Gennaro Cuofano's Blog, page 217
October 2, 2019
How Does WeWork Make Money? WeWork Business Model In A Nutshell
WeWork runs a membership model that gets monetized via a set of packages which include ancillary value-added products and services to enable companies to scale or shrink their workspace on-demand. WeWork defined its revenue model space-as-a-service claimed to be more scalable than a traditional commercial real estate.
Let’s see what it all means, to make sense of it.
What macro trends made WeWork possible?
In its financial prospectus WeWork mentions a few macro-trends that helped WeWork scale:
Urbanization
Globalization
Independent workforce
Flexible solutions
Workplace culture
Disintermediating the commercial real estate industry
[image error]
WeWork Financial Prospectus
The thesis behind the WeWork business model is that if it manages to create a commercial real estate platform that connects the demand of office spaces, related services, and additional products, with the supply. That platform will capture value a fraction of the market in the form of subscription revenue.
But how big is that market?
How big is the potentially disrupted commercial real estate addressable market?
[image error]
According to WeWork, the total addressable market opportunity is valued at around $1.6 trillion.
The competitor strength of the offering according to WeWork claims is the ability to deliver its members lower prices, compared to existing alternatives, and the fact that overall members joining WeWork spaces will save money as they scale.
WeWork mission and vision
[image error]
In its S-1 form (which gets submitted when company are about to IPO) WeWork highlighted:
Nine years ago, we had a mission to create a world where people work to make a life, not just a living. We believed that if we created a community that helped people live life with purpose, we could have a meaningful impact on the world. From the moment we started, we had conviction that there was an entrepreneurial spirit that was underserved. We knew there were creators all around the world who were looking for a better workplace solution at a lower price.
And it continued:
We envision a future in which our global platform is a one-stop shop where members have access to all of the products and services they need to enable them to work, live and grow.
Three concepts that jump right away from the articulation of WeWork vision based on what the company tries to emphasize to public investors:
Platform
Members
And community
As WeWork highlighted in its financial statements:
Our global platform provides members with flexible access to beautiful spaces, a culture of inclusivity and the energy of an inspired community, all connected by our extensive technology infrastructure.
WeWork has to leverage its platform business model to provide “beautiful spaces” to help members build communities. It’s important to highlight that the claimed WeWork platform business model is yet to be proved.
In general, a platform business model has to have a high component of network effects, leveraged by proprietary algorithms, and technologies. While WeWork does use advanced technologies in some of the services it offers, to organize the spaces around which its services are offered, it’s hard to call the company a platform.
WeWork also emphasizes itself as a community-building company that might leverage data and technology, rather than just a real estate company.
As WeWork explained further in its financial statements:
We have begun to build a suite of We Company offerings and develop a network of third-party partners to address our members’ needs.
With the support of our global footprint, our partners are presented with a unique opportunity to reach new customers and efficiently expand their businesses to new markets. While we are in the early stages of our platform journey, we are excited by the initial results and inspired by the potential.
The company highlights how the physical spaces are just a foundation to a business model that leverages on community building and a set of services for companies part of their network:
Our physical spaces are the foundation of our global platform and allow us to deliver differentiated products and services as we scale, further realizing our vision to deliver a better day at work for less.
Those are all statements that are hard to prove, as the company’s lack of profitability and viable business model makes it difficult to understand how its scalability will enable it to become a viable business model in the coming years.
WeWork, a SPaaS model?
[image error]
Where the commercial real estate model has pretty much focused on collecting rents from tenants, with a small part related to common area maintenance fees.
The space as a service (SPaaS) model introduces a set of products and services that makes space rented only the foundation of the whole model. Indeed, with space, this membership model leverages on several elements such as:
Data
Technology
Ancillary services spanning from health to lifestyle
In other words, beyond the physical locations offered by the company, WeWork also offers a set of services meant to enable members to scale their teams.
Thus, WeWork presumably leverages technology to build a platform able to offer a set of services to deliver what the company claims as “a premium experience to our members at a lower price relative to traditional alternatives.”
Thus, the core of the revenue model is a membership, and on top of that a set of ancillary, value-added products and services.
[image error]
Source: WeWork S-1
Once again, while it’s legitimate to come up with new revenue generation strategies, and while technology enables us to transform into services (through automation, and scale of the service delivery) it’s hard to prove that WeWork claimed Space-as-a-service platform is a platform at all.
The (Claimed) WeWork Effect
We have created a powerful ecosystem and brand that not only benefit our members and partners, but also result in landlords, neighborhoods and cities all benefiting from shared value creation, or what we call the “WeWork effect”.
That can be summarized as the value proposition for several key customers of WeWork.
The company claims:
Diversity of creativity
Culture of community
Design
Community
And the technology that we offer
As the company highlights its “ecosystem landlords” see their assets increase in value.
How does WeWork make lose money and burn cash?
The majority of WeWork revenues come from recurring monthly membership fees, that as of June 2019 accounted for 83% of the total revenues.
An additional 12% came from additional products and services offered by the company to its members.
And a remaining 5% comes from a few additional services on top of the membership (conference rooms,, printing credits, and commissions of the sale)
[image error]
[image error]
As of 2018, WeWork made over $1.8 billion in revenues, yet it reported over $1.9 billion in net losses.
The net losses seem to accelerate throughout 2019. If we look at the expenses, most of them are due to location operating expenses.
As the company highlights those are “Location operating expenses are our largest category of expenses and represent the costs associated with servicing members at our locations.”
Any company needs a set of services or costs which are necessary to make the sale. For instance, Google needs to acquire traffic before it can even sell its advertising. That is why understanding Google TAC is extremely important to have a grasp of the Google business model.
When it comes to WeWork the key expenses to make the sale, which in its case means selling its membership are the location operating expenses.
Those comprise things like the community that includes a dedicated member responsible for filling spaces after a location reaches maturity.
It also includes the support functions directly attributable to the operation of these locations, such as costs associated with billings, collections, purchasing, accounts payable functions and member technology.
Simply put that is the cost of sales or the necessary cost to run these locations for the members. In short, without these expenses, the membership sale would not be valuable enough to be justified.
[image error]
The company is also a cash flow negative.
[image error]
In part, this is based on how the business model of WE works. The company has to “anticipate” cash in lease obligations to guarantee the space available to its members, which will be amortized over the years.
[image error]
On the left side, you have the pre-opening locations (find, sign, build) which represent the “investments” WeWork made to scale (they don’t make money yet).
On the right side (fill, run) you have the open locations where WeWork makes money and operates primarily through its membership revenue model.
