2015-01-0010

Silverado (A)
Business Integration and Innovation WAC

Page 1 of 9
Silverado Attracting Masses to Online Entertainment
1. Introduction
With the advent of internet and World Wide Web (www), the opportunities for entrepreneurs
increased exponentially. Cashing on these opportunities, Scott Noonam and Izet Franj founded
Silverado in 1999, with the goal of targeting mass entertainment and changing this sector by
exposing it to the new world of internet. The vision of the founders was to make Silverado the
premier online event destination.
1
After successfully conducting three Live Trivia games, the
Silverado team faced some critical choices and vertical opportunities. The vision, strategy and
various choices and opportunities faced by Silverado team will be analyzed in this paper.
2. Silverado - Business Environment
Silverado combined the flamboyant aspects of two entertainment channels, i.e. television and
internet. America alone had 110 million internet users, whereas television shows like Who
Wants to be a Millionaire attracted 29 million viewers nightly in 1999 season. The Silverado
founders identified the ability of television game shows to attract mass audience and combined it
with the interactive ability of internet. The resulting combination was attractive enough for
venture capitalists to invest in and give the energized founders a chance at their aim. In order to
better understand the environment in which Silverado was operating, Porters Five Forces
Analysis can be used.
2.1. Porter s Five Forces Analysis
2.1.1. Competitive Rivalry
In the absence of any competitor, Silverado had the first movers advantage. It faced an indirect
competition from the already established television game shows; however these game shows
lacked the interactive ability of Silverado and any works to develop such interactive ability
would take a long time. Competitive rivalry can therefore be classified as low.


1
Silverado Business Plan, February 2000, pg 3
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Silverado (A)
Business Integration and Innovation WAC

Page 2 of 9
2.1.2. Threat of Substitutes
The threat of substitutes is presented by the existing television game shows, since their mass
audience can be attracted to internet versions as well. Threat of substitutes was high.
2.1.3. Bargaining Power of Customers
Customers of Silverado can be divided into two categories, advertising agencies and users of
applications developed by Silverado. Advertising agencies are willing to pay premium price to
reach consumers in a targeted way. These agencies have other alternate options available as well,
but the data bank of user profiles maintained by Silverado will keep the bargaining power of
these agencies to medium.
The users of applications, developed by Silverado, will have low bargaining power, as no other
product assures the reliable technology capable of handling large audience as well as providing
two way interactions. So the overall bargaining power of customers was medium.
2.1.4. Bargaining Power of Suppliers
Due to Silverados highly technical nature, it was dependant on suppliers for provision of
services and solutions. The engineering talent required by Silverado was scarce and demanded
high compensation packages. The management team decided to outsource some parts of the
project to vendors, who also balked at the technical challenges and quoted very high prices. The
technical platform required for the development was provided by Microsoft, which had very high
bargaining power. So overall, the bargaining power of suppliers was high.
2.1.5. Threat of New Entrants
The threat of new entrants was also high, as the technology could easily be imitated and the
capital required for setting up such a company could be provided by venture capitalists, who
were investing heavily in dotcom projects.
The success of Silverado can attract many new competitors, who will be willing to differentiate
and add values to the innovation of Scott and Izet. Exhibit 1 provides an overview of the
Porters Five Forces Analysis.
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Silverado (A)
Business Integration and Innovation WAC

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3. Silverado The setup
3.1. The Strategy
The setup of Silverado is an example of deliberate strategy in which the founders formulated a
strategy before implementing it. However, they did not persist with their planned strategy when
conditions changed and continuously evolved with new research and data. An example of their
willingness to deviate from the plans was the outsourcing of some parts of development to
outside vendors. Previously the founders had planned to establish a team of engineers who would
develop the technology. But due to scarcity of competent engineers, the core team decided to
subcontract some parts of development to vendors and the founders did not resist to this change
in plans.
3.2. Organizational Structure
Silverado was distributed into three main domains, each headed by a founder who was fully
involved and responsible for the tasks. This provided a chance to the founders to share their
vision with the team, so their energies can be aligned towards achieving those goals. Another
strategy was establishing informal teams to look after various tasks important for the success of
Silverado. The fluid organizational structure ensured that founders were sharing the workload,
supporting each others work and guaranteeing high efficiency with creativity. Exhibit 2 shows
organizational structure and informal teams of Silverado. Exhibit 3 shows the time line of some
important events for Silverado.
3.3. Neutralizing the Threats
Silverados management faced a lot of threats while establishing their company in uncharted
territory. The biggest threat was the question about the ability of internet to attract mass
audience. In 1999, only 40 % of the American population had access to internet.
2
Out of these
users, only 2.2 % had access to high speed internet whereas the rest were dependent on
traditional dial-up connections. Silverados management dealt with these threats efficiently and
effectively. To ensure that everyone got a fair chance of playing, irrespective of the type of
internet connection, a simple and user friendly application was developed. This presented a level

2
http://www.demographia.com/db-uspop1900.htm
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Silverado (A)
Business Integration and Innovation WAC

