SlideShare a Scribd company logo
1 of 225
Download to read offline
Eduardo Larrain - Linkedin - Website 
WEB-BASED BUSINESS MODELS 
Workshop #1 & #2 – November 2014 
Eduardo Larrain 
1
Eduardo Larrain - Linkedin - Website 
2 
This workshop was taught by Eduardo Larrain 
•HEC 2005 (French Business School) 
•Strategy consultant at Roland Berger and Atos – 40 projects 
•Founder of an Internet start-up called Kel Quartier « Kel Quartier helps citizens access open government data on 42,000 neighbourhoods and small towns » - The Guardian
Eduardo Larrain - Linkedin - Website 
Agenda of the web-based business model workshop 
3 
1.Let’s all talk the same language! What’s the web? What’s a business model? What’s a startup? 
2.What are the key elements of a business model? 
•Value proposition and revenue streams ………………………………………………………………………………………………………….….. 
•How’s the music, video games and book publishing industries going? …………………..………………..………………….……. 
•Customer channels, customer relationships, key partners, activities, resources, cost structure …….....….……….….. 
3.What are the business models of Internet heavyweights publicly traded? 
•Google (139), Facebook (148), Twitter (161), Linkedin (167), Groupon (172) ……………………………………………………. 
4.What are the business models of the most valuable web-based companies privately owned? 
•What is Crowdfunding? Kickstarter (182), Wiseed (187) and Prosper (189) ………………………………………………………. 
•What is the Internet of Things? Breathometer (194), Sen.se (196), Nest (199) and Akimo (201) ………………………. 
•What is the sharing economy? Uber (208), Blablacar (211) and Airbnb (214) ……………………………………………………. 
•LaRuchequiditoui (218), ZocDoc (220), SnapChat (222) ……………………………………………………………………………………… 
5.Conclusion and farewell 
4 39 42 86 116 138 139 179 180 192 206 218 225
Eduardo Larrain - Linkedin - Website 
What’s the web 
4
Eduardo Larrain - Linkedin - Website 
•Web (or World Wide Web or WWW) is a global set of documents, images and other resources, logically interrelated by hyperlinks. 
•Internet (or Net) is a global system of interconnected computer networks that use the standard Internet protocol suite (TCP/IP) to serve billions of users worldwide. It is a network of networks that carries an extensive range of information resources and services, such as the inter-linked hypertext documents of the Web and the infrastructure to support email. 
Web = HTTP, HTML, CSS, JPEG,… 
5 
Internet = Web + mail + data transfer 
Wikipedia 
e.g. FTP incl. P2P, VoIP, streaming media, video conferencing, mobile apps (not HTML 5 based) 
Internet 
Web 
Definitions 
What’s the Web?
Eduardo Larrain - Linkedin - Website 
6 
•In retail alone, G-20 consumers researched online and then purchased offline (ROPO) more than $1.3 trillion in goods in 2010 
Boston Consulting Group, The Internet Economy in the G-20, March 2011 
Is Internet only a distribution channel for online retail/ecommerce?
Eduardo Larrain - Linkedin - Website 7 
0% 
10% 
20% 
30% 
40% 
50% 
60% 
70% 
80% 
90% 
100% 
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 
Conglomerate 
Professional, Scientific, and Technical Services 
Finance and Insurance 
Information 
Health Care and Social Assistance 
Wholesale Trade 
Retail Trade 
Utilities 
Transportation and Warehousing 
Manufacturing Telecommunication 
Manufacturing Automotive 
Manufacturing 
Métaux 
Pétrole 
Agriculture, Forestry, Fishing and Hunting 
Chiffre d'affaires des 100 plus grandes sociétés US 
0% 
10% 
20% 
30% 
40% 
50% 
60% 
70% 
80% 
90% 
100% 
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 
Conglomerate 
Professional, Scientific, and Technical Services 
Finance and Insurance 
Information 
Health Care and Social Assistance 
Wholesale Trade 
Retail Trade 
Utilities 
Transportation and Warehousing 
Manufacturing Telecommunication 
Manufacturing Automotive 
Manufacturing 
Métaux 
Pétrole 
Agriculture, Forestry, Fishing and Hunting 
Profits des 100 plus grandes sociétés US 
Metal 
Petroleum 
Analysis based on Fortune 500, 2007 
• 75% of the economic impact of the Internet arises from traditional companies that don’t define 
themselves as pure Internet players (McKinsey, 2011) 
• Exhibit - Looking at top 100 US companies through time: 
Is Internet an Industry?
Eduardo Larrain - Linkedin - Website 
8 
Internet is not just an industry 
Internet is touching every part of the economy (like electricity)
Eduardo Larrain - Linkedin - Website 
What’s a business model 
9
Eduardo Larrain - Linkedin - Website 
•A business model describes the rationale of how an organization creates, delivers, and captures value. 
10 
•A business model is a coherent way to manage and develop an economic activity. 
•A business model describes how an enterprise proposes to make money. 
What’s a business model? 
Basic definition
Eduardo Larrain - Linkedin - Website 
11 
•A business model is “show me the money”. 
•It is a simple expression of the strategy of the company on how to make money without going into too much details 
Very basic definition 
What’s a business model? 
•In French, we use the english word « business model » rather than translations: 
•Modèle économique 
•Modèle d’activité 
•Modèle d’affaires 
•Modèle de revenus, modèle de profit
Eduardo Larrain - Linkedin - Website 
12 
•A Business plan is a document that describes how a project can be implemented. 
•A Business plan usually aims at selling the project because “you can’t have a funding without a Business Plan” 
•A Business plan usually includes a description of: 
•The team 
•The Business Model 
•A Financial Analysis (e.g. financial spreadsheets) 
•A Business Environment Analysis (e.g. market, competitors and competitive advantage analysis) 
•An Implementation roadmap (e.g. operation plan, milestones) 
•A Risk analysis (e.g. SWOT, Critical Success Factors) 
A Business Model is not a Business Plan 
What’s a Business Plan?
Eduardo Larrain - Linkedin - Website 
13 
•Strategy is a plan of action and the allocation of resources necessary for carrying out these goals 
•Michael Porter’s view on Strategy: 
•Strategy is a plan to differentiate the company and give it a competitive advantage 
•“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value” 
•Then decisions can only be defined as strategic if they involve consciously doing something “differently” from competitors and if that difference results in a sustainable advantage 
•e.g. making existing methods more efficient (“operational efficiency”) are not strategic since they can be easily copied by others 
A Business Model is not Strategy 
What’s Strategy?
Eduardo Larrain - Linkedin - Website 
What’s a startup 
14
Eduardo Larrain - Linkedin - Website 
15 
What’s a startup? 
•A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty 
Basic definition 
•A startup is a company, a partnership or temporary organization designed to search for a repeatable and scalable business model
Eduardo Larrain - Linkedin - Website 
16 
•For young companies with predictable revenues (like opening a new bakery), a business plan will be necessary to get a bank loan 
•For startups, “a good plan, a solid strategy, and thorough market research may not work leading to startup failures” 
•In a startup's earliest days there is not enough data to make an informed guess about what the quantitative financial model might look like 
•You have to confirm that your leap-of-faith questions of your business model are based in reality to do a business plan for a startup: 
•Did we build a product that people want (value creation hypothesis)? 
•What is the growth model (growth hypothesis)? 
•The role of strategy is to help figure out the right questions to ask 
•Followers ot the just-do-it school of entrepreneurship are impatient to get started. They start building immediately, often after just a few cursory customer conversations. Unfortunately, because customers don't really know what they want, it's easy for those entrepreneurs to delude themselves that they are on the right path 
The problem of business plans for startups 
Eric Ries, The Lean Startup, 2012
Eduardo Larrain - Linkedin - Website 
17 
The lean startup methodology 
How to build a product that people want? 
•Developing a new product should resemble simultaneously driving a car (testing your product), tuning the engine (continuously improving the product) and steering (adapting your business model when needed) 
•Startups need to conduct experiments that help determine what techniques will work in their unique circumstances 
•Startup need extensive contact with potential customers to understand them so get out of the building and start learning 
•Metrics are people too. At the end of the day, customers are breathing, thinking, buying individuals. 
•You should talk to early adopters not mainstream customers. 
Eric Ries, The Lean Startup, 2012
Eduardo Larrain - Linkedin - Website 
18 
The lean startup methodology 
Why early adopters are so important? 
•Early adopters accept-in fact prefer an 80 percent solution; you don't need a perfect solution to capture their interest. Early adopters use their imagination to fill in what a product is missing 
•This is hard truth for many entrepreneurs to accept. After all, the vision entrepreneurs keep in their heads is of a high-quality mainstream product that will change the world, not one used by a small niche of people who are willing to give it a shot before it's ready 
•First products aren't meant to be perfect. Most of the time, you are going to be rejected if you go to mainstream customers because most people are not early adopters and will not sign up for a new service sight unseen 
Eric Ries, The Lean Startup, 2012
Eduardo Larrain - Linkedin - Website 
19 
The lean startup methodology 
The importance of MVP: build-measure-learn feedback loop 
•A minimum viable product (MVP) helps entrepreneurs start the process of learning as quickly as possible. It is not necessarily the smallest product imaginable, though; it is simply the fasted way to get through the Build-Measure-Learn feedback loop with the minimum amount of effort. Contrary to traditional product development that strives for product perfection, the goal of the MVP is to begin the process of learning, not to end it 
•Unlike a prototype or concept test, an MVP is designed not just to answer product design or technical questions but to test fundamental business hypothesis 
•Several types of MVPs: problem exploration, product pitch (e.g. video mvp), concierge 
•Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question 
•Always test first your riskiest assumptions 
Eric Ries, The Lean Startup, 2012
Eduardo Larrain - Linkedin - Website 
20 
The lean startup methodology 
The Concierge MVP: have your customers design the first version of your product 
•Wait for the first customer before developing anything, solve one customer's problem 
•Each week you are learning more and more about what is required to make the product a success. After weeks you are ready for another customer. Each customer you bring on make it easier to get the next one. Only when you have a lot of customers, start to invest in automation in the form of product development 
• So you are focused on scaling something that is working rather than trying to invent something that might work for the future. As a result development efforts involves far less waste that is typical. 
•In a concierge MVP this personalized service is not the product but a learning activity designed to test the leap-of-faith assumptions in the company's growth model 
Eric Ries, The Lean Startup, 2012
Eduardo Larrain - Linkedin - Website 
21 
The lean startup methodology 
Principles 
theleanstartup.com, 2014
Eduardo Larrain - Linkedin - Website 
Why study Internet-based business models 
22 
Business Models 
Internet- based
Eduardo Larrain - Linkedin - Website 
23 
Business models have been studied for 30 years 
Traditional business models: trying to explain success with profit models 
1. Customer Solutions 
Time 
Profit 
Invest to know the customer, create a solution, develop the relationship E.g. GE 
0 
Profit zone 
2. Product Pyramid 
Time 
Profit 
At the base are products and services that are low price and high volume; at the top products and services that are high price and low volume E.g. Air France Group: Air France for business and long haul flights, Transavia for leisure and Hop! for local flights 
3. Multi-Component 
Several of the components represent a disproportionate share of the profits E.g. business seminars at hotels, advertising (Google, Yahoo, Facebook)? 
Basic activity 
Other components 
4. Switchboard 
Multiple sellers communicating with multiple buyers. The more buyers and sellers join the great the organization builds on itself E.g. eBay, Alibaba, Amazon, Monster, Seloger Or the opposite: desintermediation (Dell) 
Seller 
Buyers 
5. Time Profit 
Takes advantage of uniqueness, profit margins erode as competition seeks to imitate. Time profit companies must take the lead and maintain a "two year" lead over their competitors E.g. Intel, Microsoft 
Time 
F/unité 
6. Block Buster profits 
Revenue realized is so powerful and fast that in a quick swoop the model pays for development and marketing costs 
E.g. movies, books 
Project types 
Project return 
Adrian Slywotzky and David Morrison, The profit Zone, 1998
Eduardo Larrain - Linkedin - Website 
24 
Business models have been studied for 30 years 
Traditional business models: trying to explain success with profit models 
7. Multiplier 
Strong customer brand E.g. Disney, Google 
Different offers 
Key asset 
8. Entrepreneur Profit 
Hierarchical design with multiple subsidiaries to maintain closeness with the customer E.g. Biotechnologies, Google 
Basic activity 
Small teams 
9. La spécialisation 
Specialist are several times more profitable than the generalist. Characterized by lower cost, higher quality, stronger reputation, shorter selling cycles, and better price realization E.g. Home Depot 
Return 
Specialists 
Generalists 
10. Install Base 
Initial product sales or profits are slim and profit is realized on the follow-up products and services E.g. HP printers and Gillette Razors, Ryanair 
Margin 
Complementary products 
Basic product 
11. Defacto Standard 
The more players who buy that enter in the system, the more valuable the network E.g. Microsoft, Oracle, Skype, Linkedin, spotify, Facebook 
Market share 
Margin 
12. Brand 
The Company expends significant marketing investment in order to build awareness and is reinforced by customer experience. You know Brand is working when a consumer says, "I won't change because I trust AT&T". E.g. Google 
Price 
Brand price 
Average market price 
Adrian Slywotzky and David Morrison, The profit Zone, 1998
Eduardo Larrain - Linkedin - Website 
25 
Business models have been studied for 30 years 
Traditional business models: trying to explain success with profit models 
13. Specialty 
Specialty companies enjoy a higher premium for their products and services until competitors start to imitate E.g. Merck, 3M, Photoshop 
Marge 
Nowadays 
5 years ago 
Common 
Leading 
Common 
Leading 
14. Local Leadership 
Many businesses and their company economies are totally local. Risk occurs when these companies fail to recognize they are a local business model E.g. Wal-Mart 
Local market share 
Local return 
0 
15. Transactional Scale 
Transactions go up but the cost to provide the transaction does not go up as quickly E.g. investment banking, real estate, transportation 
Transaction size 
Transaction return 
16. Value Chain 
Specific activities pass through a chain of specialist offering value E.g. softwares, Intel 
17. Cycle Profit 
Industries characterized by distinct and powerful cycle. The company can not control the cycle, but it works to maximize its position within the cycles grip. As capacity tightens the companies lead price increases, as capacity loosens, its lag price declines E.g. Dow Chemical, Toyota 
Capacity / Occupancy 
Return by unit produced 
18. After-Sales Profit 
The company's profit does not direct come from the sale of the product, but the after sale financing or services of the product E.g. General Electric, banking 
Basic offer 
After-sales offers 
Adrian Slywotzky and David Morrison, The profit Zone, 1998
Eduardo Larrain - Linkedin - Website 
26 
Business models have been studied for 30 years 
Traditional business models: trying to explain success with profit models 
19. New Product Profit 
As new products are introduced profit margins are high and growth rapid. As the product mature the profit margins fall 
Time 
Diffusion 
20. Relative Market Share Profit 
Companies with high market share tend to be more profitable. Large companies have price advantages due to manufacturing experiences and volume economies, such as purchasing capability and economies of scale 
Relative market share 
Return 
21. Experience Curve Profit 
Experience drives down the transactional cost 
Cumulated experience 
Unit cost 
22. Low Cost Business Design 
The company trives on reducing the cost per unit through cumulative experience E.g. Southwest Air, Dell, Internet as an channel distribution (fnac.com,…) 
Unit cost 
Traditional 
Low cost 
Adrian Slywotzky and David Morrison, The profit Zone, 1998
Eduardo Larrain - Linkedin - Website 
27 
Why study Internet-based business models? 
Two reasons 
i.The technological revolution increased exponentially the number of business models types: 
•Marginal cost of digital information comes closer to nothing 
•Long tail enables larger segmentation of customers 
•Better assets rotation can enable new businesses with low margin 
ii.After 30 years, we are better at understanding complex business models
Eduardo Larrain - Linkedin - Website 
28 
(i)The technological revolution (IT, Internet, biotechnologies, nanotechnologies,…) 
Ray Kurzweil video on TED, 2005 
The accelerating power of technology 
14’00-19’10
Eduardo Larrain - Linkedin - Website 
29 
Marginal cost of digital information comes closer to nothing 
Basic economics 
•… Though with the technological revolution, marginal cost of digital information comes closer to nothing 
•Moore law: “number of transistors on a chip doubles every 18 months” 
•In basic economics, price falls to the marginal cost which increases with production… 
Quantity 
Supply 
Demand 
Price 
Exhibit – Market supply and demand 
Quantity 
Marginal cost 
Average cost 
Price 
Exhibit – Costs of one company
Eduardo Larrain - Linkedin - Website 
30 
•The great power of the eBay business model is the fact that a small number of salaried employees and outsource partners can handle a huge and growing volume of business: 
•Doubling of transaction volume can be accomplished with relatively modest investments 
•Software and servers do the heavy lifting 
eBay Headquarters, San Jose California
Eduardo Larrain - Linkedin - Website 
31 
Long tail enables larger segmentation of customers 
Long tail 
•Long tail is about selling less of more: 
•They focus on offering a large number of niche products, each of which sells relatively infrequently 
•Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestsellers account for most revenues 
•Long Tail business models require low inventory costs and strong platforms to make niche content readily available to interested buyers 
Chris Anderson, The Long Tail, 2006
Eduardo Larrain - Linkedin - Website 
32 
•Amazon sells blockbusters products but also niche hard-to-find products (online book stores bring access to increased product variety) 
•Customer customization has enabled Dell to sell a large volume of products in small numbers 
Amazon warehouse, somewhere
Eduardo Larrain - Linkedin - Website 
33 
Better assets rotation can enable new businesses with low margin 
The only formula you need to know in this workshop! 
Formula of Return on Equity 
ROE = Net Income (R) / Equity (K) 
ROE = (R / K) * (Income / Income) * (Assets / Assets) 
ROE = (R / Income) * (Income / Assets) * (Assets / K) 
ROE = Gross Margin * Assets rotation * Financial lever 
•Technological revolution increase assets productivity decreasing the amount of assets immobilized
Eduardo Larrain - Linkedin - Website 
34 
Better assets rotation can enable new businesses with low margin 
Design to cost 
•Then, new business models with low margin can be designed and have the same return than more profitable activities 
•E.g. Logan, the low-cost brand new vehicle, was designed to be sold at 5 000€ (ultimately 8 000€ in France) 
Exhibit – Different business positioning with same ROE 
Gross Margin 
Assets rotation
Eduardo Larrain - Linkedin - Website 
35 
Better assets rotation can enable new businesses with low margin 
Pyramid base: targeting tier 5 population 
•Developing countries are inventing new business models in regions with very low purchasing power where populations where traditionally excluded from any economical business modeling. E.g. Tata vehicule costing 2 500€ even cheaper than Logan 
•4 billion people live with less than 1 500 USD per year 
C. K. Prahalad, The Fortune at the Botton of the Pyramid, 2006
Eduardo Larrain - Linkedin - Website 36 
Better assets rotation can enable new businesses with low margin 
Mobile banking case 
• Half population is unbanked worldwide leaving: 
• People with no official financial service to save or to borrow: 
• Unofficial lending rates range between 50% and 400% p.a, microfinance rates are 20-40% 
• One day per month is lost in Morocco to pay invoices 
• Enabling mass tax avoidance from States with low budgets 
• Raising the cost and complexity for companies t pay their employees 
• Though new mobile banking offer are emerging in developing countries. E.g. half public servant in Kenya 
are paid with mobile banking 
Sénégal 
Egypte 
Roumanie 
Côte d'Ivoire 
Djibouti 
Maroc 
Pologne 
Espagne 
France 
Moy. Afrique 
Pakistan 
Algérie 
Tunisie 
Russie 
Afrique du Sud 
Autriche 
Portugal Royaume-Uni 
Moy. UE 
Allemagne 
Mexique 
Inde 
Etats-Unis 
Canada 
Chili 
Chine 
Colombie 
Brésil 
Arménie 
Belgique 
Botswana 
Danemark 
Finlande 
Guatemala 
Guyane 
Irlande 
Jamaïque 
Kirghizstan Kenya 
Lesotho 
Namibie 
Nicaragua 
Ouganda 
Pays-Bas 
Suède 
Tanzanie 
Vietnam 
0% 
10% 
20% 
30% 
40% 
50% 
60% 
70% 
80% 
90% 
100% 
110% 
120% 
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 
Banked population 2008 
Mobile penetration 2008
Eduardo Larrain - Linkedin - Website 
Current trends 
37 
Other big trends in creating new Internet-based companies 
•Pyramid based strategy: create a business model based on people very low purchasing power 
•Blue ocean strategy: look for a new ocean rethinking differentiation and low-cost and go beyond industry boundaries 
•Cloning strategy: clone successful internet sites and replicate them in other countries 
•Lean startup strategy: helps you build a product that people want eliminating waste
Eduardo Larrain - Linkedin - Website 
38 
(ii) We are better at understanding business models 
One Business Model Canvas 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
What are the key elements of a business model 
39
Eduardo Larrain - Linkedin - Website 
40 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010 
A business model describes what makes an company unique looking from the value propositions to cost structure 
Key elements of a business model
Eduardo Larrain - Linkedin - Website 
41 
Cost-side 
Value-side 
A business model is an ecosystem 
Rationale beyond those key elements 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
42 
1 - The proposition value 
Definition and scope 
•The value proposition describes the bundle of products and services that create value for a specific customer segment 
•Value proposition is marketing territory: 
•It can be functional (solves a customer problem, physiological need,…), social (need to belong, status,…), emotional, relationship… 
•It is an aggregation of the benefits that a Company offers customers (solve a customer problem or satisfies a customer need) minus sacrifices (price, technical process when buying or when recycling, travel time,…) 
•It is a unique combination of benefits and sacrifices 
•It is not a list of products and services, technologies or distribution channels 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
43 
1 - The proposition value 
Elements that can contribute to customer value creation 
•Newness: some value propositions satisfy an entirely new set of needs that customers previously didn’t perceive because there was no similar offering. E.g. mobile phones, ethical investment funds 
•Performance: improving product or service performance. E.g. bringing more powerful PC, more disk storages and better graphics 
•Customisation: tailoring products and services to the specific needs of individual customers. E.g. mass customisation 
•Getting the job done: helping a customer get a certain job done. E.g. Rolls-Royce airline engines. 
•Design: a product may stand out because of superior design. E.g. fashion and customer electronics 
•Brand/Status: customers may find value in the simple act of using and displaying a specific brand. E.g. Rolex 
•Price: offering similar value at a lower price e.g. Bic 
•Cost reduction: helping customers reduce costs 
•Risk reduction: reducing risks customers incur. E.g. giving a one-year service guarantee 
•Accessibility: making products and services available to customers who previously lacked access to them. E.g. NetJets popularized the concept of fractional private jet ownership, RIP Merrill Lynch bring Wall Street to Main Street in the 60s 
•Convenience/Usability: making things more convenient or easier to use. E.g. iPod. 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
44 
1 - The proposition value Defining a promise helps understanding the proposition value 
Defining the promise or tagline 
•The promise is not only advertising territory but it shapes all the business model 
•A good promise or tagline must not only deliver a clear message but also advertise an offering truthfully 
•A good way to test the effectiveness and strength of a strategy is to look at whether it contains a strong and authentic promise or tagline 
•The promise can still be simple and concise even for large international and complex companies 
•Zara (Inditex) promise is “fast-fashion” which has shaped all the company operations 
•What are the promise of those companies? 
•Starbucks 
•Ikea 
•Easyjet / Ryanair 
•Toyota 
•Lego 
•Danone 
•Yves Rocher
Eduardo Larrain - Linkedin - Website 
45 
•Starbucks promise ?
Eduardo Larrain - Linkedin - Website 
46 
•Starbucks promise: a “third space” of conviviality between home and work
Eduardo Larrain - Linkedin - Website 
47 
1 - The proposition value Defining a promise helps understanding the proposition value 
Company promise or tagline 
•What are the promise of those companies? 
•Starbucks 
•Ikea 
•Easyjet / Ryanair 
•Toyota 
•Lego 
•Danone 
•Yves Rocher 
•A “third space” of conviviality between home and work 
•Functional home furnishing, low price and design 
•Simple airline flights at low price faster than the car 
•Auto reliability 
•Learning though the joy of building 
•Health through food and beverages to a maximum number of people 
•Beauty based on plants 
Denis Dauchy, 7 étapes pour un business model solide, 2010
Eduardo Larrain - Linkedin - Website 
48 
1 - The proposition value The proposition value has to take into account all customers 
Two customers 
•Most of the time, the buyer is not the user of the product or service 
Customer 1 
Customer 2 
Mass-market products or services 
Distributor 
Final consumer 
Services to corporations (food, transportation,…) 
Company 
Employees 
This workshop 
You! 
Companies and funds 
Pharmaceutical drugs 
Prescriber (dentist, general practitioner GP,…) 
Patients, social security 
Denis Dauchy, 7 étapes pour un business model solide, 2010
Eduardo Larrain - Linkedin - Website 
•Companies have long engaged in head-to-head competition in search of sustained, profitable growth 
•Yet in today’s overcrowded industries, competing head-on results in nothing but a bloody ”RED OCEAN” of rival fighting over a shrinking profit pool 
•This strategy is unlikely to create profitable growth in the future 
•Leading companies will succeed not by battling competitors but by creating “BLUE OCEANS” of uncontested market space ripe for growth
Eduardo Larrain - Linkedin - Website 
50 
1 - The proposition value Differentiate from competitors or innovate within the value 
Red Ocean Strategy vs. Blue Ocean Strategy 
•Similar to Michael Porter definition of strategy as a differentiation plan, Blue Ocean Strategy aims at changing the proposition value to gain profitable growth 
•Red oceans will continue to be an important part of a company’s strategy (a lot of tools and framework already exists) but invest in blue oceans will create profitable growth 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
51 
1 - The proposition value Differentiate from competitors or innovate within the value 
Four questions to challenge an industry’s strategic logic and business model 
•First, capture the current state of play in the known market space in order to understand competition and the principal factors (price, quality, design…) 
•Second, reconstruct buyer value elements trading-off between differentiation and low-cost 
•E.g. is the company over delivering without payback? (typical of a company caught in the Red Ocean) 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
52 
•In the 80s, Circus was a declining industry with decreasing audiences because of increasingly attractive alternative forms of entertainment 
•There were star performers but none could compete with movie stars, multiple show arenas and a audience of families 
•There was also increasing sentiment against the use of animals in circuses by animal rights groups 
•Cirque du Soleil launched in 1984 and is now one of Canada’s largest cultural exports. Why?
Eduardo Larrain - Linkedin - Website 
53 
1 - The proposition value Cirque du Soleil created a new value curve offering the best of both circus and theater and eliminating or reducing everything else 
Cirque du Soleil canvas 
•By offering unprecedented utility, Cirque du Soleil has created a blue ocean and has invented a new form of live entertainment, one that is markedly different from both traditional circus and theater 