[image error]
In order to improve the stability of its membership base, WeWork managed to onboard enterprise customers, which by June 2019 made up 40% of the memberships.
Is WeWork a viable business model?
It’s not for several reasons:
Lack of a profit formula: in a period where markets value viable business models, a company which scaled quickly by burning a lot of cash might not be seen as viable.
Limited scalability and lack of network effects: while the company has scaled thanks to massive financial resources, it’s still hard to leverage on network effects. First, because at its foundation WeWork is a real estate business. Second, because it’s a local business, thus it’s hard to benefit from network effects, as each location will have its own dynamics.
WeWork buzz: in a time where markets privilege viable business models, a company that didn’t prove to have one yet, it won’t get listened seriously. Thus, the buzz and language used by its leaders won’t resonate, but only make things worse. In such a scenario, it’s important to understand the context around and change language accordingly. One striking thing from the WeWork S-1 form is how that seems more of a marketing plan than a financial plan.
Cash negative business model: for how it’s structured the WeWork model has a negative cash flow, as it will advance money as contractual obligations, which amount to many billions throughout the years. This requires the company to keep up with its growth and make it too dependent on it.
Other business model analyses:
Netflix Business Model
Starbucks Business Model
LinkedIn Business Model
Google Business Model
Uber Business Model
Lyft Business Model
Robinhood Business Model
Nike Business Model
DuckDuckGo Business Model
ALDI Business Model
Apple Business Model
TOMS Business Model
Slack Business Model
Fiverr Business model
Pinterest Business Model
Telegram Business Model
TripAdvisor Business Model
Booking Business Model
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post How Does WeWork Make Money? WeWork Business Model In A Nutshell appeared first on FourWeekMBA.
How Does Wework Make Money? Wework Business Model In A Nutshell
WeWork runs a membership model that gets monetized via a set of packages which include ancillary value-added products and services to enable companies to scale or shrink their workspace on-demand. WeWork defined its revenue model space-as-a-service claimed to be more scalable than a traditional commercial real estate.
Let’s see what it all means, to make sense of it.
What macro trends made WeWork possible?
In its financial prospectus WeWork mentions a few macro-trends that helped WeWork scale:
Urbanization
Globalization
Independent workforce
Flexible solutions
Workplace culture
Disintermediating the commercial real estate industry
[image error]
WeWork Financial Prospectus
The thesis behind the WeWork business model is that if it manages to create a commercial real estate platform that connects the demand of office spaces, related services, and additional products, with the supply. That platform will capture value a fraction of the market in the form of subscription revenue.
But how big is that market?
How big is the potentially disrupted commercial real estate addressable market?
[image error]
According to WeWork, the total addressable market opportunity is valued at around $1.6 trillion.
The competitor strength of the offering according to WeWork claims is the ability to deliver its members lower prices, compared to existing alternatives, and the fact that overall members joining WeWork spaces will save money as they scale.
WeWork mission and vision
[image error]
In its S-1 form (which gets submitted when company are about to IPO) WeWork highlighted:
Nine years ago, we had a mission to create a world where people work to make a life, not just a living. We believed that if we created a community that helped people live life with purpose, we could have a meaningful impact on the world. From the moment we started, we had conviction that there was an entrepreneurial spirit that was underserved. We knew there were creators all around the world who were looking for a better workplace solution at a lower price.
And it continued:
We envision a future in which our global platform is a one-stop shop where members have access to all of the products and services they need to enable them to work, live and grow.
Three concepts that jump right away from the articulation of WeWork vision based on what the company tries to emphasize to public investors:
Platform
Members
And community
As WeWork highlighted in its financial statements:
Our global platform provides members with flexible access to beautiful spaces, a culture of inclusivity and the energy of an inspired community, all connected by our extensive technology infrastructure.
WeWork has to leverage its platform business model to provide “beautiful spaces” to help members build communities. It’s important to highlight that the claimed WeWork platform business model is yet to be proved.
In general, a platform business model has to have a high component of network effects, leveraged by proprietary algorithms, and technologies. While WeWork does use advanced technologies in some of the services it offers, to organize the spaces around which its services are offered, it’s hard to call the company a platform.
WeWork also emphasizes itself as a community-building company that might leverage data and technology, rather than just a real estate company.
As WeWork explained further in its financial statements:
We have begun to build a suite of We Company offerings and develop a network of third-party partners to address our members’ needs.
With the support of our global footprint, our partners are presented with a unique opportunity to reach new customers and efficiently expand their businesses to new markets. While we are in the early stages of our platform journey, we are excited by the initial results and inspired by the potential.
The company highlights how the physical spaces are just a foundation to a business model that leverages on community building and a set of services for companies part of their network:
Our physical spaces are the foundation of our global platform and allow us to deliver differentiated products and services as we scale, further realizing our vision to deliver a better day at work for less.
Those are all statements that are hard to prove, as the company’s lack of profitability and viable business model makes it difficult to understand how its scalability will enable it to become a viable business model in the coming years.
WeWork, a SPaaS model?
[image error]
Where the commercial real estate model has pretty much focused on collecting rents from tenants, with a small part related to common area maintenance fees.
The space as a service (SPaaS) model introduces a set of products and services that makes space rented only the foundation of the whole model. Indeed, with space, this membership model leverages on several elements such as:
Data
Technology
Ancillary services spanning from health to lifestyle
In other words, beyond the physical locations offered by the company, WeWork also offers a set of services meant to enable members to scale their teams.
Thus, WeWork presumably leverages technology to build a platform able to offer a set of services to deliver what the company claims as “a premium experience to our members at a lower price relative to traditional alternatives.”
Thus, the core of the revenue model is a membership, and on top of that a set of ancillary, value-added products and services.
[image error]
Source: WeWork S-1
Once again, while it’s legitimate to come up with new revenue generation strategies, and while technology enables us to transform into services (through automation, and scale of the service delivery) it’s hard to prove that WeWork claimed Space-as-a-service platform is a platform at all.
The (Claimed) WeWork Effect
We have created a powerful ecosystem and brand that not only benefit our members and partners, but also result in landlords, neighborhoods and cities all benefiting from shared value creation, or what we call the “WeWork effect”.
That can be summarized as the value proposition for several key customers of WeWork.
The company claims:
Diversity of creativity
Culture of community
Design
Community
And the technology that we offer
As the company highlights its “ecosystem landlords” see their assets increase in value.
How does WeWork make lose money and burn cash?
The majority of WeWork revenues come from recurring monthly membership fees, that as of June 2019 accounted for 83% of the total revenues.
An additional 12% came from additional products and services offered by the company to its members.
