Business Models by ewghwehws

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									                 Chapter 5: Business models

   Questions answered in this chapter:
           • What is a business model?
           • Do firms compete on value propositions or value
             clusters?
           • How does the firm develop an online offering?
           • What is a successful, unique resource system?
           • What are the financial models available to firms?
           • What business classification schemes seem most
             appropriate for the new economy?


September 2001             Chapter 5: Business Models            1
      Exhibit 5-1: Components of a Business Model




                                   Value Cluster
                                   Value Cluster



                                Marketspace Offering
                                Marketspace Offering



                                 Resource System
                                 Resource System



                                  Financial Model
                                  Financial Model




                                          1




September 2001                 Chapter 5: Business Models   2
    Do Firms Compete on value Propositions
              or Value Clusters?

                           Value Proposition


    target segment       focal customer benefit           unique capabilities


                             Value Cluster


           multiple        combination of              unique capabilities
       target segments    customer benefits



September 2001            Chapter 5: Business Models                            3
    Do Firms Compete on value Propositions
        or Value Clusters? (continued)
   Choice of Segments
       • Market size and growth rates
       • Unmet or insufficiently met customer needs
       • Week or nonexistent competitors
   Choice of Focal Customer Benefits
       • Single-benefit approach
       • Multiple-benefit approach
   Choice of Unique and Differentiating Capabilities
       • Tangible assets
       • Intangible assets
       • Capabilities of the organization
September 2001             Chapter 5: Business Models   4
          Exhibit 5-2: Shattering Myth That Consumers Care Only About Prices On-
          line

                                  PERCENTAGE OF CUSTOMERS WHO CARE ABOUT ATTRIBUTE

                              Customer Support                                                               65


                               On-time Delivery                                                        58


                    Product Shipping & Handling                                                   49


                                Product Content                                                   49
        ATTRIBUTE




                                Privacy Policies                                             45


                               Ease of Ordering                               24


                             Product Information                              24


                    Web Site Navigation & Locks                           23


                              Product Selection                          22


                                  Product Price                     19


                                                   0    10          20             30   40        50    60        70



   Source: JP Morgan Report: etailing and the five Cs
                                                                          2




September 2001                                               Chapter 5: Business Models                                5
      Quality of a value proposition or cluster

   Customer Criteria. Do target customers understand
    the proposition or cluster? Is it relevant to their
    needs? Is it perceived as unique or
    indistinguishable from other propositions or
    clusters?
   Company Criteria. Will the company “rally
    around” the proposition or cluster? Does the
    company have the resources or capabilities to own
    this cluster?
   Competitive Criteria. Are other competitors trying
    to hold a similar proposition or cluster? Can
    current or future competitors match this cluster?
September 2001       Chapter 5: Business Models           6
        How Does a Firm Develop an Online
                    Offering?
                                         Online Offering


           Identify                   Identify customer                  Map offering to
       scope of offering              decision process              customer decision process


         single product category          problem recognition            purchase-decision cycle

       several product categories          information search                  egg diagram

                                       evaluation of alternatives

                                           purchase decision

                                              satisfaction

                                                Loyalty

                                               Disposal


September 2001                      Chapter 5: Business Models                                     7
       Exhibit 5-3: Egg Diagram for 1-800-flowers.com



                                                                       Gift reminder service
                                                                       Holiday specials           Ideas and Information
                                       “Care and handling”            Everyday celebrations                  Floral ideas
                                       “Do it yourself”                suggestions                            Garden ideas
                                       Special events and             Special occasion suggestions           Home ideas
                                                                                                               Gift ideas
                                        educational
                                                                                 Need                          Gourmet ideas
                                        workshops held at                                                      Store locator
                                        stores                                 Recognition
                                                                                                               Recommendations by budget
                                                                                                               Best sellers
                   Product                                                                                                   Gift Recommendations
                                               Education on Flowers
                   Offering                      and Decoration
                                                                                                   Search For Ideas
                                                                                                    and Offerings
                                                                                                                                 Gift guru
                                                                                                                                 Favorite gifts
                                                                                                                                 Gift frequency
                                                                                                                                 Gift impossible
           Post-Sales Support                                                                                                    Gift baskets
           Order receipt email                                                                                                  Corporate gift services
           eQ&A online customer
            service                              Flower / Gift Decision Process
           FAQ                         Post Sales Support                                                 Evaluation of
           Customer service                and Perks                                                      Alternatives
                                                                                                                                Product price
            inquiry form
                                                                                                                                Product picture
                            Perks                                                                                               Product description
                        Miles earned with                                                                                      Delivery information
                         flower purchases                                                                                       Delivery availability
                        Free gifts                           Message                        Purchase
                        Discounts at AOL &                   Selection                      Decision
                         BN with flower
                         purchases
                        Member specials                                                        Shopping basket
                                                    Gizmo fully-animated
                                                                                                E commerce transaction
                                                     greeting cards
                                                                                                Special shopping features
                                                    Physical cards in gifts
                                                                                                   – Delivery outside U.S.
                                                                                                   – 1-800-lasfloras.com