•Cirque du Soleil strategically priced its tickets against those of the theater because it attracted an adult theater audience 
•Cirque du Soleil tagline is: ”a mix of circus arts and street entertainment” 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
54 
•With which industry do Southwest airlines compete? 
•In what do they focus, in what they differ and what are they tagline?
Eduardo Larrain - Linkedin - Website 
DIVERGENCE 
FOCUS 
55 
1 - The proposition value Southwest airlines created a new curve offering high-speed transport with frequent and flexible departures at prices attractive to the mass of buyers 
Southwest Airlines canvas and the low-cost model 
•Southwest Airlines created a blue ocean by breaking the trade-offs customers had to make between the speed of airplanes and the economy and flexibility of car transport 
•Southwest emphasizes only three factors (focus) and differentiate on four others factors from the industry’s average profile (divergence) 
•Southwest promise or tagline: “the speed of a plane at the price of a car… whenever you need it” 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
56 
•With which industry do Logan compete? 
•In what do they focus, in what they differ and what are they tagline?
Eduardo Larrain - Linkedin - Website 
57 
1 - The proposition value Logan created a new curve offering a new car for the price of an used-car 
Logan canvas 
•Logan promise or tagline: “for the price of an used-vehicule, have a new car” 
•Similarly, Amazon launched Marketplace not only to compete with second-hand cultural goods marketplace like eBay but to close the gap between new and second items 
Price 
Spaciousness 
Garanty 
Resistance 
Design 
Accessories 
Status 
Low price new vehicule 
Used-vehicule 
Logan 
DIVERGENCE 
FOCUS 
High 
Low
Eduardo Larrain - Linkedin - Website 
Definition and scope 
58 
2 – Revenue stream 
•Revenue stream is the cash a company generates from each customer segment 
•A business model can involve two different types of Revenue streams: 
•Transaction revenues resulting from one-time customer payments 
•Recurring revenues resulting from ongoing payments to either deliver a Value proposition to customers or provide post-purchase customer support
Eduardo Larrain - Linkedin - Website 
Ways to generate revenue streams 
59 
2 – Revenue stream 
•Asset sale: selling the ownership rights to a physical product. E.g. Amazon selling a book 
•Usage fee: selling the use of particular service. E.g. A telecom operator charging by the minute 
•Subscription fee: selling continuous access to a service. E.g. Club Med Gym, WOW/World of Warcraft online 
•Lending/Renting/Leasing: temporary granting someone the exclusive right to use a particular asset for a fixed period in return for a fee. E.g. Autolib 
•Licensing: giving permission to use protected intellectual property in exchange of licensing fees. E.g. media industry 
•Brokerage fees: intermediation services performed on behalf of two or more parties. E.g. credit cart providers, real estate agents 
•Advertising: fees for advertising a particular product, service or brand. 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Pricing mechanisms 
60 
2 – Revenue stream Each revenue stream might have different pricing mechanisms 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
How do you set a price 
61
Eduardo Larrain - Linkedin - Website 
62 
Price is determined by what a buyer is willing to pay and the competition is allowing to be charged (not by markup on cost) Price is determined by strategy
Eduardo Larrain - Linkedin - Website 
Pricing strategy depending of the product life cycle 
63 
2 – Revenue stream Reminder 
•Product introduction: 
•Market skimming strategy setting up a very high price . E.g. Electronic goods, luxury 
•Or Penetration strategy: real low price even below cost to gain market share 
•Growth: decrease price because of volume 
•Maturity: decrease price because of competition 
•Decline: special offer because price is the main factor of value 
Chris Anderson, Free the future of a radical price, 2009 
Milton Friedman, There's no such thing as a free lunch,1975
Eduardo Larrain - Linkedin - Website 
How can a product be free 
64
Eduardo Larrain - Linkedin - Website 
Definition and scope 
65 
2 – Revenue stream 
Introduction to Free 
•Free is giving without a cost… all included 
•Free is not to be mistaken with “free” used by advertisers when it’s not really free: 
•Free “buy one get one free” is just another way of saying 50 percent off when you buy two 
•Free gift inside 
•Free shipping 
•Basic economics: there's no such thing as a free lunch 
•The "free lunch“ refers to the once-common tradition of saloons in the United States providing a "free" lunch to patrons who had purchased at least one drink. All the foods on offer were high in salt (e.g. ham, cheese and salted crackers) so those who ate them ended up buying a lot of beer. 
•You can make money on free (revenue stream) but also free can lead to fast growth: 
•Before the 2000’s, Dell was known to be the first company to have reached one billion sales after been launched in less than 10 years 
Chris Anderson, Free the future of a radical price, 2009 Milton Friedman, There's no such thing as a free lunch,1975
Eduardo Larrain - Linkedin - Website 
The penny gap theory 
66 
2 – Revenue stream Introduction to Free 
•The penny gap is the difference between cheap and free 
•For small payments, there is not a constant elasticity in price 
•Zero is one market and any other price is another market 
•Zero can attract lots of people because from the consumer’s perspective charging even a penny makes us think about the choice 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
The economics of abundance (vs. scarcity) 
67 
2 – Revenue stream 
Introduction to Free 
•Digital technologies have become too cheap to meter creating a economy of abundance (e.g. information) 
•Digital free theory: 
•“If it’s digital, sooner or later it’s going to be free” 
•“When something halves in price each year, zero is inevitable” 
•“Waste is good” 
•“Every abundance creates a new scarcity” (e.g. time) 
•Though, externalities for the consumer still exist: technical process when buying or when recycling, travel time,… 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
4 revenue streams around: first two been very old but evolving and the last two are emerging with Internet 
68 
2 – Revenue stream Introduction to Free 
A.Direct Cross-Subsidies: give a free product that have high probability to make people pay for something else 
B.The “three-parties” (or two-sided markets): one customer segment subsidizes another (the most common) 
C.Freemium: premium paid version 
D.Non-monetary markets: people choose to give away with no expectation of payment 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Definition and scope 
69 
2 – Revenue stream A – Direct Cross-Subsidies 
•This is the oldest and most familiar model where the cost of one product is shifted into the price of another 
•Free attracts customer in masses. Then cross-selling or up-selling validate the business model: 
•Give a product (equipment) and sell a service (maintenance) or another product (supplies) 
•Key success factor is the increase the equipment rate with products with better profitability 
•It has other names: Gillette and razor blades, Equipment and Supplies, Equipment and Maintenance 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
70 
2 – Revenue stream A – Direct Cross-Subsidies 
How can you sell airlines tickets far under cost? « People pay attention on ticket price not on the extra’s » 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Famous examples of direct-cross subsidies 
71 
2 – Revenue stream A – Direct Cross-Subsidies 
Free or far under cost 
Where the money comes from 
Companies 
Printer 
Ink 
Printer manufacturer 
Coffee machine 
Capsules 
Nespresso 
Razor 
Razor blades 
Gillette 
Real estate loan, credit card, savings account 
Cross-selling because customer is stuck with the same bank for 20/30 years 
Retail banks 
Airline ticket 
Hotel room, rental car, cruise and vacation package 
Go Voyages, airline companies 
Elevator 
Maintenance and security upgrades 
Elevator companies 
Alarms 
Electronic surveillance 
Security companies 
Equipement 
Reagent supplies 
Medical biology companies 
Telephone 
Communications 
Carrier
Eduardo Larrain - Linkedin - Website 
More examples of direct-cross subsidies 
72 
2 – Revenue stream A – Direct Cross-Subsidies 
• Give away services, sell products (Apple Store Genius Bar Tech support) 
•Or Give away products, sell services (free gifts when you open a bank account) 
•Give away software, sell hardware (IBM and HP’s linux offerings) 
•Or Give away hardware, sell software (video game console model) 
•Give away cell phones, sell minutes of talk time (many carriers) 
•Or Give away talk time, sell cell phones (many of the same carriers, with free nights and weekend plans) 
•Give away the show, sell the drinks (strip clubs) 
•Or Give away the drinks, sell the show (casinos) 
•Free with purchase (retailer “loss leaders” e.g. gas sold in a supermarket) 
•Free samples (gift boxes) 
•Free trials (magazine subscriptions) 
•Free parking (malls, supermarkets) 
•Free condiments (restaurants) 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Definition and scope 
73 
2 – Revenue stream B – Three-parties or Two-sided markets 
•A third party pays participate in a market created by a free exchange between the first two parties. Thus one customer segment subsidizes another 
•The most common of the economies built around free is the three party system 
•Advertising is the most famous one where advertisers pay for media to reach consumers: 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Markets with three-parties revenue stream 
74 
•Three-parties is not limited to advertising 
Denis Dauchy, 7 étapes pour un business model solide, 2010 
Market 
First-party 
Consumer 
Third-party 
Second-party 
examples 
Search 
Internet user 
Advertisers 
Google, Yahoo! 
Online recruitment 
Job seeker 
Recuiters 
Monster, cadreemploi, keljob 
Free newspapers 
Readers 
Advertisers 
Metro, 20 Minutes 
Free softwares 
Readers 
Software publisher 
Adobe 
Debit card 
Card owners 
Retail 
Banks 
Ecommerce platform 
Sellers 
Buyers 
eBay, Amazon marketplace 
Outdoor advertising 
Municipalities 
Advertisers 
JC Decaux, Clear Channel 
2 – Revenue stream 
B – Three-parties or Two-sided markets
Eduardo Larrain - Linkedin - Website 
More examples of three-parties 
75 
•Give free voice calling (in the US), charge advertisers (Facebook Messenger app) 
•Give away content, sell access to the audience (ad-support media) 
•Give woman free admission, charge men (bars) 
•Give children free admission, charge adults (museums) 
•Give away listings, sell premium search (match.com) 
•Sell listings, give away search (craigslist housing) 
•Give away travel services, get a cut of rental car and hotel reservations (travelocity) 
•Give away house listings, sell mortgages (Zillow) 
•Give away content, sell information about the consumers (practice fusion) 
•Give away content, sell stuff (Thinkgeek) 
•Give away content, charge advertisers to be featured in it (product placement) 
•Give away resume listings, charge for power search (Linkedin) 
2 – Revenue stream 
B – Three-parties or Two-sided markets 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Definition and scope 
76 
2 – Revenue stream 
C – Freemium 
•Freemium is giving a free basic version to most of people and charging for a premium version to a few people 
•Freemium or contraction of Free and Premium was invented by Fred Wilson in 2006. 
•Freemium is different with direct-cross subsidiaries because the ratio of free to paid is high (e.g. 90%, 95%) when giving free sample has a low ratio 
•This ratio is enabled by Internet because the cost of serving the basic version is close to zero 
•Si it’s not the same thing as "premium with a free sample.“ 
•Freemium is one of the most common Internet-based business model even though not every product or service can work as freemium 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
Different kind of limitation of the basic free version 
77 
2 – Revenue stream 
C – Freemium 
•Functionnalities 
•e.g. Linkedin, Flickr, Skype, Evernote, WordPress 
•Time 
•e.g. legal online streaming 
•Capacity 
•e.g. sending large files, DropBox (cloud backup system) 
•Storage 
•e.g. webmails 
•Others factors 
•e.g. 
•Spotify and Gmail invitations 
•Seat limited (first customers get free seats) 
•Customer type limited: free for small and young companies, universities (licence model)
Eduardo Larrain - Linkedin - Website 
Why go for Freemium business model? 
78 
2 – Revenue stream 
C – Freemium 
•Marketing: 
•By definition, having a free product makes it really easy to get customers 
•Even though a free user might not convert, they can invite other free users who might (referral) 
•Network effects (like fax): 
•A network effect is what happens when a product or service becomes more valuable the more people use it 
•A phone isn't very useful if you can't call anyone else with it. But once everyone you know has a phone, it becomes a pretty valuable thing to have 
•If you're in a market that lends itself to network effects you're going to want to have a free basic product because if you don't someone else will and will use the network effects to crush you 
•E.g. Skype has 600 million users who make calls for free over the internet and only a small percentage of those pay to make calls to landlines 
Business Insider, What Is The Freemium Business Model, 04/2011
Eduardo Larrain - Linkedin - Website 
Key success factors (if not, choose another business model) 
79 
2 – Revenue stream C – Freemium 
•Get lots and lots of free users: 
•Freemium is a numbers game: if only 1% of your users are going to pay you, then you need to have lots and lots of free users (millions, typically) to make that 1% enough money 
•If your product is more niche, go for premium instead of freemium 
•If your product is not sticky, go for advertising instead of freemium 
•Have a product or service whose value to users increases with time: 
•This is the biggest thing that most people 
•The value of your service needs to increase the more people use it 
•E.g. Spotify: where you create all your playlists and organize your music. Once you've done thatyou're much more likely to pay up. The value of Spotify to you has gone up from being just music to music, your playlists and your friends' playlists, so paying starts to make sense 
•Keep costs low: 
•Freemium works because the marginal cost of each additional user is low, so you need to keep your operating costs correspondingly low 
•Time: 
•It takes a long time to be profitable because users take longer to convert as the value of the product to them increases over time, and because you keep adding (hopefully) new free users, freemium businesses take a long time to reach breakeven point 
•As people get older, people migrate into paying customer (premium part of freemium) because they get richer 
Business Insider, What Is The Freemium Business Model, 04/2011
Eduardo Larrain - Linkedin - Website 
Examples of freemium 
80 
•Give away basic information, sell richer information in easier-to-use form (BoxOfficeMojo) 
•Give away generic management advice, sell customized management advice (McKinsey) 
•Give away Web content, sell printed content (everything from magazines to books) 
•Give away online games, charge a subscription to do more in the game (penguins) 
•Give away demo software, charge for the full version (most video games) 
•Give away computer-to-computer calls, sell computer-to-phone calls (Skype) 
•Give away free photo-sharing services, charge for additional storage space (Flickr) 
•Give away basic software, sell more features (QuickTime) 
•Give away ad-supported service, sell the ability to remove the ads (Ning) 
•Give away "snippets" sell books (Google Books) 
•Give away virtual tourism, sell virtual land (Second Life) 
Chris Anderson, Free the future of a radical price, 2009 
2 – Revenue stream C – Freemium
Eduardo Larrain - Linkedin - Website 
Definition and scope 
81 
2 – Revenue stream 
D – Nonmonetary markets 
•People give away content with no expectation of Payment 
•Gift economy is based on the principle that the action of individuals have a global impact 
•People give for different reasons: to gain reputation e.g. blog writers, altruism e.g. Wikipedia or unintentionally/passively (web content helps Google) 
•Labor exchange: paying something with labor even without knowing it 
•E.g. free content in exchange of Captcha solving (used by spammer in exchange of free porn but also used by Google Street view to decipher street numbers, names and trafic signs) 
•E.g. voting on Digg, Yahoo Answers or using Google 411 (phone directory in exchange of speech sound) 
•Piracy: when piracy is so powerful that content producer have accepted that, form them, doing the activity is not a moneymaking business 
•E.g. online music 
Chris Anderson, Free the future of a radical price, 2009
Eduardo Larrain - Linkedin - Website 
82 
•Google is getting the public to identify house numbers and signs from Street View photos as part of its reCAPTCHA anti-spam technology and feeding the data into its online mapping service
Eduardo Larrain - Linkedin - Website 
Answers to reCAPTCHA challenges are used to digitize textual documents 
83 
reCAPTCHA is a free CAPTCHA service that helps to digitize books, newspapers and old time radio shows 
OCR: Optical Character Recognition programs 
Example of a CAPTCHA 
Comparison of the accuracy of standard OCR versus reCAPTCHA transcriptions
Eduardo Larrain - Linkedin - Website 
84 
Features with poor usability can be an opportunity for revenues 
CAPTCHA can also be used for advertising and generate revenues 
Adyoulike
Eduardo Larrain - Linkedin - Website 
Popular revenue streams among top Internet companies 
85 
2 – Revenue stream 
Popular revenue streams among top Internet companies 
•Freemium: Zynga, Rovio, Linkedin, Spotify, Dropbox, SurveyMonkey, Eventbrite, Tumblr, Evernote, Skype 
•Advertising: Google, Facebook, Twitter, Craiglist, Criteo, Path 
•Marketplace: Amazon, Alibaba, Venteprivee, ZocDoc, TaskRabbit, Airbnb 
•Ecommerce: Groupon, LivingSocial, Foursquare, Hulu 
•Others: 
•Premium: The New York Times, Les Echos 
•Crowdsourcing/Crowdfunding: Kickstarter, Kaggle 
•Digital money: Starbuck, Paypal … Datamining and big data at the heart of the Data revolution: Shazam, Meilleursagents, Trulia, Zillow, Kel Quartier
Eduardo Larrain - Linkedin - Website 
86 
•How’s the music industry going?
Eduardo Larrain - Linkedin - Website 
2 – Revenue stream 
Looking at the music industry 
Global recorded music sales are decreasing since end of the 90’s due to digital piracy 
Exhibit – Global Recorded Music Sales (bn USD, trade value) 
IFPI, press report, 2014 
Synchronization rights: revenues from music acquired for movies, advertisements and music videos 
2013: -0,1% excl. Japan
Eduardo Larrain - Linkedin - Website 
88 
2 – Revenue stream 
Looking at the music industry 
Music downloads still accounts for 67 per cent of digital music revenues 
•Piracy has made difficult of charging a price for listening songs or albums 
•Though consumers still find value in downloads from iTunes Music Store, FnacMusic and others because of the sacrifices of the free music downloaded illegally (quality, security, complexity, accessibility…) 
•Even if downloads of music from iTunes Store and others still account for 80 per cent of digital music revenues, this market is maturing and spending is flattening in all key territories
Eduardo Larrain - Linkedin - Website 
89 
2 – Revenue stream Looking at the music industry 
Streaming and downloads make the digital proposition value 
•Consumers are finding great value in: 
•Having access to millions of songs (sellouts are impossible) 
•Creating and sharing playlists 
•Listening to music in on all devices everywhere (accessibility = cloud storage, remember Philipp comment on the “head” part of the long tail) 
•Listening to music even offline 
•Sharing his songs and getting recommendation on social networks 
•Fremium streaming music services such as Spotify will be the key growth drivers over the next years as usage and spending grow rapidly: 
•Spotify Open: free but limited in number of songs and number of hours 
•Spotify Unlimited: a monthly fee limited on a laptop 
•Spotify Premium: a monthly fee for listening to music in on all devices and even offline 
•All Spotify offers enable users to share easily on social networks such as Facebook:
Eduardo Larrain - Linkedin - Website 
•Music revenues are increasing the Swedish music industry market due to digital sales 
•Streaming is even cannibalizing downloads in Sweden that only represent 6% of digital sales 
•Music licensing for online videos is a growing market as more and more people watch videos that are accompanied by music 
90 
2 – Revenue stream 
Looking at the music industry 
Music streaming business model is already the largest market in Sweden, a country with a robust culture of Internet piracy 
IFPI Svenska Gruppen, press report, 07/2013
Eduardo Larrain - Linkedin - Website 
91 
2 – Revenue stream 
Looking at the music industry 
Digital recorded music is expected to overtake physical sales in 2015 
PwC, Global Entertainment & Media Outlook, 2012
Eduardo Larrain - Linkedin - Website 
•11 M song tracks (stock) in 2001, 100 M in 2010 (Gracenote/Sony db > Shazam db) 
•Growth of the Gracenote database obviously includes a lot of older music that has only recently been indexed and that is been rediscovered 
–E.g. Oscar Wilde - Los Vidrios Quebrados (1967) 
•The trend still looks like the amount of music available to consumers is steadily growing 
•At the other side, overall sale of music (including albums, singles, digital tracks,…) exceeded 1.5 billion transactions in 2010 (up from 845 million transactions in 2000) 
92 
2 – Revenue stream 
Looking at the music industry 
What about content production and consumption? The amount of content being produced and consumed in music is believe to be growing 
Floor 64, The Sky Is Rising, 01/2012
Eduardo Larrain - Linkedin - Website 
•Psy with its Gangnam Style song, viewed more than 1 billion times, would never had been a success outside South Korea without Youtube 
–It generated 8 M USD from advertising (50/50 split) 
•Ticket prices and merchandise have become major sources of income for many popular rock stars like Lady Gaga, Madonna, Bruce Springsteen and for bands like U2 
•It’s not easy to duplicate the experience of a live show, so concerts have become a source of revenue for musicians and aren’t negatively affected by the availability of free downloadable music - in fact, free music can encourage fans to attend live performances 
•There’s actual scarcity for live music 
•Other trends: 
–Algorithms may be replacing humans in some parts of discovering new talent (or at least discovering talent more cost-effectively) 
–Gracenote, Shazam,… are datamining music metadata in order to serve better music recommendations to consumers or to predict which artists will be popular with target demographic groups 
93 
2 – Revenue stream 
Looking at the music industry 
What about musicians revenues? 
Floor 64, The Sky Is Rising, 01/2012
Eduardo Larrain - Linkedin - Website 
94 
2 – Revenue stream 
What has the Entertainment industry learned from the Music industry? 
Some Entertainment industries have found new business models successful with the Digital era, others no… well not yet… thus a business model challenge 
IFPI, press report, 2012 
•For consumers, today is an age of absolute abundance in entertainment due to the digital era and piracy 
•New business models based on Digital sales are emerging in each Entertainement industry to take over decreasing physical sales
Eduardo Larrain - Linkedin - Website 
95 
2 – Revenue stream 
What has the Entertainment industry learned from the Music industry? 
PwC, Global Entertainment & Media Outlook 2012-2016, 2012 
Though not all new business models can be based on Advertising since advertising is a huge but finite market and volatile (reliant on the economic situation )
Eduardo Larrain - Linkedin - Website 
96 
•Has the internet decimated the entertainment industry, or are we living in a new gold age for both content creators and consumers? 
•Entertainment spending per households as a function of income is increasing from 4.9% in 2000 to 5.6% in 2008 (US) 
•The amount of content being produced in music, movies, books and video games is believe to be growing: 
•1/4 M new books were available in 2002, 3 M in 2010 
•1.700 new movies p.a. in 1995, 7.000 in 2009 
•11 M song tracks (stock) in 2001, 100 M in 2010 (Gracenote db) 
•The Entertainment industry is growing though the value chain is being totally redesigned 
Floor 64, The Sky Is Rising, 01/2012
Eduardo Larrain - Linkedin - Website 
•How’s the video game industry going?
Eduardo Larrain - Linkedin - Website 
•Globally, the amount that consumers spend on video games - for hardware, software and accessories - has grown from about $20 billion in 2000 to approximately $70 billion in 2011 
•The demographics of video game players has expanded greatly beyond the traditional core of boys and young men: 
–53% of game players are male and 47% female 
–Average gamer player age is 30 
–The amount of time kids are spending on video games has grown from 26 minutes per day in 1999 to 1 hour and 13 minutes in 2009 due to mobile device that has allow kids to squeeze more playing time into their busy days (Kaiser Family Foundation survey) 
•Worldwide, the population of gamers has exploded from 250 million in 2008 to 1.5 billion in 2011 
98 
2 – Revenue stream 
Looking at the video game industry 
Video games sales have grown with the digital revolution and cross the barrier of gender and age limitations 
Floor 64, The Sky Is Rising, 01/2012
Eduardo Larrain - Linkedin - Website 
•The traditional console business model, based on the installed based per the attach rate (number of games per owner), led to an elitist approach to game design since price of each game was high (40-60 USD) and hardcore gamers wanted a return for their investment 
•New video games digital segments have emerged: 
–Downloads: Steam is to games as iTunes is to music 
–Massively Multiplayer Online (MMO) e.g. World Of Warcraft 
–Online / Casual 
–Mobile 
–Social 
•Digital sales (and rental delivery) now generate 40% of the industry 
99 
2 – Revenue stream Looking at the video game industry 
Purchases of digital content are growing the video games industry 
ESA, Essential Facts about the computer and the video game industry, 2012
Eduardo Larrain - Linkedin - Website 
•Piracy of video games has fewer benefits than music and movie piracy: Piracy is an issue for single-player mode though the primary reason people buy games retail is for the multiplayer modes: 
–Most pirated games do not allow for multiplayer as the game often has to connect to an official server where its legitimacy can easily be verified by some sort of authentication service 
•Steam is to games as iTunes is to music: 
–Steam is a digital distribution, digital rights management, multiplayer and communications platform 
–Steam has an estimated 70% share of the digital distribution market for video games (competitor: EA’s Origin) 
–One PC game out of three is downloaded (average price not much lower than retail: -7%) 
–Steam is developed by Valve Corporation best known for a number of popular entertainment franchises such as Counter-Strike, Half-Life, Left 4 Dead 
100 
2 – Revenue stream Looking at the video game industry 
Looking at the video game download business model 
2011 top-selling games at retail ranked by unit sales (VGChartz)
Eduardo Larrain - Linkedin - Website 
•Massively Multiplayer Online game are video games in which a large number of players engage simultaneously in a persistent world 
•Value of an MMO is in the size of the community per life time (retention) 
•The hardcore game MMO revenue stream was invented by World of Warcraft: 
–Average customer lifetime of 18 months 
–Client box or download (50 USD) 
–Subscription fees (15 USD/m) 
–Virtual goods 
–Average full cost to complete WoW for a gamer is 300 USD 
•Few MMO have been able to replicate WoW model so they switch to F2P to lower entry barrier and get a sizable community e.g. Habbo Hotel, Kart Rider, Warhammer, Everquest,… 
–Average customer lifetime of 6 months 
–Free trial or free game 
–Subscription optional 
–Virtual goods for actions items (competition) and personalisation (expression) 
•Theory of engagement: « the longer a user plays the more chances there are he buys virtual items » 
–Items payable through micro-payments mainly inside the game (60%) and on an external web site 
101 
2 – Revenue stream Looking at the video game industry 
Looking at MMO business models 
Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
Eduardo Larrain - Linkedin - Website 
•Online casual games are games played online to “kill time, make a pause, relieves from stress”: 
•Free-to-Play (F2P) is the main business model (also for social games and some mobile games) 
•F2P is a freemium business model that can be based on: 
–Try-and-buy: limited access (time, levels,…), though games must be really addictive 
–Advertising with ads display on hosting sites or inside the game 
–Virtual goods 
102 
2 – Revenue stream 
Looking at the video game industry 
Looking at the online casual business model 
Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
Eduardo Larrain - Linkedin - Website 
•Ten of thousands of mobile games for smartphones and tablets can be download on platforms such as the Appel App Store, Android MarketPlaces (Google Play), Amazon, Facebook Mobile and Playstation Suite 
•Distribution is bypassing carriers: 30/70 meaning the game app developer get 70% of sales revenue (vs. 45/55 in cell phone business) 
–An opportunity for mobile banking? 
•Mobile video game revenue stream is based on: 
–Average customer lifetime of 2 months 
–Selling the app (e.g. at 0.99 cent or F2P model) 
–Selling virtual goods 
–A little of advertising (average of 15%): 
•Offer walls 
•Sponsoring 
103 
2 – Revenue stream 
Looking at the video game industry 
