Gennaro Cuofano's Blog, page 259

What Is a Business Model Canvas? Business Model Canvas Explained

A business model is a way in which organizations capture value. Not only the economic value but also the social values an organization can foster and the cultural values it can sustain in the long run.

In other words, generating a business model isn’t just about how companies make money but how they create value for several players. While unlocking profits for the organization that came up with that business model.

There isn’t a single way to design and assess a business model. However, the business model canvas is a holistic model that takes into account nine factors or building blocks.

Alexander Osterwalder proposed the Business Model Canvas. He’s a Swiss business theorist that in 2000 together with a team of 470 co-creators in an attempt to create a tool that entrepreneurs could use for their businesses.

The aim of having a sharp understanding of your business model is critical to provide strategic insights about your customers, product/service, and financial structure. Thus, to take action and iterate the business model until it unlocks value for your organization as a whole.

Let’s take a real case study. I often mention Google business model as a great example. You might like or not the giant from Mountain View. Yet what made this company so profitable – I argue – was its ability to unlock value for several players in the digital marketing space.

In fact, on the one hand, with AdWords, Google allowed businesses to transparently bid on keywords based on the clicks those ads received. This allowed companies to disintermediate advertising from intermediaries that were taking up most of the margins (of course now Google gets them).

On the other hand, with AdSense, Google allowed small publishers around the world to monetize their content. All they needed was an AdSense account and enough traffic to start earning money.

Of course, as of today, this model isn’t sustainable anymore for many businesses. Yet in a way AdSense democratized the ads revenues, which before were only taken by large players. With Google, those profits got shared with content creators about to gain traffic on the web.

Also, Google offered the best search experience compared to any other search engine. In fact, even though it wasn’t the first to take over the market (it was actually among the last movers) Google offered a free service that worked wonders:

[image error]

Little critical note: Just like professors study birds flight and go around the world to teach birds how to fly while they can’t. So entrepreneurs that tinker on a daily basis with business models might have a better feel for that compared to theorists trying to teach them what a business model is. In short, my point is that you don’t need to get bogged down on its definition or to stick with the business model canvas to assess your business model. You might want to develop your way to look at your business as – if you’re an entrepreneur – there’s none better than you to do that. In short, use the business model canvas as one of the many methods you can use to assess your business. Don’t let professors or theorists tell you that is the only way. It’s not.

Going back to the business model canvas Alexander Osterwalder, outlined several prescriptions which form the building blocks for a business model.

Those building blocks enable entrepreneurs to focus on operational, strategic, and financial assessments of their business.

Business model canvas in a nutshell

The nine building blocks of the business model canvas comprise vital partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure and revenue streams.

[image error]

The first thing you might notice is that cost structure, and revenue streams (the financial part) are just one fraction of the story. What I like the most about this model is that it allows you to have a holistic view of your business.

Let’s dive into each of the vital components of the business model canvas and see how each can be assessed. We’ll start from the canvanizer.com

Key partners

Who are your key partners/suppliers?

What are the motivations for the partnerships?

It all begins with your partners. In fact, if you don’t have the right partnerships in place, you don’t have a business at all. That is the starting point of your business model. Finding the right partners is critical.

In fact, the success of your business and the traction depend upon your ability to identify and offer your partners a compelling reason to do business with you.

For instance, if you think about Google, the principal partners are the small publishers part of the AdSense program, together to the businesses that are part of the AdWords network and the users that on a daily basis keep going back to the Google search box by giving it critical data to sustain its business model.

If you think about Uber instead, you’ll notice how the key partners are its drivers for which Uber means an additional if not a full-time income as self-employed. Its engineers that keep the platform smooth and running and people that sustain the cause of Uber.

If you think instead at Airbnb, you’ll notice that those key partners aren’t only hosts and travelers that transact each day on the platform. Also, freelance photographers that travel the world to take professional pictures that enrich the user experience of Airbnb are also key players.

When it comes to partners “who” and “why” are critical questions. In short, who’s the niche of people that can sustain your business? And why, so what compelling reason are you giving them? What value do they get from this partnership? It doesn’t have to be just in terms of finances.

Of course, initially, a better deal would do. But it could also be about social values or personal values. For instance, initially for its drivers, Uber didn’t mean right away full-time income. But it also meant more freedom for its drivers to work when they wanted. So initially freedom might have been a critical aspect.

Key activities

What key activities does your value proposition require?

What activities are important the most in distribution channels, customer relationships, revenue stream…?

As innovationtactics.com explains, critical actions for Uber were:

Remove friction from all interactions
Scale driver and customer side to reduce idle times for drivers and waiting times for customers
Reduce negative externalizes, e.g., bad behaviors on both sides
Grow the platform by getting more participants joining
Keep participants engaged and stimulate ongoing participation
Continue improving the value proposition, e.g., cheaper rides for regular commuters through UberPOOL
Look out for complementary value propositions (e.g., car financing, new customer segments, etc.)
Deliver on the customer proposition
Reduce churn (esp drivers)
Expand to more cities (US and global)
Analyse the data to fine-tune everything
Enhance technological lead and intellectual property to steepen barriers of entry

In short, those are the activities needed to make your value proposition compelling for your key partners. Thus, they can vary from removing friction (think of a marketplace that is hard to use), add features or make transactions smooth.

In short, the more your organization acts as an enabler of business relationships among several players the more its value proposition consolidates.Thus, anything that solves a customer problem, or satisfies an unfulfilled need would do.

Based on my personal experience from the case studies I’ve looked at the more the value proposition can adapt to several players needs the more it makes a business model become the driver for an organization growth. Take Quora:

[image error]

The Q&A social network can bring together several partners (users, writers, top writers, publishers/online businesses, and investors) with different value propositions; all met on the same platform.

Value proposition

What core value do you deliver to the customer?

Which customer needs are you satisfying?

Although the value proposition is not listed as the first element. In reality, this is the first thing you should assess. I’d say this is the foundation of your business model. That is what keeps the blocks together.

Without knowing the core values for your customers or partners and what needs you’re satisfying, or what problems you’re solving for them you might have a product but not a business.

This is connected with the previous building blocks and with the next ones. This is the glue that keeps it all together. As explained in the last point a value proposition doesn’t have to be for only one player, partner or type of customer.

Take the case of a multi-sided platform like LinkedIn. The value proposition can embrace both sides of the marketplace:

[image error]

The value proposition isn’t marked in the stone, but it can change over time. As new partners join; and as you tinker with your business model and as new unforeseen needs come about your value proposition might also change.

Customer relationship

What relationship that the target customer expects you to establish?

How can you integrate that into your business in terms of cost and format?

Based on the identified partners and customers you need to assess how to manage those relationships to keep them aligned with their expectations and within your business model.

If you take Uber, as specified by innovationtactics.com it needs to consider four elements to manage their customer relationships.

(1) the customers(=riders),

(2) the drivers,

(3) the broader public and

(4) regulators.

Each of those relationships will have different dynamics. For instance, drivers might be concerned about safety risks. While regulators might be worried about transparency and proper data management.

Another example, if you take Airbnb business model, hosts are critical to the success of the platform, and concerns like liability coverages are essential for them to keep using it.

That is why hosts are provided with insurance and liability coverage, the “Host Protection Coverage” (of course that might have happened because of some accidents).

How Does Airbnb Make Money? Airbnb Peer to Peer Business Model Explained

Customer segment

Which classes are you creating values for?

Who is your most important customer?

Once you have the previous building blocks in place, it shouldn’t be hard to define for which class of people you’re creating value and what are your most important customers.

It is important to stress that although this is a list of blocks, it is not necessarily meant to be read or assessed in order. In fact, at times you might have some blocks but miss others.

For instance, let’s take the case of a startup that has created an innovative software based on new, emerging technologies. The startup founders might know for sure that technology is valuable and it will open up market opportunities.

Yet that same founder might not have a clue about who the potential customers might be. This shouldn’t surprise you. In fact, starting up a business doesn’t necessarily mean to start from a problem people have.

That is true in more traditional industries. Yet in tech, the opposite might apply. You have new technology and a product that does many things.

However, you struggle to have that business take off. How to find your customers? Often they will come to you. As the interactions with the first customers become more intense. You’ll also refine your service to make it more focused on specific features and needs.

That process of iteration will bring you to the so-called “product-market fit.” This process can be at times painful and time-consuming.

[image error]

Source: startup-marketing.com
Key resource

What key resources does your value proposition require?

What resources are important the most in distribution channels, customer relationships, revenue stream…?

As we’ve seen the value proposition is the glue that keeps all the blocks of your business model together. Thus, it is critical to assess what financial and human resources to allocate to allow your value proposition to keep your business model going.

For instance, on Airbnb, it is critical to continue growing the offering and the quality of it to give more and more options to travelers. Also, Airbnb has noticed users wanted more experiences. It started to offer a whole new section focused on those experiences.

[image error]

Distribution channel

Through which channels that your customers want to be reached?

Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines?

A Peter Thiel might say if you don’t have a distribution you don’t have a product. As engineers are running many successful tech companies, it’s easy to get deluded by the fact that engineering alone can generate a successful business model. This is false!

The business world is a competitive environment. It doesn’t matter if you’re technically skilled if you don’t have the guts to take action in critical moments your business might well sink with your technical skills.

If you take Bring and Page, Google’s founders, they are engineers, but they are businessmen.

When Google paid $300 million for keeping its search engine as default choice within Mozilla, when Microsoft was about to steal it, it was an aggressive move to keep one of the most important distribution channels (at the time).

In fact, Microsoft was trying to have Bing featured as default choice of Mozilla. When Google’s founders understood what was happening, they didn’t stop thinking for a second. They didn’t build algorithms to make that decision. They acted out of their guts feelings.

If I had to name what’s the most important asset of any company, the distribution would come first. Finding the distribution channels that best fit your business isn’t a natural process. Traditional channels are word of mouth, paid marketing and media coverage.

In the digital business world instead, there are channels like SEO, social media and content marketing. I know you might look at them as marketing tactics and they are. However, those are meant to build distribution channels.

For instance, content can be used as a way to connect with key players in your industry that you’d want to have as business partners. Google can also act as a “distributor” as with a proper SEO strategy can bring a continuous stream of qualified traffic to enhance your business and so on.

Gabriel Weinberg, the author of “Traction” and founder of DuckDuckGo, a search engine that doesn’t track you, has identified 19 channels you can tap into to grow your business.

Zero to One: Sales and Distribution Lessons from Peter Thiel

Cost structure

What are the most cost in your business?

Which key resources/ activities are most expensive?

