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BUS 237 > Chapter 10 > Flashcards

Chapter 10 Flashcards

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1
Q

What is the primary metric to pay attention to for customer acquisition in firms like Roblox?

A

Customer acquisition costs (CAC)

Firms that can keep CAC low can realize potential profits faster.

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2
Q

What percentage of revenue did major tech firms spend on marketing before their public offerings?

A

Single digits for Google; over 12 percent for Facebook

Google is noted as the only big name in single digits.

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3
Q

What educational potential does Roblox have according to CEO Dave Baszucki?

A

Creating virtual physics worlds for educational experiences

Teachers can lead students on field trips within Roblox for learning concepts.

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4
Q

What challenges do platforms like Roblox face when creating experiences for older users?

A

Keeping things safe for kids while appealing to older crowds

Events like online concerts show this shift in audience.

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5
Q

What significant amount did Roblox pay out to content developers before its IPO?

A

$320 billion

This was shared as 70 percent of revenue earned by developers.

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6
Q

What distinguishes one-sided markets from two-sided markets?

A

One-sided markets derive value from a single class of users; two-sided markets involve two distinct participant categories

Examples include messaging apps (one-sided) and video game consoles (two-sided).

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7
Q

What are same-side exchange benefits?

A

Benefits derived by interaction among members of a single class of participants

Example: Messaging apps where users attract more users.

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8
Q

What are cross-side exchange benefits?

A

Benefits that arise when an increase in one side of the market boosts the other side

Example: More console owners lead to more game developers.

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9
Q

What is a key challenge for two-sided networks?

A

Jump-starting the network

Incentives must be strong for users to adopt the platform.

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10
Q

What advantage does Tesla’s NACS have over CCS in EV charging?

A

More total charging ports and better locations

By 2023, Tesla had 19,463 ports compared to CCS’s 6,930.

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11
Q

What significant action did Tesla take regarding its charging standard in November 2022?

A

Opened its proprietary standard for free use by other firms

This allowed broader adoption of NACS.

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12
Q

What is a winner-take-all market?

A

A market where one firm dominates all rivals

Often seen in industries with strong network effects.

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13
Q

What is the natural state of markets with strong network effects?

A

One major player dominating the market

Example: Microsoft’s monopoly in software.

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14
Q

What is an oligopoly?

A

A market dominated by a small number of powerful sellers

The Big Four record labels in the U.S. music market is an example.

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15
Q

What are the implications of antitrust investigations for large tech firms?

A

They prompt a reexamination of capitalism in the tech era

Regulatory scrutiny is increasing for firms like Amazon, Apple, and Google.

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16
Q

Fill in the blank: Products and services subject to _______ get their value from exchange, perceived staying power, and complementary products and services.

A

network effects

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17
Q

True or False: Only one-sided markets can experience positive feedback loops.

A

False

Both one-sided and two-sided markets can experience positive feedback loops.

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18
Q

What was the role of the U.S. government regarding EV charging standards?

A

Lobbied for CCS as the standard

The Bipartisan Infrastructure Law required CCS plugs at federally funded charging stations.

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19
Q

What is a key factor that drives competition in network markets?

A

Early, fierce competition due to network effects

This can lead to rapid market tipping in favor of one dominant firm.

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20
Q

What is the significance of antitrust investigations in the tech sector?

A

Antitrust investigations aim to reassess the dominance of firms like Amazon, Apple, Meta, and Google in the tech era.

These investigations are prompted by concerns over monopolistic behavior and the influence of these companies on competition.

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21
Q

What challenges do dominant firms face regarding public perception and regulation?

A

Dominant firms face increased public criticism and potential regulation, especially after missteps that can repel customers and attract legal attention.

Unlike startups, large public companies have a responsibility to various stakeholders, making them more vulnerable to regulatory scrutiny.

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22
Q

What is ‘creative destruction’ according to Joseph Schumpeter?

A

‘Creative destruction’ refers to the process where innovation displaces established firms, not through government action but by new products or innovations that fundamentally change the market.

This concept emphasizes that competition often comes from new entrants rather than existing firms.

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23
Q

What complicates the breakup of firms like Facebook that rely on network effects?