Adapted from Mohan Sawhney “Making New Markets”, Business 2.0
                                                                                 4




September 2001                                               Chapter 5: Business Models                                                                     8
      What Is a Successful Resource System?

   Modifications to the activity system logic for
    the online marketplace
           • Shift from physical world to virtual and back to
             physical world
           • Shift from a supply-side focus to a demand-side
             focus
           • Shift from activities to capabilities
           • Shift from single to multifirm systems


September 2001            Chapter 5: Business Models            9
                 Specifying a Resource System

   Step 1: Identify core benefits in the value cluster
   Step 2: Identify capabilities that relate to each
    benefit
   Step 3: Link resources to each capabilities
   Step 4: Identify to what degree the firm can deliver
    each capability
   Step 5: Identify partners who can complete
    capabilities


September 2001           Chapter 5: Business Models        10
       Exhibit 5-4: 1-800-flowers.com Resource System


                                                                     BloomNet
                                                                     BloomNet                                   Third Party
                                                                                                                 Third Party
                  Address Book
                  Address Book                                        Network                Strong
                                                                                              Strong            Contractors
                                                                      Network              Distribution         Contractors
        Gift
         Gift                                                                              Distribution
    Recommend-                                                                              Network
                                                                                             Network
    Recommend-
       ations
        ations                                                Fulfillment
                                                              Fulfillment
                                                               Center                                      Stores
                                                                                                           Stores
                                                                Center
                                Online Gift
                                Online Gift
    Gift Reminder                Center
                                  Center
    Gift Reminder
                                                                                                                        Rich Content
                                                                                                                        Rich Content
                                                         Broad
                                                          Broad                            High Quality
                                                                                           High Quality
                                                       Assortment
                                                       Assortment                           of Flowers
                                                                                             of Flowers                                Personalization
                                                         of Gifts
                                                          of Gifts                                                                     Personalization
                                                                                                                                        Capabilities
                                                                                                                                         Capabilities
                                                                                                           Popular Web
                                                                                                           Popular Web
                                                                                                              Site
                                                                                                               Site
    Garden Works
    Garden Works            Integrated
                             Integrated
                           Partner Offers
                           Partner Offers                                                                                      Telephone
                                                                                                                               Telephone
                                                                                                           3,000 Affiliates
                                                                                                            3,000 Affiliates
    Plow & Hearth
    Plow & Hearth                                                                                                                                On-line
                                                                                                                                                 On-line
                    Great Foods
                    Great Foods
                                                        Customer
                                                        Customer                           Widespread,
                                                                                            Widespread,                 Multiple Contact
                                                                                                                        Multiple Contact         Franchi
                                                                                                                                                 Franchi
                                                         Service
                                                         Service                           Easy Access
                                                                                           Easy Access                       Points
                                                                                                                              Points               se
                                                                                                                                                    se
                                                                                                                                                 Stores
                                                                                                                                                  Stores

                                                                                                                                       Catalog
                                                                                                                                       Catalog
                          Technology
                           Technology                                       Strong Brand
                                                                            Strong Brand                  Wide Reach to
                                                                                                          Wide Reach to
                                                      Customer
                                                      Customer                  Name
                                                                                Name                       Customers
                                                                                                            Customers
                                                       Service
                                                        Service
        = Core Benefits
                                                       Centers
                                                       Centers
                                                                                                 SNAP
                                                                                                 SNAP                             Starmedia
                                                                                                                                  Starmedia
        = Activities & assets         Integrated
                                       Integrated
                                      on-line off-
                                       on-line off-
        = Capabilities              line systems                                                          AOL             MSN
                                     line systems                                                         AOL             MSN

