Gennaro Cuofano's Blog, page 262
March 18, 2018
The Featured Snippet vs. The Knowledge Panel [My SEO Experiments with Google for March 2018]
If you follow me on LinkedIn or you’ve read this blog in the last weeks you know that I’ve been experimenting a lot with the featured snippet. In fact, as part of the team at WordLift in the previous year, I’ve been training dozens of people on how to integrate structured data and open linked data in their SEO strategy.
As of 2018 structured data and open linked data are two crucial factors that Google is taking into account to rank web pages. Not only that. In fact, nowadays things are changing, and Google‘s search algorithm is getting smarter and smarter. For that matter, there are three crucial aspects of search to take into account:
Google‘s featured snippet
Google‘s Knowledge panel
Voice search
From a superficial look, those might seem three separated aspects of SEO. However, that is not the case. In fact, with a proper Semantic SEO strategy, you can target them all.
A little caveat: the purpose of this article is to show you the findings of my experiments. I try to test things, not in the sense of gathering data but rather to do simple experiments with a low probability of succeeding. When one of those does succeed; for me the signal is clear. There is something in the experiment that Google liked. I can’t say exactly why and what. But that doesn’t matter. As long as you follow the steps I’ve taken chances are you’ll also get similar results.
Start with the end in mind
A few weeks back on this blog I published an article about Google‘s business model:
What Is a Hidden Revenue Business Model? Google’s Business Model Explained
I intended to target a long-tail keyword with low search volume and competition and see if I could trigger a featured snippet. Once and if the featured snippet would have been triggered. I’d wait a few days and then test whether that also triggered a voice search from my Google assistant. That is what I did, and it worked!
In short, the question I targeted was:
“what’s a hidden revenue business model?”
After 24 hours from publishing the article associated with that query, the featured snippet appeared:
[image error]
After a few days that featured snippet has become a trigger for the voice search answer you get from Google‘s assistants:
How did that happen?
Dissecting Google’s featured snippet
Going from the featured snippet to voice search is not automatic. Backlinko recently analyzed over 10,000 Google Home search results, and it found that a featured snippet 40.7% of all voice search answers came from a Featured Snippet.
Of course, thinking about a fixed percentage might be deceiving as Google continuously updates its search algorithm. Also, voice search is so new that it’s hard to say how it will evolve in the next months.
Yet as of now a featured snippet is a powerful way to get into voice search, that is also why I like a strategy based on targeting for the Google‘s featured snippet.
In a recent post I explained how I triggered the featured snippet and what steps I did take to make that happen:
[image error]
Above you can see a summary and breakdown of five critical aspects. I suggest you read the article below to have a more in-depth overview:
What Is Google’s Featured Snippet Framework? How to Get a Featured Snippet for Your Blog
Google’s search algorithm is smart enough to split text and images: how to optimize for both image and text in the featured snippet
In my editorial strategy, you’ll see that in some cases I divide up the title of an article in two parts. The first part is usually a question. In fact, the purpose of that question is to target a featured snippet.
Recently I had written an article on DuckDuckGo business model:
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
I was targeting the question: “How does DuckDuckGo make money?”
However, this one was way more competitive as the featured snippet was already taken by Quora (as you might imagine Google trusts Quora way more than a small blog like mine). However, not all is lost.
Thus, I had already an answer to that question on Quora. So I used the infographic I had produced for my article, and I added it to the same question on Quora.
My reasoning was simple. First, the question that was ranking first on Quora and that Google was using as featured snippet didn’t have any image inside. So why not try to see whether I could trigger a featured snippet by signaling Google that my answer was more comprehensive as it comprised the infographic.
Second, by positioning my content on Quora, I was also trying to signal to Google that the same content coming from my blog could be trusted. In short, I was trying to use Quora as a vehicle to bring credibility toward my blog. Something interesting happened.
[image error]
The day after I had repurposed my content over Quora. When I typed on Google the question “how does DuckDuckGo make money?” it triggered the old featured snippet.
This time though, while the text was coming from the old answer; the image was coming from my answer (which includes a graphics I had inserted inside). Even though I didn’t manage to steal the featured snippet; I still managed to position my image inside the featured snippet.
In short, I believe since the text answer from Quora didn’t provide any graphics. The search algorithms pulled it out from mine.
In other words, Google‘s search algorithm is smart enough to split the featured snippet in half: text and image.
Remember the purpose of the featured snippet is to give a direct, short answer to users for questions. Further, the goal is to provide relevant content that can quickly answer, be it text or an image.