And a remaining 5% comes from a few additional services on top of the membership (conference rooms,, printing credits, and commissions of the sale)
[image error]
[image error]
As of 2018, WeWork made over $1.8 billion in revenues, yet it reported over $1.9 billion in net losses.
The net losses seem to accelerate throughout 2019. If we look at the expenses, most of them are due to location operating expenses.
As the company highlights those are “Location operating expenses are our largest category of expenses and represent the costs associated with servicing members at our locations.”
Any company needs a set of services or costs which are necessary to make the sale. For instance, Google needs to acquire traffic before it can even sell its advertising. That is why understanding Google TAC is extremely important to have a grasp of the Google business model.
When it comes to WeWork the key expenses to make the sale, which in its case means selling its membership are the location operating expenses.
Those comprise things like the community that includes a dedicated member responsible for filling spaces after a location reaches maturity.
It also includes the support functions directly attributable to the operation of these locations, such as costs associated with billings, collections, purchasing, accounts payable functions and member technology.
Simply put that is the cost of sales or the necessary cost to run these locations for the members. In short, without these expenses, the membership sale would not be valuable enough to be justified.
[image error]
The company is also a cash flow negative.
[image error]
In part, this is based on how the business model of WE works. The company has to “anticipate” cash in lease obligations to guarantee the space available to its members, which will be amortized over the years.
[image error]
On the left side, you have the pre-opening locations (find, sign, build) which represent the “investments” WeWork made to scale (they don’t make money yet).
On the right side (fill, run) you have the open locations where WeWork makes money and operates primarily through its membership revenue model.
[image error]
In order to improve the stability of its membership base, WeWork managed to onboard enterprise customers, which by June 2019 made up 40% of the memberships.
Is WeWork a viable business model?
It’s not for several reasons:
Lack of a profit formula: in a period where markets value viable business models, a company which scaled quickly by burning a lot of cash might not be seen as viable.
Limited scalability and lack of network effects: while the company has scaled thanks to massive financial resources, it’s still hard to leverage on network effects. First, because at its foundation WeWork is a real estate business. Second, because it’s a local business, thus it’s hard to benefit from network effects, as each location will have its own dynamics.
WeWork buzz: in a time where markets privilege viable business models, a company that didn’t prove to have one yet, it won’t get listened seriously. Thus, the buzz and language used by its leaders won’t resonate, but only make things worse. In such a scenario, it’s important to understand the context around and change language accordingly. One striking thing from the WeWork S-1 form is how that seems more of a marketing plan than a financial plan.
Cash negative business model: for how it’s structured the WeWork model has a negative cash flow, as it will advance money as contractual obligations, which amount to many billions throughout the years. This requires the company to keep up with its growth and make it too dependent on it.
Other business model analyses:
Netflix Business Model
Starbucks Business Model
LinkedIn Business Model
Google Business Model
Uber Business Model
Lyft Business Model
Robinhood Business Model
Nike Business Model
DuckDuckGo Business Model
ALDI Business Model
Apple Business Model
TOMS Business Model
Slack Business Model
Fiverr Business model
Pinterest Business Model
Telegram Business Model
TripAdvisor Business Model
Booking Business Model
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post How Does Wework Make Money? Wework Business Model In A Nutshell appeared first on FourWeekMBA.
October 1, 2019
Why A Freemium Is Not A Business Model But A Growth Tool
The freemium business model is based on a service that the majority of users get for free, while a small percentage of users convert into paying customers. Those paying customers become the basis for the long-term financial success of the company.
That is what common wisdom says. However, this is a misconception. A freemium isn’t a business model. It does influence your overall business model. But a freemium is, first of all, a growth tool. A marketing tactic to grow the acquisition of non-paying users or potential customers.
Understanding this difference is key to understand what’s freemium and why your business model is something else.
A freemium is not a business model
You create a product or software, you make it available for free on the web, thus (if the tool is good) it gains visibility quickly, and you call your company a freemium business model.
Looking at things in this perspective makes you confuse your business strategy with your marketing strategy. While a business strategy looks at understanding the whole logic of your business.
A marketing strategy makes you focus on your customers. And while customers do matter, they are not all that is in a business model.
So that you know what key questions to ask that person to make sure the freemium is the right growth tool for your business. Some of those questions are:
Do we have the resources to sustain a free product? Many forget that a free product still requires a lot of maintenance, updates, support or else. If you don’t have those things in place, your free product won’t be good, which will make it flop quickly.
Is the free product cannibalizing my premium offering? It might sound obvious for some people, but engineering a free product isn’t easy. Do you know how much of that free offering is enough to be valued? Do you know how to strike a balance between what you offer for free and what instead should be paid? Is the free product in line with your overall business strategy?
Is the freemium in line with my overall business model? For instance, if your organization is primarily structured on a sales team, which works with enterprise customers a freemium might make sense as it enables your brand to be known by more people. But will the fact that more people will know my brand a way to speed up the process of acquiring another potential enterprise customer? If not, is a freemium aligned with a business strategy where I want to get the lower-end of the market?
Below an example of how a freemium decision tree might look like:
[image error]
Freemium business model origin story
On March 2006, venture capitalist Fred Wilson wrote an article entitled “My Favorite Business Model” which said:
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.
He mentioned examples of this successful business model like Skype, Flickr, and a few others.
According to Fred Wilson, the advantages of a Freemium business model were multiples, but he made clear that it had to be as frictionless as possible:
A customer is only a click away and if you can convert them without forcing them into a price/value decision you can build a customer base fairly rapidly and efficiently. It is important that you require as little as possible in the initial customer acquisition process. Asking for a credit card even though you won’t charge anything to it is not a good idea. Even forced registration is a bad idea. You’ll want to do some of this sort of thing once you’ve acquired the customer but not in the initial interaction.
The main aim was to “eliminate all barriers to the initial customer acquisition.” He didn’t have yet a name for this kind of revenue model.
The Freemium business model started with a comment
At the end of his article, Fred Wilson had clear in mind what the Freemium business model looked like. However, he didn’t have a name for it.
That is why he invited people to comment and to come up with a proper name for this business model. A commenter, Jarid Lukin suggested the name Freemium model.
Thus, a service and product wholly free and frictionless, where most users don’t pay, and a small base of users pay for a product that has premium features.
Over the years Fred Wilson kept emphasizing the importance of free. Today the freemium business model has taken over also the gaming industry. But it has also become the most debated business model in the software industry.
On the power of free
Building a free product and make it available to anyone and then expect to make money isn’t the right strategy.
Instead, the “free” within the freemium, if appropriately used, can be a lever for quick success.
