OMIS Santa Clara University Bitcoin Startup Business Model Final Paper (Note :- The following 4 questions needs to be answered respectively the answered sh

OMIS Santa Clara University Bitcoin Startup Business Model Final Paper (Note :- The following 4 questions needs to be answered respectively the answered should be supported by the logics, which should be based on the concept of case study and reading materials. Please check the attachment for the case study & reading material for your reference. Out of four questions, three of which have extensive prompts. The questions are open-ended, essay questions. Questions 2 and 3 have the same prompt. )

Q:1 “Bitcoin was a decentralised, digital currency that enabled electronic cash-like transactions between two parties without requiring a trusted, third party intermediary to verify the transaction. By now, Bitcoin had significantly outgrown its libertarian roots: an increasing number of mainstream e-commerce companies (e.g., TigerDirect, Overstock, Gyft, WordPress, Expedia) had begun to accept the digital currency and venture capitalists had invested over $140 million in Bitcoin-related startups.

The Bitcoin startups had chosen very different business models. Some firms (e.g., BitPay) were focused on providing merchant services only, enabling merchants to accept payments in Bitcoin. Other firms (e.g., Circle, Xapo) focused on digital wallets, which allowed consumers to store and pay with bitcoin. Still other firms (e.g., Coinbase) provided both merchant services and digital wallets, thus acting as two-sided platforms. Given the early stages of the Bitcoin ecosystem and the fast rate at which it evolved, it was unclear which of these models would deliver higher long-term value and competitive advantage.

As an investor, which type of Bitcoin startup (business model) do you view as most promising? For picking your choice of business model, please provide 3 reasons from the lectures and case discussions we had in this course. I will evaluate your answers based on the strength of your arguments, not on your choice.

a. Two-sided provider of both merchant services and digital wallets (e.g., Coinbase)
b. One-sided provider of digital wallet services (e.g., Circle, Xapo)
c. One-sided provider of merchant services (e.g., BitPay)

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Q 2 : In the summer of 2012, GAMEON was one of the two companies that dominated Japan’s mobile social gaming market. GAMEON was well known internationally for its profitability, particularly when compared with U.S. counterpart such as Zynga. In 2012, GAMEON’s average revenues per user (ARPU) were estimated to be more than four times higher than Zynga’s.

GAMEON’s success in Japan had been built on three key pillars: 1) the sophistication of the company’s data analytics tools, which allowed it to build engaging games and monetize them through in-game sales of digital goods; 2) the popularity of the development platform that GAMEON offered to third-party game developers: 3) effective mass-media advertising campaigns (e.g., TV commercials), combined with celebrity endorsements and partnerships with other commercially successful products. GAMEON began its international expansion in late 2010, intending to leverage the same three assets in order to achieve success in global markets. Early results were encouraging: in August 2012, GAMEON placed three games in the top 230 highest grossing games for Apple’s US App Store.

If GAMEON is to pursue a platform strategy in the U.S. and other international markets, the company would be building a two-sided platform on top of other two-sided platforms –Apple’s iOS and Google’s Android. With this in mind, should GAMEON continue pushing its platform or should it focus on being a top mobile social game developer? For picking your choice of business model, please provide 3 reasons from the lectures and case discussions we had in this course. I will evaluate your answers based on the strength of your arguments, not on your choice.

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Q3 In the summer of 2012, GAMEON was one of the two companies that dominated Japan’s mobile social gaming market. GAMEON was well known internationally for its profitability, particularly when compared with U.S. counterpart such as Zynga. In 2012, GAMEON’s average revenues per user (ARPU) were estimated to be more than four times higher than Zynga’s.

GAMEON’s success in Japan had been built on three key pillars: 1) the sophistication of the company’s data analytics tools, which allowed it to build engaging games and monetize them through in-game sales of digital goods; 2) the popularity of the development platform that GAMEON offered to third-party game developers: 3) effective mass-media advertising campaigns (e.g., TV commercials), combined with celebrity endorsements and partnerships with other commercially successful products. GAMEON began its international expansion in late 2010, intending to leverage the same three assets in order to achieve success in global markets. Early results were encouraging: in August 2012, GAMEON placed three games in the top 230 highest grossing games for Apple’s US App Store.

