Cork'd is a wine-focused social networking site that connects wine enthusiasts with wineries. It recently changed its business model to focus on social media and subscription models. Under the new model, individual users can interact for free while wineries must pay an annual $999 fee for a verified profile and interaction capabilities. However, the high fee likely deters most wineries from signing up. The business model could be improved by lowering fees, offering free trial periods for wineries, and allowing direct wine sales through the site.

1. Case Submission
CORK’D
Information Technology & Systems (Section C)
Group C5
Dwaipayan Bhowmik PGDM/0115/49
Jasmeet Singh PGDM/0150/49
Vaishnavi T FP/20/12

2. INTRODUCTION
Cork’d is a Wine-centric Social Networking Website, trying to bridge the gap between the connoisseurs
of wine and the wineries. Initially, it had an ad-based business model with a limited relationship with
wine.com, whereby users could shop for selected wine.com wines. At the time when the case was
written, its owner Gary Vaynerchuk and newly appointed CEO Lindsay Ronga was taking a number of
measures to rejuvenate the stagnated website and in the process changed its business model. We shall
now try to analyze what this new business model, how viable it was and recommend whether any
changes were required in it.
BUSINESS MODEL
Cork’d, under Ronga, has based its business on two fundamental internet business models, namely the
‘Social Media Model’ and the ‘Subscription Model’ 1. Accordingly it accommodates two types of users-
individuals and wineries. Further, it also had adopted the Web 2.0 culture which allow users to
interact and collaborate with each other in a social media as creators of user-generated content in a
virtual community,
 Individuals
For individual users Cork’d offers several features similar to other social networks but with dedicated
functionality for wine. Users were not charged for signing up. There was no paid premium features.
This is one of the key qualities of Web 2.0. Users could upload a profile, review wines and rate them,
maintain a wine cellar, interact with other users and choose friends. They could also link their profiles
to other social networking site More importantly they can actively engage with wineries and purchase
wines. To purchase wine they are directed to an external third party site and Cork’d receive
commissions for outbound clicks. This is the only source of income in this model as Cork’d is an ad free
site.
 Wineries
A verified winery account, on the other hand, requires an annual fee of $999. A winery with an account
can maintain profile pages where they can post information, provide links to their own websites and
interact directly with customers. In addition there are a host of other features for member wineries.
For wineries which do not have an account but find mention in the wine database Cork’d creates a
bare-bones page from where they can upgrade to full membership by paying the requisite amount to
‘claim’ their page. This was a means of attracting new paid accounts.
CHARGES- JUSTIFIED?
The most pertinent question in a subscription based business model is whether the charges are fair
and justified. In the case of Cork’d, we believe that the prices are not reasonable. That is because the
wineries are not sure about the benefits arising from getting associated with Cork’d. As per Exhibit 2of
the case, Cork’d audience consists of a significant population of wine-newcomers. This meant that the
wineries shall be sceptical about the quantity and value of their purchases. One among top rated wine
is Temecula Desert Wine (Exhibit 1) which costs around $15, which exemplifies the fact that the users
are the first time or frequent inexpensive wine drinkers and this makes it more difficult for wineries to
pay the annual amount. The premium wine figuring in the list Marguax costs around $500 would be
consumed rarely.
1
Internet Business Models- Jim Muehlhausen

3. So what we understood that the $999 price was acting as an entry barrier for most wineries and that is
probably why no wineries had signed up with Cork’d other than those through influences of Gary and
Lindsay. This could in fact create a vicious cycle. If good wineries do not enrol, true wine enthusiasts
also shall not actively join Cork’d, which again means that high class wineries will not have any
incentive in joining.
To save its cause, Cork’d could take the following measures-
 After registration offer the wineries a verified page free of charge for the initial 2-3 months. If
they are satisfied with the benefits, they can pay the subscription fee to get a permanent
account.
 They should reduce the annual fee to a more reasonable amount, say $699. As a way to reduce
the entry barrier even further, Cork’d could also introduce quarterly (say $199) or half-yearly
(say $375) subscription schemes.
CHANGES REQUIRED IN BUSINESS MODEL?
The two most obvious solutions of the present financial problem facing Lindsay Ronga are allowing
advertising on their website and selling wines directly rather than directing customers to third parties.
We shall now try to analyze the pros and cons of each of them.
 Advertisement
Cork’d should not allow advertising on its site because the very business model of Cork’d goes against
it. Cork’d is designed to offer the users the best possible experience which would attract a great
number of loyal users creating a large and active community. As such introduction of advertisements
may compromise user satisfaction which would destabilize the entire model. Further as it is already a
particular product (wine) centric website, advertisements of different products may distract users and
irritate the wineries, weakening the business model even further. In contrast offering the entire
advertisement opportunity to wineries would actually make them contribute related and valuable
content to the website.
 Direct Selling
The prospect of selling wines is something that Cork’d could seriously consider. Currently, to purchase
wine users are directed to an external third party site and Cork’d receives commissions for outbound
clicks. But if it enables users to buy wine from the site itself, it will be much more convenient for users.
Further they would prefer to buy from the site of which they are enthusiastic users rather than an
unknown third party site. Moreover it will further increase the levels of association with wineries who
would become suppliers in addition to account holders with the site. Gary Vaynerchuk, present owner,
was the one who pioneered the sale of wine via internet and remains a wine-celebrity with huge
popularity. Operation and supply remains a big hurdle for e-commerce setups selling products, but
Vaynerchuk prior experience can be leveraged by the Cork’d team and moreover they will also enjoy
first mover advantage as none of the competitors sell wines directly to users. Margins would be much
more than now, even after considering all the investments required to acquire selling rights and
develop selling infrastructure.