Is it a good idea to encourage ALL employees to trade in these markets? Should insiders and/or highly uninformed people be allowed to trade? Do they help or hurt the market?
Yes, it is. These markets rely on network effects. More users lead to greater accuracy and will also provide more liquidity in the market. At worst, the outliers in the user base (uninformed and insiders) will cancel each other out. That is assuming that it is still an anonymous system. However, there might be problems in an open, more social system. People would ignore the outsiders and would all follow the lead of the insiders, which would definitely skew the results.
Thursday, April 23, 2009
Thursday, April 9, 2009
LinkedIn Case
Online social networks have become ubiquitous in the past few years. What forms of value do users get from these services and who is most likely to sign up on LinkedIn versus other sites?
The primary value that users get from online social networks is simple communication with persistence and a broad reach. With social networking sites, a user can simply post a thought, message, picture, video, etc, and all of their friends can see it. While emailing or making phone calls is not particularly difficult, posting on your wall is even easier. This ease of communication, though not necessarily as thorough, helps keep more people in regular contact. This persistent contact can strengthen relationships that could otherwise become stagnant due to a lack of communication. This is also aided by the ease of reciprocation between friends. Social networking sites become even more powerful as the network effects grow. I for one was initially resistant to joining Facebook. But once I did, I found a lot of my old high school and college friends, as well as old work associates. It seems like I find another one every week at least. The network effects are getting stronger- Facebook just announced that it has reached 200 million members. LinkedIn is an online social networking site that focuses on building business and work relationships. It does not have many frills like the games that can be played on other purely social networking sites. The users of LinkedIn post work related information like work experience, expertise, work recommendations, and can make connections with people that are linked to their profile in a professional context.
The primary value that users get from online social networks is simple communication with persistence and a broad reach. With social networking sites, a user can simply post a thought, message, picture, video, etc, and all of their friends can see it. While emailing or making phone calls is not particularly difficult, posting on your wall is even easier. This ease of communication, though not necessarily as thorough, helps keep more people in regular contact. This persistent contact can strengthen relationships that could otherwise become stagnant due to a lack of communication. This is also aided by the ease of reciprocation between friends. Social networking sites become even more powerful as the network effects grow. I for one was initially resistant to joining Facebook. But once I did, I found a lot of my old high school and college friends, as well as old work associates. It seems like I find another one every week at least. The network effects are getting stronger- Facebook just announced that it has reached 200 million members. LinkedIn is an online social networking site that focuses on building business and work relationships. It does not have many frills like the games that can be played on other purely social networking sites. The users of LinkedIn post work related information like work experience, expertise, work recommendations, and can make connections with people that are linked to their profile in a professional context.
Thursday, April 2, 2009
Wikipedia
How do Wikipedia’s processes for creating and modifying articles ever lead to high-quality results?
The key to Wikipedia’s success for creating and modifying articles lies in its open architecture; that is, any internet user can modify articles. This also leads to the incredible diversity of articles that are contained on the website. Any user could start an article on any topic that was of interest to them. These articles started as “stubs” that could be expanded upon by any user- particularly those who were subject matter experts in that area who had a vested interest that the information was correct. These experts ranged from academics and professionals, to average people with various interests and hobbies. For this reason, you can find Wikipedia articles on subject traditionally found in an encyclopedia like religion and science, to more pedestrian subjects like movies, television shows, comic books, etc. As the mass of content grew bigger it attracted more users. More users brought with them more scrutiny for the articles and therefore more editing and accuracy. I for one was skeptical when I first learned of Wikipedia, but over time have come to trust it as a valuable source of information. Most articles are heavily footnoted with credible references as well as links to more “official” websites, all of which aid in verification. Another feature that leads to high quality results is the linking of articles to other related ones on Wikipedia. Personally, I have been sucked into the webpage for long periods of time moving from one link to another, particularly when looking at the many “lists” that Wikipedia can generate and link to- and this goes for almost any topic.