                                                                                     5




September 2001                                                Chapter 5: Business Models                                                                   11
  Criteria to Assess the Quality of a Resource
                     System
   Uniqueness of the system
   Links between capabilities and benefits
   Links among capabilities in the system
   Links among resources
   Links between virtual world and physical
    world business systems
   Sustainable advantage

September 2001     Chapter 5: Business Models    12
              Exhibit 5-5 : On-line/Off-line Egg Diagram for 1-800-flowers.com


                                                                                                         Prompts on toll free number recording
                                                                     Special events and                 Suggestions from CSRs* in stores and via phone
                                                                      educational workshops
                                                                      held at stores                                                                                           Prompts    on
                                                                                                                                                                                toll free number
                                                                                                         Gift reminder service                                                 recording
                                                                                                                                                                               Suggestions from
                                                                                                         Holiday specials                                                      CSRs* in stores and
                                      Off-line Product                                                   Everyday celebrations suggestions Ideas and Information               via phone
                                                                                                         Special occasion suggestions                  Floral ideas          Brochure
                                            Offering                 “Care and handling”                                                               Garden ideas
                                                                     “Do it yourself”                                                                  Home ideas
                                                                                                                                                        Gift ideas
                                                                                                                                                        Gourmet ideas
                                                                                                                    Need
                                                                                                                                                        Store locator
                                                                                                                 Recognition                            Recommendations by budget
                                                                                                                                                        Best sellers


                                             On-line                                                                                                                     Gift Recommendations
                                                                              Education on Flowers and
                                         Product Offering                            Decoration                                            Search For Ideas                Gift guru                    Suggestions
                                                                                                                                            and Offerings                  Favorite gifts
                                                                                                                                                                           Gift frequency
                                                                                                                                                                                                          from CSRs in
                                                                                                                                                                           Gift impossible               stores via
                                                                                                                                                                           Gift baskets                  phone
                                       Post-Sales Support                                                                                                                  Corporate gift services      Brochure
         In-store                   Order receipt email
          customer service           eQ&A online customer
         Customer                    service                                                 Flower / Gift Decision Process
          servifce on toll-          FAQ
                                                                      Post Sales Support                                                            Evaluation of
          free number                Customer service inquiry
                                                                          and Perks                                                                 Alternatives
                                      form                                                                                                                              Product price                   Information
                                                                                                                                                                        Product picture                  from CSRs in
                                                         Perks                                                                                                          Product description              store and via
                                                                                                                                                                        Delivery information             phone
             In-store specials                     Miles earned with
                                                                                                                                                                        Delivery availability           Brochure
             Specials offered                       flower purchases
              via phone                             Free gifts
                                                    Discounts at AOL &                       Message                               Purchase
                                                     BN with flower                           Selection                             Decision
                                                     purchases
                                                    Member specials
                                                                                                                                       Shopping basket
                                                                                    Gizmo fully-animated greeting                     E commerce transaction
                                                                                     cards                                             Special shopping features
                                                                                    Physical cards in gifts                               – Delivery outside U.S.
                                                                                                                                           – 1-800-lasfloras.com




                                                                                    Select card in-store                              Purchase in-store
                                                                                    Select card via phone                             Purchase via phone

  *CSR = Customer service representative
                                                                                                                         6

September 2001                                                                           Chapter 5: Business Models                                                                                                       13
                 The Role of Partnerships

   Portal agreements (AOL, Yahoo, MSN, etc.)
   Anchor tenant agreements (exclusive
    partnerships)
   Promotion agreements (cross industry
    promotions such as frequent-flier miles,
    telephone discount rates, gift certificates,
    etc.)


September 2001         Chapter 5: Business Models   14
       What Are the Financial Models Available to
                        Firms?
                                    Financial Models


           Revenue Models       Shareholder Value Models     Growth Models


                 advertising          company and               products
                                       user derived

             product sales          company derived
                                     value creation           new      existing

                 transaction                                  online markets


                 subscription
                                                              new      existing

                                                              offline markets




September 2001                  Chapter 5: Business Models    new      existing   15
           Alternative Shareholder Value Models

   Metamarket switchboard
   Auctions
   Category switchboard
   Best information
   Widest assortment
   Lowest prices
   Broadest user network
   Best experience
   Most personalized


