InformationWeek: The Business Value of Technology

October 30, 2000

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Bizmodel.com
The spin on startups, Web commerce, E-markets, and Internet strategies

Edited by Brain Dakss (bdakss@cmp.com)

Blockbuster Reaping Revenue-Sharing Rewards
Blockbuster Reaping Revenue-Sharing Rewards

Two years ago, Blockbuster was paying as much as $80 per video for the movies it rented out. The video-store chain couldn't afford to stock enough copies to meet demand, so it missed out on revenue from lost rentals. Then it hit on revenue-shar-ing, an idea that let Blockbuster hike its market share from 25% to 31% within a year, says a new study from the Wharton Business School and Kellogg School of Management.

The formula? Blockbuster pays only $8 for videos but gives its suppliers as much as 45% of the rental income. That way, Blockbuster can buy enough videos to meet demand and suppliers make more than they would selling the videos at the full wholesale price. The study says there are drawbacks, such as increased administrative costs, but these should decline as E-business apps take on more of the administrative load. --Steve Konicki

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Finding That Perfect Set Of Wheels
Finding That Perfect Set Of Wheels

For many consumers, car-shopping is fraught with heartbreaking compromises. The quest may begin with a vision of the ideal six-cylinder chariot and end with something that just happens to be available. Buyers end up disappointed, while dealers and manufacturers jeopardize customer loyalty when shoppers aren't completely satisfied.

The auto industry hopes to end that pattern with a build-to-order model, à la Dell Computer. While that approach is still a ways off, MSN's CarPoint.com could serve as a bridge to it with its locate-to-order system. Configure a car, name your price, and CarPoint canvasses dealers nationwide to find your dream machine. CarPoint has been using the system to locate used vehicles for the past two years, pulling dealer inventories daily and storing the information in a SQL Server database. After a year of infrastructure preparations, CarPoint will provide the service for new cars in early December, says Todd Weatherby, director of industry services for MSN Carpoint. Consumers will work through a preferred dealer that will handle pricing after the car is located so CarPoint isn't involved in haggling.

Weatherby says the system will save time and boost sales for dealers. "In the past when we've tried to locate cars by phone and fax, it's taken four to six days," he says. "This only takes a few hours."

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Who Wants To Be A Billionaire?
The heck with this millionaire stuff. Why not shoot for a billion? Grab.com claims it's going to make one lucky Web surfer a billionaire.

Similar to sites such as Iwon.com, Grab.com is using prize and cash giveaways to get attention for its advertisers, but in a unique way. Instead of using Iwon.com's approach of having contestants surf news, sports, and other topics to get points good for entries in a prize drawing, Grab.com takes you right to the contest, where you pick seven numbers. You're then sent to a sponsor's site, where you must remain--presumably reading about the company's products--until your entry has been processed, usually a minute or so.

Grab.com CEO and president Andrew Warner says the idea is to get quality hits for advertisers. "We get eyes for your Web site," he says.

The winner will be picked Dec. 29. Grab.com will pay the prize money in installments, with $5 million payouts the first few years. The biggest chunk, $620 million, comes in the 40th year. Grab.com says it expects to cover the $1 billion in prize money with fees paid by advertisers whose sites contest entrants visit. Just in case, however, the prize is being underwritten by National Indemnity. Deloitte & Touche will oversee the drawing.

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