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Q4 A platforms interfaces (API) should follow three criteria: They must be precise, frozen, and versatile. Getting app developers to comply with them requires a carrot rather than a stick. Please provide your comments on each criteria and the last statement (carrot versus stick).

If GAMEON chooses to operate as a platform, is GAMEON’s platform complementing or competing against the underlying operating system platforms (iOS and Android)? M5-lecture-governance-issues
M5: LECTURE GOVERNANCE ISSUES
Transcript
Regulatory issues and platforms. As we have software platforms dominate our daily lives, we are facing
with an increasingly important social challenge. How will the software platforms are designed with a balanced
internal governance systems with an external regulatory regimes to ensure that they operate fairly. We all want
innovation and economic developments, but we also need to think about its social component.
There are social issues such as fair pricing, tax policy and data price. There has been lengthy
discussions on Airbnb since its launch as a software platform. People did not want in their neighborhoods, in
the house next to their’s, a totally, a total stranger coming and staying for a night or two.
Some of the incidents that were reported in the media fueled the fears of people. This is exactly what
we learned earlier. Airbnb was imposing externalities onto the public. Another externality Airbnb created was
lack of insurance. After so many complaints, in December 2014, Airbnb announced that it would provide a $1
million of liability coverage to protect its US hosts from damages by careless guests.
But one important detail about this policy was that this insurance was a secondary insurance and would
only kick in after the host’s own insurance was used up. Airbnb probably hoped that the costs of insurance will
be diverted into the personal insurance policies. This also is an externality imposed on the general public,
because to cover the damages to Airbnb hosting sites, the premiums of everyone would increase.
Of course, there were positive externalities as well. After the successful launch of Airbnb, the hotel
prices fell down. Their customer service has been improved, tourism sector enjoyed increased number of
visitors, etc. As you see, it is not a simple task when dating the cost of such huge software platforms on the
society, and there seems to be a need for regulatory restrictions.
Another very interesting example is MonkeyParking app launched in San Francisco in January 2014.
This app was encouraging people to auction off their empty parking spaces to other drivers. Many considered
what this app was suggesting as unfair. Because this is a privatization of public goods, public parking spaces.
It would not be surprising to see intermediates keeping the open public park, parking spaces occupied and
selling for their own good.
Of course, private parking area owners would also suffer. And the second externality in my opinion is
not very important, but the first one might lead people to think about what was next. Would people auction off
their spaces in public hospitals and public schools? This app idea did not survive the complaints and in June
2014, the regulators closed it.
I know three different groups, two of them my friends, who are running platforms similar to Upwork and
TaskRabbit, matching talent and skills with required tasks. There are so many freelancers now using this
flexibility and working as much as they want on projects they want to. This is great.
But how about benefits and, and worker protection for these freelancers as law requires? This is
another important externality software platform imposes on the public we need to consider. Some may argue
against any regulations and let the market run itself until it determines winners and losers. But please let us not
forget the airline system that we are using has improved tremendously in terms of providing a safe flight
through improved technology and staff training and detailed post-crash investigations by the government
agencies.
We depend on regulations to maintain the purity of our drinking water and to control infected diseases.
As a compromise today, there’s a trend toward regulations provided by private companies. There are private
companies setting, providing, and checking Internet security standards and protocols. Similarly, there are
accounting standards that are now widely accepted that were established by the International Accounting
Standards Board, a private company in London.
Platforms provide a marketplace open to consumers and producers. And platforms facilitate the match
between these two groups, we know that. One main value platforms create, and by the way they may choose
to charge the participants for that, for this value, is providing access to this market. Now the question is, should
platforms restrict the access to the market place for some of the participants?
And please keep in mind we are talking about regulations. If yes, what should be the criteria and what
