The Solution to the Ever-increasing Traffic Intensity in Urban Areas? Try This App!

13

October

2016

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In the first volume of October 2016, The Economist contained an article in which a very interesting solution was proposed to the ever-increasing traffic intensity accompanying the vast population growth in urban areas. By means of an app, a user can easily navigate through different options that will bring him from A to B. The options differ in terms of travel time, price and transport type (The Economist, 2016). Indeed, the app that was examined (called Whim), displays not only the traditional public transport possibilities like the tram and bus, but also incorporates transportation services of private parties (think of bike rentals, for example). The future success of this project is attributed to two main trends. Firstly, the widespread presence of smartphones renders it worthwhile to offer such a service through the mobile network. Secondly, the rise of the sharing economy motivates an increasing number of consumers to reallocate scarce goods more efficiently (e.g. AirBnB and Peerby). In addition to increased environmental consciousness, these factors are believed to stimulate the younger generations to waive car usage.

However, many past studies have identified a variety of incentives that motivate car users to hold on to their personal transportation device. For example, Jensen (1999) points out the importance of perceived ‘freedom’. Car users fulfill their desire to act freely by purchasing a car as a consumer item in the first place, or by driving a car to wherever or at whatever speed they want. Unfortunately, Jensen mentions accurately, this type of car user overlooks the paradox that in fact their car use (driven by freedom) increases traffic intensity and indirectly hijacks the ability to drive freely and unrestricted. Furthermore, Anable (2005) continues, there’s an antagonist to ‘freedom’ that is extremely important in determining the intensity of car use: ‘car dependency’. By means of statistical analysis, Anable was able to infer that individuals whose car use was relatively high and whose attitude towards car alternatives was relatively negative, had the feeling to be largely dependent on their automobile.

Thus, Beirão et al. (2007) argue, the most effective way to change the perception of public transport alternatives, is to adjust the quality of the service to the standards as required by existing users and potential users. In relation to Anable’s analysis, this would imply a reduction of the ‘urge’ of possessing a car. Only such changes of intrinsic attitude are decisive for the success of public transportation systems (Beirão et al., 2007). To conclude, we have solid reasons to believe that an app integrating all sorts of transport and their respective prices has serious chances of redefining the transportation industry in urban areas. However, a selection of relevant research has shown that at the root of such success, there lies an important task to manipulate the impeccable psychological value a car offers to its driver. But by bundling efforts from psychological as well as technology-driven areas, I have good hopes that in the long-run, traffic intensity and public health in urban areas will be improved by large.

The Economist. (2016). It starts with a single app. [online] Available at: http://www.economist.com/news/international/21707952-combining-old-and-new-ways-getting-around-will-transform-transportand-cities-too-it [Accessed 11 Oct. 2016].

Jensen, M. (1999). Passion and heart in transport — a sociological analysis on transport behaviour. Transport Policy, 6(1), pp.19-33.

Anable, J. (2005). ‘Complacent Car Addicts’ or ‘Aspiring Environmentalists’? Identifying travel behaviour segments using attitude theory. Transport Policy, 12(1), pp.65-78.

Beirão, G. and Sarsfield Cabral, J. (2007). Understanding attitudes towards public transport and private car: A qualitative study. Transport Policy, 14(6), pp.478-489.

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Technology of the Week – Online Newspaper Industry Competition by group 27