A

The breakup of firms like Facebook is complex because their natural state involves having a dominant player benefiting from network effects.

This raises questions about the implications of such breakups on competition and user experience.

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24
Q

How do network effects influence product adoption?

A

Network effects create a situation where the value of a product increases as more people use it, making it difficult for new entrants to compete without offering significant additional value.

This is particularly evident in markets where compatibility with existing networks is crucial.

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25
What is the impact of network effects on innovation?
While network effects may limit competition against a dominant standard, they can encourage innovation within that standard. ## Footnote For example, the dominance of Windows attracted developers to innovate for that platform.
26
What strategies can firms use to compete in markets with network effects?
Firms can use strategies like: * Move early * Subsidize product adoption * Leverage viral promotion * Expand by redefining the market * Form alliances and partnerships * Establish distribution channels * Seed the market with complements * Encourage development of complementary goods * Maintain backward compatibility * Be compatible with larger networks * Constantly innovate * Make preannouncements ## Footnote These strategies help firms navigate the challenges posed by network effects.
27
What lesson did eBay learn from its experience in Japan regarding network effects?
eBay's failure to compete with Yahoo! in Japan demonstrated that being late to market can result in significant losses due to established network effects. ## Footnote The language barrier further complicated eBay's ability to leverage its existing network in Japan.
28
What role do subsidies play in establishing network effects?
Subsidies can incentivize initial adoption of a product, helping to kickstart network effects by attracting early users. ## Footnote PayPal's early rebates for new users exemplify this strategy.
29
What is a two-sided market?
A two-sided market is a platform that connects two distinct user groups, typically where one group provides value to the other, such as consumers and businesses. ## Footnote Examples include Groupon and SwagBucks, which offer incentives to attract users and businesses.
30
What is the challenge faced by newcomers in network industries?
Newcomers must create a product that not only surpasses the established firm's offering but also compensates for the benefits of the incumbent's existing user base and complementary products. ## Footnote This often involves overcoming significant switching costs and perceived stability of the dominant firm.
31
What do networks need to attract paying partners?
A sufficient number of customers using the service
32
What happens as more users join services like Groupon, Upromise, and SwagBucks?
More firms will offer deals and pay to reach customers
33
What discount does Groupon offer for signing up via e-mail?
20 percent off
34
What bonus does Upromise offer just for signing up?
$30
35
What is the signup bonus offered by SwagBucks?
$10
36
What is the freemium model?
A model where a free product attracts users to eventually convert them into paying customers
37
What major difference exists between the free and paid versions of Zoom?
The removal of the forty-minute meeting cap
38
What type of access may limit usage but is considered a subsidy?
Free or limited access
39
Fill in the blank: A product or service given away for free to convert users into paying customers is a _______.
subsidy
40
Why did Yahoo! struggle to attract sellers from eBay?
Lack of enough buyers and valuable seller ratings
41
What do seller ratings represent in online auctions?
A critical switching cost
42
In what market context do auctions work best?
For differentiated goods
43
What strategic advantage did eBay create through early technology use?
Network effects and switching costs
44
What is viral promotion?
Leveraging customers to promote products or services through personal invitations
45
How did Airbnb benefit from friend referral incentives?
Bookings increased up to 25 percent in markets with referral incentives
46
What was the major innovation that Square implemented with Cash App?
Embracing Bitcoin as a revenue engine
47
What is the blue ocean strategy?
Focusing on uncontested market spaces instead of competing in saturated markets
48
What market shift did Apple leverage with the iPhone?
Envelopment strategy to combine multiple product categories
49
What is the significance of the NYCE in ATM networks?
It allowed competing banks to share ATM operations
50
What companies formed an alliance to compete against Uber?
Lyft, Ola, Didi Chuxing, and Grab
51
What is the purpose of creating open standards in technology?
To jump-start a network by ensuring interoperability