In the business community often growth is confused for profitability. That is not the case. Many companies that achieved staggering growth rates have failed to be profitable.

This isn’t necessarily bad, but a successful long-term business needs to become profitable as soon as possible. When Google opened its hood in 2004 after its IPO, the numbers were staggering. In terms of growth, revenues, and profitability.

A cost structure is then crucial to allow a sustainable long-term growth.

[image error]

Generally speaking, your customer acquisition cost has to be lower than the lifetime value of your customers. Easy said than done. This connects us to the next, critical building block, the revenue stream generation.

Revenue stream

For what value are your customers willing to pay?

What and how do they recently pay? How would they prefer to pay?

How much does every revenue stream contribute to the overall revenues?

Until you don’t have a stream of revenues coming in you can’t say you have a business. This might seem a trivial point. Yet the way you monetize the company will also affect the overall business model.

There isn’t a single way to generate revenues. You might choose a subscription business model, a freemium, a fee or membership model. That also depends upon the industry, product, and service you offer.

For instance, Facebook uses a hidden revenue generation model.

In short, the utterly free platform in a way “hides” to its users the way it monetizes. Of course, businesspeople and marketers are well aware of how Facebook makes money as it has been so far a proper advertising channel for many businesses.

However, the average user doesn’t have a clue. Things are changing now that privacy issues and new regulations have brought attention to the Facebook, business model.

Yet for a decade Facebook has benefited from a vast stream of revenues and high profitability without most users ever noticing it.

How Does Mark Zuckerberg Make Money? Facebook Hidden Revenue Business Model Explained

Many might argue that the hidden revenue generation model is the most powerful. And in fact, it has proved so (Google is another example).

Indeed, as Peter Thiel remarks in his book, Zero to One, sales works best when hidden. As none likes to be reminded of being sold something. However, a business model that works, in the long run, needs to be aligned with users’ interests.

Thus, the way you monetize isn’t only about the bottom line but also about the kind of organization you’re building. If the revenue streams you generate provides value and is in line with your users’ interests, there is no need of corporate slogans like “don’t be evil.”

What more? Once you’ve found a revenue stream the works and is in line with your business model you can’t stop there. You need to keep experimenting with new revenue models.

In short, the business model canvas is the starting point for your business, rather than the ending point of your entrepreneurial journey.

Key takeaways

The business model canvas is a model that helps you have an overall strategic vision of your business. It is comprised of nine building blocks. Those building blocks are critical to assessing your long-term strategy.

This is one of the methods you can use. To sum up, the nine building blocks are:

Key partners
Key activities
Value proposition
Customer relationship
Customer segment
Distribution channel
Cost structure
Revenue stream

Each of those blocks is not independent of each other. In fact, in many cases, they are strictly tied to each other.

And from the interactions between them, you can build a sustainable business model able to unlock value for your organization and other players that are part of its growth.

The post What Is a Business Model Canvas? Business Model Canvas Explained appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 14, 2018 14:58

What Is a Business Model Canvas?

A business model is a way organization capture value. For such intended not only the economic value but also the social values it fosters and the cultural values it sustains. In other words, business modeling isn’t just about how a company makes money but how it creates value for several players while unlocking profits for the organization that designed such business model.

There isn’t a single way to design and assess a business model. However, the business model canvas is a holistic model that takes into account nine factors that any business models should have to be successful.

Alexander Osterwalder proposed the Business Model Canvas. He’s a Swiss business theorist that in 2000 together with a team of 470 co-creators published the Business Model Canvas.

Keep in mind that he is one way to design or assess a business model. It might be the most popular method. Yet that doesn’t make it the best. In the end what matters is the ability of an enterprise to unlock value that goes beyond profits.

The aim of having a sharp understanding of your business model is to provide you critical strategic insights about your customers, product/service, financial structure to take action and tweak it until it unlocks value for your organization as a whole.

Let’s take a real case study. I often mention Google business model as a great example. You might like or not the giant from Mountain View. Yet what made this company so profitable – I argue – was its ability to unlock value for several players in the digital marketing space.

In fact, on the one hand, with AdWords, Google allowed businesses to transparently bid on keywords based on the clicks those ads received. This allowed companies to disintermediate advertising from intermediaries that were taking up most of the margins (of course now Google gets them). On the other hand, with AdSense, Google allowed small publishers around the world to monetize their content. All they needed was an AdSense account and enough traffic to start earning money. Of course, as of today, this model isn’t sustainable anymore for many businesses. Yet in a way AdSense democratized the ads revenues, which before were only taken by large players. With Google, those profits got shared with content creators about to gain traffic on the web.

Also, Google offered the best search experience compared to any other search engine. In fact, even though it wasn’t the first to take over the market (it was actually among the last movers) Google offered a free service that worked wonders:

[image error]

Little critical note: Just like professors study birds flight and go around the world to teach birds how to fly while they can’t. So entrepreneurs that tinker on a daily basis with business models might have a better feel for that compared to theorists trying to teach them what a business model is. In short, my point is that you don’t need to get bogged down on its definition or to stick with the business model canvas to assess your business model. You might want to develop your way to look at your business as – if you’re an entrepreneur – there’s none better than you to do that. In short, use the business model canvas as one of the many methods you can use to assess your business. Don’t let professors or theorists tell you that is the only way. It’s not.

Going back to the business model canvas Alexander Osterwalder, outlined several prescriptions which form the building blocks for a business model. Those building blocks enable entrepreneurs to focus on operational, strategic, and financial assessments of their business.

Business model canvas in a nutshell

The nine building blocks of the business model canvas comprise vital partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure and revenue streams.

[image error]

The first thing you might notice is that cost structure, and revenue streams (the financial part) are just one fraction of the story. What I like the most about this model is that it allows you to have a holistic view of your business. Let’s dive into each of the vital components of the business model canvas and see how each can be assessed.

We’ll start from the canvanizer.com

Key partners

Who are your key partners/suppliers?

What are the motivations for the partnerships?

It all begins with your partners. In fact, if you don’t have the right partnerships in place, you don’t have a business at all. That is the starting point of your business model. Finding the right partners is critical. In fact, the success of your business and the traction depend upon your ability to identify and offer your partners a compelling reason to do business with you.

For instance, if you think about Google, the principal partners are the small publishers part of the AdSense program, together to the businesses that are part of the AdWords network and the users that on a daily basis keep going back to the Google search box by giving it critical data to sustain its business model.

If you think about Uber instead, you’ll notice how the key partners are its drivers for which Uber means an additional if not a full-time income as self-employed. Its engineers that keep the platform smooth and running and people that sustain the cause of Uber.

If you think instead at Airbnb, you’ll notice that those key partners aren’t only hosts and travelers that transact each day on the platform. Also, freelance photographers that travel the world to take professional pictures that enrich the user experience of Airbnb are also key players.

When it comes to partners “who” and “why” are critical questions. In short, who’s the niche of people that can sustain your business? And why, so what compelling reason are you giving them? What value do they get from this partnership? It doesn’t have to be just in terms of finances. Of course, initially, a better deal would do. But it could also be about social values or personal values. For instance, initially for its drivers, Uber didn’t mean right away full-time income. But it also meant more freedom for its drivers to work when they wanted. So initially freedom might have been a critical aspect.

Key activities

What key activities does your value proposition require?

What activities are important the most in distribution channels, customer relationships, revenue stream…?

As innovationtactics.com explains, critical actions for Uber were:

Remove friction from all interactions
Scale driver and customer side to reduce idle times for drivers and waiting times for customers
Reduce negative externalizes, e.g., bad behaviors on both sides
Grow the platform by getting more participants joining
Keep participants engaged and stimulate ongoing participation
Continue improving the value proposition, e.g., cheaper rides for regular commuters through UberPOOL
Look out for complementary value propositions (e.g., car financing, new customer segments, etc.)
Deliver on the customer proposition
Reduce churn (esp drivers)
Expand to more cities (US and global)
Analyse the data to fine-tune everything
Enhance technological lead and intellectual property to steepen barriers of entry

In short, those are the activities needed to make your value proposition compelling for your key partners. Thus, they can vary from removing friction (think of a marketplace that is hard to use), add features or make transactions smooth. In short, the more your organization acts as an enabler of business relationships among several players the more its value proposition consolidates.

Thus, anything that solves a customer problem, or satisfies an unfulfilled need would do. Based on my personal experience from the case studies I’ve looked at the more the value proposition can adapt to several players needs the more it makes a business model become the driver for an organization growth. Take Quora:

[image error]

The Q&A social network can bring together several partners (users, writers, top writers, publishers/online businesses, and investors) with different value propositions; all met on the same platform.

Value proposition

What core value do you deliver to the customer?

Which customer needs are you satisfying?

Although the value proposition is not listed as the first element. In reality, this is the first thing you should assess. I’d say this is the foundation of your business model. That is what keeps the blocks together. Without knowing the core values for your customers or partners and what needs you’re satisfying, or what problems you’re solving for them you might have a product but not a business.

This is connected with the previous building blocks and with the next ones. This is the glue that keeps it all together. As explained in the last point a value proposition doesn’t have to be for only one player, partner or type of customer. Take the case of a multi-sided platform like LinkedIn. The value proposition can embrace both sides of the marketplace:

[image error]

The value proposition isn’t marked in the stone, but it can change over time. As new partners join; and as you tinker with your business model and as new unforeseen needs come about your value proposition might also change.

Customer relationship

What relationship that the target customer expects you to establish?

How can you integrate that into your business in terms of cost and format?

Based on the identified partners and customers you need to assess how to manage those relationships to keep them aligned with their expectations and within your business model. If you take Uber, as specified by innovationtactics.com it needs to consider four elements to manage their customer relationships.

(1) the customers(=riders),

(2) the drivers,

(3) the broader public and

(4) regulators.

Each of those relationships will have different dynamics. For instance, drivers might be concerned about safety risks. While regulators might be worried about transparency and proper data management.

Another example, if you take Airbnb business model, hosts are critical to the success of the platform, and concerns like liability coverages are essential for them to keep using it. That is why hosts are provided with insurance and liability coverage, the “Host Protection Coverage” (of course that might have happened because of some accidents).

How the peer to peer business model helped Airbnb growth

Customer segment

Which classes are you creating values for?

Who is your most important customer?

Once you have the previous building blocks in place, it shouldn’t be hard to define for which class of people you’re creating value and what are your most important customers. It is important to stress that although this is a list of blocks, it is not necessarily meant to be read or assessed in order. In fact, at times you might have some blocks but miss others. For instance, let’s take the case of a startup that has created an innovative software based on new, emerging technologies. The startup founders might know for sure that technology is valuable and it will open up market opportunities.

