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May 12, 2019

Top 5 Ways To Make Money Blogging

Thousands of writers and creatives worldwide are already making a living from blogging.

Aren’t you?

If you’re an aspiring blogger looking to earn money writing about the things you love, here’s your guide to pursue your passion while earning big time.

I’ve been blogging from 2013, and all I can say is, blogging is incredible.

If you have a huge passion in any particular field, and you know the basics of writing, it’ll be fairly easy to grow your blogging career.

I’ve tried and tested almost all of the monetization techniques out there.

All of these monetization techniques work great, only if you know what method to use at the right time.

Let’s discuss one-by-one:

Affiliate Marketing

Affiliate marketing enables you to earn a commission for promoting the products/services of another company or person on your blog.

The majority of my online income comes through affiliate marketing.

The main goal of affiliate marketing is to offer value that would benefit the readers and then promote relevant affiliate products.

It is an easy way to make money blogging as you don’t need to create your own product, instead promote other affiliate products relevant to your blog content.

I would strongly recommend you first go by affiliate marketing route, before creating your suite of products pouring in the efforts.

If you are wondering how affiliate marketing works, here’s how:

An advertiser or company agrees to give you a specific commission when a customer makes the sale of their product or service through your site.
Your site will contain links that will direct the reader to the website of the seller where they can make their purchase. Affiliate links can be placed directly in your content, or you could use banner ads.
Once the reader uses the affiliate link to buy a product or service, you will get a percentage of that purchase.

Research: The first step is to do extensive research to identify which products you want to promote. You are most likely to know which niche to focus on after checking out competitor sites and doing your due diligence.

Overall, research will help you identify a profitable niche that is going to make you money consistently.

If you already have a niche, you need to identify the top-performing pages on your site and look for places where you can promote your affiliate products.

Marketplaces: An affiliate marketplace is a site that connects advertisers and other vendors with affiliates. The marketplace is responsible for establishing easy communication channels, making affiliate links and payment processes more efficient.

If you are looking for products to promote, here are the best affiliates marketplaces that will give you access to numerous affiliate products:

ClickBank: ClickBank is very popular and is a great place to look for affiliate niches. They have digital offerings like online courses and e-books which somehow do better than physical products.
JVZoo: If you are in the internet marketing niche, you can consider exploring products on JVZoo.
Amazon Associates: If you review Amazon products on your blog, you can get started by joining the Amazon associates program.

There are also various other affiliate marketing marketplaces like ShareASale, CJ, Impact, and other in-house affiliates.

If a product owner does not have a publicly announced affiliate program, you can always reach out to them, and the chances of them set you up a private affiliate program will be more.

Advertising

One of the most common ways to make money is through advertising on your blog.

This is the most preferred revenue stream for first time bloggers because it is relatively easy and does not require copywriting skills.

Google AdSense is one of the easiest pay-per-click (PPC) advertising platforms. This program is also popular for placing the CPM Ads.

With Google AdSense, you need to put the banner on your site and Google will display ads that are most relevant to your site.

You’ll not have direct contact with the advertisers, but you can earn passive income—especially if your blog grows its readership and authority.

To increase your ad earnings, find your way to Adwords and check the cost-per-click of the keywords.

The key is to know how the competition is and how much the click costs.

This way, you will identify some worthwhile keywords that marketers pay high for, target them in your blog posts and thus boost your ad earnings.

Online Courses

Are you an expert in a particular field or you have a skill that you can confidently teach to other people?

You will be surprised at how many people are willing to pay to learn from your skills or expertise.

There is no better way to monetize your skill and share your knowledge than through online courses. Because, once you setup your course funnel, it’s more or less a passive income.

Some great platforms that you can use for your online course creation include Udemy and Teachable.

Once you identify a skill you want to teach, you need to research the course ideas, determine the angle, and validate the idea with your prospect students. This will help you ensure a target audience for that course.

Info Products

Are you looking to make a large profit margin with your blog?

If so, then you need to consider information products. Information products involve selling information or knowledge through eBooks or online courses. It requires less initial investment compared to creating say SaaS or physical products.

As a blogger, you probably have a lot of knowledge in a specific field. You can make money by turning this information into a product. Even if you don’t have a unique skill, you can begin with something you are passionate about.

You can choose to sell information products digitally through some platforms like Teachable, Thinkific or Udemy. You can also consider offering your readers to download it from your site. No matter what platform you use, learn the basics of online sales funnels as funnels are a great way to sell info products from your blog systematically for maximum conversions and effectiveness.

Sponsored Posts

Sponsored posts are, without a doubt, one of the best ways to earn money through blogging. Though very profitable, not many bloggers talk about it.

What is a sponsored post?

Well, a sponsored post is a content you write regarding the brand or product/services of a company, and they pay a fee for that.

A vital tip is to stay true to your audience when publishing sponsored posts and ensure that they provide real value to your readers. As long as you provide genuine value to the readers and adopt an SEO strategy to get ongoing organic traffic, you’re good to go.

Examples of Bloggers Making Money With Blogging
Pat Flynn

Pat Flynn is the owner of Smart Passive Income. He teaches readers proven strategies to optimize their online businesses for passive income.

When he was fired from his job in 2008, he used his knowledge from the LEED exam to launch an eBook and created an info product.

He then began his Smart Passive Income blog where he talks about passive income and shares his experiences.

Smart Passive Income has become very successful over the years thanks to affiliate marketing and selling info products. Also, recently, he launched the Smart Podcast player, which generated $9,646.70 in December 2017.

In the same month, 25% of revenue was collected from course sales while 63% came from advertising.

He regularly publishes his income reports on his blog.

Also read: How Does Pat Flynn Make Money? The Smart Passive Income Business Model Explained

Alex and Lauren from Create and Go

If you are one of those people who believe that blogging generates no money, then you have not heard of Alex and Lauren.

These two are the founders of Avocadu and Create and Go which generate revenue of $75,000 a month.

Initially, Alex was a personal trainer, and Lauren was an accountant.

However, they were both dissatisfied with corporate life, and this is when they decided to try an online business.

Currently, this couple makes money from their blogs through the selling of their eBooks and courses.

They also generate revenue through ads and affiliate marketing. The couple also attests to the power of Pinterest which has helped their sites grow further.

Kristin Larsen from Believe in a Budget

Kristin Larsen is the author of Believe in A Budget and co-creator of Pinterest Presence.

In 2015, Larsen began her blog Believe in A Budget which is a personal finance site.

The blog made under $100,000 in the first year. However, this changed when she started using Pinterest, and the monthly page views of her blog drastically increased from 5000 to 230,000.

Kristin managed to achieve success because of multiple income streams.

Her income comes from affiliate marketing, ads, and courses. She also sells her products and gets traffic through Pinterest and Google.

Bottom line

Whether you are passionate about writing or you are trying to earn a living from blogging, the above tips and examples come in handy.

Just find what works best for you, your blog readers and what doesn’t.

Also, be sure to build a relationship with other bloggers, sponsors, and affiliate marketers to develop your network which is your net worth and further promote your blog.

I hope you found this post helpful. If you have any doubts, make sure you leave them in the comments section.

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

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Published on May 12, 2019 12:29

How Does TripAdvisor Make Money? TripAdvisor Business Model In A Nutshell

TripAdvisor business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences. When this match is created TripAdvisor collects commission from partners on a CPC and CPM basis. The non-hotel revenue comprises experiences, restaurants, and rentals.

Pivoting and initial traction

Chris Dixon had what seemed to be a brilliant idea. He wanted to create a vertical search engine, covering the travel industry. That’s how TripAdvisor started, and how it built its business plan.

It could be summarized as a vertical search engine for the travel industry, selling users to larger customers, like Expedia, Travelocity, AOL, and Yahoo.

So when Chris Dixon built the business plan, he got funding for that idea. Fast forward, a year and a half later, TripAdvisor had no revenues and no clients. The first site was gaining some traction through PR, but there was no revenue model.