is the impact of imposing such restrictions? When a certain participant is excluded from the platform, it raises
the question of who benefits from this exclusion. Whether that exclusion is fair, and what will be the long-term
impact of this exclusion.
For example, Alibaba handles 80% of e-commerce transactions in China. Threat of exclusion is
serious. If Alibaba excludes someone from accessing to this platform, imagine the damage that excluded site
would get from this exclusion. Sony, Microsoft, and Nintendo offer category exclusively to certain firms like
Electronic Arts in exchange for their support to the platform.
Sometimes platforms may use exclusion to create a compatibility issue with it, to be competitive. In
1997, Sun Microsystems sued Microsoft for intentionally forking the Java language in order to limit its appeal
on operating systems other than Microsoft Windows. Exclusion may create serious problems when, when
network effects are strong.
Exclusion may prevent new firms from creating their own critical mass of users and make the current
market leader a monopoly. This in turn slows down the innovation and hurts the entire market. But the
regulated exclusion sometimes may be beneficial for the society. For example, a platform may grant a
temporary category exclusivity to a particular extension developer in exchange for substantial investment in
new products and services.
Again, as an example, SAP has used preferred partners strategy with ADP, a payroll software
company. In these kind of partnerships, over time, the innovations created during this limited time exclusivity
become part of the core of the platform and then begin to serve the entire society. Predatory pricing is a
situation that the firm prices its goods and services so low that it cannot possibly make money out of that.
This pricing scheme temporarily benefits the consumers. But the main reason behind that is to drive
competitors out of the way. Once competitors are eliminated and cleared, now the remaining market suppliers
becomes the monopoly. However in the case of two-sided platforms, especially if there are strong cross-side
network effects, platforms can price their services on one side for free to maximize their revenue from the other
side.
And ev, we learned about that. This is definitely not predatory pricing and should be regarded
differently, and regulators cannot approach such cases with conventional wisdom that they have been using for
pipeline businesses. All software platforms are collecting data and consumers provide that. We share our
personal data all the time.
There is no escape from that. It’s simply a, a part of our daily lives. Once we begin to use our credit
cards, we give away our personal purchase history. But also we shared our personal credit worthiness with
financial institutions. The three agencies that create credit scores developed algorithms, and based on the data
they collect from credit card companies, computed our credit scores.
When you apply for a car loan, a mortgage, you will face with your credit score. Now, the question is, is
this good or bad? A lot of discussions are made around this topic. The other day I was listening to NPR and the
Berkeley economics professor was saying that credit agencies were racially biased.
Not only racially, but also these scores are geographically biased as they are using algorithms based
on completed transactions which might lead to selection bias. Based on credit scores, we now have the term of
predatory lending, which is the deliberate targeting of consumers who can’t afford credit. If you begin to receive
too many credit card offers, you should check your finances.
Another problem is aggregated data, that is used to form a personal profile for all individuals. It is very
easy to gather data on an individual’s web usage, financial interactions, political or charitable donations,
magazine subscriptions, etc. One of my professors told me in 2003 that once he received a mail in his mailbox
from a lawyer advocating personal data privacy.
In the mail, that professor’s entire history of flights, his Social Security number, his addresses, and
many more detailed information was enclosed. The point the lawyer was making that if I can have access to so
much of information about you, imagine who knows what about you. One final point in data privacy is the
confusing question of data ownership.
Who owns the data? If you get paid, if you like, when you let someone use your property, your car, your
bike, etc. Then how come you don’t get paid when companies out there use your data, something directly
about you? Companies use your data to come up with recommendations for others and increase their sales,
then should companies pay you when they use your data?
So this is an important and open discussion. OK, so and lastly, potential manipulation of consumers
and markets. When platforms grow big enough, they have the potential to manipulate individuals or sometimes
entire markets through their great size and reach. Amazon controls online book market and giant publishers
feel pressure to accept Amazon’s business terms.
