The product business model is a dyadic transactional relationship where your good or service can be designed and delivered without prior interactions with the customer.
This Pathway Requires
Selling products or services is the oldest and most common form of business model.
Exemplars for B2C include Ford motor cars; McDonald’s hamburgers, and for B2B companies include electric motors for consumer durables. This pathway requires:
- Identifying potential customers
- Identifying how to capture awareness and create demand
- Identifying mechanisms of monetization – that include unit price, freemium, razor-blade, discounts for quantity
- There are many ways the firm can be structured that include: hierarchical-integrated or unbundled-networked among partners of suppliers and channels.
Scalability – Greater volumes typically reduce costs.
Profitability – When the firm achieves scale and there are high entry barriers.
Risk – Copycat products especially those with lower costs.
Transform your thinking of the
Product Business Model
The BusinessModelZoo™ provides insight to help you understand and navigate the opportunities and rewards as well as risks and threats to the product business model it faces from the other business model pathways.
Engaging dynamically and as a result fulfilling more completely my customer’s needs is an essential element of transforming from a product to a solutions business model. These moves are likely to involve some significant costs, and are typically worthwhile only when I can digitize critical elements of the offering that allow the dynamic engagement to be offered at large scale (see digital solutions exemplar). The benefits of a solutions business model are typically higher prices and the opportunity to tailor prices to particular customers.
Adding a physical market place (or better a digital market place) that allows customers to buy not just my offerings but also those of rivals is an addition to my business portfolio. By definition, a market place uses a matchmaking business model that allows me to engage with a wider group of customers and to learn more about rival offerings, but typically demands more resources and a much more-nimble approach to management. Amazon’s market place is not a very profitable business considered separately, but this matchmaking business model has allowed Amazon to create complementary businesses such as AWS that are very profitable.
Adding a new customer group that brings a new additional revenue stream on account of their interactions with my current customers is an essential element of becoming a multi-sided business model. Such actions will be challenging, costly and are typically only achieved in stages, but might be a very profitable final end point. The new customers are likely to be advertisers, and whoever they are it is essential that they engage with my existing customers in a value adding manner. I will need enhanced capabilities to service this new group of customers (the advertisers). Once again, to be really effective as a multi-sided business model, I will have to digitize many elements of my offering.
My physical product business model is at risk from rivals offering solutions business models at scale. In every industry, there are small scale operators who offer solutions business models that are not a threat, but there is a significant threat when a large-scale operator appears with an attractive solutions business model. Such has been the case in capital goods industries where large firms are offering digitally enhanced products or services that engage more effectively with customer needs and are offered on “pay for use and performance” basis. Such a threat can only be countered either by my reducing price significantly, or by my switching to a solutions business model, something that will involve significant costs (see text above).
If a market place appears in my industry, my sales could be increased by participating in this matchmaking business model, but I might lose my direct customer relationship and that may reduce my profits. Airbnb expanded the sales of its smaller rental firm participants many-fold, but threatened traditional hotel chains who were reluctant to participate because they no longer “owned the customer”. My best response maybe to develop a solutions business model (see text above).
It may be very difficult to counter an effective multi-sided business model competitor, especially if the multisided firm is able to use one of its customer groups to subsidize the costs (and prices) of its offering. If the appearance of the extra customer group debases the offering in the eyes of your customers (as in say advertising supported educational offerings) you may be able to resist by maintaining the integrity of your offer. Otherwise you might be forced to change your business model to either a solutions business model or a multi-sided business model (see text above).
Engaging dynamically and as a result fulfilling more completely my customer’s needs is an essential element of transforming from a digital product to a digital solutions business model. Even in the digital sphere, these moves are likely to involve some significant costs. The benefits of a solutions business model are typically higher prices and the opportunity to tailor prices to particular customers.
Adding a digital physical market place that allows customers to buy not just my offerings but also those of rivals is an addition to my business portfolio. By definition, a market place uses a matchmaking business model that allows me to engage with a wider group of customers and to learn more about rival offerings, but typically demands more resources and a much more-nimble approach to management. Electronic games producers often run market places, and this aspect of their business is typically not a very profitable business considered separately, but the matchmaking business model allows the games producers to gain insights into market trends and competitor offerings.
Adding a new customer group that brings a new additional revenue stream on account of their interactions with my current customers is an essential element of becoming a multi-sided business model. Such actions will be challenging, costly and is typically only achieved in stages, but might be a very profitable final end point. The new customers are likely to be advertisers, and whoever they are it is essential that they engage with my existing customers in a value adding manner. I will need enhanced capabilities to service this new group of customers (the advertisers).
My digital product business model is at risk from rivals offering a digital solutions business model because customers of solutions business models are typically more loyal. Such a threat can only be countered either by my reducing price significantly, or by my switching to a solutions business model, something that will involve significant costs (see text above).
If a digital market place appears in my industry, my sales could be increased by participating in this matchmaking business model, but I might lose my direct customer relationship that may reduce my profits. (see text above).
It may be very difficult to counter an effective multi-sided business modelcompetitor, especially if the multisided firm is able to use one of its customer groups to subsidize the costs (and prices) of its offering. If the appearance of the extra customer group debases the offering in the eyes of customers (as in say advertising supported educational offerings) you may be able to resist by maintaining the integrity of your offer. Otherwise you might be forced to change your business model to either a olutions business model or a multi-sided business model (see text above).
Unicorn Business Model Exemplars
Digital content
Amazon Instant Video
Amazon Instant Video is an example of a product business model: Video on Demand (VoD) streaming is offered for a subscription fee.
Overview
It is important to note that Amazon Instant Video forms just one part of Amazon’s portfolio of business models, which include the Amazon Prime product (free shipping, free VoD, and other benefits in return for an annual subscription fee), the Amazon Cloud Services product wherein Amazon charges other companies for the use of its servers, and the Amazon marketplace which connects buyers and sellers and charges a transaction fee. This write-up will focus on the Amazon Instant Video as a stand-alone business model, which is consistent with Amazon’s current policy of offering it as a stand-alone product. Amazon Instant Video serves as an incentive to join Amazon Prime, creating cross-sell and up-sell opportunities.
History
In 2011 Amazon rebranded its already existing video-on-demand service as Amazon Instant Video, and offered it as a stand-alone product for a monthly fee, or as part of the suite of benefits for joining the Amazon Prime membership program. Currently it is estimated that Amazon Prime has more than 20 million members. Amazon Instant Video streaming accounted for 2% of shows streamed in Q1 2013. The VoD industry contains multiple large players and business models. Firms in the industry compete on price, exclusivity and range of content, and user experience in terms of personalization and compatibility with different devices. Some of the large competitors include Hulu, which uses a platform business model partly based on advertising revenues, and Netflix, which has over 40 million subscribers and is the largest VoD streaming company providng advertising-free service in exchange for a subscription fee.
Customers
In this business model the customer is understood to be individuals who have access to the internet, particularly through a personal device such as a laptop or tablet for whom VoD would be an attractive entertainment option. Many Amazon Instant Video customers are also customers of other Amazon products like Amazon Prime membership.