Therefore, they started to monetize the site via banner ads, which seemed a smart idea – on paper – at the time, as the founding team figured, if they were going to make a 3% click-through rate on those banners, the company would be highly profitable.

However, when they started to roll this out in the real world, things didn’t look right. As those banners had a 0.1% clicks barely, which meant the company would be profitable only with billion of pages views.

As the traditional CPM (cost per mille) model and the banner ads didn’t make much sense. Chris Dixon and the rest of the team stumbled upon a new monetization model, called CPC (cost per click). In other words, the site had hotel pages, on those pages, a simple call to action that said “book this hotel” would be paid on a click-through basis.

While this model is given for granted now, it was the early 2000s, when Google neither had figured that out. Indeed, there was only one player – GoTo.com later Overture – which made money by syndicating its links.

Thus, when TripAdvisor figured the CPC revenue model, they went from no revenue in November 2001, to break even in March 2002, with $70K per month in revenues, and the company became profitable ever since.

One other key element of TripAdvisor initial traction and success was the user-generated content. The site allowed users to write reviews – at the time something completely new, as most people relied on experts’ reviews – and to sell the leads generated by the site to travel agencies.

The turning point happened when TripAdvisor figured out that people were actually skipping experts’ reviews and they were going straight to the users’ reviews. Today this seems trivial and a proved concept, but at the time it was neither granted, nor supposed to work.

But when TripAdvisor understood that the user-generated content was so effective, and the CPC revenue model worked so well, that’s when they pushed on the gas pedal, to gain even more traction. Fast forward 2019, TripAdvisor gained a market cap of over six billion dollars!

TripAdvisor mission statement analyzed

our mission is to help people around the world to plan, book and experience the perfect trip.

TripAdvisor achieves its mission by providing consumers and travel partners several pieces to “experience the perfect trip:”

A global platform
The rich consumer-generated content
A set of price comparison tools
Online reservation
Related services for destinations, accommodations, travel activities
Experiences
And restaurants

Breaking down TripAdvisor Two-Sided Business model

TripAdvisor business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences.

Therefore the company has two key partners:

Consumers looking for the perfect travel experience
Travel partners willing to pay TripAdvisor to be discovered by their potential customers. Those travel partners include hotel chains, independent hoteliers, online travel agencies, or OTAs and more

TripAdvisor enables media advertising opportunities, and it facilitates transactions between consumers and travel partners by:

Sending referrals to travel partners’ websites,
Facilitating bookings on behalf of travel partners,
Serving as the merchant of record (in particular for Experiences and Rentals offerings)
And with advertising placements on its websites and mobile apps.

How does TripAdvisor make money?

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TripAdvisor makes money with two segments:

Hotel revenues
And non-Hotel revenues (Experiences, Restaurants, and Rentals)

The Hotel segment explained

The Hotel segment accounted for 72%, 77%, and 80%, of TripAdvisor revenue in 2018, 2017 and 2016, coming from the following sources:

TripAdvisor-branded Click-based and Transaction Revenue. Click-based advertising comprises of contextually-relevant links to travel partners’ sites. Click-based travel partners are primary OTAs and direct suppliers in the hotel category. The revenue model is on a cost-per-click, or “CPC” basis, with payments determined by the number of travelers who click on a link multiplied by the CPC rate for each specific click.
TripAdvisor-branded Display-based Advertising and Subscription Revenue. Comprising display-based advertising placements on TripAdvisor websites. The display-based advertising clients are predominantly direct suppliers of hotels, air travel, and cruises, as well as destination marketing organizations. Display-based advertising is sold primarily on a cost per thousand impressions, or CPM, basis. TripAdvisor also offers subscription-based advertising to hoteliers, owners of B&Bs and other lodging properties. Subscription advertising services are predominantly sold for a flat fee for a contracted period of time of one year or less.
Other Hotel Revenue. The other Hotel revenue includes revenue from non-TripAdvisor-branded websites, such as www.bookingbuddy.com, www.cruisecritic.com, www.onetime.com, and www.smartertravel.com, primarily including click-based advertising and display-based advertising revenue sources.

Within the Hotel Segment in 2018, 2017 and 2016 TripAdvisor two most significant travel partners were Expedia (and its subsidiaries) and Booking (and its subsidiaries) which combined accounted for approximately 37%, 43% and 46% of its revenues.

Non-Hotel offerings (Experiences, Restaurants, and Rentals)

Experiences, Restaurants, and Rentals accounted for 28%, 23%, and 20% of TripAdvisor revenue in 2018, 2017 and 2016, respectively. That revenue comes from:

Experiences: in popular travel destinations both through Viator, a dedicated Experiences offering, and on TripAdvisor website and app. TripAdvisor connects with local tour or travel activities/experiences operators (on the supplying side) to provide consumers with access to tours, activities, and experiences by generating commissions for each booking transaction.
Restaurants: Through the dedicated restaurant reservations offering, TheFork, an on TripAdvisor websites and mobile apps the company primarily generates transaction fees (or per seated diner fees) paid by restaurants for diners seated primarily from bookings through TheFork’s online reservation system.
Rentals: It provides information and services for consumers to research and to book a vacation and short-term rental properties, including full home rentals, condominiums, villas, beach rentals, cabins, and cottages. And it generates revenue primarily by offering individual property owners and managers the ability to list their properties on TripAdvisor websites and mobile apps thereby connecting homeowners with travelers through a free-to-list, commission-based option.

Breaking down marketing and distribution channels

TripAdvisor generates demand by tapping mainly into three principal distribution channels:

Search engine optimization, or SEO,
Search engine marketing, or SEM,
Retargeting and television, or brand advertising.

Indeed, if we look at the primary channels of the acquisition on TripAdvisor websites, search engines, paid advertising, and social media marketing represent the majority of its traffic:

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Traffic from search engines, in particular (SEO) represents the majority of traffic for TripAdvisor.com.

We can also see the importance of both SEO and SEM on TripAdvisor top organic keywords and paid keywords:

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And another good chunk of traffic and distribution happens via TripAdvisor’s mobile apps:

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During 2018, TripAdvisor total advertising expense was approximately $544 million, primarily driven by online search engines, and to a lesser extent, investments in offline marketing channels (primarily television advertising).

Read next:

Booking Business Model

Other business models:

How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising!
The Google of China: Baidu Business Model In A Nutshell
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Does Pinterest Work And Make Money? Pinterest Business Model In A Nutshell
Seven Amazon Statistics That Break Down Its Business Model
Fastly Enterprise Edge Computing Business Model In A Nutshell

Other business tools and resources:

How To Write A Mission Statement

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Published on May 12, 2019 08:59

May 5, 2019

Comparable Company Analysis: Business And Financial Profile

A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company.

In short, we want to select companies, which present the same features as our target firm.

The objective, then, is to understand the competitive context of the organization we’re analyzing.

Joshua Rosenbaum and Joshua Pearl, authors of “Investment Banking,” offer us two main criteria to select our comparable companies:

The business profile
And the financial profile

These two profiles will help us find those companies that can be used as comparables for our financial analysis.

Business Profile

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The business profile attains to qualitative aspects of the business, which we can synthesize in five properties:

Sector

In what sector does the target company operate?

Product and services

What are the core products and services the target company offers?

Customers and end markets

What’s the customer base? And which market is the company serving?

Distribution channel

How does the target company get to its end customers?

Geography

What is the main market where our target company operates?

For instance, Apple Inc. operates in the consumer goods category and electronic equipment category. Its main products are iPhone, iPod, MAC (which make up most of its revenues).

Apple Inc. distributes its products mainly through its own retails stores and the main market is the U.S. (although the company operates worldwide and currently Greater China also makes up for a good chunk of the company’s sales).

