WTGR

WTGR

"it is getting harder for companies to deliver profitable growth on a sustained basis. It is also more difficult for many companies to hold their  ground and not fall behind. The key reasons include the dramatic increase in complexity in managing business and the increasing premium put on innovation. The complexity is due to significant and irreversible changes in  the business environment. The pace of business is accelerating beyond the ability of most corporations to  adjust. "
 http://www.strategy-business.com
/research/96201/page1.html
this article from the well-known consulting firm
Booz-Allen & Hamilton about changing business models, is divided into 7 pages online, which print out to about 12 pages if you want a hard copy

Jan
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Revenue based business models p. 131- 132 Hanson text
Hanson says of revenue based models, "the major split is between cases where providers pay for service and those where users pay"

• Provider based revenue models
• fees are paid to the web site by the companies wanting to read the people using the site
• examples are the search engines that have become portals and have income driven by selling advertising space on their page which will be seen by people using the search engine to find information
• User pay based revenue models
• Hanson says revenues from transactions are the fastest growing benefits of being online (p. 137)
• Hanson connects user based models to B2B sales

• what type of business they do, 
• some discuss it in terms of how they are structured, 
• some in terms of how they make money.(eg. provider based, user based) 
• Some even go so far as to say the goal is not to make money, but capture market share and the model is based on that assumption.

WTGR

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• Sell Goods and Services
• Sell Information or Other Digital Content
• Advertising-Supported
• Advertising-Subscription Mixed Model

Jan
16

Internet Business Models 
- series on online Powerpoint slides at
 http://www.prenhall.com/divisions/bp/app/turban/cw/ppt/
 go to Chapter 2, slide 9

The following are the "perspectives" that compose the e-business models, according to the book's authors

• Direct Maketing vs Indirect Marketing
• Full Cybermarketing vs Partial Cybermarketing
• Electronic Distributor vs Electronic Broker
• Electronic Store vs Electronic Shopping Mall
• Generalized E-malls/stores vs Specialized E-malls/stores
• Proactive vs Reactive Strategic Posture toward Cybermarketing
• Global vs Regional Marketing
• Sales vs Customer Service

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As TIME magazine noted, (Dec 11th issue, 2000) "The Wu-Tang "brand" blossomed in 1993. Each member of the group periodically goes off and does some solo project from which they develop additional capability and experience, at the same time keeping public their alliance and affiliation with Wu-Tang. The "brand", in the form of the bands members, continue to also put out products under the bands name as well in order to maintain the value of the "base" of their individual reps.

The strength of the company, as explained in TIME, is "... maintaining just a small core and outsourcing everything else."
Wu-Tang is a conglomeration of rappers that includes

• Robert Diggs AKA RZA
• his interview with TIME  www.time.com/time/sampler/article/0,8599,88614,00.html 
• for those of you that don't know much about the "business" of rap and hip hop, this is a fascinating interview which exposes just how "business" oriented these people are to market share, branding building, product diversification etc.
• Diggs "my original strategy — to have artists placed in different locations, then get those different labels to work together for my brand"
• Michael Diggs AKA Divine
• his interview with TIME  www.time.com/time/sampler/article/0,8599,88545,00.html 
• Method Man
• Masta Killa
• U-God
• Raekwon
• Inspectah Deck
• GZA
• Ghostface Killah
• official website from Epic records  www.ghostfacekillah.com
• ODB AKA Ol' Dirty Bastard
• Cappadonna

"Everything else" is their forays into video games, clothing, comics, movies and many other constantly new and evolving merchandise crossing over and back into music, video, movies and the internet.
 

	Wu-Tang website for their new comic book  http://www.ninerings.net/
	Wu-Tang website for their kung fu game  http://www.activision.com/games/wutang/

.