Yet that same founder might not have a clue about who the potential customers might be. This shouldn’t surprise you. In fact, starting up a business doesn’t necessarily mean to start from a problem people have. That is true in more traditional industries. Yet in tech, the opposite might apply. You have new technology and a product that does many things.

However, you struggle to have that business take off. How to find your customers? Often they will come to you. As the interactions with the first customers become more intense. You’ll also refine your service to make it more focused on specific features and needs. That process of iteration will bring you to the so-called “product-market fit.” This process can be at times painful and time-consuming.

[image error]

Source: startup-marketing.com
Key resource

What key resources does your value proposition require?

What resources are important the most in distribution channels, customer relationships, revenue stream…?

As we’ve seen the value proposition is the glue that keeps all the blocks of your business model together. Thus, it is critical to assess what financial and human resources to allocate to allow your value proposition to keep your business model going. For instance, on Airbnb, it is critical to continue growing the offering and the quality of it to give more and more options to travelers. Also, Airbnb has noticed users wanted more experiences. It started to offer a whole new section focused on those experiences.

[image error]

Distribution channel

Through which channels that your customers want to be reached?

Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines?

A Peter Thiel might say if you don’t have a distribution you don’t have a product. As engineers are running many successful tech companies, it’s easy to get deluded by the fact that engineering alone can generate a successful business model. This is false!

The business world is a competitive environment. It doesn’t matter if you’re technically skilled if you don’t have the guts to take action in critical moments your business might well sink with your technical skills. If you take Bring and Page, Google’s founders, they are engineers, but they are businessmen.

When Google paid $300 million for keeping its search engine as default choice within Mozilla, when Microsoft was about to steal it, it was an aggressive move to keep one of the most important distribution channels (at the time). In fact, Microsoft was trying to have Bing featured as default choice of Mozilla. When Google’s founders understood what was happening, they didn’t stop thinking for a second. They didn’t build algorithms to make that decision. They acted out of their guts feelings.

If I had to name what’s the most important asset of any company, the distribution would come first. Finding the distribution channels that best fit your business isn’t a natural process. Traditional channels are word of mouth, paid marketing and media coverage.

In the digital business world instead, there are channels like SEO, social media and content marketing. I know you might look at them as marketing tactics and they are. However, those are meant to build distribution channels. For instance, content can be used as a way to connect with key players in your industry that you’d want to have as business partners. Google can also act as a “distributor” as with a proper SEO strategy can bring a continuous stream of qualified traffic to enhance your business and so on. Gabriel Weinberg, the author of “Traction” and founder of DuckDuckGo, a search engine that doesn’t track you, has identified 19 channels you can tap into to grow your business.

Zero to One: Sales and Distribution Lessons from Peter Thiel

Cost structure

What are the most cost in your business?

Which key resources/ activities are most expensive?

In the business community often growth is confused for profitability. That is not the case. Many companies that achieved staggering growth rates have failed to be profitable. This isn’t necessarily bad, but a successful long-term business needs to become profitable as soon as possible. When Google opened its hood in 2004 after its IPO, the numbers were staggering. In terms of growth, revenues, and profitability. A cost structure is then crucial to allow a sustainable long-term growth.

[image error]

Generally speaking, your customer acquisition cost has to be lower than the lifetime value of your customers. Easy said than done. This connects us to the next, critical building block, the revenue stream generation.

Revenue stream

For what value are your customers willing to pay?

What and how do they recently pay? How would they prefer to pay?

How much does every revenue stream contribute to the overall revenues?

Until you don’t have a stream of revenues coming in you can’t say you have a business. This might seem a trivial point. Yet the way you monetize the company will also affect the overall business model. There isn’t a single way to generate revenues. You might choose a subscription business model, a freemium, a fee or membership model. That also depends upon the industry, product, and service you offer. For instance, Facebook uses a hidden revenue generation model.

In short, the utterly free platform in a way “hides” to its users the way it monetizes. Of course, businesspeople and marketers are well aware of how Facebook makes money as it has been so far a proper advertising channel for many businesses. However, the average user doesn’t have a clue. Things are changing now that privacy issues and new regulations have brought attention to the Facebook, business model. Yet for a decade Facebook has benefited from a vast stream of revenues and high profitability without most users ever noticing it.

When Facebook Hidden Revenue Business Model Becomes a Business of $40 Billion in Revenues

Many might argue that the hidden revenue generation model is the most powerful. And in fact, it has proved so (Google is another example). Indeed, as Peter Thiel remarks in his book, Zero to One, sales works best when hidden. As none likes to be reminded of being sold something. However, a business model that works, in the long run, needs to be aligned with users’ interests. Thus, the way you monetize isn’t only about the bottom line but also about the kind of organization you’re building. If the revenue streams you generate provides value and is in line with your users’ interests, there is no need of corporate slogans like “don’t be evil.”

What more? Once you’ve found a revenue stream the works and is in line with your business model you can’t stop there. You need to keep experimenting with new revenue models. In short, the business model canvas is the starting point for your business, rather than the ending point of your entrepreneurial journey.

Key takeaways

The business model canvas is a model that helps you have an overall strategic vision of your business. It is comprised of nine building blocks. Those building blocks are critical to assessing your long-term strategy. This is one of the methods you can use. To sum up, the nine building blocks are:

Key partners
Key activities
Value proposition
Customer relationship
Customer segment
Distribution channel
Cost structure
Revenue stream

Each of those blocks is not independent of each other. In fact, in many cases, they are strictly tied to each other. And from the interactions between them, you can build a sustainable business model able to unlock value for your organization and other players that are part of its growth.

The post What Is a Business Model Canvas? appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 14, 2018 14:58

How Does Netflix Make Money? Netflix Business Model Explained

Netflix is the subscription service that is changing the way we consume traditional media. From series like Stranger Things, Narcos and Black Mirror Netflix have been able to become a titan of the media industry, with more than a hundred and fifty thousand of members across the globe. With three simple subscription plans (basic, standard and premium) from $8 to $14, Netflix has been able to become a multi-billion dollar unicorn with more than a hundred fifty billion at the time of this writing.

In this article, I’ll break-down how its business models work by looking at its financial statements. The purpose is to dissect its business model by looking at the numbers. In no way, this is a recommendation on Netflix stock, neither investment advice. We’ll use numbers to understand the logic behind Netflix business model.

Netflix wasn’t an overnight success

Like any start-up, also Netflix has its founding myth. As the story goes Netflix founder and CEO Reed Hastings recounted how the idea behind Netflix came about:

The genesis of Netflix came in 1997 when I got this late fee, about $40, for Apollo 13. I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there’s a big market out there.

So I started to investigate the idea of how to create a movie-rental business by mail. I didn’t know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.

This was the year 1997, still a long way to go until Netflix reached its scale and international expansion worldwide, which can be dated at 2017.

How does Netflix business model work? A simple subscription will do

As explained in Netflix annual report:

Our business model is subscription based as opposed to a model generating revenues at a specific title level. Therefore, content assets, both licensed and produced, are reviewed in aggregate at the operating segment level when an event or change in circumstances indicates a change in the expected usefulness.

In short, Netflix sells three simple kinds of subscriptions:

[image error]

With a simple packaging and three subscriptions (basic, standard and premium) you can get the streaming of all the available series, movies and shows available on the Netflix library.

Business segments

The business segments are the are of the business that has a different financial logic and thus requires a separated strategy.

[image error]

As of 2017 Netflix revenues were over $11 billion, with a staggering growth compared to just 2013, when the revenues passed $4 billion.

[image error]

If we look at the global picture, you can see how Netflix has more than 117K subscribers worldwide.

The company has three business segments:

Domestic streaming: revenues from monthly membership fees for services consisting solely of streaming content to our members in the United States.
International streaming: revenues from monthly membership fees for services consisting solely of streaming content to our members outside the United States
and Domestic DVD: revenues from monthly membership fees for services consisting solely of DVD-by-mail

Let’s dive a bit into the numbers of each of those segments to understand the financial logic behind those and also see what’s the strategy of Netflix in the next future.

Netflix domestic streaming financials explained

[image error]

From the numbers above you can see how the Netflix total numbers of members in the US grew from 44,738 in 2015 to 54,750. This growth also meant an increase in costs.

As explained in Netflix annual report:

The increase in domestic streaming cost of revenues was primarily due to a $335.4 million increase in content expenses relating to our existing and new streaming content, including more exclusive and original programming

One interesting aspect to look at is the contribution margin. In short, this is given by the revenues minus all the variable costs (the costs that vary according to the production output). This concept is essential to assess the financial success of specific products. In this case, you can see how the contribution margin is 37% in 2017.

Taken in isolation, this number is relatively significant. Instead, if we compare it to the other segments of the business, we can have an overview of which is more successfully (at least in the short term) financially.

Netflix international streaming financials explained

[image error]

The international segment has become almost as big as the international segment as of 2017. In fact, with over $5 billion in revenues, this has been growing at a faster and faster pace also thanks to the international expansion plan that Netflix started in 2015.

As you might notice in this case also expenses are very high. As specified in the Netflix annual report:

The increase in international cost of revenues was primarily due to a $998.5 million increase in content expenses relating to our existing and new streaming content, including more exclusive and original programming. Other costs increased $132.5 million primarily due to increases in our streaming delivery expenses, costs associated with our customer service call centers and payment processing fees, all driven by our growing member base, partially offset by decreases resulting from exchange rate fluctuations.

In fact, if we look at the contribution margin, we can see how in 2017 it was a positive 4%, while it was negative in 2016. As of now, this is a normal process. In fact, where Netflix has already consolidated its presence in the US, with the international expansion the company is investing resources to gain traction in new countries.

International competition isn’t as easy as you might think. In fact, if we take into account the fact that Netflix is a media company, entering a new market isn’t only a matter of distribution but also of understanding cultural differences in their programming.

As specified by Tech Crunch:

“When you look at [Netflix] content in Asian countries, it is significantly lower,” Aravind Venugopal, vice president at Singapore-based Media Partners Asia, told TechCrunch in an interview. “It just doesn’t have the amount of local content that some of the [streaming and pay TV] competitors have.”

What about the oldest part of the business? The DVD segment.

It all started with that DVD pay per rental business model

Today we give for granted the on-demand business model of Netflix. Yet, back in the days, you could have movies “on-demand” only with the pay per rental business model. As technology has evolved, the on-demand model has been possible also for media companies.

[image error]

The interesting aspect from the financials is that the DVD segment has a very high contribution margin. In fact, of the three parts (domestic, international and DVD) it seems the most profitable. True, it is just a small fraction of the overall revenues. Yet as of today it is a profitable segment.