As Fred Wilson pointed out in October 2008 “freemium is far from dead, in fact, it may be the business model de rigueur.”
What did he mean? He recounted in a later article:
Facebook is a perfect example of freeconomics at work. A woman who works for a major media company was in my office recently. She quoted her CEO as saying “why doesn’t Facebook just charge a monthly subscription fee, they’d be making money hand over fist?”. Well I believe that if Facebook did that, they’d be vulnerable to other networks offering a free service. And certainly not every one of those 200mm users are going to cough up a monthly subscription. But by offering a friction free service, they have built a powerful and growing network that they are now starting to monetize in various ways and that they will monetize even further in additional ways. And they are super hard to compete with because they are free.
Freemium isn’t new
As pointed out on broadstuff.com:
The new Free! plan is in fact Freemium – where a small number of people subsidise the majority, who get it for free. But “Freemium” models have existed since antiquity, they work in some situations, don’t work in others. This is also likely to be true for Digital goods. The issue lies in the price sensitivity
This point is critical, as freemium is not a size fits all monetization strategy (yes the “free” in it is meant to make money).
In fact, that also depends on the cost structure of the company offering the service. Also, freemium seems to work well in conjunction with advertising spending.
Think of the most popular services and apps we use today, like Facebook and Google. Those are freemium services.
In fact, millions of users are accessing them for free and with the least friction possible. Thousands of businesses are paying and financing those services through advertising.
This is also the power of the hidden revenue business model. In other cases, free needs to be offset with a different monetization strategies, just like the razor and blade monetization strategy. Where you get something for free, but then a complimentary service associated is costly.
Key metrics for the freemium
To make the freemium business model work it is critical to look closely at a few key metrics. Some of those metrics are matured from the gaming industry but are also used by traditional freemium business models:
The average cost of serving a free user
The rates at which free users convert to premium (paying) customers
DAU (Daily Active Users) is used to show the number of people who engage with the product, service on a daily basis. For other platforms, other metrics like monthly active users might be more appropriate
ARPU: Average Revenue Per User
ARPDAU: Average Revenue Per Daily Active Use
ARPPU: Average Revenue Per Paying User
LTV: Lifetime Value
Daily Sessions: The number of play sessions a user engages each day.
CPA: Cost Per Acquisition or Cost
Freemium is not a size fits all business model
In 2015 a SaaS company, Baremetrics, started to experiment with the Freemium, business model. In short, they created a version of the product the was entirely free.
That product version allowed users to switch to the premium if they wanted to add specific features or capabilities.
As the story went, the conversion rates on the freemium-based business model turned out to be also quite good compared to the traditional subscription-based business model.
In fact, in 11 weeks over a thousand accounts were created. The math on those new accounts wasn’t exciting, but it worked. As explained on Baremetrics blog:
So, of the 1,000 accounts, 461 were actually eligible to even think about becoming a paying customer.
Of the 461 eligible paying customers, 53 actually upgraded.
53 as a % of 461 = 11.5%
Considering a 3-5% conversion rates on B2B the rates from the freemium seemed to be promising, until…
Beware of the cost structure
As pointed out by Baremetrics on the experiment they run with the freemium:
Quickly, we started coming up against a lot of performance and database issues. Within a few weeks our “free” customers were outnumbering our “paying” customers and the amount of data were both storing and processing had doubled.
This, in turn, created an adverse effect on the revenues:
[image error]
Source: baremetrics.com
In short, the freemium resulted in higher server costs and the loss of active paying customers, rather than an increase in revenues.
Free isn’t free after all
With the advent of free services like Google, Facebook and many other tech giants that have become part of our daily routine the assumption that everything needs to be free has become pervasive.
In some cases, free isn’t free after all — the reason a company opts for the freemium it isn’t because it wants to benefit the public.
But rather because it expects higher revenue growth and scalability from it. Thus a free service has to generate higher revenues to make sense. That’s why it has to come with built-in “psychological traps” that make users become paying customers.
That doesn’t mean that other subscription-based products or services are “less evil.” But the nature of free is meant to create addiction and leverage on the lack of breaks.
For instance, the Facebook newsfeed is thought with the logic of a slot machine, where the more you get, the more you want. For freemium models to work, they need to bring in a continuous flow of users that keep using them indefinitely.
Also paid services leverage on the same psychological traps. Those paid services have breaks based on the fact that those services aren’t free. Thus, the business can keep growing even though users aren’t necessarily trapped into it.
Is your one big enough to pay the bills?
On September 2009 MailChimp went freemium. Its user base went in one year to 450,000 users. Ever since MailChimp has grown into a successful company.
As pointed out one year after the experimentation with the freemium-based model, a critical question to ask is “whether or not your “one” is big enough to pay your bills yet.”
MailChimp didn’t start as a freemium. When they launched the company back in 2001, they didn’t even have a free trial.
They didn’t have an idea of what the freemium was. They only started to consider that the freemium model as a viable option when they realized that that paying customers was able to keep them going with the other nine unpaying customers.
As remarked by MailChimp:
We’d never consider freemium until our “1” was big enough. Enough to pay for 70 employees, their health benefits, stash some cash for the future, etc.
Are you using the freemium just to get VC money?
In the Silicon Valley archetype “users” have become the most important asset a company seems to need to be eligible to get billion dollars of capital.
However, this system – I argue – is broken because it draws on the myth that once you have users then monetizing them is easy.
However, for anyone that has ever tried to grow a startup you know that monetization is the hardest part.
It might seem a trivial concept for small business owners that to build a sustainable business you need to balance things up so that your revenues will exceed your expenses.
The so-called “profit” seems to be a thing of the past. Thus, they use large user base to get VC money to keep growing revenues without focusing on profits.
Cases like ConvertKit are a great example of why generating profits is critical for your business. Many counterargue by mentioning cases like Google and Facebook.
Yet they forget that Google and Facebook were extremely profitable not long after they launched their services. At the time of this writing, companies like Snapchat are struggling just because they never managed to become profitable.
A final remark on how to do the Freemium right
I want to close this article with the extract from the MailChimp Freemium business model. The reason being, MailChimp has been one of the most effective companies in applying the freemium, and this is the greatest lesson learned:
I think there are too many startups out there who are interested in going freemium because that big “10” number is so attractive. This is dangerous when they don’t even have the “1” yet. How will they pay their bills while they figure out how to “monetize?” Answer: they will need to borrow that money. Does your VC have the patience for the long term, while you try to figure out how to “monetize” and build up that measely “1” number? Answer: No — no they don’t. Build up that “1” before you chase the “10.” After you’ve got your “1” all set, use VCs to help you chase after that “10” (if you must). That’s my personal opinion. Disclaimer: I’m wrong about 99% of the time.
