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APPENDIX 4
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Table 3. Types of customers
Quantity A
B
C
D
Product %
164x 40% 164x 25%
16x
204x 25% 15x
28x
104x 10% 25x
38x
The percentage represents how many orders for each type of customer are out of the total number of orders. The type of customers and percentages have been estimated, based on Perezcano’s partner’s knowledge of the photography market.
Table 4. Estimated number of daily orders
Year # of orders
1 7 2 9 3 10 4 12 5 15
The estimated number of daily orders has been determined, based on a conservatively estimated growth of the customer base.
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APPENDIX 5
Digital Photography Market in Number of Printed Images by 2004 (Biederman, 2005)
Table 5. Digital photography market in number of printed images
Digital images printed by all methods Home printing
Retail locations Online services
Estimated number of printed images for 2007
1.9 billion 57%
33% 10%
10.7 billion
Table 6. Digital photography market in dollars (Bulkeley, 2005)
Consumer expenditure in prints by 2004
Digital pictures printed from the pictures taken
$8.2 billion
20% - 30%
APPENDIX 6
Kiosks Printing Services (Bulkeley, 2005)
Table 7. Kiosks printing services
Number of kiosks in 2004
Estimated number of kiosks by 2008
75,000
121,000
The main players in kiosk printing services are Kodak, Fuji, and Sony. Kodak is the leader `HXWVFK$UHFHQWSOD\HUHQWHULQJWKHPDUNHWLV3L[RORJ\DVRIWZDUHGHYHORSHU¿UPIRU the kiosks at Cotsco (Biederman, 2005).
This work was previously published in the International Journal of Cases on Electronic Commerce, edited by M. Khosrow-Pour, Volume 2, Issue 2, pp. 64-80, copyright 2006 by IGI Publishing (an imprint of IGI Global).
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Chapter 4.16
An Online Success Story: The Role of an Online Service in a
Magazine Publisher’s Business Model
Olli Kuivalainen
Lappeenranta University of Technology, Finland
Hanna-Kaisa Ellonen Lappeenranta University of Technology, Finland
Liisa-Maija Sainio Lappeenranta University of Technology, Finland
ABSTRACT
The aim of this article is to provide a holistic exploration of the development of the business model of a magazine Web site, and of the factors behind its success. The discussion is based on an explorative case study of a successful Finn-ish magazine publisher and its Web site. We use triangulated data (interviews, observation, statistical data, customer feedback, newspaper articles) to describe and analyze the development of the Web site and the subsequent changes in the e-business model of the magazine from the Web site foundation in 1998 to the situation in fall 2004. Our case illustrates that a magazine’s Web site is linked to all of its functions (editorial, circula-
tion, and advertising), and to the business-model elements that are vital to its success. We suggest that the discussion forums in question, one type RIYLUWXDOFRPPXQLW\EHQH¿WHGIURPWKHSRVLWLYH feedback that resulted in positive network effects, and led to the adoption of the service. Moreover, community activities have enhanced customer loyalty and added a more lifelike dimension to the magazine concept. As such, the Web site now complements rather than substitutes the print magazine. Interestingly, although it does not LQGHSHQGHQWO\IXO¿OOWKHUHTXLUHPHQWVRIDVXF-cessful business model (e.g., Magretta, 2002), it enhances the customer experience and adds new dimensions to the magazine’s business model.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
An Online Success Story
INTRODUCTION
The role and the effect of the Internet has been a hot topic within the media sector for some time. The Internet could be seen as one of the big-gest challenges ever to the publishing industry as Internet-only publications incur virtually no paper, printing, or distribution costs. Web sites also compete with the two revenue streams that are essential to publishers, that is, readers’ and advertizers’ time and money. Correspondingly, one of the dominant areas of research within the publishing sector has been the business model and its evolution in the age of digitalization (e.g., Fetcherin & Knolmayer, 2004; Gallaugher, Auger & BarNir, 2001; Stahl, Schafer & Mass, 2004; Vasisht & Gutierrez, 2004).
Consultants and practitioners have often used WKHWHUP³EXVLQHVVPRGHO´ORRVHO\WRGHVFULEHD unique aspect of a particular Internet business venture, resulting in considerable confusion in the end (Mahadevan, 2000). Similarly, it is evident that the link between the Internet and the business model is not always clear: the Internet as such is not automatically an enabler of new models, and its role may be just that of a medium, or a new distribution channel, for example. In fact, we be-lieve that its role in most companies with functions outside of it cannot be separated from the business model as a whole. We agree with Porter (2001), who states that the Internet often complements the traditional activities of companies. Accordingly, LWLVQRWHQRXJKWRH[DPLQHMXVWWKH³HEXVLQHVV model” without trying to comprehend the links to other activities.
