Strategies to Fight Ad-sponsored Rivals

Ramon  Casadesus-Masanell; Feng  Zhu

Article | Management Science | September 2010

Strategies to Fight Ad-sponsored Rivals

by Ramon Casadesus-Masanell and Feng Zhu

Abstract

We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed-business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.

Keywords: strategy; business models; tactics; advertising; pricing; Business Model; Advertising; Competition; Quality; Price; Product Marketing;

Format: Print

16 pages

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Citation:

Casadesus-Masanell, Ramon, and Feng Zhu. "Strategies to Fight Ad-sponsored Rivals." Management Science 56, no. 9 (September 2010): 1484–1499.

We examine two episodes of strategic interaction in the U.K. betting industry: (i) Betfair (an entrant multi-sided platform or MSP) vs. Flutter (also an MSP), and (ii) Betfair vs. traditional bookmakers. We find that although Betfair was an underfunded second mover in the betting exchange space, it was able to attract punters at a much faster rate than the better-funded first mover, Flutter. Moreover, while Betfair and traditional bookmakers competed aggressively for market share, they also developed a highly complementary relationship that favored all parties. We discuss implications for research in the economics and management of MSPs. Specifically, we argue that the literature would benefit from work that endogenizes platform design and that considers the possible competitive and cooperative interactions between the business models of traditional incumbents and those of potential innovative MSP entrants.

Case | HBS Case Collection | November 2018

Sportradar (A): From Data to Storytelling

Ramon Casadesus-Masanell, Karen Elterman and Oliver Gassmann

In 2013, the Swiss sports data company Sportradar debated whether to expand from its core business of data provision to bookmakers into sports media products. Sports data was becoming a commodity, and in the future, sports leagues might reduce their dependence on third-party data feeds such as Sportradar’s, prefering to develop data services in-house. Thus, CEO Carsten Koerl believed the company needed to branch into sports media, not just supplying data to companies, but finding ways to tell stories about that data. However, Sportradar's core business was thriving, whereas a recent attempt to branch out into video player tracking systems had proved a costly failure. The team weighed the pros and cons of various media ventures, including online sports betting minigames, a social media site, and streaming of sports content.

Keywords: sports data; data; sport; Sportradar; football; soccer; gambling; betting; betting markets; statistics; odds; live data; bookmakers; Betradar; visualization; integrity; Monitoring; gaming; streaming; 2013; St.Gallen; algorithm; mathematical modeling; Carsten Koerl; Betandwin; Bwin; wagering; probability; Sports; Data and Data Sets; Mathematical Methods; Games, Gaming, and Gambling; Transition; Strategy; Media; Sports Industry; Technology Industry; Information Technology Industry; Media and Broadcasting Industry; Europe; Switzerland; Asia; Austria; Germany; England;

Citation:

Casadesus-Masanell, Ramon, Karen Elterman, and Oliver Gassmann. "Sportradar (A): From Data to Storytelling." Harvard Business School Case 719-429, November 2018. View Details

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This case, set in 1990, describes the history of Walmart and asks what competitive strategies Kmart might adopt in response to Walmart's success. It discusses the strategy and organization of both companies in terms of HR practices, store location, distribution, information technology, procurement, pricing, and company culture. This (A) case is the first in a multi-part series that goes on to describe the results of Kmart's competition with Walmart, as well as Walmart's later grappling with ecommerce and Amazon.

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Strategies to Fight Ad-sponsored Rivals

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