2512ICT eCommerce — Assignment 1 — Revenue Models, Customer Centric Design, SWOT, and News Subscriptions

Pref­ace

Terms

You are view­ing an assign­ment from my 2512ICT eCom­merce course at Grif­fith Uni­ver­sity. This assign­ment is 100% my intel­lec­tual prop­erty, unless oth­er­wise stated via ref­er­enc­ing. Images and logos belong to their respec­tive com­pa­nies unless oth­er­wise stated as mine. Feel free to use or quote any mate­r­ial from this assign­ment, how­ever, you must credit this work as mine, and not rep­re­sent it as yours.

Def­i­n­i­tions

“Mine”, “me”, “I” all refer to Edmond den Dekker.
“You”, “yours” refers to any­one that has the abil­ity to view this con­tent in any way.

Rev­enue Models

Twit­ter

Twit­ter is an online ser­vice that allows users to elec­tron­i­cally fol­low other people’s thoughts, and to enable users to post their own thoughts. It has been described to be sim­i­lar to web based IRC chat. This idea has led to their web­site being widely used and is evi­dent with the sta­tis­tic of 6 mil­lion unique users vis­it­ing twit­ter every month (Kazenia, 2009). This sug­gests that Twit­ter is grow­ing positively.

With growth hav­ing a pos­i­tive impact, Twitter’s CEO Evan Williams is in no hurry to imple­ment a rev­enue model. Cur­rently, Twit­ter has no rev­enue model and is purely funded by pri­vate investors. Another inter­est­ing fact is that Williams was the founder of Blog­ger which was later bought out by Google. Williams hav­ing this money on hand can sus­tain Twit­ter for many more years accord­ing to Chris Sny­der from Wired (Sny­der, 2009) In addi­tion Face­book had tried to acquire Twit­ter for US$500 mil­lion dol­lars but CEO Williams rejected the offer as he felt that Twit­ter has poten­tial to grow in value (Swisher, 2008). With this said the founders are def­i­nitely plan­ning pos­si­ble rev­enue mod­els but are in no way in a rush to imple­ment them.

Google – YouTube

YouTube is owned by Google and is a free ser­vice where users can upload, share and view their videos. The CEO of Google is cur­rently Eric Schmidt in which he acquired YouTube on Oct 9^th, 2006 (Google Press Cen­ter). YouTube’s rev­enue model con­sists of mon­etis­ing the view­ing of their web­site and their consumer’s videos. In video ads and on web­site ads are pri­mary rev­enue gen­er­a­tors which accord­ing to ZDNet, will give YouTube a gross rev­enue of US$323 mil­lion dol­lars by the 31^st of August 2009. How­ever, ZDNet says that these costs do not cover their web­site up keep­ing, in other words, the costs for pro­vid­ing video stream­ing are esti­mated to cost more than gen­er­at­ing rev­enue. (Dig­nan, 2009).

The CFO of Google, Patrick Pichette, says that they do not dis­close any infor­ma­tion about the eco­nom­ics of YouTube, but that he could say that they are please with YouTube’s direc­tion in the mar­ket and its eco­nomic posi­tion. YouTube’s inter­nal research says that rev­enue growth is sta­ble and that they fore­see the web ser­vice to be very prof­itable in the future.

Yahoo

Yahoo pro­vides many online ser­vices but is well known for their search engine, email and adver­tis­ing ser­vices. They also have ser­vices includ­ing Yahoo! Shop­ping, Yahoo! Autos, Yahoo! Real-​​estate, and Yahoo! Travel which are all ecom­merce web­sites. (Wikipedia, Yahoo!) Yahoo! was founded by Jerry Yang and David Filo in which Yahoo! was incor­po­rated in March 1^st 1995. At this present time, Carol Bartz is the cur­rent CEO.

With their search engine, email, adver­tis­ing and com­merce ser­vices, yahoo has very large rev­enue mak­ing base and a large sur­face area for mon­etis­ing views for their web ser­vices, and for tak­ing advan­tage of their com­merce ser­vices by charg­ing for each sale. The oppor­tu­ni­ties for rev­enue are ample.