Engagement — Value Creation Proposition
Amazon Instant Video subscribers enjoy unlimited instant streaming of thousands of movies and TV shows. To compensate for a smaller movie library and limited compatibility with some mobile devices, Amazon Instant Video is priced lower than its largest competitor, Netflix, at $6.58 per month compared to Netflix’s $7.99. Video streaming quality is comparable to Hulu and Netflix.
Delivery — Value Chain
Amazon licenses content from broadcast and cable network providers as well as film studios and distribution companies. The technology used to stream the content is based on Flash, which is not supported by some devices like those running iOS. In 2010 Amazon established a division for development of original content, which has recently started developing video content as well. The company is planning to take into account viewer feedback and viewing habits to develop content that it feels confident will appeal to a wide range of viewers.
Monetisation — Value Capture
The Amazon Instant Video model captures value by charging a monthly subscription fee.
Box.com
Box, headquartered in Los Altos, California, is an enterprise software company, which enables users to store documents in the cloud. The primary business model is a product, in which the company sells cloud storage and file management to individuals and companies alike.
Overview
Box also operates a work-for-hire business model alongside its product model in which it creates a tailor-made cloud storage and file management system for large companies. This write-up will focus on the product business model.
History
Box was founded by Aaron Levie and Dylan Smith, Silicon Valley entrepreneurs in 2005, based on an idea Levie had at business school. Levie found sharing documents and group work with business school classmates to be cumbersome. At this time, the concept of the cloud was still in its infancy and the iPhone was still yet to be invented.
Box quickly became popular with individual users, but Levie and colleagues realized that the product would also appeal to companies. While their initial launch was designed for individual users who used it as a secure option for storing files (eg music, videos, photos) and who want to be able to access the files from mobile devices as well as desktops, Box saw the effect of consumerization of IT, which meant as individuals became comfortable with Box’s offering, they demanded the same quality and accessibility in the workplace. Box has recently, therefore, begun to target more and more of the corporate user market. This sets Box apart from Dropbox, which still largely focuses on the individual consumer market.
Three years ago Box launched in the UK and now has over 140 staff at its Mayfair international headquarters. Box Limited was listed on the New York Stock Exchange in January 2015, netting Levie, 29 years old, approximately $100 million.
Customers
Box targets two categories of users: individuals and small businesses, and large companies, who need a way to store, access and share files in the cloud.
Engagement — Value Creation Proposition
In its product business model, Box provides a scaled, standardized product for personal and small business users. All users can share access to the files to colleagues or friends allowing them to edit, download or add files, enabling collaborative working. The other major benefit is that users can then access the files on any device they are using, whether it’s a laptop, tablet or iPhone, wherever they are. Small business users benefit from the ability to share documents within small offices and teams. Box effectively removes the need for inflexible traditional office networks. Large enterprises can benefit from the secure mobile access to corporate information, document management and collaboration benefits. This is of particular value for employees who are working remotely or travelling. The Box platform also integrates with other enterprise software providers (including Salesforce, DocuSign, NetSuite, and others), which means workers can still use their enterprise software resources within the Box.
Delivery — Value Chain
Box’s servers create cloud storage space, which it essentially sells to users for the purpose of storing and sharing files. The software and algorithms that Box developed in-house provide security from hackers, and enable real-time file management. Users access their files through Box’s web-based interface, or through their own desktop/laptop as they would access files on their hard drives.
Monetisation — Value Capture
Box operates a typical freemium pricing model. Personal users can get up to 10GB of storage free. If they need additional storage, users can pay £7 per month to get 100GB. Small business users can get monthly subscriptions for £3.50 per month or £11 per month, depending on needs. Enterprise users can buy an enterprise license, which is priced based on number of users and amount of storage and additional services (such as other SaaS tool integration). These enterprise contracts tend to be operated more as a work-for-hire business model.
Evernote
Evernote offers a software product enabling users to organise and store information across multiple platforms and devices.
Overview
Evernote embodies an “exemplar” product business model: its core offering is a suite of software and services that enable users to find, capture, store, organize, and access information across multiple platforms and devices. The customer can use a basic version of the software product for free, but has to pay for additional premium features.
History
Evernote is an independent, privately held company headquartered in Redwood City, California. The company was founded in 2007 by Stepan Pachikov and has collected $205M in 10 funding rounds from 14 investors. Evernote is currently headed by CEO Chris O’Neill with more than 200 million users worldwide and nearly 400 employees.
Customers
The typical customers of Evernote range from the average consumer who owns a few devices such as a phone, desktop and laptop, to businesses with hundreds of computers. All consumers use the software to organize all kinds of data (notes, pictures, videos) across multiple platforms like mobile phones, tablets and PCs. Evernote does not allow the display of advertisements, nor does it enable the sales of data to other companies.
Engagement — Value Creation Proposition
Evernote is a cloud-based note-taking system that is designed to keep the user organized and save time. It is often described by its users as being their “external brain,” whereby the user can add text, images, audio, scanned documents and files all the while automatically synchronizing the databank across all registered devices. Evernote analyzes new data inputs –i.e., pictures – with a range of algorithms to enable an efficient tagging system, in turn facilitating users’ data search via specific context-based keywords.
Evernote offers a flexible range of organization tools to adapt to any of the users’ preferred working methods. Insofar as the user can remember a few words of the document – whatever the format – it can be swiftly and precisely pinpointed by the Evernote search bar. Additionally, users can easily share the various notes collected with other users – either publicly or with other specific users – and the system records a complete history of all changes made to files. Another distinctive feature of the Evernote software is the Web Clipper, which enables the users to clip any part of a webpage and save it in a particular folder for future use.
Furthermore, users can also reap the benefits of additional Evernote applications, including Skitch – which allows users to annotate, draw shapes and sketch on pictures – Scannable – which digitizes sheets of paper into high-quality scans – or Penultimate, an iPad application designed to mimic the natural calligraphic experience.
Delivery — Value Chain
Users must first download the Evernote software on their device, and create an account from a range of options depending on the amount of monthly data they wish to upload. Customers can then access Evernote via a mobile application or direct web access. In terms of customer acquisition, Evernote traditionally relied on partnerships, such as pre-installation agreements on Samsung and Lenovo mobile phones and notebooks.
Monetisation — Value Capture
Evernote offers four subscription options to its users: “Basic,” “Plus,” “Premium” and “Evernote Business,” depending on the required amount of uploaded data. This ranges from 60MB for the Basic option, to 10GB + 2GB for the “Evernote Business” package.
All Evernote subscriptions encompass the following features: notebook sharing, text search in images, industry-standard security, text encryption and image annotation. “Plus” accounts, costing £29.99 a year, allow for emails to be saved into Evernote, syncing across all devices (basic accounts only allows for 2 devices), offline access to notebooks, and customer support via email. “Premium” accounts, costing £44.99 a year, offer the added features of PDF searching, office documents and attachments, digitalizing business cards, viewing previous versions of notes and switching between multiple accounts. “Evernote Business” includes all the aforementioned features, as well as a team knowledge and content hub, and other IT tools enabling a centralized account administration and user management.