Freemium business model: Dropbox case study
[image error]Dropbox generated over 90% of its revenue via its self-serve channels to convert users in paying customers through in-product prompts and notifications, time-limited free trials of paid subscription plans, email campaigns, and lifecycle marketing. Dropbox generated over $1.1 billion revenue in 2017, with an average revenue per paying user of $111, $305 million in free cash flow and 11 million paying users
Dropbox is a classic example of a startup that managed to grow at a massive scale thanks to its freemium model:
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The free basic account has a storage of 2GB. The free plan also allowed Dropbox to benefit from massive network effects. The more people joined in to get the free storage, the more people they invited. To speed up the organic growth of its user base, Dropbox also built incentives that allowed users to get more free space if they invited more users to join!
Related: Dropbox Self-Serve Business Model In A Nutshell
How to align your business model to a freemium offering
The primary advantage of a freemium model is the fact it can be used as a powerful marketing tool. Indeed, if you offer a great product or service for free, the chances are that you won’t need much salesforce to bring you to more paying customers.
Instead, you’ll have to experiment on conversion marketing tactics to allow free members to become paying users quickly and at a sustainable rate. This is a critical difference between marketing vs. sales and why your free service will become your best companion to scale up growth!
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Handpicked business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
Business models analyses:
How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising!
How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
The Google of China: Baidu Business Model In A Nutshell
Accenture Business Model In A Nutshell
Salesforce: The Multi-Billion Dollar Subscription-Based CRM
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained
The post Why A Freemium Is Not A Business Model But A Growth Tool appeared first on FourWeekMBA.
How Relationship Marketing Can Expand Your Business Opportunities
Relationship marketing is the bedrock of most successful businesses, and it’s effectiveness has not dwindled. It continues to increase ROI.
Expanding Your Business Opportunities with Relationship Marketing
For you to know how to grow your business with relationship marketing, you need first to understand or re-educate yourself on what relationship marketing is about.
Simply put, relationship marketing is a strategy that focuses on building long-term relationships with your customers that will, in turn, bring about a triple effect. The effects include keeping you in business for a long time, increasing your sales and profit margin, and marketing your products through word of mouth for free.
An off-shoot of the triple effects is that relationship marketing fosters trust, and loyalty, two key elements you’ll need to expand your business opportunities. After all, if your original product and services are not trusted, and you lack a loyal customer base, expansion, would be a bad idea.
Relationship marketing is also that brand of marketing that creates an emotional connection between your customers, and product, and it is far more effective than traditional means of marketing.
How Relationship Marketing Expands Your Business Opportunities
Having the above in mind, the question becomes, what are the ways relationship marketing can help you expand your business opportunities? Note that the latter does not necessarily mean going into a business, or creating a product other than the one you are known for.
It covers branching out into a new market with the same product. For example, if your products get designed with a certain age demographic, or locality, relationship marketing lets you know when your business is ripe to move beyond where you are, which brings us to our first point.
Provides Information on What People Need
Every business is tailored towards finding a need and meeting it. Whether you sell insurance, produce beauty products, or you are in the hospitality business, the bottom line is you are following the economic principle that human wants are insatiable.
In times past, people go into business and expansion without knowing if those they are producing for need their product. The information was not available because they relied on the traditional means of marketing.
However, things have changed, and relationship marketing, lets you know what people are interested in buying. It enables you to understand what’s sellable, what consumers are talking about. It’s the secret to the success of prominent corporations, and how Apple knows that its customers would buy its new iPhone, and when best to release it.
It Makes Available, Useable and Credible Feedbacks
Getting and using feedback is one of the bedrocks of most successful businesses. In business expansion, you need feedback, which is one thing that relationship marketing gives you.
Feedback lets you know a lot of things; it’s how you get to find out what people need, and are willing to pay money for. Never underestimate the power of positive feedback. With it, you know the ripe business opportunities, and when and how to key into it.
If for instance, your business is not doing as well as it should, relationship marketing would give you an insight into the reason. And what more you can do to complement and make it better. Sometimes, it’s not about breaking into a new market, but improving what you already have.
Gives You Insight on the State of the Market
Business opportunities abound, but a person without insight might miss them. But don’t fret, because with relationship marketing, you will have tons of ideas on the state of the market, and the business to invest in, that guarantee you a return on your investment.
The insight will also let you know the sustainable business plan to follow. What to do to ensure your expansion is in and for the right market. It equally provides you with workable data that does not only cover the readiness of the market, but the people.
It Gives You Insight on Customer Expectations
Firstly, needs and expectations are two different things; both are important. While needs cover products and services, expectations deal with the delivery. Bringing it down to how it expands your business opportunities; insight into customers’ expectations lets you know what’s lacking in terms of delivery, and how you can capitalize on it.
Think about brands, like DHL, that offer courier services; they capitalized on relationship marketing to know that not all companies can deliver their products. Also, they understood that people expected the existence of a company whose sole purpose is to deliver goods around the world and they get it.
What Else Can Relationship Marketing Do for You?
The knowledge gotten from relationship marketing is endless, with infinite opportunities. However, in addition to the four mentioned above, here are some other ways relationship marketing contributes to business expansion opportunities:
It gives you an in-depth knowledge of the target market, and audience.
It gives you an understanding of the core values of the target market.
It brings to light people in a different locality who wish they had your product. Referrals, which is one of the advantages of relationship marketing, will deliver this to you.
In conclusion, there are some things you’ll never know without the right information. When Jeff Bezos started Amazon, all he wanted was to create a platform for people to buy books with ease, but with relationship marketing, he branched out into delivering online services for different products.
Relationship marketing has recorded more testimonies and started more businesses than any other form of marketing, so capitalize on it, and use it to expand your business opportunities.
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post How Relationship Marketing Can Expand Your Business Opportunities appeared first on FourWeekMBA.
September 30, 2019
Is Uber Profitable? Uber Profitability 2016-2018
Uber made over $11 billion in dollars in revenues in 2018, and its profits were $987 million. It’s essential to notice that the profitability in 2018 was positively affected by divestitures in Russian/CSI operations and from gains on investments in the “Chinese’ Uber,” called Didi.
Understanding Uber financials
Uber made over $11 billion in dollars in revenues in 2018, and its profits were $987 million. In 2017, the company earned $7.9 billion in revenues, and its net losses were over $4 billion. And in 2016, Uber made $3.8 billion in revenues, and its net losses were over 370 million dollars.
It’s essential to notice that the profitability in 2016 was positively affected by the sales of Uber China for $2.9 billion. And in 2018 it was positively impacted by divestitures in Russian operations and gains on investments for Chinese’ Uber, called Didi.
