Internet Based Business Model Dubli

Dubli. com is an auction, shopping and entertainment portal based on a pay-to-shop model.

Traditionally, all pay-to-shop models create value for customers by effectively leveraging the initial payments made by the customers. In the case of Dubli. com, this initial payment can be leveraged much more effectively due to the possibilities available in an internet environment. The internet enables customers to simultaneously and speedily access information about the auction item and to take further decisions on that information.Dubli uses this effective leverage of initial payments in all its lines of business, but most profoundly in its auction business which is the area of innovation we have decided to focus on.

Dubli. com has pioneered and implements two unique reverse auction models. Unlike traditional auction models where buyers bid to increase the price of the item, in these models each bid decreases the price of the item and the winner can buy the item at the lowest price.The 2 models work as follows: (i) Dubli Express auction: The customer can initially only see the original list price of the item – the price they would pay on the high street. In order to view the current price of the item, the customer uses 1 pre-purchased credit ($ 0.

80). This reduces the price of that item by $ 0. 25, as does every other attempt to view the price by other customers. At this point, the customer can choose to either buy the item at the current price or to wait for the price to be lowered further by other bidders.Thus the prices of the items are constantly lowered and Dubli makes a margin of $ 0.

50 on each bid. This results in savings for the auction winner and a substantial margin to Dubli at the cost of only small losses by a large number of bidders. (ii) Dubli Unique Bid auction: Bidders bid on an item for a limited period of time but do not have a choice to buy the item during the auction. With each bid, which costs 1 credit (approx $0.

80) the bidder is told whether his is the lowest unique bid and if he should therefore increase or decrease the next bid to become the lowest unique bid.At the end of the auction, the bidder with the lowest unique bid wins and can buy the item at that price. This can lead to much bigger discounts for the customer and a higher income for Dubli as there are possibilities of spread in a single price of bid amongst various bidders meaning that numerous people could bid on the same price, producing income for Dubli, but not impacting the result of the auction. Dubli sells top brand items and provides substantial savings on these items.Hence, the customers of Dubli would be anyone willing to input extra effort into their shopping habits to extract greater potential savings, and particularly those interested in high brand items.

Even if the item is not a necessity, the potential savings available can lure customers to participate in Dubli’s auctions. A small fraction of customers are those interested in a shopping experience with a touch of gambling Dubli Auction owns the items it offers on the auction portal and it operates solely on the web.Therefore, as per Rappa’s framework Dubli Auction would be categorized as “Merchant Model” with the sub-category being “Virtual Merchant”. However, as evident from the business model description above, this categorization of Dubli Auction does not encompass the reverse auction aspect of its business model, which is more prominent in case of Dubli than it simply being a merchandiser. Therefore, Dubli would have been a proper business to be sub-categorized under “Auction” had such a sub-categorization existed within the category of “Merchant Model” in Rappa’s framework as it exists within the “Broker ” category.

Our decision of whether to invest in Dubli. com would be impossible without taking into consideration the business model of Dubli Network (DN). Dubli Network is the marketing arm of Dubli. com which uses a type of affiliate model to build a substantial customer base in new markets, something that is vital to the success of any online shopping portal.

It works by certain customers becoming ‘Business Associates’ who are then financially incentivized to introduce more members to Dubli. com as well as recommend other Business Associates who can also build large customer bases.Dubli forgoes a small portion of revenue from each transaction these new customers make in order to pass this directly to the original Business Associate as an incentive. This quickly creates a large customer base and promotes ongoing loyalty and growth as more and more business associates have a vested interest in building the customer base of Dubli. com. It is a self-perpetuating marketing campaign.

As the customer base grows, Dubli’s unique reverse auction model increases value for both themselves and their customers, exhibiting increasing returns to scale. This behavior fulfils one of Eisenmann’s existing premises for a business to be a natural monopoly. However, we also observe that the existing explanation of businesses exhibiting increasing returns to scale is based on the Minimum Efficient Scale being large in relation to the mature market size which allows only one business to operate at Minimum Efficient Scale, thus making it a natural monopoly.In the case of Dubli, MES would not raise entry barriers to the competitors.

Hence, there would be competition in the market. On analyzing the business further in order to predict the expected platform structure of the reverse auction market, we observe the following: (I) Multi-homing costs for Dubli reverse auction customers would not be high but multi-homing costs for Dubli Network customers who have a substantial impact on Dubli Auction customers would be high. ii) Dubli Network customers would exhibit a strong preference for transaction partner variety, as this would increase their commissions (iii) Neither Dubli nor Dubli reverse auction and hence Dubli Network customers can be expected to have a strong preference for differentiated platform functionality with respect to reverse auctions.Hence, assuming that other platforms in the reverse auction market would either use the same marketing strategy as Dubli or would be at a competitive disadvantage with respect to business growth if they use conventional marketing strategies, Dubli Auction, in combination with Dubli Network is expected to operate in a Winner Take All platform structure.Based on the above mentioned analysis and based on the fact observed earlier with regards to Dubli Auction exhibiting increasing returns to sale, we conclude that Dubli Auction would compete in a WTA market if it faced competition and would clearly have an edge over the competitors because of its already built and growing customer base and business. It would also be in a favorable position to be a natural monopoly because of the nature of the business model.

However, Dubli has received negative press containing accusations of Dubli Network operating as a disguised (illegal) pyramid selling business; raising doubt about the economic soundness of the business model; and highlighting the often shady past of many of its directors. We also observe that in order for one person to ‘win’ each product at a low price, a substantial number of other ‘bidders’ must lose. The percentage of ‘winners’ compared to those who take part must be extremely low in order for the system to work.We believe that regular losses would reduce the incentive to take part as some people could end up investing substantial sums for zero returns meaning that they will stop participating altogether, reducing the income of Dubli. com and its ability to operate effectively as a reverse auction model. In conclusion, we would invest in the business as we believe it has potential for significant growth but only after substantial due diligence.Referencehttp://www.digitalenterprise.org/models/models.html