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    THE WEB'S 100 Billion Surplus: Mckinsey Quarterly BY Jacques Bughin

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    Rohit Gupta
    This document summarizes a McKinsey Quarterly report about the estimated €100 billion annual consumer surplus generated by online activities. The report estimates that consumers are willing to pay €150 billion per year for online services, but currently only pay about €30 billion directly through subscriptions and fees. Consumers also pay €20 billion indirectly through tolerating online ads and privacy issues. This leaves €100 billion in annual consumer surplus. The surplus is expected to grow to €190 billion by 2015. Web companies currently capture very little of this surplus through advertising, leaving room for business models to evolve. Three potential scenarios for how the economics could shift are: web costs rising, advertising growing, or alternative monetization methods.

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    THE WEB'S 100 Billion Surplus: Mckinsey Quarterly BY Jacques Bughin

    Uploaded by

    Rohit Gupta
    14 views16 pages
    This document summarizes a McKinsey Quarterly report about the estimated €100 billion annual consumer surplus generated by online activities. The report estimates that consumers are willing to pay €150 billion per year for online services, but currently only pay about €30 billion directly through subscriptions and fees. Consumers also pay €20 billion indirectly through tolerating online ads and privacy issues. This leaves €100 billion in annual consumer surplus. The surplus is expected to grow to €190 billion by 2015. Web companies currently capture very little of this surplus through advertising, leaving room for business models to evolve. Three potential scenarios for how the economics could shift are: web costs rising, advertising growing, or alternative monetization methods.

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    Mckinsey_WebSurplus

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    This document summarizes a McKinsey Quarterly report about the estimated €100 billion annual consumer surplus generated by online activities. The report estimates that consumers are willing to pay €150 billion per year for online services, but currently only pay about €30 billion directly through subscriptions and fees. Consumers also pay €20 billion indirectly through tolerating online ads and privacy issues. This leaves €100 billion in annual consumer surplus. The surplus is expected to grow to €190 billion by 2015. Web companies currently capture very little of this surplus through advertising, leaving room for business models to evolve. Three potential scenarios for how the economics could shift are: web costs rising, advertising growing, or alternative monetization methods.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    14 views16 pages

    THE WEB'S 100 Billion Surplus: Mckinsey Quarterly BY Jacques Bughin

    Uploaded by

    Rohit Gupta
    This document summarizes a McKinsey Quarterly report about the estimated €100 billion annual consumer surplus generated by online activities. The report estimates that consumers are willing to pay €150 billion per year for online services, but currently only pay about €30 billion directly through subscriptions and fees. Consumers also pay €20 billion indirectly through tolerating online ads and privacy issues. This leaves €100 billion in annual consumer surplus. The surplus is expected to grow to €190 billion by 2015. Web companies currently capture very little of this surplus through advertising, leaving room for business models to evolve. Three potential scenarios for how the economics could shift are: web costs rising, advertising growing, or alternative monetization methods.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    THE WEB’S €100

    BILLION SURPLUS
    MCKINSEY QUARTERLY
    BY
    JACQUES BUGHIN
    Presented By:
    Rohit Gupta
    Sanand Misra

    NIIT University 23rd February 2011


    Objective
     To understand Consumer surplus in current web
    scenario.
     Providers and Advertisers try to get bigger share:
     Will this lead to change in industry dynamics?
     Understand current business model
    Current Scenario: Consumers
     Consumers activities on web:
     Considerable value derived.
     Advertisements cover the cost.
     Examples: Social Network, Web video.
     No immediate payment to be made by consumers.
    How much is all of this web use worth?

     According to new McKinsey research:


     €150 billion a year
     Survey included 4500 web users across:
     Europe
     United States
     Survey also included conjoint analysis of their
    willingness to pay for various online activities.
    Findings
     It was found that consumers do pay for some of the online
    services.
     Such as: €30 billion
     Music Subscriptions.
     Gaming Websites.

     Consumers also pay for:


     “Pollution” of their internet experience.
     Intrusive pop-ups
     Perceived data privacy risks
     Consumers willing to shell €20 billion.
     To avoid further mess.
     Privacy concerns

     Total Consumer Surplus left: €100 billion


    Projections
     By 2015, total web worth may increase to:
     €190 billion
     Due to:
     Expansion in broadband.
     New Services
     Wireless devices
    Boost to Web Service Providers
     This would be more than 3 Times the companies pay
    to advertise on their websites.
     Equivalent to what consumers pay for wired and
    wireless broadband access-€120 billion.
     Why?
     High cost of development.
     Very low cost of distribution.
     As compared to offline world where the surplus is
    more evenly divided between consumers and suppliers
    Business Model

    Source: McKinsey Quarterly-Jan’11


    How web economics can shift?
     Web players may try to take advantage of the
    situation.
     Similar to how pay-TV captured the market.
     According to research-3 scenarios seems worth
    study:
    Service Growth in
    costs rise Advertisement

    Monetization
    by other means
    Service Cost Rise
     Web Players might charge more for the services.
     Consumers will show resistance to the approach.
     The number of web users might decrease
    drastically.
     This will lead to shift in the economies of web
    business.
    Advertising Grows
     Web companies are expected to ramp up web
    advertising.
     Pollution Factor will play a critical role in this
    strategy.(€30 billion versus €20 billion)
     The advertising are stable and there is scope for
    new ads and other monetization.
     There is great uncertainty on how consumers would
    react to this.
    Monetization by other means
     Web services can earn revenue from both the users
    as well as the advertisers.
     With large consumer surplus, and big audience,
    companies can promote their other brands online.
    Preparing for the change
     Consumer surplus has increased with success of
    social networking websites.
     The present web market is far from equilibrium.
     The companies should adopt new strategies to deal
    with change
     To stay ahead, leading players are already
    broadening their base of services.
    Contd..
     People shifting their business online can take the
    first mover advantage.
     Web innovation are helping companies to earn
    more revenues through advertising display adds are
    vanishing.
     Consumers will keep enjoying more consumer
    surplus.
    Thank You
    Consumer Surplus
     Consumer surplus measures the welfare that
    consumers derive from their consumption of goods
    and services, or the benefits they derive from the
    exchange of goods. 

     Consumer surplus is the difference between what


    consumers are willing to pay for a good or service
    and what they actually pay (the market price). 

    BACK Source: www.tutor2u.net

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