That is also why at times the search algorithm might get the text from a site and the image from another site. Therefore, when you’re planning to trigger a snippet, you have to make sure to do a consistent strategy for both text and image. Both have to be prone to be “snipped!”
Do you want to skip the line? Target the featured snippet!
In 2017 ahrefs.com analyzed 2 million featured snippets. From the analysis it turned out that a featured snippet didn’t always come from the first position on Google‘s SERP:
[image error]
Source: ahrefs.com
From the data above you can see that also search results that are at the 4th or 5th position have chances of getting the featured snippet. This is important because if you do get it, then you’ll steal traffic from the first position.
[image error]
Source: ahrefs.com
As pointed out by the same study, when a search result is ranked first, and there is no featured snippet, it gets 26% of the traffic for the overall query. When instead, there is a featured snippet on that page the first result only reaches 19.6% of traffic. In other words, the featured snippet steals traffic from the first positions.
At times a featured snippet might be triggered by the last results on the first page, just like it happened to me with this query:
[image error]
Even though my result was in the 7th position in the SERP (therefore according to ahrefs.com study it only had 0.7% of chances of getting snipped) it still triggered a featured snippet.
Featured snippet vs. knowledge panel: Who’s the winner?
Another experiment I had done was based on personal branding. In short, I was trying to assess whether I could trigger a featured snippet on the query “who’s Gennaro Cuofano?”
Thus, control my brand through Google. Therefore, I set up a page for the scope and used a strategy that I explained in this article. This experiment is important because usually a featured snippet of a person is triggered either when there is a Wikipedia page that supports it. Or the site from where it’s coming from has high authority. Yet I wanted to see whether I could do that with my small blog based on the quality of data I provided to Google.
It did trigger it:
[image error]
Thus, the featured snippet showed up. Also, something interesting happened! A knowledge panel that before wasn’t there was triggered:
[image error]
In this particular case that is pulling up information about me taken from an author page, I have on Amazon.
What is a Google Knowledge Panel?
When people search for a business on Google, they may see information about that business in a box that appears to the right of their search results. The information in the box, called the Knowledge Panel, can help customers discover and contact your business.
How do you get one?
Like search results, whether or not a business’s information will appear in the Knowledge Panel is determined by a variety of factors. Relevance, distance, and the prominence of the business all contribute to its standing in local search results. Verifying a business does not guarantee that it will appear in the Knowledge Panel.
In short, it seemed like the work I’ve done for the featured snippet (Schema and Open Linked Data might have been the most significant contributors) had also triggered the knowledge panel.
However, as of the time of this writing, the knowledge panel has eaten the featured snippet:
[image error]
Like in a poker game where there are winning hands. If I had to compare featured snippet to knowledge panel; I’d say the featured snippet is like having a four of a kind. Instead, the knowledge panel is like having a straight flush!
In fact, today if you look for “Gennaro Cuofano” you’ll only see that box on the right side of the search box (that is the knowledge panel).
As we’ve seen the knowledge panel has a different purpose than the featured snippet; while the featured snippet aim is to answer a specific question. The knowledge panel gives relevant information about a business.
The featured snippet is way more fluid and based on rankings; the knowledge is based on the ability of the information you’ve provided to enter Google’s knowledge vault. While there is no sure way to trigger a knowledge panel; getting a featured snippet might facilitate it. When the knowledge panel cannibalizes the featured snippet that is a good sign – I argue – as this implies that Google might be trusting more your data.
As pointed out by Dr. Peter J. Meyers on Moz, over time featured snippets get cannibalized by knowledge panels:
[image error]
Source: moz.com
Why does that happen?
As Dr. Peter J. Meyers pointed out:
It’s likely that Google is trying to standardize answers for common terms, and perhaps they were seeing quality or consistency issues in Featured Snippets. In some cases, like “HDMI cables”, Featured Snippets were often coming from top e-commerce sites, which are trying to sell products. These aren’t always a good fit for unbiased definitions. Its also likely that Google would like to beef up the Knowledge Graph and rely less, where possible, on outside sites for answers.
Therefore, over time Google‘s knowledge panels might consolidate around websites like Wikipedia, Amazon and so on.
What’s going on with Google?
A debate is going on about what’s happening with Google. In fact, Google introduced a featured snippet with no SERP:
[image error]
In other words, for some queries, Google prefers to give a result in the form of a featured snippet. If users want to see the other search results they have to voluntarily click on “show all results.” This seems to be an important change as for the first time Google is hiding its results page.