Looking at the mobile video game business model 
Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
Eduardo Larrain - Linkedin - Website 
•Social games are those games played primarily on social networking sites or games that can be played with a person’s real world social graph 
–E.g. CityVille, FarmVille (Zynga), EA (Sims) 
•Social video game revenue stream is based on: 
–F2P model with a logic of a massive audience 
–Virtual goods (50%) 
–Advertising (25%) 
–Lead-generation offers (25%): virtual currency incentives by marketers to social gamers in exchange of signing up for subscriptions, participating in surveys, or buying goods and services 
–Since virality is a key to success, notifications, invitations, sharing, gifting and other social network tools are used extensively to get new customers 
–Social games must work with a low retention rate (first day retention rate of 30% is a “huge success”) 
104 
2 – Revenue stream 
Looking at the video game industry 
Looking at social games 
Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
Eduardo Larrain - Linkedin - Website 
105 
2 – Revenue stream 
Looking at the video game industry 
Looking at the e-sports business model 
•Twitch launched 3 years ago borne out of Justin.tv, the largest online community to live streaming service to enable streaming video service embedded into popular games 
•Twitch provide instant broadcasting of user gameplay: 23 million unique viewers per month, viewers watched 6 billion minutes viewed in December 2012, average session time of 1.5 hours 
•Twitch is getting embedded in games such as Call Of Duty: Black Ops 2 
•Twitch business model is based on sharing advertising revenue with broadcaster and in growing the e- sports market e.g. Twitch has announced a new scholarship of $50,000 to five student gamers
Eduardo Larrain - Linkedin - Website 
•“Gamification” trend meaning that video games are no longer restricted to leisure: 
–Every part of our lives will eventually be turned into a game 
–Potentially encourage people to change their behavior to: 
•Benefit the environment 
•Perform their jobs better 
•Lose weight 
•Buy products 
•Perform almost any task imaginable 
•Games are even encroaching into vocational education 
106 
2 – Revenue stream 
Looking at the video game industry 
What’s next for the game industry?
Eduardo Larrain - Linkedin - Website 
•Two business models: 
–Based on subscriptions such as Vimeo 
•150.000 paying subscribers in 2010 
–Based on advertising such as Youtube 
•400 M USD of adversitiving revenues in 2010 
•Online videos are also a substantial traffic driver to social networking (e.g. Facebook) 
107 
2 – Revenue stream 
Short focus at online video services 
Purely online video services are not yet collecting revenues at the same scale as the traditional TV and films industries, but the size of this audience is unquestionnably large
Eduardo Larrain - Linkedin - Website 
•How’s the book publishing industry going?
Eduardo Larrain - Linkedin - Website 
•Consumer and educational book publishing will increase by 0.6 percent compounded annually to 116 bn USD in 2016 from 112 bn in 2011 
–E-books grow their share of global spending from 5% in 2011 up to 18% in 2016 
–Print/audio consumer and educational books will continue to decline throughout the forecast period notably paperback books (“livres de poche” in French) 
•Publishers will need to provide eBooks in addition to paperbacks and the entire value process will be changing, from aggregation right to distribution 
•Piracy less likely to impact digital sales like in the music industry: demographic groups that are most often associated with digital piracy (generally men between 20 and 39 years old) and not the same than those associated with high-volume reading of mass market books (in general women age 40 and older) 
•New intermediaries are emerging to handle eBooks: 
–eBook platform (e.g. mass aggregators such as Amazon, Apple, and Google) 
–Handling of payments 
–Support for digital conversion 
–Establishment of a digital content system 
109 
2 – Revenue stream 
Looking at the book publishing industry 
Sales of e-books expected to compensate the decline of the physical books 
PwC, Turning the Page - The Future of eBooks, 2010
Eduardo Larrain - Linkedin - Website 
•Apps and special eBook editions enriched with music and video 
–Notably for educational and juveniles segment e.g. Byook start-up http://youtu.be/O_pBNPe3s-M 
•Sales of individual chapters and sections from books 
•Offer additional content such as a blog/forum dedicated to a chapter or sentence, immediate definition of a word, links to other content (news/other authors),… 
•Easier to sell updates 
•Books on demand 
•Easier to sell porn and erotic fiction 
•Establish basic contracts with university libraries to offer free eBooks for students or offer special editions exclusively to students for a discounted price 
•Providing online reviews (non-monetary action is posting a review at Amazon website) 
110 
2 – Revenue stream 
Looking at the book publishing industry 
New revenues streams are emerging and changing current business models 
PwC, Turning the Page - The Future of eBooks, 2010
Eduardo Larrain - Linkedin - Website 
•In 2010, 4 million new titles were published with 92% of those being “non-traditional” i.e. self-publishing and books representing the reuse of content, most of it not covered by copyright 
•Non-traditional books are largely on demand titles produced by reprint houses specializing in public domain works and by presses catering to self-publishers and micro-niche publications 
•Non-traditional titles are marketed primarily on the Web 
111 
2 – Revenue stream Looking at the book publishing industry 
Non-traditional book publishing on the internet is 8X the output of traditional book publishing 
Bowker, ISBN Output 2002-2011, 2012 
Non-traditional numbers are undersestimated since books with no International Standard Book Numbers (ISBN) are not included
Eduardo Larrain - Linkedin - Website 
The traditional business model of book publishing 
112 
2 – Revenue stream What’s the business model of self-publishing? 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
A new business model by lulu.com 
113 
2 – Revenue stream 
What’s the business model of self-publishing? 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
•World population continues to grow 
•Literacy rates are increasing 
•Developing nations are taking advantage of the lower infrastructural costs of ebooks 
•Number of books per inhabitant is low in developing countries because books are much more expensive than in France and hardcover book piracy is high 
114 
2 – Revenue stream Looking at the book publishing industry 
The best opportunity for the book publishing market is volume enabled by lowering costs of digital distribution
Eduardo Larrain - Linkedin - Website 
•Filmed Entertainment has grown worldwide from 26 bn USD to 37 and is expected to reach 46 in 2015 (PwC) 
•Film piracy includes Internet piracy and Hard-good piracy 
–Though piracy apologists have long argued that online piracy was good for business (similar to freemium theory) 
•New business model are aimed at decreasing demand for illegal pirated downloads: 
–Worldwide releases 
–Day-and-date digital releases (releasing in theaters and VOD the same day) 
–Ultra release (releasing on VOD before a theatrical release) can also create a buzz and increase the number of people going to theaters 
•Current digital business models includes: 
–VOD (Video-On-Demand) 
–Over-the-top online movie providers such as Hulu and Google TV 
–Steaming such as Amazon and Netflix 
115 
2 – Revenue stream 
Short look at the film industry 
Film industry is growing but new digital-based business models are yet to be found
Eduardo Larrain - Linkedin - Website 
Definition and scope 
116 
3a – Customer segments 
•Customer segments are the different groups of people or organizations an enterprise aims to reach and serve 
•In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors or other attributes. 
•An organization must take a conscious decision about which segments to serve and which to ignore (like facebook) 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Different types of Customer Segments 
117 
3a – Customer segments 
•Mass market: e.g. consumer electronic sector 
•Niche market: such business models are often found in supplier-buyer relationships, e.g. car part manufacturers (e.g. Faurecia in France) 
•Segmented: a company serve several different industries with the same needs or segment customers to provide a different proposition value: 
•e.g. in the banking industry individuals customers can be segmented in wealth Management (>1M€ financial assets), High Net Worth (>0,1M€) and large public 
•Diversified: a company serve unrelated customers segments with different needs e.g. Amazon sell “cloud computing” services 
•In fact, there are usually always two type of customers with different needs: B2B and B2C 
•Multi-sided markets: e.g. a credit card company need a large base of credit card holders and a large base of merchants who accept those credit cards 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
The Three Tiers of Noncustomers 
118 
3a – Customer segments 
Noncustomers differ in their relative distance from your market but they all offer big blue ocean opportunities 
•First-tier: buyers who minimally purchase an industry’s offering out of necessity and they are waiting to jump ship and leave the industry 
•Second-tier: people who refuse to buy your industry’s offerings 
•Third-tier: people who have never thought of your market’s offerings as an option 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
How to attract each tiers of noncustomers 
119 
3a – Customer segments 
•First-tier: Pret targeted UK workers who used not to go to a restaurant for healthy and time-consuming reasons with fast-food and fresh meal 
•Second-tier: JC Decaux targeted refusing municipalities and corporations by putting advertising in the street furniture instead on city outskirts 
•Third-tier: defense department has usually sold military technology to the private sector 
•Companies should go for the biggest catchment at the time although there could be overlapping commonalities across all three tiers of noncustomers 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
Definition and scope 
120 
3b – Channels 
•Channels are the way how a company communicates with and reaches its customer segments to deliver a value Proposition 
•Communication, distribution and sales Channels comprise a company’s interface with customers 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Type of channels 
121 
3b – Channels 
•Distribution channels can be owned (sales force, web sales, own stores) or done with partners (partners stores and wholesaler) 
•Partners channels lead to lower margins but they allow an organization to expand its reach and benefit from partner strengths 
McDonald’s 2008 
Restaurants 
Income 
bn USD 
Income growth 
Owned 
6,502 
16.5 
0% 
Franchise 
25,465 
6.9 
13%
Eduardo Larrain - Linkedin - Website 
Definition and scope 
122 
3c – Customer Relationship 
•Customer Relationships are the type of relationships a company establishes with specific customers segments 
•A company should clarify the type of relationship it wants to establish with each customer segment (customer acquisition, customer retention, boosting sales/upselling) 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
Categories of Customer Relationships 
123 
3c – Customer Relationship 
•Personal assistance: relationship based on human interaction. E.g. point of sales (pos), call-centers. 
•Dedicated personal assistance: dedicating a customer representative specifically to an individual client. It represents the deepest and most intimate type of relationship and normally develops over a long-period of time. E.g. key account managers, HWN individuals consultant 
•Self-service: no direct relationship with customers 
•Automated services: more sophisticated form of customer self-service with automated process. E.g. offering a book or movie recommendations 
•Communities: deploy user communities to become more involved with customers/prospects and facilitate connections between community members 
•Co-creation: go beyond the traditional customer-vendor relationship and co-create value with customers. E.g. Youtube, Amazon invites customers to write reviews and thus create value for other book lovers 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
The buyer experience cycle 
124 
3c – Customer Relationship Great blocks to utility can be identify looking at the buyer experience in order to be removed and unlock exceptional utility 
•A each stage of the buyer experience, managers can ask a set of questions to gauge the quality of buyers’ experience and thus unlock utility for buyers 
•The following questions can help you identify the most compelling hot spots to unlock exceptional utility: 
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
Eduardo Larrain - Linkedin - Website 
Definition and scope 
125 
4a – Key ressources 
•Key resources are the most important assets required to make a business model work 
•Key resources can be: 
•Human 
•Physical assets: manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems and distribution networks 
•Financial resources / guarantees: cash, lines of credit, or a stock option pool for hiring key employees. 
•E.g. distributors (B2C) have usually a low or negative working capital as for producers (B2B), they usually have positive working capital 
•Intellectual: brands, proprietary knowledge, patents and copyrights, partnerships and customer databases 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Definition and scope 
126 
4b – Key activities 
•Key activities are the most important things a company must do to make its business model work 
•There is several types of key activities: 
•Production: designing, making and delivering a product. E.g. Manufacturing 
•Problem solving: coming up with new solutions to individual customer problems. E.g. hospitals, consultancies and services organizations 
•Platform/Network: networks, platforms, software and brands. E.g. eBay, Visa 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Definition and scope 
127 
4c – Key partnerships 
•Key partnerships are the network of suppliers and partners that make the business model work 
•There is four types of partnerships: 
•Buyer-supplier relationships to assure reliable supplies 
•Strategic alliances between non-competitors 
•Coopetition: strategic partnerships between competitors 
•Joint ventures to develop new businesses 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Motivations for creating partnerships 
128 
4c – Key partnerships 
•Optimization and economy of scale: optimize the allocation of resources and activities since it would be illogical for a company to own all resources or perform every activities by itself 
•E.g. 100,000 people will have contributed to build your iphone 5.0, limitation for 3D printers 
•Reduction of risk and uncertainty: it is not unusual for competitors to form a strategic alliance in one area while competing in another. E.g. Blu-ray 
•Acquisition of particular resources and activities: such partnerships can be motivated to acquire knowledge, licenses or access to customers 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
Tracking partnerships with the code bar and code packer 
129 
4c – Key partnerships 
Exhibit - Code bar 
Exhibit - Code packer 
Exhibit – Tracking a partnership for a bean can with Open Food Facts 
OpenFoodFacts
Eduardo Larrain - Linkedin - Website 
Definition and scope 
130 
5 – Cost structure 
•Cost structure is all costs incurred to operate a business model 
•Naturally enough, costs should be minimized in every business model but we have already see that some business models are more cost-driven than others (design to cost, pyramid base): 
•Cost-driven: focus on minimizing costs wherever possible maintaining the leanest possible cost structure 
•Value driven: focus on value creation rather than the cost implications 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
131 
Use a business canvas just to be sure you have covered all key elements of a business model 
One Business Model Canvas 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
•In 2010, 4 million new titles were published with 92% of those being “non-traditional” i.e. self-publishing and books representing the reuse of content, most of it not covered by copyright 
•Non-traditional books are largely on demand titles produced by reprint houses specializing in public domain works and by presses catering to self-publishers and micro-niche publications 
•Non-traditional titles are marketed primarily on the Web 
132 
2 – Revenue stream 
Looking at the book publishing industry 
Non-traditional book publishing on the internet is 8X the output of traditional book publishing 
Bowker, ISBN Output 2002-2011, 2012 
Non-traditional numbers are undersestimated since books with no International Standard Book Numbers (ISBN) are not included
Eduardo Larrain - Linkedin - Website 
The traditional business model of book publishing 
133 
2 – Revenue stream What’s the business model of self-publishing? 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
A new business model by lulu.com 
134 
2 – Revenue stream What’s the business model of self-publishing? 
Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
Eduardo Larrain - Linkedin - Website 
•World population continues to grow 
•Literacy rates are increasing 
•Developing nations are taking advantage of the lower infrastructural costs of ebooks 
•Number of books per inhabitant is low in developing countries because books are much more expensive than in France and hardcover book piracy is high 
135 
2 – Revenue stream 
Looking at the book publishing industry 
The best opportunity for the book publishing market is volume enabled by lowering costs of digital distribution
Eduardo Larrain - Linkedin - Website 
•Filmed Entertainment has grown worldwide from 26 bn USD to 37 and is expected to reach 46 in 2015 (PwC) 
•Film piracy includes Internet piracy and Hard-good piracy 
–Though piracy apologists have long argued that online piracy was good for business (similar to freemium theory) 
•New business model are aimed at decreasing demand for illegal pirated downloads: 
–Worldwide releases 
–Day-and-date digital releases (releasing in theaters and VOD the same day) 
–Ultra release (releasing on VOD before a theatrical release) can also create a buzz and increase the number of people going to theaters 
•Current digital business models includes: 
–VOD (Video-On-Demand) 
–Over-the-top online movie providers such as Hulu and Google TV 
–Steaming such as Amazon and Netflix 
136 
2 – Revenue stream Short look at the film industry 
Film industry is growing but new digital-based business models are yet to be found
Eduardo Larrain - Linkedin - Website 
Executive summary 
137 
Things we’ve learned at this stage 
•Internet’s “pure players“ are just a quarter of the Internet story 
•A business model describes “how an enterprise proposes to make money” 
•A business model is an ecosystem that starts with the proposition value 
•Business model engineering is needed to understand a company instead of looking on a business model catalog 
•A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty 
•Defining a promise (or tagline) helps understanding the proposition value 
•Price is determined by what a buyer is willing to pay and the competition is allowing to be charged (not by markup on cost) 
•4 revenue streams around Free inclunding: 
•Freemium is giving a free basic version to most of people and charging for a premium version to a few people 
•Non-monetary markets: people choose to give away with no expectation of payment (remember Google reCAPTCHA anti-spam technology)
Eduardo Larrain - Linkedin - Website 
Who are the Internet heavyweights 
138
Eduardo Larrain - Linkedin - Website 
139 
•What is Google business model?
Eduardo Larrain - Linkedin - Website 
140 
What is Google’s business model? 
Google value proposition 
Google value proposition 
Organize the world’s information and make it universally accessible and useful… … for better quality leads
Eduardo Larrain - Linkedin - Website 
141 
What is Google’s business model? 
Google has changed the ad industry by giving products away to end users for free (in return for advertising), as well as reducing the advertising costs for brand 
Google revolution on advertising 
•Google opened up the market to SMEs and extended the reach of larger corporations 
•A great search algorithm is important though real advantage comes from the massive investments in Google platform which means tiny marginal costs, so Google give Free products to end users 
Illustration – Advertising market by company size
Eduardo Larrain - Linkedin - Website 
142 
What is Google’s business model? Google revenue stream comes from Google AdWords and Google AdSense 
Google revenue stream 
Traffic acquisition costs (TAC) comprises of money paid to the Google Network websites under the Adsense program and to the distribution partners who distribute Google Toolbar and other products or drive traffic to the Google websites.
Eduardo Larrain - Linkedin - Website 
143 
What is Google’s business model? 
Two-thirds of Google revenues come from AdWords and remaining from AdSense 
Google quarterly revenues 
Google, Q3 2012Quarterly EarningsSummary, 2012
Eduardo Larrain - Linkedin - Website 
144 
What is Google’s business model? 
Newspaper ad revenue after Google
Eduardo Larrain - Linkedin - Website 
145 
What is Google’s business model? Google give products away in return for advertising (two-sided market) and Google reduce the advertising costs for brand 
Google business model using the Canvas 
Business Model Innovation Matters, Understanding Business Models, 2012
Eduardo Larrain - Linkedin - Website 
146 
What is Google’s business model? 
Google is trying to remain central in the Mobile experience 
Google strategy on mobile 
•Mobile advertising is still in relative infancy, though the mobile device is quickly becoming the world’s newest gateway to information 
•Google dominate the mobile ad market which is mainly based on search 
•Google is trying to remain central in the Mobile experience controlling the hardware, as well as the software: 
•On the software side, 
•Android was created to be a free, fully open source mobile software platform that any developer could use to create applications for mobile devices and any handset manufacturer can install on a device 
•Android include the Google Mobile App 
•On the hardware, Google acquired Motorola Mobility in 2012 (12,5 bn USD) in order to acquire Motorola’s patent portfolio and remain central in the mobile experience like Apple has demonstrated with its popular iPhone
Eduardo Larrain - Linkedin - Website 
147 
What is Google’s business model? 
Google’s stock quote highly volatile since it is in the advertising business
Eduardo Larrain - Linkedin - Website 
•What is Facebook business model?
Eduardo Larrain - Linkedin - Website 
149 
What is Facebook’s business model? 
Facebook value proposition 
Facebook value proposition 
•Facebook helps Internet users stay connected with their friends, families, and colleagues 
•Facebook provides a number of products, free of charge, to its users: 
•Timeline, News Feed, Photos and Videos, Messages (Email, Chat, Text Messaging), Groups, Lists, Events, Places, Subscribe, Ticker, Notifications, and Facebook Pages 
•Facebook have a “long tail” of customers (not dependent upon any single customer for their revenues) 
Business Model Innovation Matters, Understanding Business Models, 2012
Eduardo Larrain - Linkedin - Website 
150 
What is Facebook’s business model? 
Its revenue stream is mainly advertising-based 
Facebook, Facebook Reports Third Quarter 2013 Results, 30/10/2013 
Facebook key operational figures 
•Fourth Quarter 2012 Operational Highlights: 
•Monthly active users (MAUs) were 1.19 billion as of September 30, 2013, an increase of 18% year-over-year 
•Daily active users (DAUs) were 728 million on average as of September 30, 2013, an increase of 25% year-over-year 
•Mobile MAUs were 874 million as of December 31, 2012, an increase of 45% year-over-year 
•Mobile DAUs exceeded web DAUs for the first time in the fourth quarter of 2012 
•Recent Business Highlights 
•Mobile revenue represented approximately 49% of advertising revenue for the third quarter of 2013 (that was the main business model question of 2013) 
•Facebook launched Graph Search Beta, a structured search tool that enables users for the first time to find people, places, photos and other content that has been shared on Facebook 
•Launched Facebook for Android 2.0, completely rebuilt to deliver improved stability and faster performance and opened Facebook Messenger to anyone with a telephone number
Eduardo Larrain - Linkedin - Website 
151 
What is Facebook’s business model? Its revenue stream is mainly advertising-based 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook key financial figures 
•5.1 bn in 2012 (up from 3.7 bn USD in 2011) 
•83% of revenues coming from advertising 
•Profit down to 0,05 bn in 2012 (down from 1 bn USD in 2011) mainly due to shares given to the top management 
Exhibit – Key figures 2011
Eduardo Larrain - Linkedin - Website 
152 
What is Facebook’s business model? Facebook replicated Google’s formula... with relatively less success 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook advertising model
Eduardo Larrain - Linkedin - Website 
153 
What is Facebook’s business model? Facebook’s main asset is the connections and interactions between users 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook’s Social Graph 
•100 billion friendships, 250 million photos uploaded every day and 2.7 billion Likes and Comments per day 
•« User engagement » is key for Facebook success
Eduardo Larrain - Linkedin - Website 
154 
What is Facebook’s business model? Looking at the Canvas 
Facebook business model using the Canvas 
Business Model Innovation Matters, Understanding Business Models, 2012
Eduardo Larrain - Linkedin - Website 
155 
What is Facebook’s business model? 
Facebook’s stock quote highly volatile since the company is still growing fast and it is in the advertising business
Eduardo Larrain - Linkedin - Website 
156 
Facebook validated its business model assumptions on Mobile ads even though mobile is considered “a horrible ad medium” 
•In mid-2013, Facebook noted that mobile ads accounted for 49 percent of its advertising revenue, up from 41 percent in the second quarter. Facebook said prices for mobile ads remained high, and users were clicking on them in their news feeds more frequently. 
•Potential to open up new inventory via Instagram as well as the announcement to include video ads in the newsfeed
Eduardo Larrain - Linkedin - Website 
157 
What is Facebook’s business model? 
Facebook vs. MySpace 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Automated news feed launched in 2006 gave the illusion of a continuous user and personalized activity that MySpace didn’t have – “oh that’s cool” said customers
Eduardo Larrain - Linkedin - Website 
158 
What is Facebook’s business model? Similar to Google’s Page Rank, Facebook’s created its Edge Rank based on an algorithm 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook’s Edge Rank
Eduardo Larrain - Linkedin - Website 
159 
What is Facebook’s business model? 
Its new Open Graph is expected to leverage its current business model (key partners) 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook’s new OpenGraph
Eduardo Larrain - Linkedin - Website 
160 
What is Facebook’s business model? 
Facebook is a social media (not only network) based on advertising 
Fabernovel, Facebook, The Perfect Startup, 05/2012 
Facebook’s like button developed the social graph even further
Eduardo Larrain - Linkedin - Website 
•What is Twitter business model? 
161
Eduardo Larrain - Linkedin - Website 
162 
What is Twitter’s business model? … Advertising 
Twitter business model key elements 
•Value proposition: blogging service 
•Share text messages with a length constraint (social Networking Site / SNS and Micro-blogging platform) 
•For advertisers, marketers, and media, 
•Traffic generator (ecommerce, fund-raising,…) 
•Communication tool (customer service channel, brand awareness, PR,…) 
•Cheap monitoring on niche subject and tracking the spreading of news 
•Datamining and data visualization of worldwide data 
•Competitors: Reuters, survey companies, consulting companies 
•Revenue stream: advertising (self-serve ad platform) 
•Companies spending money on Twitter to ensure their messages are seen: promoting Accounts (Cost-Per-Follow / CPF) , Tweets (Cost-Per-Engagement / CPE) and Trends appearing in search results, within the ‘Who to Follow’ and next to a user’s timeline 
•No ‘Display Ads’ 
•Twitter’s mobile ad revenue surpassed that of its desktop ads
Eduardo Larrain - Linkedin - Website 
163 
What is Twitter’s business model? 
Twitter business model key elements 
•Key partnerships are key since Twitter is a multi-sided platform (like Facebook) 
•Developers and companies: 
•APIs for third party apps 
•Tweet and Follow buttons 
•Search API and Streaming API provides real-time access to Twitter firehose helping developers with data-intensive needs 
•Search Vendors: Twitter licenses full feed of public tweets to search engine vendors such as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling real-time search and discovery. 
•Device Vendors: Twitter partnered with Apple to enable deep integration of Twitter in iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps such as Flipboard, Livingsocial, and Instagram. 
•Media:Twitter has entered into partnerships with media companies and brands to deliver compelling Twitter integration to their users more easily. This can help media companies capture real-time reactions to the important news 
•Mobile operators/ Twitter has partnered with Telecom operators across the globe to enable users to send and receive tweets from mobile phones using SMS
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015
Web-based business models in 2015