Financial Profile

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The financial profile attains to quantitative aspects of the business. We are going to consider five main elements:

Size

Market cap, revenues, net income

Profitability

Average net margin, or gross margin last three or five years

Growth profile

Where does the revenue growth come from? Geography and product analysis

Return on investment

Net Income/Total Assets

Credit profile

What rating was the company assigned lately? Or what level of liquidity the company has?

For instance, Apple Inc. 2015 market cap surpassed $500 billion, with over $230 billion in revenues and over $50 billion in net profit.

As for the profitability, the company showed an average net margin (net income/sales) of 23% in the last five years. Its revenue growth came mainly from one product, the iPhone and one market, Greater China.

Select Comparable: Apple’s case study

It is time to select Apple’s main comparable.

For simplicity sake, here I want to highlight the fact that when selected Apple comparable I gave more importance to criteria such as geography, products and services, size, and profitability.

Apple has been able to achieve a dominant position in so many different industries in the tech world, and therefore it has also several direct competitors. For instance, in the smartphone industry, Apple’s direct competitors are Samsung, Sony, Lenovo and so on.

In the personal computer industry, Apple’s main competitors are Microsoft, Dell, HP, and Lenovo. We could go on forever. Although, my assumption here is that de facto Apple’s success was mainly due to its ability to integrate several products through a very intuitive interface that differentiated it from its competitors.

In short, I am assuming that the future battle in the tech industry will be played on the software side, rather than the hardware. Therefore, the two most prominent players, which are competing against Apple in this respect, are Microsoft and Google.

Understand that although the business and financial profiles criteria help use a lot in discerning the competitors of our target company personal judgment is a determinant factor.

For instance, if you believe that the future battle will be played on a different ground you may be tempted to select other comparable for Apple and that is fine. Or you could pick a larger group of comparable than I did. In short, you can personalize the analysis as much as you want if it gives a better picture of Apple’s overall competitive landscape.

Other resources:

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Published on May 05, 2019 13:20

May 4, 2019

What Is Porter’s Five Forces And Why It Matters

Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces:

Competition in the industry
Potential of new entrants into the industry
Power of suppliers
Power of customers
Threat of substitute products

Porter’s five forces is a business framework which can provide a qualitative assessment and come up with a corporate strategy.

Breaking down Porters’ five forces
Competitive rivalry

This force examines the intensity of the competition in the marketplace. The competition is given by several factors such as barriers to entry, the bargaining power of buyers and suppliers and the threat of substitute products or services.

Barriers to entry

Imagine operating in a business where anyone can become your competitor. This is a market where there is no high capital requirement to start a business, and there are no particular regulations in place to limit the entrance from new competitors. For example, in today’s world where anyone with internet access can create its blog or website with very few overhead costs, barriers to entry are very low, therefore the competition is fierce, and it is tough to keep the market share for too long.

Bargaining power of suppliers

This force studies the numbers of suppliers in the marketplace. Indeed, a smaller number indicates the power of those suppliers to dictate prices. A more significant number shows no power of those suppliers over price control. For example, Coca-Cola operates in a market where the suppliers are neither concentrated nor differentiated. Indeed, Coke ingredients such as caffeine and sweetener can be easily found in the marketplace. Therefore suppliers, in general, cannot control prices.

Bargaining power of customers

This is the flipside of the power of the supplier. Imagine a business where there are very few customers and switching between one supplier and the other is extremely easy. Undeniably, this gives total control to customers to set the prices they want. Going back to our previous example, Coke is very powerful to its bottler suppliers.

Threats of substitute products or services

This force examines how easy it is for customers to switch from a product or service to the other. For example, Coke is extremely powerful in relation to its can manufacturer. Indeed, competition among can suppliers is fierce. Also, the threat of substitution is very high. In effect, Coke can easily switch to plastic bottles.

Drawing conclusions

Having analyzed the factors that influence an organization through Porter’s five forces, a company can draw conclusions on its corporate strategy and integrate it with its business strategy, to maintain a competitive advantage.

Other resources:

How To Write A Mission Statement

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Published on May 04, 2019 16:46

How Does Instagram Make Money? Instagram Business Model In A Nutshell

Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc. overall business model. Acquired by Facebook for a billion dollar in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger, left the company, as Facebook pushed toward tighter integration of the two platforms.

Instagram background story

Instagram has been one of the most successful startup stories of the last decade. It quickly turned into a multi-billion dollar company, with millions of users. It is worth exploring some key dates of its story.

A big hairy audacious goal

As Kevin Systrome, founder of Instagram pointed out in one of the first Instagram posts:

When we started working on Instagram, we tried to imagine what the world would be like if everyone could contribute media to an open, transparent, and international community.

This was at a time when Instagram had 80 users! When Systrome announced the photo app in October 2010, he communicated three key problems Instagram was trying to solve:

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Source: instagram.tumblr.com

As soon as Instagram launched it reported explosive growth. As Systrom, Instagram founder recounted: “We crossed 10,000 users within hours, and I was like, ‘this is the best day of my life.’ This is amazing, right?” he said. “At the end of the day, it kept growing so much I thought, ‘are we counting wrong?'”

Problem/solution fit

When Instagram launched it was solving three key problems at the time:

At the time phone cameras hadn’t the resolution they have today. And Instagram made it possible to transform low-quality pictures by supercharging them with filters
The company built upon the concept of social media, which had already proved successful, and improved on it by curving its own niche, photo-sharing
It focused on making the platform easy and smooth for users, which allowed them to upload photos quickly and integrate them within other social media platforms

Note: A successful startup has to understand first what’s the problem it needs to solve. In most cases, companies fail to achieve success, because they lack the understanding of the problem. Rather they focus on the solution, as pointed out in the interview I had with Ash Maurya. Therefore, it is important to move from a position of product/market fit, which makes you focus on the product and features you can offer. To a position of problem/solution fit where you actually focus on the definition of the problem, and then, only once you have validated the problem, you focus on the product and its features.

By September 2011 Instagram would reach 10 million users! By the end of 2011, Instagram would reach 15 million users, and its engagement kept growing.

Facebook acquisition and integration

If there is one strategy Facebook‘s Marck Zuckerberg has mastered over the years is the acquisition of wildly successful products to integrate within Facebook.

Facebook acquired Instagram for $1 billion in 2012. As pointed out by the NY Times at the time “It’s a notable move for Facebook, which has exclusively focused on bite-size acquisitions, worth less than $100 million.”

At the time Facebook wasn’t that strong on mobile, and the move to acquire Instagram made perfect sense from that standpoint. As pointed out by Mark Zuckerberg at the time:

For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

At the time Facebook was committed to leaving Instagram independent:

That’s why we’re committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.

On a separate note on the Instagram blog, in April 2012, Kevin Systrome announced:

When Mike and I started Instagram nearly two years ago, we set out to change and improve the way the world communicates and shares. We’ve had an amazing time watching Instagram grow into a vibrant community of people from all around the globe. Today, we couldn’t be happier to announce that Instagram has agreed to be acquired by Facebook……It’s important to be clear that Instagram is not going away. We’ll be working with Facebook to evolve Instagram and build the network. We’ll continue to add new features to the product and find new ways to create a better mobile photos experience.

Just as happened with WhatsApp not long after the acquisition, Instagram changed its privacy policy to allow integration with Facebook products.

Facebook goes all in with Instagram

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The integration between Facebook and Instagram proved so successful, that by 2018, Facebook, which makes most of its money from advertising revenues also transitioned successfully to mobile. Which as of 2018, represented 92% of Facebook advertising revenues!

We don’t know exactly how much of those revenues were coming from Instagram, but Recode argues that Facebook might soon rely on the majority of its revenues from Instagram.

Zuckerberg takes over

Fast forward 2018, as Systrome pointed out on a blog post:

We’re planning on leaving Instagram to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.