In the year 2008, Yahoo Inc refused Microsoft Corp’s offer to sell for less than US$45 bil­lion. (Sakuma, 2008) This act sug­gests Yahoo’s mon­e­tary value to be around that range. The high value of this can be assumed to be due to Yahoo’s high vis­i­tor expo­sure and its high con­sumer data acqui­si­tion. Not only does Yahoo rank up with Google in terms of unique vis­i­tors, Yahoo col­lects more infor­ma­tion about con­sumers than any other com­pany, even sur­pass­ing Google. (Story, 2008)

Face­book

Face­book is founded by Mark Zucker­berg who was a stu­dent at Har­vard Uni­ver­sity. (Wikipedia, Face­book) Facebook’s main source of rev­enue is pay per view adver­tise­ments. With Face­book being a free pop­u­lar ser­vice, adver­tise­ment rev­enue alone is a great wealth gen­er­a­tor and is evi­dent by the fact that Face­book is still grow­ing. Accord­ing to Ven­ture Beat, from the year 2006 to 2008, Facebook’s active user’s jumped from approx­i­mately 10 mil­lion to 140 mil­lion peo­ple (Eldon, 2008). Growth of Face­book is evi­dent even though it has been run­ning for five years with the last three years being avail­able to peo­ple other than col­lege stu­dents (Diaz, 2008). Growth of Facebook’s user base pro­vides oppor­tu­ni­ties for increas­ing rev­enue. This was seen by Microsoft in 2007, when they offered to grow their adver­tis­ing part­ner­ship. The result is Microsoft tak­ing a US$240million equity stake, and sell­ing adver­tis­ing for Face­book locally in the US and also inter­na­tion­ally. (Palo Alto, Red­mond, 2007)

MySpace

MySpace was founded by eUni­verse (Wikipedia, MySpace), but was bought by News Cor­po­ra­tion in July 2005 by Rupert Murdoch’s News Cor­po­ra­tion. This sell off was for US$580 mil­lion. (Anon., 2005). MySpace is a social net­work­ing site just like Face­book and has a sim­i­lar rev­enue model. Accord­ing to MySpace, they do not have any pre­mium paid ser­vices yet and is cur­rently gen­er­at­ing rev­enue via adver­tis­ing. (MySpace). MySpace has also gone under recent change such as the inclu­sion of Skype con­tacts in MySpace’s IM envi­ron­ment. With MySpace not being the only social net­work­ing site, their rev­enue model must be suf­fi­cient enough to sus­tain them­selves given their cur­rent major com­peti­tors like Face­book and Twitter.

MSN

MSN includes ser­vices like MSN mail, MSN Encarta, MSN Games, MSN Live Mes­sen­ger, MSN Music. All of which con­tain paid adver­tise­ments and some pre­mium paid ser­vices. These brands were renamed from 2005 to 2006 so that they could include their Win­dows brand. Ser­vices are now known as Win­dows Live Hot­mail, Win­dows Live Mes­sen­ger, Live Search, Live Search Maps, Win­dows Live Spaces Win­dows Live Alerts Win­dows Live Groups. (Wikipedia, MSN) MSN brand is now more of a news ser­vice fur­ther increas­ing their adver­tis­ing sur­face area. (MSN, MSN World­wide) MSN’s rev­enue model is sim­i­lar to other online ser­vices and include paid for pre­mium ser­vices and paid for adver­tis­ing exposure.

SWOT Analy­sis of Facebook

A SWOT analy­sis of Face­book shall deter­mine the company’s Strengths, Weak­nesses, Oppor­tu­ni­ties, and Threats. The out­comes of this analy­sis are eval­u­ated busi­ness opportunities.

Strengths

• Min­i­mal­is­tic design of user inter­face result­ing in user appeal and effi­cient human com­puter interaction.
• Inter­na­tion­al­i­sa­tion of web service
• Free for users to join result­ing in a mul­ti­mil­lion cus­tomer count.
• Net­work­ing and find­ing new friends via photo tags and via their pos­si­ble friend algo­rithm (increases cus­tomer count)
• Mobile Appli­ca­tion Sup­port (like for the iPhone)

Weak­nesses

• Spam /​ Fraud­u­lent Third-​​party Face­book appli­ca­tion security
• Fre­quent Spam /​ Fraud­u­lent Face­book advertisements

Oppor­tu­ni­ties

• Use of social net­work­ing web­site are in the cur­rent trend and is mov­ing upward
• Pos­si­ble charg­ing of third party appli­ca­tions that adver­tise /​ sell prod­ucts directly to Face­book users. Exam­ple, A Face­book Nike shoe store could sell their mer­chan­dise while Face­book takes a share. This con­se­quently is com­bin­ing both the ide­olo­gies of eBay and Face­book to cre­ate a ser­vice that sat­is­fies both com­mer­cial and free to use services.
• Mobile Phone App Tech­nol­ogy has already been exploited with the intro­duc­tion Face­book on Win­dows Mobile and Apple iPhone.