What kind of expenses does Netflix incur for this segment?

Cost of revenues in the Domestic DVD segment consist primarily of delivery expenses such as packaging and postage costs, content expenses, and other expenses associated with our DVD processing and customer service centers. The number of memberships to our DVD-by-mail offering is declining, and we anticipate that this decline will continue.

Ok, not an exciting business. Yet this is where it all started.

What can we learn from Netflix business model?

For a company that started in 1997 as a website with 925 titles available for rent through a traditional pay-per-rental model; a company that in 2000 offered itself for acquisition to Blockbuster for $50 million and now it’s worth more than a hundred fifty billion dollars. What can we learn from it?

Business modeling isn’t about just how you monetize

There is a misconception in the business world, where a business model is seen as a monetization strategy. A business model also embraces a monetization strategy but is way more than that. It is how you monetize your business. It is about how you make your product or service available to an audience.

It is about the value you create not only for your business but also for several stakeholders. In fact, as I see it, the more a business model creates values for several players, the more it will be able to create an ecosystem that will help the organization part of its scale.

In the end, the organization and the scale is just the result of that ecosystem. This also applies to Netflix. Looking at the financials is a good starting point. Yet Netflix isn’t only a subscription-based media provider. Netflix it is also based on the concept of on-demand. It is a media production company. It is a brand that in the mind of its subscribers can mean several things. In fact, among the over a hundred thousand subscribers some tribes get assembled around the Netflix series which have become the symbol of our generation.

We like to call things “innovative.” What’s new isn’t the business model but the application of it

The first critical aspect of business models is that that we like so much the word “innovative” what we tend to call anything we see as such. In reality, in most cases, it is just about taking an old business model and apply it to a new industry.

Just like the wheel, invented in Mesopotamia over five thousand years ago, it took us way more than a thousand years to put it on the bottom of luggage. In fact, the first wheeled luggage might date back to the 1970s.

In other words, in business just like in any different life domain, what’s hard isn’t the discovery of a new business model but the application of a business model that has always existed to new industries. The subscription business model has been used by traditional newspaper, magazines and academic journals for decades.

As technology evolves old business models become viable to new industries and

One interesting aspect that you’ll notice if you go on the Netflix blog is that the most critical editorial piece is the Netflix ISP Speed Index, a monthly report that provides updates on which Internet Service Providers (ISPs) offers the best primetime Netflix streaming experience.

[image error]

Companies like Netflix, or other tech giants like Google, Amazon, Facebook, and Microsoft successes are strictly tied to the technological advancements we’ve achieved as humanity. Imagine you had a poor internet connection. Would you pay even a dollar for Netflix subscription? Of course, you wouldn’t. Thus, as technology evolves, business models of companies like Netflix depend on how fast technology has advanced. Had the internet not snowballed Netflix would still be a DVD rental company. Why? The on-demand business model is possible thanks to the speed at which the internet infrastructure can travel today.

The power of the on-demand business model and the “Uberization” of the service economy

In the digital world, the on-demand economy is dominating the business arena. The “Uberization” of services means offering more option on how to consume something. In Netflix case, the subscriber is given with more flexibility, optionality about what to watch. For years, TV has used us to rigid schedules. That worked in the years where large corporations with strict schedules were the norm.

Instead, with the rise of the digital nomadism and the self-employed, freelancer our habits and the way we consume media has changed drastically. In this scenario, on-demand has become a dominant business model in the media industry.

Also in this case though what it seems an innovative business model it’s not. In fact, once again what is innovative in its application. In fact, when Netflix back in 1997 started to rent DVD from its website, it was already working on the premises of the on-demand business model. However, as the web evolved and streaming became viable, they started to apply the on-demand model through their platform.

On-demand model plus subscription business model

What makes a business model powerful is the mixture of several ingredients; in Netflix case, the on-demand business model, with a simple subscription applied to the traditional media industry has made it incredibly effective.

Subscription business model can scale

Netflix proved that the subscription business model could scale. However, this doesn’t happen overnight. If we look at the international expansion of Netflix, we can see how it started to expand outside the US only in 2010.

[image error]

Source: Annual report Netflix

And it was only in 2016 that it launched globally. This isn’t random. The subscription business model requires a lot of financial resources.

The subscription business model requires enormous investments

We acquire, license and produce content, including original programing, in order to offer our members unlimited viewing of TV shows and films.

This was specified in the Netflix Annual report for 2017. In fact, at this stage Netflix is as much a media production company as a service provider:

[image error]

Streaming content obligations increased $3.2 billion from $14.5 billion as of December 31, 2016 to $17.7 billion as of December 31, 2017 primarily due to multi-year commitments associated with the continued expansion of our exclusive and original programming.

Streaming content obligations include amounts related to the acquisition, licensing and production of streaming content. An obligation for the production of content includes non-cancelable commitments under creative talent and employment agreements. An obligation for the acquisition and licensing of content is incurred at the time we enter into an agreement to obtain future titles.

Once a title becomes available, a content liability is recorded on the Consolidated Balance Sheets. Certain agreements include the obligation to license rights for unknown future titles, the ultimate quantity and/or fees for which are not yet determinable as of the reporting date. Traditional film output deals, or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of these types of agreements. The contractual obligations table above does not include any estimated obligation for the unknown future titles, payment for which could range from less than one year to more than five years.

However, these unknown obligations are expected to be significant and we believe could include approximately $3 billion to $5 billion over the next three years, with the payments for the vast majority of such amounts expected to occur after the next twelve months. The foregoing range is based on considerable management judgments and the actual amounts may differ. Once we know the title that we will receive and the license fees, we include the amount in the contractual obligations table above

We all like the logic and the scalability fo the subscription business model. You create a product or service have people enroll in it, and you make money each month, steadily. Yet this isn’t the case. When you offer a subscription that will never come at a low price. Instead, you will need continuous support, development, new ideas and ways to make sure your subscribers stick as long as possible.

In fact, only when you’re able to have a customer acquisition cost (CAC) that is way lower than your customer lifetime value (CLV) that is when your business gets viable. However, this is easy said than done. In fact, a sales funnel of a subscription-based model is way longer than a company that sells a one-off product or service.

This is reflected in Netflix financial statement as on many other companies that operate with the logic of the subscription-based business model.

Key takeaways

Netflix has grown from a DVD rental site born in 1997 to an over a hundred fifty billion market cap company. Today Netflix has become a major player in the media industry, and it is investing billions of dollars in production and development of TV Shows that have become a symbol for millions of people worldwide. At the same time, the international expansion is costing Netflix billion of dollars, and the subscription-based business model requires continuous investments to keep millions of people pay their monthly plan. As the SaaS industry has taken over the tech world, many give for granted that a subscription business model always makes sense. In reality, as we’ve seen in Netflix case study, it took it thirteen years to start expanding outside the US. And only in 2016, after almost twenty years Netflix was able to reach Asia.

The post How Does Netflix Make Money? Netflix Business Model Explained appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 13, 2018 13:25

Is First Mover Advantage a Myth? When the Last Mover Takes It All

When you get into business school, one of the first principles they teach you is about the story of the first mover advantage. As the story goes, when you’re the first to enter a market; things like branding recognition, economies of scale and switching costs allow the first player to retain that advantage for a long time.

This is the conventional part of the story business professors like to teach so much. There is another part of it, which makes less noise and might sound less appealing but in the real business world is more accurate than the conventional first mover advantage story. I’m talking about the last mover advantage. My argument is that – first movers not only are not supposed to win, but they might have a few drawbacks that make their moves very risky. This makes the last comer, who makes the last move in the position to dominate the market. In this article, we’ll see why and how.

Timing can make or break your business

As specified by Tech Crunch:

Segways, and websites like Six Degrees or services like Webvan, we saw the stumbling start of great ideas that were ahead of their time. We learned that when starting a company being right and too early is the same as being wrong.

When you’re the first mover, you’re seen as bold. This isn’t a chance. In fact, you’re taking a huge risk. Indeed, if you failed to gain traction and conquer market dominance, chances are you’ll be kicked out by the last comers. Not only that. But also market dominance isn’t enough if you’re not able to capture enough profits to be able to acquire or kick out the latest comers. Think about Google. When he got in the search market, it wasn’t the first. In fact, in the 90s Netscape held 90% of the browser market. Only to disappear by the turn of the century. Why? Well, Google arrived last, but it built a monopoly able to capture most of the market value. Who can afford to compete with that?

Why Metcalfe’s law like so much the last mover

As techopedia.com explains:

Metcalfe’s Law is a concept used in computer networks and telecommunications to represent the value of a network. Metcalfe’s Law states that a network’s impact is the square of the number of nodes in the network. For example, if a network has 10 nodes, its inherent value is 100 (10 * 10). The end nodes can be computers, servers and/or connecting users.

This means that when the last mover arrives on the market, it has one of the most important assets you can have in business: your competitors’ mistakes. In fact, if you are entering the market, you can do it by looking at what your competitors have done wrong. At the same time, you can also look at what they’ve done right to copy it! In this scenario, when growth picks up the effect of it will be more than exponential. So the first mover that seemed a giant will soon become the dwarf.

Peter Thiel’s law

In Zero to One by Peter Thiel, there is a whole chapter on the last mover advantage. As he explains, when looking for a successful business one should ask:

Will this business be around a decade from now?

In fact, what he means is that – this is true for the tech world – the ability of a company to be the dominant player depends upon two main things. First, the ability to monopolize the market. Second, the ability of that business to generate future cash flows.

He suggests to look at four main aspects:

proprietary technology
network effects
economies of scale
and branding

In the end, being the first mover doesn’t mean anything if you’re not able to build any of those factors into your business. The secret then is to be the last mover but then make sure you create a monopoly. How?

How to build a monopoly in four steps

In the book Zero to One, Peter Thiel also explains how – in theory – to build a monopoly.

Start small to monopolize

The first objective is to start very small. We all like the grandiose project to conquer the world. Having that kind of vision is fine. Yet you want to be highly practical on a day to day basis. You need to start from a tiny group of people that might benefit from your product or service.

In fact, by targeting a tiny market, it will be way easier to monopolize it.

Scale-up

One example that Peter Thiel mentions in the book is about Amazon. When it started, it did as an online bookstore. This was, of course, a niche. Amazon could have tried to sell anything from day one. Instead, they focused on books. Until they dominated the market. As of now, Amazon has expanded so much also to sell grocery and gourmet food.

Thus, once dominated a niche, the time will be right to move to the next.