This article thus examines the role of a maga-zine Web site in the publisher’s business model, and depicts the strategic changes in that role. The aim is to provide a holistic exploration of the mo-tives behind the development of the model, and of the subsequent success factors of the Web site. The
magazine, called BAP (the Baby and Pregnancy magazine) here, is a clear long-term market leader in its Internet services in Finland.
The next section of the article provides the conceptual background, and then the focus turns to business models within the magazine publishing industry. We then explain our research strategy, and introduce the case study: we describe and analyze the development of the Web site from its start in 1998 to the situation in fall 2004 using triangulated data (interviews, observation, sta-tistical data, customer feedback, and newspaper articles). Finally, we suggest some implications for researchers and practitioners alike.
A REVIEW OF THE LITERATURE ON BUSINESS MODELS
For many companies, the Internet has provided a platform for various business activities. It could be seen as a new marketplace, and in order to ¿QGRXWKRZWRFRPSHWHLQVXFKDQDUHQDPDQ\ people have found the business-model concept useful (Lumpkin & Dess, 2004).
The extant literature on business models is extensive (e.g., Boulton, Libert & Samek, 2000; Chesbough & Rosenbloom, 2002; Dickinson, 2000; Hamel, 2000; Mahedevan, 2000; Rajala, Rossi, Tuunainen & Korri, 2001; Rappa, 2000; Slywotzky, 1996; Timmers, 2000). Correspond-LQJO\GH¿QLWLRQVRIWKHFRQFHSWDERXQGHDFK depending on the purpose and the theoretical background of the examiner. However, the basic idea appears to be the same: it concerns what is produced and sold, how, and to whom. How is the value of the product or service derived? What is WKHHDUQLQJVORJLFEHKLQGWKHSUR¿WPDNLQJ"7KH business model is a representation of manage-ment thinking and practice that helps companies to see, understand, and run their activities in a
discussion is based on an explorative case study of a successful Finnish magazine Web site. The case
GLVWLQFWDQGVSHFL¿FZD\&KDUDUEDJKL)HQGW Willis, 2003).
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An Online Success Story
7KHUHVHHPWREHWZRVWUHDPVRIGH¿QLWLRQV UHÀHFWLQJ IXQGDPHQWDO WKHRUHWLFDO GLIIHUHQFHV in conceptualizations of business models and VWUDWHJLHV)LUVWO\WKHUHDUHGH¿QLWLRQVWKDWIROORZ Porterian value-chain thinking: we place in this category those in which streams (Mahadevan, ÀRZV7LPPHUVRUWUDQVDFWLRQV (Amit & Zott, 2000) are used to describe the functions of the organization in a meaningful way. Rajala et al. (2001) follow the same logic with their elements of a conceptual business PRGHOWKHLUGH¿QLWLRQHQFRPSDVVHVWKHSURG-uct-development approach, revenue logic, the marketing and sales approach, and the servicing and implementation approach. The second stream RIGH¿QLWLRQVIRFXVHVRQresourcesDQGUHÀHFWV WKHUHVRXUFHEDVHGYLHZRIWKH¿UPWKH\DUHDVVHW (Boulton et al., 2000) or resource based (Hamel, 2000). For the purposes of this article we have WDNHQWKHGH¿QLWLRQSXWIRUZDUGE\5DMDODHWDO (2001) as a basis for inspection. Their model is presented in Figure 1.
The four elements in the model outlined by Rajala et al. (2001) point out how a company develops its products, how it gets revenues, how it does its marketing and sales, and how it oper-
ates and serves customers. Accordingly, we can make a distinction between various sources of revenue, that is, revenue logic, and between vari-ous functions and/or activities of the company if our aim is to distinguish between utilized busi-ness models.
Rajala et al. (2001) also refer to a business model as a practical action plan for strategy execution. 7KHSRWHQWLDOEHQH¿WVRIWKLVDSSURDFKRYHUWKH more traditional hierarchical strategy formation (e.g., McDonald, 1992) lie in its wider, more ho-listic perspective on the company’s operations: at its best, it is a cross-functional approach in terms of activities or resources, and incorporates a customer and cooperation orientation. It could be considered helpful in online environments, which continue to evolve dynamically.
ONLINE BUSINESS MODELS IN THE MAGAZINE PUBLISHING INDUSTRY
The focal actor in our study is a magazine pub-lisher carrying out various strategic activities and utilizing certain business models. According to
Figure 1. Elements of the conceptual business model utilized in this study (Rajala et al., 2001)
Operating Environment
Marketing & Sales
Revenue Logic
Resource Environment
Servicing & Implementation
Product Development
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