Creating values online
All business models for online media are created with one thought in mind: to generate revenue. Doing quality journalism at the same time is an extra bonus.
While adopting business models from offline businesses, online media tweak their own business models for several different purposes that are dependant on the business environment and objectives. With CNN.com, the online business model (BM) was based on the cable network BM, since cable was the originating business.
However, it was changed substantially to reflect a different environment and peculiarities of the medium – the Internet. In the cable network BM, there are B2B streams of revenue: from distribution and from advertisers. In the online BM, in addition to B2B streams there’s a C2B revenue stream, which is represented by subscription-based premium products like Pipeline, where users can pay additional money to be able to get access to the premium tier of the product.
But one of the common elements in the bricks-and-mortar model as compared to its online counterpart is value and processes of value creation. To be successful and profitable, the company must offer to customers a product that is not available somewhere else and that is of value to customers. (Porter, M. E. "Towards a Dynamic Theory of Strategy." Strategic Management Journal (winter 1991).
Affuah and Tucci note that customer value can take two forms: differentiation or lower cost. Since the second value is attributed mostly to distribution-based formulas for business models; the value of differentiated product is more appropriate to the discussion in terms of the business of online media.
To elaborate on this observation, I would also add such variables as timeliness, established brand name, customer loyalty, content, novelty (or innovation) and efficiency (i.e. usability) to the list of values important to customers of an online news organization like CNN.com. Lock-in and, the so-called, complimentaries also play an important role in the processes of value creation and maintenance. The latter two terms come from Amit and Zott and translate well into dot-com’s business model as stickiness and loyalty for the first one and partner-supplied content and other add-ons, or a good product mix, for the second term.
Porter, among other researchers, say that the differentiation component of customer value can be accomplished in 8 ways: product features, timing, location, service, product mix, linkage between functions, linkage with other firms and reputation. (Porter, M. E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 1980. (Republished with a new introduction, 1998.) Although, this is a general concept that’s not necessarily applicable to all business models and all business environments, there are some common traits that are universal to all BMs, including those employed by online media companies.
Targeting the right audience and appropriate market segmentation is also important for the viability of a BM. In case with CNN.com, the quality of their audience is an important indicator in the revenue-generating capability of the company, as demographics and other online metrics play a crucial role in the process of pricing ad placements for advertisers. On another hand, what’s of value to some people may not be of value to others. And dot-com does a great job of targeting its product to mature, adult, educated, sophisticated, employed demographics that is so desirable for the advertisers.
Another part of the value equation is the value creation activities that are performed by employees. According to Porter (Porter, M. E. The Competitive Advantage: Creating and Sustaining Superior Performance. N.Y.: Free Press, 1998.), firms must perform the activities that underpin the value. CNN.com’s main line of activities to underpin the value is content creation. More on that -- in the earlier notes from August.
Human resources are crucial in the processes of value creation for online media business models. Dependant on the capabilities and versatility of talents, the product quality, and therefore its value, may differ substantially. Distinctive product is produced by distinctive workers – this is a universal principle that applies to many industries outside online media.
Sustainability of product value and profits is yet another challenge faced by online media companies that are trying to develop or maintain a well-sustained BM on the competitive arena. The more innovative are the ways to retain a competitive advantage, the better it is for the overall success of an enterprise. I would categorize CNN.com’s launch of CNN Exchange as one of those events, when to sustain its superiority on the market the company goes an extra mile to put yet another innovative product on the market in hopes to add to the existing value component of its BM.
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