For example, French based Hachette Book Group found online sales of its products delayed and
preorder buttons removed. Amazon and this publisher came to an agreement after long discussions and
negotiation. Facebook users and privacy experts were distressed in June 2014 when it was revealed that the
news feeds of almost 700,000 members were experimented over emotional contagion.
In one study, in one study of 61 million Facebook users, positive news feeds caused roughly 2% more
people to vote differently than those who did not receive positive news feeds. Uber was embroiled in July 2015
when phantom cabs on the Uber app was discovered. Cars that appeared to be close to a pick-up location in
fact did not exist.
We can increase this eh, number of examples. Such cases illustrate the wide variety of ways that highly
popular platforms can use their market power and their access to vast amounts of data to mislead people and
manipulate them. Nick Grossman, a former MIT media lab scholar, calls for transition from today’s regulations
which emphasize prescriptive rules and gate keeping to a new regulation regime that is based on open
innovation tempered by data-driven transparency and accountability.
Because firms like Uber and Airbnb know who did what to whom and when through the rich data they
collect, consumers can hold people accountable for their behaviors after the fact. Uber riders will not accept an
Uber driver if his record is not very promising. Grossman advises that government regulators should simply
enforce the after the fact transparency for the platforms.
A similar idea is promoted by Richard Stallman, the programmer and activist who’s the leader of the
Free Software Movement. We know that open source software allows us to inspect the code itself. So if the
code is available, we can detect if a company uses a code to spy on con, customers.
The openly shared code will allow us to catch such misbehaviors and it will have that deterring effect on
code misusages. So with this lecture, we conclude our journey on software platforms. There is honestly so
much left to talk about. I hope you enjoyed the lectures, and I wish you all the best.
M5-lecture-governance-importance
M5: LECTURE GOVERNANCE IMPORTANCE
Transcript
In this module we are going to discuss the governance tools and policies that increase the value and
enhance the growth of these platforms. Why Governance Matters: Platforms As States. Governing a platform
matters. It matters because they have so much influence on the business and political landscape. They may
shape the customer perceptions and attitudes, they can create new types of consumer behaviors.
With extremely strong network effects and large user base of millions, some of the software platforms
of our time resemble nation states. They had the population, jargon, and protocols that can be regarded as
language. And of course, huge financial power that is backed up with advanced distribution and inventory
systems.
One of the reading assignments in this module discusses in a funny way how Apple, Twitter and
Facebook resemble some of the states of our time. In choosing to apply unilateral software standards as
opposed to multilateral standards, what kind of foreign policy is Apple pursuing? It’s true they’re following an
industrial policy based on investment in state-owned services, or one relying on decentralized development of
others.
What kind, what, what did Facebook credits, a short lead system of virtual currency, say about
Facebook’s monetary policy? To get the answers for these interesting questions, please refer to the reading
assignment. The goal of good governance is to create fairly distributed wealth among all who add a value to
the system.
Platforms should pursue this fairness when hosting billions of transactions happening at the core of
their ecosystem. Otherwise, a market failure might be unavoidable. Market Failure and Its Causes. What is a
market failure? Market failure occurs when bad transactions happen as good ones fail to occur. Very
straightforward, right?
But the difficult part is maintaining a fair market that is not going to fail. We talked about the communitydriven filtering mechanism that software platforms have been using. Participants of the platform that fuel good
transactions and create value are appreciated, while bad ones are pushed down the drain. But is this just
enough?
Should we just leave this software platform market free of rules, restrictions or safeguards, and expect
fair transactions? This may not be always possible. A group of eBay members, noticing that some
inexperienced sellers were prone to misidentifying goods, for example, by misspelling Louis Vuitton with one T.
And Abercrombie and Fitch as Abercrombie and Fish, began taking advantage of these errors as middlemen.
What should be done about that? Should they provide accurate information to both sides of the platform
to maintain trust, and continue generating good transactions? Common sense says yes to this question. Before
data with good governance, let’s look at four main reasons of market failure. Information asymmetry,
externalities, monopoly power, and risk.
