Short, interesting article about 3 companies that sold to Amazon...including Zappos,
http://money.cnn.com/2011/02/21/smallbusiness/amazon_acquisitions/index.htm
Tuesday, February 22, 2011
Sunday, February 13, 2011
The best long term strategy for Netflix
The case discusses 3 options for Netflix:
1. Partner with an existing VOD player by contributing their proprietary rating technology thereby avoiding the technology challenge of linking the computer and tv.
2. Integrate a streaming online video feature into their core product which would leverage many of their core strengths.
3. Create a stand alone online video offering.
I think the first option sacrifices too much of the company's talents and assets. The proprietary rating system is an extremely valuable aspect of their business and divesting ownership rights so early in this industry's life cycle seems like a case of itchy trigger finger syndrome. I think Netflix should keep the rating system, a key market differentiator, in house.
Another key differentiator for Netflix is their distribution efficiency. This capability not only supplies a strategic advantage, it acts as a significant barrier to entry into the market. To even think about joining the market, a firm would have to compete with 1 day delivery turnaround...a talent Netflix took 10 years to perfect. For this reason I do not believe Netflix should go with option 3. That option potentially allows this great strategic advantage to whither away sooner than the market would demand .
However, I do believe that over the very long term (15-20 years) online or media-less content distribution will be the norm. Access to high definition content over the internet and through VOD services is already growing and I expect distribution to become easier and more cost effective over time. This eventuality will begin to dwindle and possibly eliminate Netflix's DVD/Blu-ray rental service profits. For this reason, Netflix should consider media-less distribution as a long term foundation for the company. In the intermediate time frame, Neftlix can utilize option 2 which keeps their DVD/Blu-ray rental business thriving and growing as the market exists. At the same time it sets up an online streaming option for consumers and lays the foundation for their long term goals.
1. Partner with an existing VOD player by contributing their proprietary rating technology thereby avoiding the technology challenge of linking the computer and tv.
2. Integrate a streaming online video feature into their core product which would leverage many of their core strengths.
3. Create a stand alone online video offering.
I think the first option sacrifices too much of the company's talents and assets. The proprietary rating system is an extremely valuable aspect of their business and divesting ownership rights so early in this industry's life cycle seems like a case of itchy trigger finger syndrome. I think Netflix should keep the rating system, a key market differentiator, in house.
Another key differentiator for Netflix is their distribution efficiency. This capability not only supplies a strategic advantage, it acts as a significant barrier to entry into the market. To even think about joining the market, a firm would have to compete with 1 day delivery turnaround...a talent Netflix took 10 years to perfect. For this reason I do not believe Netflix should go with option 3. That option potentially allows this great strategic advantage to whither away sooner than the market would demand .
However, I do believe that over the very long term (15-20 years) online or media-less content distribution will be the norm. Access to high definition content over the internet and through VOD services is already growing and I expect distribution to become easier and more cost effective over time. This eventuality will begin to dwindle and possibly eliminate Netflix's DVD/Blu-ray rental service profits. For this reason, Netflix should consider media-less distribution as a long term foundation for the company. In the intermediate time frame, Neftlix can utilize option 2 which keeps their DVD/Blu-ray rental business thriving and growing as the market exists. At the same time it sets up an online streaming option for consumers and lays the foundation for their long term goals.
Saturday, February 5, 2011
The best way Yelp can monetize their business
In response to the question posted : http://jessebockstedt.wordpress.com/
Yelp certainly faces a challenge. The dense competitive landscape, particularly now in 2011, and relatively low customer switching costs means that Yelp must work hard to differentiate itself. I do not believe that charging users, even in a fremium type model, will work to increase revenue since their primary competition (google, yahoo, citysearch) do not utilize such models. Because of the low switching costs, many users would likely migrate to competitor sites. However I do believe that increased local sales forces could lead to increased revenue. From my own revue of several sites including Yelp, Google Hotpot, and Yahoo local, very little local advertising appears for most search results. As a user myself, I think it would be nice if some links to coupons or other incentives showed up with my search results.
Yelp should be able to increase their advertising revenue with local establishments by stressing the search and click through statistics for the given business type. Yelp can also point out the fringe benefits businesses get of direct access to compliments and complaints. In addition, Yelp should be able to leverage their vast database of business ratings, click through statistics (for genres and specific establishments), and users to create other possible revenue streams. Entrepreneurs and larger scale investors might value the data yelp has built over the years and yelp could possibly monetize consulting services or direct access to statistics.
Regarding Google Hotpot, as with all things Google, Yelp should be very afraid. Google's gargantuan user base automatically gains access to all of Google's free apps as soon as the app becomes available. Given many yelp users are likely Google users as well, Google has an immediate tendril into Yelp's customer base. As noted above, switching costs are very low for users in this space so Yelp needs to bolster its differentiation over Google's alternative service.
Another more drastic step for the company at this time would be to look to sell to or merge with another firm. Their business model is quickly becoming a small piece of what many other sites do. Many of those sites like google, facebook, and yahoo have many more revenue streams and could even take hostile competitive steps at a loss to dwindle Yelp's market share. It may be time for the company "join em" since it's going to be tough to "beat em."
Yelp certainly faces a challenge. The dense competitive landscape, particularly now in 2011, and relatively low customer switching costs means that Yelp must work hard to differentiate itself. I do not believe that charging users, even in a fremium type model, will work to increase revenue since their primary competition (google, yahoo, citysearch) do not utilize such models. Because of the low switching costs, many users would likely migrate to competitor sites. However I do believe that increased local sales forces could lead to increased revenue. From my own revue of several sites including Yelp, Google Hotpot, and Yahoo local, very little local advertising appears for most search results. As a user myself, I think it would be nice if some links to coupons or other incentives showed up with my search results.
Yelp should be able to increase their advertising revenue with local establishments by stressing the search and click through statistics for the given business type. Yelp can also point out the fringe benefits businesses get of direct access to compliments and complaints. In addition, Yelp should be able to leverage their vast database of business ratings, click through statistics (for genres and specific establishments), and users to create other possible revenue streams. Entrepreneurs and larger scale investors might value the data yelp has built over the years and yelp could possibly monetize consulting services or direct access to statistics.
Regarding Google Hotpot, as with all things Google, Yelp should be very afraid. Google's gargantuan user base automatically gains access to all of Google's free apps as soon as the app becomes available. Given many yelp users are likely Google users as well, Google has an immediate tendril into Yelp's customer base. As noted above, switching costs are very low for users in this space so Yelp needs to bolster its differentiation over Google's alternative service.
Another more drastic step for the company at this time would be to look to sell to or merge with another firm. Their business model is quickly becoming a small piece of what many other sites do. Many of those sites like google, facebook, and yahoo have many more revenue streams and could even take hostile competitive steps at a loss to dwindle Yelp's market share. It may be time for the company "join em" since it's going to be tough to "beat em."
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