Threats

• Con­stant user inter­face change may affect cus­tomer growth due to users hav­ing to adapt to new layouts
• Google’s Orkut is pop­u­lar in coun­tries like Brazil, Facebook’s com­pet­i­tive edge may reduce when fresh new faces enter the scene

With the above analy­sis, it can be seen that Face­book is strong in terms of sat­is­fy­ing the user with func­tion­al­ity and usabil­ity of their web ser­vice and with draw­ing new users. Facebook’s abil­ity to adapt to cur­rent trends and new tech­nolo­gies, such as devel­op­ing for Mobile Phone Apps, proves that they are well estab­lished in keep­ing con­sumers and exploit­ing new medi­ums to exer­cise their rev­enue mod­els. The only down­fall of Face­book is Secu­rity and Spam. These are the down­falls of many online ser­vices as it is near impos­si­ble to achieve a 100% secure and spam free ser­vice. With Facebook’s user defined secu­rity fea­tures for both third party appli­ca­tions and user accounts, secu­rity is mit­i­gated but not obso­lete. Oppor­tu­ni­ties that Face­book faces are min­i­mal at this point and are only lim­ited by cur­rent tech­nol­ogy. Intro­duc­tion of new tech­nolo­gies may pave the way for more elec­tronic medi­ums that could be used to fur­ther expose the Face­book ser­vice and its adver­tis­ing rev­enue model. Threats that are appar­ent are listed here http://​www​.trade​vibes​.com/​c​o​m​p​a​n​y​/​p​r​o​f​i​l​e​/​f​a​c​e​b​o​o​k​/​c​o​m​p​e​t​i​t​o​r​s​#​c​o​m​p​a​r​i​s​o​n​_​g​r​a​phs with MySpace hav­ing a steady monthly unique vis­i­tor count as opposed to Face­book which is increas­ing sharply.

Future Prospects of Facebook

With the analy­sis of Facebook’s strengths, weak­nesses, oppor­tu­ni­ties and threats, its medium term prospect, that is, within five years from now, is pos­i­tive. With the cur­rent adver­tis­ing model being used, smarter ways to adver­tise shall pave a new way to reach the audi­ence. This may include branded vir­tual gifts that are free to give to friends. All in all, Face­book has the large con­sumer base; so long as it keeps it, there is plenty of oppor­tu­nity for Face­book to gain rev­enue. Unique vis­i­tor counts of Face­book sug­gest that they won’t be los­ing any con­sumers any time soon, but instead shall grow within the next five years. This is evi­dent by the fact that since the time when Face­book was made avail­able to the pub­lic three years ago, their active user count has risen very sharply. It is rea­son­able to pre­dict that they will con­tinue to rise in active users due to Facebook’s low busi­ness threats, their strong busi­ness strengths, their mit­i­gated busi­ness weak­nesses, and their abil­ity to take advan­tage of changing/​new tech­nolo­gies. It is there­fore con­cluded that Face­book will be a safe con­tender if cho­sen to be invested in by a wealth man­age­ments firm.

Cus­tomer Cen­tric Design

This sec­tion shall iden­tify and analyse three web­sites one with excel­lent adher­ence to a customer-​​centric web­site design, one with mod­er­ate adher­ence, and another with bad adherence.

Google​.com – http://​www​.google​.com

Google’s web­site has con­formed to most of the guide­lines spec­i­fied for a customer-​​centric design. Google’s nav­i­ga­tion was designed by how vis­i­tors nav­i­gate around their site and is evi­dent by their user feed­back pro­gram which enables Google to improve their inter­face based on users’ behav­iours. Google’s min­i­mal usage of dec­o­ra­tive graph­ics results in faster page loads. For exam­ple the only images on the Google home page are the Google logo and image/​media from any spon­sored ad. This was an effort to allow vis­i­tors to access the infor­ma­tion they wanted quickly. Mar­ket­ing and busi­ness jar­gon is not evi­dent on the Google home page but instead, suc­cinct lay­men tex­tual com­mu­ni­ca­tion is present. The Google web­site was tested for com­pli­ance with older browsers and with Mobile devices via a Fire­fox plu­gin. With the plug-​​in ren­der­ing the web­site to mimic what it would look like with a text only browser, Google’s lay­out of nav­i­ga­tion and con­tent is cohe­sive and com­pre­hen­sive. Although, it would be advan­ta­geous if a third party opin­ion were to assess this aspect. Con­trast­ing colours and colour-​​blind safe colours are used in Google to aid dis­abled users such as the colour blind. This web­site sat­is­fies end users and its over­all web­site design has proved to be func­tional and usable for all its users. Google seems to “get it all right” in terms of imple­ment­ing a customer-​​centric web­site design.