More Related Content

What's hot

20120608 tsigos.v trip_social_media
20120608 tsigos.v trip_social_media20120608 tsigos.v trip_social_media
20120608 tsigos.v trip_social_mediaDimitris Tsingos
 
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015Francis Stevens George
 
How I built a local startup with dream international clients
 How I built a local startup with dream international clients How I built a local startup with dream international clients
How I built a local startup with dream international clientsFound.ation
 
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...Opportunities for Digital Entrepreneurship According to the Indices -- Natali...
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...Natalie Novick
 
Crossing the digial divide - A one hour presentation
Crossing the digial divide - A one hour presentationCrossing the digial divide - A one hour presentation
Crossing the digial divide - A one hour presentationOpenMatters
 
55 Business Models to Revolutionize your Business by Michaela Csik
55 Business Models to Revolutionize your Business by Michaela Csik55 Business Models to Revolutionize your Business by Michaela Csik
55 Business Models to Revolutionize your Business by Michaela Csikjindrichweiss
 
Digital Business Model Innovation
Digital Business Model InnovationDigital Business Model Innovation
Digital Business Model InnovationTathagat Varma
 
Innovation In Professional Services - Sectors Facing Digital Disruption
Innovation In Professional Services - Sectors Facing Digital DisruptionInnovation In Professional Services - Sectors Facing Digital Disruption
Innovation In Professional Services - Sectors Facing Digital DisruptionMatthew Ho
 
10 Hyper Disruptive Business Models
10 Hyper Disruptive Business Models10 Hyper Disruptive Business Models
10 Hyper Disruptive Business ModelsScopernia
 
Disruption and digital disruption 2016
Disruption and digital disruption 2016Disruption and digital disruption 2016
Disruption and digital disruption 2016Dirk Laverge
 
Seminar Part One: Integration or Isolation?
Seminar Part One: Integration or Isolation?Seminar Part One: Integration or Isolation?
Seminar Part One: Integration or Isolation?Precedent
 
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...Burton Lee
 
Digital Business Models 101
Digital Business Models 101Digital Business Models 101
Digital Business Models 101Willy Braun
 
Daring to be Digital - London - 20.11.13
Daring to be Digital - London - 20.11.13Daring to be Digital - London - 20.11.13
Daring to be Digital - London - 20.11.13Precedent
 
Technopreneurship and the Early Stage Ecosystem in China in 2013
Technopreneurship and the Early Stage Ecosystem in China in 2013Technopreneurship and the Early Stage Ecosystem in China in 2013
Technopreneurship and the Early Stage Ecosystem in China in 2013Chris Evdemon
 
GeeksOnaPlane DC/EU 2009
GeeksOnaPlane DC/EU 2009GeeksOnaPlane DC/EU 2009
GeeksOnaPlane DC/EU 2009Dave McClure
 
Steve Currie of Communitech - ScaleUp CT keynote 2017
Steve Currie of Communitech - ScaleUp CT keynote 2017Steve Currie of Communitech - ScaleUp CT keynote 2017
Steve Currie of Communitech - ScaleUp CT keynote 2017Courtney King
 
China Startup Scene: A Few Lessons Learned (1million cups omaha )
China Startup Scene: A Few Lessons Learned (1million cups   omaha )China Startup Scene: A Few Lessons Learned (1million cups   omaha )
China Startup Scene: A Few Lessons Learned (1million cups omaha )Mark Koester
 

What's hot (20)

20120608 tsigos.v trip_social_media
20120608 tsigos.v trip_social_media20120608 tsigos.v trip_social_media
20120608 tsigos.v trip_social_media
 
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015
Presentation identifying 20entrepreneurial_opportunities_in_norway_25102015
 
How I built a local startup with dream international clients
 How I built a local startup with dream international clients How I built a local startup with dream international clients
How I built a local startup with dream international clients
 
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...Opportunities for Digital Entrepreneurship According to the Indices -- Natali...
Opportunities for Digital Entrepreneurship According to the Indices -- Natali...
 
Crossing the digial divide - A one hour presentation
Crossing the digial divide - A one hour presentationCrossing the digial divide - A one hour presentation
Crossing the digial divide - A one hour presentation
 
55 Business Models to Revolutionize your Business by Michaela Csik
55 Business Models to Revolutionize your Business by Michaela Csik55 Business Models to Revolutionize your Business by Michaela Csik
55 Business Models to Revolutionize your Business by Michaela Csik
 
Digital Business Model Innovation
Digital Business Model InnovationDigital Business Model Innovation
Digital Business Model Innovation
 
How Square is Disrupting Banks
How Square is Disrupting BanksHow Square is Disrupting Banks
How Square is Disrupting Banks
 
Innovation In Professional Services - Sectors Facing Digital Disruption
Innovation In Professional Services - Sectors Facing Digital DisruptionInnovation In Professional Services - Sectors Facing Digital Disruption
Innovation In Professional Services - Sectors Facing Digital Disruption
 
10 Hyper Disruptive Business Models
10 Hyper Disruptive Business Models10 Hyper Disruptive Business Models
10 Hyper Disruptive Business Models
 
Disruption and digital disruption 2016
Disruption and digital disruption 2016Disruption and digital disruption 2016
Disruption and digital disruption 2016
 
Rebuilding the World
Rebuilding the WorldRebuilding the World
Rebuilding the World
 
Seminar Part One: Integration or Isolation?
Seminar Part One: Integration or Isolation?Seminar Part One: Integration or Isolation?
Seminar Part One: Integration or Isolation?
 
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...
Lessons from Silicon Valley - Company Culture, Growth Hacking, Design Thinkin...
 
Digital Business Models 101
Digital Business Models 101Digital Business Models 101
Digital Business Models 101
 
Daring to be Digital - London - 20.11.13
Daring to be Digital - London - 20.11.13Daring to be Digital - London - 20.11.13
Daring to be Digital - London - 20.11.13
 
Technopreneurship and the Early Stage Ecosystem in China in 2013
Technopreneurship and the Early Stage Ecosystem in China in 2013Technopreneurship and the Early Stage Ecosystem in China in 2013
Technopreneurship and the Early Stage Ecosystem in China in 2013
 
GeeksOnaPlane DC/EU 2009
GeeksOnaPlane DC/EU 2009GeeksOnaPlane DC/EU 2009
GeeksOnaPlane DC/EU 2009
 
Steve Currie of Communitech - ScaleUp CT keynote 2017
Steve Currie of Communitech - ScaleUp CT keynote 2017Steve Currie of Communitech - ScaleUp CT keynote 2017
Steve Currie of Communitech - ScaleUp CT keynote 2017
 
China Startup Scene: A Few Lessons Learned (1million cups omaha )
China Startup Scene: A Few Lessons Learned (1million cups   omaha )China Startup Scene: A Few Lessons Learned (1million cups   omaha )
China Startup Scene: A Few Lessons Learned (1million cups omaha )
 

Viewers also liked

Web-based business models in 2013
Web-based business models in 2013Web-based business models in 2013
Web-based business models in 2013Eduardo Larrain
 
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)Бизнес-модели. UML для монетизаторов (Сергей Скворцов)
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)Ontico
 
Collaboration strategy how-to
Collaboration strategy how-toCollaboration strategy how-to
Collaboration strategy how-toGordon Vala-Webb
 
Knowledge Management for Real
Knowledge Management for RealKnowledge Management for Real
Knowledge Management for RealCherwell Software
 
Web-based Business Marketing
Web-based Business MarketingWeb-based Business Marketing
Web-based Business MarketingLeonardo ENERGY
 
If You Tag it, Will They Come? Metadata Quality and Repository Management
If You Tag it, Will They Come? Metadata Quality and Repository ManagementIf You Tag it, Will They Come? Metadata Quality and Repository Management
If You Tag it, Will They Come? Metadata Quality and Repository ManagementSarah Currier
 
Knowledge Management and Communication Opportunities in Peace Support Operations
Knowledge Management and Communication Opportunities in Peace Support OperationsKnowledge Management and Communication Opportunities in Peace Support Operations
Knowledge Management and Communication Opportunities in Peace Support Operationsrmcpu
 
Towards unified knowledge management platform (rulefest 2010)
Towards unified knowledge management platform (rulefest 2010)Towards unified knowledge management platform (rulefest 2010)
Towards unified knowledge management platform (rulefest 2010)Geoffrey De Smet
 
Planning Your Cloud Strategy
Planning Your Cloud StrategyPlanning Your Cloud Strategy
Planning Your Cloud StrategyUthaiyashankar
 
Integrated Marketing Communication Campaign
Integrated Marketing Communication CampaignIntegrated Marketing Communication Campaign
Integrated Marketing Communication Campaignmcgrath.michaelp
 
Knowledge Production and Dissemination in the Digital Era
Knowledge Production and Dissemination in the Digital EraKnowledge Production and Dissemination in the Digital Era
Knowledge Production and Dissemination in the Digital EraAnas Tawileh
 
Knowledge management and knowledge workers in the digital era challenges and...
Knowledge management and knowledge workers in the digital era  challenges and...Knowledge management and knowledge workers in the digital era  challenges and...
Knowledge management and knowledge workers in the digital era challenges and...Kishor Satpathy
 
Tara Knapp: From Conceptual Knowledge to Real World Implementation
Tara Knapp: From Conceptual Knowledge to Real World ImplementationTara Knapp: From Conceptual Knowledge to Real World Implementation
Tara Knapp: From Conceptual Knowledge to Real World ImplementationJack Molisani
 
Knowledge Management and Communication
Knowledge Management and CommunicationKnowledge Management and Communication
Knowledge Management and CommunicationICIMOD
 
Achieving Impact Through Knowledge Management and Communication in the Hindu ...
Achieving Impact Through Knowledge Management and Communication in the Hindu ...Achieving Impact Through Knowledge Management and Communication in the Hindu ...
Achieving Impact Through Knowledge Management and Communication in the Hindu ...Olivier Serrat
 
The Future of the Web - Cold Front conference 2016
The Future of the Web - Cold Front conference 2016The Future of the Web - Cold Front conference 2016
The Future of the Web - Cold Front conference 2016Robert Nyman
 
KM at Microsoft Services: Strategy, Execution & Culture
KM at Microsoft Services: Strategy, Execution & CultureKM at Microsoft Services: Strategy, Execution & Culture
KM at Microsoft Services: Strategy, Execution & CultureJean-Claude Ferréol Monney
 

Viewers also liked (20)

Web-based business models in 2013
Web-based business models in 2013Web-based business models in 2013
Web-based business models in 2013
 
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)Бизнес-модели. UML для монетизаторов (Сергей Скворцов)
Бизнес-модели. UML для монетизаторов (Сергей Скворцов)
 
Collaboration strategy how-to
Collaboration strategy how-toCollaboration strategy how-to
Collaboration strategy how-to
 
Knowledge Management for Real
Knowledge Management for RealKnowledge Management for Real
Knowledge Management for Real
 
Web-based Business Marketing
Web-based Business MarketingWeb-based Business Marketing
Web-based Business Marketing
 
If You Tag it, Will They Come? Metadata Quality and Repository Management
If You Tag it, Will They Come? Metadata Quality and Repository ManagementIf You Tag it, Will They Come? Metadata Quality and Repository Management
If You Tag it, Will They Come? Metadata Quality and Repository Management
 
Knowledge Management and Communication Opportunities in Peace Support Operations
Knowledge Management and Communication Opportunities in Peace Support OperationsKnowledge Management and Communication Opportunities in Peace Support Operations
Knowledge Management and Communication Opportunities in Peace Support Operations
 
Towards unified knowledge management platform (rulefest 2010)
Towards unified knowledge management platform (rulefest 2010)Towards unified knowledge management platform (rulefest 2010)
Towards unified knowledge management platform (rulefest 2010)
 
Planning Your Cloud Strategy
Planning Your Cloud StrategyPlanning Your Cloud Strategy
Planning Your Cloud Strategy
 
IFAD KM Strategy
IFAD KM StrategyIFAD KM Strategy
IFAD KM Strategy
 
Integrated Marketing Communication Campaign
Integrated Marketing Communication CampaignIntegrated Marketing Communication Campaign
Integrated Marketing Communication Campaign
 
Knowledge Production and Dissemination in the Digital Era
Knowledge Production and Dissemination in the Digital EraKnowledge Production and Dissemination in the Digital Era
Knowledge Production and Dissemination in the Digital Era
 
Knowledge management in the social era
Knowledge management in the social eraKnowledge management in the social era
Knowledge management in the social era
 
Knowledge management and knowledge workers in the digital era challenges and...
Knowledge management and knowledge workers in the digital era  challenges and...Knowledge management and knowledge workers in the digital era  challenges and...
Knowledge management and knowledge workers in the digital era challenges and...
 