While there was no confirmation from Systrom on a clash with Zuckerberg, Bloomberg reported:

Lately, they were frustrated with an uptick in day-to-day involvement by Zuckerberg, who has become more reliant on Instagram in planning for Facebook’s future

Thus, this move makes it clear that Facebook and Instagram were to become tightly integrated.

Instagram mission, and key partners

Our mission is to bring you closer to the people and things you love.

Thus, Instagram emphasizes on creating relationships through visual storytelling. This is the primary payoff for users. However, as Instagram makes money through advertising, it also promises to businesses, willing to advertise on the platform to get “proven results” on the platform.

Therefore, we have two payoffs for the two key partners:

Users: build relationships through visual storytelling
Businesses: advertising their brands and products
There is also a third persona that is a key partner for the Instagram business model, which is the so-called influencer. What does the influencer get? The payoff for the influencer is the ability to build a following that can be resold to businesses ad campaigns to promote their brands

How does Instagram make money?

Instagram – as part of Facebook products – makes money via advertising revenues. We can’t know for sure exactly how much Instagram makes as Facebook doesn’ break down for us its revenues. However, a good chunk of Facebook revenues seems to be driven by Instagram.

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Read next:

How Mobile Advertising Is Driving Facebook Growth
The Advertising Economy: Inside Facebook Money-Making Machine
How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained
The Hacker Way: Inside Facebook Business Strategy
ARPU: This Is How Much You’re Worth To Facebook
Visualizing Facebook ARPU Over The Years And Why It Matters

The State Of Facebook Business Model In 2018 [Report]

Other resources:

How To Write A Mission Statement

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Published on May 04, 2019 02:50

Is Apple Completing Its Transition To Becoming The Luxury Tech Leader?

Apple is among the key tech companies (FAANG) that managed to influence our culture and capture our imagination. Each company has internal processes that are defined by its culture and Apple is no different. Indeed, the company founded by Steve Jobs is focused on design and aesthetics as much as to the technological aspects of the products they build.

While many might think of Apple as a company that builds products which have innovative featured and functionalities. To understand the importance of designers at Apple it is sufficient to look at its Job description page, where the company describes how design integrates into the overall development process:

At Apple, the Industrial Design team plays a pivotal role at every stage of the product development process, from the preliminary concept to the production of the painstakingly crafted final product. This team is world-renowned for their meticulous attention to detail and the high-quality standards they use to select materials, manufacturing processes, and final colors and finishes. Their projects extend further than product categories to also support the design of accessories, packaging, and the Apple retail experience.

Of course, design, in Apple’s perspective isn’t just about aesthetics, but as much as about usefulness and functionality:

This team conceptualizes, designs, and creates the user experience for all Apple products, services, and accessories. They consider each human interaction — including every visual, audible, and haptic experience — to create products that are not only beautiful, but also intuitive and useful.

Thus, my argument is that Apple is transitioning even more toward becoming a Luxury Tech company. Indeed, Apple has been the first and most successful company able to sell its phone at very high price points.

That has helped the company thrive for over a decade. And while Apple is also transitioning toward becoming a service company, by looking at its last financial statements it is interesting to notice, how other segments (that of wearables, home, and accessories) is growing substantially:

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Source: Apple Q2 Statement

This segment includes products like the AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and other third-party accessories. As pointed out in Apple Business Strategy they are helping the company keep its pace, while its iPhone sales are slowing down.

Why is this important at all?

Luxury business models (like Kering Group, LVMH, and Prada) had figured out already in the 2000s – when Apple didn’t even come up with the iPhone yet – that the real cash cow was in the accessories sales. That is what it led to the Gucci war and the consolidation of the luxury industry. Luxury companies craved for years to consolidated their accessory business, because that is their real cash cow.

It seems that Apple is making the same transition toward embracing its status as the Luxury Tech leader!

Key takeaways

Apple is a company that focuses on design and aesthetics
The company’s segments related to accessories is growing very quickly
Luxury companies have figured out back in the 1990s that the real cash cow was in the accessories
Apple seems to be embracing its complete transition toward becoming a Luxury Tech leader!

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Published on May 04, 2019 00:21

April 30, 2019

Discussing Business Model Innovation With Felix Hofmann [Interview]

https://fourweekmba.com/wp-content/uploads/2019/04/Interview-felix-hoffman-BMI.mp3

In this episode, I took the chance to ask, Felix Hofmann, CEO of the Business Model Innovation Lab, a spin-off from the University of St. Gallen, a few questions about business model innovation and more!

To give a bit of context the Business Model Innovation Lab is a spin-off from the University of St. Gallen, from which research, the book “Business Model Navigator,” came up. The Business Model Navigator is one of my favorite books when it comes to understanding business model innovation.

What brought you to study and research business model innovation?

Felix Hofmann: I got involved about 10 years ago when I started my first company, a startup in the field of education. It was like a textbooks platform and we developed a business model. The company was called PaperC GmbH. Basically, you paid only for what you saw. So the idea was to create a freemium business model for digital textbooks, and this was at the time when I was studying in Berlin and writing my diploma thesis. Thus, I got involved from the practical side and then, of course, we changed the business model several times. We pivoted and I learned that business model innovation is not just developing an idea and then going with it, but there is a lot of testing and iteration.

Then four and a half years later, I went back to university. I left the company, I left the startup, and then I met Professor Oliver Gassmann and Professor Karolin Frankenberger, the two professors that wrote the book, “Business Model Navigator,” where they basically described all the possible business models patterns that you can ever think of when you develop a business model. I found this very interesting, intriguing to have this total overview because quite often that you think just about one business model but you don’t think about all the options. So I think that was the motivation for me to join their model.

Gennaro Cuofano: I had a pleasant conversation with Ash Maurya, author of Running Lean. And it was interesting because we discussed how business model innovation is also a lot about tweaking your business model to find the right fit. So business model innovation is not just you coming up with this brilliant idea, you have this business model and everything works out.

Instead, you have to actually change a lot of things, you have to experiment with a lot of things until all the pieces come together. And it’s interesting because you started with the freemium model back in 2008.

Did you find the freemium model to be an effective model in your first start-up?

Felix Hofmann: In general, I think the freemium model is a good model, also for publishing, and for books. It can work. What we basically did wrong was we had some kind of wrong incentives, like what later become famous as “vanity metrics.” We had some investors that were just looking at users, active users, and not so much about the conversion rates, so basically, our motivation was just to get more and more users. So we grew the free part, but then later, the investors said, “Okay, now we want to see the revenues.” And then we had to quickly convert them into paying users.

So it was more like the wrong kind of KPIs incentives, I think. Not so much the business model itself that didn’t work. And another mistake actually that we did, but you never know before, is we had like a freemium paper use business model. So as the company was called PaperC, it was really on a pay per page base, and this was a little bit cumbersome. When you really wanted to purchase something, you need to upload credits. It was not very convenient, and later we wanted to shift the business model to a freemium model, but more like a Spotify, like a premium subscription or a free version.

But at the time, we already had like hundreds of contracts with the old business model, so it wasn’t easy to change that. That was for me an insight. We bet on the wrong horse and basically fixed the business model too early. We should have been much more flexible at the time. This was really 2008, 2009, and it was before the book, “The Lean Startup” was published and then, of course, most people got much smarter at developing business models. But this was a bit too early.

Gennaro Cuofano: And the freemium model, I believe is controversial because we know for a fact that the freemium model can scale the marketing of a company because you can get many users quickly. For me though, as I’m in business development, I know that not all the leads and all the users will ever actually convert in paid customers. Many startups running a freemium model are also still running at net losses. Those two things don’t have to be connected. Yet the freemium model is a harder model than many believe.

Do you think can we call a business model viable when we’re missing the profit formula?