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Uber cash flows coming from dismissions in several business operations. Source: Uber Annual Report, 2018.
Sale of Uber China
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Sales of Uber China, which would go to the Chinese startup, Didi. Source: Uber Financial Statements.
As pointed out in Uber financial statements:
On August 1, 2016, the Company sold its majority-owned subsidiary, Uber China, Ltd. (“Uber China”) to Xiaoju Kuaizhi, Inc. (“Didi”) for an equity stake in Didi, valued at the time at approximately $6.0 billion. The financial results of Uber China’s operations are presented as discontinued operations in the consolidated statements of operations and, as such, have been excluded from continuing operations for all periods presented. Refer to Note 15—Discontinued Operations for further information. During the year ended December 31, 2018, the Company completed the disposition of the Uber Russia and the Commonwealth of Independent States (“Uber Russia/CIS”) operations and the sale of the Southeast Asia operations. Refer to Note 19—Divestitures for further information. These 2018 divestitures did not represent a strategic shift that had a major effect on the Company’s operations and financial results, and therefore are not presented as discontinued operations.
Pretty much Uber sold to Didi, but then it acquired a stake into the company by 2017:
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From the schedule above, you can see the several investments Uber made throughout the years, also based on dismissions, sales, and joint ventures.
Dismission of Russia/CIS operations with the creation of the Yandex joint venture
As pointed out on Uber financial statements:
In July 2017, a wholly-owned subsidiary of the Company agreed to contribute the net assets of its Uber Russia/CIS operations into a newly formed private limited liability company, MLU B.V., with Yandex and the Company receiving ownership interests in MLU B.V. As a result of this transaction, the Company determined that the contributed assets and liabilities were disposed of and met the held for sale requirement as of December 31, 2017. The Company performed an evaluation to determine if the sale constituted discontinued operations and concluded that the sale did not represent a major strategic shift, primarily because the Uber Russia/CIS operations did not materially affect consolidated assets, revenue or loss from operations of the Company. In addition, the Company determined the sale constituted the sale of a business in accordance with ASC 805. The carrying value of Uber Russia/CIS’s total assets and liabilities were $20 million and $15 million as of December 31, 2017, respectively. The transaction received approval from the necessary regulatory agencies in the fourth quarter of 2017 and closed on February 7, 2018.
Uber operations in 2018[image error]
Gain and divestitures are coming from dismissed, sold, and reorganized operations.
Gain on divestitures increased by $3.2 billion from 2017 to 2018. This increase was due to gains on the divestitures of our Russia/CIS and Southeast Asia operations.
Unrealized gain on investments increased by $2.0 billion from 2017 to 2018. This increase was primarily due to a gain from a fair value adjustment of our Didi investment.
Uber business model
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Read next:
How Does Uber Eats Make Money? Uber Eats Business Model In A Nutshell
How Does Uber Make Money? Uber Business Model In A Nutshell
Lyft Transportation-As-A-Service Business Model
How Does HyreCar Make Money? HyreCar Business Model In A Nutshell
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What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
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What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post Is Uber Profitable? Uber Profitability 2016-2018 appeared first on FourWeekMBA.
September 28, 2019
Is Netflix Profitable? Netflix Profitability 2014-2018
Netflix is a profitable company. It generated over $1.2 billion in 2018, a 116% increase compared to 2017, primarily driven by substantial growth in paid memberships. However, Netflix has negative cash flows as it invests massively on content license agreements and original content.
What drove Netflix profitability?
In 2018 revenues drove profitability as they increased by 35%. More precisely those included an increase of 24% and 53% in revenues in the Domestic streaming and International streaming segments, respectively.
International revenues accounted for 50% of total streaming revenue for 2018 primarily driven by the growth in the average number of streaming paid memberships globally.
International streaming memberships accounted for 55% of total average streaming paid memberships in 2018, primarily driven also by an increase in the plan mix, that moved toward higher-priced plans:
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Netflix old plans in euros
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Netflix new plans in euros
As we’ll see Netflix has been increasing its content expenses as it continues to acquire, license and produce content (Netflix originals).
Netflix offers three main types of streaming membership plans:
Basic
Standard
Premium
Why Netflix is investing massively on content
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Netflix financials
While Netflix has a positive income and it shows growing profits. The company also used a substantial amount of cash for its operating activities. For instance, in 2018 an additional $895 billions, compared to 2017, were used for investments in streaming content.
It’s important to understand the unit economics of the Netflix business model. The company has to pay in advance for the right to stream content, or at least have content ready to be streamed on its platform.
Indeed, it’s critical for Netflix to show to its members that it has a library of content always available, and it is also critical for Netflix to make an upfront investment in original content.
To understand why we need to look at the Netflix distribution strategy.
Understanding the Netflix distribution strategy
A distribution strategy starts with a product. Without a product, there is no distribution. For how trivial that might sound if we go back of a few years, Netflix didn’t have a product of its own.
Instead, the company assembled the content to stream on its platform for its members. While this strategy worked pretty well over the years. As Netflix scaled up and it became a threat to the same platforms licensing that content to it. Netflix realized it needed to start producing its own content, what the company calls Netflix Originals.
If you have a strong distribution platform but you don’t have a product you make, there are several long-term risks:
You’re subject to the provider of content changing agreements, pricing, and distribution
Your brand won’t be recognized
You are not free to distribute that content as you wish as the licensing agreements might have intrinsic limitations
When you do understand that, you can appreciate why Netflix is burning so much cash to produce its own content.
As Netflix highlighted in its financial statements “the payments for streaming content assets increased $3,138 million, from $8,906 million to $12,044 million, or 35%.”
And again those higher expenses were primarily driven by increased headcount to support growing streaming services, the international expansion, and the increased content production activities.
Why content is so expensive?
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Original content is extremely expensive. A show like Chris Rock stand-up series for Netflix cost $20 million per episode. A series like Orange Is the New Black cost as much as $50 million per season.
If you add those numbers up for all the original series, documentaries and else that makes up billions of dollars in investments. That is why Netflix balance sheet in the coming years will be dominated by an item called “screaming content obligations” which consists of almost $20 billion, and that the company will have to pay in about five years.
Read next:
How Does Netflix Make Money? Netflix Business Model Explained
Other business model analyses:
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does WhatsApp Make Money? WhatsApp Business Model Explained
The Power of Google Business Model in a Nutshell
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post Is Netflix Profitable? Netflix Profitability 2014-2018 appeared first on FourWeekMBA.
