variety of news articles?
Let me introduce you to Recent News. This news application is launched in September 2015 and is taking care of the importance of customization. Recent News will first ask their new users to fill in their interests and what kind of articles they are looking for. There are many subjects and specializations to choose from. After this artificial intelligence will take over. A learning system is integrated and Recent News will customize your news based on your preferences, past reading behaviour and similar users. The news application is able to learn your interests and will propose exactly these articles you may like to read (Bright, 2015; Recent News, 2015).
In my opinion Recent News is one of the innovations that is able to serve the future. Nowadays users will ask for more personal and customized products and services. Because of the Internet the market is more transparent than ever, consumers are better informed and they can find exactly what they want (Clemons, 2008). Firms have to make sure that they will respond to these needs; firms have to be able to customize their services the best they can. Clemons (2008) shows that this trend called resonance marketing; the firm should find the perfect fit with the customer.
Another feature of Recent News will also fit the latest trends: the location-based suggestions. Recent News will propose the users news articles based on their location. According to Ghose, Goldfarb and Han (2013) mobile Internet differs from Internet on personal computers. They show that mobile Internet is an important driver of the rise of location-based services. In our case Recent News will respond closely by proposing articles to their users based on their location, within news application local news becomes more important and preferable.
I am curious about how the future will look like. How can we still improve customization and make products and services even more personalized? Is artificial intelligence the future of businesses to customize the services and is this the way to really get to know the customers? Besides that I am wondering if news applications such as Recent News are able to replace the variety of news applications that exist these days? Let’s count the number of news apps that we have right now and compare it to the number we will have over two years.
Bright, 2015. ‘App van de week: Recent News’ http://www.bright.nl/app-van-de-week-recent-news, last visited: 20 September 2015.
Clemons, E.K. 2008. How Information Changes Consumer Behavior and Consumer Behavior Determines Corporate Strategy. Journal of Management Information Systems 25(2) 13-40.
Ghose, A., Goldfarb, A., and Han, S. 2013. How is the Mobile Internet Different? Search Costs and Local Activities. Information Systems Research. Articles in Advance. 1-19.
Recent News, 2015. http://www.recent.io/, last visited: 20 September 2015.
Author: Lizan Bakker
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)
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)
Apple Music vs Spotify
With the advance of technology, the world has entered a digital society. The inevitable shift to digital music forced the industry to seek new business models. Legal downloads became available with the launch of iTunes in 2003 and a decade later subscription-based “pay-to-stream” services emerged. The streaming services made a large impact on the industry. With Spotify being the current market leader with 75 million users and Apple Music the latest entrant and a serious competitor, a new battle for market share developed. This article will provide an analysis and future prediction of both companies.
Spotify uses the so called freemium model, which offers free service with additional features that can only be utilized once someone has subscribed to a premium account. In order to also generate revenue from its free users, Spotify occasionally inserts audio advertisements that cannot be skipped. Unlike Spotify’s freemium model, Apple Music uses a free-trial model, meaning that after the free-trial period users are required to pay a monthly subscription fee to make use of the service. Apple Music is trying to offer an all-in-one solution to music lovers and therefore tries to make the monthly cost seem negligible.
SWOT & future prediction
The defining key trend in early 2015 in the global music market is the continued surge in consumer uptake of streaming services. This uptake of streaming services drives subscription to listen to music. On top of this, there is a substantial untapped potential for growth within the paid-for category. So we can say that Spotify and Apple Music are competing in the right market.
At the same time, the streaming market entered a new phase of growth. In a few years a lot of big players entered the market (e.g. Google, Apple, Amazon and Tidal). The near future of this market will cause intense competition between those companies. For Spotify and Apple music to win this fierce battle, a few key trends are extremely important:
– Revenue model and artist royalties. People will choose the service with the most and the best artists. One important factor to attract the most and the best artists is to have a revenue model that is considered to be fair according to the artists. Due to Apple’s subscription model, we expect that they will be more successful in attracting artists than Spotify.
– Partnerships. In order to accelerate the growth of their customer base, they have to form bundled offers with telecom companies and make exclusive deals with artists and labels. It is hard to predict who will be most successful in this area.
– Competition on curation. Surfacing songs and editor recommendations that are tailored to the listener’s taste is key to customer retention. We expect Apple Music to have the best tech team to be able to outperform Spotify in the future on curation.
Another factor that can’t be left unmentioned and can play an important role in gaining market share in this rapidly developing market is the brand community of Apple.
After the analysis of both companies and taking into account their future potential, we believe, that Apple Music will be the most profitable on the long term.
