Tag Archive | business model

Why you will never meet Bob: The takeover of Ticketfly by Pandora

Ilistening-music_0magine 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?

Sources:

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>.

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Why API-Centric Software Will Dominate the Future

Why API-Centric Software Will Dominate the Future

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?

API Centric Design

Source: Nikko Bautista

API-Centric Design

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:

Google Maps API Prices

Google Maps API Prices

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!


Sources

http://blog.cloudoki.com/the-new-era-in-software-engineering-api-centric-design/

http://apigee.com/about/blog/technology/api-centric-architecture-all-development-api-development

http://techcrunch.com/2015/09/27/the-future-of-coding-is-here-and-threatens-to-wipe-out-everything-in-its-path/

http://www.infoworld.com/article/2920792/apis/ibms-next-big-bluemix-move-api-management.html

http://www.thestreet.com/story/13259862/1/intel-stakes-future-on-internet-of-things-at-developers-forum.html

http://www.programmableweb.com/news/oracles-api-management-portfolio-aims-digital-enterprise/press-release/2015/06/02

http://www.zingdesign.com/top-10-web-development-trends-and-predictions-for-2015/

Technology of the week – Amazon Dash and HelloFresh

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

Technology of the Week – Spotify and Coursera

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

spotify

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

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.

Spotify vs Coursera

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

Sources:

  1. Spotify, (2013). Spotify Explained. [online] Available at: http://www.Spotifyartists.com/Spotify-explained/ [Accessed 12 Sep. 2015].
  2. 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].
  3. 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].
  4. Heath, A. (2015). Spotify is getting unbelievably good at picking music — 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].
  5. 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].

The Magazine

Pundits have long called for transformation of news media that will bring new business models better fitted for the digital age. It is still common that publishers offer separate subscriptions for online and offline channels or expensive bundles for mobile access. Efforts to breath new life into the publishing business came not only from publishers and media companies but also technology companies such as Apple, Google, Microsoft. Apple’s Newsstand app, which was introduced in 2011 as a hallmark feature of iOS 5, allowed publishers to recreate and publish their magazines on the iOS platform. Magazines published in the Newsstand app behaved differently from regular apps and had more rights that ought to make them more attractive for publishers and subscribers. Apple provided the tools for publishers to offer free and paid subscriptions and the possibility to push new content to subscribers. Similar solutions were also created by companies such as Samsung and Google. Large and small publishers saw this as an opportunity to reach new customers, with news/magazine apps that stood out from other apps.

Marco Arment, one of the first employees at Tumblr and creator of Instapaper, took on the challenge to create a magazine native to the digital age and perfectly suited for the capabilities of mobile devices. the result was The Magazine.

The Magazine

Introduced, in 2012, the Magazine was a Newsstand app that released weekly issues. Because there are many freelance writers who produce content for their own websites, Marco figured he could attract those writers to produce content for The Magazine. For writers it was attractive to write for The Magazine, since the company allowed all contributors to retain ownership of their content and let them publish it on their own sites two months after it was published in The Magazine. Marco believed that the new tools created a new category for magazines such as The Magazine:

But just as the App Store has given software developers a great new option for accepting direct payment, Newsstand has given publishers an even bigger opportunity with subscription billing and prominent placement. Yet most publishers aren’t experimenting with radical changes.

There’s room for another category between individuals and major publishers, and that’s where The Magazine sits. It’s a multi-author, truly modern digital magazine that can appeal to an audience bigger than a niche but smaller than the readership of The New York Times. This is what a modern magazine can be, not a 300 MB stack of static page images laid out manually by 100 people.

On the money side, The Magazine relied on paid subscriptions from readers and individual issue sales. This revenue was used to pay writers (the subsidy side),editing, illustration, proofreading, design, and programming for each issue.

Although The Magazine was fairly popular and highly profitable according to the owners, the company recently announced that it is shutting down.

Why did it fail?

Apple’s Newsstand is also partially to blame. Because all apps created for the Newsstand are locked into the Newsstand app, they are no longer visible on the homescreen. And because the average mobile device already has dozens of apps fighting for attention, out of sight means out of mind for apps locked in folders. Furthermore, these apps also often faced download issues, causing frustration for subscribers. But unfortunately, the main reason for shutting down is the lack of subscribers. The Magazine did not have a high enough retention rate and was losing subscribers faster than it was gaining them.

What are the possibilities?

The Magazine has shown that it is possible apply a new business model for news media.  However, just applying the newest technologies and building a high-quality app was not enough. Publishers already have the writers, they need to find a way to gain and retain as much subscribers as possible.

Do you think large publishing houses should take example?

A Comparison of Business Models of Sharing Economies (Group 1, TotW)

Bildschirmfoto 2014-09-14 um 21.24.13

An online development of growing popularity is the formation of so-called sharing economies. Companies such a Peerby and 3D Hubs are among the many new businesses that have picked up on the trend of linking consumer demand to consumer supply. Though the basic idea of these online platforms is the same, they have created very different business models and pose great examples of the possibilities of sharing economies for modern businesses.