On the one hand, this isn’t surprising as those queries (like knowing what’s the time) have a clear intent. In short, users just want to get a straight answer. In this case, Google is acting just like Wolfram Alpha. In addition, as pointed out by Bill Slawski this isn’t new as it was since 2005 that Google started to work on “Just the Facts, Fast”:
Google started providing answers to questions in 2005, as they described back then in “Just the Facts, Fast”: https://t.co/rZ1aee690V https://t.co/C6K4jy8053
— Bill Slawski
(@bill_slawski) March 15, 2018
Yet now the question comes naturally: Will Google cannibalize content from the SERP? Is going getting into the content business?
Well, I thought what a better way to solve the impasse than to ask Google itself. If you think about it – I argue – it’s all about its business model. If the business model fails, then the company doesn’t exist anymore.
So I asked Google itself, what is its business model:
[image error]
The answer is clear: “Googe is a one-stop shop for helping you find things.”
Now, “one-stop shop” means that users can get all they need right there, on that blank page. Thinking about how Google has evolved in the last years. There is no doubt that Google needed third-party websites – it still needs them – to offer relevant content to its users, besides paid ads.
Imagine a web filtered through Google where all you got was a bunch of paid ads. Who would have found that interesting at all? Instead, when Google introduced its paid network for publishers (AdSense), this allowed any site to monetize their content quickly.
As anyone – that deals with Google – knows, the search engine from Mountain View loves content. This spurred the birth of a content industry on the web, which main aim was to feed as much web pages to Google. The deal – although implicit – seemed to work quite well. Google got “quality content” from third websites. It allowed them to monetize it; while those websites remained the intermediaries between Google’s users and Google itself.
This deal made sense for anyone. In fact, Google didn’t have enough power to produce content itself. However, starting 2012 Google has introduced a set of initiatives (Knowledge Graphs, Hummingbird, and RankBrain just to mention a few) that made it way smarter than it was. Those initiatives allowed Google to gather content around the web, converts it into data, which can be easily manipulated to create new data. That data, in turn, can become content, served to its users.
Thus, if Google can produce that content itself? Would it still make sense to show search results coming from third-party websites?
The question remains open. It’s too early and too hard to say what will the future hold. There are a few considerations to make though. First, if we look at AdSense compared to AdWords. There is no doubt that the former help fuel the latter. However, it is true that Google shares most of its revenues with AdSense partners. That is also why AdSense has such lower margins compared to AdWords.
Thinking business, if I were Google, I’d try to focus on the part of the business that has high margins. Second, Google has no control over third-party websites part of AdSense. As a company that wants to be a one-stop shop, it also makes sense to have as much control over its content. Thirds, today for Google might be cheaper to index the visible web and give back search results. But what if it becomes cheaper to create its own content? Imagine how much resources would Google save in terms of crawling budgets, and spamming controls.
Another little caveat: featured snippets are volatile as they depend on ranking and other aspects that Google might take into account from time to time. Thus, some snippets that appeared at the time of this writing might have disappeared. However, the overall strategy proved to be successful, at least in the short run. In fact, the objective isn’t just the featured snippet but the knowledge panel, which is usually way more stable over time. Yet, one and the other might often be connected if in you use a Semantic SEO strategy based on structured data and open linked data.
Numbers and Results
Let’s talk numbers now!
[image error]
As you can see even though the number of total impressions deteriorated by 18% (from 31,170 impressions down to 25,525). On the other hand, if we look at total clicks, they went up by 6% (from 521 to 554) in the last 28 days. In addition, the average CTR (click through rate) has increased from 1.52% to 2.17% (this is a staggering 42% increase). Also, the average position of my keywords on the SERP increased from 47.8 up to 45.9.
If we look at the numbers in absolute terms, they might seem small. Yet, if we take into account the % increase that is not bad at all! Imagine this kind of metrics improvement for a large site.
[image error]
If you look at the users for this month (in blue) from organic traffic alone, compared to the previous month (in orange) that is clear that the slope is upward. I also noticed that some of that traffic was coming from specific questions:
[image error]
On those keywords the volume is low. Yet as of now they seem to have a good click-through rate. Of course, numbers are still too small to draw any conclusion. However, It will be fun to see how traffic coming from those keywords will evolve over time.
Now it’s time to go back and make more experiments!
The post The Featured Snippet vs. The Knowledge Panel [My SEO Experiments with Google for March 2018] appeared first on FourWeekMBA.