Tara Knapp: From Conceptual Knowledge to Real World Implementation
Tara Knapp: From Conceptual Knowledge to Real World ImplementationTara Knapp: From Conceptual Knowledge to Real World Implementation
Tara Knapp: From Conceptual Knowledge to Real World Implementation
 
Knowledge Management and Communication
Knowledge Management and CommunicationKnowledge Management and Communication
Knowledge Management and Communication
 
Achieving Impact Through Knowledge Management and Communication in the Hindu ...
Achieving Impact Through Knowledge Management and Communication in the Hindu ...Achieving Impact Through Knowledge Management and Communication in the Hindu ...
Achieving Impact Through Knowledge Management and Communication in the Hindu ...
 
The Future of the Web - Cold Front conference 2016
The Future of the Web - Cold Front conference 2016The Future of the Web - Cold Front conference 2016
The Future of the Web - Cold Front conference 2016
 
Web 2010 Discover Ten Strategies Defining Your Business Future
Web 2010  Discover Ten Strategies Defining Your Business FutureWeb 2010  Discover Ten Strategies Defining Your Business Future
Web 2010 Discover Ten Strategies Defining Your Business Future
 
KM at Microsoft Services: Strategy, Execution & Culture
KM at Microsoft Services: Strategy, Execution & CultureKM at Microsoft Services: Strategy, Execution & Culture
KM at Microsoft Services: Strategy, Execution & Culture
 

Similar to Web-based business models in 2015

Web-based business models, Eduardo Larrain - HEC Paris
Web-based business models, Eduardo Larrain - HEC Paris Web-based business models, Eduardo Larrain - HEC Paris
Web-based business models, Eduardo Larrain - HEC Paris HEC Paris
 
Aau entrepreneurship+innovation - sept13
Aau   entrepreneurship+innovation - sept13Aau   entrepreneurship+innovation - sept13
Aau entrepreneurship+innovation - sept13Johan Winbladh
 
Social networks and social media analysis in the context of the enterprise
Social networks and social media analysis in the context of the enterpriseSocial networks and social media analysis in the context of the enterprise
Social networks and social media analysis in the context of the enterpriseRamez Al-Fayez
 
Your Rock Solid Digital Approach to Attract More Industry Attention
Your Rock Solid Digital Approach to Attract More Industry AttentionYour Rock Solid Digital Approach to Attract More Industry Attention
Your Rock Solid Digital Approach to Attract More Industry AttentionAtlas Integrated
 
How to start an e commerce start-up (A step by step guide)
How to start an e commerce start-up (A step by step guide)How to start an e commerce start-up (A step by step guide)
How to start an e commerce start-up (A step by step guide)Amit Kumar
 
How Can Your IT Business Succeed Internationally?
How Can Your IT Business Succeed Internationally?How Can Your IT Business Succeed Internationally?
How Can Your IT Business Succeed Internationally?Milena Milicevic
 
Digital Lead Generation for Economic Development
Digital Lead Generation for Economic DevelopmentDigital Lead Generation for Economic Development
Digital Lead Generation for Economic DevelopmentAtlas Integrated
 
About Schematiq
About SchematiqAbout Schematiq
About SchematiqSchematiq
 
NPTEL E BUSINESS NOTES Week1 for moocs..
NPTEL E BUSINESS NOTES Week1 for moocs..NPTEL E BUSINESS NOTES Week1 for moocs..
NPTEL E BUSINESS NOTES Week1 for moocs..LavanyaAggarwal3
 
Week1 introduction to_e_business (1)
Week1 introduction to_e_business (1)Week1 introduction to_e_business (1)
Week1 introduction to_e_business (1)Dudekulakaleel
 
Content Marketing For Building And Construction Products
Content Marketing For Building And Construction ProductsContent Marketing For Building And Construction Products
Content Marketing For Building And Construction ProductsLeigh Simpson
 
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...Sachintha Gunasena
 
Marcus Ward, Peach Consultancy, BIG Assist conference 2016
Marcus Ward, Peach Consultancy, BIG Assist conference 2016Marcus Ward, Peach Consultancy, BIG Assist conference 2016
Marcus Ward, Peach Consultancy, BIG Assist conference 2016elizabethpacencvo
 
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...Corporate Innovation : developing a lean & curious culture : Michel Duchateau...
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...Michel Duchateau
 
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...AnnArborSPARK
 
New Media Webinar Presentation
New Media Webinar Presentation New Media Webinar Presentation
New Media Webinar Presentation ACLion
 
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...Luciano Pesci, PhD
 
Global service technological entrepreneurship
Global service technological entrepreneurshipGlobal service technological entrepreneurship
Global service technological entrepreneurshipZulfiya-2012
 
From startup to scale-up
From startup to scale-upFrom startup to scale-up
From startup to scale-upFound.ation
 

Similar to Web-based business models in 2015 (20)

Web-based business models, Eduardo Larrain - HEC Paris
Web-based business models, Eduardo Larrain - HEC Paris Web-based business models, Eduardo Larrain - HEC Paris
Web-based business models, Eduardo Larrain - HEC Paris
 
Cri 5th anniversay background
Cri 5th anniversay background Cri 5th anniversay background
Cri 5th anniversay background
 
Aau entrepreneurship+innovation - sept13
Aau   entrepreneurship+innovation - sept13Aau   entrepreneurship+innovation - sept13
Aau entrepreneurship+innovation - sept13
 
Social networks and social media analysis in the context of the enterprise
Social networks and social media analysis in the context of the enterpriseSocial networks and social media analysis in the context of the enterprise
Social networks and social media analysis in the context of the enterprise
 
Your Rock Solid Digital Approach to Attract More Industry Attention
Your Rock Solid Digital Approach to Attract More Industry AttentionYour Rock Solid Digital Approach to Attract More Industry Attention
Your Rock Solid Digital Approach to Attract More Industry Attention
 
How to start an e commerce start-up (A step by step guide)
How to start an e commerce start-up (A step by step guide)How to start an e commerce start-up (A step by step guide)
How to start an e commerce start-up (A step by step guide)
 
How Can Your IT Business Succeed Internationally?
How Can Your IT Business Succeed Internationally?How Can Your IT Business Succeed Internationally?
How Can Your IT Business Succeed Internationally?
 
Digital Lead Generation for Economic Development
Digital Lead Generation for Economic DevelopmentDigital Lead Generation for Economic Development
Digital Lead Generation for Economic Development
 
About Schematiq
About SchematiqAbout Schematiq
About Schematiq
 
NPTEL E BUSINESS NOTES Week1 for moocs..
NPTEL E BUSINESS NOTES Week1 for moocs..NPTEL E BUSINESS NOTES Week1 for moocs..
NPTEL E BUSINESS NOTES Week1 for moocs..
 
Week1 introduction to_e_business (1)
Week1 introduction to_e_business (1)Week1 introduction to_e_business (1)
Week1 introduction to_e_business (1)
 
Content Marketing For Building And Construction Products
Content Marketing For Building And Construction ProductsContent Marketing For Building And Construction Products
Content Marketing For Building And Construction Products
 
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...
Entrepreneurship & Commerce in IT - 01 - Introduction in to Entrepreneurship,...
 
Marcus Ward, Peach Consultancy, BIG Assist conference 2016
Marcus Ward, Peach Consultancy, BIG Assist conference 2016Marcus Ward, Peach Consultancy, BIG Assist conference 2016
Marcus Ward, Peach Consultancy, BIG Assist conference 2016
 
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...Corporate Innovation : developing a lean & curious culture : Michel Duchateau...
Corporate Innovation : developing a lean & curious culture : Michel Duchateau...
 
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...
Michigan Marketing Minds - September 9, 2014 - Expressing Thought Leadership:...
 
New Media Webinar Presentation
New Media Webinar Presentation New Media Webinar Presentation
New Media Webinar Presentation
 
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...
Big Data & Marketing Analytics - How to Use Available Data, and How to Prepar...
 
Global service technological entrepreneurship
Global service technological entrepreneurshipGlobal service technological entrepreneurship
Global service technological entrepreneurship
 
From startup to scale-up
From startup to scale-upFrom startup to scale-up
From startup to scale-up
 

Recently uploaded

Fabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsFabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsWristbands Ireland
 
PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfHajeJanKamps
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBBPMedia1
 
Data skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsData skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsyasinnathani
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfHajeJanKamps
 
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...AustraliaChapterIIBA
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarNathanielSchmuck
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003believeminhh
 
Project Brief & Information Architecture Report
Project Brief & Information Architecture ReportProject Brief & Information Architecture Report
Project Brief & Information Architecture Reportamberjiles31
 
Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Winbusinessin
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsIntellect Design Arena Ltd
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...Brian Solis
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursKaiNexus
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxJemalSeid25
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfJohnCarloValencia4
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 

Recently uploaded (20)

Fabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and FestivalsFabric RFID Wristbands in Ireland for Events and Festivals
Fabric RFID Wristbands in Ireland for Events and Festivals
 
PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdf
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
 
Data skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story pointsData skills for Agile Teams- Killing story points
Data skills for Agile Teams- Killing story points
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
 
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
 
Live-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry WebinarLive-Streaming in the Music Industry Webinar
Live-Streaming in the Music Industry Webinar
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
 
Project Brief & Information Architecture Report
Project Brief & Information Architecture ReportProject Brief & Information Architecture Report
Project Brief & Information Architecture Report
 
Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024
 
Upgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking ApplicationsUpgrade Your Banking Experience with Advanced Core Banking Applications
Upgrade Your Banking Experience with Advanced Core Banking Applications
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, Ours
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptx
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 