The key to Wikipedia’s success for creating and modifying articles lies in its open architecture; that is, any internet user can modify articles. This also leads to the incredible diversity of articles that are contained on the website. Any user could start an article on any topic that was of interest to them. These articles started as “stubs” that could be expanded upon by any user- particularly those who were subject matter experts in that area who had a vested interest that the information was correct. These experts ranged from academics and professionals, to average people with various interests and hobbies. For this reason, you can find Wikipedia articles on subject traditionally found in an encyclopedia like religion and science, to more pedestrian subjects like movies, television shows, comic books, etc. As the mass of content grew bigger it attracted more users. More users brought with them more scrutiny for the articles and therefore more editing and accuracy. I for one was skeptical when I first learned of Wikipedia, but over time have come to trust it as a valuable source of information. Most articles are heavily footnoted with credible references as well as links to more “official” websites, all of which aid in verification. Another feature that leads to high quality results is the linking of articles to other related ones on Wikipedia. Personally, I have been sucked into the webpage for long periods of time moving from one link to another, particularly when looking at the many “lists” that Wikipedia can generate and link to- and this goes for almost any topic.
Thursday, March 19, 2009
iPod vs. Cell Phones
Has the digital music market irreversibly tipped in Apple’s favor?
Apple has never looked back from when it gained leading market position in the digital music industry in 2004. This lead was due to several factors: early-mover advantage, 99-cents-per-song pricing, iTunes software- which was free to download and offered proprietary DRM technology to ease the concerns of music labels, and the iPod. The iPod was the key to Apple’s dominance in the digital music market. It was the first portable device that combined ease of use, hip styling, and large memory. Coupled with iTunes, the iPod became the industry standard. Digital music formats have overtaken the CD as the format of choice. Digital sales and PC-based downloads have grown spectacularly as well. (PC downloads grew 167% between 2004 and 2005) Apple’s business model is simple and effective. The software is free and works on a Mac or PC. The $0.99 download fee has become the de facto industry standard. The key to the plan is the seamless integration of iTunes and an iPod. ITunes offers a huge selection of songs, but due to the Fairplay DRM, they can only be played on an iPod. Apple used iTunes as a loss leader for selling their iPods. While Apple barely breaks even on the sale of iTunes music, the profit margin for the iPod is around 25%. There was a threat to this dominant position- the evolution of more advanced smart cell phones which had the potential to become the mobile music platform of choice. Apple responded to this threat by preempting the industry yet again, with the introduction of the iPhone. The iPhone was as revolutionary to the cell phone market as the iPod was to the digital music player market. Apple will continue to dominate the digital music market as long as it remains innovative with its new technologies and products. The rest of the industry has been playing catch-up for years, and it does not look like that is going to change any time soon.
Apple has never looked back from when it gained leading market position in the digital music industry in 2004. This lead was due to several factors: early-mover advantage, 99-cents-per-song pricing, iTunes software- which was free to download and offered proprietary DRM technology to ease the concerns of music labels, and the iPod. The iPod was the key to Apple’s dominance in the digital music market. It was the first portable device that combined ease of use, hip styling, and large memory. Coupled with iTunes, the iPod became the industry standard. Digital music formats have overtaken the CD as the format of choice. Digital sales and PC-based downloads have grown spectacularly as well. (PC downloads grew 167% between 2004 and 2005) Apple’s business model is simple and effective. The software is free and works on a Mac or PC. The $0.99 download fee has become the de facto industry standard. The key to the plan is the seamless integration of iTunes and an iPod. ITunes offers a huge selection of songs, but due to the Fairplay DRM, they can only be played on an iPod. Apple used iTunes as a loss leader for selling their iPods. While Apple barely breaks even on the sale of iTunes music, the profit margin for the iPod is around 25%. There was a threat to this dominant position- the evolution of more advanced smart cell phones which had the potential to become the mobile music platform of choice. Apple responded to this threat by preempting the industry yet again, with the introduction of the iPhone. The iPhone was as revolutionary to the cell phone market as the iPod was to the digital music player market. Apple will continue to dominate the digital music market as long as it remains innovative with its new technologies and products. The rest of the industry has been playing catch-up for years, and it does not look like that is going to change any time soon.
Thursday, March 5, 2009
Brightcove Case
What are the strengths and weaknesses of Brightcove’s business model?
Brightcove’s business model has several strengths. They utilize a multisided business model with focus on content providers, advertisers, and affiliated programmers.