March 17, 2018
What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model Explained
The cost per first stream is a metric used by Amazon to assess how much it cost to the company to hook a customer on their video platform, Prime Video. That is given by the show’s production and marketing expenses divided up to the number of people who stream that program after signing up. The lower the cost the better.
Your best email below to get great content straight to your inbox!
According to Amazon‘s internal documents disclosed by Reuters, a few interesting things came out about how Amazon is using its streaming subscription platform – Prime Video – as a way to add value to the overall business.
Amazon’s diversified yet integrated business model
When you look at Amazon‘s business model you might be fooled to believe that in some way each part of its business is a stand-alone unit, siloed from the rest of the company:
[image error]
With a more in-depth look, you realize that is not the case. However, when we look at things we like to believe that they were planned. Yet Amazon‘s business model is fascinating for the opposite reason. In some way, some of the businesses had started as a necessity of the company to scale up.
One example is the incredible story of how Amazon developed AWS, as a pure necessity to allow stores to build e-commerce on top of Amazon‘s engine. What was initially a side business; it had become a significant contributor to Amazon’s success.
Other times, however, when a company unlocks financial resources, not available in the past. This allows that company to start “designing” its business model. That is the case of how Amazon is using the streaming platform Prime Video, to attract subscribers, retain them and most importantly convert them into Amazon‘s products buyers.
Breaking down the (not any more so) secret revenue formula of Prime Video
[image error]
Amazon Prime is a subscription service offered by Amazon. It comprises a two-day fast delivery service for products purchased through Amazon and a streaming platform where a user can access to videos and music, just like on Netflix. You might wonder, what buying a physical product on an online store has to do with a subscription to a service that offers video streaming?
Apparently a lot!
Use traditional media for higher conversion rates
At a 2016 technology conference near Los Angeles, referring to film and TV customers Jeff Bezos said: “they convert from free trials at higher rates” compared to users that do not stream videos on Prime.
As reported by Reuters:
For example, the first season of the popular drama “The Man in the High Castle,” an alternate history depicting Germany as the victor of World War Two, had 8 million U.S. viewers as of early 2017, according to the documents. The program cost $72 million in production and marketing and attracted 1.15 million new subscribers worldwide based on Amazon’s accounting, the documents showed.
Lower acquisition cost by creating Hollywood Buzz
Another advantage Amazon gets from Prime Videos is based on its acquisition costs. In fact, Amazon calculated that the show“The Man in the High Castle,” drew new Prime members at an average cost of $63 per subscriber.
Considering that Amazon‘s Prime subscriptions come at $99 on a yearly basis that seems a scalable way for Amazon to acquire new customers as quickly as possible. True, not all shows will be as successful yet when new Prime members come in there is also another related vantage for Amazon.
The Golden Globe as a hook to sell more shoes
When we win a Golden Globe, it helps us sell more shoes
said Jeff Bezos at a 2016 technology conference near Los Angeles
In other words, Prime Video is a great way to attract new customers to Amazon‘s store. As Jeff Bezos pointed out, entertainment is quite effective in driving merchandise sales.
That is also why in 2010 Amazon launched its Studios to develop original programs. The objective is clear: grab Hollywood buzz to sell more merchandise
The logic behind the cost per first impression metric
Imagine for a second you have a store. That store has on average ten customers each day. Yet one day the number goes to twenty. What had happened? Apparently, ten customers rushed in to buy the new product you had in store. Thus, you monetized thanks to that new product.
Going back to Amazon Prime, the cost per the first impression allows it to see what shows are driving up subscriptions. In fact, when Amazon had launched “The Gran Tour Season One” its cost per the first impression was $49. In other words, new Amazon Prime subscribers watched “The Grand Tour” as soon as they joined in. Further allowing Amazon to improve its customers’ base.
[image error]
Source: reuters.com
This metric allows Amazon Prime to understand which shows are driving more new subscribers in. Thus, what shows are generating more value for Amazon.
Summary and Conclusions
Most of the times a business model is the result of tinkering. When financial resources not available in the past are unlocked; some elements might be intelligently designed to improve the overall value of that the organization.
Take Amazon Prime Video’s case. Amazon now uses Prime to acquire new subscriptions to its Prime program that also comprises a two-day fast delivery. Why? For a few reasons:
offer another service on top of its platform
lower its acquisition costs
improve its retention
boost sales of other seemingly unrelated physical products
This strategy has proven quite powerful.