Web-based business models in 2015

  • 1. Eduardo Larrain - Linkedin - Website WEB-BASED BUSINESS MODELS Workshop #1 & #2 – November 2014 Eduardo Larrain 1
  • 2. Eduardo Larrain - Linkedin - Website 2 This workshop was taught by Eduardo Larrain •HEC 2005 (French Business School) •Strategy consultant at Roland Berger and Atos – 40 projects •Founder of an Internet start-up called Kel Quartier « Kel Quartier helps citizens access open government data on 42,000 neighbourhoods and small towns » - The Guardian
  • 3. Eduardo Larrain - Linkedin - Website Agenda of the web-based business model workshop 3 1.Let’s all talk the same language! What’s the web? What’s a business model? What’s a startup? 2.What are the key elements of a business model? •Value proposition and revenue streams ………………………………………………………………………………………………………….….. •How’s the music, video games and book publishing industries going? …………………..………………..………………….……. •Customer channels, customer relationships, key partners, activities, resources, cost structure …….....….……….….. 3.What are the business models of Internet heavyweights publicly traded? •Google (139), Facebook (148), Twitter (161), Linkedin (167), Groupon (172) ……………………………………………………. 4.What are the business models of the most valuable web-based companies privately owned? •What is Crowdfunding? Kickstarter (182), Wiseed (187) and Prosper (189) ………………………………………………………. •What is the Internet of Things? Breathometer (194), Sen.se (196), Nest (199) and Akimo (201) ………………………. •What is the sharing economy? Uber (208), Blablacar (211) and Airbnb (214) ……………………………………………………. •LaRuchequiditoui (218), ZocDoc (220), SnapChat (222) ……………………………………………………………………………………… 5.Conclusion and farewell 4 39 42 86 116 138 139 179 180 192 206 218 225
  • 4. Eduardo Larrain - Linkedin - Website What’s the web 4
  • 5. Eduardo Larrain - Linkedin - Website •Web (or World Wide Web or WWW) is a global set of documents, images and other resources, logically interrelated by hyperlinks. •Internet (or Net) is a global system of interconnected computer networks that use the standard Internet protocol suite (TCP/IP) to serve billions of users worldwide. It is a network of networks that carries an extensive range of information resources and services, such as the inter-linked hypertext documents of the Web and the infrastructure to support email. Web = HTTP, HTML, CSS, JPEG,… 5 Internet = Web + mail + data transfer Wikipedia e.g. FTP incl. P2P, VoIP, streaming media, video conferencing, mobile apps (not HTML 5 based) Internet Web Definitions What’s the Web?
  • 6. Eduardo Larrain - Linkedin - Website 6 •In retail alone, G-20 consumers researched online and then purchased offline (ROPO) more than $1.3 trillion in goods in 2010 Boston Consulting Group, The Internet Economy in the G-20, March 2011 Is Internet only a distribution channel for online retail/ecommerce?
  • 7. Eduardo Larrain - Linkedin - Website 7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 Conglomerate Professional, Scientific, and Technical Services Finance and Insurance Information Health Care and Social Assistance Wholesale Trade Retail Trade Utilities Transportation and Warehousing Manufacturing Telecommunication Manufacturing Automotive Manufacturing Métaux Pétrole Agriculture, Forestry, Fishing and Hunting Chiffre d'affaires des 100 plus grandes sociétés US 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 Conglomerate Professional, Scientific, and Technical Services Finance and Insurance Information Health Care and Social Assistance Wholesale Trade Retail Trade Utilities Transportation and Warehousing Manufacturing Telecommunication Manufacturing Automotive Manufacturing Métaux Pétrole Agriculture, Forestry, Fishing and Hunting Profits des 100 plus grandes sociétés US Metal Petroleum Analysis based on Fortune 500, 2007 • 75% of the economic impact of the Internet arises from traditional companies that don’t define themselves as pure Internet players (McKinsey, 2011) • Exhibit - Looking at top 100 US companies through time: Is Internet an Industry?
  • 8. Eduardo Larrain - Linkedin - Website 8 Internet is not just an industry Internet is touching every part of the economy (like electricity)
  • 9. Eduardo Larrain - Linkedin - Website What’s a business model 9
  • 10. Eduardo Larrain - Linkedin - Website •A business model describes the rationale of how an organization creates, delivers, and captures value. 10 •A business model is a coherent way to manage and develop an economic activity. •A business model describes how an enterprise proposes to make money. What’s a business model? Basic definition
  • 11. Eduardo Larrain - Linkedin - Website 11 •A business model is “show me the money”. •It is a simple expression of the strategy of the company on how to make money without going into too much details Very basic definition What’s a business model? •In French, we use the english word « business model » rather than translations: •Modèle économique •Modèle d’activité •Modèle d’affaires •Modèle de revenus, modèle de profit
  • 12. Eduardo Larrain - Linkedin - Website 12 •A Business plan is a document that describes how a project can be implemented. •A Business plan usually aims at selling the project because “you can’t have a funding without a Business Plan” •A Business plan usually includes a description of: •The team •The Business Model •A Financial Analysis (e.g. financial spreadsheets) •A Business Environment Analysis (e.g. market, competitors and competitive advantage analysis) •An Implementation roadmap (e.g. operation plan, milestones) •A Risk analysis (e.g. SWOT, Critical Success Factors) A Business Model is not a Business Plan What’s a Business Plan?
  • 13. Eduardo Larrain - Linkedin - Website 13 •Strategy is a plan of action and the allocation of resources necessary for carrying out these goals •Michael Porter’s view on Strategy: •Strategy is a plan to differentiate the company and give it a competitive advantage •“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value” •Then decisions can only be defined as strategic if they involve consciously doing something “differently” from competitors and if that difference results in a sustainable advantage •e.g. making existing methods more efficient (“operational efficiency”) are not strategic since they can be easily copied by others A Business Model is not Strategy What’s Strategy?
  • 14. Eduardo Larrain - Linkedin - Website What’s a startup 14
  • 15. Eduardo Larrain - Linkedin - Website 15 What’s a startup? •A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty Basic definition •A startup is a company, a partnership or temporary organization designed to search for a repeatable and scalable business model
  • 16. Eduardo Larrain - Linkedin - Website 16 •For young companies with predictable revenues (like opening a new bakery), a business plan will be necessary to get a bank loan •For startups, “a good plan, a solid strategy, and thorough market research may not work leading to startup failures” •In a startup's earliest days there is not enough data to make an informed guess about what the quantitative financial model might look like •You have to confirm that your leap-of-faith questions of your business model are based in reality to do a business plan for a startup: •Did we build a product that people want (value creation hypothesis)? •What is the growth model (growth hypothesis)? •The role of strategy is to help figure out the right questions to ask •Followers ot the just-do-it school of entrepreneurship are impatient to get started. They start building immediately, often after just a few cursory customer conversations. Unfortunately, because customers don't really know what they want, it's easy for those entrepreneurs to delude themselves that they are on the right path The problem of business plans for startups Eric Ries, The Lean Startup, 2012
  • 17. Eduardo Larrain - Linkedin - Website 17 The lean startup methodology How to build a product that people want? •Developing a new product should resemble simultaneously driving a car (testing your product), tuning the engine (continuously improving the product) and steering (adapting your business model when needed) •Startups need to conduct experiments that help determine what techniques will work in their unique circumstances •Startup need extensive contact with potential customers to understand them so get out of the building and start learning •Metrics are people too. At the end of the day, customers are breathing, thinking, buying individuals. •You should talk to early adopters not mainstream customers. Eric Ries, The Lean Startup, 2012
  • 18. Eduardo Larrain - Linkedin - Website 18 The lean startup methodology Why early adopters are so important? •Early adopters accept-in fact prefer an 80 percent solution; you don't need a perfect solution to capture their interest. Early adopters use their imagination to fill in what a product is missing •This is hard truth for many entrepreneurs to accept. After all, the vision entrepreneurs keep in their heads is of a high-quality mainstream product that will change the world, not one used by a small niche of people who are willing to give it a shot before it's ready •First products aren't meant to be perfect. Most of the time, you are going to be rejected if you go to mainstream customers because most people are not early adopters and will not sign up for a new service sight unseen Eric Ries, The Lean Startup, 2012
  • 19. Eduardo Larrain - Linkedin - Website 19 The lean startup methodology The importance of MVP: build-measure-learn feedback loop •A minimum viable product (MVP) helps entrepreneurs start the process of learning as quickly as possible. It is not necessarily the smallest product imaginable, though; it is simply the fasted way to get through the Build-Measure-Learn feedback loop with the minimum amount of effort. Contrary to traditional product development that strives for product perfection, the goal of the MVP is to begin the process of learning, not to end it •Unlike a prototype or concept test, an MVP is designed not just to answer product design or technical questions but to test fundamental business hypothesis •Several types of MVPs: problem exploration, product pitch (e.g. video mvp), concierge •Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question •Always test first your riskiest assumptions Eric Ries, The Lean Startup, 2012
  • 20. Eduardo Larrain - Linkedin - Website 20 The lean startup methodology The Concierge MVP: have your customers design the first version of your product •Wait for the first customer before developing anything, solve one customer's problem •Each week you are learning more and more about what is required to make the product a success. After weeks you are ready for another customer. Each customer you bring on make it easier to get the next one. Only when you have a lot of customers, start to invest in automation in the form of product development • So you are focused on scaling something that is working rather than trying to invent something that might work for the future. As a result development efforts involves far less waste that is typical. •In a concierge MVP this personalized service is not the product but a learning activity designed to test the leap-of-faith assumptions in the company's growth model Eric Ries, The Lean Startup, 2012
  • 21. Eduardo Larrain - Linkedin - Website 21 The lean startup methodology Principles theleanstartup.com, 2014
  • 22. Eduardo Larrain - Linkedin - Website Why study Internet-based business models 22 Business Models Internet- based
  • 23. Eduardo Larrain - Linkedin - Website 23 Business models have been studied for 30 years Traditional business models: trying to explain success with profit models 1. Customer Solutions Time Profit Invest to know the customer, create a solution, develop the relationship E.g. GE 0 Profit zone 2. Product Pyramid Time Profit At the base are products and services that are low price and high volume; at the top products and services that are high price and low volume E.g. Air France Group: Air France for business and long haul flights, Transavia for leisure and Hop! for local flights 3. Multi-Component Several of the components represent a disproportionate share of the profits E.g. business seminars at hotels, advertising (Google, Yahoo, Facebook)? Basic activity Other components 4. Switchboard Multiple sellers communicating with multiple buyers. The more buyers and sellers join the great the organization builds on itself E.g. eBay, Alibaba, Amazon, Monster, Seloger Or the opposite: desintermediation (Dell) Seller Buyers 5. Time Profit Takes advantage of uniqueness, profit margins erode as competition seeks to imitate. Time profit companies must take the lead and maintain a "two year" lead over their competitors E.g. Intel, Microsoft Time F/unité 6. Block Buster profits Revenue realized is so powerful and fast that in a quick swoop the model pays for development and marketing costs E.g. movies, books Project types Project return Adrian Slywotzky and David Morrison, The profit Zone, 1998
  • 24. Eduardo Larrain - Linkedin - Website 24 Business models have been studied for 30 years Traditional business models: trying to explain success with profit models 7. Multiplier Strong customer brand E.g. Disney, Google Different offers Key asset 8. Entrepreneur Profit Hierarchical design with multiple subsidiaries to maintain closeness with the customer E.g. Biotechnologies, Google Basic activity Small teams 9. La spécialisation Specialist are several times more profitable than the generalist. Characterized by lower cost, higher quality, stronger reputation, shorter selling cycles, and better price realization E.g. Home Depot Return Specialists Generalists 10. Install Base Initial product sales or profits are slim and profit is realized on the follow-up products and services E.g. HP printers and Gillette Razors, Ryanair Margin Complementary products Basic product 11. Defacto Standard The more players who buy that enter in the system, the more valuable the network E.g. Microsoft, Oracle, Skype, Linkedin, spotify, Facebook Market share Margin 12. Brand The Company expends significant marketing investment in order to build awareness and is reinforced by customer experience. You know Brand is working when a consumer says, "I won't change because I trust AT&T". E.g. Google Price Brand price Average market price Adrian Slywotzky and David Morrison, The profit Zone, 1998
  • 25. Eduardo Larrain - Linkedin - Website 25 Business models have been studied for 30 years Traditional business models: trying to explain success with profit models 13. Specialty Specialty companies enjoy a higher premium for their products and services until competitors start to imitate E.g. Merck, 3M, Photoshop Marge Nowadays 5 years ago Common Leading Common Leading 14. Local Leadership Many businesses and their company economies are totally local. Risk occurs when these companies fail to recognize they are a local business model E.g. Wal-Mart Local market share Local return 0 15. Transactional Scale Transactions go up but the cost to provide the transaction does not go up as quickly E.g. investment banking, real estate, transportation Transaction size Transaction return 16. Value Chain Specific activities pass through a chain of specialist offering value E.g. softwares, Intel 17. Cycle Profit Industries characterized by distinct and powerful cycle. The company can not control the cycle, but it works to maximize its position within the cycles grip. As capacity tightens the companies lead price increases, as capacity loosens, its lag price declines E.g. Dow Chemical, Toyota Capacity / Occupancy Return by unit produced 18. After-Sales Profit The company's profit does not direct come from the sale of the product, but the after sale financing or services of the product E.g. General Electric, banking Basic offer After-sales offers Adrian Slywotzky and David Morrison, The profit Zone, 1998
  • 26. Eduardo Larrain - Linkedin - Website 26 Business models have been studied for 30 years Traditional business models: trying to explain success with profit models 19. New Product Profit As new products are introduced profit margins are high and growth rapid. As the product mature the profit margins fall Time Diffusion 20. Relative Market Share Profit Companies with high market share tend to be more profitable. Large companies have price advantages due to manufacturing experiences and volume economies, such as purchasing capability and economies of scale Relative market share Return 21. Experience Curve Profit Experience drives down the transactional cost Cumulated experience Unit cost 22. Low Cost Business Design The company trives on reducing the cost per unit through cumulative experience E.g. Southwest Air, Dell, Internet as an channel distribution (fnac.com,…) Unit cost Traditional Low cost Adrian Slywotzky and David Morrison, The profit Zone, 1998
  • 27. Eduardo Larrain - Linkedin - Website 27 Why study Internet-based business models? Two reasons i.The technological revolution increased exponentially the number of business models types: •Marginal cost of digital information comes closer to nothing •Long tail enables larger segmentation of customers •Better assets rotation can enable new businesses with low margin ii.After 30 years, we are better at understanding complex business models
  • 28. Eduardo Larrain - Linkedin - Website 28 (i)The technological revolution (IT, Internet, biotechnologies, nanotechnologies,…) Ray Kurzweil video on TED, 2005 The accelerating power of technology 14’00-19’10
  • 29. Eduardo Larrain - Linkedin - Website 29 Marginal cost of digital information comes closer to nothing Basic economics •… Though with the technological revolution, marginal cost of digital information comes closer to nothing •Moore law: “number of transistors on a chip doubles every 18 months” •In basic economics, price falls to the marginal cost which increases with production… Quantity Supply Demand Price Exhibit – Market supply and demand Quantity Marginal cost Average cost Price Exhibit – Costs of one company
  • 30. Eduardo Larrain - Linkedin - Website 30 •The great power of the eBay business model is the fact that a small number of salaried employees and outsource partners can handle a huge and growing volume of business: •Doubling of transaction volume can be accomplished with relatively modest investments •Software and servers do the heavy lifting eBay Headquarters, San Jose California
  • 31. Eduardo Larrain - Linkedin - Website 31 Long tail enables larger segmentation of customers Long tail •Long tail is about selling less of more: •They focus on offering a large number of niche products, each of which sells relatively infrequently •Aggregate sales of niche items can be as lucrative as the traditional model whereby a small number of bestsellers account for most revenues •Long Tail business models require low inventory costs and strong platforms to make niche content readily available to interested buyers Chris Anderson, The Long Tail, 2006
  • 32. Eduardo Larrain - Linkedin - Website 32 •Amazon sells blockbusters products but also niche hard-to-find products (online book stores bring access to increased product variety) •Customer customization has enabled Dell to sell a large volume of products in small numbers Amazon warehouse, somewhere
  • 33. Eduardo Larrain - Linkedin - Website 33 Better assets rotation can enable new businesses with low margin The only formula you need to know in this workshop! Formula of Return on Equity ROE = Net Income (R) / Equity (K) ROE = (R / K) * (Income / Income) * (Assets / Assets) ROE = (R / Income) * (Income / Assets) * (Assets / K) ROE = Gross Margin * Assets rotation * Financial lever •Technological revolution increase assets productivity decreasing the amount of assets immobilized
  • 34. Eduardo Larrain - Linkedin - Website 34 Better assets rotation can enable new businesses with low margin Design to cost •Then, new business models with low margin can be designed and have the same return than more profitable activities •E.g. Logan, the low-cost brand new vehicle, was designed to be sold at 5 000€ (ultimately 8 000€ in France) Exhibit – Different business positioning with same ROE Gross Margin Assets rotation
  • 35. Eduardo Larrain - Linkedin - Website 35 Better assets rotation can enable new businesses with low margin Pyramid base: targeting tier 5 population •Developing countries are inventing new business models in regions with very low purchasing power where populations where traditionally excluded from any economical business modeling. E.g. Tata vehicule costing 2 500€ even cheaper than Logan •4 billion people live with less than 1 500 USD per year C. K. Prahalad, The Fortune at the Botton of the Pyramid, 2006
  • 36. Eduardo Larrain - Linkedin - Website 36 Better assets rotation can enable new businesses with low margin Mobile banking case • Half population is unbanked worldwide leaving: • People with no official financial service to save or to borrow: • Unofficial lending rates range between 50% and 400% p.a, microfinance rates are 20-40% • One day per month is lost in Morocco to pay invoices • Enabling mass tax avoidance from States with low budgets • Raising the cost and complexity for companies t pay their employees • Though new mobile banking offer are emerging in developing countries. E.g. half public servant in Kenya are paid with mobile banking Sénégal Egypte Roumanie Côte d'Ivoire Djibouti Maroc Pologne Espagne France Moy. Afrique Pakistan Algérie Tunisie Russie Afrique du Sud Autriche Portugal Royaume-Uni Moy. UE Allemagne Mexique Inde Etats-Unis Canada Chili Chine Colombie Brésil Arménie Belgique Botswana Danemark Finlande Guatemala Guyane Irlande Jamaïque Kirghizstan Kenya Lesotho Namibie Nicaragua Ouganda Pays-Bas Suède Tanzanie Vietnam 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Banked population 2008 Mobile penetration 2008
  • 37. Eduardo Larrain - Linkedin - Website Current trends 37 Other big trends in creating new Internet-based companies •Pyramid based strategy: create a business model based on people very low purchasing power •Blue ocean strategy: look for a new ocean rethinking differentiation and low-cost and go beyond industry boundaries •Cloning strategy: clone successful internet sites and replicate them in other countries •Lean startup strategy: helps you build a product that people want eliminating waste
  • 38. Eduardo Larrain - Linkedin - Website 38 (ii) We are better at understanding business models One Business Model Canvas Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 39. Eduardo Larrain - Linkedin - Website What are the key elements of a business model 39
  • 40. Eduardo Larrain - Linkedin - Website 40 Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010 A business model describes what makes an company unique looking from the value propositions to cost structure Key elements of a business model
  • 41. Eduardo Larrain - Linkedin - Website 41 Cost-side Value-side A business model is an ecosystem Rationale beyond those key elements Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 42. Eduardo Larrain - Linkedin - Website 42 1 - The proposition value Definition and scope •The value proposition describes the bundle of products and services that create value for a specific customer segment •Value proposition is marketing territory: •It can be functional (solves a customer problem, physiological need,…), social (need to belong, status,…), emotional, relationship… •It is an aggregation of the benefits that a Company offers customers (solve a customer problem or satisfies a customer need) minus sacrifices (price, technical process when buying or when recycling, travel time,…) •It is a unique combination of benefits and sacrifices •It is not a list of products and services, technologies or distribution channels Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 43. Eduardo Larrain - Linkedin - Website 43 1 - The proposition value Elements that can contribute to customer value creation •Newness: some value propositions satisfy an entirely new set of needs that customers previously didn’t perceive because there was no similar offering. E.g. mobile phones, ethical investment funds •Performance: improving product or service performance. E.g. bringing more powerful PC, more disk storages and better graphics •Customisation: tailoring products and services to the specific needs of individual customers. E.g. mass customisation •Getting the job done: helping a customer get a certain job done. E.g. Rolls-Royce airline engines. •Design: a product may stand out because of superior design. E.g. fashion and customer electronics •Brand/Status: customers may find value in the simple act of using and displaying a specific brand. E.g. Rolex •Price: offering similar value at a lower price e.g. Bic •Cost reduction: helping customers reduce costs •Risk reduction: reducing risks customers incur. E.g. giving a one-year service guarantee •Accessibility: making products and services available to customers who previously lacked access to them. E.g. NetJets popularized the concept of fractional private jet ownership, RIP Merrill Lynch bring Wall Street to Main Street in the 60s •Convenience/Usability: making things more convenient or easier to use. E.g. iPod. Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 44. Eduardo Larrain - Linkedin - Website 44 1 - The proposition value Defining a promise helps understanding the proposition value Defining the promise or tagline •The promise is not only advertising territory but it shapes all the business model •A good promise or tagline must not only deliver a clear message but also advertise an offering truthfully •A good way to test the effectiveness and strength of a strategy is to look at whether it contains a strong and authentic promise or tagline •The promise can still be simple and concise even for large international and complex companies •Zara (Inditex) promise is “fast-fashion” which has shaped all the company operations •What are the promise of those companies? •Starbucks •Ikea •Easyjet / Ryanair •Toyota •Lego •Danone •Yves Rocher
  • 45. Eduardo Larrain - Linkedin - Website 45 •Starbucks promise ?
  • 46. Eduardo Larrain - Linkedin - Website 46 •Starbucks promise: a “third space” of conviviality between home and work
  • 47. Eduardo Larrain - Linkedin - Website 47 1 - The proposition value Defining a promise helps understanding the proposition value Company promise or tagline •What are the promise of those companies? •Starbucks •Ikea •Easyjet / Ryanair •Toyota •Lego •Danone •Yves Rocher •A “third space” of conviviality between home and work •Functional home furnishing, low price and design •Simple airline flights at low price faster than the car •Auto reliability •Learning though the joy of building •Health through food and beverages to a maximum number of people •Beauty based on plants Denis Dauchy, 7 étapes pour un business model solide, 2010
  • 48. Eduardo Larrain - Linkedin - Website 48 1 - The proposition value The proposition value has to take into account all customers Two customers •Most of the time, the buyer is not the user of the product or service Customer 1 Customer 2 Mass-market products or services Distributor Final consumer Services to corporations (food, transportation,…) Company Employees This workshop You! Companies and funds Pharmaceutical drugs Prescriber (dentist, general practitioner GP,…) Patients, social security Denis Dauchy, 7 étapes pour un business model solide, 2010
  • 49. Eduardo Larrain - Linkedin - Website •Companies have long engaged in head-to-head competition in search of sustained, profitable growth •Yet in today’s overcrowded industries, competing head-on results in nothing but a bloody ”RED OCEAN” of rival fighting over a shrinking profit pool •This strategy is unlikely to create profitable growth in the future •Leading companies will succeed not by battling competitors but by creating “BLUE OCEANS” of uncontested market space ripe for growth
  • 50. Eduardo Larrain - Linkedin - Website 50 1 - The proposition value Differentiate from competitors or innovate within the value Red Ocean Strategy vs. Blue Ocean Strategy •Similar to Michael Porter definition of strategy as a differentiation plan, Blue Ocean Strategy aims at changing the proposition value to gain profitable growth •Red oceans will continue to be an important part of a company’s strategy (a lot of tools and framework already exists) but invest in blue oceans will create profitable growth W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 51. Eduardo Larrain - Linkedin - Website 51 1 - The proposition value Differentiate from competitors or innovate within the value Four questions to challenge an industry’s strategic logic and business model •First, capture the current state of play in the known market space in order to understand competition and the principal factors (price, quality, design…) •Second, reconstruct buyer value elements trading-off between differentiation and low-cost •E.g. is the company over delivering without payback? (typical of a company caught in the Red Ocean) W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 52. Eduardo Larrain - Linkedin - Website 52 •In the 80s, Circus was a declining industry with decreasing audiences because of increasingly attractive alternative forms of entertainment •There were star performers but none could compete with movie stars, multiple show arenas and a audience of families •There was also increasing sentiment against the use of animals in circuses by animal rights groups •Cirque du Soleil launched in 1984 and is now one of Canada’s largest cultural exports. Why?
  • 53. Eduardo Larrain - Linkedin - Website 53 1 - The proposition value Cirque du Soleil created a new value curve offering the best of both circus and theater and eliminating or reducing everything else Cirque du Soleil canvas •By offering unprecedented utility, Cirque du Soleil has created a blue ocean and has invented a new form of live entertainment, one that is markedly different from both traditional circus and theater •Cirque du Soleil strategically priced its tickets against those of the theater because it attracted an adult theater audience •Cirque du Soleil tagline is: ”a mix of circus arts and street entertainment” W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 54. Eduardo Larrain - Linkedin - Website 54 •With which industry do Southwest airlines compete? •In what do they focus, in what they differ and what are they tagline?