Evernote has been quite consistent in converting free users the longer they use the free product. While only 0.5% of first-time users jump straight to the premium product, this conversion rate increases to 7% after one year, and to 11% after two years. For those using the software for four or five years, a full 25% is likely to become paying users 1. Recent reductions to the number of syncable devices to only two for the free service are expected to increase the number of paid subscriptions.
http://vator.tv/news/2014-02-07-how-does-evernote-make-money#zZl3VYzIi0rZ6KiP.9https://evernote.com/corp/http://www.androidcentral.com/evernote-hikes-price..https://www.crunchbase.com/organization/evernote#/…http://www.bloomberg.com/news/articles/2014-01-23/evernote-market-app-makers-retail-strategy-pays-off
Huddle
Huddle is a product business with a cloud based collaboration product that helps people work together on projects.
Overview
Huddle is a cloud based collaboration product that helps people work together on projects. It lets employees of an organization focus on mission and business-critical tasks rather than deal with communication bottlenecks or IT infrastructure issues. The product is a web- and downloadable software-based technology that facilitates real-time communication (e.g., chat), document collaboration and sharing, and other teamwork activities like scheduling.
History
Huddle was established in 2006, with offices in London and San Francisco. Headed by Marten Brogger, a technology industry veteran with over two decades of experience, Huddle is backed by multiple investors such as Eden Ventures, Matrix Partners and Icon Ventures to name a few. The company has raised over $83 million in investment as of 2014.
Customers
Huddle is used by more than 100,000 organizations worldwide, including SEGA, AKQA, Unilever, and KIA Motors, to securely manage projects, share files and collaborate with people inside and outside of their business.
Engagement — Value Creation Proposition
Workplaces today are changing dramatically. Employee friendly policies let people work from home. Globalization means that teams are distributed across the world in different time zones and speaking different languages. Companies are adopting changes in their organization structure and operations bringing in practices such as lean that call for seamless flow of information across the organization. The IT infrastructure & capability that organizations require to realize this are demanding and pose a significant deviation from the focus of many organizations. Huddle takes this challenge away from organizations by providing a secure, reliable & cost-effective cloud based collaboration platform that companies can easily access at reasonable costs.
Tools such as virtual workspace for groups, team based content sharing, cross team collaboration tools such as messaging, task management & tracking tools and intra-company social platforms help organizations create integrated & productive virtual teams. Teams focus on the tasks that are critical to their goals rather than dealing with impediments in flow of information & communication.
Delivery — Value Chain
Huddle develops its software in-house and customers access it initially through Huddle’s website, but customers can also download a software program so that the Huddle interface becomes embedded as part of the user’s laptop or PC operating system. This adds functions to existing software packages like Microsoft Office – for example, users that download Huddle’s software will have an option in a Microsoft Word document to share the document with their Huddle group. Huddle’s platform is accessible from a range of devices from desktop & laptops to the rich set of mobile devices. It also supports a multi-lingual user interface to enable global deployments.
Monetisation — Value Capture
The business model is a simple product model. Customers pay a subscription fee depending upon the class of service they require. Standard service is $20 per month per user, enterprise subscriptions are $40 per month per user and an ‘unlimited’ service is available for a much higher fee.
Awards and Winners Website: http://awardsandwinners.com/winner/?name=horizon-discovery-ltd&mid=/m/0zbsl3l
Company Website: http://www.horizondiscovery.com/
Wikipedia Entry: https://en.wikipedia.org/wiki/Horizon_Discovery
Mind Candy — World of Warriors
Mind Candy operates diverse business models with several children’s entertainment brands. This write-up focuses on the gaming app “World of Warriors”.
Overview
Mind Candy is a company operating a number of children’s entertainment brands; each with distinct business models. Indeed, Mind Candy operates an exceptionally diverse portfolio of business models for its relatively small size. Among its brands/business models are the Moshi Monsters brand (subscription-website and licensing based product model, now in decline) and the recently launched, currently non-monetized but soon-to-be platform-based Popjam social media application. Mind Candy launched “World of Warriors”, a gaming app that is free to download but includes in-app purchases (and supports some limited advertising) in October 2014. The gaming app also has a social community, a music single, and collectors cards and sticker albums. The in-app purchase element of the game (as opposed to the limited advertising element) follows a product model. This write up shall focus on this model.
History
World of Warriors was launched by parent company Mind Candy in October 2014 following the success, and recent decline, of its Moshi Monsters brand and by March 2015, more than 167 million ‘battles’ had taken place in the game. The launch represented its first purely mobile game and was intended to reach a broader audience of family gamers than Moshi Monsters, which was targeted at kids aged 7-13.
Mind Candy, founded in 2003, employs 170 staff and develops digitally-native entertainment brands, mostly targeted at children. Its revenues fell by 34.8% from £46.9m in 2012 to £30.6m in 2013 and the company went from an £8.1m net profit in 2012 to a £2.2m loss in 2013, following declining revenues in Moshi Monsters and significant R&D investment in both World of Warriors and Mind Candy’s new social media platform for children, PopJam.
World of Warriors operates a model similar to, and competes against, other freemium app-based games such as King’s Candy Crush Saga, Mojang’s Minecraft and Supercell’s Clash of Clans.
Customers
The business model represented by World of Warriors relies on customers who are sometimes described as “mid-core” gamers; those who have become used to simple app-based games such as Candy Crush and are ready to interact with more involving and complex titles. Demographically, these represent a slightly older, broader audience than that of Moshi Monsters, whom Mind Candy struggled to interact with responsibly (due to the consent to purchase issues with in-app purchasing for minors).
This broad audience reflects the large number of iPhone and Android users around the world with an interest in mobile app gaming. The app has already been downloaded approximately 13 million times.
Engagement — Value Creation Proposition
World of Warriors’ value proposition is to provide a rich, “free”, gaming experience with high quality graphics and gameplay to a large number of smartphone users. They employ a scale (or “bus”) model, offering the same product to every user. Gamers can earn in-app rewards to progress through the game and collect achievements. Recently, Mind Candy has added a player versus player (PvP) element to the game that allows gamers to compete against each other and to develop followings. It is possible to play the game entirely for free, though progress will be significantly slower than that of players who opt to make in-app purchases.
Mind Candy has used broadcast media to market World of Warriors, as well as creating a community of over 133,000 fans on Facebook, Twitter and YouTube. Via separate models, Mind Candy has created collectable cards and even released a music single; both of which have helped to promote the game itself.
Delivery — Value Chain
Mind Candy is a vertically integrated business which designs and develops its games in house. These are then made available through Apple’s App Store or through Google Play to Android users. Once the app has been downloaded, users can purchase in-app content with their OS account.
Monetisation — Value Capture
World of Warriors uses the now-familiar freemium app approach. The app itself is free to download, but in-app purchases (ranging from £1.50 up to £79.99) can be made which are charged to users’ iTunes/Google accounts. Apple and Google both pass on 70% of this revenue to Mind Candy.
http://mindcandy.com/about
http://www.adweek.com/socialtimes/world-of-warriors-surpasses-167m-battles-receives-multiplayer-arena-mode-infographic/617745
http://www.theguardian.com/technology/2014/nov/13/moshi-monsters-mind-candy-financial-results
http://xyo.net/iphone-game/world-of-warriors-84cexoE/?country=GB
https://www.facebook.com/WorldOfWarriors?fref=ts
https://itunes.apple.com/gb/app/world-of-warriors/id793076829?mt=8
Netflix
Netflix is a product business model that runs a video-on-demand service through streaming technology for a subscription fee.