Sjaak Meeuwsen – 437156
Claude Zwicker – 437277
Yinuo Jin – 373227
Hidde van Heijst – 436800
Ruud Schippers – 441698
The Internet strongly disrupted both the music and education industries, giving rise to new companies with innovative business models, and forcing old companies to rethink their own in order to survive their new competitive landscape. In this article we discuss and compare the business models of Spotify and Coursera with the goal of showing the effects of IT in shaping global business.
Spotify’s Business Model
In 2006, the music-streaming platform Spotify was launched in response to the changing landscape produced by information technologies. Today Spotify is one of the leading music streaming platforms and counts with over 75 million active users1.
Spotify serves two different customer segments; on one-hand music fans, and on the other advertisers2. Spotify’s value proposition to music fans is “get all the music you want, whenever you want it”2. To fulfill its promise, Spotify requires massive Data Centers and Cloud Services3. Data is another key resource for Spotify, since it uses all data collected on user listening habits to develop “taste profiles” to deliver the “right music listening experience”4.
Spotify builds relationships with key partners in order to provide its services. First, with music labels, which allow access to their catalogues; royalty payments to these partners are one of Spotify’s main cost drivers. Second, with brands such as Facebook, which serve as channels to reach their customers 2.
Spotify uses a freemium revenue model1. Users that opt for the free version are financed by brands, which in exchange are allowed to advertise to users using several ad-formats. Premium users pay 9.99 euros for unlimited music streaming.
Coursera’s Business Model
Coursera also serves two customer segments; first students and second employers and universities5. It provides value to students by providing access to top-quality education from prestigious universities, and to companies and universities by sharing the data and insights it collects from students. It builds strong customer relationships with students by providing personalized services like course recommendations, and promoting interaction within its online communities.
A key success factor for Coursera is developing relationships with key partners such as Universities, which deliver the content that attracts users to the platform. Similarly to Spotify, fees to universities and are a large cost driver for Coursera. Coursera primarily communication channel is its own platform.
Similarly to Spotify Coursera uses a freemium revenue model. Users can attend to courses for free, but if they wish to get a verified certificate they need to pay. Coursera also makes revenue by selling companies and universities the data it collects.
Comparison between both business models
The following table provides a comparison between the strengths and weaknesses of the business model of each platform.
Both platforms have several similarities when it comes to strengths; differences lay mainly in their weaknesses. Both companies are extremely good at providing valuable content for free, using data to engage users, and they have both build strong partnerships with well-established brands.
Authors (BIM2015 – Team 6):
- Stéphanie Visser – 407153
- Job Deibel – 407756
- Dirk Breeuwer – 329445
- Colin van Lieshout – 414788
- Jord Sips – 421144
- Spotify, (2013). Spotify Explained. [online] Available at: http://www.Spotifyartists.com/Spotify-explained/ [Accessed 12 Sep. 2015].
- Chaffey, D. (2015). How Spotify built a $5 billion business with more than 50 million subscribers. [online] smartinsights.com. Available at: http://www.smartinsights.com/digital-marketing-strategy/online- business-revenue-models/Spotify-case-study/ [Accessed 12 Sep. 2015].
- Garcia, D. (2013). Spotify: Data center & Backend buildout. [online] Slideshare.net. Available at: http:// http://www.slideshare.net/davidpoblador/Spotify-bcn2013slideshare [Accessed 12 Sep. 2015].
- Heath, A. (2015). Spotify is getting unbelievably good at picking music â€” hereâ€TMs an inside look at how. [online] techinsider.com. Available at: http://www.techinsider.io/inside-Spotify-and-the-future-of-music- streaming [Accessed 12 Sep. 2015].
- TED, (2012). What we’re learning from online education.
Available at: http://www.ted.com/talks/ daphne_koller_what_we_re_learning_from_online_education [Accessed 12 Sep. 2015].
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)
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)
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
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
The App Store was the first online applications store of its kind. Launched in July 2008, it completely changed the way users used the smartphones and developers interacted with their customers.
When it was launched, nobody would have imagined the impact that it would have, but it brought in a whole new way of looking at software and it altered user expectations forever.
The App Store allows users to browse and download apps developed using Apple’s iOS Software Development Kit. These apps can be either free or paid, the pricing decision depends on the developer of the app.
The developers have to purchase the iOS SDK in order to developer apps which allows them to develop apps for various devices like the iPhone, iPad and the iPod. Every app listed on the App store follows a 70/30 revenue sharing model, which means that 70% of the revenue goes to the developers and 30% goes to Apple.
In addition to this users can also buy digitised content in-app and the developer can display ads in the app.
How Apple earns money:
- Sale of iOS SDK to developers
- Sharing 30% of the revenue of all app purchases with the developers
How Developers earn money:
- Sale of apps (they get 70% of the revenue)
- Sale of digitised content in-app
- Revenue generated from ads displayed in the app
For Apple this is easy money. They have developed a digital distribution platform for their devices which has empowered both the users and the developers. It has provided them with an endless revenue stream which has generated billions of dollars till now without having to do anything more.
