Data business models
Where a digital service's money comes from: targeted advertising, subscription, free with a paid option, commission, API. The mechanisms behind it: two-sided markets, network effects, marginal cost, lock-in.
- 24 cards
- 4 topics
- Free
The outline, topic by topic
Each topic is weighted the way the exam weighs it.
- Concepts
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- The numbers
A few cards from the deck
Business model: what is it?
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A description of how an organisation creates value for its customers and earns revenue from it.
It answers a simple question: who pays, for what, and why would they? For a free service, the payer is not the user.
A map app is free to its users, but shop owners pay to appear at the top. Where does the money come from?
- From one side of the market only, the shop owners
- From public grants paid for mapping
- From reselling the maps to states
- From both sides, in equal parts
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From one side of the market only, the shop owners
That is the logic of a two-sided market: you subsidise the side whose presence attracts the other, and charge the one that gets monetisable value.
A network effect is … when value grows with the number of users of the same kind, and … when it grows with the number of users on the other side.
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A network effect is direct when value grows with the number of users of the same kind, and indirect when it grows with the number of users on the other side.
Messaging illustrates the first case, a marketplace the second: buyers and sellers attract each other.
Two-sided market: what is it?
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A platform that connects two groups, each deriving value from the presence of the other, and that often charges only one of them.
A free search engine is a typical case: web users do not pay, advertisers pay to reach them.