Exploring the value creation of online microenterprises

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School of Business | Master's thesis
International Business
Kansainvälinen liiketoiminta
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The role of Internet and information and communication technology (ICT) in the economy has been growing increasingly over the recent years. Meanwhile, a significant part (93%) of Finnish enterprises outside agriculture, forestry and fishing industries are microenterprises and these firms employ 26% of the workforce and make up for 18% of the private sector turnover in Finland if aforementioned industries are excluded. Additionally, it has been predicted that small firms will have an increasing role in creating new jobs in the Finnish economy. This makes online microenterprises an extremely interesting and important subject of study. However, this group of firms is little researched, even more so from viewpoint of value creation. This thesis sheds light on the phenomenon of online-based microenterprises that sell digital goods by examining their value creation processes. The study was conducted as multiple cases study, where five Finnish mobile gaming firms' representatives were interviewed in order to identify the value activities, relevant value chain actors and value distribution in the chain. Due to the lack of niche-specific previous research, the literature forming the basis for the study is drawn from e-commerce and value creation literature at large. The findings suggest that the main activities in creating a mobile game are sound and audio production, graphic design, game design and development, marketing through various channels, and distribution. The main actors are various freelancers in the upstream of the value chain, inhouse operators in terms of game design, development, graphic design, business development and marketing, and downstream actors in the form of publishers, Apple or Google and finally the end customer. It is also important to note the role of various media such as game review websites and blogs in the value formation process. Also revenue models of mobile games were identified. These are in-app purchases, advertising, and premium game sales. The value is captured in following proportions. Apple or Google captures 30% of a game's retail price and in-app purchases, whereas a potential publisher captures approximately 30% - 50% of the revenue that is left after the distributor, which translates to 21% - 35% of the total revenue. The rest is captured by the mobile game development firm, which has to subtract salaries and other operating expenses from their revenue.
value creation, value chains, mobile games
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