The organization I selected was Justin.tv, as the largest online community for people to broadcast, watch and interact in the setting of streaming video. The company was founded in October 2006 and is already the leading live video site enabler on the web with more than 41 million unique visitors per month and 428,000 channels broadcasting live video.
Whilst analyzing Justin.tv for the required key elements of a business model the first thing that came to mind that this organization is young and may get not have the organizational skill set to succeed however their business model has what it takes to provide quality services to its customer and the management team has navigated through some troubling times where things could have gone either way. One thing about their live video model is that its emphasis on user-created content sidesteps the copyright issues that have plagued the video sharing industry, their clever wording and operating model has differentiated them for peer to peer network or illegal download sites.
Summarized Business Model for Justin.tv
The greatest service that Justin.tv provides to its customers it that they do not have to pay for the basic amenities. There business model is focused at providing customers a valued unified product at no cost but to be subjected to advertising. They truly offer a unique experience by interweaving chat and other social networking gadgets with live media viewing. Don't get me wrong Justin.tv is looking for ways to accelerate its money making ability. Laudon K and Traver C (2009, 2-7) “…companies develop their value proposition based on current market conditions or trends.” Justin.tv is no different however they have a competitive edge over their competitors which we will discuss later.
Laudon K and Traver C (2009, 2-7) “The function of business organizations is both to generate profits and to produce returns on invested capital that exceed alternative investments.” Justin.tv initial started out with one revenue model, the advertising model which is based on providing users content, services and/or a product whilst a forum for advertisers to post advertisements. Since their conception their have expanded the money making model to a subscription based service allowing loyal customers to avoid the advertising circuit that overlays the stream media for on occasion. More recently, it was noted that Justin.tv will be also providing transaction fee for products like pay-per-view events taking 30% of the profits from any hosted broadcast. The P & L of Justin.tv can only be estimated being that it is a privately owned company an d is not required to disclose its revenue.
Justin.tv makes it easy for any user to broadcast live video while interlinking aspects of social networking. This makes for a compelling user experience and tremendous market opportunity, just as YouTube succeeded by sharing recorded videos easily. Within two years and a bit Justin.tv has over 41 million unique users visiting it site. The marketing opportunity has not yet been remotely exploited however they must be careful not to focus on the advertising but remained focus on the maintaining customer value. Know the Laudon K and Traver C (2009, 2-9) “revenue potential in each of the market niches where you hope to compete.”
Laudon K and Traver C (2009, 2-10) “ firms typically have both direct and indirect competitors” Ustream.tv is Justin.tv direct competitor however Justin.tv was one of the first companies to lay the ground work therefore they would be considered the largest of the direct competitors. However we still have such mediums as digital TV, Cable TV and other traditional sources which have not moved into the web world and do not know of forum of entertain and social networking mixture.
Justin.tv has some significant advantages over their competitor. One is very intelligent employees, the initial site was constructed by a team of MIT and Yale graduates. The technology is so clever and innovative that it scales to support massive audiences by measuring the demand in real-time and intelligently replicating video to additional resources. Laudon K and Traver C (2009, 2-11) “First-mover advantage a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service”. Another advantage is there low cost operational model by streaming video at mire pennies on the dollar allows for massive expanding to meet the ever increase demand for video.
Laudon K and Traver C (2009, 2-12) “No matter how tremendous a firm's qualities, its marketing strategy and execution are often just as important” Based on my analysis the market strategy for Justin.tv was to use social network and word of mouth to promote there real-time video streaming service but integrating the two services the consumer base would almost fill itself.
Laudon K and Traver C (2009, 2-12) “Many e-commerce firms and many traditional firms who attempt an e-commerce strategy have failed because they lacked the organizational structures and supportive cultural values required to support new forms of commerce (Kanter, 2001)” Justin.tv has quickly grown from a co-founder operation to an operation with thirty two employees to handle such needs as operational duties, marketing, customer support, finance, etc.
Laudon K and Traver C (2009, 2-13) “Arguably the single most important element of a business model is the management team responsible for making the model work.” Based on my first impression, it they appear the management may not have what it takes however they have over come various odds in the deployed an innovative service that has be wisely marketed using the best marketing tool “word of mouth”, thus they have had to do very little to achieve a market share of millions of viewers. The organization structure is filled with smart people and is not overloaded with politics but filled with a light hearted atmosphere where they are surrounded by friends.
Justin.tv has appears that their Business-to-customer business model has taken a little bit from each of the major categories (Portal, Content Provider, and Community Provider). This will only lead to their success by increasing their market opportunity by reaching into the homes of millions.
I believe e-commerce can remove some barriers for small business to be more competitive with larger businesses however the larger business still should have an advantage if they have liquidity. Laudon K and Traver C (2009, 2-37) “ E-commerce changes industry structure, in some industries more than other… to understand and describe the nature of competition in an industry, the nature of substitute products, the barriers to entry, and the relative strength of consumers and suppliers.” An e-commerce business does not require bricks and mortar or staff to manage the front office operations, just a website and possible one central warehouse. The infrastructure to manage a e-commerce based business are normally about 8 percent of the business revenues. Regardless if you are a small or large business the consumer market immediately expands to a global frontier, consumers all over the world have the choice to shop online, expanding the reaches by allowing consumers to choose their language and it is always open 24 hours day, thus a consumer can shop at their own convenience.
The small and large business E-commerce leveling factors are
* Lowers Business Costs
* Is Accessible Anywhere, Anytime
* Strengthens Customer Service
* Develops Customer Loyalty with personalization and customization
* Improves Customer knowledge of the product
Laudon K and Traver C (2009, 2-45) “Adopting a strategy of cost competition means a business has discovered some unique set of business processes or resources that other firms cannot obtain in the marketplace. Business processes are the atomic units of the value chain.” Where E-commerce becomes unequal between small and large business is in the cash rich companies who can market themselves and spend the money to personalize and customize the website to be feature rich and appealing to customers. Large businesses which have a traditional brick and mortar shop will have loyal customers they can influence to their website. In addition, the larger business is in a better position to buy up any smaller competitor that may be making grounds on their market share or have an unique / competitive edge that is appealing to customers.
In conclusion if you set a plan to offer a service or product in a unique way to differentiate the business from competitors then superior long term returns can be achieved regardless if you are a small or large business however in most cases larger business will have an advantage of the small business unless the smaller business experiences explosive growth which gains them control of the market share and customer loyalty.
Laudon, Kenneth C. and Traver, Carol G. (2009). E-commerce: Business, Technology, Society, 5th ed. New Jersey: Pearson Prentice Hall.
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