Information asymmetry. Let’s begin our market failure discussion with Information Asymmetry, that
arises when one of the two parties involved in the transaction knows some facts that the other part doesn’t,
and uses them to their own advantage. You night know about lemon’s problem from your other classes, a
lemon is a car with manufacturing deficiencies.
Lemon’s problem arises because buyers don’t know everything about a used car that sellers know
about. And buyers might end up with buying a lemon for an average price that is to be paid for a non-lemon
car. When exchanging values on a software platform, one side may not have all the facts that the other side
knows about.
For example, when sellers know that the goods are fake but does not inform the buyer, we have the
information estimated problem. Did you know that the size of the counterfeit good, eh, goods market, estimated
at $350 billion worldwide, exceeds the trade in illegal drugs estimated at $321 billion?
This kind of estimated billing is for bad transactions, which if it happens consistently would result in a
market failure. Externalities. Another reason for market failure is externalities. Externalities occur when
spillover costs or benefits accrue for anyone involved in a given transaction. There are positive and negative
externalities. Of course, we are pointing out negative ones in this context.
As an example to positive externalities, Netflix analyzes the movie watching behavior of someone,
whose taste match with yours and uses, Netflix uses this data to give you a more accurate movie
recommendation. You, basically as a consumer, having benefit from the consumption of some other user. On
the other hand, on Amazon Books, to the extent that suppliers overlap in the range of products they offer, they
may become price competitors.
And that may constitute a negative externality on, on buy, on seller success. Sometimes it may be
difficult to draw the line between positive and negative externalities. For example, a platform, a third party, may
intervene on the platform. For instance, advertisers in ad-driven online businesses, like Google AdWords is
one of the most famous examples, that may generate negative externalities for another party.
For instance, consumers, who are irritated by ads. But positive externalities for advertisers, those who
benefit from positive externalities do not complain from them. But this creates a problem from business
standpoint, if the platform cannot monetize this value, this positive externality that is created on the platform.
Monopoly. Monopoly power arises when one supplier in a, in an ecosystem becomes too powerful and
determines the rules of the game.
A platform will keep its users active only if total value these users drive from the platform is greater than
the same user’s costs. One may argue that monopolies can act cleverly and dictate the prices so carefully that
they capture the entire market. That is partially true. However, in a market where there is monopoly the
innovation slows down and new attributes and the whole idea of turning the focus of firms inside out concept
collapses.
As an example for platform monopoly, we can mention the case between Zynga and Facebook. As you
all know, Zynga is a social game developer that was operating on Facebook platform. At some point, Zynga
made up 19% of Facebook total revenue. Zynga became excessively powerful on Facebook, leading, on, on
Facebook, leading the conflict over sharing of user information, split of game revenues, cost to Zynga of ads
on the social network.
After a while, Facebook broke its ties with Zynga, which was a smart move. Facebook kept its doors
open to external game developers on its platform. Risk. Risk, as we understand from the term, is simply related
to unexpected and unpredictable outcomes. It’s a problem of all markets, not just software platforms.
The risk for platforms is that a good interaction may turn out to be a bad one. You make a purchase,
pay with your credit card. What are the risks you may face? Someone stealing your credit card information?
Someone selling you a fake product, or the product does not turn out to be as advertised, the item may be
broken during the shipment.
Now simply consider if you are dealing with these risks, when you’re making an online shopping at
Amazon Marketplace. All these risks are there but we honestly don’t care that much, because credit card
platforms, Amazon Marketplace took precautions to minimize the impact of unexpected outcomes on the
consumer. Good governance is important and it addresses the market failures.
The literature on the corporate governance is pretty much established, and it is vast. Of course, our
focus here is the governance of software platforms. Systems of Control. We said earlier that some of the
software platforms resemble nation-states in many aspects. A broader view of platform governance insides are
borrowed from the nation’s state as modeled by constitutional law scholar Lawrence Lessig.
In his formulation, systems of control involve four …
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