Leveraging the Newest Internet Business Models - From Social Shopping to Freemium
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What are the latest trends in online business models, and how can your company use them? Learn about social shopping, virtual goods, freemium, and APIs and see how other companies have successfully put them into practice. This presentation was given at the Internet Technology Summit 2010 in Orlando on June 22, 2010.
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Leveraging the Newest Internet Business Models - From Social Shopping to Freemium
- 1. 1
- 3. Virtual Goods & Virtual Currency
- 4. Freemium
- 6. Word of Mouth via Social Networks 4
- 7. How We Used to Shop 5
- 8. How We Shop Now 6
- 9. Social Shopping on Your Website 7
- 10. Social Shopping on Facebook 8
- 11. Booming Market for Virtual Goods 9 Est. $1 billion in revenue in the U.S. in 2010 Est. $2.5 billion in revenue in the U.S. by 2013 Sources: http://www.emarketer.com/Article.aspx?R=1007226 and http://www.emarketer.com/Article.aspx?R=1007740 Sources: http://www.emarketer.com/Article.aspx?R=1007226 and http://www.emarketer.com/Article.aspx?R=1007740 Sources: http://www.emarketer.com/Article.aspx?R=1007226 and http://www.emarketer.com/Article.aspx?R=1007740 Sources: http://www.emarketer.com/Article.aspx?R=1007226 and http://www.emarketer.com/Article.aspx?R=1007740 Sources: http://www.emarketer.com/Article.aspx?R=1007226 and http://www.emarketer.com/Article.aspx?R=1007740
- 12. What are virtual goods? 10 Source: Facebook.com
- 13. Why do people buy virtual goods? 11 Source: IMVU.com
- 14. Who Buys Virtual Goods? 12 Source: Emarketer.com
- 15. Examples of Virtual Goods 13 Source: Free: The Future of a Radical Price, Chris Anderson
- 16. Examples of Virtual Goods 14 http://www.playspan.com
- 17. How can you incorporate virtual goods? 15
- 20. Subscribe to a newspaper or magazine
- 22. Trial a service or product
- 23. Install an applicationSource: gWallet Source: gWallet
- 24. Using Virtual Currency Increases Ad Response 17 Source: tubemogul.com/research/report/33 Source: gWallet
- 25. Freemium = Free + Premium 18
- 26. Freemium: Ideal to Have Several Tiers 19 37Signals.com
- 27. Freemium: Need Both Popularity & Monetization 20 Animoto.com
- 28. Freemium: Convert Your Heaviest Users 21 Pandora.com
- 29. Freemium: Transparency with Users is Key 22
- 30. APIs and Applications 23 API: Application Programming Interface
- 31. APIs and Apps: Beyond the Browser 24 For successful companies, 80% of traffic in the future will come from beyond the browser.
- 35. Virtual Goods & Virtual Currency
- 36. Freemium
Hinweis der Redaktion
- Did you know that there is a fundamental change occurring in online shopping? We witnessed the big shift ten years ago as more and more consumers began to shop online. Now we’re in the midst of another revolution.Messaging, commenting, blogging, sharing and “liking” now fill up 22 percent of all time spent online each month, and social networks or blogs are “visited by three-quarters of global consumers who go online”, according to Nielsen Research - http://bits.blogs.nytimes.com/2010/06/16/22-percent-of-internet-time-is-social-nielsen-says/
- Online social network users were three times more likely to trust their peers' opinions over advertising when making purchase decisions. (1)Consumer recommendations, like those on social networking sites, are the most credible form of advertising. (2)Word of mouth marketing, including social networking, is the number one influencer in consumers’ apparel and electronics purchases. (3)JupiterResearch, March 2007Nielsen, October 2007Retail Advertising and Marketing Association/BIGresearch Study, November 2008
- Five or six years ago, we usually purchased a product by searching for it on a price comparison site and then buying it from the site with the cheapest price and best shipping. However, after some poor customer service experiences and orders that never arrived, many of us have become more selective where we buy from.
- We now rely on our friends on Facebook and we read through discussions on forums and customer reviews before purchasing from a site we’re unfamiliar with. We also like to see a “human face” on the site – who works there and how likely will they be to help if there’s a problem?
- Shoppers at retail websites can log in via Facebook Connect and view what their Facebook friends have said about certain products.
- Companies can also integrate shopping carts right on their Facebook page.
- Huge opportunity for companiesto capitalize on this growing market, especially as virtual currency and pre-paid payment options become more widely used by consumers.
