Cool business models

There is a website with the latest, and probably coolest, business ideas…

Fusions

The merger of Microsoft and Yahoo just ended, with a lot of consequences for both firms. But what would it be the next move for all the players of the market, like AOL, Yahoo, Google, Warner Times and MSN?

Ubuntu, an open source operating system for PCs, already embends some applications that come with the software and send the OS users to specific sites – this is the case of Totem movie player that has an integrated plug-in which helps the user to make on-line searches in Youtube. What is more, Youtube is a partner of Google and, recently, there are some rumours that want Google to merge with Ubuntu (the Goobuntu project).

So, where could advertising lead markets to? A new OS that has on-line functionalities and relations with the world’s most visited websites could create a community that people would use in everyday life is something interesting. The fact that the business model of Google, which would be mainly financed through advertisements and Ubuntu, the promising and free-of-charge OS by Canonical, will consist a new challenge for Microsoft. As for the latter, the time needed to evolute its services and gain on-line popularity will be crucial for its future.

And here comes a solution that seems ideal: A free laptop with wifi that has all the necessary tools and promotes specific firms… it would be interesting to see the popularity of a product like that.

Referencing strategies

For the best results in on-line paid advertising systems, the reference words should be the most relevant to the site’s activities. General expressions and words that do not remind the website to the internet users should be avoided because of the bad CTR they will cause.

In addition, the main feature of the referencing advertisements is the bidding process. A maximum bid is not expensive when the phrases used as keywords are exact and long, something that would also increase the CTR. The bidding of low cost words should not be a reason for the beginning of an advertising war (something that would increase the website’s costs).

Then, it is advisable that the landing page of the website is designed for these words only, for instance a “project management research papers” request should link to a page that has only pdf files about project management.Potentially it could be the result of a local search engine using the precise phrase.

The HTML pages should have a minimum MB size.

Business Models

In the paper called “Relations interentreprises et nouveaux modèles d’affaires”, professor m. Benghozi exposed the new online business models of firms in the 00s.

Besides that, other business models are the following, as listed online in digitalenterprise.org:

• Brokerage

Model Brokers are market-makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary. Brokerage models include:

Marketplace Exchange — offers a full range of services covering the transaction process, from market assessment to negotiation and fulfillment. Exchanges operate independently or are backed by an industry consortium. [Orbitz, ChemConnect]

Buy/Sell Fulfillment — takes customer orders to buy or sell a product or service, including terms like price and delivery. [CarsDirect, Respond.com]

Demand Collection System — the patented “name-your-price” model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. [Priceline.com]

Auction Broker — conducts auctions for sellers (individuals or merchants). Broker charges the seller a listing fee and commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. [eBay]

Transaction Broker — provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal, Escrow.com]

Distributor — is a catalog operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners.

Search Agent — a software agent or “robot” used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.

Virtual Marketplace — or virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship marketing services. [zShops and Merchant Services at Amazon.com]

• Advertising

Model The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.

Portal — usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. [Yahoo!]

Classifieds — list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee. [Monster.com, Craigslist, Match.com]

User Registration — content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. [NYTimes]

Query-based Paid Placement — sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture’s trademark “pay-for-performance” model. [Google, Overture]

Contextual Advertising / Behavioral Marketing — freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user’s surfing activity.

Content-Targeted Advertising — pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. [Google]

Intromercials — animated full-screen ads placed at the entry of a site before a user reaches the intended content. [CBS MarketWatch]

Ultramercials — interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [Salon in cooperation with Mercedes-Benz]

• Infomediary

Model Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns. Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.

Advertising Networks — feed banner ads to a network of member sites, thereby enabling advertisers to deploy large marketing campaigns. Ad networks collect data about web users that can be used to analyze marketing effectiveness. [DoubleClick]

Audience Measurement Services — online audience market research agencies. [Nielsen//Netratings]

Incentive Marketing — customer loyalty program that provides incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising. [Coolsavings]

Metamediary — facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties. [Edmunds]

• Merchant

Model Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.