September 2001          Chapter 5: Business Models   16
      Table 5-2: Alternative Shareholder Value Models (Company and User
      Derived)
                                                                Company and User Derived
         Alternative Models                                                  Auctions
                                Metamarket Switchboard                                                 Category Switchboard
                                                                     (Traditional & Reverse)
                               Hub for many buyers and         Competitive bid hub for            Aggregates brands in
       Description               sellers; multiple categories      buyers and sellers                   product category

                               BabyCenter.com                  Ebay                               PlanetRX
       Examples                VerticalNet.com                 Amazon
                                                                 FreeMarkets

                               Transactions                    Transactions                       Transactions
       Revenue Model           Product sales                                                        Advertising
                               Advertising                                                          Product sales

                               Perceived value added ser-      Percentage of Transactions         Perceived value-added
       Value Source              vices                                                                  services
                               Brand name credibility                                               Brand name credibility
                               Build buyer database              Build buyer database             Build brand
       Key Success Factors     Build seller database             Build seller base                Critical mass of buyers
                               Value-added services              Credible “hub” brand               and sellers
                                                                   Efficient back-office support
                               Alternative switchboard         Alternative auction                Emergence of
                                 emerges                         Niche auctions                       metamaket
                               Niche switchboard emerges       Price of switchboard               Niche category switch-
       Key Threat Factors
                               Fundamental shift in care         offering equal to auction            board
                                 technologies                    Value-added services               Brand name strength of
                                                                   differentiate competitors            market leaders


                                                                 7

September 2001                               Chapter 5: Business Models                                                           17
      Table 5-3: Alternative Shareholder Value Models (Company Derived)
                                                                                Company Derived
       Alternative
         Models            Best                  Widest                                    Broadest User                Best                  Most
                                                                    Lowest Prices
                        Information            Assortment                                     Network                Experience           Personalized
                      Timely, high           Widest assort-        Lowest prices         Aggregation of        Highest quality       Highest level of
                        value-added in-        ment within the        within category         users around           merchandise as        customization
      Description       formation              category                                       standard               perceived by tar-
                                                                                                                     get customers
                      Forrester              ArtistDirect.com      Buy.com               ICQ                   FAO Schwatz.com       Reflect.com
                      Zagat                  Secondspn.com         Lowestfares.com       MP3                   Ashford.com
      Examples        NYTimes                                                              Mercasa
                      Jupiter.com                                                          Accompany

      Revenue         Product Sales          Product sales         Product sales         Varied                Product sales         Product sales
      Model           Subscriptions

                      Premium pricing        Selective pre-        Unclear               Users drive traffic   Level of Luxury       Level of customi-
                        based on per-          mium pricing                                 Standard              Premium drives         zation drives
      Value Source      ception of best                                                       emerges                prices                premium pricing
                        information
                                                                                            Price premium
                                                                                              follows
                      Timeliness of in-      Reduce uncer-         Operational ex-       Establish stan-       Ability to spot       Deep Customer
                        formation              tainty in offering     cellence                dard                   symbolic brands       Knowledge
      Key Success     Perceived quality      Quality of infor-     Supply-chain          Grow user net-        Ability to judge      Ability to “Mine”
      Factors           of information         mation and             management              work                   quantity              Customer Data-
                                               value-added                                  Network eco-                                  base
                                               services                                       nomics
                      Customers do not       Specialization        Shopbots              Alternate standard    Subniche markets      Technology ad-
                        perceive suffi-        within the cate-      Lack of profit im-      emerges                emerge by cate-       vanced lead to
                        cient gap in time-     gory                   perative              Technology shift        gory                  “me-to” products
                        liness with ge-       Emergence of          Shifting investor     Backward or for-      Symbolic brand        Customers wants
                        neric offerings        dominant brands                                                       loses appeal          control of per-
      Key Threat                                                      confidence              ward integration
                      Competitors                                                                                                         sonalization
      Factors                                                        Re-engineer total       of complemen-
                        match market                                                          tary players
                                                                      process not price
                        leaders
                                                                     Niche markets
                      Cost of “fresh-
                        ness” becomes
                        prohibitive



                                                                                8



September 2001                                          Chapter 5: Business Models                                                                             18
               Exhibit 5-6: Revenue Growth Choices: 1-800-flowers




                              Greatfoods.com
                              Greatfoods.com
                                                                             Plow & Hearth
                                                                             Plow & Hearth
                               Home Decor
                               Home Decor
           New
                                   Plants
                                   Plants
                                                                            In-Store Seminars
                                                                             In-Store Seminars
    PRODUCTS