Ebay​.com – http://​www​.ebay​.com​.au

Ebay’s web­site is designed around the user and is evi­dent by its cat­e­gori­sa­tion of prod­uct items which are worded and grouped in a way that a typ­i­cal user would expect. An exam­ple is the cat­e­gori­sa­tion of Instru­ments, Instru­ment Acces­sories, and Pro Audio, under the Musi­cal Instru­ments group. Its nav­i­ga­tion and search boxes are located at con­ven­tional loca­tions fur­ther evi­dence of a user cen­tred design. Use of cat­e­gori­sa­tion and the search­ing within or out­side this enables users to access infor­ma­tion they need quickly. For eBay’s ser­vice descrip­tion, there seems to be no busi­ness or mar­ket­ing jar­gon that vis­i­tors may not under­stand. How­ever, users that are sell­ing their items tend to break this guide­line. This is evi­dent in many listed items for sale. When run­ning the Fire­fox plug-​​in to test for viewa­bil­ity in a text-​​only browser, nav­i­ga­tion became ambigu­ous due to its dis­place­ment on the page. In addi­tion over­lay­ing of tex­tual con­tent upon each other and nav­i­ga­tion ren­dered the web­site in text-​​only mode use­less. In terms of colour schemes and colour-​​blind com­pli­ancy, eBay’s design has enough con­trast to cater for this. As for posted pho­tos of items, it would be a long time before they find a solu­tion that would allow severe colour blind user’s view posted pho­tos of items for sale. For now, they shall have to rely on tex­tual descrip­tions and “alt” tags. Over­all eBay has not addressed a major­ity of user-​​centric web­site design com­pared to Google’s efforts but has mod­er­ately adhered to these guidelines.

Golden Cock­erel Chicken — http://​www​.gold​en​cock​erel​.com​.au/

Golden Cock­erel Chicken is a com­pany web pres­ence web­site whose pur­pose is to estab­lish its man­u­fac­tur­ing pres­ence and com­mu­ni­cate employ­ment vacan­cies. This is evi­dent by the website’s con­tent. Nav­i­ga­tion of this web­site seems user cen­tric and not based on the company’s hier­ar­chy. Sim­ple nav­i­ga­tion comes with sim­ple con­tent and there­fore the one bar nav­i­ga­tion enables users to access infor­ma­tion quickly. Mar­ket­ing and busi­ness jar­gon is evi­dent in the home page. The over­all feel of all the writ­ten con­tent seems busi­ness ori­ented. With this break­ing the user cen­tric guide­line, one may argue that this website’s pri­mary tar­get audi­ence is busi­ness peo­ple due to this com­pany being a man­u­fac­turer of chicken prod­ucts. How­ever, in oppo­si­tion to this argu­ment, one could say that if the lan­guage were changed into laymen’s terms, then regard­less of whether they are busi­ness peo­ple or not, com­mu­ni­ca­tion is more suc­cess­ful due to the greater reach of web­site view­ers. When this web­site was tested with the Fire­fox plug-​​in, the text only ver­sion became vis­i­ble. This resulted in ambigu­ous nav­i­ga­tion due to inad­e­quate spac­ing of links and aes­thet­i­cally unpleas­ing colours which replace the image’s back­ground. Con­tent of the web­site how­ever was still read­able but not visu­ally well when in text only mode. With regards to colour-​​blind opti­mi­sa­tion, the colours cho­sen for graph­ics and text are colour safe except for pho­to­graphic mate­r­ial. In terms of acces­si­bil­ity for the dis­abled, “alt” text for images are either non-​​existent or irrel­e­vant for this web­site. When com­par­ing this website’s attrib­utes to test for customer-​​centric web­site design, this web­site does not con­form to a sat­is­fac­tory amount of guide­lines to be called user-​​centric. Com­pared to Google​.com and Ebay​.com, this web­site has bad adher­ence to customer-​​centric web­site design.

Are There Seri­ous eCom­merce Web­sites Mak­ing These Mistakes?

After scour­ing the web and brain­storm­ing any pre­vi­ously vis­ited eCom­merce sites, no dras­ti­cally bad designed sites were found. After all, if one wants to be a seri­ous con­tender in the eCom­merce mar­ket, one must design their online pres­ence around the user and imple­ment a customer-​​centric design. If one fails to do so, the life­time of one’s online ser­vice shall cease to exist due to the costs of run­ning a web­site over­weigh­ing the eCom­merce website’s revenue.

News Sub­scrip­tions

Accord­ing to Mar­ket­ing VOX, Rupert Mur­doch plans use the Sun­day Times as a guinea pig in which any out­comes from this shall influ­ence whether or not to charge for all online con­tent from his sub­sidiaries (Mar­ket­ing VOX, 2009). In essence Rupert Mur­doch is attempt­ing to tran­si­tion from an advertising–supported rev­enue model to an advertising-​​subscription mixed rev­enue model in attempt to increase profit and recover from their finan­cial loss dur­ing its fourth quarter.