52
How did Tesla respond to competition in the charging standard market?
Opened its charging standard to rivals
53
What was the challenge Sun faced when launching Java?
No computers could run it without the Java Virtual Machine (JVM)
54
How did Sun overcome the challenge of launching Java?
Bundled the JVM with Netscape's browser
55
What is the impact of the OpenAI/Microsoft partnership on distribution?
Incorporating ChatGPT into multiple Microsoft products
56
What is one of the main reasons for Oracle's acquisition of Sun?
Java was cited as the single most important software asset acquired ## Footnote Oracle's CEO emphasized the significance of Java in the acquisition decision.
57
How is ChatGPT integrated into Microsoft products?
Incorporated into Bing search, Edge browser, Microsoft Office, Business tools, and Azure cloud offerings ## Footnote This integration leverages Microsoft's distribution channels.
58
What was the outcome of Apple's retail store launch?
Apple's retail stores became among the world's most successful retail outlets ## Footnote They effectively promoted the uniqueness of Apple products.
59
What percentage of Apple revenue comes from high-margin services?
About 20 percent ## Footnote This includes services such as storage, gaming, music, video, and fitness.
60
True or False: European regulators have not taken action against Microsoft for product bundling.
False ## Footnote European regulators have forced Microsoft to unbundle products and opened inquiries into their bundling practices.
61
What was the initial response to Elon Musk's acquisition of Twitter?
Power users were outraged over changes like the loss of the exclusive 'blue checkmark' ## Footnote This led to a decline in trust and user engagement.
62
How did Meta leverage Instagram for the launch of Threads?
Users could log into Threads using Instagram credentials, connecting followers automatically ## Footnote This reduced switching costs and facilitated rapid user growth.
63
What feature did Threads lack at launch that contributed to its decline in usage?
Robust hashtags, trending terms, direct messages, search, and a desktop browser version ## Footnote These features were vital for user engagement.
64
What is an example of a company that subsidized a product to seed the market?
Sony subsidized the PS3 by selling it at a price estimated $300 below unit cost ## Footnote This strategy helped promote Blu-ray adoption.
65
Fill in the blank: In two-sided markets, companies often charge the one who will _______.
pay ## Footnote This strategy is used to create a market for complementary goods.
66
What strategy did ThredUp use to encourage sellers to become buyers?
Provided immediate purchase credit for resale items accepted for sale ## Footnote This approach aimed to balance supply and demand.
67
How do firms encourage the development of complementary goods?
By offering lower royalties, free SDKs, training programs, and startup capital ## Footnote These incentives help build a network of complementary products.
68
What is backward compatibility?
The ability of new products to work with older versions of software or hardware ## Footnote It helps maintain customer loyalty and reduces switching costs.
69
What was a significant advantage of Apple's M1 chip transition?
Included Rosetta 2 to emulate functionality of Intel chips ## Footnote This allowed users to preserve their investment in existing software.
70
What technology does Samsung Pay use that gives it a competitive advantage?
Magnetic secure transmission (MST) ## Footnote This technology allows Samsung Pay to work with more retailers than Apple Pay or Google Pay.
71
What strategy did Microsoft use to gain users for Live Maps?
Adopted the KML standard used by Google ## Footnote This allowed Microsoft to utilize existing user-generated content.
72
What is a preannouncement strategy?
A tactic where firms announce products before they are ready to delay competitors' purchasing decisions ## Footnote This strategy is effective for large firms that pose a credible threat.
73
What was a significant factor in the decline of Threads' user engagement?
Failure to deliver essential features that users expected ## Footnote This led to a rapid drop in daily usage.
74
What is the purpose of preannouncements by large firms?
To cause potential adopters to delay purchasing decisions until new products are ready. ## Footnote This strategy can create anticipation and influence market behavior.
75
What is a key condition for preannouncements to be effective?
The firm must be large enough to pose a credible threat to current market participants.
76
What is the Osborne Effect?
When a firm announces new products too early, causing current sales to plummet as customers wait for the new offerings.
77
What is FUD in the context of preannouncements?
Fear, uncertainty, and doubt, which firms try to impart on markets through preannouncements.
78
What are congestion effects in network markets?