                                            Gourmet Treats
                                            Gourmet Treats
                                            Greeting Cards
                                            Greeting Cards




   Existing                                 Corporate Gift
                                            Corporate Gift
                                              Services
                                               Services



                        Existing                New              Existing         New

                           ON-LINE MARKETS                         OFF-LINE MARKETS



                                                             9


September 2001                                Chapter 5: Business Models                         19
               Business Classification Schemes

   Porter generic strategy model
           • differentiation strategy
           • cost strategy
           • niche strategy
   Sawhney and Kaplan model
           • business-to-customer hubs
           • business-to-business hubs (vertical and functional hubs)
   Rayport, Jaworski, and Siegal model
           •     Forward-integrated producers
           •     Supply-side aggregators
           •     Backward-integrated user
           •     Demand-side aggregators

September 2001                Chapter 5: Business Models                20
           Exhibit 5-7: Sawhney and Kaplan — Classification of B-to-B Models


                                                                  VERTICAL HUBS




                                                          Steel




                                                                     Plastics




                                                                                    Chemicals




                                                                                                Paper
                                                          Steel




                                                                     Plastics




                                                                                    Chemicals




                                                                                                Paper
                                          Logistics Management
                                          Logistics Management




                                          Media Buying
                                          Media Buying
               FUNCTIONAL
                  HUBS
                                          Advertising
                                          Advertising




                                          Energy Management
                                          Energy Management




    Source: Adapted from Business 2.0, September 1999, p.88
                                                                                1
                                                                                0



September 2001                                           Chapter 5: Business Models                     21
        Table 5-4: RJS Model Summary



                            SOURCES OF CONTENT ORIGINATION

                                 Single Brand                   Multiple Brands



                 Supply-
                  Side     Forward-Integrated Producer       Supply-Side Aggregator
                                 (Wal-Mart.com)                (Surplusdirect.com)


      FOCUS OF
      STRATEGY

                 Demand-    Backward Integrated User         Demand-Side Aggregator
                   Side
                             (Dellonline.com) - B2B             (Accompany.com)




                                Hybrid Integrator               Hybrid Aggregator
                                  (Cisco.com)                    (Amazon.com)




                                                         1
                                                         1



September 2001                       Chapter 5: Business Models                       22
       Table 5-5: Implications of “Pure Play” Business Approaches




         Business Model            Forward-Integrated    Backward Integrated     Supply Aggregator     Demand Aggregator
                                       Producer                User
           Implications


       Potential Sources of    • Streamlined             • Streamlined          • Strong brand         • Strong brand
       Competitive                  outbound logistics      inbound logistics     identity               identity
       Advantage               •    Producer brand                              • Relevant strategic   • Relevant customer
                                                                                  alliances              scale
                               •    Producer customer
                                    base

       Potential Benefits to   • Lower cost for          • Lower cost for        • More targeted       • Expanded access
       Producer                  delivery of products,     delivery of products,   access to             to customers
                                 services, or              services, or            customers           • More targeted
                                 information               information                                   access to
                               • Efficiencies which      • Efficiencies which                            customers
                                 translate into cost       translate into cost
                                 savings                   savings
       Potential Benefits to   • Lower price for         • Lower price for       • Time savings        • Connection to
       User                      products, services,       products, services, • Privacy                 others who are
                                 or information            or information                                likeminded
                               • Efficiencies which      • Efficiencies which                          • Access to relevant
                                 translate into cost       translate into cost                             information/advice
                                 savings                   savings




                                                                    1
                                                                    2


September 2001                                   Chapter 5: Business Models                                                     23
           Marketwatch.com Business Model

   Value Cluster
           • Target segments (savvy investors, “seekers”,
             “dabblers”)
           • Key benefits (up-to-the-minute information;
             original, in-depth analysis, personal-finance
             tools, multiple points of access)
           • Supportive rationale (experienced editorial
             staff, multiple forms of media, CBS News and
             Financial Times brand names)

September 2001           Chapter 5: Business Models          24
           Marketwatch.com Business Model
                     (continued)
   Marketspace Offering
           • Scope: The best provider of financial
             information and analysis across a number of
             media
           • Media: Online, television, radio, wireless
             devices




September 2001           Chapter 5: Business Models        25
     Exhibit 5-8: MarketWatch.com Egg Diagram