The ulti­mate ques­tion here is, will this work or will this back­fire? One way to deter­mine this is to analyse sim­i­lar cases where com­pa­nies tran­si­tion from an advertising-​​supported rev­enue model, into an advertising-​​subscription mixed rev­enue model. The first case in mind is North­ern Light. North­ern Light became a search engine ser­vice in 1997. In their ser­vice they pro­vided a web search with the addi­tion of search­ing jour­nal arti­cles that have repro­duc­tion rights. With the addi­tion of these free ser­vices they also sold arti­cles rang­ing from $1 to $5 per arti­cle. With this cur­rent rev­enue model they were suc­cess­ful in gain­ing profit but faced a down­fall in 2002 where they decided that its cur­rent rev­enue model was not sat­is­fac­tory enough to main­tain the up keep of its online ser­vice (Schnei­der, pg 139, 2009). They then decided to cease pub­lic access of their web ser­vice and tran­si­tion from their advertising-​​supported model to a sub­scrip­tion model. This switch may seem like a bad move but in fact it was a good one due to their switch in rev­enue source. North­ern Lights now pro­vide their research arti­cle ser­vice to large cor­po­ra­tions and are keep­ing afloat. When com­par­ing this case to the Sun­day Times one may say that in order for Rupert Mur­doch to be suc­cess­ful he must also change his rev­enue source. How­ever, being a news ser­vice that may seem very unlikely.

Another alter­na­tive for the Sun­day Times is to be an advertising-​​subscription mixed model where they would have a pre­mium ser­vice that would be charged to con­sumers. This would seem to be more effec­tive as they would be get­ting rev­enue form adver­tis­ing when a con­sumer utilises their free ser­vice, and be get­ting rev­enue when a con­sumer utilises their pre­mium ser­vices. This tran­si­tion is sim­i­lar to Salon​.com (Schnei­der, pg 138, 2009). This alter­na­tive may very well be the solu­tion as it both caters for long going free view­ing con­sumers of the Sun­day Times and the inter­ests of Rupert Murdoch.

Another case to look at that can be com­pared to the Sun­day Times is the use of the method­ol­ogy SWOT analy­sis. SWOT has helped com­pa­nies realise their oppor­tu­ni­ties in their mar­ket and help gain more rev­enue. An exam­ple is Dell where they used this analy­sis method­ol­ogy to cre­ate a strat­egy that enabled them to be com­pet­i­tive in their par­tic­u­lar indus­try value chain. The result of this led to Dell offer­ing cus­tomis­able com­puter sys­tems which could be sold via phone and inter­net medi­ums. This led to Dell being suc­cess­ful in increas­ing their rev­enue. Com­pared to the Sun­day Times, it could be sug­gested that if a SWOT was imple­mented, other ways of recov­er­ing from their finan­cial loss could be evident.

In con­clu­sion, it is com­mon prac­tice for online busi­nesses to tran­si­tion from one rev­enue model to the next in order to max­imise their prof­its and stay afloat. In addi­tion, SWOT analy­sis can be used to iden­tify oppor­tu­ni­ties that a busi­ness has and be com­pet­i­tive in their indus­try value chain. With the cur­rent sit­u­a­tion of the Sun­day Times, a tran­si­tion from their advertising-​​supported rev­enue model to an advertising-​​subscription model would be a very risky move con­sid­er­ing the pre­vi­ously dis­cussed cases. If a rev­enue model tran­si­tion is to be made, it would be wise to tran­si­tion to an advertising-​​subscription mixed model so that the Sun­day Times’ cur­rent free view con­sumers will remain a cus­tomer which shall pro­vide oppor­tu­nity for rev­enue from adver­tis­ing and rev­enue from sub­scrip­tion. With the inter­ests of Rupert Mur­doch recov­er­ing from their pre­vi­ous finan­cial loss, it would be wise to imple­ment the dis­cussed advertising-​​subscription mixed model so that their cur­rent cus­tomer base remains and so that a rev­enue increase shall be appar­ent in their pre­mium subscriptions.

Ref­er­ences

1 Comment

• 

  By Lucy, January 6, 2010 @ 6:59 pm

  I recently came across your blog and have been read­ing along. I thought I would leave my first com­ment. I don’t know what to say except that I have enjoyed read­ing. Nice blog. I will keep vis­it­ing this blog very often. Lucy http://​dataen​tryjob​-​s​.com

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