Overview
Netflix represents a classical “product” business model in the video-on-demand industry where users pay a subscription fee to access Netflix’ library of films and television shows. Netflix was one of the pioneers of offering entertainment content using video streaming technology in exchange for a subscription fee.
History
Netflix video on demand (VoD) originated from a DVD rental business in 2007. The company still operates the DVD rental service, but its primary focus has since shifted to the VoD streaming business. This business model write-up focuses on the VoD business. Netflix is the largest online movie and TV show streaming provider with more than 40 million streaming members as of 2013; Netflix streaming accounted for 89% of shows streamed in Q1 2013. The company also produces original content. Video on demand industry is a crowded one, with multiple players and business models. Players in the industry compete on price, exclusivity and range of content, as well as user experience in terms of personalization and compatibility with different devices. Some of the largeest competitors include Hulu, which uses a hybrid business model partly based on advertising revenues, and Amazon’s Prime Instant Video offered as a complement to their retail market place business.
Customers
Netflix’s customers are the individuals who pay a subscription fee to access the entertainment content in Netflix’s library. They must have an internet connection. Netflix launched in the United States and is currently available in many other countries in North America, Europe, and Asia. Netflix customers span wide demographic ranges – young to old, wealthy to lower-income, men and women, etc.
Engagement — Value Creation Proposition
The main value propositions to streaming consumers are the legal access to a large movie database (in the UK there are currently almost 3,000 different titles available1 – note that availability varies by country) and the personalized service expressed in the suggestions of movies for each customer. The customers’ ratings serve as the basis for the recommendations and not a film’s popularity at the box office. The rating algorithm makes better use of movies available on the website tailored to his/her taste to watch. Netflix also creates value by having one of the widest supported devices ranges, including game consoles, smart phones, tablets, PCs, and internet TVs. Finally, Netflix offers original and exclusive content to its subscribers. New and exclusive series are released as full seasons, enabling binge watching; users do not have to wait week by week for new episodes to be released. Combined, these products and services significantly increase customers’ willingness to pay for access to Netflix’s catalogue as they have a wider choice and easy use.
Delivery — Value Chain
Netflix licenses content from broadcast networks, cable network providers, and film and television studios. As an early entrant, Netflix was able to build a huge database of movies benefitting from the willingness of both TV studios and media companies to license their content. These companies hoped that Netflix users would have a chance to catch up on previous series of TV shows or films and, as a result, would be more willing to pay for their services to watch new episodes or film releases. As time passed, however, Netflix was viewed as a substitute rather than a complementary good to traditional content distributors.
Netflix also produces original content based on customer viewing data. By analysing behavioural propensities of its paying customers, Netflix determined that a political drama starring Kevin Spacey and produced by David Fincher would appeal to a large cross-section of its existing subscriber base, resulting in the highly successful (14 Emmy nominations) political drama “House of Cards”. Netflix has now licensed its original content to other distribution channels.
Netflix delivers its streamed media through Microsoft’s SilverLight platform, which is a platform that permits programmers to develop complex web applications. In 2010 Netflix switched to Amazon’s cloud services and started using some features of the HTML5 technology to extend the range of devices that could stream video through Netflix to numerous web browsers, consoles, and other devices including tablets and iOS systems since they do not work with Flash. Due to the fact that HTML5 platform is not yet implemented officially Netflix engineers had to work to integrate and innovate the way they deliver video in order to use the technology. The way Netflix integrates HTML5 enables a wider range of devices able to stream media, and uses less battery than other platforms. The supreme rating algorithm CineMatch, which recommends movies to customers matched to their tastes, makes for a distinct personalized service.
Monetisation — Value Capture
Netflix’s major source of revenue are the subscription fees of $7.99 per month for unlimited access to TV shows and movies streamed over the internet to a range of devices. Currently Netflix does not use price discrimination for its customers. A popular critique of Netflix is that the company cannot bring in enough revenue from customers alone to keep up with the need to continue purchasing new content for their service: “Netflix needs advertisements to bring in more money.” Netflix’s response has always been a solid “No.” Instead, the company is planning to increase their fees, while still protecting the original add-free value proposition.
Omnifone
Omnifone is a music provider operating a product business model selling MusicStation, a cloud-based music streaming application.
Overview
Music provider Omnifone operates a product business model. It sells its primary product, MusicStation – a cloud-based music streaming application – to makers of consumer electronics products (e.g., Sony), internet service providers, and telecommunications companies. Omnifone enters into licensing agreements with music labels to obtain the rights to stream the labels’ songs online, and then sells access to these songs to its customers. The customers then use the cloud-based music service for their own commercial music platform.
History
In 2003, Rob Lewis, Phil Sant and Mark Knight established Omnifone in U.K. The company spent 4 years developing its flagship product, ‘MusicStation’. Currently, the company has customers in more than 40 countries including most of the EU, the U.S, and Japan. It employees more than 200 people, and in 2014, it recorded revenue of £38.5 miliion, with a gross profit of £14.8 million.
Customers
Omnifone is a B2B company – selling its products to companies, rather than individual consumers. Customers are primarily telecommunications service providers, internet service provider, and consumer electronics companies. The company recently lost its biggest clients, BlackBerry and Sony.
Engagement — Value Creation Proposition
Omnifone provides a suite of cloud-based music streaming products to its customers. Omnifone enters into licensing agreements with music labels, and then sells access to the music labels’ songs to its customers via cloud-based streaming. In this way, Omnifone’s customers do not have to enter into licensing agreements with individual music labels, since purchasing Omnifone’s products gives them access to a variety of different labels’ music libraries. In addition, Omnifone’s music streaming products are cloud-based, meaning customers do not have to develop or download software. Finally, Omnifone’s products can be used on smartphones, tablets, computers, and video game consoles – which means Omnifone’s customers can provide their consumers with access to streaming music across a variety of devices.
Delivery — Value Chain
Omnifone enters into licensing agreements with a variety of music labels (the company currently has licensing agreements with many major music companies including Universal Music Gorup, Sony Music, Warner Music Group and EMI Music), and develops in-house its cloud-based products. Omnifone purchases server space from third parties, which it uses to host its cloud-based products. Omnifone’s customers access these products via the Internet.
Monetisation — Value Capture
Omnifone’s customers pay a subscription fee for the use of its cloud-based products, with the fee varying by type of product (which differ, essentially, by number of songs and associated services like search, offline listening, ability to create playlists, etc.).
http://www.bbc.co.uk/news/technology-19555308
http://www.theinquirer.net/inquirer/news/1051069/sky-omnifone-talking-legal-downloads
https://gigaom.com/2012/03/09/419-interview-omnifone-ceo-eyes-investments-as-music-access-takes-off/
OrderDynamics
OrderDynamics operates a product business model providing customizable ecommerce platforms for retail customers, facilitating the online market place entry.
Overview
OrderDynamics operates a “product” business model, in which the company provides retail clients with customizable ecommerce platforms that allow a retailer to enter the online market place with minimal capital expenditure and skill levels. The platforms are scalable to suit the retailers’ business requirements. OrderDynamics offers a suite of products that include tools to convert “big data” into “actionable insights,” order management systems that connects retail inventory with orders across channels, and a cloud based commerce platform. In a work-for-hire business model that the company operates alongside its product business model, a global team of retail and technology advisors help customers to design, implement and run these software platforms.