Is Amazon Profitable? Amazon Profitability 1994-2018
Amazon is a profitable company. Its operating income and net income passed $12.4 billion and $10 billion respectively in 2018. The operating income was driven primarily by Amazon AWS, contributing $7.29 billion. Amazon has been consistently profitable since 2015 when it posted 596 million in profits.
Amazon aggressive growth
Since its inception, Amazon has been aggressively focusing on growth. While it managed to survive the dot-com bubble Amazon also hat to tweak its business playbook throughout those years:
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Source: Amazon S-1
Amazon business model today has several moving parts:
Amazon e-commerce
Amazon platform business (Amazon hosts third-party sellers on the platform since the early 2000s)
Amazon AWS
Amazon Prime
Advertising
And more
Below you can appreciate the Amazon business model in full:
[image error]Amazon has a diversified business model. In 2018, online stores contributed to nearly 52% of Amazon revenues, followed by Physical Stores, Third-party Seller Services, AWS, Subscription Services, and Advertising revenues.
As of 2018-2019, Amazon AWS is a major contributor to Amazon operating and net income. That is because AWS has different unit economics logic:
[image error]Amazon AWS follows a platform business model, that gains traction by tapping into network effects. Born as an infrastructure built on top of Amazon‘s infrastructure, AWS has become a company offering cloud services to thousands of clients from the enterprise level, to startups. And its marketplace enables companies to connect to other service providers to build integrated solutions for their organizations.
To understand more about the Amazon business model consult the resources below:
Amazon Business Model
What Is the Receivables Turnover Ratio? How Amazon Receivables Management Helps Its Explosive Growth
Amazon Case Study: Why from Product to Subscription You Need to “Swallow the Fish”
What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
Why Is AWS so Important for Amazon Future Business Growth?
Amazon Flywheel: Amazon Virtuous Cycle In A Nutshell
Amazon Value Proposition In A Nutshell
Why Amazon Is Doubling Down On AWS
The Economics Of The Amazon Seller Business In A Nutshell
How Much Is Amazon Advertising Business Worth?
What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model Explained
Jeff Bezos Teaches You When Judgment Is Better Than Math And Data
Alibaba vs. Amazon Compared in a Single Infographic
Amazon Mission Statement and Vision Statement In A Nutshell
The Amazon Leadership Principles Crafted By Jeff Bezos
For more business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post Is Amazon Profitable? Amazon Profitability 1994-2018 appeared first on FourWeekMBA.
How Data Scientists Can Bridge The Gap Between Businesses And Technology
Company executives now recognize the power of data. They know that they must leverage this power if they want to remain competitive. The challenge is that making data useful requires very technical skills. Data scientists must employ technologies such as data analytics and artificial intelligence in order to process available data.
At the other end of the spectrum are the business areas that rely on the information that can be gleaned from these data sources in their decision-making processes.
In its ‘raw’ form, this data isn’t very useful. As a result, it’s up to data scientists to bridge that gap by presenting data in a way that makes sense to business professionals.
Data Science: Potential Value Vs. Practical Value
Data is full of potential value. Like a not yet assembled piece of furniture from IKEA, something must be done with it before it is actually useful. One way that data scientists can do this is by using data storytelling.
Data scientists who have this skill are likely to be valued over data scientists who do not. In this article, we’ll explore the value of data storytelling, then examine the potential downsides that data scientists might face.
What is Data Storytelling?
Udacity published a list of 8 skills that people should have if they’re interested in working as data scientists. One of these is ‘Data Visualization & Communication. This is further described as the ability to communicate data in ways that make sense to both technical and non-technical audiences. Data storytelling is a methodology that involves using data as a tool to communicate important information to your audience.
Business professionals need data to be communicated to them in a way that enables them to make the best possible decisions.
Good data storytelling does that. It makes the information you gain from data analysis relevant, and easy to understand. Some of the benefits of data storytelling include:
Provide Actionable Information to Decision Makers.
Persuade Stakeholders With Data They Can Understand.
Present Information in Real-Time to Audience Members.
Customize Information to Different Business Areas.
Continually Refine Data to Answer Relevant Questions.
How to Use Data Storytelling
Data storytelling makes information accessible to a wider audience. It has a purpose in marketing, but can also be used internally to help decision-makers make sense of the information provided to them.
Know Your Audience
You should understand the importance of getting to know your audience before determining how to use data to assist them. Who you are communicating with should drive how you are communicating with them.
Each business area will have different needs and competencies when it comes to understanding data. C-level staff may want short summaries that cover a broad range of topics. On the other hand, department heads will want you to take a deeper dive into data that specifically impacts their business area.
It’s also important to understand what your audience needs to know. Assumptions can lead to frustration and wasted time. Of course, this can be challenging.
Data can be used to answer questions for sure. On the other hand, it can produce new information that reveals questions that your audience didn’t know they had to begin with.
Use Data From Multiple Sources
The stories you tell should be based on multiple sources of data. First-party data is the information you obtain from your owned sources. This includes customer information, transaction histories, and customer service records. Second-party data is data from another entity that is collected directly from its customers.
This information isn’t aggregated in any way, so you have to be cognizant of the importance of data privacy. Finally, third party data is data that you purchase from third parties that are in the business of collecting and aggregating data from a variety of sources.
By incorporating data from multiple sources you can:
Gain deeper insights.
Validate or challenge your own data reveals.
Find relevant stories that don’t exist in your own data sets.
Use Simple But Impactful Visualizations
People are best able to understand and recall information if you use visuals. However, what you want to avoid is using overly complex imagery. Keep things simple, and focus on a single point so that your data storytelling is relevant and easy to understand.
Create a Relevant Narrative
You should not bombard people with facts and figures. Don’t ignore the storytelling part of data storytelling. It’s the story that is engaging, and that creates relevance.
Look for existing case studies or other content that is relevant to your data. Show where the information you’ve gathered supports or contradicts that. Also, don’t be hesitant to look for narratives from other sources as well.
Final Thoughts: Let Stakeholders Participate in The Storytelling Process
Without intimate familiarity with a particular business area, it can be difficult to determine which data is important or to identify the stories within that data. People working in various business areas cannot only be passive consumers of data.
Yes, as a data scientist, it is your job to make data accessible, but you need their inputs to understand what is relevant, and where to dig deeper. Keep in mind that they may use the data you provide to them to further communicate with their customers.
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post How Data Scientists Can Bridge The Gap Between Businesses And Technology appeared first on FourWeekMBA.
September 26, 2019
Starbucks Mission Statement and Vision Statement In A Nutshell
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”
The Starbucks Mission And Values
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Source: Starbucks
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
From this mission statement, a set of core principles make up the core of Starbucks‘ company culture:
Creating a culture of warmth and belonging, where everyone is welcome.
