eCommerce-Selling New Value
Creating Business Cases in an
Uncertain Environment
2
Session Objectives
•
Review the key components of an eCommerce business
case
•
Discuss steps needed to build a persuasive analysis
•
Examine a case that demonstrates the complexities of
eCommerce business case development
3
A business case generally consists of three
components.
Business Model
Financial Model
Data and Assumptions
A business strategy specifying the primary
approach and rationale for pursuing an
eCommerce opportunity
The financial analysis of a proposed business
model consisting of baseline projections,
revenue and expense estimates and valuations
The data, analysis and assumptions which
support the financial model
4
Several common eCommerce business models
exist and new ones emerge continually.
Portal

•
Percentage of Online Purchasers
Visiting MakeMeRich.com
•
Percentage Purchasing from
MakeMeRich.com
•
Average Purchase Amount
•
Other Revenues
•
Development Costs
•
General and Advertising Expenses
•
Operating Costs
Baseline
Revenue
Expense
Valuation
Income Statement
Balance Sheet
Cash Position
Net Present Value
Internal Rate of Return
Earnings Multiple
Revenue Multiple
Payback Period
7
Session Objectives

10mm
NPV
x
Revenue
Capital
Costs
150mm
NPV

The “quick and dirty” approach can be used to
qualify multiple opportunities or model competitors.

Approach 1: Quick & Dirty
10
Rewards
Transaction
Services
Commerce
Media Placement
Services
(e.g. Double Click)
Branded
Advertiser/
Sponsor
Transactive Content
Sponsorship/
Advertising

Bounty


Revenue
Reduce
Costs
Reduce Non-Care Related
Costs
Reduce Care Related
Costs
Potential
eCommerce
Benefits
Attract/Retain More
Members
Expand Share of Each
Customer
($ x)
Value Potential
($ y)
$ p
$ q
($ A)
$ B
Is there compelling value? $ B-A
Health Services: CareFirst Example
eCommerce initiatives for existing businesses
focus on cost reduction and revenue enhancement.

Approach 3: Existing Business
12
Market Capitalisation (US$ Bn)
AOL

AOL recorded a net
loss of US$(0.5)Bn
in 1997 and net
income of only
US$160 m in 1998.
= Traditional ‘Bricks and mortar’
The impact of eCommerce initiatives on
shareholder value can be a driving factor.

Approach 4: Valuing the ePremium