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October

2016

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In our video, we perform a comparative analysis between the business models of two different online newspapers. Whereas the Wall Street Journal (WSJ) fully relies on subscription fees as the sole source of online income, NU.nl prefers an online advertisement strategy to generate revenue.
A distinctive feature of WSJ’s business model is its value proposition: offering high-quality articles. Because WSJ is able to accurately identify its potential reader base (students, professors and corporate customers), it is able to ask relatively high subscription fees. The lock-in strategy, through which WSJ attracts lifelong customers by offering students a subscription discount, is of vital importance here.
On the other side of the spectrum, NU.nl offers free-of-charge news content which is updated 24/7. The article quality is debatable, since usually only essential information is included. As such, NU.nl has developed a business strategy that is about quantity rather than quality: advertisement income. The higher the quantity of users, views and clicks, the more user data can be sold to advertising parties and the more income can be generated from selling advertisement space.
Next to the strengths of both business models, the weaknesses are compared too. Regarding WSJ, the indivisibility of the product is a malefactor. In other words, many customers pay the full package but are only interested in parts of it. Since the standard subscription fees are exceptionally high, this can deter many users who aren’t interested in the newspaper’s full content. For NU.nl, the perceived low quality of its contents impair on the number of frequent users. Moreover, the sole focus on advertising income might imply an overrepresentation of advertisements relative to news content. Some users might experience this advertisement proliferation as bothersome and may switch to other free competitors (e.g. NOS.nl).
All in all, there’s strong reason to believe that transitions in the IT-sector have enabled firms to guard against the problems mentioned above. As a solution we propose Blendl, that offers separate articles at prices that are more in line with the customers’ willingness to pay. The information broker purchases bundles of goods from the newspapers and sells them in parts to users. Thus, supply and demand friction diminishes and the market clearing is more efficient. Although this business model poses a threat to the initial creators of articles (customers may switch from a WSJ subscription to Blendl) on the long-term, it will boost reader quantities in the short- to medium-term. Moreover, Blendl can gather more information about its users due to the transactions they do through the platform. This implies higher quantities of more accurate information, which will subsequently yield more customized advertisements and higher advertisement income.

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Is Medium the next big thing out of Mr. Williams’ hat?

25

September

2016

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Evan Williams, for whom the name doesn’t ring a bell, is the co-founder of Twitter and has been one of its largest shareholders so far. It might surprise many users of the 140-character messaging service that Mr. Williams is currently is working on a project that represents quite the opposite: Medium, a newspaper-like forum that contains primarily thoughtful essays and substantiated open letters. In this setting there’s no such thing as a maximum word count and more importantly, there’s no opportunity for third parties (read: Governments) to censor the website’s content.

The question is; will Medium become as a commercial success as did William’s last venture? According to investors it definitely should, whereas over $120 million has been invested in the website over the past years. However, the increase in the number of Medium users is falling short compared to its superficial competitor, momentarily amounting to circa 30 million monthly users (versus a 300 million Twitter users). We must note however, that the larger part of Medium’s reader base consists of well-endowed US coastline citizens. This fact entails an interesting trade-off: does their higher income level compensate for the significant difference in user quantities, in terms of revenues?

On first sight, the obvious answer would be a straight ‘no’. However, Evans and Schmalensee (2008) argue that the primary driver that determines the advertisers’ willingness to pay, is the value they can extract from the other group that is active on a certain platform (the readers on Medium). The user base on Medium is fairly homogenous compared to Twitter and as such, it might very well be that advertisers can more accurately identify the readers’ needs. Also taking into account the superior purchasing power of this group, there’s a possibility that the pay-per-click revenue model yields a far larger markup for Medium.

Unfortunately for Medium, a revenue model that is primarily relying on advertising fees is still just a fantasy. Presently, it asks publishers of sponsored content for subscription fees, mainly being smaller enterprise. This straightforwardly narrows down the scope for revenue generation. But if larger companies step in, this might pose a profitable business opportunity. Before this happens, it remains questionable whether the direct network effects (from readers) and indirect network effects (from the smaller enterprise) are strong enough to lure the larger players onto the platform. Depending on the amount of information these firms can acquire, they are willing to join the new movement. One may then wonder; is Medium ready to overthrow its current business model to chase the big money?

Sources:

http://www.economist.com/news/business/21707261-co-founder-twitter-betting-he-can-revolutionise-digital-publishing-once-again-three-hit
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1094820

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