History
Michael Ross and Andrew McGregor found eCommera in 2007. Prior to eCommera, Michael Ross was involved in setting up Shop Direct, Glasses Direct and Figleaves.com. In June 2013, eCommera acquired OrderDynamics to expand the suite of its products and subsequently went through a rebranding and renaming process to OrderDynamics as the company felt the name better reflects the nature of its product suites. eCommera went through several funding rounds, raising around $51m to expand in the US and Europe. The main investors of eCommera are Dawn Capital, West Coast Capital, Frog Capital, ePlanet Capital, WPP and WTI.
Customers
OrderDynamics serves retail clients who have online operations or would like to expand into the online arena. OrderDynamics supports House of Fraser, Asda Direct, Clarins and Neiman Marcus, amongst others, with their online operations & strategy. It has more than 80 clients across 33 countries. Known customers include: H2O+, Pret a Manger, Eclipse, Defacto, Laura and Quick Silver.
Engagement — Value Creation Proposition
OrderDynamics creates value for its retail customers by providing pre-integrated (with other key retailer software) ecommerce platforms that allow a retailer to enter the online market place with minimal capital expenditure and skill levels. OrderDynamics products enable retailers to set up an online trading operation or expand their existing platforms. OrderDynamics will handle all the technology burden of implementing and maintaining the platform.
Once the platform is set up, OrderDynamics is able to create analytical insights that identify online customer behaviour and profit maximising opportunities. It also has software that helps inventory management in an Omni channel environment. OrderDynamics works with its clients on a partnership basis to develop, implement and improve online solutions. For example, OrderDynamics team and Asda’s business team worked as a unit to roll out multichannel offerings such as “Click and Collect.”
Delivery — Value Chain
OrderDynamics delivers its products via OrderDynamics’ website. The software remains on OrderDynamics’ servers, so customers do not need to invest in expensive servers or other IT hardware and software. The solutions are therefore “cloud-based” and delivered via internet and can be upgraded or new functionality added on demand.
Monetisation — Value Capture
OrderDynamics gains a share of the commercial success of the projects it implements for its clients. For example, OrderDynamics helped the House of Fraser’s online sales to grow to more than £100m by redesigning and supporting the online business. OrderDynamics takes a share of this revenue.
The Sunday Times: Tech Track 100
http://www.fasttrack.co.uk/fasttrack/leagues/dbtechDetails.asp?siteID=3&compID=3192&yr=2012
Eseller: How to use:ecommera
http://eseller.net/how-to-use-ecommera/
retailTouchPoints: ECommera Rebrands As OrderDynamics
The Telegaph : eCommera raises £25m to conquer the US
http://www.telegraph.co.uk/finance/businessclub/10657476/eCommera-raises-25m-to-conquer-the-US.html
The Entrepreneur:Michael Ross, eCommera
http://startups.co.uk/the-entrepreneur-michael-ross-ecommera/
Performance Horizon
Performance Horizon’s enables marketers to apply performance-based commercial models to drive sales growth across a wide range of digital marketing partners.
Overview
Performance Horizon operates an exemplar Product business model in a space called digital partner marketing (where advertisers pay partners to drive sales). Through their Software-as-a-Service model, Performance Horizon’s core technology enables marketers to apply performance-based commercial models to drive sales growth across a wide range of digital marketing partners – from affiliates, comparison shopping engines and aggregators through to apps, media partners, meta-partners and social media portals. This includes the ability to optimize partner performance, deploy creative, manage partner and product spend, easily integrate data into existing workflows and systems, as well as process partner payments globally.
History
Performance Horizon was started in 2010 by a group of Affiliate Marketing veterans. Among them, Malcolm Cowley and Paul Fellows, who previously founded buy.at, an affiliate network, acquired by AOL.
The core performance marketing technology platform was launched in 2011. Everything Everywhere became the first major UK client in May 2011 followed by the first major US client, Nextag, in October 2011. The team has grown to over 100 employees serving about 100 customers, with average growth above 100% YoY.
Today, Performance Horizon is the leading provider of SaaS solutions for digital partner marketing. The company is headquartered in Newcastle, England with offices in the U.S., U.K., Japan and Australia; Performance Horizon’s platform drives $3B+ in top line revenues across 155,000 marketing partners in over 170 countries. The company is backed by top-tier investors including Mithril, Greycroft Partners and DN Capital.
Customers
- Major brands in travel, retail, finance, Telecom and digital content
- Digital marketing agencies
- Digital marketing partners
Engagement — Value Creation Proposition
Performance Horizon enables brands to drive customer acquisition, revenue increases and profitability gains through their online marketing partners. This includes the ability to optimize campaign performance, deploy creative, manage partner and product spend, adjust commission rates and run promotions on the fly, easily integrating data into existing workflows and systems via the open architecture as well as process partner payments globally.
Delivery — Value Chain
Performance Horizon solutions including its core performance marketing application and platform are available and delivered as software-as-a-service (SaaS).
Monetisation — Value Capture
Performance Horizon’s business model is based on providing the technology solution to clients and retaining a percentage of the underlying value driven through the platform.
Qubit
Qubit uses a product business model in marketing industry where users pay to access website traffic analysis and website enhancement tools.
Overview
Qubit represents a “product” business model in the digital marketing industry where users pay a usage based subscription to access Qubits suite of website traffic analysis and website enhancement tools. Qubit offers a sophisticated set of tools via it’s SaaS platform that allows customers to segregate their website traffic and optimise the customer experience when using the website. There are also some work-for-hire integration services that the company offers in a complementary business model to support its products.
History
Founded in 2010 by four ex-Googlers, Qubit is headquartered in London with offices in New York, San Francisco, and Paris. Accel Partners, Balderton Capital, and Salesforce Ventures have invested over $36 million in the company.
Qubit have grown over the last 5 years and currently have revenue of £5.4 million. They are seeking to meet the needs of omnichannel businesses with analytics, segmentation, A/B testing, and web personalization tools.
Customers
Qubit’s customers are companies with e-commerce websites. These businesses are seeking to improve their websites via use of the tools and analytics provided by Qubit services.
Qubit has also created partnerships with consultancy firms that focus on improving web traffic and integrates the products into their value chain. This drives more customers to their platform.
Engagement — Value Creation Proposition
Qubit has four main services that can work separately or in conjunction with each other in order to help the client company improve their customer experience of the website. This could be in allowing them to ensure the right users get the right information or to help increase spend, or provide insight into why customers choose not to complete purchases.
The A/B testing service allows the client company to quickly test the effect on customer interactions with their website when small details are changed.
The analytics suite allows the client company to track uses progress through their website and understand generalised usage patterns.
The web personalisation tools allow the client company to modify an ecommerce site to personalise the experience for different user groups. This tool can take data from other software and databases as inputs to help understand which customer has visited and what their personal needs are.
The tag management tools improve the ease with which tracking and information tags can be continuously updated with the client company’s e-commerce platform changes.
Delivery — Value Chain
Qubit writes their own software largely in Java and Javascript. They support both browser, tablets and mobile channels. The service runs on the AWS platform, giving it a lot of potential for reliability and scalability. Customers acquire the product by purchasing it online.
At the back end they have championed the use of emerging NoSQL technologies such as HBASE (based on Hadoop).