Felix Hofmann: Yes. I think that’s a pretty old discussion, so a lot of big startups had huge valuations before becoming profitable, and sometimes not even having revenues. But of course, it’s very difficult because when you don’t see the conversions, it’s really hard to imagine if people would convert and how many would convert to calculate or extrapolate if this becomes a profitable business model sooner or later. It’s still a high risk at the time. On the one hand, you might have millions or billions of users. But on the other hand, you just have a kind of assumption about whether one percent can be converted in paid customers. And it can be totally different than if it was three or five percent of your users converting to paying customers.

You can make a lot of scenarios and it’s still very, very uncertain if your business model becomes profitable. You definitely have to take this into the calculation of your evaluation.

So there’s no guarantee at this time.

Gennaro Cuofano: I was looking at the Slack business model and it was interesting to me how from over half a million free users, the customers which were making up about 40% of the company’s revenues in 2019 were actually 575 customers. Those were more or less enterprise customers that Slack had to convert through a direct sales force. So it was interesting to me how on one end, of course, you can use the freemium to enhance your brand, especially for people to know you so that you can become a sort of a standard. But then, on the other hand, you still need sort of that sales force to actually manage to understand what is the “good side” of those users from the commercial standpoint. So I think that one is a very important aspect.

And just to go back to a very basic definition, which is important because everyone is talking about business modeling, but then it seems that someone means something, someone else means something else.

What is for you a good definition of business model?

Felix Hofmann: many still use just a revenue model and name that a business model. I see that still basically every day. When you look at slides and presentations of startups you see, “this is our away proposition, this is the customer, this is the problem, blah, blah, blah…” “And this is the business model,” and then they actually just talk about how they want to earn money.

But the definition of a business model is like the one we drafted in the Business Model Navigation, with a whole set of dimensions. We have the definition of four main dimensions, starting from the four Ws questions: the who, the what, the how, and the why.

So we say who is the customer? We need to first understand the customer, we need to be able to describe the customer because also a business model innovation can be a new customer or at least a new customer problem that we target. So that’s one element of the business model.
Then the what, basically the products and service that we offer, but also the benefits that you create, the problems that we solve. So describing the what.

And of course the what and the who needs to fit together. So I need to solve the problem that a customer has.

the third dimension is the how dimension. So basically what the key partners are, the key activities and the key resources in the business model.
And then the why dimension, which we say is not just the revenue, but also the purpose. And then, of course, the profit formula. So why do we earn more money than we have costs? And a big part of that is the revenue model. But the revenue model is just one element of the why.

And all these four questions together, for us, describe the business model.

[image error]

Gennaro Cuofano: This is so important, because often the people think of a business model, as a revenue model. Rather, it is something way more holistic and it needs to take into account all other pieces that we need to put together in order to have a viable business model.

What’s the difference between a business model pattern and the business model?

Felix Hofmann: The Business Model Navigator framework is basically just the questions, the “empty canvas.” But then, of course, you can fill this with life, you can fill this with ideas and you describe an existing business model or you can describe a vision for a future business model. But then you have a concrete case, and the business model pattern is basically on a different level. So we say it’s a recurring logic that you see in very different business models and in very different products and industries, but it’s always the same kind of logic why it works.

And it’s best explained with an example, so we use the razor and blade business model pattern as an example. So razor and blade got its name from Gillette. Since Gillette is selling razors and razor blades for more than 100 years with the kind of same logic, selling cheap razors and then very expensive razor blades. And basically, of course, you have the lock-in, first with the razor, so there are a lot of patterns used, et cetera. So there are only the official Gillette razor blades that work with the razor. And then you have the high margins on the blades.

This kind of logic, you can use it to describe the Gillette business model, but it’s very similar also when you talk about printers and printer cartridges from HP for example, that have been developed since the 1980s, where you always have the same kind of cartridges for the printers, or so other products like Nespresso coffee capsules or some medical devices, like in diabetes care. So it’s very different industries, it’s a medical industry, it’s coffee, it’s Gillette razors. Very different industries but it’s always the same kind of logic. It’s a recurring logic, and so we have identified 55+ business model patterns that basically describe these logics and that have been applied not just for one product category or one industry but can be transferred to different industries.

And that’s why we say, okay, when it’s transferrable, then we call it a business model pattern, and you can use it as a blueprint, as a recipe for your own business model.

Gennaro Cuofano: There is also one argument that I believe that is in the book, in the business model navigator, which is often times, a business model innovation is a matter of actually mixing up those patterns.

So it’s not necessary to come up with a whole new idea, but just combining those patterns so you sort of create a new recipe for your business model.

Is business model innovation about mixing up those patterns and blueprints?

Felix Hofmann: That’s another element of it. So yeah, a business model itself typically is a combination of several of those patterns. We did a lot of case studies. Also, some are public on Slide Share. When we analyze business models, let’s say for example for Tesla or for Uber, or the other big, famous examples for business model innovation. When you look at them, you find at least three, four, five, six business model patterns that they have combined in a very smart way.

And of course It’s a long process, sometimes takes several years, but it’s typically that good mix of business model patterns that makes them really strong.

Gennaro Cuofano: there is another topic, which you covered recently on your blog, which is about business model scalability.

How does business model scalability work?

Felix Hofmann: business model scalability comes from the very old question also. Every venture capital basically is asking, “Okay, how scalable is your business model?” Right, so of course when they invest one, two, three million, they want to have a high return so they want to see high exit IPO. And for that, a business model needs to scale.

That means that it can be in very different ways. So it means that it’s geographically can scale into different countries, having more users and this is a very profitable way. And we looked into the concept of scalability because we figured out that sometimes it’s not clear what actually means. First of all, we kind of just figured out that it’s basically at least two dimensions, and it’s good to think of those two dimensions.

The one thing is the external scalability. That means can I scale my business model to normal users? Globally, are there limitations, for example in terms of regulation? And then there is the other dimension, the internal scalability that means: how efficient can I grow my customer base? Do I have a lot of investments to take? Like a lot of capital is bound or is it more very light business model, let’s say, software, where I basically have just initial investment and then no other investments to basically grow.

And this is the internal dimension, so the internal dimension is basically a lot about digitization. So how digital is my business model? Do I have, let’s say, physical assets or just digital assets? And the external scalability is really about is this a global need for this business model? Are there regulations restricting it?

This is also basically then either promoting or limiting my business model. And in combination, based off these two dimensions, we have drawn a diagram, driven by by two metrics that we call the BMI scalability metrics. And that metrics, of course, you see in the upper right corners are basically the perfect scalable business models of the digital platforms, let’s say Facebook, Google, et cetera.

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Source : bmilab.com

And you also see that in the evaluation of those companies which are the most valuable companies in the world right now they are also the most scalable business models. And on the left basically lower corners, so basically the less scalable business models are basically the business models of the past,100 years old, or 200 years old business models. Let’s say the butcher in your village or the bakery; they are fixed for one location, they are physical and you need a lot of people to scale them up. It’s not digitized at all, and before franchise models, they also haven’t been scalable.

Based on these kinds of metrics, you can describe where is your business model, and maybe make it more scalable. For example, Uber is not as scalable as Google. You can see that because there are a lot of physical assets you need to scale Uber. Even they don’t have their own cars, they have much more people involved. And then, of course, the big point is regulation with Uber, which poses obstacles, as every city is different. Thus, Uber is not as scalable in terms of external scalability compared to let’s say Facebook.

Gennaro Cuofano: And of course, this going to hold true until there is not going to be also massive regulation on the digital side, on the media side because right now companies like Google and Facebook have scaled obviously, also because there is not yet much regulation.

Are there business models that you see will be dominating in the future?

Felix Hofmann: What we are looking into, especially with the research that we are doing in St. Gallen, as we are a spin-off from it; we still have our ties to some researchers. We’re looking very much into circular business models, so basically business models for the circular economy. And when talking about circular business models, what matters are ecosystems.