Leveraging a network strategy, the revenue flows stem from affiliates, advertisers, publishers, and consumers. Realizing the importance of network effects- that the services they offer would become more valuable as more and more users entered the network, Brightcove first pursued large publishers. They used an invitation-only introduction to premium customers that were large, established media companies got the ball rolling. This led to two primary customers in their early stages: “long-tail” customers- small niche-based content owners seeking a cheap, all-inclusive internet TV solution and “high-touch” customers- large media companies that wanted fuller control over use and branding.
This business model also has several weaknesses. The complexity of their multisided model leads to uncertainty of how to invest capital funding. Pursue all four options (build out key elements of software platform, invest in efforts to drive traffic to the network, expand internationally, or make acquisitions that would fill gaps in either the platform line of business or that of the network) and spread that capital investment evenly, or, “double down” more promising options? There are also problems with the “premium customers” who were courted early on. These “high-touch” customers had a high demand for customization which was a drain to engineering and business development resources, leading to delays in planned company advances. Another weakness was the Catch-22 of the revenue model. Brightcove needed to bring in both consumers and advertisers. They currently do not have a large audience so therefore, no audience, no advertisers. Similarly, until they attract a large number of advertisers, they will not attract enough high quality content publishers and therefore will have no new consumers. Brightcove also faces competition from many sources. Some are competing in specific segments of Brightcove’s business, like- technology suppliers, aggregators such as Comcast, social networking sites, and broadband media distributors. There is also competition from giants like YouTube and Google, which leverage huge financial resources as well as established user base. YouTube one year after launch: 100 million views per day, 20million unique visitors each month, 60% of all online video watched online and 65,000 uploads a day.
Brightcove’s business model has several strengths. They utilize a multisided business model with focus on content providers, advertisers, and affiliated programmers.
Leveraging a network strategy, the revenue flows stem from affiliates, advertisers, publishers, and consumers. Realizing the importance of network effects- that the services they offer would become more valuable as more and more users entered the network, Brightcove first pursued large publishers. They used an invitation-only introduction to premium customers that were large, established media companies got the ball rolling. This led to two primary customers in their early stages: “long-tail” customers- small niche-based content owners seeking a cheap, all-inclusive internet TV solution and “high-touch” customers- large media companies that wanted fuller control over use and branding.
This business model also has several weaknesses. The complexity of their multisided model leads to uncertainty of how to invest capital funding. Pursue all four options (build out key elements of software platform, invest in efforts to drive traffic to the network, expand internationally, or make acquisitions that would fill gaps in either the platform line of business or that of the network) and spread that capital investment evenly, or, “double down” more promising options? There are also problems with the “premium customers” who were courted early on. These “high-touch” customers had a high demand for customization which was a drain to engineering and business development resources, leading to delays in planned company advances. Another weakness was the Catch-22 of the revenue model. Brightcove needed to bring in both consumers and advertisers. They currently do not have a large audience so therefore, no audience, no advertisers. Similarly, until they attract a large number of advertisers, they will not attract enough high quality content publishers and therefore will have no new consumers. Brightcove also faces competition from many sources. Some are competing in specific segments of Brightcove’s business, like- technology suppliers, aggregators such as Comcast, social networking sites, and broadband media distributors. There is also competition from giants like YouTube and Google, which leverage huge financial resources as well as established user base. YouTube one year after launch: 100 million views per day, 20million unique visitors each month, 60% of all online video watched online and 65,000 uploads a day.
Thursday, February 19, 2009
EA Case- the online gaming market
Since the writing of the Electronic Arts Case the Sony Playstation 3 and the Nintendo Wii have been released and both have online gaming capabilities. What’s your assessment of the current online gaming market?
Online gaming is the future of video games. All of the major console game makers have online gaming capabilities. This is true for PC gaming as well. What was once the realm of first person shooters and role playing games like World of Warcraft, has expanded to all genre of gaming. Many new games are focusing less on the single player aspects of the game design and are focusing on the online multiplayer features. Many newer games do not have a single player option at all; it is all online and multiplayer. The target audience is expanding as well. Games like Madden and Medal of Honor represented the mainstay of the online gaming market—young males. But now that demographic is changing. There is a quickly expanding market of people, many of whom are older and female, that play “casual” games like cards online. These are simple games when compared to games produced by large developers, but they are attracting an ever increasing audience who enjoy the simplicity and social interaction (albeit limited) that they provide. These casual gamers are good targets for advertisers seeking to gain exposure to a market that is increasing astronomically. (A quick Google search shows that the potential for growth in the online gaming market is huge- up to $13 billion by the end of this decade.)
