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Plentyoffish.com is one of the most efficient and profitable networking sites, with $10 million in annual revenues (Cheung et al.). However, apart from its superior financial performance, its business strategy is questionable since it heavily relies on advertising and makes it the only source of revenue (Cheung et al.). Consequently, this paper’s primary goal is to present an analysis of the current competition, assess its strategy, and suggest the most appropriate tactics for improvement.
Nature of Competition
As it was mentioned earlier, Plentyoffish.com generated its revenues from the advertisers while the usage of the website was entirely free of charge (Cheung et al.). The company was able to attract different agencies and enterprises to use this platform as a promotion instrument due to high activity on the website (Cheung et al.). However, it was not the only website focusing on providing similar dating services. In this case, the major trigger for the constantly intensifying competition was the technological development and Web 2.0 (Cheung et al.).
These factors, along with other Internet-based features, contributed to the escalating usage of the World Wide Web and increased the popularity of online social networks. According to the case study, Frind, the CEO of Plentyoffish.com, views dating (Match.com) and listing sites (Craigslist) and other online communities (MySpace and Facebook) as the major competitors (Cheung et al.). Due to low entry barriers, a threat of new entrants is also high, and this factor implies that the competition will become even more saturated shortly. Meanwhile, the market will continue to be represented by niche service providers and widely known networks and attract customers by the user-friendly interface, constant support, and high-quality offerings.
The article published in the New York Times might be considered another trigger for the increasing competition, as this publication reveals the success of Plentyoffish.com and describes its revenue-generating tool (Cheung et al.). In this instance, the competitors will attempt to copy this strategy or implement its best features. The rapid development of technology will assist them in attracting more users to their services while decreasing the flow of customers and their activity at Plentyoffish.com. Overall, it could be said that the company has to be prepared for changes in the nature and structure of the competition and its intensity, as the rival firms will react very fast (within several months) to this announcement.
Evaluation of the Strategy
Based on the aspects indicated above, it could be said that Frind should consider revising his strategy, as having advertising as the main source of revenue is rather risky. Currently, the business model is neither sustainable nor solid because it does not have a long-term orientation or a plan that ensures business continuity. Thus, the overall idea and framework seem to be competitive. In this instance, the main strategic goals should cover continuous growth, expansion, and an introduction of various levels of services. Consequently, they can be formulated as
- creating different levels of offerings such as premium and average by the end of 2009,
- discovering several new markets such as the UK and Australia and occupying 20% of their market shares in 2009,
- expanding a pool of employees to nine people in 2009 to enhance its working processes, and
- having a 10% annual increase in revenues in 2009.
These strategies will help improve the website and attract more customers to the social network while enhancing its position in the market.
Due to fast technological progress and know-how of Internet features such as ASP.NET, Frind should continue growing his business. Its hardware and software are currently inexpensive, and this strategy helps the company minimize its costs while generating extremely high revenues (Cheung et al.). Thus, hiring staff can be viewed as a priority, as experienced employees are the company’s most important assets, and they contribute to its growth and constant development. Overall, it could be said that the existent economic environment, rapid technological growth, the rising popularity of online social networks, and profound understanding of the Internet processes can be considered as critical advantages and the main reasons for aiming at continuing operations in this sphere.
The Best Model of Going Forward
Nevertheless, apart from the positive aspects mentioned above, the company should consider designing a well-developed business model for future growth. These matters would contribute to a simultaneous increase in the rivalry. In this case, there is a diversity of strategies, and one of them implies continuing to provide free services (a). The analysis of the strategy conducted previously depicts that this approach is rather risky and cost-ineffective. In this instance, the company’s management has to consider offering subscriptions and proposing a certain way to divide services into levels (d). For example, it is possible to provide free services and premium subscriptions covering special features. This approach will secure the streams of revenue and help attract a different segment of users.
Thus, an alternative strategy might be expanding offerings, and the current provided service range (b). This approach could not be discovered as the most suitable one for Plentyoffish.com. It is more reasonable to rely on the existent competitive advantage by constantly improving the quality of the delivered services. Creating additional ones might saturate the business and question its competitiveness in the market. Another possible strategy is to continue expanding traffic by providing its services to more countries (c). This approach is also reasonable since it will attract additional revenues by occupying market segments in different geographical areas. To summarize, it could be said that it will be rational for Plentyoffish.com to integrate several strategies (c and d), give priority to the development of premium service, and consider its international expansion as a subsequent step. Only with a combination of these ideas, the company will be able to gain its worldwide recognition and become one of the market leaders in its area of operation.
This paper shows that even successful companies such as Plentyoffish.com have to enhance their strategies. It is necessary due to the rapidly escalating competition and changing economic and technological environment. Plentyoffish.com has to revise its business strategy since it has some gaps, such as using advertising as the only source of revenue. In this instance, the management of the company should consider its expansion and combine the development of different levels of subscriptions and the growth of its traffic. With the integration of these ideas, it will be possible to reach the set goals such as 10% annual revenue growth and develop a distinct competitive advantage.
Cheung, Wilfred, et al. “Swimming in the Virtual Community Pool with Plentyoffish.” Harvard Business Review. 2008, Web.