The purpose of the video

• to solicit discussion of some of the key personal characteristics which allow a person to "conduct E-commerce successfully" 
• understand some of the environmental circumstances that allowed Amazon.com to create a successful brand out of nowhere
• opportunity
• timing
• growth of related technologies
• original idea
• to see how the success of the brand allows Amazon.com to get involved in other business areas apart from its core competency.
• Amazon's toy business, recently merged with the online ventures of 

Toys R Us
• Amazon.com claims that up to one-third of its 23 million customers are not yet aware of the company's latest offerings, such as home improvement, toys and cooking,
• look at an example of the dot.com business model that does not turn a profit, and how they can continue to "get away with it"

On Amazon.com's own web site is a bio of Jeff Bezos, which can augment some of the information you would have seen in the beginning of the video.
 www.amazon.com/exec/obidos/subst/misc/bio-bezos.html/107-0666044-7561336.

Let's look at what the irreverent people at the Motley Fool.com site have to say about the future directions of Bezos and Amazon.com

 http://www.fool.com/news/2000/amzn001009.htm

In an October 2000 article on Fool.com, staff writers suggested
"Is Amazon Overgrown? "

"Amazon.com was criticized last week [Oct 2000]  for over-expanding its product offerings. Today, Amazon's Chairman and Chief  Executive Officer Jeff Bezos answered the charges, and said his company intends to expand into many more product categories."

"In an interview with Reuters, [Oct 2000] Amazon's Chairman and Chief Executive Officer Jeff Bezos said: "We will continue to do deals like the photo deal and we'll also continue to enter new product categories." "This model works," continued Bezos. "Selection is an advantage, not a  disadvantage." He went on the say that he was sure his company would be profitable eventually, but wouldn't disclose when that might actually occur."

Brian Lund, Co-manager of the Rule Breaker Portfolio 
" Amazon has gotten itself in trouble in the past through diversifying into new product categories. Part of the problem was that they got into categories that they didn't fully understand, causing inventory inefficiencies in departments like toys and electronics, which wreaked  havoc on their working capital management. Another problem is that some of the categories didn't fit Amazon's medium very well. It's just not easy to sell table saws profitably on the Internet.".

Paul Commins, Rule Breaker Portfolio Writer 
"Amazon has become the ultimate risky stock bet. Now featuring a negative book value and junk-bond class debt, Amazon has never been closer to not making it."
 

On January 31, 2001, one of the biggest stories in the online media community was the news that Amazon.com would lay off a large number of people. E-commerce Times had a good article which explains the situation

"The Amazon Question: Will Investors Trade Growth for Profits?"
by Keith Regan
 www.ecommercetimes.com/perl/printer/7138

"News that Amazon.com is slashing 1,300 jobs continued to  rattle the e-commerce world  Wednesday, as analysts said reduced sales forecasts from the  bellweather company are a signal that the era of spectacular growth may have ended for the e-tail sector.  Amazon chief executive officer  Jeff Bezos and other executives blamed a cooling U.S. economy for the slowing sales. However, analysts said the more likely  culprit is the company's core business in books, music and videos, which has matured to a  point where earlier growth rates are no longer possible."

Read the humorous, and inciteful article by Sean Carton 
titled "An Open Letter to Jeff Bezos "
 http://clickz.com/print.jsp?article=2354

"Hello! Earth to Bezos! What the hell are you doing? 

You've built a great company based on the premise that stellar service, a great brand experience, and judicious application of your users' information can make an incredible site that millions of us can't do without. In a world where commodity-based dot-coms die out faster than gnats around a bug-light, you've figured out how to stand out from the crowd, sell kajillions of books, and inspire customer loyalty just this side of fanaticism. 

And you did it all by creating a system that gathers some basic preference information from us, puts it together with information about our basic shopping habits, and then combines it with the behavior of all other users in order to help us loyal customers find new products that consistently delight and inform us. You've even taken the rarely heard customer's voice  and incorporated it into the site, allowing customers to see what other people like and don't like in order to make better buying decisions. The result? The dot-com poster-child that the  rest of us mere mortals can only aspire to. 

And now you're throwing it all away."

Carton's ponts are based on the fact that Amazon.com made a point of collecting info from the customer to allow them to to better satisfy customer interests during repeat visits to the site - yet the good will created by that might be lost of Amazon goes ahead and starts sharing that private profile info with othe Amazon.com group member companies.