Stop with the BS of disruption

Looking like someone that is trying to innovate and challenge the status quo is cool. Yet it also brings a lot of attention and visibility. In the Silicon Valley startup stereotype visibility has become the goal rather than a mean for growth. Instead, as Peter Thiel suggests in Zero to One, you don’t need to disrupt. In the long run, you will. But in the short term, you don’t have to challenge large organizations just for the sake of it. You need to work on dominating your niche and move on to the next. As quickly as possible; and with the slightest attention from the public as possible

Be like a chess player, think about the endgame

Having an ambitious long-term vision isn’t bad. Instead, this is the compass that will guide you toward the successful building of your business. In short, your long-term vision will be the endgame. Just like the chess player starts with the last move in mind. However, targeting a small niche, dominating it, move to the next is your primary day to day goal.

Key takeaway: the last mover takes it all

In this perspective, the last mover arrives at a stage when the public is ready to accept that product and service. It has learned from the first movers. It has copied them. It has avoided their mistakes. Used their strengths but also innovated. From that perspective, by starting small, dominating a niche, moving to the next. The network effects will allow the last mover to gain traction at an exponential growth rate that makes it impossible for the first mover to understand what’s happening and to stop its advancement. This is how the last mover takes it all!

The post Is First Mover Advantage a Myth? When the Last Mover Takes It All appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 12, 2018 13:42

The Innovative Business Models Using Blockchain Technologies

As more startup are springing up on Blockchain technologies, it is normal to see the proliferation of Blockchain protocols that promise to disrupt any industry. Just like when the web started to become mainstream, thanks to technologies like search engines. We assisted to the birth of many search engines that made the search market fragmented; up to when Google became so dominant to tame most of the search market share.

Are we assisting also today to a similar phenomenon? We might be. In fact, when new technologies come about, competition initially is the norm. Eventually, due also to the lack of regulation and the inability of bureaucrats to keep up with technological advancements, a few players dominate the market until they create real monopolies.

As of today, according to GS Statcounter , Google still dominates the market and there is no reason to believe it won’t:

[image error]

Unless of course, regulators won’t break those monopolies. This also happened at the beginning of the century, when people like Andrew Carnegie, J.D. Rockefeller, and Henry Ford were so wealthy that they would dwarf today’s billionaires.

Today we’re assisting to a similar phenomenon in the cryptocurrency and Blockchain space. Many players were birth in the last years. A countless number of ICO happened, and many other cryptocurrencies got created.

In the short term, all this noise is a normal process of evolutionary selection of what it will eventually survive. Given the Lindy Effect, the Bitcoin as the first cryptocurrency which laid out a Blockchain protocol should survive at least other nine years (as it began in 2009). Of course, this is a probabilistic rule it’s not a certainty.

Yet beside what it will survive and what not I think there’s a compelling reason why the Blockchain protocols will be so critical for the future of entrepreneurship.

The blockchain as a business model toolbox for innovation

When the web kept growing at exponential pace, new companies and innovative business models sprouted up. On this blog, I have spoken at length about the innovation introduced by Google Business Model and why I believe this is what made it so successful.

The paradox though is that what seemed an innovative business model a few years back, it seems an ancient business model today. In fact, when you think about the hidden revenue generation model of Google and Facebook through advertising. This model today seems old for several reasons.

First, it is not aligned with users interest. Right, users get free services but at what price? Second, as those models manage people’s data, they’re also responsible for that data. With recent GDPR regulation, one might wonder whether that data which was an asset might instead turn as the most significant debt for both Google and Facebook. The third, most critical point is connected to the previous two. As those companies have grown so large and powerful, many believe they will keep growing at that pace forever. This belief in part is due to the high profitability of companies like Google and Facebook. Yet, although very profitable those companies are also very very fragile.

Tech giants that today dominate were allowed to do so also based on traditional economics beliefs (like economies of scales are good, large is more efficient and standardization wins). Now that new decentralized technologies, like the Blockchain have come about. There is no more justification to believe that a large organization should be run by a few dicators taking most of the profits. In fact, the first element of a Blockchain is the ability to run a large organization in a decentralized manner.

One could start to wonder if we still need all those boards of directors, super paid executives, or people which only work is to manage other people. The blockchain challenges all that. And in a way, it gives us the flexibility to experiment with new, innovative business models.

Let’s see some interesting ideas in the blockchain world. Remember, if you’re reading this article after a few years it might be that one, some or all of them turned out to be unsuccessful attempts. Yet, I believe it will be undeniable that those unsuccessful attempts might have led to some great successes.

Bitpress for fact-checking

Bitpress is developing a framework that in a way should allow a better, bottom-up fact-checking mechanism. Will this succeed? Hard to say. There is one aspect though that I think is genial of all of this. In their PageRank mechanism, they want to allow publishers to express an opinion on the resources the link. In fact, those links can carry a vote which isn’t necessarily positive, but it can also have a negative connotation.

In other words, Google’s PageRank has also been built on the assumption that links are good votes that a site passes along another site. Just like in academia, where referencing to another author means a favorable vote. So Google’s PageRank has used the same mechanism to rank web pages.

This has opened up manipulations and drawbacks. For instance, as of today nonetheless, the sophistication of Google’s new algorithms driven by AI, things like private blog network or PBN (a network of websites that exchange links from each other) are still a reality. Those not only might be a mechanism that still works to rank web pages. But it also requires a lot of resources from Google to catch up to those networks. In fact, as of now, besides intelligent algorithms; Google might have a militia of engineers browsing the web to find those networks and blacklist them!

Would Bitpress mechanism prove successful?

What Is Bitpress? The Fact-Checking Blockchain Protocol for Digital Publishing

Steemit for getting paid as a publisher

I got passionate about the Steem Blockchain the day I’ve read their white paper and when I started to experiments with the many apps sprouted up on this blockchain. The most exciting part of this blockchain is the way it allows its community to monetize while either curating or writing content.

In short, Steemit and other Steem Blockchain apps, pay their users to do what they already do on another social network, for free. This model has still proved to be sustainable in the long run and as I explain in this article there are still some challenges. However, if this model proves effective, it might become the next big thing to take over purely centralized giants like Facebook, Reddit, and Quora.

What is Steemit? The Decentralized Social Network That Is Challenging Facebook Business Model

Dock.io for professional data management

A company which most crucial asset is made of the data of its users will make sure to preserve it. However, as short-term logic might prevail by time to time, those companies will also try to profit as much as possible from that data.

This places the company owning the data in the conflict of interests with its users. For how much that company is comprised of smart individuals. Conflict of interests and the way the system work might well make those companies mismanage the data.

Dock.io is envisioning a decentralized way to manage professional data, which gives ownership to the users and have them choose which third parties can reuse that data.

What is dock.io? The Decentralized Professional Network That Gives Data Back to Its Users

Key takeaway

What I find most striking of the new Blockchain protocols that are getting created is that those allow the experimentation of new business models that challenge the old one. The old business models that were designed with the rise of the web, the search industry, and the social media industry have led us to the creation of tech giants that have vast power and control over our data.

The Blockchain allows us to challenge that. Of course, those same tech giants might also take advantage of those protocols for their own sake. And we even can envision the rise of new tech giants that will be built on top of blockchain protocols. However, what seems good to me is the intrinsic decentralized nature of those models.

The post The Innovative Business Models Using Blockchain Technologies appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 11, 2018 11:36

Best Qualified Traffic Growth Strategies from Five Top Digital Marketers

A blog is one of the most important places that any company can use to nurture its brand. From awareness to sales a blog is crucial for any businesses or start-ups to acquire customers, maintain relationships with current ones and enhance sales.

In fact, many companies still believe a blog is only a way to improve the brand awareness. However, 81% of shoppers conduct online research before making big purchases.

Today one of the most significant challenges for any company is to generate enough leads to sustain its revenue growth.

[image error]

Source: hubspot.com/marketing-statistics

I blog for passion, fun and because It gives me the chance to research into topics that I find fascinating. However, I do know the power of blogging, and that is why I use my blog to experiment and test the strategies that are most effective to fuel growth online and offline. In this article, I want to show you some acquisition channels I became aware of while reading a book, Traction, wrote by Gabriel Weinberg and Justin Mares.

I already explained in this article how to put down, identify and keep using the acquisition channels that will bring you the most traffic, leads, and sales. Here instead I want to show you some practical examples of how you can use some of those channels to grow your business.

I will use my direct experience but also look at how famous marketers like Neil Patel, Jeff Bullas, Tim Ferris, Pat Flynn, Larry Kim and some more use them.

Some of the data I will use will come from Similar Web. Before we dive into it, a little disclaimer.

The tool is relatively accurate. In other words, you won’t get the exact number, but you should look at it more as a range.

MOZ Estimated how accurate are those tools and for instance:

SimilarWeb – monthly visits

Avg. of Metric/Actual Traffic: 406.37%
% of Data within 70-130% of Actual Traffic: 22.00%
Spearman’s Correlation w/ Actual Traffic: 0.827
Standard Error: 0.0504
Data coverage: 87.41%

As you can see “% of Data within 70-130% of Actual Traffic: 22.00%.”

It means that Similar Web was accurate on almost one-fourth of the sites analyzed. Yet that accuracy swings between 70–130% of actual traffic. Therefore, let’s say Similar Web says traffic of a site is 100K monthly. Consider that more as a range (from 70–130K monthly visitors) rather than an actual number.

In short, take the data as a reference rather than an absolute number. However, that range will allow us to understand the underlying strategy that each of those marketers is using to speed up growth.

Some interesting data about top online marketers

Everywhere you go, you can find a list of the top something in any discipline. In reality, those lists mean all and nothing. For this analysis, I used a metric to discern between top marketers: traffic.

However, whether a marketer is top or not can be classified in dozens of other ways. You will forgive me if I picked traffic as a metric, but that seemed to be a decent heuristic to determine the influence of someone online.

Considering also that as a blogger I want traffic to reach more people. Of course, traffic itself isn’t valuable because you want it to be qualified. In short, if you reach millions of people but only a tiny fraction is interested in what you write, then your effort is wasted.

Therefore, another metric I took into account is organic traffic. In short, at least 30% of the traffic of those websites come from search engines.

Having clarified those aspects. Let’s jump into the list of the top five marketers/websites I dissected for this article/report:

neilpatel.com
jeffbullas.com
wordstream.com
fourhourworkweek.com
smartpassiveincome.com

If we look at those websites total visits they have all an impressive reach:

[image error]

You may expect that websites with this kind of reach have low engagement metrics. However, the data below shows a different story:

[image error]

Also, each of those marketers uses several sources to grow their traffic, therefore generate more leads and sales.