                                                                             Planning Tools
                                             Learn                              Sharebuilder
                                                Investor’s Primer              Payment Calculator
                                                IPO Basics                     Home Price Checker
                                                Financial Glossary             Best Credit Card Rates                 Breaking News
                                                                                Insurance QuickQuote
                                                                                                              Online                  Television
      Track Investments                                                                                        News Watch              CBS MarketWatch
        Portfolio View                                 Learn                                                  Email Alerts             Weekend
        Portfolio Analyzer                             About
                                                                             Plan                              Real-time Headlines  Contributions To:
        Portfolio Allocation                          Personal                                                Hotstock Tracker           – CBS Early Show
                                                                         Investment                                                        – CBS Evening News
        Portfolio Forecast        Track               Finance                                                 Marketwatch Live
                                                                           Strategy                                                        – CBS NewsPath
                                Investments                                                                    eSignal
                                                                                                              Radio
                                                                                 Stay Updated on               Contribution to Westwood One

                                             Personal Finance Process            the Latest News
                                                                                   and Figures                              Market Figures
                                                                                                          Futures and Options      Global Markets      US Markets
                                    Invest                                                                  Futures Contracts        Key Rate           Market Monitor
                                                                                                            After-Hours Futures       Snapshot           Major Indexes
                                                                  Develop
      Invest                                                                                              Bonds                       International      Dollar Volume
                                                                   Insight
                                                                                                            Bellwether Bonds          Indexes             Leaders
      Sponsorships by Online Brokerages                                                                                               Non-Us Stocks
        Datek Online                                                                                        Report
        Fidelity Investments                       Develop Insight                                       Funds
        National Discount Brokers    Third Party Sources         Commentary                 Fund Profile
        Ameritrade                      Market Guide             Thom Calandra’s          Fund Charts
        DLJ Direct                      Hoover’s Online           Stockwatch
                                                                                           Stocks
      Broker Decision Center             Multex                   Bambi Francisco’s Net
                                                                                             Interactive Charting
                                         Annual Reports Club       Sense
                                                                                             Historical Charts
                                         INVESTools               Bezderick on Bonds
                                         Over 250,000 Investment  (Many other commentary
                                          Research Reports          columns)
                                       Community                   eNewsletters
                                         Private E-mail
                                         People Watch
                                         Hot Discussions
                                         Occasional Polls

                                                                                    1
                                                                                    3


September 2001                                                Chapter 5: Business Models                                                                                    26
           Marketwatch.com Business Model
                     (continued)
   Resource System
           • CBS News
           • Financial Times
           • Marketwatch.com
           • BigCharts.com
           • Content partners (Hoovers, Zacks,
             INVESTools, etc.)
           • Distribution partners (Yahoo, AOL, Quicken,
             etc.)

September 2001          Chapter 5: Business Models         27
         Exhibit 5-9: MarketWatch.com Resource System

                                                                                                                                        AOL
                                                                                                                                         AOL                      Yahoo!
                                                                                                                                                                   Yahoo!                Quicken
                                                                                                                                                                                         Quicken
                                                                              FT Partnership
                                                                               FT Partnership
                                                          US
                                                           US                    (Europe)
                                                                                  (Europe)


                                                                                                           Asia
                                                                                                            Asia
                              Up-to-the-minute
                               Up-to-the-minute                                                                                              Multiple Points of
                                                                                                                                             Multiple Points of
                                Information
                                 Information                     International
                                                                  International                                                                   Access
                                                                                                                                                   Access                           Distribution
                                                                                                                                                                                     Distribution
                                                                   Presence
                                                                    Presence                                                                                                        Partnerships
                                                                                                                                                                                     Partnerships


                                                                                        Big Charts
                                                                                         Big Charts
                                                                                        Acquisition
                                                                                         Acquisition                                                              DBC Admin
                                                                                                                                                                   DBC Admin
                   Multex
                   Multex                         Hoovers
                                                   Hoovers                                                                                                          Services
                                                                                                                                                                     Services

                                                                                                                                                                                     Westwood One
                                                                                                                                                                                     Westwood One
                                                                                                                                                                                        Radio
                                                                                                                                                                                         Radio
                                                                                                                      DBC Technology                                                   Network
                                                                                                                                                                                        Network
                                                                News Alert               Leading
                                                                                          Leading                      DBC Technology
    Annual Reports Club
     Annual Reports Club      Partnerships with                  News Alert
                               Partnerships with                                        Technology
                                                                                         Technology
                              Content Providers
                               Content Providers                                                                                                               Available
                                                                                                                                                                Available
                                                                                                                                                             Infrastructure
                                                                                                                                                              Infrastructure