Monetisation — Value Capture
Qubits major source of revenue is via subscript fees for use of its SaaS platform. There is heavy price differentiations among its customers depending on their usage levels and which of the suite of tools are used. The average cost of using the service is $100,000 (Forrester report).
There is no evidence of income from other partnerships that might drive traffic to their platform or who might be able to make use of the aggregate website traffic data the platform collects.
Repknight
RepKnight is an IT firm uses a product business model who’s software captures, analyses, and reports on data from open-source digital, social media, and dark web sources.
Overview
RepKnight is an exemplar of a Product business model. The company’s software captures, analyses and reports on data from open source digital, social media, and dark web sources. Governments, defence, law enforcement agencies and companies use this information to discover and improve their response to risks and threats, identify criminality, and manage major events. RepKnight offers subscriptions to its software at different price points with monthly data allowances.
History
RepKnight, founded by John Reid, is jointly headquartered in London and Belfast, Northern Ireland. RepKnight was developed in 2011 through the UK Government Small Business Research and Innovation programme, in response to a government requirement following events including the London riots and a series of global security incidents. In December 2013 the company was chosen to be a part of London’s Tech City Future Fifty. In 2014 RepKnight won the prestigious Security Innovation Award from the Home Office and security and defence trade organisation ADS Group at the Security & Policing Exhibition in Farnborough, UK. In January 2015, RepKnight was part of the delegation led by UK Prime Minister David Cameron on a UK Trade and Investment mission to Washington, DC on cyber security, and again to Asia in July 2015.
Customers
RepKnight’s customers come from the public and private sectors. This includes government agencies, defence organisations, police and security forces, and corporates. RepKnight has worked with UK national intelligence to ensure the software capability tracks the requirement of agencies and organisations dealing with threat, risk and harm.
Engagement — Value Creation Proposition
Manually tracking and sorting through web and social media content, even through aggregator websites, is a near-impossible task for a single person or team. RepKnight’s software uses algorithms to find and analyse relevant digital data from across the internet. The results are displayed in a user-friendly dashboard. Simple tools enable the user to search, visualise, understand and easily report on the findings, creating information that is used to help decision-making. RepKnight’s software is highly secure and has been built for customers in government, intelligence, defence and security who require the highest security levels.
Delivery — Value Chain
RepKnight delivers value through a Software-as-a-Service platform (not to be confused with Platform-as-a-Service). It develops its software and algorithms in-house to scan, analyse, and make sense of data from sources across the internet, with open-source data such as social media sites being available in real-time. Customers can choose which sources they want to monitor. The software can focus on spikes in keyword usage, geographic information, sentiment analysis, influencers and trends, and provides its alerts when a topic a customer is interested in starts to trend or spike. RepKnight can also be used for engagement, and content can be posted in real-time or scheduled.
Monetisation — Value Capture
RepKnight offers several structured plans that allow customers to buy volumes of data, used by as many users as they need. RepKnight also offers training in open-source intelligence methods and techniques, to help customers make the most of both the software to find the information and their use of open-source intelligence.
Digital Buzz (2012). Infographic: 24 Hours on the Internet [Online], accessed on May 12, 2015 from http://www.digitalbuzzblog.com/infographic-24-hour…
Bloomberg Business (2015). Company Overview of RepKnight Ltd [Online] accessed May 12, 2015 from
http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=266328384
Crunchbase (2016). Company overview of RepKnight ltd [Online]. Accessed April 14, 2016 from https://www.crunchbase.com/organization/repknight#…
RepKnight (2013). Future Fifty Announcement [Online], accessed May 12, 2015 from https://www.repknight.com/future-fifty-announcemen…
RepKnight (2016). RepKnight. [Online], accessed April 14, 2016 from https://www.repknight.com/ and https://www.repknight.com/about-us/
Gov.uk (2016) Digital Marketplace. [Online], accessed April 14, 2016 from https://www.digitalmarketplace.service.gov.uk/g-cl…
Spotify
Spotify is a music streaming platform that provides users with content from record labels and media companies via a product business model.
Overview
Spotify is a music streaming platform which provides users content from record labels and media companies. Spotify employs a ‘Freemium Model’: users can enjoy a free version paid for by advertisers, and a premium, ad-free version. Accordingly, Spotify operates both a multi-sided business model and a product business model its free and premium versions, respectively.
Spotify aims to convert its free users who are using the streaming platform to premium customers. With the premium version, users pay a subscription for advertisement-free streaming and unlimited mobile usage as well as offline access to playlists. Despite making revenues of 1.95 billion Euros, which was an 80 per cent increase from 2014, Spotify reported a net loss of 173 million Euros. (Ft.com, 2016).
Spotify’s largest expense is the amount it pays to the music industry for the use of its songs and recordings. The royalty and distribution fees increased by 85 per cent in 2015 to 1.63 billion Euros. Unlike its rivals such as Youtube and Vevo, who pay a share of revenue to the music right holders, Spotify pays music right holders a minimum per stream. This implies that despite the amount of revenues music holders make, Spotify is required to pay the agreed amounts.
History
Over the past decades, the digitisation of music has created a massive rupture in the music industry value chain, with the rise of counterfeit plaguing incumbents’ profitability. Spotify was a pioneer in the provision of a right-protected, cloud-based music-streaming platform.
Spotify was founded by Daniel Ek and Martin Lorentzon in Stockholm, Sweden, in 2006. Spotify has over 75 million users worldwide, with 30 million being paying subscribers that have access to 30 million songs. Spotify accounts for more than 41 percent of the world’s playing music subscriptions as of 2016. (International Business Times, 2016).
Customers
Spotify caters to two main customer groups: users and advertisers.
Spotify users are individuals who legally listen to music that is streamed on the platform. Users can save music to their library, create playlists and easily navigate through the platform to search for music based on song, artist or album.
Advertisers typically embody consumer-product companies seeking to efficiently target a broad and global customer base.
Engagement — Value Creation Proposition
Users of the free Spotify version can enjoy legal streaming access to a wide ad-supported catalogue (30M songs) bundled with carefully selected playlists (mood, genre etc.), but are limited to shuffle-play and are forced to listen to advertisements. Users can also add other friends on Spotify and view their public playlists as well as see what they are currently listening to, which allows them to be introduced to other music and explore various genres.
Spotify’s value proposition is extremely attractive insofar as their consumption is subsidized by advertisers, who pay to reach Spotify’s vast customer base via its targeted advertisement algorithm. Where Spotify gathers vast amounts of data – regarding its users’ music consumption patterns, such as artists’ fans location, types of media consumption etc. – ads broadcasted on Spotify become even more attractive as they promise to efficiently reach a global and diverse customer base. They can advertise via audio ads, display ads, branded playlists, sponsored sessions, video takeovers and home page takeovers. Audio ads, being one of the main advertising forms, plays an audio commercial up to 30 seconds long between songs. Audio ads appear every fifteen minutes on the free service exposing users to ads they cannot skip.
On the other hand, the premium version offers ad-free streaming and downloads to a vast library of high-quality music. Premium users can choose and listen to their music offline, across multiple devices. Spotify Premium costs £9.99 in the UK and $9.99 in the US. Spotify also offers a Family Premium package which provides the premium service for up to five family members for 14.99 pounds and dollars respectively. Students receive the Premium service for £4.99 or $4.99.