Online gaming is the future of video games. All of the major console game makers have online gaming capabilities. This is true for PC gaming as well. What was once the realm of first person shooters and role playing games like World of Warcraft, has expanded to all genre of gaming. Many new games are focusing less on the single player aspects of the game design and are focusing on the online multiplayer features. Many newer games do not have a single player option at all; it is all online and multiplayer. The target audience is expanding as well. Games like Madden and Medal of Honor represented the mainstay of the online gaming market—young males. But now that demographic is changing. There is a quickly expanding market of people, many of whom are older and female, that play “casual” games like cards online. These are simple games when compared to games produced by large developers, but they are attracting an ever increasing audience who enjoy the simplicity and social interaction (albeit limited) that they provide. These casual gamers are good targets for advertisers seeking to gain exposure to a market that is increasing astronomically. (A quick Google search shows that the potential for growth in the online gaming market is huge- up to $13 billion by the end of this decade.)
Thursday, February 12, 2009
Netflix VOD
Since the publishing of this case, Netflix has entered the video on demand (VOD) market. What is your analysis of how Netflix has attempted to update their business model with VOD?
Netflix has always been an industry leader that has embraced new ideas and new technology. They were the first to distribute DVDs through the mail. Video on demand (VOD) technology was a direct threat to their DVD rental business. The full integration of streaming content on computers and televisions was not a question of if, but of when. The timing of mass adoption of VOD wasn’t clear, however, but it was clear that integrating VOD into the business model was central to the long term success of Netflix.
Netflix wisely prepared for the future; dedicating cash for investment in VOD for several years, even as it grew its core DVD rental business. Netflix realized that the main impediments to VOD (technology and content) were out of their control and more importantly beyond the scope of their core focus- movie recommendation (through their proprietary system) and movie delivery.
Their foresight is paid off. Netflix now has a “Watch Instantly” feature for no additional cost to subscribers with the most popular plan ($16.99 for unlimited DVD rentals, three at a time). Netflix brought onboard major movie and television studios. Subscribers can stream near-DVD quality movies and television shows on PCs and Apple computers. Netflix has also expanded the VOD from the user’s computer to their television by forming partnerships with electronics manufactures to stream their content directly to televisions; via Blu-ray players, Xbox 360, and also directly to certain HD televisions.
Netflix could not ignore VOD and hope to remain a viable company. Technology was evolving that may eventually replace the DVD (or Blu-ray, or any other similar media). By investing early, Netflix was able to leverage their experience and specifically their proprietary movie recommendation system to expand into the VOD segment of the home movie market.
Netflix has always been an industry leader that has embraced new ideas and new technology. They were the first to distribute DVDs through the mail. Video on demand (VOD) technology was a direct threat to their DVD rental business. The full integration of streaming content on computers and televisions was not a question of if, but of when. The timing of mass adoption of VOD wasn’t clear, however, but it was clear that integrating VOD into the business model was central to the long term success of Netflix.
Netflix wisely prepared for the future; dedicating cash for investment in VOD for several years, even as it grew its core DVD rental business. Netflix realized that the main impediments to VOD (technology and content) were out of their control and more importantly beyond the scope of their core focus- movie recommendation (through their proprietary system) and movie delivery.
Their foresight is paid off. Netflix now has a “Watch Instantly” feature for no additional cost to subscribers with the most popular plan ($16.99 for unlimited DVD rentals, three at a time). Netflix brought onboard major movie and television studios. Subscribers can stream near-DVD quality movies and television shows on PCs and Apple computers. Netflix has also expanded the VOD from the user’s computer to their television by forming partnerships with electronics manufactures to stream their content directly to televisions; via Blu-ray players, Xbox 360, and also directly to certain HD televisions.
Netflix could not ignore VOD and hope to remain a viable company. Technology was evolving that may eventually replace the DVD (or Blu-ray, or any other similar media). By investing early, Netflix was able to leverage their experience and specifically their proprietary movie recommendation system to expand into the VOD segment of the home movie market.
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