UIUC BADM 350 - Chapter 4 Summary (3 pages)

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BADM 350 Lecture 7 Outline of Current Lecture I Chapter 4 Summary II Chapter 7 Summary III Business Models on the Web Summary IV Current Lecture Notes Chapter 4 Summary Scale economies when firms leverage the cost of an investment across increasing units of production Churn rate the rate at which customers leave a product service By going public Netflix had to disclose its financial data and two large competitors Blockbuster and Wal mart entered the market Long Tail large selection of products content beneficial for internet retailers Collaborative Filtering classification of software that monitors trends among customers and uses this data to personalize customer experience Bandwidth cap limit imposed by the ISP on the total amount of traffic that a subscriber can consume Chapter 7 Summary Network effects Metcalfe s Law Network externalities the value of a product or service increases as the number of users grows Works because exchange creates value They have a long term staying power Experience early and fierce competition because once a bandwagon forms new adopters begin to overwhelmingly favor the leading product over rivals Complementary benefits products or services that add to the value of the network iTunes store to the iPod These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute One sided market a market that derives most of its value from a single class of users Instant messaging users Two sided market markets comprised of two distinct categories of participants both of which are needed to deliver value for the network to work People buying a videogame console and developers making games for a videogame console Cross side exchange benefit when an increase in the number of users on one side of the market creates a rise in the other side Blue Ocean Strategy firms should seek uncontested new market spaces Convergence when two or more markets once distinctly