Delivery — Value Chain
Spotify signs deals with record labels, pays royalties “split amongst the rights holders in accordance with the popularity of their music on the service. The label or publisher then divides these royalties and accounts to each artist depending on their individual deals” (Hatmaker, 2013).
Spotify is available on PCs as well as smart phones. Users require internet access to browse and listen to music – including songs and playlists curated by Spotify. Spotify’s users both free and premium, receive the same songs and have unlimited access to it. After having downloaded their songs onto their devices, premium users can listen to their content offline, anywhere they want.
Monetisation — Value Capture
Spotify firstly generates revenue through its subscription payments on the premium tier, accounting for 92.5% of revenues (Hatmaker, 2013), thus limiting advertisers to contribute the rest. 2015 reports disclosed that majority of Spotify’s revenue -$1.95 billion – comes from its 30 million paid subscribers, while $219 million came from advertisements.
However, in paying out royalties to record labels – between $0.006 and $0.0084 each time a track is streamed (Plaugic, 2015) – Spotify re-distributes over 70% of its revenues.
Swiftkey
Swiftkey operates a product business model that sells an app that speeds up users’ typing by making predictions.
Overview
SwiftKey represents a product business model in the technology industry that replaces the touch keyboard of iOS and Android devices such as smartphones and tablets. It uses a blend of artificial intelligence technologies that enable it to predict the next word the user intends to type. In addition SwiftKey learns from previous user input into SMS messages, Twitter, Gmail, Yahoo!, Google+ and Facebook to increase the accuracy of its predictions. Furthermore SwiftKey also enables users to customise the look of their keyboard though themes. Swiftkey builds upon cloud based synchronization and the global uptake of keyless smartphones as well as Apple’s App Store and Google’s Google Play.
History
The company behind SwiftKey (Touchtype Ltd.) was founded in 2008 by Jon Reynolds and Dr Ben Medlock in London. It now has over 160 staff, its head office in Southwark, London, and has other offices in San Francisco, US and Seoul, South Korea. Major recent events include:
July 2010, Paid version of SwiftKey Beta released on Android Market.
September 2013, B finance round ($17.5m) led by Index Ventures with Octopus Investments and Accel Partners.
January 2014, iOS SwiftKey Note released, incorporates predictive typing technology as a custom toolbar attached to the top of the regular iOS keyboard.
June 2014, SwiftKey 5 update released, now a Freemium app.
September 2014, SwiftKey Keyboard for iPhone, iPad and iPod touch launched. It reached No 1 in the free US App Store charts and the company confirmed it had been downloaded more than 1 million times on the first day of launch.
Customers
SwiftKey is for people that want to speed up and increase accuracy of typing when using their touch devices and for those that want to change the look of their keyboard. The app is widely available – in Western countries and emerging markets – and all that is needed to purchase it is a compatible phone and an account with either Google or Apple in order to access these companies’ app stores.
Engagement — Value Creation Proposition
The principal value proposition to the user is an improved keyboard experience that is able to synchronize prediction across all devices the app is installed on and increase the speed with which customers can type.
Delivery — Value Chain
Users download and install Swiftkey onto their device from an app store, and set up an account (username and password). They can log in with their credentials and download it to another device for free. The app learns the user’s typing style and begins to predict and correct the next words or characters in a typed field. This saves the user time both by reducing error correction and automatically suggesting the next word.
Monetisation — Value Capture
SwiftKey is free to download and use, while in app purchases enable users to customise the look of their keyboard. Swiftkey is available through Apple’s App Store and Google’s Play Store.
Synthesio
Synthesio is a media firm operating a product business model that helps companies to ‘sense’ public sentiments about a product or brand.
Overview
Synthesio is an example of a product business model. The company monitors social media to ‘sense’ public sentiments about a product or brand, allowing companies and marketing agencies to understand and connect with their customers. The jargon term to describe their work is an “Enterprise Listening Program”. Essentially, the value proposition is information, or the instant summarisation of information from complex and disparate sources. Synthesio trawls through various social networks like Facebook and Twitter – as well as more regional social networks like Orkut, Sina Weibo and Renren – and provides, at a glance, the information needed by brand owners and marketing agencies to plan their next actions.
History
Synthesio is a relatively young technology startup, founded in 2006 by Loic Mousand and Thibault Hanin. It has grown quickly – and taken on larger and larger investments, totalling $22.2 million since its founding, from Entrepreneur Venture, ESSEC, Idinvest Partners, and LIOR Investments. Synthesio now has 150 employees, and offices in New York, London, Paris, and Singapore. There are two other Enterprise Listening Platforms (platforms in the non-business model sense etc etc) in the “leadership” spot, namely Sprinklr and Visible Technologies. Both competitors offer very similar services to Synthesio.
Customers
Synthesio’s customers are brand owners and marketing agencies. Although social media users are an important part of Synthesio’s value creation, they are not part of Synthesio’s customers as they derive no value from Synthesio’s services and, in fact, may be entirely unaware of the company’s existence. Social media users are important to Synthesio only because they’re important to Synthesio’s customers – those users and their content are essentially the “suppliers” of the “raw materials” that the company processes.
Engagement — Value Creation Proposition
Synthesio follows a classic product-based model when dealing with its only category of customers. Its technology allows it to provide a standardised service for its customers at a large scale – a typical “bus” offering. There is a small degree of customisation – a “shared taxi”, if you will – in that Synthesio offers partnership programs with its larger customers, modifying the core value delivery slightly to better suit each partner’s needs. (e.g. by fine-tuning the reports to exclude blogs, if the partner’s inclinations lean that way.)
There is no connectivity between Synthesio’s customers, but Synthesio does offer to indirectly ‘facilitate’ connecting brand owners/marketing agencies with social media users, for example by telling their customers who’s the biggest influencer in the social media circles they’re most mentioned in.
Delivery — Value Chain
Synthesio’s primary value delivery system is its web platform (platform in the technology sense, not the business model sense) which creates real-time reports and analytics for the consumption of the customers. Synthesio’s primary enabler is its social media “listening” technology which allows it to quickly process complex information at a large scale. The web platform is primarily maintained in-house and the nature of information means the delivery is near instantaneous. Synthesio is very much technology-driven in this sense.
Monetisation — Value Capture
Monetisation follows a subscription-based model. Customers pay Synthesio to access the web platform and the secondary social media collaboration system.
Venntro Media Group
Venntro Media Group uses primarily a product business model to provide customers with technology and web hosting capabilities for setting up dating sites.
Overview
Venntro Media Group represent an “exemplar” product business model, which provides individuals and companies the technology and web hosting capabilities to set up their own online dating websites. Venntro Media Group are one of the world’s largest providers of technology for online dating and social discovery businesses. In addition to providing the technology, Venntro Media Group operates a complementary work-for-hire business model in which it offers customer care and after sales service to companies that use its technology. Venntro Media Group help service the dating sites created by their partners in order to boost revenues and increase the number of users on the platform. Venntro Media Group hold on to all of the dating service user information on their databases.
History
Ross Williams and his partner Steve Pammenter set up a web-based dating service in 2003. It all started as the two partners identified a gap in the market while using existing online dating sites. They decided to develop a technology that could improve the existing offering with the acknowledgement that most dating sites where based on the same type of technology. The company was founded without any outside investments, and four years later Venntro Media Group had an annual £3m turnover. By 2011 the annual revenues had grown to £30m a year.