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playing field for all participants. In order to ensure maximum participation, Silverado
management looked for precedent set by online events in the past. Advertising agency HMEI
was hired to launch an air war to spread the word about Silverado and its Live Trivia game
show. All media vehicles were used to penetrate and target the potential players and advertisers
to ensure maximum revenue streams.
Another threat was the failure to develop the challenging technology required to support large
number of users and multiple simultaneous events. Silverado management dealt with this threat
by hiring and building a superior engineering team who were more interested in the challenges of
developing a ground-breaking system, rather than the compensation packages. The founders
were personally involved in the hiring of these engineers and the efforts paid off when
Lavastorm was hired as a vendor for development of Event Matrix. The vendor represented the
mindset of Silverados engineering team, as they quoted a price significantly lower than other
vendors and were more interested in undertaking the challenges rather than the monetary gains.
3.4. Tapping the Opportunities
Silverado benefitted from the opportunity of being the first entrant, when Scott and Izet
discovered the unique and valuable set of offerings. The vast market was untapped and Silverado
came forward to reap the benefits. Within three game shows, the management was able to attract
50,000 players. The founders discovered that by making the traditional television game shows
interactive, the firm can attract larger audiences and ensure steady revenue streams. The system
was designed to ensure geographical access for consistency and future growth. The system was
also capable of maintaining user profiles, which would be used to attract advertising agencies
targeting specific market segments. The technological development of two way interaction made
sure that Silverado was differentiating itself from the already existing options available to the
users. This not only increased the involvement of the players and advertising agencies, but also
increased their willingness to pay.
Silverados management made intelligent choices regarding the opportunities of developing its
core teams, vendors and suppliers. Dedicated and innovative engineers, vendors who believed in
technological superiority and technical platforms of market leader like Microsoft show the
opportunities utilized by the management. By selecting the technical platform, Silverado earned
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Silverado (A)
Business Integration and Innovation WAC

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the support and discounts of experienced market players like Microsoft and Compaq. Similarly,
by keeping fluid hierarchy, the management ensured that the company benefited from the
creativity and innovation of its engineers and employees.
Exhibit 4 shows the alignment of Silverados strategy propelling it towards success.
4. Silverado The way forward
4.1. Live Trivia
The decision to hire creative employees and giving them the freedom of innovation meant that
Silverados management had no shortage of solutions and proposals. The current version of Live
Trivia game show attracted 50,000 players backed by the $ 15 Million marketing campaign.
However, the future of this game in the absence of such marketing campaigns is unknown.
Instead of increasing the frequency of the game shows or changing the format, the management
should try to develop a loyalty amongst its users. By advertising the stories of game winners, a
brand can be developed for Silverado and any changes in the current game can then be proposed.
It is also recommended to spend the additional $ 3 Million to surpass the critical threshold of
consumer awareness.
4.2. Vertical Opportunities
Three vertical opportunities to ensure secondary revenue streams are under consideration. The
most promising is the distance learning, which not only has market potential of $ 7 Billion, but
will also align with the goals of Silverado. By coming into contact with leading corporations and
educational institutions, Silverado can benefit in two ways; ensure a steady stream of revenues
and tap into the human resource of these corporations and educational institutions for hiring.
This would mitigate the risks faced by Silverado, i.e. scarcity of resources and dependence on
single stream of revenues. The other two applications can be developed later, when more
information regarding their consumer base is available.
So the strategy of planning and evolving with the changes has prepared Silverado to succeed in
the future as well. However, with more applications and work load in the future, founders will
have to develop organizational hierarchy to ensure that Silverado stays on its path.
2015-01-0010
Silverado (A)
Business Integration and Innovation WAC

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Exhibit 1


Porters Five Forces Model
Competitive
Rivalry -
LOW
Bargaining
Power of
Supplier -
HIGH
Bargaining
Power of
Customer -
MEDIUM
Threat of
New
Entrants -
HIGH
Threat of
Substitutes
- HIGH
2015-01-0010
Silverado (A)
Business Integration and Innovation WAC

Page 7 of 9
Exhibit 2

Silverado Organizational Structure

Silverado Informal Tiger Teams

Silverado
Technology Operations Administration
Silverado
User
Experience
Site Content
Business
Development
Player
Retention
Human
Resources
Prototype
Marketing
Writers
2015-01-0010
Silverado (A)
Business Integration and Innovation WAC

Page 8 of 9
Exhibit 3

Time Line of Important Events

1999 -
Silverado
founded
Till April
2000 - $ 50
Million
financed,
30
employees
hired
May 2000 -
Writers
hired to
develop
questions
21st May,
2000 - Live
Trivia
launched.
20,000
players
participated
28th May,
2000 -
Second
Live Trivia
game.
30,000
players
participated
5th June,
2000 -
Third Live
Trivia
game.
50,000
players
participated
2015-01-0010
Silverado (A)
Business Integration and Innovation WAC

Page 9 of 9
Exhibit 4

Live Trivia Strategy Aiming for Success

Success
User profiles
for Ad
agencies to
ensure
revenues
Motivated
and creative
employees,
vendors and
suppliers
Huge
untapped
market
potential
Simple
applications
for consistent
and fair user
experience