[image error]

The main acquisition channels are direct traffic, organic search, referrals and social media.

Let’s have a better glance:

[image error]

What topics are they ranking for?

[image error]

By looking at this data, you can see how the most critical acquisition channels for most of the top marketers are direct, organic, social media and referrals. Let’s dive into each of those channels and how to grow them up!

The importance of direct traffic to assess your branding strategy

Direct traffic is critical. First though, let’s define it. Direct traffic comprises sources that are accessing directly to your website for several reasons. As specified on Moz there might be several reasons for getting direct traffic. Some of those are the following:

1. Manual address entry and bookmarks

2. HTTPS > HTTP

3. Missing or broken tracking code

4. Improper redirection

5. Non-web documents

6. “Dark social.”

While part of some direct traffic might be due to technical reason and the inability to track all the referral traffic that gets to your site. Direct traffic is critical as it points out that your investments in branding are paying off. In fact, people are looking actively for your website, and this means that they might spend more time on it. This isn’t just a theory but can be backed up by some data that Moz has gathered:

[image error]

Source: moz.com

As you can see above, direct traffic seems to point out that users that come through it are more loyal compared to all other traffic sources.

How do you grow your direct traffic? You need to invest a bit in increasing your brand awareness. For instance, below some ideas:

Guest blogging: when writing a guest post on another site link back to your site through the branded keyword. For example, when I blog on another site, if it makes sense I’ll link back to my blog by using the branded keyword “FourWeekMBA” that links back to my homepage. By using this strategy, I’ve noticed some volume picking up lately:

[image error]

This, of course, is still a very small amount of search volume, yet not bad as a first site. You can do the same thing with interviews.

Interviews: if getting interviewed by other blogs also have them link back to your site with the branded keyword, like above.
Social media: why social media? Well, when people will recognize your brand on social media, there are more chances they’ll search for it on Google. If this becomes consistent, also your branded keyword will grow in importance and you’ll get more direct traffic over time
Community building: the same applies to community building. If people learn about your brand, then they will actively search for it
Go off-line: meeting with people at events is another great opportunity to grow your brand, this your direct traffic
Spark curiosity: you can also be more creative. For instance, I remember a story Neil Patel tells often. When he was trying to grow his brand “Neil Patel” he had a bunch of models go around the city with a billboard that said “Neil Patel” When people so that they started to search for “who’s Neil Patel?” That hack helped him create some traction

How do you know you’re on the right path in growing your brand, thus your direct traffic? First, of course, you can monitor the growth of the direct traffic over time. Second, and most important, you’ll notice if you’ve been successful in your branding effort if your branded keyword gains some momentum. What is a branded keyword? This is simply the keyword that includes the name of your brand. Take the keyword “Neil Patel.”

This is a name of a person, but also the name of a website and a brand. Neil Patel has been implementing several strategies to grow his brand. No surprise that direct traffic is one of the primary sources for his site:

[image error]

As you can see the branded keyword “Neil Patel” has a monthly search volume of 49,500 searches! This didn’t happen overnight, but it took years of hard and smart work.

Why organic means a sustainable business

Organic traffic is what you get from Google and other leading search engines which is not paid. In short, you’re producing quality content that Google ranks because relevant to an audience that is searching an answer for specific keywords. Building organic traffic might be the holy grail to grow an online business.

However, it isn’t easy at all. I’ve been struggling for almost three years to build up a consistent stream of organic traffic that would allow me to monetize my blog. I’m still working on that. The truth is that organic traffic takes time and the proper strategy. Ahrefs.com suggests 7 strategies summarized below:

1. Choose the right words to target in your SEO campaigns to increase traffic quality

2. Make a good use of your competitors’ keywords

3. Answer the questions of your potential customers

4. Go long-tail and forget keyword stuffing

5. Revise your old content and update it

6. Get some paid social media promotion

7. Don’t blindly follow every advice about website traffic you can find online

Beside those strategies that are pretty useful, I also suggest the following:

8. Use structured data to allow Google to better understand your web pages

9. Target lower volume and less competitive keywords that solve a specific issue for your users (in a way this connects with point 3 & 4)

As Neil Patel explains:

Organic traffic boils down to providing useful content for your target audience, so that they’ll share it with others. When you consistently do that, your organic traffic will increase each month.

Neil Patel also suggests some interesting strategies in this blog post, I’m going to summarize the ones that I find most relevant:

Syndicate Infographics on Community-Based Networks
Tactical Competitive Auditing
Optimize for Long-Tail Keyword Variations
Resource Page Organic Outreach
Build Awareness of Your Site Through Public Speaking

Social media strategy to grow your blog traffic

For many either social media experts and for some SEO “experts” those are two separate channels. In reality, they’re not. In fact, what matters is bringing qualified traffic to your blog. When this happens Google measures the user engagement and experience to understand the relevance of your content. Thus, decide whether to rank it higher or not.

That is why social media is critical for SEO. If you bring qualified traffic back to your blog that is almost the equivalent of a proper SEO strategy, that will over time grow your organic traffic. No surprise, the top digital marketers we analyzed so far, also use social media as the main distribution channel for their online business.

What social media channels do those marketers use? [image error]

As you can see Facebook has the winning hand. Followed by Twitter, and YouTube. Some top marketers, like Tim Ferris and Pat Flynn (fourhourworkweek and smartpassiveincome), use mainly Facebook, Twitter, and YouTube. Others, like Neil Patel, are quite transversal and can get an audience from Facebook, Twitter, YouTube , and LinkedIn. It is interesting to see also how Pocket seems to play a critical role!

Can you double your traffic from social media? According to blog.kissmetrics.com you can and these are the strategies you can use:

Develop a Sharing Schedule
Never Share the Same Message Twice
Optimize Your Content for Each Network
Monitor Your Results

Let’s give a look at the last, yet extremely important content distribution strategy: referral traffic

Referral traffic

Referral traffic is what you get from other websites that are either linking out to your websites or from some social media platforms like Quora, Growthhackers.com or Zest.is and so on. As you can see neilpatel.com is the one that performs the best:

[image error]

Once again Neil Patel suggests a few practical strategies:

Guest blog on industry blogs
Leverage local partner sites
Strategically comment on blogs
Create ego-bait content
Get active on social media networks

But where is he getting most of the referral traffic? According to SimilarWeb those are the five top communities/referrers that are bringing traffic to Neil Patel’s website:

[image error]

If this isn’t enough here’s a nice infographic with some great tips:

Also, to improve overnight you referral traffic, this is a list of 500 places where to syndicate your content.

Also, to growth hack your blog I also have four community for you that can help you out! Keep in mind though; you can leverage on those communities if you produce relevant and quality content. If not, you’ll not see any improvement:

Top Four Communities to Join to Be a Successful Digital Marketer

Key takeaway

Many digital marketers operate like content distribution strategies as something that works separately from each other. In short, they lack a holistic view of it. Instead, content distribution is as much about SEO as it is about social media and other acquisition channels. Even off-line marketing is relevant for SEO. In fact, when people meet you at an event and look for your brand online, that is data that Google is recording.

When that data becomes consistent your brand name starts to gain some traction, and that is also how Google will send organic traffic to your site. The same applies to social media. When you gain relevant traffic to your blog. That is a way for Google to understand through user engagement whether that web page is relevant or not for specific keywords.

Those are simplifications. However, this is to remind you that content distribution is about keeping a holistic view of your content strategy. In fact, what matters at the end is how much, qualified traffic, you can get to grow your business and get a consistent ROI.

The post Best Qualified Traffic Growth Strategies from Five Top Digital Marketers appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 10, 2018 14:12

26 Ideas on How to Monetize a WordPress Blog

You might ask before you tell me how to monetize my blog, tell me how you monetize yours! I’ve been testing several monetizations strategies since 2015 when I started blogging. For instance, in the past, I used the blog to sell my info products (ebooks and online courses).

In the years the strategy has changed. As of the time of this writing I don’t monetize my blog directly. Yet I use it for personal branding and to build up a consultancy business. In fact, as of now, I believe those are the best-suited strategies for a simple reason. My traffic is still low yet very qualified. In fact, I do around 5,000-6,000 visits per month and mostly from founders or marketing and sales professionals.

Would this blog start to gain traction the monetization strategy might change toward other monetization strategies, like affiliate marketing?

What about you? How can you make money with your WordPress blog?

1. Affiliate Marketing

For instance, Patt Flynn made $51,877.40 of affiliate earnings in September 2017. It is worth exploring the list of affiliations that smartpassiveincome.com shows on its reports to see what kind of affiliate links might work for you too:

Amazon.com (Book/Equipment Referrals)

AWeber (email marketing)

Bluehost (web hosting)

ConvertKit (email marketing)

Create Awesome Online Courses (online teaching)

Fizzle (online learning)

LeadPages

LegalZoom

Libsyn

Long Tail Pro Keyword Research Tool

Market Samurai

Marketing Impact Academy with Chalene Johnson

Music Radio Creative

Samcart

SumoMe

Teachable

The FB Advantage

WP-Wishlist

2. Infoproducts

Info products are also a great way to monetize as they allow you to get 100% cut of the revenues you make. Imagine you’ve produced an ebook or online course that sells anywhere from $20 up to $399. A few dozens of customers are enough to make you the passive income you need to do what you like and live a good life. Of course, easily said than done.

3. Email marketing

When I speak to some of my clients they often ask, is email marketing still a valid way to make money? The question comes from the fact that we all hear stories of AI and machine learning and tend to think that email marketing is too old school as a monetization strategy. In reality, this is wrong! In fact, there are companies like AppSumo and digital marketers, like Tim Ferris and many others that still make a consistent amount of money through a large email list.

4. Google AdSense

I’ve never suggested AdSense as a valid monetization strategy unless you have such a large website that this strategy becomes profitable. In fact, if you have a small blog, Google AdSense won’t pay the bills. Also, I honestly don’t like my users see banners all over the pages of my site when instead I can keep my content clean and more focused on user experience rather than make a few dollars with – at times – spammy banners.

5. Consulting

This is a viable alternative for anyone, from small to large WordPress websites. In fact, this is a strategy I’m testing as of the time of this writing. Of course, if you offer consultancy, this needs to be in line with the editorial strategy of your blog.

If you’re a food blogger, you can’t sell yourself as a business consultant, but rather as a food consultant. The only limitation of this strategy is that if your blog grows fast, then you won’t be able to get all the projects that come in. However, if you wish to build a consultancy boutique and hire other people to help you out this might scale. If instead, you wish to keep a solo business this strategy will work only as long as you’re able to work on the projects that come in through the blog.