Amazon Prime Video revenue model Explained with an Infographic
[image error]
What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model ExplainedSource: FeedPublished on 2018-03-17How Does Quora Make Money? Quora Business Model ExplainedSource: FeedPublished on 2018-03-09How Does Wolfram Alpha Make Money? Wolfram Alpha Business Model ExplainedSource: FeedPublished on 2018-03-07Ryan Holiday on Influencer Marketing: This Is How to Scale up Sales with Influencer MarketingSource: FeedPublished on 2018-03-05What Is Google’s Featured Snippet Framework? How to Get a Featured Snippet for Your BlogSource: FeedPublished on 2018-03-04How Does Pat Flynn Make Money? The Smart Passive Income Business Model ExplainedSource: FeedPublished on 2018-03-03How Does TOMS Shoes Make Money? The One-For-One Business Model ExplainedSource: FeedPublished on 2018-03-02How Does Airbnb Make Money? Airbnb Peer to Peer Business Model ExplainedSource: FeedPublished on 2018-03-01What Is Cash Conversion Cycle? Amazon Cash Machine Business Model ExplainedSource: FeedPublished on 2018-02-26How Does DuckDuckGo Make Money? DuckDuckGo Business Model ExplainedSource: FeedPublished on 2018-02-25
The post What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model Explained appeared first on FourWeekMBA.
March 9, 2018
How Does Quora Make Money? Quora Business Model Explained
Quora is a question and answer website which allows anyone to ask questions publicly or anonymously. As of now, Quora grew thanks to several rounds of investments from venture capital firms. Among those firms, Peter Thiel‘s Founders Funds and Paul Graham‘s Y Combinator. Quora now generates revenues with advertising.
Your best email below to get great content straight to your inbox!
What is Quora?
Founded by Adam D’Angelo, former Facebook’s CTO, Quora is a question and answer site that allows anyone to ask any question; while it is possible to do that on Google as well. The main difference is that on Quora you get answers from real people. Google, instead, matches a user query with content available on the web. Also, Quora allows users to ask questions publicly or anonymously.
Quora has over 190 million of monthly users, with millions of questions asked and answered. Besides being a Q&A platform, Quora is a huge, engaged community. Also, many public people take the time to answer questions personally. Just like Hillary Clinton starts to answer questions on Quora during the electoral campaign. Or famous authors, like Tim Ferris, organize Q&A session during his book launch. Therefore, you can access expertise for free and easy. This, of course, represents a great success for Quora.
What are the most frequently asked questions on Quora?
The most asked questions on Quora are in the following categories:
career advice (how can one become a good machine learning engineer?)
life advice (what skill should I learn for 1-2 hours a day that will help me become successful?)
medicine and healthcare (what is the best natural treatment for cluster headaches?)
politics of the USA (how did Donald Trump win the 2016 US Presidential Election?)
dating and relationships (how can you be sure the person you’re going to marry is the one?)
jobs and careers (is software development really a dead-end job after 35-40?)
[image error]
Source: https://techcrunch.com/2017/04/21/uni...
How much is Quora worth?
After receiving a series D investment of $85 million, Quora got total funding of $452 million. This places Quora among the so-called Unicorns startups with a valuation of $1.8 billion according to Tech Crunch. If the company keeps growing and attracting larger investors it will go for an IPO. However, before taking this step, Quora has to be able at least to generate revenues to sustain its growth.
How sticky is Quora? Quora vs. Reddit
By looking at the comparison between Quora and Reddit, it seems clear that Reddit is stickier than Quora:
[image error]
[image error]
In fact, regarding page views and time spend on page Reddit shows 10:33 minutes and 7.43 respectively. Compared to Quora 2:34 minutes and 2.15 page views.
However, there are a couple of considerations here. First, Reddit has been around for longer (it was founded in 2005). Second, Reddit is more of a forum, where anyone takes part of the discussion. Quora is more based on writers ability to engage users. And Quora’s ability to create the right environment to retain writers.
Therefore, Quora is much more about making knowledge and expertise available to its users. Even though both platforms are accessible from Google search results. Often answers on Quora are way shorter than discussions on Reddit. Thus, many users might just get in, read the answer and leave.
Also, ever since Google is experimenting with the so-called featured snippet, it uses more and more answer to complex queries, coming from Quora as a way to answer to users questions directly from the search results. Therefore, Google might be de facto stealing traffic from Quora itself.
[image error]
See how Google answers with a featured snippet to an otherwise complex query by getting content from Quora
Quora’s success?