Peerby

Aiming at the mass market, this company’s free online platform matches its users’ borrowing requests for any product, e.g. drills etc., with users that live nearby and are willing to lend the product in case they own it. This offers the consumer a way to avoid large product purchases. This is especially useful for expensive products that are used only few times throughout their life, e.g. high-pressure cleaners.

3D Hubs

This company’s online platform connects consumers that own 3D printers with those that require the service of a 3D printer. As opposed to Peerby’s customers, 3D Hubs operates in a niche market. Though the matching process is similar to Peerby’s, the company further facilitates the exchange of ideas and questions.

Revenues

A wide-spread problem of web-based companies is the creation of profit streams. As can be seen from well-known examples such an Instagram, growth and popularity do not guarantee profitability. Peerby is facing this exact problem, as it is offering a free service. Without fees, the company has no income besides the financial support received from investors and partners. In contrast, 3D Hubs charges a fee for the printer-usage with an additional 15% commission (Forbes, 2013). Peerby plans to eliminate its weakness in the near future through a novel revenue model, in which income will be created through the issuance of insurance to the lending users. With no quite comparable service available until today, the success of this innovative business model is yet to be determined.

Current Market Situation

Though currently relatively alone in their respective markets, new entrants with more profitable business models are especially threatening to Peerby. By offering advice for its users 3D Hubs is offering additional value while Peerby merely matches its members without being further involved in the actual lending process. The companies will have to ensure that they create strong enough two-sided network effects for themselves and build up a goodwill among their users in order to survive these threats.

We can see that although both businesses are built around the idea of a sharing economy and are facing similar threats, underlying business models are completely different especially with regard to their revenue models. Whether or not their offering will be enough for their survival is yet to be seen. However, with the speed of developments in the web industry it is advisable for both companies to act quickly on their weaknesses if they want to ensure their success and future profitability.

MF Akkurt, R Van ‘T Hooft, B Narozniak, MT Groenestege & M Wagenaar

This comparison was produced in light of the ‘Technology of the Week’ assignment for the course of Information Strategy.

Further reading:

Dervojeda et al., 2013: The Sharing Economy Accessibility Based Business Models for Peer-to-Peer Markets. Business Innovation Observatory Contract No 190/PP/ENT/CIP/12/C/N03C01. European Union: European Commission.

Forbes, 2013: 3D Hubs Crowdsources 3D Printing. Available at: http://www.forbes.com/sites/jenniferhicks/2013/08/27/3d-hubs-crowdsources-3d-printing/

These 8 Internet Companies Are Worth Over $1 Billion – But They Haven’t Made a Dime. Available at:
http://business.time.com/2013/10/29/these-8-internet-companies-are-worth-over-1-billion-but-they-havent-made-a-dime/

Pay-as-you-go Personal Assistants

After reading the articles about electronic market places and auctions for the upcoming session and thinking about the business solution we have to come up with for Designing Business Applications, I started to think about how we make and create business around us. ‘Apps’ are entering the market place on a daily basis; people manage to come up with ‘solutions’ where some people did not even know a ‘problem’ existed. Thus, we are not always using information (i.e. disgruntled people) to come up with solutions. As technology is within reach for most of the developed world, many of the proposed solutions are technical in nature.

However one can also create a business by letting people tell them about their problems, instead of making them up ourselves. Fetchamsterdam.nl is an example of such a business. This Dutch company basically acts as a temporary employment agency. Or, put in terms of the upcoming lecture: Fetch has created an electronic marketplace for personal assistants. People can come up with the most bizarre requests; Fetch will scour its pool of PAs and find someone to do the job. Look at the request of the week below:

Fetch

For non-Dutch speakers: someone lost his/her keys in a drain in front of their house while in a hurry. They requested Fetch to send someone to dig for the keys, lock the bike and leave the keys on a table as the person in question had to go to work.

This way, Fetch simply sits back and waits whilst people inform them about their hitch. Customers mention in detail what they wish Fetch to do and the company selects someone from their pool able to do the job (they also have people skilled in plumbing, (house) repair work or willing to book your concert or flight tickets). Using social media and word-of-mouth, Fetch manages to use technology to create a very low threshold for people to approach them with their (often bizarre – check out the other “request of the weeks” on their Facebook) problems. Besides, having an actual PA is simply too posh in the down-to-earth Dutch culture. Also, people know exactly what they want Fetch to do and thus provide the firm with detailed information, leaving less room for errors.  So, would you pay someone to FETCH your problem?

The long tail

Dear Bimmers,

I was surfing the internet looking for more information on the subject of ‘the long tail’. This video explains the concept in a very simple language and it comes up with many examples. I actually think that it was well done, because it is not as boring as most text books. Paul Andersen explains the long tail and the influence of the internet on it. Because of the internet, many people found a place in their hearts for very ‘rare’ movies, books, etc. Basically there is an audience for everything nowadays, only sometimes the crowd is not as big as other times… Check out this video! Enjoy!

Robert Loth