Question 1:
a) What are the different components of the internet value network? For each component, give two types of service providers, drawing examples from the actual companies you know.
b) State the value configuration known as value chain. How does the scalability and virtual capacity of the Internet influence the value chain?
Question 2:
a) What is the relevance of an Initial Public Offering (IPO) for an Internet startup?
b) Consider the given extract from Google’s IPO filing document (Form S-1) with the Security and Exchange Commission in the US, 29th April 2004.
The auction process being used for our initial public offering differs from methods that have been traditionally used in most other underwritten initial public offerings in the United States. In particular, the initial public offering price and the allocation of shares will be determined primarily by an auction conducted by our underwriters on our behalf. We plan to conduct this auction in five phases: Qualification; Bidding; Auction Closing; Pricing; and Allocation.
i) In what manner was Google’s IPO distinct from the conventional process and what could have been the motivation behind it?
ii) What might be the possible reasons for the differential between an Internet startup’s book value and its market value? (You might suppose that the market value is usually much bigger than the book value for a promising startup company).