Virtual Merchant –or e-tailer, is a retail merchant that operates solely over the web. [Amazon.com]

Catalog Merchant — mail-order business with a web-based catalog. Combines mail, telephone and online ordering. [Lands' End]

Click and Mortar — traditional brick-and-mortar retail establishment with web storefront. [Barnes & Noble]

Bit Vendor — a merchant that deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web. [Apple iTunes Music Store]

• Manufacturer

(Direct) Model The manufacturer or “direct model”, it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. [Dell Computer]

Purchase — the sale of a product in which the right of ownership is transferred to the buyer.

Lease — in exchange for a rental fee, the buyer receives the right to use the product under a “terms of use” agreement. The product is returned to the seller upon expiration or default of the lease agreement. One type of agreement may include a right of purchase upon expiration of the lease.

License — the sale of a product that involves only the transfer of usage rights to the buyer, in accordance with a “terms of use” agreement. Ownership rights remain with the manufacturer (e.g., with software licensing).

Brand Integrated Content — in contrast to the sponsored-content approach (i.e., the advertising model), brand-integrated content is created by the manufacturer itself for the sole basis of product placement.

• Affiliate

Model In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model — if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well-suited to the web, which explains its popularity. Variations include, banner exchange, pay-per-click, and revenue sharing programs. [Barnes & Noble, Amazon.com]

Banner Exchange — trades banner placement among a network of affiliated sites.

Pay-per-click — site that pays affiliates for a user click-through.

Revenue Sharing — offers a percent-of-sale commission based on a user click-through in which the user subsequently purchases a product.

• Community

Model The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

Open Source — software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [Red Hat]

Open Content — openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [Wikipedia]

Public Broadcasting — user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. [The Classical Station (WCPE.org)]

Social Networking Services — sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [Flickr, Friendster, Orkut]

• Subscription

Model Users are charged a periodic — daily, monthly or annual — fee to subscribe to a service. It is not uncommon for sites to combine free content with “premium” (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.

Content Services — provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [Listen.com, Netflix]

Person-to-Person Networking Services — are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [Classmates]

Trust Services — come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [Truste]

Internet Services Providers — offer network connectivity and related services on a monthly subscription. [America Online]

• Utility

Model The utility or “on-demand” model is based on metering usage, or a “pay as you go” approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S.

Metered Usage — measures and bills users based on actual usage of a service.

Metered Subscriptions — allows subscribers to purchase access to content in metered portions (e.g., numbers of pages viewed).

What happens with the intermediaries? In their article, Sarkar,Butler and Steinfield mentioned that the main reasons for the existence of the intermediaries are the value they provide, mainly in 1. Search and Evaluation.
2. Needs Assessment and Product Matching.
3. Customer Risk Management.
4. Product Distribution.
5. Product Information Dissemination.
6. Purchase Influence.
7. Provision of Customer Information
8. Producer Risk Management.
9. Transaction Economies of Scale.
10. Integration of Consumer and Producer Needs.
but they do not describe any particular business model. This is also a critisism of Web 2.0, because no matter how many the visitors of a popular webpage are, the universally used business model is the one that trades advertisements and not other information or products.

Orange Labs & Online Positioning

In the continuous effort to understand the percentage of people attending the top websites and determining their odjectives, Orange Labs sociology expert Dominique Cardon explains the possitioning of different webpages. The main question is why sites like Wikipedia, Facebook and Meetinc are frequented by a large number of internet users.

The next step for a firm is to carefully select its services and the way it will approach the audience, as the positioning at this stage will define its competitors.

Google and the (Mars) project

One can easily acquire the official Google cheat sheet (or a non official version) which includes the most famous Google applications and other information about the usage of this search engine . In this case, from a business standpoint, there are a couple things that need to be clarified: The diversity of products that Google is offering is enormous, ranging from online services to offline specialised software . This is maybe part of Google strategy or a simple coincidence?