How the App Store spurred a culture of entrepreneurship?
Entrepreneurs were always told that having a good product is not good enough. Marketing that product was equally important. But the App Store was changing this age old perception.
On the App Store the developers could spend 90 percent of their resources on their product and 10 percent on everything else. Before the App Store, it might have been 50/50.
It meant that developers could now reach out, and sell to, everywhere in the world regardless of where they lived.
It also meant that they didn’t have to worry about being big. As a matter of fact, it was often easier for small teams to achieve greatness on the App Store than big, established companies.
But most importantly, it meant that you could build that something you wanted to build. For the first time ever, “building something you loved” became a sustainable business model.
If you build something you loved, chances are that there were another 50 million people in the world who loved the same thing as much as you did. And because of the App Store and the environment it sprung up around itself, those 50 million people would love to hear about your app and be able to buy it from anywhere in the world.
Twitch is the largest live-streaming website in the United States which lets users record and show their own gaming experiences, as well as chat with other players. Lately, the platform has also expanded into non-gaming ventures, like streaming concerts. With more than 55 million monthly active users Twitch has raised $35 million since debuting in 2011.
Sounds nice. But why would Amazon envelop a game-streaming network?
One reason could be just to annoy its big search competitor Google. The Mountain View company was in acquisition talks with Twitch in May but failed to close the deal due to concerns for potential antitrust issues. Sounds familiar? Well, in this case Google itself called the acquisition off. By already owning Youtube, the world’s most-visited content streaming site and competitor of Twitch in broadcasting and streaming live or on-demand video game sessions, Google supposedly had difficulties consenting on a potential breakup fee with Twitch in case the deal did not go through with antitrust regulations.
Why else if not only to irritate a competitor could Amazon be interested in Twitch?
There is various speculation going on in the market. One rumor is that Amazon´s interest goes far beyond gaming and possibly into streaming of other activities. According to that, by performing the acquisition the company is investing rather in internet infrastructure than in gaming media because what Twitch has built up is essentially a video-based community that could feature any activity. Another guesswork states that Amazon might primarily be interested in the advertising power inherent in Twitch´s community. The average Twitch user is between 18 and 49 years of age and plays about 106 minutes a day – this represents a highly captive audience for ads and other content.
These are only some conjectures about the plans Amazon could have in mind with its envelopment strategy. What do you think the shopping platform will do with the freshly acquired online-streaming community? Build a second Youtube, dive deeper into the game scene or create something entirely new?
Automotive is one of the largest industries in the world right now and is still growing at a rate of more than 3% per annum. We have proposed a mobile application for one of the most well-known and respected automotive brands in the world – BMW.
The app would work well with BMW’s existing business model which seeks to offer a superior value proposition and customer service while targeting a segment which is willing to spend money for reliable and high quality services.
The app would be beneficial to both the company and the user. The users would be able to review new offers and deals, build their dream car, schedule test drives, calculate and make financial transactions, read and write reviews and view everything the dealership has to offer without having to physically go to the store.
The company would also benefit from the app in a myriad of ways as it would allow them to target a newer, more tech savvy demographic, offer new and unique services that will give them an edge over their competitors, and the app would also serve as a marketing platform for the firm.
The app’s success would be judged by the number of application downloads, amount of usage of various app features and the novelty of the idea through word of mouth propagation and feedback. Thus, the important decisions to be considered revolve around the features of the app, extent of integrating technology with the overall strategy and infrastructure to be planned for growth and new campaigns. Feedback from the users and the dealers would be a very important source of information in the conceptualization of the app.
Developing such an application is not cheap. But we believe that even if do not get any direct financial benefits from this app, the company will be able deliver superior value to the consumer through the app and that would be beneficial to the company in the long run while aligning itself to the company’s business strategy. The app would also serve as a marketing platform for the company. The financial risks associated with developing the app are not very high for a company like BMW. If the app is not able to succeed as per the company’s expectation, it is very easy to terminate the app, without incurring any additional costs.
The future scope of this app is also very vast. The app may be designed to include a larger variety of services such as including garage visits, and roadside assistance into the app. The app can serve as an interactive online community for BMW owners and it may also be developed to serve as a marketplace for sale and purchase of used cars. The app can also be integrated with the car in such a way that the owner is able to monitor the car’s location and it’s health at all times directly from the app while controlling the luxury features of the car from their mobile device.
In conclusion, we propose a mobile app for a car dealership such as BMW which can potentially transform its business model. This app would serve as a platform for all types of communication between the user and the company. The app would give the company a significant competitive edge as no other car dealership offers such an app right now and BMW would have the first mover’s advantage.