Friday, December 10, 2010

Collective Buying Power: The Effect on Small Businesses

(Post by Douglas Hwang, Esther Tan, Mansoo Park, Joy Koh, Jason Costa)

The landscape for collective buying platforms is growing tremendously. In this two-sided network, the service providers receive revenue on every deal, and the consumers receive deals on businesses, services, and restaurants in their local area, often 50% or greater.

Then what about small businesses?

In our study, when local businesses try to advertise to their small community, they often go through local newspapers, spending thousands of dollars without clear metrics on their advertising returns. In contrast, these collective buying platforms offer numerous benefits to small businesses:

  • · 90% new customers
  • · Opportunity to up-sell
  • · 20% return rate on customers
  • · Up to 40% un-unused rate on deals
  • · Customer relationship management (CRM) opportunities

For businesses with small marginal costs [fitness classes or memberships], even if a deal is 50% off, most deals are still profitable. Even for businesses with high marginal costs [services or restaurants], this still creates exposure, as long as the deal is priced not to take a loss.

One of the biggest benefits to small businesses is cash flow. Once the deal is finished on the platform’s site, they immediately receive the cash. Essentially, they’re borrowing the cash until the buyers use the deal, which many do not use at all. Further, it is not uncommon for many of these small businesses to sell number of deals equal to their units sales of the previous year!

In conclusion, everyone wins in this 2-sided network. The platform and their business model, the consumers with their deals, and the small businesses with their “better than free” advertising, exposure, and with clear customer segmentation.

What are your thoughts? Is this always true?

Wednesday, December 8, 2010

Whither the Contactless Payment?

(Posted by Michael Plasmeier, Maya Bustan, Iulian Pogor, Tal Snir)

RFID-enhanced contactless cards might be the future of payment, but they certainly are not the present. Credit card companies have faced continuous challenges in the United States when introducing contactless payments methods. In 2006, the major card associations agreed to standards for use in the United States and cards were rolled out.

Unfortunately, the cards provided weren’t satisfactory in terms of protecting the identity and credit card information of the user. This led to negative publicity for contactless picked up by mainstream media. Consumers’ concern that thieves would be able to capture their payment information outweighed the potential benefit of faster check out times for small purchases.

Regardless, contactless payment systems are currently seeing a resurgence in popularity. In addition to start ups like Bling Nation that is focusing on smaller businesses and communities, many banks and card issuers are developing/offering cards with contactless capability.

In spite of the growing buzz and opportunity for contactless cards, the authors of this post have found that it is actually quite difficult to obtain a contactless card in the US. We were unable to even find, much less apply for a Chase “Blink” credit card. Searching for “Blink” on Chase’s site led to a dead link. While attempting to apply for a PayPass MasterCard, we could see a selection of several cards, but we ran into errors when attempting to apply. Applying for a Visa PayWave card was partially successful. One bank told us that the offer was no longer available, but Wells Fargo appeared to be issuing PayWave cards.

Are standards and technology to blame for the slow adoption? Or are their other issues at play?

Tuesday, December 7, 2010

The Net-Neutrality battle heats up with online video

(Post by Edwardo Sackey, Andrew Lei, Liza Gutina,Emmanuel Badoo)

There is a battle brewing between Comcast Corp and Level 3 Communications. This spat arose because of Comcast's demands that Level 3 Communications pay exorbitant fees to deliver Netflix content to Comcast subscribers. Below is a snippet from a Bloomberg article on Dec 3rd

“….Level 3 Communications Inc., accusing Comcast Corp. of setting up a “toll booth” for Web traffic, said the cable carrier is trying to protect its TV business by charging Level 3 for delivering video to its customers.

“Online distribution of movies, TV shows and other content threatens Comcast’s traditional ‘closed’ video distribution model,” the company said. Broomfield, Colorado-based Level 3, which provides broadband services to customers including Netflix Inc., made the statement in a 19-point public letter today….”

Do you feel Comcast by charging Level 3 Communication a fee will protect its TV business?

Monday, December 6, 2010

A new market for reselling digital goods

(Post by Bryan Drake, Leo Espindle, Eddie Liu, Hai Liu, Steve Yoshida)

Imagine a marketplace where consumers are able to sell used digital goods to each other. The envisioned marketplace essentially allows for increased price differentiation, which decreases deadweight loss caused by rigid pricing.

In this marketplace, Mary Moneybags is able to purchase a movie at the original price of $$$ from the retailer, and later has the right to sell the movie to Charlie Cheapo after a specified blackout period for a price of $$. To allow this capability, a small amount of money ($) is paid to the retailer as a fee to provide the clearinghouse, and, importantly, to the original content producer as well.

Under this framework, retailers benefit from charging a fee to provide an internet clearinghouse for resale content, and content producers benefit through the introduction of “droit de suite” for digital content, a rights law currently used in the European marketplace for fine art. We also anticipate that this system will reduce piracy, which costs an estimated $6 Billion a year in lost movie sales, and may introduce a type of social networking component to the marketplace so popular in physical used music stores.

The digital content marketplace is expanding in terms of offering content at various price points. The rental market, dominated by Netflix in the United States and including niche offerings in other countries such as eHit in Korea, allow consumers to spend less to consume content, but ultimately they do not own it. On the other end of the market, announced the ability to for users to “lend” eBooks via the Kindle marketplace for free to friends for a limited time. In light of these developments, the time certainly seems right for a full fledged digital resale market.

Thursday, December 2, 2010

What is the best way to find a new employee?

(Posted by Michelle Livengood, Batu Oncul, Derek Lyon, Melissa Spencer, Michael Connolly)

A few years ago, the answer may have been to post your job description on one of the big online boards--Monster, CareerBuilder, or HotJobs--but more and more, the answer is to turn to networking and the ever-increasing number of social media solutions for finding the right employees.

Many of the major online job boards are moving more and more towards using social media as part of the job search experience that they are trying to sell. Monster has its Social Recruiting Solution, CareerBuilder has its Social Media Brand Management tool. Monster recently acquired Yahoo! HotJobs in an effort to reach even more job seekers.

But when the major job boards are charging hundreds of dollars to employers to post a job description versus the much cheaper (and increasingly more visited!) posting options on LinkedIn, Twitter, Facebook and Craigslist can the giants of the job-board world keep their prices so high? Or are announcements of job openings, like so many other digital information artifacts, trending towards free?

Does the prevalence of social media channels put more of the onus on the job seeker to get out there and push their information , instead of waiting for the right job to find them?

Research shows that usage of social media for job searches will increase in the near-term, grabbing significant market share specifically from online job search websites. Some traditional recruiting channels, such as local posts and headhunters, will be less affected by recent social media trends.

Many recruiters say that they are moving away from websites such as Monster and Dice, because it is becoming more and more difficult to find good people at a good price. Many recruiters report that they are now using LinkedIn to find ‘real’ people within their network, for free. Especially for small firms, research shows that 60-70% of new hires are partially or fully driven by social networks. 62% of recruiters say that social networks are either significant or primary way of direct sourcing.

Some implications of this shift from traditional hiring sources to social networking is that job boards will need to change their business model or they will be forced out by social media avenues and recruiting through social media will continue to increase.