- You may be wondering – what are virtual goods? They are digital items like specialized avatars, clothing, gifts, coins, trinkets – things that you can add to your profile or page or avatar or things that you send to friends. They can cost a few cents to a dollar to $10 per item. And, what is most remarkable, is that once they are created, it costs nothing to replicate them thousands or even millions of times.
- Why do people buy?Enhance game playExpress their identityBuild relationships (gifts)Shop (browse and buy) = fun
- Who buys virtual goods? All ages and demographics. Where they buy their virtual goods is the difference. Older adults buy them on sites like Dogster and Catster. College students buy them on Facebook. Teens buy them on MyYearbook.com, and young kids buy them on Club Penguin, Neopets, and Webkinz.May 2010 study = 13% of the population has purchased a virtual good. Males were more likely than females, though both groups had made gains since last year. Men ages 18 to 24 more than doubled their likelihood of participating in the virtual economy, with 31% buying virtual items this year compared with just 15% in 2009. Purchasers rose from 8% to 14% of women in the same age group. Broken down by race, whites made up the smallest portion of virtual goods buyers, at only 11%. Nearly one-half of the market is made up of Asians (26%) and Hispanics (20%). Source: http://www.emarketer.com/Article.aspx?R=1007740
- Club Penguin is free for kids to play, but if they want to upgrade their igloo with furniture or buy a pet for their penguin, they have to subscribe for $6/month (with their parent’s permission, of course). Club Penguin has over 700,000 paid subscribers who generate more than $40 million annually.
- PlaySpan is a company that offers publishers and retailers a platform for selling virtual goods. More than $50 million in transactions went through PlaySpan's marketplace in 2008.
- Do you have any products you sell that could have a corresponding virtual good? Could you create some digital items that enhance your products, make your customers feel special, and help increase word of mouth about your company? You don’t have to charge for all of your virtual goods and you may decide to make them all free in the beginning. Just remember that you want to maintain some levels of scarcity to ensure that there is continued demand.
- According to the study, around 43% of virtual currency ad viewers completed the entire ad, and roughly 52% watched at least three quarters of the ad. These numbers just barely inch out those of in-banner and interstitial ads, but where the virtual currency ads excel is in click-through and share rate. By rewarding viewers for completing ads, advertisers see a click-through rate double that of in-banner ads and over 5 times that of interstitial ads. Users share these ads on Facebook and Twitter roughly 50% more than in-banner ads and around 6 times more than interstitial ads.http://www.tubemogul.com/research/report/33
- Concept of freeloaders not a bad thing with digital goodsHeavier users will upgrade and payIdeal to have several tiersFree version encourages later adoptionChallenges with Freemium:Get a lot of users (viral)Convert a sufficient fraction
- Lessons Learned by Animoto:People have to fall in love with your free product.~10% conversion rate (150,000 of 1.5 million)Created Facebook app in 2008 and had dramatic increase in installs (and huge increase in cloud bill)No way to monetize it, so shut it off.Need both popularity and monetization
- Lessons Learned by Pandora:Was originally subscription-only (2005-06)Only 0.5% converted from trialsWent to ad-supported model:Doesn’t scale with heavy usersAdvertisers want to buy your reach/breadthDiminishing marginal potential revenue with heavy usersCustomer segmentation = focused on very heavy listeners (5%)Pay-as-you-go option (monthly)Doesn’t require commitment; good for users early onPandora One subscription (yearly)40% of very heavy users converted
- Transparency with users is really importantIf they don’t understand your business model, they will think they are getting screwed.
- APIs = How developers can access a company’s data/content.How people get to your business.
- For successful companies, 80% of traffic will come from beyond the browser.Make your API useful and it will be carried to customers you’ve never met.Markets becoming more specialized and differentiated.Facebook betting its future on its APIsMobile = use APIs to access maps, location, social graphs, events
- Siri purchased by Apple in April 2010.
- The global market for mobile applications is expected to more than triple from just under $10 billion at the end of 2009 to $32 billion in 2015 (Juniper Research - http://econsultancy.com/blog/6082-mobile-internet-stats-roundup).Foursquare has opened up its API so that people and companies can build additional functionality on top of the existing check-in and badge features the company has created. As users play with geo-location applications and fill in data and recommendations, the services become infinitely more valuable. = http://econsultancy.com/blog/6078-in-the-geo-wars-the-next-step-will-be