The company reported annualized revenues in excess of £74 million last year (2014) with a staff of nearly 200 people, with offices in Winchester, London, Melbourne and San Francisco, with another opening in Boston. Venntro Media Group now hosts a portfolio of over 25,000 sites and work with over 1,700 partners around the world. The company has over 40 million people worldwide on their database.
Customers
The business model represented by Venntro Media Group serves developers of dating / matching websites. These tend to be existing companies that have a portfolio of websites – dating or not – that either want to build or improve an existing dating website.
The websites created by Venntro Media Group partners are categorised into three groups: traditional, niche and casual. Traditional include the mainstream sites tailored to those who are looking for dating, long term and traditional relationships. Niche sites cater for people who wish to meet someone little more specific to their interest whether it is age range, hair colour, ethnic background, divorced etc. Casual sites are tailored to individuals looking for more flirty fun.
Engagement — Value Creation Proposition
Venntro Media Group delivers value to developers by providing the software to build a dating web site, a pre-populated member database, payment processing, a dedicated customer support center and a bespoke CRM program. The Venntro Media Group product includes a simple site creator tool, which allows partners/developers to create and launch their very own site with little effort and at no cost. The challenge for partners/developers are to drive the traffic onto their own websites.
Delivery — Value Chain
Venntro Media Group develops its software in-house and delivers the technology suite to customers through it website. Website user data is stored in the cloud, for which Venntro Media Group pays a third party provider. Effectively, Venntro Media Group develops technology that provides the backbone behind dating sites – including matching algorithms, ways to screen and search for individuals, tools to build user profiles, and messaging technology that allows users to contact each other, among other systems and infrastructure that are needed to run a dating website.
Monetisation — Value Capture
When a customer’s site is up and running, Venntro Media Group will take a small percentage of each user’s subscription fee. Venntro Media Group charges no start-up costs for web-site developers and they do not charge any ongoing maintenance costs.
Vice Media
Among Vica Media’s business model portfolio, the product business model allows the firm to create and sell high-quality television content to broadcasters.
Overview
Vice Media is a global leader in the creation and distribution of of high-impact news content, primarily targeted at a Millennial audience. Vice distributes its video and text content to users for free via its website, social media accounts, YouTube channel, and traditional broadcasting channels. As such, the content can be consumed on any device.
Vice operates a portfolio of three business models: the lion share of its revenues is generated by its product business model, whereby it creates and sells high-quality television content to broadcasters and distributes the latter in several European countries. It has previously sought to break into the UK television market via a partnership with Channel 4 News, but is now preparing to launch its own channel. [1]
Where Vice broadcasts videos itself and collects revenues from advertisers, it employs a multi-sided business model. It has been a pioneer in ‘branded content;’ its advertiser-customers, such as the microchip giant Intel, pay Vice to create and publish content that promotes their brands to its young target audience on its own media channels. [2] Content is free-of-charge and cross-subsidized by the revenues collected from advertisers. The viewer-customers and advertiser-customers are kept separate, as the latter target and reach the former using Vice’s advertising algorithms. Where Vice creates the advertising content in and of itself – and receives additional revenues in doing so – it also operates a solution business model, which complements its multi-sided business model.
History
Vice Media was founded by Shane Smith and Suroosh Alvi in 1994, initially as a punk magazine. Vice gained notoriety in 2013 by creating Vice News, an online news network which pledged to focus on issues that the mainstream media would typically consider to be too dangerous or too controversial to cover. Infamously, Vice has had correspondents reporting from some of the most dangerous areas in the world, including North Korea and Syria, and has interviewed wanted fugitives on the run. Since 2013, Vice has exploded in popularity thanks to its weekly Vice News show on HBO, which attracts around 2.8 million viewers per episode.[3]
To date, the company has raised more than $770 million in private equity capital from 21st Century Fox, A&E Networks, Disney Interactive, and Technology Crossover Ventures (TCV), valuing the firm at $2.5 billion.[4]
Customers
Vice Media caters to three customer groups: its primary customers are broadcasters, who pay Vice for the license to air its unique and compelling news content. It also serves end-viewers, typically part of the Millenial generational cohort, who seek offbeat news content. It also accounts for an advertiser-customer group, who wish to reach Vice’s end-viewers and efficiently promote their brands to the target audience.
Engagement — Value Creation Proposition
Vice Media has consistently thrilled audiences with on-the-ground coverage of unusual or controversial topics like melting glaciers, the so-called Islamic State, and escapes from North Korea. Vice journalists often take significant risk to their own lives to report from the most extreme conflict zones, which makes the Vice Media news product unique and a compelling offering both for broadcasters and end-viewers. Its ability to source interviews with controversial figures enables it to produce high-quality content about topics that generally receive little coverage in mainstream media. In doing so, it has attracted a loyal pool of users, which increases the attractiveness of the Vice content for advertiser-customers. Due to the quality of the content, broadcasters have opted to commission content from Vice to air on their networks.
Delivery — Value Chain
Vice has expanded to include more than 30 news bureaus and 1,500 employees around the world, most of whom are journalists. Vice Media has made content and distribution deals with seven groups across Asia, Africa and the Middle East. It has also partnered with the Times Group of India to launch online, mobile and TV content in the country, with plans to hire hundreds of local journalists, producers and filmmakers at a new production headquarters in Mumbai. [5]
Vice Media distributes its content through its own website and through all major social media outlets, via global broadcast on HBO, and via regional broadcasters in some countries, including Canada’s Rogers Communications. Vice has been able to effectively distribute its content through existing platforms and networks, meeting its customers in their preferred venue for content consumption.
Monetisation — Value Capture
Vice Media does not disclose financial statements and therefore its revenue breakdown not known. However, the company expected to generate around $915 million in revenues in 2015, and has stated that a majority of its revenues stems from content sales to broadcasters.[6]
[1] Christopher Williams,. (2015). Vice plans UK television channel. Available: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/media/11932031/Vice-plans-UK-television-channel.html. Last accessed 15th August 2016.
[2] Christopher Williams. (2014). Vice Media valued at more than $2.5bn. Available: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/11074572/Vice-Media-valued-at-more-than-2.5bn-after-500m-cash-injection.html. Last accessed 15th August 2016
[3] Crunchbase.com. (2016). Vice Media | CrunchBase. [online] Available at: https://www.crunchbase.com/organization/vice#/enti… Accessed 4 May 2016.
[4] Flint, L. (2016). HBO, Vice Media Announce News Programming Deal. [online] WSJ. Available at: http://www.wsj.com/articles/hbo-vice-media-announc… Accessed 4 May 2016.
[5] Nicolaou, Anna. (2016). Vice Media expands in Asia, Africa and Middle East . Available: http://www.ft.com/cms/s/0/ff91c1da-37f3-11e6-9a05-82a9b15a8ee7.html#axzz4GgWD8xtf. Last accessed 7th August 2016.
[6] Sorkin, S. (2015). As Vice Moves More to TV, It Tries to Keep Brash Voice. [online] Nytimes.com. Available at: http://www.nytimes.com/2015/05/04/business/media/a… Accessed 4 May 2016.
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