Thus, it’s not just about your business models anymore. It’s really about creating an ecosystem of business models, and then, of course, they ask the question “who is the orchestrator?” So basically who is designing the whole ecosystem model, or basically are there several orchestrators, or what’s your role?

Maybe you are the orchestrator at one ecosystem, and maybe you’re just another smaller supplier in another ecosystem. That ecosystem strategy I think becomes more and more important. And of course it’s sustainability with circular business models, they also need to be sustainable, otherwise, it’s just pure marketing.

Then we look into of course digital ledgers technologies. If they will produce new types of platforms, decentralized platforms that work differently than the big centralized platforms that we see today. That’s also a very interesting field that we look into. So this is really the research that is going on. We see this coming more and more, but of course, they have to prove to be successful. This would probably take also many years.

And we also see it from the larger corporations, that they have more interest in circular business model innovation right now than it was maybe before, some years ago. But of course you have to show that they can really be profitable, but the same was true in the mid-’90s when you have all the e-commerce startups that also haven’t been profitable at the times. Like the Amazons of the time. So it needs some time and also people need to get smarter on how to make those business models successful.

Are there any interesting business model patterns that you notice so far in the blockchain world?

Felix Hofmann: Probably yes, but it’s difficult to identify patterns until you just see the business model in full grown and successful. We had a researcher looking into this, but we stopped the project actually because of lack of commercial viability yet.

Gennaro Cuofano: Of course it takes time because the research is way more rigorous compared to anything else. And it’s very interesting what you said in your research, of course, you have to wait years because you need to isolate the noise and the “marketing effect.”

Is there any person, academics, that you suggest following from the business modeling side?

Of course, the professors that I mentioned, Professor Oliver Gassmann, definitely interesting to follow. And at his institute, there are some researchers that look into ecosystems and that look into digital ledgers technologies, and the works together with Professor Karolin Frankenberger, and Professor Michaela Csik, authors of the Business Model Navigator.

So definitely interesting to follow them and also to see what they publish in terms of papers and also probably some books over the next years. We are writing on a circular business model navigator book right now!

Gennaro Cuofano: It’s going to be a great reading!

Is there a companion book that you suggest reading together of course with the “Business Model Navigator?”

If you know everything about design thinking and lean startup and the business model canvas, and the “Business Model Navigator,” definitely worth reading as an additional resource. If you start, I think there are other books, like “Lean Startup,” and definitely just look into everything from Steve Blank and then Eric Ries. And also Ash Maurya, “Running Lean!”

I think that there’s a big literature. Also “Corporate Startup,” I think is a very good book when more about when you’re more coming from a corporate side. So there’s a lot of literature that is good and that you can recommend.

Gennaro Cuofano: Thank you very much, Felix! It was a pleasure having you here.

Felix Hofmann: Yes, thanks, Gennaro.

Key takeaways from the interview

Business model innovation implies a lot of testing and iterations
Beware of falling in love with vanity metrics
A business model comprises a revenue model, but they are not the same thing
A revenue model is part of the “why” dimension of a business model
The blueprint of a business model is called a pattern. This needs to be repeatable
Often a successful business model implies mixing up several business model patterns
Before a business model might become viable it might take up years of experimentation and testing
A business model scalability implies two dimensions: internal and external
The business models of the future are becoming more about creating ecosystems
Thus, circular business models might become dominant in the future

Suggested readings from the interview

Business Model Navigator

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Running Lean by Ash Maurya
Lean Startup by Eric Ries
The Corporate Startup by Dan Toma, Esther Gons, and Tendayi Viki

A glance at the business model patterns from the Business Model Navigator

60-business-model-patterns

Other resources:

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Published on April 30, 2019 14:40

April 28, 2019

How Does Slack Make Money? Slack Business Model In A Nutshell

Slack follows a freemium model, where a free version is offered, and users can convert in paying customers if they want more usage or advanced functionalities. Slack combines the free model with a direct sales force to acquire enterprise customers with yearly recurring revenue of over 100K. Those customers were 575 in 2019, and they accounted for 40% of its revenues.

Slack background story

Stewart Butterfield is a serial entrepreneur, co-founder of the photo-sharing website Flickr. He went through the founding of several companies, in particular, when he founded Glitch (an online game).

When he was running Tiny Spek, which comprised a set of companies Butterfield and his team needed a communication system to handle the teams within his organizations. That tool was developed in-house, and it eventually became Slack.

When Slack launched, back in 2013, more and more companies signed up, until its growth kept compounding. Where did this opportunity come from? The timing was right!

As Butterfield said in an interview for CNET: “In the last 15 years, the Microsoft hegemony and Office and Windows worship has broken down, and as a result, we’ve gotten a lot of new and, in most cases, better tools…But that means information is scattered across a bunch of different tools and there’s no one search tool that you can go through to search across all of this.”

From that stage, Slack kept inviting larger and larger groups of companies.

Breaking down Slack vision and mission

Our vision is a world where organizational agility is easy to achieve, regardless of an organization’s size

Therefore, the challenge for Slack is to organize larger and larger groups of people within organizations. Indeed, Slack has been using its enterprise customer base more aggressively in the last years.

Our mission is to make people’s working lives simpler, more pleasant and more productive

The value proposition and mission of Slack starts from its willingness to reduce fragmentation within tools used by organizations. One of the critical elements of Slack is the integrations with other apps and tools, to bring this information together.

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Source: Slack Financial Prospectus
How does Slack make money? Slack Freemium subscription model
It generates revenue primarily from paid subscriptions. Those subscriptions are paid either on a monthly or annual basis, based on the number of users a company has on Slack.

Slack offers four subscription plans:

Free,
Standard,
Plus,
And Enterprise Grid.

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Source: Slack Financial Prospectus
The Free, Standard, and Plus subscription plans consist of a single workspace or a basic Slack environment configured for each team.
Slack leverages on a freemium model, that makes it easy for small organizations to try and understand the value of the product.
Once those organizations are “locked-in” Slack offers additional capabilities (unlimited integrations, shared channels, guest accounts) that drive the free users to become paying customers.

The Enterprise Grid package instead, is made for larger organizations with – at times – tens of thousands of users. As Slack points out in its financial prospectus, this requires a product that has enhanced functionality, flexibility, administrative control, and security at scale.

Enterprise Grid also allows paid customers to:

Create and manage an unlimited set of connected workspaces and channels;
Search across multiple workspaces, making it easy for workers and administrators to tap into their organization’s collective knowledge at scale;
Access centralized controls to ensure a company’s data remains secure, giving administrators a single point of visibility to provision and manage Slack; and
Integrate with third-party e-Discovery and data loss prevention tools to help meet security and compliance requirements.

[image error]
Source: Slack’s website
Slack sales and marketing strategy dissected
Slack combines a self-service go-to-market approach to attract non-paying users. At the same time, it uses direct sales efforts to growing the paid users within larger organizations.

Therefore the sales process usually follows this flywheel model:

The Slack free version easily attracts a large number of users
Self-service users become leads for salespeople
Salespeople convert free users in paying customers, usually within larger enterprises
These larger enterprises that join in, create organic awareness of Slack inside and outside of their organizations
Slack keeps investing in its product, and customer experience
It also employs after sales customer success representative, which makes it easy to trigger referral customers

By looking at the company financials Slack has invested substantially in sales and marketing efforts. Indeed, the company spent almost 99% of its revenues in 2017 for Sales and Marketing activities. This number stabilized to 63.5% in 2018 and 58% by 2019.

Thus, the freemium business model of Slack still needs some fine tuning to find the right balance between growth and profitability. In fact, as of 2019 the company still reported net losses at the time of its IPO.
As of now though Slack is pushing on sales and marketing activities to sustain its momentum and growth.
Among the marketing strategies and tactics that Slack adopts to drive initial awareness and adoption, there is the Slack website through which users are driven in a frictionless way through the free plan.
In short, Slack is acquiring users at high speed, without creating a high touch sales experience. Instead, it is relying on its low-touch, frictionless process, to bring in as many active users. Therefore, at that stage, the Slack product team focuses on organic growth and adoption.