  • 55. Eduardo Larrain - Linkedin - Website DIVERGENCE FOCUS 55 1 - The proposition value Southwest airlines created a new curve offering high-speed transport with frequent and flexible departures at prices attractive to the mass of buyers Southwest Airlines canvas and the low-cost model •Southwest Airlines created a blue ocean by breaking the trade-offs customers had to make between the speed of airplanes and the economy and flexibility of car transport •Southwest emphasizes only three factors (focus) and differentiate on four others factors from the industry’s average profile (divergence) •Southwest promise or tagline: “the speed of a plane at the price of a car… whenever you need it” W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 56. Eduardo Larrain - Linkedin - Website 56 •With which industry do Logan compete? •In what do they focus, in what they differ and what are they tagline?
  • 57. Eduardo Larrain - Linkedin - Website 57 1 - The proposition value Logan created a new curve offering a new car for the price of an used-car Logan canvas •Logan promise or tagline: “for the price of an used-vehicule, have a new car” •Similarly, Amazon launched Marketplace not only to compete with second-hand cultural goods marketplace like eBay but to close the gap between new and second items Price Spaciousness Garanty Resistance Design Accessories Status Low price new vehicule Used-vehicule Logan DIVERGENCE FOCUS High Low
  • 58. Eduardo Larrain - Linkedin - Website Definition and scope 58 2 – Revenue stream •Revenue stream is the cash a company generates from each customer segment •A business model can involve two different types of Revenue streams: •Transaction revenues resulting from one-time customer payments •Recurring revenues resulting from ongoing payments to either deliver a Value proposition to customers or provide post-purchase customer support
  • 59. Eduardo Larrain - Linkedin - Website Ways to generate revenue streams 59 2 – Revenue stream •Asset sale: selling the ownership rights to a physical product. E.g. Amazon selling a book •Usage fee: selling the use of particular service. E.g. A telecom operator charging by the minute •Subscription fee: selling continuous access to a service. E.g. Club Med Gym, WOW/World of Warcraft online •Lending/Renting/Leasing: temporary granting someone the exclusive right to use a particular asset for a fixed period in return for a fee. E.g. Autolib •Licensing: giving permission to use protected intellectual property in exchange of licensing fees. E.g. media industry •Brokerage fees: intermediation services performed on behalf of two or more parties. E.g. credit cart providers, real estate agents •Advertising: fees for advertising a particular product, service or brand. Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 60. Eduardo Larrain - Linkedin - Website Pricing mechanisms 60 2 – Revenue stream Each revenue stream might have different pricing mechanisms Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 61. Eduardo Larrain - Linkedin - Website How do you set a price 61
  • 62. Eduardo Larrain - Linkedin - Website 62 Price is determined by what a buyer is willing to pay and the competition is allowing to be charged (not by markup on cost) Price is determined by strategy
  • 63. Eduardo Larrain - Linkedin - Website Pricing strategy depending of the product life cycle 63 2 – Revenue stream Reminder •Product introduction: •Market skimming strategy setting up a very high price . E.g. Electronic goods, luxury •Or Penetration strategy: real low price even below cost to gain market share •Growth: decrease price because of volume •Maturity: decrease price because of competition •Decline: special offer because price is the main factor of value Chris Anderson, Free the future of a radical price, 2009 Milton Friedman, There's no such thing as a free lunch,1975
  • 64. Eduardo Larrain - Linkedin - Website How can a product be free 64
  • 65. Eduardo Larrain - Linkedin - Website Definition and scope 65 2 – Revenue stream Introduction to Free •Free is giving without a cost… all included •Free is not to be mistaken with “free” used by advertisers when it’s not really free: •Free “buy one get one free” is just another way of saying 50 percent off when you buy two •Free gift inside •Free shipping •Basic economics: there's no such thing as a free lunch •The "free lunch“ refers to the once-common tradition of saloons in the United States providing a "free" lunch to patrons who had purchased at least one drink. All the foods on offer were high in salt (e.g. ham, cheese and salted crackers) so those who ate them ended up buying a lot of beer. •You can make money on free (revenue stream) but also free can lead to fast growth: •Before the 2000’s, Dell was known to be the first company to have reached one billion sales after been launched in less than 10 years Chris Anderson, Free the future of a radical price, 2009 Milton Friedman, There's no such thing as a free lunch,1975
  • 66. Eduardo Larrain - Linkedin - Website The penny gap theory 66 2 – Revenue stream Introduction to Free •The penny gap is the difference between cheap and free •For small payments, there is not a constant elasticity in price •Zero is one market and any other price is another market •Zero can attract lots of people because from the consumer’s perspective charging even a penny makes us think about the choice Chris Anderson, Free the future of a radical price, 2009
  • 67. Eduardo Larrain - Linkedin - Website The economics of abundance (vs. scarcity) 67 2 – Revenue stream Introduction to Free •Digital technologies have become too cheap to meter creating a economy of abundance (e.g. information) •Digital free theory: •“If it’s digital, sooner or later it’s going to be free” •“When something halves in price each year, zero is inevitable” •“Waste is good” •“Every abundance creates a new scarcity” (e.g. time) •Though, externalities for the consumer still exist: technical process when buying or when recycling, travel time,… Chris Anderson, Free the future of a radical price, 2009
  • 68. Eduardo Larrain - Linkedin - Website 4 revenue streams around: first two been very old but evolving and the last two are emerging with Internet 68 2 – Revenue stream Introduction to Free A.Direct Cross-Subsidies: give a free product that have high probability to make people pay for something else B.The “three-parties” (or two-sided markets): one customer segment subsidizes another (the most common) C.Freemium: premium paid version D.Non-monetary markets: people choose to give away with no expectation of payment Chris Anderson, Free the future of a radical price, 2009
  • 69. Eduardo Larrain - Linkedin - Website Definition and scope 69 2 – Revenue stream A – Direct Cross-Subsidies •This is the oldest and most familiar model where the cost of one product is shifted into the price of another •Free attracts customer in masses. Then cross-selling or up-selling validate the business model: •Give a product (equipment) and sell a service (maintenance) or another product (supplies) •Key success factor is the increase the equipment rate with products with better profitability •It has other names: Gillette and razor blades, Equipment and Supplies, Equipment and Maintenance Chris Anderson, Free the future of a radical price, 2009
  • 70. Eduardo Larrain - Linkedin - Website 70 2 – Revenue stream A – Direct Cross-Subsidies How can you sell airlines tickets far under cost? « People pay attention on ticket price not on the extra’s » Chris Anderson, Free the future of a radical price, 2009
  • 71. Eduardo Larrain - Linkedin - Website Famous examples of direct-cross subsidies 71 2 – Revenue stream A – Direct Cross-Subsidies Free or far under cost Where the money comes from Companies Printer Ink Printer manufacturer Coffee machine Capsules Nespresso Razor Razor blades Gillette Real estate loan, credit card, savings account Cross-selling because customer is stuck with the same bank for 20/30 years Retail banks Airline ticket Hotel room, rental car, cruise and vacation package Go Voyages, airline companies Elevator Maintenance and security upgrades Elevator companies Alarms Electronic surveillance Security companies Equipement Reagent supplies Medical biology companies Telephone Communications Carrier
  • 72. Eduardo Larrain - Linkedin - Website More examples of direct-cross subsidies 72 2 – Revenue stream A – Direct Cross-Subsidies • Give away services, sell products (Apple Store Genius Bar Tech support) •Or Give away products, sell services (free gifts when you open a bank account) •Give away software, sell hardware (IBM and HP’s linux offerings) •Or Give away hardware, sell software (video game console model) •Give away cell phones, sell minutes of talk time (many carriers) •Or Give away talk time, sell cell phones (many of the same carriers, with free nights and weekend plans) •Give away the show, sell the drinks (strip clubs) •Or Give away the drinks, sell the show (casinos) •Free with purchase (retailer “loss leaders” e.g. gas sold in a supermarket) •Free samples (gift boxes) •Free trials (magazine subscriptions) •Free parking (malls, supermarkets) •Free condiments (restaurants) Chris Anderson, Free the future of a radical price, 2009
  • 73. Eduardo Larrain - Linkedin - Website Definition and scope 73 2 – Revenue stream B – Three-parties or Two-sided markets •A third party pays participate in a market created by a free exchange between the first two parties. Thus one customer segment subsidizes another •The most common of the economies built around free is the three party system •Advertising is the most famous one where advertisers pay for media to reach consumers: Chris Anderson, Free the future of a radical price, 2009
  • 74. Eduardo Larrain - Linkedin - Website Markets with three-parties revenue stream 74 •Three-parties is not limited to advertising Denis Dauchy, 7 étapes pour un business model solide, 2010 Market First-party Consumer Third-party Second-party examples Search Internet user Advertisers Google, Yahoo! Online recruitment Job seeker Recuiters Monster, cadreemploi, keljob Free newspapers Readers Advertisers Metro, 20 Minutes Free softwares Readers Software publisher Adobe Debit card Card owners Retail Banks Ecommerce platform Sellers Buyers eBay, Amazon marketplace Outdoor advertising Municipalities Advertisers JC Decaux, Clear Channel 2 – Revenue stream B – Three-parties or Two-sided markets
  • 75. Eduardo Larrain - Linkedin - Website More examples of three-parties 75 •Give free voice calling (in the US), charge advertisers (Facebook Messenger app) •Give away content, sell access to the audience (ad-support media) •Give woman free admission, charge men (bars) •Give children free admission, charge adults (museums) •Give away listings, sell premium search (match.com) •Sell listings, give away search (craigslist housing) •Give away travel services, get a cut of rental car and hotel reservations (travelocity) •Give away house listings, sell mortgages (Zillow) •Give away content, sell information about the consumers (practice fusion) •Give away content, sell stuff (Thinkgeek) •Give away content, charge advertisers to be featured in it (product placement) •Give away resume listings, charge for power search (Linkedin) 2 – Revenue stream B – Three-parties or Two-sided markets Chris Anderson, Free the future of a radical price, 2009
  • 76. Eduardo Larrain - Linkedin - Website Definition and scope 76 2 – Revenue stream C – Freemium •Freemium is giving a free basic version to most of people and charging for a premium version to a few people •Freemium or contraction of Free and Premium was invented by Fred Wilson in 2006. •Freemium is different with direct-cross subsidiaries because the ratio of free to paid is high (e.g. 90%, 95%) when giving free sample has a low ratio •This ratio is enabled by Internet because the cost of serving the basic version is close to zero •Si it’s not the same thing as "premium with a free sample.“ •Freemium is one of the most common Internet-based business model even though not every product or service can work as freemium Chris Anderson, Free the future of a radical price, 2009
  • 77. Eduardo Larrain - Linkedin - Website Different kind of limitation of the basic free version 77 2 – Revenue stream C – Freemium •Functionnalities •e.g. Linkedin, Flickr, Skype, Evernote, WordPress •Time •e.g. legal online streaming •Capacity •e.g. sending large files, DropBox (cloud backup system) •Storage •e.g. webmails •Others factors •e.g. •Spotify and Gmail invitations •Seat limited (first customers get free seats) •Customer type limited: free for small and young companies, universities (licence model)
  • 78. Eduardo Larrain - Linkedin - Website Why go for Freemium business model? 78 2 – Revenue stream C – Freemium •Marketing: •By definition, having a free product makes it really easy to get customers •Even though a free user might not convert, they can invite other free users who might (referral) •Network effects (like fax): •A network effect is what happens when a product or service becomes more valuable the more people use it •A phone isn't very useful if you can't call anyone else with it. But once everyone you know has a phone, it becomes a pretty valuable thing to have •If you're in a market that lends itself to network effects you're going to want to have a free basic product because if you don't someone else will and will use the network effects to crush you •E.g. Skype has 600 million users who make calls for free over the internet and only a small percentage of those pay to make calls to landlines Business Insider, What Is The Freemium Business Model, 04/2011
  • 79. Eduardo Larrain - Linkedin - Website Key success factors (if not, choose another business model) 79 2 – Revenue stream C – Freemium •Get lots and lots of free users: •Freemium is a numbers game: if only 1% of your users are going to pay you, then you need to have lots and lots of free users (millions, typically) to make that 1% enough money •If your product is more niche, go for premium instead of freemium •If your product is not sticky, go for advertising instead of freemium •Have a product or service whose value to users increases with time: •This is the biggest thing that most people •The value of your service needs to increase the more people use it •E.g. Spotify: where you create all your playlists and organize your music. Once you've done thatyou're much more likely to pay up. The value of Spotify to you has gone up from being just music to music, your playlists and your friends' playlists, so paying starts to make sense •Keep costs low: •Freemium works because the marginal cost of each additional user is low, so you need to keep your operating costs correspondingly low •Time: •It takes a long time to be profitable because users take longer to convert as the value of the product to them increases over time, and because you keep adding (hopefully) new free users, freemium businesses take a long time to reach breakeven point •As people get older, people migrate into paying customer (premium part of freemium) because they get richer Business Insider, What Is The Freemium Business Model, 04/2011
  • 80. Eduardo Larrain - Linkedin - Website Examples of freemium 80 •Give away basic information, sell richer information in easier-to-use form (BoxOfficeMojo) •Give away generic management advice, sell customized management advice (McKinsey) •Give away Web content, sell printed content (everything from magazines to books) •Give away online games, charge a subscription to do more in the game (penguins) •Give away demo software, charge for the full version (most video games) •Give away computer-to-computer calls, sell computer-to-phone calls (Skype) •Give away free photo-sharing services, charge for additional storage space (Flickr) •Give away basic software, sell more features (QuickTime) •Give away ad-supported service, sell the ability to remove the ads (Ning) •Give away "snippets" sell books (Google Books) •Give away virtual tourism, sell virtual land (Second Life) Chris Anderson, Free the future of a radical price, 2009 2 – Revenue stream C – Freemium
  • 81. Eduardo Larrain - Linkedin - Website Definition and scope 81 2 – Revenue stream D – Nonmonetary markets •People give away content with no expectation of Payment •Gift economy is based on the principle that the action of individuals have a global impact •People give for different reasons: to gain reputation e.g. blog writers, altruism e.g. Wikipedia or unintentionally/passively (web content helps Google) •Labor exchange: paying something with labor even without knowing it •E.g. free content in exchange of Captcha solving (used by spammer in exchange of free porn but also used by Google Street view to decipher street numbers, names and trafic signs) •E.g. voting on Digg, Yahoo Answers or using Google 411 (phone directory in exchange of speech sound) •Piracy: when piracy is so powerful that content producer have accepted that, form them, doing the activity is not a moneymaking business •E.g. online music Chris Anderson, Free the future of a radical price, 2009
  • 82. Eduardo Larrain - Linkedin - Website 82 •Google is getting the public to identify house numbers and signs from Street View photos as part of its reCAPTCHA anti-spam technology and feeding the data into its online mapping service
  • 83. Eduardo Larrain - Linkedin - Website Answers to reCAPTCHA challenges are used to digitize textual documents 83 reCAPTCHA is a free CAPTCHA service that helps to digitize books, newspapers and old time radio shows OCR: Optical Character Recognition programs Example of a CAPTCHA Comparison of the accuracy of standard OCR versus reCAPTCHA transcriptions
  • 84. Eduardo Larrain - Linkedin - Website 84 Features with poor usability can be an opportunity for revenues CAPTCHA can also be used for advertising and generate revenues Adyoulike
  • 85. Eduardo Larrain - Linkedin - Website Popular revenue streams among top Internet companies 85 2 – Revenue stream Popular revenue streams among top Internet companies •Freemium: Zynga, Rovio, Linkedin, Spotify, Dropbox, SurveyMonkey, Eventbrite, Tumblr, Evernote, Skype •Advertising: Google, Facebook, Twitter, Craiglist, Criteo, Path •Marketplace: Amazon, Alibaba, Venteprivee, ZocDoc, TaskRabbit, Airbnb •Ecommerce: Groupon, LivingSocial, Foursquare, Hulu •Others: •Premium: The New York Times, Les Echos •Crowdsourcing/Crowdfunding: Kickstarter, Kaggle •Digital money: Starbuck, Paypal … Datamining and big data at the heart of the Data revolution: Shazam, Meilleursagents, Trulia, Zillow, Kel Quartier
  • 86. Eduardo Larrain - Linkedin - Website 86 •How’s the music industry going?
  • 87. Eduardo Larrain - Linkedin - Website 2 – Revenue stream Looking at the music industry Global recorded music sales are decreasing since end of the 90’s due to digital piracy Exhibit – Global Recorded Music Sales (bn USD, trade value) IFPI, press report, 2014 Synchronization rights: revenues from music acquired for movies, advertisements and music videos 2013: -0,1% excl. Japan
  • 88. Eduardo Larrain - Linkedin - Website 88 2 – Revenue stream Looking at the music industry Music downloads still accounts for 67 per cent of digital music revenues •Piracy has made difficult of charging a price for listening songs or albums •Though consumers still find value in downloads from iTunes Music Store, FnacMusic and others because of the sacrifices of the free music downloaded illegally (quality, security, complexity, accessibility…) •Even if downloads of music from iTunes Store and others still account for 80 per cent of digital music revenues, this market is maturing and spending is flattening in all key territories
  • 89. Eduardo Larrain - Linkedin - Website 89 2 – Revenue stream Looking at the music industry Streaming and downloads make the digital proposition value •Consumers are finding great value in: •Having access to millions of songs (sellouts are impossible) •Creating and sharing playlists •Listening to music in on all devices everywhere (accessibility = cloud storage, remember Philipp comment on the “head” part of the long tail) •Listening to music even offline •Sharing his songs and getting recommendation on social networks •Fremium streaming music services such as Spotify will be the key growth drivers over the next years as usage and spending grow rapidly: •Spotify Open: free but limited in number of songs and number of hours •Spotify Unlimited: a monthly fee limited on a laptop •Spotify Premium: a monthly fee for listening to music in on all devices and even offline •All Spotify offers enable users to share easily on social networks such as Facebook:
  • 90. Eduardo Larrain - Linkedin - Website •Music revenues are increasing the Swedish music industry market due to digital sales •Streaming is even cannibalizing downloads in Sweden that only represent 6% of digital sales •Music licensing for online videos is a growing market as more and more people watch videos that are accompanied by music 90 2 – Revenue stream Looking at the music industry Music streaming business model is already the largest market in Sweden, a country with a robust culture of Internet piracy IFPI Svenska Gruppen, press report, 07/2013
  • 91. Eduardo Larrain - Linkedin - Website 91 2 – Revenue stream Looking at the music industry Digital recorded music is expected to overtake physical sales in 2015 PwC, Global Entertainment & Media Outlook, 2012
  • 92. Eduardo Larrain - Linkedin - Website •11 M song tracks (stock) in 2001, 100 M in 2010 (Gracenote/Sony db > Shazam db) •Growth of the Gracenote database obviously includes a lot of older music that has only recently been indexed and that is been rediscovered –E.g. Oscar Wilde - Los Vidrios Quebrados (1967) •The trend still looks like the amount of music available to consumers is steadily growing •At the other side, overall sale of music (including albums, singles, digital tracks,…) exceeded 1.5 billion transactions in 2010 (up from 845 million transactions in 2000) 92 2 – Revenue stream Looking at the music industry What about content production and consumption? The amount of content being produced and consumed in music is believe to be growing Floor 64, The Sky Is Rising, 01/2012
  • 93. Eduardo Larrain - Linkedin - Website •Psy with its Gangnam Style song, viewed more than 1 billion times, would never had been a success outside South Korea without Youtube –It generated 8 M USD from advertising (50/50 split) •Ticket prices and merchandise have become major sources of income for many popular rock stars like Lady Gaga, Madonna, Bruce Springsteen and for bands like U2 •It’s not easy to duplicate the experience of a live show, so concerts have become a source of revenue for musicians and aren’t negatively affected by the availability of free downloadable music - in fact, free music can encourage fans to attend live performances •There’s actual scarcity for live music •Other trends: –Algorithms may be replacing humans in some parts of discovering new talent (or at least discovering talent more cost-effectively) –Gracenote, Shazam,… are datamining music metadata in order to serve better music recommendations to consumers or to predict which artists will be popular with target demographic groups 93 2 – Revenue stream Looking at the music industry What about musicians revenues? Floor 64, The Sky Is Rising, 01/2012
  • 94. Eduardo Larrain - Linkedin - Website 94 2 – Revenue stream What has the Entertainment industry learned from the Music industry? Some Entertainment industries have found new business models successful with the Digital era, others no… well not yet… thus a business model challenge IFPI, press report, 2012 •For consumers, today is an age of absolute abundance in entertainment due to the digital era and piracy •New business models based on Digital sales are emerging in each Entertainement industry to take over decreasing physical sales
  • 95. Eduardo Larrain - Linkedin - Website 95 2 – Revenue stream What has the Entertainment industry learned from the Music industry? PwC, Global Entertainment & Media Outlook 2012-2016, 2012 Though not all new business models can be based on Advertising since advertising is a huge but finite market and volatile (reliant on the economic situation )
  • 96. Eduardo Larrain - Linkedin - Website 96 •Has the internet decimated the entertainment industry, or are we living in a new gold age for both content creators and consumers? •Entertainment spending per households as a function of income is increasing from 4.9% in 2000 to 5.6% in 2008 (US) •The amount of content being produced in music, movies, books and video games is believe to be growing: •1/4 M new books were available in 2002, 3 M in 2010 •1.700 new movies p.a. in 1995, 7.000 in 2009 •11 M song tracks (stock) in 2001, 100 M in 2010 (Gracenote db) •The Entertainment industry is growing though the value chain is being totally redesigned Floor 64, The Sky Is Rising, 01/2012
  • 97. Eduardo Larrain - Linkedin - Website •How’s the video game industry going?
  • 98. Eduardo Larrain - Linkedin - Website •Globally, the amount that consumers spend on video games - for hardware, software and accessories - has grown from about $20 billion in 2000 to approximately $70 billion in 2011 •The demographics of video game players has expanded greatly beyond the traditional core of boys and young men: –53% of game players are male and 47% female –Average gamer player age is 30 –The amount of time kids are spending on video games has grown from 26 minutes per day in 1999 to 1 hour and 13 minutes in 2009 due to mobile device that has allow kids to squeeze more playing time into their busy days (Kaiser Family Foundation survey) •Worldwide, the population of gamers has exploded from 250 million in 2008 to 1.5 billion in 2011 98 2 – Revenue stream Looking at the video game industry Video games sales have grown with the digital revolution and cross the barrier of gender and age limitations Floor 64, The Sky Is Rising, 01/2012
  • 99. Eduardo Larrain - Linkedin - Website •The traditional console business model, based on the installed based per the attach rate (number of games per owner), led to an elitist approach to game design since price of each game was high (40-60 USD) and hardcore gamers wanted a return for their investment •New video games digital segments have emerged: –Downloads: Steam is to games as iTunes is to music –Massively Multiplayer Online (MMO) e.g. World Of Warcraft –Online / Casual –Mobile –Social •Digital sales (and rental delivery) now generate 40% of the industry 99 2 – Revenue stream Looking at the video game industry Purchases of digital content are growing the video games industry ESA, Essential Facts about the computer and the video game industry, 2012
  • 100. Eduardo Larrain - Linkedin - Website •Piracy of video games has fewer benefits than music and movie piracy: Piracy is an issue for single-player mode though the primary reason people buy games retail is for the multiplayer modes: –Most pirated games do not allow for multiplayer as the game often has to connect to an official server where its legitimacy can easily be verified by some sort of authentication service •Steam is to games as iTunes is to music: –Steam is a digital distribution, digital rights management, multiplayer and communications platform –Steam has an estimated 70% share of the digital distribution market for video games (competitor: EA’s Origin) –One PC game out of three is downloaded (average price not much lower than retail: -7%) –Steam is developed by Valve Corporation best known for a number of popular entertainment franchises such as Counter-Strike, Half-Life, Left 4 Dead 100 2 – Revenue stream Looking at the video game industry Looking at the video game download business model 2011 top-selling games at retail ranked by unit sales (VGChartz)
  • 101. Eduardo Larrain - Linkedin - Website •Massively Multiplayer Online game are video games in which a large number of players engage simultaneously in a persistent world •Value of an MMO is in the size of the community per life time (retention) •The hardcore game MMO revenue stream was invented by World of Warcraft: –Average customer lifetime of 18 months –Client box or download (50 USD) –Subscription fees (15 USD/m) –Virtual goods –Average full cost to complete WoW for a gamer is 300 USD •Few MMO have been able to replicate WoW model so they switch to F2P to lower entry barrier and get a sizable community e.g. Habbo Hotel, Kart Rider, Warhammer, Everquest,… –Average customer lifetime of 6 months –Free trial or free game –Subscription optional –Virtual goods for actions items (competition) and personalisation (expression) •Theory of engagement: « the longer a user plays the more chances there are he buys virtual items » –Items payable through micro-payments mainly inside the game (60%) and on an external web site 101 2 – Revenue stream Looking at the video game industry Looking at MMO business models Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
  • 102. Eduardo Larrain - Linkedin - Website •Online casual games are games played online to “kill time, make a pause, relieves from stress”: •Free-to-Play (F2P) is the main business model (also for social games and some mobile games) •F2P is a freemium business model that can be based on: –Try-and-buy: limited access (time, levels,…), though games must be really addictive –Advertising with ads display on hosting sites or inside the game –Virtual goods 102 2 – Revenue stream Looking at the video game industry Looking at the online casual business model Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
  • 103. Eduardo Larrain - Linkedin - Website •Ten of thousands of mobile games for smartphones and tablets can be download on platforms such as the Appel App Store, Android MarketPlaces (Google Play), Amazon, Facebook Mobile and Playstation Suite •Distribution is bypassing carriers: 30/70 meaning the game app developer get 70% of sales revenue (vs. 45/55 in cell phone business) –An opportunity for mobile banking? •Mobile video game revenue stream is based on: –Average customer lifetime of 2 months –Selling the app (e.g. at 0.99 cent or F2P model) –Selling virtual goods –A little of advertising (average of 15%): •Offer walls •Sponsoring 103 2 – Revenue stream Looking at the video game industry Looking at the mobile video game business model Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