6. Branded stories

Many see sponsored content, not as a viable way to monetize a blog. I don’t think this is the case. In fact, if you offer value to your users, you can still offer content that is relevant, and that makes you money.

Let’s say a company pays you to talk about their startup. If what the startup does is truly interesting; if you have an honest interest and you know your audience would like that story, then this might be a great way to monetize. Branded stories if your blog has qualified traffic can make you good money for minimum work.

7. Paid reviews

Like branded stories, the people from your audience are looking for tools and services that can help them grow their online business. You can get paid by companies that offer those tools or services to post a paid review. Once again, this model works – I believe – only if you’re honest with yourself and your audience.

In short, I’d ask the following questions: do I use this service to grow my business? Do I find it valuable? Would my audience find it valuable too? If you answer yes to those questions then why not do it. But don’t accept just the first person that knocks your door. I’ve been receiving several offers in the past year to do paid reviews but I didn’t do it because I either wasn’t using their tool, service or I didn’t think that would have been valuable to my audience.

8. Banner Ads

It’s tough to make money in an era where people developed a high degree banner blindness. However, if you have a large website, with consistent traffic this also might be a viable option.

9. Sponsored Blog Posts

Just like branded stories or paid reviews, sponsored blog posts might work well as a monetization strategy. Of course, you have to make clear what represents a sponsored content, and I believe you must do it only if you find relevant the sponsored content. Otherwise, you risk undermining the trust your audience has for you. Plus, if you don’t believe in something this will be clear from your writing. In short, lack of belief in the product/service = bad writing = no conversion.

10. Members Only Content

If you have a small audience that follows you with determination why not make some part of your content only accessible to members?

11. Paid Business Directory

If you have a directory website that has gained substantial traffic, you can have areas of the site which are paid. Take for instance the listing of the 100 most popular business blogs. You could ask those business blogs if they wish to pay a monthly fee to have an honest review of their blog. Once again, this model works if you take the time to do proper research and you add value to your audience. Creating a listing only won’t add any value neither for the business listed nor for your audience.

12. Become a Coach

If you often write about self-growth and leadership, then you might be the right person to candidate yourself as a coach. Many people need a person that keeps them accountable. Be it the creation of a blog, a diet or just professional growth, if you’re good at setting up objectives and keep people accountable, then becoming a coach might be a good monetization strategy. Of course, do it because you’re passionate about helping others. Otherwise, this will reflect in your service, and you will not last long.

13. Accept Donations

Yes, that’s right. You only need a PayPal donation button to become a millionaire! As you might imagine, I’ve been cynic here. However, adding the donation button won’t cost you any work, and it still gives people the option to thank you for what you do with a small donation. Why not try this out?

14. Charge For ‘Premium’ Content

Let’s say you’ve written a five thousand words tutorial on how to build an SEO strategy from scratch. Rather than make it accessible entirely, you could offer a sneak preview and ask your audience to pay to have the whole tutorial. If you’ve spent time doing your research, people might pay for it.

15. Sell Your Blog

Well, if you got bored to write about the same topic, yet your blog is successful. Why not sell it? Some people make a living just by flipping websites.

16. Build your SaaS

If you’re building an online business, chances are you don’t want to set up a complicated business, that requires much work and responsibility. That applies to a SaaS (Software as a Service). While this can be very profitable. It also requires a lot of work regarding development and support of your customer base. If you’re trying to have more freedom, this might not be for you.

17. Speaking Gigs

Many like to influence other people’s lives through speaking. If you’re one of them then why not start asking to get paid for a speaking gig? The first time you might get only the reimbursement of the expenses, the second time a bit more than that. The third, you’ll have a business.

18. Create & Sell Your Product

This is by far one of the most profitable monetization strategies. However, this is might also be the hardest to achieve. In fact, building your product means investing thousands of dollars in developing it. Thus, it only makes sense if you have enough people willing to pay for it. One way to understand whether that is viable is to check whether people would be willing to finance your project? How? With crowdfunding, for instance.

19. Write Tutorials & Guides

You don’t have to be a world-class expert to write a tutorial or a guide to a topic. Let’s say you’ve matured a competence that makes you in the top percentile of people in that industry you can sell your competence through tutorials and guides!

20. Live Workshops

People like live workshops. So if you’re recognized locally why not bring your audience off-line for a live workshop? This is a great monetization strategy to connect for real with your audience while making money

21. Find Sponsors For An Event

If you’ve been blogging for a while and you have a loyal, local audience. Why not host your event? Finding sponsors that can help you organize it might be easier than you think!

22. Generate ‘leads’ for other companies

For companies that sell certain services (think real estate, insurance or car dealerships) a lead might be worth also thousand of the dollar. If you write about topics that are in the right context for those services why not help them find new leads, while you get a fixed rate for each lead you find for them?

23. Create a job board

Do you write about professional growth or how to freelance? Why not have your job board? Headhunters and companies offer great rewards for finding valid candidates to fill their vacancies.

24. Advertise pages

If you have a few, very popular pages. You can make those available to third parties to sell their services. The agreement will be on that specific page. In this way, you can experiment and offer a good ROI to the business that will use that page to have more leads.

25. Host paid webinars

Let’s say you’ve attended a webinar from another blogger that helped you get better at writing. You paid for that webinar. Why not ask that person to host his webinar on your blog? He’ll get new customers, and you’ll get a cut of the revenues. In the end, your audience will also learn something new

26. Writing Gigs

your blog is your professional portfolio. If people like what you write, why not have a CTA to offer a writing gig? If you don’t have a full-time job, this might be a great freelancing opportunity!

Key takeaway

Finding the most effective way to monetize your blog isn’t easy. In fact, I think is the most difficult part of the journey of becoming a professional blogger. On the one hand, you want to find a monetization strategy that is in line with your values, that is sustainable and that makes sense to your audience. On the other hand, you need to have multiple sources monetizations, as some might work in certain circumstances, not in others.

For instance, affiliate marketing works if done on tools . At the end of it, your most important asset is your audience trust. Affiliate marketing works if you suggest tools that your really use to grow your business.

At the same time when those tools still produce good affiliate earnings, but you don’t believe in them anymore, you need to have the courage to cut them off from your monetization strategy. Other monetization strategies, like consulting and services, while might make you gain new professional opportunities, they are not scalable as there is so much time you can offer to provide those services. Thus, if you only provide those services you might be losing business opportunities.

The post 26 Ideas on How to Monetize a WordPress Blog appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 10, 2018 11:26

What Is Google Talk to Books?

Google Talk to Books is a machine learning model build by Google, which got trained from a library of over 100,000 books; where Google search uses quality signals to understand the relevance of a web page. Google Talk to Books uses a machine learning model that looks at every sentence in over 100,000 books to find the responses that would most likely come next in a conversation. In short, this is a predictive model trained on billion pairs of statements.

As Google explains:

Our approach was to use billions of lines of dialogue to teach an AI how real human conversations flow.

Once the AI has learned from that data, it is then able to predict how likely one statement would follow another as a response. In these demos, the AI is simply considering what you type to be an opening statement and looking across a pool of many possible responses to find the ones that would most likely follow.

The technique we’re using to teach computers language is called machine learning. Google’s Machine Learning Glossary defines machine learning as:

“…a program or system that builds (trains) a predictive model from input data.”

Why is this special at all?

Not a traditional search: in fact, if used correctly, Google Talk to Books can be a great creative tool for brainstorming editorial ideas
Use natural language: the “talk” to Google is intended to be so. In fact, you can formulate any question in human, so-called natural language

In short, a machine learning model comprises three phases:

Input data
Predicting
Model

[image error]

How does Google Talk to Books work?

When you input a question in the search box, you will get an answer coming from a library of over 100,000 books. Yet this is not keyword matching. Instead, the machine learning model looks at every sentence in over 100,000 books to find the responses that would most likely come next in a conversation.

[image error]

The response sentence is shown in bold, along with some of the text that appeared next to the sentence for context.

Once again, this approach is entirely different from the traditional search. Even though I used the term “search box” don’t be fooled. In fact, in conventional search, Google looks at signals on a web page to assess the relevance of that page compared to specific keywords. There is also an AI part that leverages on RankBrain to understand the intent of a query. Yet his isn’t a predictive model. In short, based on that assessment Google will give back results.

In Google Talk to Books instead, the model predicts the answer, just like in a human conversation. However, in Google Talk to Books, there is no assessment on how authoritative might be the book from where the answer is coming from (which instead is a primary metric in Google search). Instead, it simply gives you back the sentence that seems to pair best with your query.

So the question is: what can I use this for?

Gather definitions, quickly

Content marketing, as defined by the Content Marketing Institute, is “a marketing technique of creating and distributing valuable, relevant, and consistent content to attract and acquire a clearly defined audience – with the objective of driving profitable consumer action

[image error]

The tool is quite good at gathering definitions. However, it is as good as the books available.

Finetune it for your editorial strategy

Talk to Books is an exciting tool for which there might be several applications for your editorial strategy. You’ll have to experiment a bit and find what answers would be most useful for you to discover through it.

I asked some questions to see what kind of answers I’d get:

[image error] [image error] [image error] [image error] [image error] [image error] [image error] [image error]

Key takeaway

Google Talk to Books is a machine learning tool built on a predictive model, which based on a question you might have it will predict the answer, pretty much like in a human conversation. The great thing is that you can talk to it using human, natural language. This tool can have a lot of applications. However, you need to finetune it to understand in which way it can help you enhance your creativity and make your editorial strategy more effective!

The post What Is Google Talk to Books? appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 10, 2018 08:21

Why Is AWS so Important for Amazon Future Business Growth?

When you think about Amazon.com the first things that might come to mind are the infinite number of objects you might have bought in the years on their super efficient online store. However, Amazon Inc. is way more than that. In fact, one business unit is called AWS, which stands for Amazon Web Services; a cloud infrastructure as a service that provides servers, storage, networking, remote computing, email, mobile development, and security. Started as a side project it is now a very strategic business unit within Amazon, and many bet this might become the most critical unit in the next years.

How did Amazon AWS start?

We like to think that we can scale up a startup by planning ahead its business model. However, in most cases, scalability is a matter of tinkering. Amazon’s story on how it developed AWS is quite impressive for that matter.

In fact, back in 2000 Amazon was trying to figure out a way to allow other stores to build their e-commerce on top of Amazon. That is why the Amazon team came up with an e-commerce service at the time called Merchant.com. However, they soon realized that it was impossible to do that on the existing Amazon’s infrastructure.