Acting with courage, challenging the status quo, and finding new ways to grow our company and each other.
Being present, connecting with transparency, dignity, and respect.
Delivering our very best in all we do, holding ourselves accountable for results.
As pointed out in Starbucks 2018 Annual Report:
Our objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world. To achieve this, we are continuing the disciplined expansion of our global store base, adding stores in both existing, developed markets such as the U.S., and in newer, higher growth markets such as China, as well as optimizing the mix of company-operated and licensed stores around the world. In addition, by leveraging the experience gained through our traditional store model, we continue to offer consumers new coffee and other products in a variety of forms, across new categories, diverse channels and alternative store formats. We also believe our Starbucks Global Social Impact strategy, commitments related to ethically sourcing high-quality coffee, contributing positively to the communities we do business in and being an employer of choice are contributors to our objective
Starbucks Vision In A Nutshell
This instilled a vision at Starbucks to “treat people like family, and they will be loyal and give their all.”
The vision statement is articulated around the concept of family, loyalty, and generosity.
What it means from the business standpoint is that Starbucks is a place where people spend a lot of time. Therefore, it has to feel like a second home.
Understanding Starbucks Business Model
[image error]Starbucks is a coffee retail company that sells beverages (primarily consisting of coffee-related drinks) and food. Even though Starbucks has 49% of company-operated stores vs. 51% of licensed stores, revenues for company-operated stores accounted for 79% of total revenues compared to just 11% of licensed stores in 2017. Thus even though licensed stores generally have a higher operating margin than company-operated stores, the company can be defined as a company-owned business model.
If we look at the combined financial statements of the company, we can draw a few interesting conclusion:
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The company revenues were in the last years primarily driven by company-operated stores. However, if we look at the composition of the company-operated stores vs. the licensed operated stores we can notice how Starbucks runs almost 57% of the total stores as company-operated. And the remaining 43% as licensed stores.
While keeping a majority of its stores as company-operated was critical to control the brand and experience as much as possible. The company also used the licensing model to grow substantially its brand across the world.
For more read the Starbucks Business Model in a Nutshell
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
The post Starbucks Mission Statement and Vision Statement In A Nutshell appeared first on FourWeekMBA.
September 25, 2019
Three Reasons Why Content Marketing Matters So Much For Your Business
Content marketing is witnessing a steady growth in adoption across various industries. According to a 2017 Content Marketing Institute report, close to a fifth of all B2B businesses spend between 10% to 24% of their marketing budget on content.
At the outset, this does not make a lot of sense. Content marketing is typically used to bring visitors from search engines and social media channels. Each of these referral platforms has limited ‘real estate’ in terms of visibility. For instance, more than 90% of Google search users do not scroll past the first page of the result. So unless your content is in the top 10 results, it goes unseen.
So why exactly is content such an important channel for marketing? Are businesses ROI positive with this strategy or is this another platform marketers spend money on simply because ‘others are doing it’? Let’s take a look.
The three key objectives of content marketing
As it is with any other form of marketing, content too, needs specific objectives in order to deliver results. Every piece of content, be it blog posts, infographics, videos or podcasts that your organization creates must help meet any one of these three key objectives – lead generation, SEO or branding.
If the content you create is not aimed at building search visibility, generate leads or build your brand, then it perhaps is not generating positive ROI.
Search visibility
As we mentioned earlier in this article, Google search results (or Bing for that matter) has limited real estate in terms of the content that is shown on the first page. However, to be one of the ten pages ranking for your preferred keyword, it is important to build backlinks and authority to the page you want to rank for.
There are two types of backlinks that need to be built – internal and external. Take the example of a highly competitive keyword like “CRM software”. Most of the pages ranking for this search term on Google (like this CRM page on SoftwareSuggest) are listing pages that rank various third party CRM tools based on ratings and reviews.
For them to rank on Google, these pages will need to build lots of internal and external links. So while the blog sections of these websites may not have too many blog posts that rank high on Google, they help in building valuable internal links to the primary listings page.
Backlinks from other websites are another important driver of search engine visibility. For example, the author bio section on guest posts contains links to the website owned by the author. Links such as this help in SEO. Content marketing with the help of guest posts like this one is aimed at building such external backlinks.
Lead generation
Content marketing is very often used to capture leads for your business. The premise of the strategy is this – you publish content that appeals to a very niche subset of your customer base. This content is then promoted through social media, email newsletters and also sometimes through search.
Targeted users who land up on your blog post this way are then directed to sign up for a newsletter or download a “lead magnet” in exchange for their lead information.
Content produced for leads is most commonly published on your company blogs. This gives marketers the freedom to decide what kind of lead magnets to showcase and how. Take a look at this article talking about what window cleaners earn in various parts of the UK. The content angle makes it highly attractive for traffic from both social media channels and search engines.
Visitors who make to the page, either way, are then nudged to get a quote for their window cleaning insurance policy.
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Content aimed at generating leads does not always have to be blog posts. Videos are becoming an important source of lead generation in recent times. However, since this content is predominantly distributed through third-party platforms like YouTube or Facebook, the Call-To-Action is limited mostly to links in the video description. The conversion rate on such pieces of content is thus likely to be lower.
Brand building
While lead-generating pieces of content are mostly focused on internal distribution channels, content targeted at brand-building focus on external channels. The objective here is simple – to reach out to target customers who are not yet part of your marketing funnel. By distributing content over third-party platforms, you may reach prospective customers who may be interested in your content and get to know your brand in the process.
As a marketer, this aspect of content marketing is the most exciting because it gives you a lot of freedom to test and track. In recent times, many businesses have started experimenting with their own podcasts, YouTube channels, and self-published books. The understanding here is that as long as you publish content that reaches your target market, it’s a brand-building effort well done.
That also echoes the possible futility of this marketing strategy. Building a brand is a long term strategy. At the same time, it is difficult to measure brand equity with the same objective metrics that marketers use to measure lead conversion rate or SEO rank improvement.Add to this the fact that a bigger brand does not always mean improved sales.You will still need to focus on lead generation and conversion rates to monetize your visitors.
This makes brand building the most dispensable format of content marketing. It is most popular among businesses with disposable marketing budgets. Bootstrapped businesses seldom use content marketing to build their brand.
In conclusion, it is important to remember that writing a blog or producing a video costs money and the ROI of such efforts need to be immaculately measured. Identifying your business priorities and investing in the right form of content is thus critical to ensure positive ROI on your content marketing campaigns.
Other business resources:
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
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