  • 104. Eduardo Larrain - Linkedin - Website •Social games are those games played primarily on social networking sites or games that can be played with a person’s real world social graph –E.g. CityVille, FarmVille (Zynga), EA (Sims) •Social video game revenue stream is based on: –F2P model with a logic of a massive audience –Virtual goods (50%) –Advertising (25%) –Lead-generation offers (25%): virtual currency incentives by marketers to social gamers in exchange of signing up for subscriptions, participating in surveys, or buying goods and services –Since virality is a key to success, notifications, invitations, sharing, gifting and other social network tools are used extensively to get new customers –Social games must work with a low retention rate (first day retention rate of 30% is a “huge success”) 104 2 – Revenue stream Looking at the video game industry Looking at social games Luc Bourcier, Game in progress new business models for the videogame industry, 04/2012
  • 105. Eduardo Larrain - Linkedin - Website 105 2 – Revenue stream Looking at the video game industry Looking at the e-sports business model •Twitch launched 3 years ago borne out of Justin.tv, the largest online community to live streaming service to enable streaming video service embedded into popular games •Twitch provide instant broadcasting of user gameplay: 23 million unique viewers per month, viewers watched 6 billion minutes viewed in December 2012, average session time of 1.5 hours •Twitch is getting embedded in games such as Call Of Duty: Black Ops 2 •Twitch business model is based on sharing advertising revenue with broadcaster and in growing the e- sports market e.g. Twitch has announced a new scholarship of $50,000 to five student gamers
  • 106. Eduardo Larrain - Linkedin - Website •“Gamification” trend meaning that video games are no longer restricted to leisure: –Every part of our lives will eventually be turned into a game –Potentially encourage people to change their behavior to: •Benefit the environment •Perform their jobs better •Lose weight •Buy products •Perform almost any task imaginable •Games are even encroaching into vocational education 106 2 – Revenue stream Looking at the video game industry What’s next for the game industry?
  • 107. Eduardo Larrain - Linkedin - Website •Two business models: –Based on subscriptions such as Vimeo •150.000 paying subscribers in 2010 –Based on advertising such as Youtube •400 M USD of adversitiving revenues in 2010 •Online videos are also a substantial traffic driver to social networking (e.g. Facebook) 107 2 – Revenue stream Short focus at online video services Purely online video services are not yet collecting revenues at the same scale as the traditional TV and films industries, but the size of this audience is unquestionnably large
  • 108. Eduardo Larrain - Linkedin - Website •How’s the book publishing industry going?
  • 109. Eduardo Larrain - Linkedin - Website •Consumer and educational book publishing will increase by 0.6 percent compounded annually to 116 bn USD in 2016 from 112 bn in 2011 –E-books grow their share of global spending from 5% in 2011 up to 18% in 2016 –Print/audio consumer and educational books will continue to decline throughout the forecast period notably paperback books (“livres de poche” in French) •Publishers will need to provide eBooks in addition to paperbacks and the entire value process will be changing, from aggregation right to distribution •Piracy less likely to impact digital sales like in the music industry: demographic groups that are most often associated with digital piracy (generally men between 20 and 39 years old) and not the same than those associated with high-volume reading of mass market books (in general women age 40 and older) •New intermediaries are emerging to handle eBooks: –eBook platform (e.g. mass aggregators such as Amazon, Apple, and Google) –Handling of payments –Support for digital conversion –Establishment of a digital content system 109 2 – Revenue stream Looking at the book publishing industry Sales of e-books expected to compensate the decline of the physical books PwC, Turning the Page - The Future of eBooks, 2010
  • 110. Eduardo Larrain - Linkedin - Website •Apps and special eBook editions enriched with music and video –Notably for educational and juveniles segment e.g. Byook start-up http://youtu.be/O_pBNPe3s-M •Sales of individual chapters and sections from books •Offer additional content such as a blog/forum dedicated to a chapter or sentence, immediate definition of a word, links to other content (news/other authors),… •Easier to sell updates •Books on demand •Easier to sell porn and erotic fiction •Establish basic contracts with university libraries to offer free eBooks for students or offer special editions exclusively to students for a discounted price •Providing online reviews (non-monetary action is posting a review at Amazon website) 110 2 – Revenue stream Looking at the book publishing industry New revenues streams are emerging and changing current business models PwC, Turning the Page - The Future of eBooks, 2010
  • 111. Eduardo Larrain - Linkedin - Website •In 2010, 4 million new titles were published with 92% of those being “non-traditional” i.e. self-publishing and books representing the reuse of content, most of it not covered by copyright •Non-traditional books are largely on demand titles produced by reprint houses specializing in public domain works and by presses catering to self-publishers and micro-niche publications •Non-traditional titles are marketed primarily on the Web 111 2 – Revenue stream Looking at the book publishing industry Non-traditional book publishing on the internet is 8X the output of traditional book publishing Bowker, ISBN Output 2002-2011, 2012 Non-traditional numbers are undersestimated since books with no International Standard Book Numbers (ISBN) are not included
  • 112. Eduardo Larrain - Linkedin - Website The traditional business model of book publishing 112 2 – Revenue stream What’s the business model of self-publishing? Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 113. Eduardo Larrain - Linkedin - Website A new business model by lulu.com 113 2 – Revenue stream What’s the business model of self-publishing? Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 114. Eduardo Larrain - Linkedin - Website •World population continues to grow •Literacy rates are increasing •Developing nations are taking advantage of the lower infrastructural costs of ebooks •Number of books per inhabitant is low in developing countries because books are much more expensive than in France and hardcover book piracy is high 114 2 – Revenue stream Looking at the book publishing industry The best opportunity for the book publishing market is volume enabled by lowering costs of digital distribution
  • 115. Eduardo Larrain - Linkedin - Website •Filmed Entertainment has grown worldwide from 26 bn USD to 37 and is expected to reach 46 in 2015 (PwC) •Film piracy includes Internet piracy and Hard-good piracy –Though piracy apologists have long argued that online piracy was good for business (similar to freemium theory) •New business model are aimed at decreasing demand for illegal pirated downloads: –Worldwide releases –Day-and-date digital releases (releasing in theaters and VOD the same day) –Ultra release (releasing on VOD before a theatrical release) can also create a buzz and increase the number of people going to theaters •Current digital business models includes: –VOD (Video-On-Demand) –Over-the-top online movie providers such as Hulu and Google TV –Steaming such as Amazon and Netflix 115 2 – Revenue stream Short look at the film industry Film industry is growing but new digital-based business models are yet to be found
  • 116. Eduardo Larrain - Linkedin - Website Definition and scope 116 3a – Customer segments •Customer segments are the different groups of people or organizations an enterprise aims to reach and serve •In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors or other attributes. •An organization must take a conscious decision about which segments to serve and which to ignore (like facebook) Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 117. Eduardo Larrain - Linkedin - Website Different types of Customer Segments 117 3a – Customer segments •Mass market: e.g. consumer electronic sector •Niche market: such business models are often found in supplier-buyer relationships, e.g. car part manufacturers (e.g. Faurecia in France) •Segmented: a company serve several different industries with the same needs or segment customers to provide a different proposition value: •e.g. in the banking industry individuals customers can be segmented in wealth Management (>1M€ financial assets), High Net Worth (>0,1M€) and large public •Diversified: a company serve unrelated customers segments with different needs e.g. Amazon sell “cloud computing” services •In fact, there are usually always two type of customers with different needs: B2B and B2C •Multi-sided markets: e.g. a credit card company need a large base of credit card holders and a large base of merchants who accept those credit cards Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 118. Eduardo Larrain - Linkedin - Website The Three Tiers of Noncustomers 118 3a – Customer segments Noncustomers differ in their relative distance from your market but they all offer big blue ocean opportunities •First-tier: buyers who minimally purchase an industry’s offering out of necessity and they are waiting to jump ship and leave the industry •Second-tier: people who refuse to buy your industry’s offerings •Third-tier: people who have never thought of your market’s offerings as an option W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 119. Eduardo Larrain - Linkedin - Website How to attract each tiers of noncustomers 119 3a – Customer segments •First-tier: Pret targeted UK workers who used not to go to a restaurant for healthy and time-consuming reasons with fast-food and fresh meal •Second-tier: JC Decaux targeted refusing municipalities and corporations by putting advertising in the street furniture instead on city outskirts •Third-tier: defense department has usually sold military technology to the private sector •Companies should go for the biggest catchment at the time although there could be overlapping commonalities across all three tiers of noncustomers W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 120. Eduardo Larrain - Linkedin - Website Definition and scope 120 3b – Channels •Channels are the way how a company communicates with and reaches its customer segments to deliver a value Proposition •Communication, distribution and sales Channels comprise a company’s interface with customers Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 121. Eduardo Larrain - Linkedin - Website Type of channels 121 3b – Channels •Distribution channels can be owned (sales force, web sales, own stores) or done with partners (partners stores and wholesaler) •Partners channels lead to lower margins but they allow an organization to expand its reach and benefit from partner strengths McDonald’s 2008 Restaurants Income bn USD Income growth Owned 6,502 16.5 0% Franchise 25,465 6.9 13%
  • 122. Eduardo Larrain - Linkedin - Website Definition and scope 122 3c – Customer Relationship •Customer Relationships are the type of relationships a company establishes with specific customers segments •A company should clarify the type of relationship it wants to establish with each customer segment (customer acquisition, customer retention, boosting sales/upselling) W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 123. Eduardo Larrain - Linkedin - Website Categories of Customer Relationships 123 3c – Customer Relationship •Personal assistance: relationship based on human interaction. E.g. point of sales (pos), call-centers. •Dedicated personal assistance: dedicating a customer representative specifically to an individual client. It represents the deepest and most intimate type of relationship and normally develops over a long-period of time. E.g. key account managers, HWN individuals consultant •Self-service: no direct relationship with customers •Automated services: more sophisticated form of customer self-service with automated process. E.g. offering a book or movie recommendations •Communities: deploy user communities to become more involved with customers/prospects and facilitate connections between community members •Co-creation: go beyond the traditional customer-vendor relationship and co-create value with customers. E.g. Youtube, Amazon invites customers to write reviews and thus create value for other book lovers Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 124. Eduardo Larrain - Linkedin - Website The buyer experience cycle 124 3c – Customer Relationship Great blocks to utility can be identify looking at the buyer experience in order to be removed and unlock exceptional utility •A each stage of the buyer experience, managers can ask a set of questions to gauge the quality of buyers’ experience and thus unlock utility for buyers •The following questions can help you identify the most compelling hot spots to unlock exceptional utility: W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005
  • 125. Eduardo Larrain - Linkedin - Website Definition and scope 125 4a – Key ressources •Key resources are the most important assets required to make a business model work •Key resources can be: •Human •Physical assets: manufacturing facilities, buildings, vehicles, machines, systems, point-of-sales systems and distribution networks •Financial resources / guarantees: cash, lines of credit, or a stock option pool for hiring key employees. •E.g. distributors (B2C) have usually a low or negative working capital as for producers (B2B), they usually have positive working capital •Intellectual: brands, proprietary knowledge, patents and copyrights, partnerships and customer databases Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 126. Eduardo Larrain - Linkedin - Website Definition and scope 126 4b – Key activities •Key activities are the most important things a company must do to make its business model work •There is several types of key activities: •Production: designing, making and delivering a product. E.g. Manufacturing •Problem solving: coming up with new solutions to individual customer problems. E.g. hospitals, consultancies and services organizations •Platform/Network: networks, platforms, software and brands. E.g. eBay, Visa Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 127. Eduardo Larrain - Linkedin - Website Definition and scope 127 4c – Key partnerships •Key partnerships are the network of suppliers and partners that make the business model work •There is four types of partnerships: •Buyer-supplier relationships to assure reliable supplies •Strategic alliances between non-competitors •Coopetition: strategic partnerships between competitors •Joint ventures to develop new businesses Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 128. Eduardo Larrain - Linkedin - Website Motivations for creating partnerships 128 4c – Key partnerships •Optimization and economy of scale: optimize the allocation of resources and activities since it would be illogical for a company to own all resources or perform every activities by itself •E.g. 100,000 people will have contributed to build your iphone 5.0, limitation for 3D printers •Reduction of risk and uncertainty: it is not unusual for competitors to form a strategic alliance in one area while competing in another. E.g. Blu-ray •Acquisition of particular resources and activities: such partnerships can be motivated to acquire knowledge, licenses or access to customers Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 129. Eduardo Larrain - Linkedin - Website Tracking partnerships with the code bar and code packer 129 4c – Key partnerships Exhibit - Code bar Exhibit - Code packer Exhibit – Tracking a partnership for a bean can with Open Food Facts OpenFoodFacts
  • 130. Eduardo Larrain - Linkedin - Website Definition and scope 130 5 – Cost structure •Cost structure is all costs incurred to operate a business model •Naturally enough, costs should be minimized in every business model but we have already see that some business models are more cost-driven than others (design to cost, pyramid base): •Cost-driven: focus on minimizing costs wherever possible maintaining the leanest possible cost structure •Value driven: focus on value creation rather than the cost implications Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 131. Eduardo Larrain - Linkedin - Website 131 Use a business canvas just to be sure you have covered all key elements of a business model One Business Model Canvas Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 132. Eduardo Larrain - Linkedin - Website •In 2010, 4 million new titles were published with 92% of those being “non-traditional” i.e. self-publishing and books representing the reuse of content, most of it not covered by copyright •Non-traditional books are largely on demand titles produced by reprint houses specializing in public domain works and by presses catering to self-publishers and micro-niche publications •Non-traditional titles are marketed primarily on the Web 132 2 – Revenue stream Looking at the book publishing industry Non-traditional book publishing on the internet is 8X the output of traditional book publishing Bowker, ISBN Output 2002-2011, 2012 Non-traditional numbers are undersestimated since books with no International Standard Book Numbers (ISBN) are not included
  • 133. Eduardo Larrain - Linkedin - Website The traditional business model of book publishing 133 2 – Revenue stream What’s the business model of self-publishing? Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 134. Eduardo Larrain - Linkedin - Website A new business model by lulu.com 134 2 – Revenue stream What’s the business model of self-publishing? Alexander Osterwalder and Yves Pigneur, Business Model Generation, 2010
  • 135. Eduardo Larrain - Linkedin - Website •World population continues to grow •Literacy rates are increasing •Developing nations are taking advantage of the lower infrastructural costs of ebooks •Number of books per inhabitant is low in developing countries because books are much more expensive than in France and hardcover book piracy is high 135 2 – Revenue stream Looking at the book publishing industry The best opportunity for the book publishing market is volume enabled by lowering costs of digital distribution
  • 136. Eduardo Larrain - Linkedin - Website •Filmed Entertainment has grown worldwide from 26 bn USD to 37 and is expected to reach 46 in 2015 (PwC) •Film piracy includes Internet piracy and Hard-good piracy –Though piracy apologists have long argued that online piracy was good for business (similar to freemium theory) •New business model are aimed at decreasing demand for illegal pirated downloads: –Worldwide releases –Day-and-date digital releases (releasing in theaters and VOD the same day) –Ultra release (releasing on VOD before a theatrical release) can also create a buzz and increase the number of people going to theaters •Current digital business models includes: –VOD (Video-On-Demand) –Over-the-top online movie providers such as Hulu and Google TV –Steaming such as Amazon and Netflix 136 2 – Revenue stream Short look at the film industry Film industry is growing but new digital-based business models are yet to be found
  • 137. Eduardo Larrain - Linkedin - Website Executive summary 137 Things we’ve learned at this stage •Internet’s “pure players“ are just a quarter of the Internet story •A business model describes “how an enterprise proposes to make money” •A business model is an ecosystem that starts with the proposition value •Business model engineering is needed to understand a company instead of looking on a business model catalog •A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty •Defining a promise (or tagline) helps understanding the proposition value •Price is determined by what a buyer is willing to pay and the competition is allowing to be charged (not by markup on cost) •4 revenue streams around Free inclunding: •Freemium is giving a free basic version to most of people and charging for a premium version to a few people •Non-monetary markets: people choose to give away with no expectation of payment (remember Google reCAPTCHA anti-spam technology)
  • 138. Eduardo Larrain - Linkedin - Website Who are the Internet heavyweights 138
  • 139. Eduardo Larrain - Linkedin - Website 139 •What is Google business model?
  • 140. Eduardo Larrain - Linkedin - Website 140 What is Google’s business model? Google value proposition Google value proposition Organize the world’s information and make it universally accessible and useful… … for better quality leads
  • 141. Eduardo Larrain - Linkedin - Website 141 What is Google’s business model? Google has changed the ad industry by giving products away to end users for free (in return for advertising), as well as reducing the advertising costs for brand Google revolution on advertising •Google opened up the market to SMEs and extended the reach of larger corporations •A great search algorithm is important though real advantage comes from the massive investments in Google platform which means tiny marginal costs, so Google give Free products to end users Illustration – Advertising market by company size
  • 142. Eduardo Larrain - Linkedin - Website 142 What is Google’s business model? Google revenue stream comes from Google AdWords and Google AdSense Google revenue stream Traffic acquisition costs (TAC) comprises of money paid to the Google Network websites under the Adsense program and to the distribution partners who distribute Google Toolbar and other products or drive traffic to the Google websites.
  • 143. Eduardo Larrain - Linkedin - Website 143 What is Google’s business model? Two-thirds of Google revenues come from AdWords and remaining from AdSense Google quarterly revenues Google, Q3 2012Quarterly EarningsSummary, 2012
  • 144. Eduardo Larrain - Linkedin - Website 144 What is Google’s business model? Newspaper ad revenue after Google
  • 145. Eduardo Larrain - Linkedin - Website 145 What is Google’s business model? Google give products away in return for advertising (two-sided market) and Google reduce the advertising costs for brand Google business model using the Canvas Business Model Innovation Matters, Understanding Business Models, 2012
  • 146. Eduardo Larrain - Linkedin - Website 146 What is Google’s business model? Google is trying to remain central in the Mobile experience Google strategy on mobile •Mobile advertising is still in relative infancy, though the mobile device is quickly becoming the world’s newest gateway to information •Google dominate the mobile ad market which is mainly based on search •Google is trying to remain central in the Mobile experience controlling the hardware, as well as the software: •On the software side, •Android was created to be a free, fully open source mobile software platform that any developer could use to create applications for mobile devices and any handset manufacturer can install on a device •Android include the Google Mobile App •On the hardware, Google acquired Motorola Mobility in 2012 (12,5 bn USD) in order to acquire Motorola’s patent portfolio and remain central in the mobile experience like Apple has demonstrated with its popular iPhone
  • 147. Eduardo Larrain - Linkedin - Website 147 What is Google’s business model? Google’s stock quote highly volatile since it is in the advertising business
  • 148. Eduardo Larrain - Linkedin - Website •What is Facebook business model?
  • 149. Eduardo Larrain - Linkedin - Website 149 What is Facebook’s business model? Facebook value proposition Facebook value proposition •Facebook helps Internet users stay connected with their friends, families, and colleagues •Facebook provides a number of products, free of charge, to its users: •Timeline, News Feed, Photos and Videos, Messages (Email, Chat, Text Messaging), Groups, Lists, Events, Places, Subscribe, Ticker, Notifications, and Facebook Pages •Facebook have a “long tail” of customers (not dependent upon any single customer for their revenues) Business Model Innovation Matters, Understanding Business Models, 2012
  • 150. Eduardo Larrain - Linkedin - Website 150 What is Facebook’s business model? Its revenue stream is mainly advertising-based Facebook, Facebook Reports Third Quarter 2013 Results, 30/10/2013 Facebook key operational figures •Fourth Quarter 2012 Operational Highlights: •Monthly active users (MAUs) were 1.19 billion as of September 30, 2013, an increase of 18% year-over-year •Daily active users (DAUs) were 728 million on average as of September 30, 2013, an increase of 25% year-over-year •Mobile MAUs were 874 million as of December 31, 2012, an increase of 45% year-over-year •Mobile DAUs exceeded web DAUs for the first time in the fourth quarter of 2012 •Recent Business Highlights •Mobile revenue represented approximately 49% of advertising revenue for the third quarter of 2013 (that was the main business model question of 2013) •Facebook launched Graph Search Beta, a structured search tool that enables users for the first time to find people, places, photos and other content that has been shared on Facebook •Launched Facebook for Android 2.0, completely rebuilt to deliver improved stability and faster performance and opened Facebook Messenger to anyone with a telephone number
  • 151. Eduardo Larrain - Linkedin - Website 151 What is Facebook’s business model? Its revenue stream is mainly advertising-based Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook key financial figures •5.1 bn in 2012 (up from 3.7 bn USD in 2011) •83% of revenues coming from advertising •Profit down to 0,05 bn in 2012 (down from 1 bn USD in 2011) mainly due to shares given to the top management Exhibit – Key figures 2011
  • 152. Eduardo Larrain - Linkedin - Website 152 What is Facebook’s business model? Facebook replicated Google’s formula... with relatively less success Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook advertising model
  • 153. Eduardo Larrain - Linkedin - Website 153 What is Facebook’s business model? Facebook’s main asset is the connections and interactions between users Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook’s Social Graph •100 billion friendships, 250 million photos uploaded every day and 2.7 billion Likes and Comments per day •« User engagement » is key for Facebook success
  • 154. Eduardo Larrain - Linkedin - Website 154 What is Facebook’s business model? Looking at the Canvas Facebook business model using the Canvas Business Model Innovation Matters, Understanding Business Models, 2012
  • 155. Eduardo Larrain - Linkedin - Website 155 What is Facebook’s business model? Facebook’s stock quote highly volatile since the company is still growing fast and it is in the advertising business
  • 156. Eduardo Larrain - Linkedin - Website 156 Facebook validated its business model assumptions on Mobile ads even though mobile is considered “a horrible ad medium” •In mid-2013, Facebook noted that mobile ads accounted for 49 percent of its advertising revenue, up from 41 percent in the second quarter. Facebook said prices for mobile ads remained high, and users were clicking on them in their news feeds more frequently. •Potential to open up new inventory via Instagram as well as the announcement to include video ads in the newsfeed
  • 157. Eduardo Larrain - Linkedin - Website 157 What is Facebook’s business model? Facebook vs. MySpace Fabernovel, Facebook, The Perfect Startup, 05/2012 Automated news feed launched in 2006 gave the illusion of a continuous user and personalized activity that MySpace didn’t have – “oh that’s cool” said customers
  • 158. Eduardo Larrain - Linkedin - Website 158 What is Facebook’s business model? Similar to Google’s Page Rank, Facebook’s created its Edge Rank based on an algorithm Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook’s Edge Rank
  • 159. Eduardo Larrain - Linkedin - Website 159 What is Facebook’s business model? Its new Open Graph is expected to leverage its current business model (key partners) Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook’s new OpenGraph
  • 160. Eduardo Larrain - Linkedin - Website 160 What is Facebook’s business model? Facebook is a social media (not only network) based on advertising Fabernovel, Facebook, The Perfect Startup, 05/2012 Facebook’s like button developed the social graph even further
  • 161. Eduardo Larrain - Linkedin - Website •What is Twitter business model? 161
  • 162. Eduardo Larrain - Linkedin - Website 162 What is Twitter’s business model? … Advertising Twitter business model key elements •Value proposition: blogging service •Share text messages with a length constraint (social Networking Site / SNS and Micro-blogging platform) •For advertisers, marketers, and media, •Traffic generator (ecommerce, fund-raising,…) •Communication tool (customer service channel, brand awareness, PR,…) •Cheap monitoring on niche subject and tracking the spreading of news •Datamining and data visualization of worldwide data •Competitors: Reuters, survey companies, consulting companies •Revenue stream: advertising (self-serve ad platform) •Companies spending money on Twitter to ensure their messages are seen: promoting Accounts (Cost-Per-Follow / CPF) , Tweets (Cost-Per-Engagement / CPE) and Trends appearing in search results, within the ‘Who to Follow’ and next to a user’s timeline •No ‘Display Ads’ •Twitter’s mobile ad revenue surpassed that of its desktop ads
  • 163. Eduardo Larrain - Linkedin - Website 163 What is Twitter’s business model? Twitter business model key elements •Key partnerships are key since Twitter is a multi-sided platform (like Facebook) •Developers and companies: •APIs for third party apps •Tweet and Follow buttons •Search API and Streaming API provides real-time access to Twitter firehose helping developers with data-intensive needs •Search Vendors: Twitter licenses full feed of public tweets to search engine vendors such as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling real-time search and discovery. •Device Vendors: Twitter partnered with Apple to enable deep integration of Twitter in iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps such as Flipboard, Livingsocial, and Instagram. •Media:Twitter has entered into partnerships with media companies and brands to deliver compelling Twitter integration to their users more easily. This can help media companies capture real-time reactions to the important news •Mobile operators/ Twitter has partnered with Telecom operators across the globe to enable users to send and receive tweets from mobile phones using SMS