Lecture 5

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Transcript Lecture 5

Online marketing
Dr Tim King
15th May 2008
Business models
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Free
– Web sites for the fun of it or to gain early users
– Part of a wider service (BBC, cars)
– Free software, pay for maintenance (Linux, AVG)
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Free funded by adverts
– Land grab - lots of users means lots of adverts displayed
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Shareware
– Guiltware
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Try before you buy
– Poor quality short clips
– Licence key cracks (Macromedia)
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Pay per use
– Software as a service
– UK 1901 Census
– Betting
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Licence / subscription / price per item
– Digital Rights Management (everlasting vs annual)
– Physical fulfilment
2/14
Market fit
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Different versions for
different market subsections
Many examples
Price p
– Travel
• First class vs coach
– Cars
• Audi vs Skoda
– Software
• “lite” versions with hardware
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Psychology
– Brand awareness
Quantity
3/14
Lock-in
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Buying something commits you to buying more
– Services
• Car services
• Mobile phone subsidy
• Frequent flyer
– Consumables
• Ink-jet printers
• Yoghurt makers
– Complimentary products
• Camera lenses
• Operating systems
4/14
Lock-out
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Incumbent tries to maximise switching cost
Loyalty programs
Technology control
– Nintendo game cartridges
– Sony Playstation DVD formats
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Crypto and tamper resistance
Community – its where your friends are
• MySpace, YouTube
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Hassle
– eg email address change
5/14
Personalisation (1)
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Know your customer
– Profile typical users when they visit a web site
• Purchase history
• Time to make purchase decision
• Amount of research done
– Profile users through loyalty cards
• Nectar
– They know everything you have ever bought
– Keep in touch with customers
• Collect email addresses
• Email newsletters
– Lastminute, Maplin
• Cookies
– Welcome back Tim
6/14
Personalisation (2)
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Know your customer type
– User database
• Address/postcode -> socio economic indicator
• Gender
• Age -> Register with Data Protection Registrar
• 60 “bins” 5 classes x 2 genders x 6 age groups
– (kids, teens, dinky, married with kids, empty nesters, retired)
– Disposable income
– Disposable leisure time
– Recommendation
• People who bought this also bought that
– Data from your own site
– Amazon really can recommend music or books you might like
• Data mining
– People who buy this on cold winter Fridays in Slough also buy that
7/14
Customer support
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Identify meaning of email
– Auto-respond with the answer
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Classify once human response given
– So next time it will auto-respond
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Expose database as FAQ
– So they don’t send the email at all
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Always give the option of human interaction
8/14
Brand awareness
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Single most important piece of data
People buy from a known name
– Sense of trust
• Marks and Spencer
– Perceived value
• Cheap reliable airline => Cheap reliable mobile
– Peer pressure
• Nike, Rolex, Dolce and Gabanna, Ferrari
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Brands can expand
– Virgin
• Active, Atlantic, Books, Brides, Broadband, Cosmetics, Credit
card, Drinks, Galactic(!), Games, Holidays, Limobike, Megastore,
Mobile, Trains, Wines
– Apple
• From computers to iPods
9/14
Community
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YouTube
– TV adverts
• Recycle TV adverts
• People send copies of your advert to each other
• Risqué adverts not acceptable on TV
– TV shows
• Trail shows
• Repeat the best bits
– Music
• Shareable
• Do-it-yourself MTV
10/14
Advertising
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Google
– Buy your brand name
• Coke
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Careers
Corporate Responsibility
The Coca-Cola company
Press Centre
– Buy your supplier’s brand name
• Nike
– JDSports
– Buy your competitors’ brand name
• Ford
– Adverts for Seat dealer
– Buy your target
• Nike (Boycott Nike), Coke (KillerCoke)
11/14
Successful business models
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Google
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Acquiring DoubleClick gives it over 80% of web advertising
Acquiring YouTube gives it millions more viewers
Providing a simple way to advertise gets it plenty of customers
Has Microsoft Office firmly in its sights
PlentyOfFish
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Run by a single guy from his apartment
Free dating site
In the global top 40 web sites
Runs Google AdSense adverts
Gets paid over $5m per year by Google
12/14
Successful exits
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MySpace
– Bought by News Corp for $580m July 2005
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YouTube
– Bought by Google for $1.65bn in October 2006
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Friends Reunited
– Bought by ITN for £175m in December 2005
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Bebo
– Bought by AOL for $850m in March 2008
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Valued by
– Number of users
• Potential income, possibly over several years
• Cost (or impossibility) of getting there yourself
– Value of brand (what market will bear)
– Asset base (users who can’t leave)
– Capital already invested (but the money may well have been squandered)
13/14
Conclusion
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Continuous evolution
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28K/s -> 8M/s
Still pictures -> movies
2D -> 3D
Newsgroups -> online communities
Games -> Second Life
Evolving economics
– Many people make a living online
• Buying and selling on ebay
• Property developer in Second Life
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What’s next?
14/14