                                                                                                                                                                                         Website
                                                                                                                                                                                         Website
                                                                                    Credible Analysis
                                                                                     Credible Analysis
     Zacks Investment
      Zacks Investment                                       WSRN
                                                             WSRN                                                              Wireless Access
                                                                                                                               Wireless Access                  CBS
                                                                                      and Personal
                                                                                       and Personal                                                              CBS
         Research
          Research                                                                                                                                           Marketwatch
                                INVESTools                                           Finance Tools
                                                                                      Finance Tools                                                          Marketwatch
                                 INVESTools                                                                                                                   Weekend
                                                                                                                                                               Weekend




                           Experienced
                            Experienced                                                                        Licensing
                                                                                                                Licensing            Association
                                                                                                                                      Association                  Access to
                                                                                                                                                                    Access to
                           Editorial Staff                            TV Journalists
                                                                       TV Journalists                       CBS Brand Name            with CBS                    CBS Studios
                            Editorial Staff                                                                  CBS Brand Name            with CBS                    CBS Studios



               Experienced                                                                                                                              Content
                                                                                                                                                         Content
                Experienced            Well-organized                                                                     Brand mentions              Distribution
                Reporters              Well-organized                                                                      Brand mentions              Distribution
                 Reporters             editorial staff
                                        editorial staff                                                                  during CBS shows              Through
                                                                                                                                                        Through
               and Editors                                                                                                during CBS shows          CBS NewsPath
                and Editors                                                                                                                          CBS NewsPath



                                                                                                                              =Core Benefits           =Capabilities            =Activities and Resources
                                                                                                       1
                                                                                                       4

September 2001                                                           Chapter 5: Business Models                                                                                                         28
      Table 5-6: Partners “Give / Get” Matrix


                 Partners               Benefits to Partner: “Give”             Benefits to MarketWatch.com: “Get”

                                  Experienced   editorial staff               Credibilityof CBS brand name
                                  24/7, international coverage of financial   Access to CBS facilities
                                    markets                                     Access to CBS audience of 6.6 million
               CBS News
                                  Real time financial news                      homes
                                  32% ownership of MarketWatch.com            $30 million of rate card promotion and
                                                                                  advertising on CBS channels
                                  Part   ownership of joint venture           Branding   in European marketspace
         FT.MarketWatch.com       Technology   transfer                       Traffic driven to site and increase in
                                                                                  awareness

           Content Partners       Access    to MarketWatch.com audience       High quality analysis of financial news
         (e.g. Hoovers, Zacks,                                                  Portion of revenue generated from
              INVESTools)                                                         sales of partner products
                                  Users  get access to MarketWatch.com
          Distribution Partners     content and tools                           Increase   in audience reach
           (e.g. Yahoo!, AOL,
                Quicken)          Advertising and click-through fees          Increase   in brand recognition
                                    collected




                                                                 1
                                                                 5



September 2001                                 Chapter 5: Business Models                                                   29
           Marketwatch.com Business Model
                     (continued)
   Revenue model
           • Advertising revenue (72% in 1999)
           • Licensing revenue (21% in 1999)
           • Other revenue, subscription, etc. (7% in 1999)
   Value model (best information)
   Growth model
           •     Advanced portfolio-tracking tools
           •     International markets
           •     Services to address expanded trading hours
           •     Expand reach to wireless devices
           •     Expand TV and radio shows to more stations

September 2001                Chapter 5: Business Models      30
       Table 5-7: MarketWatch.com Revenue Growth Choices


                   Advanced Portfolio Tracking
                            Tools



                                       International Markets
           New
                                  Services Leveraging Increased
                                            Broadband

                              Services to Address Expanded Trading
                                              Hours
  Products and
    Features
                                                                                                   Expand TV and Radio Shows
                                Expand Reach to Wireless Devices
                                                                                                        to More Stations

                                                                                                      Expand Number of
                                                                                                     Newspapers Providing
        Existing                                                                                     MarketWatch Content




                           Existing                            New            Existing                        New

                                       On-line Markets                                   Off-line Markets


                                                                     1
                                                                     6


September 2001                                       Chapter 5: Business Models                                                31

								
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