Once the pipeline is ready, the sales team and the overall organization, instead, focuses on two key metrics:

Free-to-paid conversion
And the net dollar retention rate

When it comes to the acquisition of paid clients, for larger accounts, the sales team uses a high-touch sales approach, which complements the self-service approach. The sales team targets C-suite executives, and leaders of a specific business unit.
Therefore, that also includes resources for direct sales such as:

Field sales force,
Solution engineers
Demand generation campaigns
Webinars
Analyst relations
C-suite events
Partnership marketing and co-marketing
Annual user conference

Who are Slack’s paid customers?
Organizations on Slack are of all sizes:

Individual entrepreneurs,
Freelancers,
Emerging small businesses,
Multi-national corporations.

They work across a wide range of industries. According to the Slack 2018 Survey, more than half of its users are in non-technical roles.
As of January 31, 2019, Slack reported more than 600,000 organizations with three or more users, broken down as it follows:

88,000 Paid Customers, including more than 65 of the companies in the Fortune 100,
and more than 500,000 organizations on Slack Free subscription plan.

[image error]

Source: Slack Financial Prospectus

Who’s the customer that really matters to Slack?
Slack also tracks another kind of customer, the one who has a higher ARR, compared to regular paying customers. This cohort is made of companies with an ARR (annual recurring revenue) higher than $100K.

That is used as a key indicator for the growth of the business. In 2017, 2018, and 2019, those represented approximately 22%, 32%, and 40%.

[image error]
Source: Slack Financial Prospectus
Slack functionalities and product
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Source: Slack Financial Prospectus
Slack key functionalities can be broken down in:

Messaging and Channels:The channel is the fundamental unit of Slack. Indeed, through the channels people are organized to collaborate on specific tasks, to share information, and get work done. Channels are organized by project, topic, team, or based on the organizational structure and situation. Channels can be public, thus accessible to anyone in the Slack organization. Or private, so that they are available only to certain people within the organization. Messaging happens through the channels.
Integrations: Integrations help companies to gather information from other applications. Integrations with software like Salesforce help salespeople be more productive. Advanced use cases can help design custom workflows, to perform tasks and actions in Slack. For instance, by integrating Slack with the invoicing system reports and digests can be pulled up from Slack.
Shared Channels: Shared channels connect Slack workspaces of different organizations. Shared channels can be public or invite-only.
Search: Everything in Slack, is searchable, so that information within those channels can be retrieved easily.

Is Slack blitzscaling?

[image error]

It’s interesting to notice how Slack almost quadrupled its revenues from 2017 to 2019. However, it also doubled its expenses. Thus, Slack seems to be in a blitzscaling phase, where it prioritizes speed and growth over anything else. As of 2019, the company is still running at net losses.
Usually, companies blitzscale because they want to quickly gain market shares, and be in a position of dominance. Or they do it to defend their business. In 2018, Microsoft announced the free version of its Microsoft Teams. Apparently, the move from Microsoft tried to keep up if not dominate the space, thus, take over Slack.
Key facts and statistics from Slack business model

Of the over 500K free users, 88K are paid accounts.
Within the paid accounts, there is the category of businesses that make over $100K per year in recurring revenues. Those were 575 in 2019, and they represented 40% of its revenues.
Slack spent almost 99% of its revenues in 2017 for Sales and Marketing activities. This number stabilized to 63.5% in 2018 and 58% by 2019.
Slack follows a freemium model pattern which quickly brings in free users, which then get funneled within Slack direct sales effort to turn them in paying customers
Slack primary value proposition starts from fragmentation among tools used by organizations to handle their internal communication workflows

Source: Slack Financial Prospectus

Other business models in a nutshell:

Other business resources:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
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

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Published on April 28, 2019 11:19

April 26, 2019

Jeff Bezos’ Business Lessons On How To Run A Company

In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years.

These lessons are fundamental for any entrepreneur, of small or large organizations to understand the pitfalls to avoid to run a successful company!

The power of wandering

From very early on in Amazon’s life, we knew we wanted to create a culture of builders – people who are curious, explorers. They like to invent. Even when they’re experts, they are “fresh” with a beginner’s mind. They see the way we do things as just the way we do things now. A builder’s mentality helps us approach big, hard-to-solve opportunities with a humble conviction that success can come through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again. They know the path to success is anything but straight.

Most people in the business world know Jeff Bezos for his analytical skills. However, Amazon has been driven through uncertain times, mostly through guts. Indeed, in “Jeff Bezos Teaches You When Judgment Is Better Than Math And Data” we saw how data helps Amazon run its operations very efficiently.

Data also helps to make short term decisions, for which there is not much opacity. However, when it comes to dealing with uncertainty, and deciding a business strategy, guts turns out to be still a powerful business tool.

Thus, Amazon as a company has learned when to prioritize on efficiency, and when, instead, that is time to wonder:

Sometimes (often actually) in business, you do know where you’re going, and when you do, you can be efficient. Put in place a plan and execute. In contrast, wandering in business is not efficient … but it’s also not random. It’s guided – by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it’s worth being a little messy and tangential to find our way there. Wandering is an essential counter-balance to efficiency. You need to employ both. The outsized discoveries – the “non-linear” ones – are highly likely to require wandering.

The non-linear discoveries are often those that bring massive results. And in some cases, they are the result of wondering. Therefore, Amazon has made of wondering part of its executive team business resource!

But why does wondering matter so much? Jeff Bezos explained:

No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said “Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?” I guarantee you they’d have looked at you strangely and said “No, thank you.”

Available data might be useful in telling you the current or the last picture. But when it comes to betting on the future, the wondering process will be your best ally.

Speed matters in business

Jeff Bezos also highlighted the importance of speed in business. That might seem trivial. However, speed might be one of the critical elements of business success.

When windows of opportunities become available, they won’t last long, and those who have the stamina to push hard, and to execute well might probably win.

Those with a better product, technology or service, but with the lack of stamina and speed might lose essential pieces of the distribution network, this suppering to faster and more effective business players.

Give customers what they don’t know they want

Much of what we build at AWS is based on listening to customers. It’s critical to ask customers what they want, listen carefully to their answers, and figure out a plan to provide it thoughtfully and quickly (speed matters in business!). No business could thrive without that kind of customer obsession. But it’s also not enough. The biggest needle movers will be things that customers don’t know to ask for. We must invent on their behalf. We have to tap into our own inner imagination about what’s possible.

In the interview to Ash Maurya, we focused primarily on the lean startup model. Ash also highlighted an important point, which is how entrepreneurship can be done by minimizing risk and demoing a product, even before it’s ready.

This model of demo-sell-build is useful as it allows you to gather customers feedback, even before you have spent time and resources in building something that people don’t want.

This model is useful for many to start businesses in domains where there is already commercial viability. However, if you want to innovate in a space, I believe you need to take risks.

The probability of success is negligible. But the upside might be huge. In that scenario, you’re moving on a path where you’re offering customers something they don’t even know they want.

For that matter, you’ll need to bet, educate and create a massive distribution network for your products. This kind of entrepreneurship is riskier. Yet worth undertaking, especially for organizations, like Amazon or Google which have billions of dollars to invest in new bets.

None of this would be possible without a culture of curiosity and a willingness to try new things on behalf of customers.

Scaling up failure

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

Even when you do dominate a market or industry, you still have to keep experimenting, innovating and betting on the future. That is the baseline to be on top of your game.

When Amazon launched Fire, that was a failure. However, with the learnings and development teams from that project Amazon speeded up the development for Alexa and Echo voice devices.

Now, if you look at Amazon dominating the voice war, you understand how that bet and failure helped it move faster and translate its competence in another whole new industry!