"Amazon.com's two controversial software patents - one of which he's used to sue his main competitor, Barnesandnoble.com. Nor did he mention the latest  patent, issued only days ago for collaborative filtering, a method of sorting millions of customer  preferences electronically to help new customers choose products and services. 
This third patent has been called by CNET news sources the kind of development that could "spell trouble for dozens of e-commerce sites that use similar technology to recommend books, videos or  other products to customers." .

"Patents on Internet Business Models"
 www.webpr.co.uk/news/patents.asp
Nicholas Schmidt's article March 2000 on the Cybersavvy website is good reading because it explains the consequences if patent protection becomes to extreme.

"Why should you care?"

Why? Because you'll find out, that most, if not all of the business practices that are completely common and obvious on the Internet today... will have been PATENTED by corporate behemoths like Amazon.com or Priceline.com... making it outright ILLEGAL for you to:

1.) Set up an affiliate program on your own;

 2.) Create a site that conductions auctions or reverse auctions;

 3.) Create a site where the customer will name their own price on items;

 4.) Create a Web site with a button that allows one-click ordering;

 5.) Create a Web site that does any kind of e-commerce at all?

   ...unless you ask Amazon.com for permission to do so;

   ...unless you buy the software from the single (or one of few) vendors that have been licensed by Amazon.com or Priceline.com, etc. to legally sell such software;

 ...unless you pay a hefty MONOPOLY PREMIUM because all competition in the Web software market has been virtually eliminated;"
 
 

"What damage has been done?

Amazon.com owns a patent on their "groundbreaking" idea of one-click ordering: This is the idea of placing a button on your Web site that allows ordering without entering  credit card details every time you place the order.

 The USPTO should have said: DUH! Instead, they granted patent number 5,960,411 on 9/28/99.

Now Amazon.com received a patent on "affiliate programs": The idea of issuing  someone commissions as a reward for all sales that have been generated by a hyperlink  from their site to yours.

Again, anybody who ever created just one Web page would say: DUH! But the USPTO granted patent number 6,029,141 on 2/22/00.

BOTH IDEAS ARE PLAIN AND OBVIOUS. But, due to a loophole in U.S. patent law, you, me, or anyone, could have applied for a "patent" on these business processes, so as to extort royalties, or impose a de-facto e-commerce tax on virtually all transactions made anywhere on the Web, from anyone in the world who ever chooses to create Web sites that employ the same, inevitable, and obvious IDEAS."
 

"To succeed in this competitive e-commerce market, a business must attract as many consumers as possible to its Web site, while building and retaining consumer loyalty. Sometimes, a Web site is more attractive
to consumers because it is built with cutting edge technology that provides advanced audio/visual user interfaces, services and security measures. E-commerce proprietors have recognized that a competitive advantage may be gained by securing patent protection for such technological innovations. Other times, the appeal of a Web site does not lie in cutting edge technology, but rather is due to an innovative business model. E-commerce proprietors may be surprised to learn that patent protection also may be available to protect innovative business models embodied in computer software."

"To obtain a patent, an inventor must demonstrate that an invention is directed to patentable subject matter and is useful, novel and non-obvious over the prior art. An invention must fall into one of four classes of patentable subject matter: machines, articles of manufacture, compositions of matter, and processes. For example, a computer software invention can be viewed as a machine when combined with a computer, an article of manufacture when distributed on a diskette or a CD-ROM, or a computer-implemented process. An improvement to an invention included in these classes may also be patentable. Examples of
"unpatentable" subject matter include a mere idea, printed matter, an inoperable device, e.g., perpetual motion machine, and an obvious improvement of an old device. Typically, any arguable use for an invention will suffice to meet the usefulness requirement. To qualify for patent protection, an invention must be novel when compared to prior solutions to the problem solved by that invention, i.e., the prior art. Two broad categories of prior art which may destroy novelty include (1) events which occur prior to the date of invention and (2) events which occur more than one year prior to the filing date of a patent application directed to the invention. If an event satisfies either requirement, it is considered prior art. "
 

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