When increasing numbers of users lower the value of a product or service due to resource scarcity.
79
Give an example of a service that experienced congestion effects.
The launch of a new version of EA's SimCity faced significant problems due to overwhelming demand.
80
What is one negative consequence of network effects?
A dominant standard may attract virus writers and malicious hackers.
81
What can help a firm establish a lead in network effects?
Subsidizing adoption, leveraging viral marketing, creating alliances, and maintaining backward compatibility.
82
What percentage of credit card transactions does Apple earn from Apple Pay?
0.15 percent.
83
What significant banking service did Apple launch in 2023?
Apple buy-now-pay-later (BNPL) program.
84
What are the benefits of the Apple Card compared to traditional credit cards?
3 percent cash back on Apple purchases, no late fees, no annual fees, and no over-limit fees.
85
Name a consortium formed by banks to compete with Apple Pay.
Paze.
86
What is one reason for past failures of banking consortiums like CurrentC?
They failed to offer compelling reasons for consumers to switch from existing solutions.
87
What major advantage do Apple devices provide for its fintech services?
A powerful distribution channel.
88
Who is Eric Yuan?
The founder of Zoom, previously a VP of engineering at Cisco.
89
What issue did Eric Yuan identify with WebEx that led to the creation of Zoom?
WebEx was difficult to install and had issues with call reliability and video quality.
90
What pricing model did Zoom adopt?
Freemium model with a simple pricing structure.
91
What was a major factor in Zoom's rapid rise during the COVID-19 pandemic?
Its ease of use and superior product quality compared to established competitors.
92
Fill in the blank: Zoom's first product was launched in _______.
2013.
93
What was a significant hurdle for IT departments during the pandemic?
Finding a reliable video conferencing solution quickly.
94
What is a key factor that contributed to Zoom's viral promotion?
Low friction choice for users without burdensome account setup.
95
Who is Eric Yuan?
Founder of Zoom and former VP of engineering at Cisco's WebEx ## Footnote Yuan left Cisco due to customer dissatisfaction with WebEx.
96
What was a key factor in Zoom's initial success?
High-quality, easy-to-use, and feature-rich offering ## Footnote Zoom started in 2013 but gained significant praise from users.
97
What pricing model did Zoom use?
Freemium pricing model ## Footnote Offered all features and 100 simultaneous users with a forty-minute limitation.
98
What was the impact of offering Zoom free to K–12 schools during the pandemic?
Customer base exploded by twenty times in just four months ## Footnote This move was risky and led to increased work and expenses for the firm.
99
How did Zoom ensure low-friction product adoption?
Required a code to start a meeting instead of a signup ## Footnote This approach fueled virality among users.
100
What major issue did Zoom face during its rapid growth?
Security and privacy issues, including Zoom bombing ## Footnote Such issues were reported widely in the media.
101
What action did Eric Yuan take in response to security issues?
Paused the release of new features for ninety days ## Footnote This allowed engineers to focus on resolving pressing security and privacy challenges.
102
What was the effect of Zoom's freemium model?
Encouraged experimentation and easy transition to paid subscriptions ## Footnote Pricing was cheap and straightforward.
103
What lesson can businesses learn from Zoom's rise?
Focus on customer needs to avoid losing market opportunities ## Footnote Cisco failed to address customer dissatisfaction, allowing Zoom to capture market share.
104
What was the result of Zoom's market cap increase in September 2020?
Shot up over $37 billion ## Footnote This added over half the value of Verizon in a single day.
105
Fill in the blank: Zoom's user base increased _______ in just four months.
twenty-fold
106
True or False: Zoom was an overnight success.
False ## Footnote It started in 2013 and took time to gain traction.
107
What unique position did Zoom occupy in the market?
Professional/consumer (prosumer) space ## Footnote This positioned Zoom for a wide target market encompassing both corporate and casual use.
108
What did Zoom's commitment to rapid response help with during the pandemic?
Dealing with unforeseen security and privacy issues ## Footnote Maintaining nimbleness was vital for the company's growth.
109
What did the return to office work mean for Zoom's revenue growth?
Revenue growth decreased from 300% to 4.6% ## Footnote This decline occurred in 2022 as the demand for video meetings diminished.
110
What action did Zoom take regarding employee layoffs?
Laid off 1,300 employees in early 2023 ## Footnote This was a response to mismanaged expectations following rapid pandemic growth.

BUS 237 (2 decks)

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