One can interpret this divergence as a bunch of different business models that contribute to the search engine results (possibly), with respect to the privacy information and other legal issues that have to do with such activities. (Google Maps,…)

Another possible explanation is that Google pursues to be universally present, including services for the satisfaction of the customer that are completely different. In this way, its brand name guarantees different and difficult to find online servises (Gmail)

Some thoughts about excluding the potential entrants in online businesses come forward at this point. The dominance in new markets is a game that no firm would like to lose, like for instance is the case with sites that within one or two years became the leaders in their field (Facebook)

In the end, Google would like to introduce these services for a long term target, for instance to be able to merge with an operating system firm (Ubuntu) or to conquer new markets (digital marketing, affiliate marketing etc)

Oh, not to forget! Everyone interested in making a trip to Mars, for scientific purposes, may still apply online!

Managing the PageRank

In a website’s effort to manage its page rank in Google, the fact that a program is evaluating the site’s performance should be the first of all clues. Knowing better the program would lead to having a better view for the steps to improve the site and the required efforts that a programmer plus a marketing manager should do.

Then, the matter becomes bi folded, if we take into consideration what the Google AdWords Blog proposes: From the one point, the amelioration of a website – as a follow up page from a potential request – and on the other hand, the mentioning of the webpage in other pages of high page rank.

There are firms proposing solutions for the first one… But the buy or make decision becomes more complicated. These SEO companies can make search requests more efficient when building your website but you do not know for how long they will be a blackbox for your company’s activity growth, not to mention the increased effort for cooperating with that firm.

The second one is either an issue of credibility of the site – a well known site for instance with many years of on line presence. There are not many things to be done, so as not to be characterised as spamming from the major search engines. The probable punishment is heavy for a firm to bear. Each firm should be competitive on the natural referencing market.

Tools for Webmasters

Estimation for CPC
gives a first clue about the website’s structure and how it can be indexed by another search engine

Webmaster tools
help the web creators to monitor and optimise their site’s performance as far as natural reference is concerned

Google Command
Google command link: gives the links that Google considers to direct to your site

Yahoo Site Explorer
shows which of your site’s webpages are indexed by yahoo. What’s more, it mentions the number of inlinks, or the pages that link to your site.

a traffic estimator and a Spider Simulator

Game Theory links, thanks Mariana

Game Theory Blog

Virtual Perfection (GREAT)

MIT Website (GREAT TOO)

Economics Website

Internship about search engines

As my internship in CRG under the supervision of professor J.P.Benghozi started, I will provide some of the main links I came up with. The topic of the internship is ” The economics and business models of the Search Engines, the Google Case”.

The purpose of the internship is to:

1. give an extensive study about the way firms may use Google
2. make clear the use of AdSence / AdWords
3. Make an estimation about these tools in a hypothetical case: if we implement them to advertise CRG

The intenship started with me attending the Ad:Tech conference on April 7th & 8th in Paris. There were independent upstream firms that were proposing solutions for digital marketing from their stands. In addition, free ateliers where exposing firms were providing information about new developments in their sector and payable seminars were available.

Google University described in two consecutive sessions during these days the use of AdWords and an introduction to Optimisation techniques for AdWords. The first seminar was targeting starters and the second one advanced users of AdWords.

Up to now, my main work for the internship report has included the following useful references. One can start with these to investigate the matter in depth:

• Compano Ramon (2008), “Challenges in Audiovisual Search Engines”, Conference: “Audiovisual Search. Regulatory Challenges for Audiovisual Abundance”, 12th April 2008, Amsterdam

• Goldman, Eric, “Search Engine Bias and the Demise of Search Engine Utopianism” . Yale Journal of Law & Technology, 2005-2006

• Joris van Hoboken (2008), Freedom of expression implications for the governance of search platforms, Conference: “Audiovisual Search. Regulatory Challenges for Audiovisual Abundance”, 12th April 2008, Amsterdam

• Maximilien Nayaradou (2006) “Advertising and Economic Growth”, Doctorate Thesis in Economics, University of Paris 9 – Dauphine

• Porter, M.E. 1985 “Competitive Advantage: Creating and Sustaining Superior Performance” New York, Free Press