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Manufacturing experiments should be an essential ingredient for any business, of any size. It doesn’t matter if you run a solo business or a large organization.

You need to manufacture experiments that allow you to keep making deliberate bets on the future.

The aim is not to be right all the times. It takes one bet to pay off for all the others. And that doesn’t mean you have to bet on anything that comes at you blindly.

Instead, to make sure the things you’re betting on might have a substantial payoff and are not carrying a risk of permanent harm. So if all goes wrong your business is still, at least, up and running!

Source: Amazon Shareholders’ Letter 2018

More resources about Amazon

How Amazon Makes Money: Amazon Business Model in a Nutshell
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

The post Jeff Bezos’ Business Lessons On How To Run A Company appeared first on FourWeekMBA.

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Published on April 26, 2019 15:29

What Is A SWOT Analysis And Why It Is Important

A SWOT Analysis is a technique used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid you in identifying the problematic areas of your business so that you can maximize your opportunities and improve. It will also alert you to the negative challenges which might hinder the prospects for your organization.

Background story

I remember meeting Rohan for a long time. After the repeated failure in getting a job, he finally gave up trying and instead decided to dabble in a little grocery business.

Everything was arranged with care, and each decision regarding the products which would be sold was taken with care.

A prime location was scouted, some handbills printed to let people know about his business and a proper shop was constructed for him.

We all expected that it won’t be easy to make a profit right away, but we still expected him to break even. That didn’t happen within the first quarter. So then came the time to do a SWOT analysis.

There are discovered that while some products sold well, some didn’t in that market. There was also the fact that the place he was operating from already had a concentration of grocery stores.

Carrying out the SWOT analysis helped him figure out what worked, what went wrong, what was the competition and how he could deal with it.

Opening up a business or perhaps you have been in charge of running one for some time?

Then it must have struck your mind to evaluate your business, its objectives or more as a whole.

Want to know how to do it?

There is a technique which will help you do just that:

SWOT Analysis.

What is SWOT Analysis?

Let’s begin at the basics.

SWOT analysis is a technique which is used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats.

The effective use of a SWOT analysis can aid you in identifying the problematic areas of your business so that you can maximize your opportunities and improve. It will also alert you to the negative challenges which might hinder your work.

Why is a SWAT analysis so useful?

SWOT analysis is an effective way of maximizing the opportunities which your business gets.

But on the other hand, it also works towards minimizing the negative factors plaguing your business.

Along with this, you will also be able to evaluate a business’s strengths and weaknesses unbiasedly.

Judging any work unbiasedly is important because it will help in avoiding errors which might come from a lack of insight.

To help you along the way and show you how it’s done, here are SWOT analyses steps:

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Steps to follow to conduct a SWOT analysis

There are precisely four steps which you will have to take while evaluating your business or product as a whole.

These are:

1. Identify your strengths

You should look at your product or business and look at how the brand is perceived by the public.

This is because, in today’s digital media age, public opinions can go a long way. Take into consideration if it is well known or early recognizable.

If not, then try to locate if a specific niche audience well receives it. Now think about your process and evaluate if it is effective or innovative.

Try to answer the tough questions- is there good communication between your sales and marketing?

Are they one the same page and use the same vocabulary whole discussing the product?

One factor many don’t consider well when it comes to social media marketing is SEO tactics.

Proper tactics can ensure that your business website stays on top so that whenever people will search for that category, yours will pop up.

But putting in the appropriate or relevant SEO’s isn’t easy. So you need some strategies to help you along the way.

2. Identify your weaknesses

The whole purpose of this step is to foresee any type of potentially negative factors which could mitigate your success.

So begin by putting yourself into the shoes of your customer. Then ask yourself, what would prevent you from buying the product or engaging with the business.

After this, try to foresee what could possibly be the biggest hindrance to the productivity of your employees.

When you are identifying your weakness you should consider what are the areas of your business which are not or the least profitable.

Analyze these in terms of money and time. Don’t do this alone and take input from your employees as well.

3. Consider every opportunity

This is where your hopes and dreams come in. Think of the kind of opportunities you hope to get.

Potential questions to ask yourself at this stage is what kind of technologies do you want your business to use to make it more effective?

Is there something which can make the business stand out more? What is the target audience you want to reach?

4. Contemplate all your threats

Most businessmen already have a pretty good list of threats made up in their heads. This is because threats are experienced in every step of the way.

But if you are having trouble figuring out the threats then gather up your business partners, employees and all.

Then brainstorm about the kind of obstacles could prevent you from reaching your goal, what could mitigate your success, what tech could cause conflict with your product and more.

You can list your threats down in order which might help you in evaluating them properly, like in terms of least and more likely to occur.

Improper marketing is a huge threat and it could be what ultimately makes you lose out on valuable market share, especially if you are a startup. The effective marketing strategy should penetrate the travel market demographic properly.

Apple SWOT analysis case study

To understand how it actually plays out and how it should be implemented, you need real-world examples.

So here’s one to help you along the way:

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Apple’s Strengths

Apple is a brand which is undeniably valuable. After all, it was named as the most valuable brand in the world by Forbes.

Also since it’s so easily recognized, so Apple can make a new product and have it enjoy a certain degree of success always due to the virtue of the brand. Thus, the strengths of Apple are:

High prices
Brand recognition
Innovative products

Apple’s weaknesses

It includes the most obvious- high prices. While the high and middle customer base isn’t affected but the lower classes are surely affected.

Along with this, Apple also has an exclusivity problem since it controls all products and services in-house so the burden falls squarely on Apple employees.

There is also the matter of Apple‘s tight control over who distributes limits their market reach.

Lastly, Apple is held to a really high standard and so when it actually comes to creating and distributing new products, the brand prestige could inhibit Apple from experimenting and taking risks.

So to sum up:

High prices
Lack of proper experimentation
Closed ecosystem

Your business may not be as big as Apple, but if you feel like your products are also facing market and sales troubles then here some strategies to help you out

Apple’s opportunities

One of the major weaknesses when it comes to Apple is its distribution network which remains really small in the name of exclusivity.

But if Apple did choose to expand its network then it could reach more people on a global basis.

Which would put less pressure on their in house employees. Apple also has lots of opportunities to make new products.

They could realistically consider making more affordable products that could reach out to a larger global demographic. Apart from this, they could also think about expanding to new industries.

Finally, Apple could very well continue to advance the technology of its phones. They can take their existing products and then refine those.

This will surely ensure that each such product will be able able to offer as many unique features as possible.

So to sum up:

Expand their distribution options
Create brand new products
Focus on technological advancement

Apple’s threats

Keep in mind that Apple isn’t the only company which dabbles in making innovative tech. It continues facing tough competition from companies like Google, Samsung and such.

Such weaknesses really do hinder Apple’s ability to successfully compete with tech companies which have more freedom to experiment, or those which don’t have to work within the restrictions of a closed ecosystem.

Another threat to Apple revolves around lawsuits, especially between Apple and Samsung. These lawsuits affect Apple’s reputable image and make customers purchase elsewhere.

Lastly, Apple does need to improve its reach significantly on a global basis. It certainly isn’t number one in China and also doesn’t have a very positive relationship with the Chinese government.

When it comes to China’s neighbor India, Apple’s share there is low and the company faces problems bringing its products to Indian stores.

So to sum up:

Lawsuits
Tough competition
International issues

So, SWOT Analysis essentially is just a roadmap which shows you the way you should proceed with your business.

It basically shows you want kinds of opportunities you are missing out on and what are the kind of challenges you could have to tackle.

A SWOT analysis can effectively tackle both small and big challenges, opportunities, strengths and weaknesses which come its way.

If you want to let your friends know about how they too can improve their business and lead better lives, then hit that share button below.

Other business tools and resources:

How To Write A Mission Statement

The post What Is A SWOT Analysis And Why It Is Important appeared first on FourWeekMBA.

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Published on April 26, 2019 12:08

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