They had to develop it! Thus, what was supposed to be a clear, linear path, toward scalability became a total mess. That is why they started to build out AWS (a cloud Infrastructure as a Service).

What was at the time a side business has become as of 2017 significant contributors to Amazon’s sales, on what is believed to be the future of computing.

As AWS CEO Andy Jassy explained on Tech Crunch: “In retrospect, it seems fairly obvious, but at the time I don’t think we had ever really internalized that,”

Moreover, he continued: “So very quietly around 2000, we became a services company with really no fanfare.” In short, there was no “aha moment,” no growth hack, no vision but only a mess and a company figuring out how to scale up its operations.

What AWS can teach you about Amazon’s business model

As Tech Crunch reports:

What you may not know is that the roots for the idea of AWS go back to the 2000 timeframe when Amazon was a far different company than it is today — simply an e-commerce company struggling with scale problems. Those issues forced the company to build some solid internal systems to deal with the hyper growth it was experiencing — and that laid the foundation for what would become AWS.

In fact, in 2017 AWS contributed to almost 10% of its total revenues. AWS wasn’t developed out of a plan to create a new business venture. Quite the opposite. In the 2000 Amazon was struggling as it was facing scalability issues.

Indeed, in 2000 Amazon wanted to scale up its operations by allowing other merchants to build their e-commerce on top of Amazon. However, that turned out to be way more complicated than it seemed. That is how and why Amazon started to develop this new infrastructure, which would later become AWS.

That proved to be quite effective. In fact, as of Q1 of 2016, AWS cloud infrastructure services:

[image error]

Source: techcrunch.com
Why is AWS a strategic business unit for Amazon?

As explained in Amazon 2017 annual report:

It’s exciting to see Amazon Web Services, a $20 billion revenue run rate business, accelerate its already healthy growth. AWS has also accelerated its pace of innovation – especially in new areas such as machine learning and artificial intelligence, Internet of Things, and serverless computing. In 2017, AWS announced more than 1,400 significant services and features, including Amazon SageMaker, which radically changes the accessibility and ease of use for everyday developers to build sophisticated machine learning models. Tens of thousands of customers are also using a broad range of AWS machine learning services, with active users increasing more than 250 percent in the last year, spurred by the broad adoption of Amazon SageMaker. And in November, we held our sixth re:Invent conference with more than 40,000 attendees and over 60,000 streaming participants.

In fact, if we look at the numbers related to Amazon AWS there are a few interesting things to notice:

[image error]

If we look at the total net sales, Amazon AWS seems still to be a “small” part of the total revenues. However, the growth rate for AWS has been staggering. There is also another important aspect:

[image error]

The operating margin of AWS is way higher than other lines of business within Amazon. In fact, Amazon uses a business strategy that can be defined as Cash Machine Business Model:

[image error]

In other words, Amazon can operate at a higher level even if it has a very low Net Income Margin. This is because Amazon can leverage its infrastructure and practically get financed by customers to run its short-term operations.

Instead, AWS seems to move away from this logic.

How will the future of Amazon AWS look like?

As explained by Andy Jassy in a 2017 interview on Forbes:

If you look at what’s happening in the enterprise and the public sector over the last two to three years, it’s exponential and dramatic for AWS,” he says. “You can see it in really every imaginable vertical business segment. So it’s not like these enterprises are running just a couple applications. We have an $18 billion revenue run rate. You don’t have a business that big just on startups. We’re just at the beginning of mainstream enterprise mass migration to the cloud.

Why Is AWS so Important for Amazon Future Business Growth?Source: FeedPublished on 2018-06-10What Is Bitpress? The Fact-Checking Blockchain Protocol for Digital PublishingSource: FeedPublished on 2018-06-09Five Free Must-Have SEO Extensions for ChromeSource: FeedPublished on 2018-06-09Neil Patel Growth Hack to Grow a Multi-Billion Dollar SEO AgencySource: FeedPublished on 2018-06-09What Is a Business Model? 10 Successful Types of Business Models You Need to KnowSource: FeedPublished on 2018-06-05When Donald Trump Meets Kim Kardashian the Unfake News Becomes the New Unconventional PR StuntSource: FeedPublished on 2018-06-01When gut feelings is a better SEO tool than Google keyword plannerSource: FeedPublished on 2018-06-01ChaCha: the Story of the Defunct Human-Powered Search Engine That Burned $96 MillionSource: FeedPublished on 2018-05-31DuckDuckGo: Gabriel Weinberg on the Future of the Search Engine That Doesn’t Track YouSource: FeedPublished on 2018-05-28How to find Online Courses Ideas with High Earning Potential to Quickly Make Money on UdemySource: FeedPublished on 2018-05-27

The post Why Is AWS so Important for Amazon Future Business Growth? appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on June 10, 2018 01:54

What Is Bitpress? The Fact-Checking Blockchain Protocol for Digital Publishing

Bitpress is a blockchainbased ledger of trust that leverages a decentralized network of journalists to determine the credibility of news. Bitpress enables journalists and news organizations to publish bulletins in the form of original reporting, or as a response to anything on the internet, indicating a vote of credibility. The resulting network of verifications determines not only if a source is credible, but also identifies consensus and bias within the network itself

In this article, we’re diving a bit on the White Paper of Bitpress to see why this might be a good solution for the media industry

Use cases

The Bitpress network is comprised of a few simple components that enable several complex use cases:

Authors write Bulletins
Bulletins can reference other Bulletins or external content through Citations
Publishers broadcast Bulletins to the network
Publisher Nodes write Bulletins into the blockchain
Bitpress Rank (BPR) is passed between Publishers via positive and negative Citations
Users, Authors, and Publishers send and receive XBP to incentivize good journalism

What token will Bitpress use?

Native Bitpress tokens, called XBP, are used throughout the network to pay transaction fees for publishing Articles and offering Bounties to perform work, among other things. Technical details are discussed in Token Economics, Section 5, later in this paper.

What is a Bulletin?

Technical aspects of a Bulletin are:

They can contain content similar to news articles, text, formatting and other metadata
They can have more than one Author and usually have a Publisher, requiring the public keys of each signed to the Article
The unique ID of a Bulletin also serves as a twoway wallet that both accepts and disperses XBP–this may be governed by a smart contract

How do bounties work?

Bounties contain smart contract that hold onto funds like escrow accounts. The sender prefunds with XBP, but additional XBP can be contributed by other users using a Tip to increase the total Bounty paid when fulfilled.

[image error]

Source: bitpress.network
How does the Bitpress protocol work? The proof of trust protocol

Bitpress uses Proof of Trust as its consensus protocol. Nodes are selected pseudorandomly to generate block, with more trusted nodes having a greater chance of being selected.

Bitpress leverages the security of Proof of Work with the utility and governance of Proof of Stake.

Blockchains are natively transparent and decentralized, both key components for any successful trust protocol.

How does that Bitpress Rank system work?

Bitpress Rank (BPR), an algorithm for measuring the credibility of news. Broadly speaking, the theory behind the process is:

It should be selfpolicing.
Reputation should only be obtained by consistent good behavior.
The system needs to be robust in the face of potential attacks from malicious users.
The process should be open source and available to inspect, clone, and modify.

What factors are taken into account in the Bitpress Ranking system?

Citations from Publishers who are very trustworthy carry much more weight than those from new or poorly rated Publishers. Publishers become trustworthy by actively participating in the system. A scaling factor is used to ensure each Publisher has a minimum amount of inbound trust before they are considered credible, and a decay factor is used to ensure continued participation.

Publisher trust: Publisher trust is calculated using a slightly modified version of the PowerTrust algorithm
Importance of power nodes: One of the advantages of using PowerTrust is that it dynamically calculates a set of m power nodes that represent the most trusted Publishers in the system
Bulletin trust: Once the global trust values have been computed for each Publisher, we perform a modified version of PageRank that accounts for negative links and weights Citations by the amount of global trust of their Publisher
Bulletin consensus: Bulletin consensus provides an additional perspective using the number of positive and negative designations across the blockchain combined with the trust score to produce a weighted score of the consensus of a Bulletin across the blockchain

How does the Bitpress PageRank algorithm work?

Any algorithm that ranks the trustworthiness of a publisher or authenticates a source needs to be clearly understood
Any successful solution also has to be immune to manipulation and censorship — requiring it to be independent of any government or commercial entity

In the same way that Bitcoin uses this blockchain technology as a way to exchange money, Bitpress uses this technology as a way to exchange trust.

Bitpress uses these links to construct a network of cross-validations between all media organizations.

Isn’t this what Google’s PageRank does?

PageRank assumes that all links between articles are an endorsement, but in the real world links between articles can mean many different things such as disagreement, newsworthiness, and novelty.

How does BitPress’ PageRank algorithm differ from Google’s PageRank?

In order to account for links that do not signify endorsement, Bitpress allows journalists to indicate the context of their links.

[image error]

Source: medium.com/bitpress

Another way that Bitpress differs from Google’s algorithm is that PageRank treats all links equally, even those from potentially untrustworthy domains.

In contrast, Bitpress weighs the impact of each link according to the overall trust of the publisher.

Bitpress business model explained

Publishers must pay a market rate in XBP based on transaction size and network congestion. These fees act to disincentivize spam and other unwanted contentPublishers have the option of hosting and running full nodes, or Power Nodes, that act similarly to Bitcoin miners, collecting and splitting the total XBP tokens of all Bulletin fees contained in a block in exchange for powering the network.

Micropayments,
paywalls
subscriptions

As expressed in the white paper:

Experts believe that users will never pay for news, but we believe that paying for news simply needs to be easier

Tips: those are transactions of XBP sent by users to Bulletins, Publishers or Authors. Tips are differentiated from micropayments in that they are initiated freely from users
Pledges: Every successfully sustainable model for journalism includes a combination of donations, public funds, private grants, and memberships
Bounty economics: A Bounty allows any user to indicate interest in a particular Bulletin they would like to see produced. The user incentivizes the production of this Bulletin by sending XBP to the Bounty smart contract, which is dispersed upon fulfillment
Pay for news creation: users will pay journalists to commission specific content pieces
Factchecking as a service: small publishers and independent journalists cannot always afford the intensive and expensive fact-checking process, and even when they can, the public may want to verify this. A factcheck for a specific Article or specific content in an Article
Smart contracts: smart contracts are a set of rules that govern a transaction. Authors, and Publishers to send and receive XBP in virtually unlimited ways
XBP cryptoconomy and Bitpress ICO: those will be respectively the currency and the initial coin offering that will allow the platform to function in the short and long run

To read more you can download the Bitpress White Paper.