Quora is a Q&A platform that empowers people to share and grow the world’s knowledge. The vast majority of human knowledge is still not on the internet. Most of it is trapped in the form of experience in people’s heads, or buried in books and papers that only experts can access. More than a billion people use the internet yet only a tiny fraction contribute their knowledge to it. We want to democratize access to knowledge of all kinds—from politics to painting, cooking to coding, etymology to experiences—so if someone out there knows something, anyone else can learn it. Our mission is to share and grow the world’s knowledge, and we’re building a world-class team to help us achieve this mission.
I believe there are three critical factors that contributed and contributes to Quora success:
Questions that Google can’t answer (Yet)
From the mission above it’s clear that Quora is about knowledge. When Google started out; it was about organizing the information scattered around the web with smart algorithms. PageRank was the most intelligent at the time. Able to put an order to a network made of billion disjoined pages.
Quora instead, started from the opposite assumption. Take what’s inside experts’ people heads and make it available to anyone. That is true; Google is moving more and more toward giving as many answers as possible to its users (we saw that with the featured snippet and with the transition toward voice search).
However, that knowledge is still organized by algorithms that extract relevant information from web pages. Instead, Quora starts from human creation, and curation. The algorithms play a role just in understanding people’s preferences, the so-called feed. In a world that moves swiftly toward AI (Google now is an AI first company) having this human approach, for now, might be the winning hand.
This connects to the next point.
Human vs. AI
In the digital marketing space, ChatBots are taking over. However, for how much any online business loves the idea of software that creates content automatically. People still like to interact with people. Quora allows just that. In fact, not by chance, the most popular questions are those related to life and career advice. We all want to feel understood. There’s no better way than having other people sharing their experiences. The paradox here is that in a digital world that moves toward automation and AI, having a community based on human interactions might be a winning strategy in the long run.
Quora is about Quorans
Another critical aspect is that Quora is as much about asking questions, as it is about answering them. In fact, Quora does not only provide value to its users but also to people who write. Many aspiring writers get on Quora each day to honing their craft. That is why they love to call themselves Quorans.
Key Quora partners
There are few stakeholders involved in Quora’s success. Those are:
Top Writers
VIP Writers
Users
Power Users
Publishers/Online Businesses
Investors
The possible business model evolution of Quora
As of now, Quora’s business model is based on two main foundations:
investors, looking for ROI through exit or IPO
and publishers/online businesses looking for ROI through advertising
Quora is successfully generating revenue through its advertising program. However, it isn’t clear yet whether the company is profitable or not. Therefore, if as of now the company has still to rely on financial resources coming from investors plus advertising, the future will move more toward advertising alone to allow Quora to become profitable. Of course, other monetization strategies will be experimented in the meanwhile.
Quora Business Model Explained
[image error]
The post How Does Quora Make Money? Quora Business Model Explained appeared first on FourWeekMBA.
March 7, 2018
How Does Wolfram Alpha Make Money? Wolfram Alpha Business Model Explained
Wolfram Alpha is a computational knowledge engine that makes money by selling a pro subscription for students and educators that starts at $4.75. It also sells apps for iTunes and Google Play Store starting at $0.99. Further, Wolfram Alpha provides APIs for startups or enterprises beginning at $25 per thousand queries.
Your best email below to get great content straight to your inbox!
What is Wolfram Alpha?
Wolfram Alpha is a computational engine. In short, when you look for something through Google, the search engine looks through its massive index of web pages to find an answer that fits your query. Therefore, most of the time the search result is based on a web page that already exists, curated by a human. Instead, Wolfram Alpha computes the answer based on raw data it has in its curation pipeline, which gets manipulated by its algorithms to give a proper answer.
Let’s say you asked a comparison between Apple vs. Microsoft; rather than look for data and show it. Wolfram Alpha‘s engine will manipulate the raw data it has in its curation pipeline through normalization, validation, crosslinking, analysis, linguistics, expert review and so on. It eventually went to its data cloud to be further manipulated to its computation technology and give back results.
[image error]
How does Wolfram Alpha make money?
It makes money by selling three kinds of products:
Apps for iTunes and Google Play Store
[image error]
Pro subscriptions memberships for students and educators
[image error]
APIs for startups and enterprises
[image error]
What are Wolfram Alpha key partners?
Wolfram Alpha has three main target customers:
Educators
Students
Enterprises
Wolfram Alpha vs. Google Business Model
Google’s primary business model is based on advertising. Wolfram Alpha monetizes on products (like Apps and APIs) and subscriptions. That is also why the logic behind Wolfram Alpha and Google is entirely different. Since Google monetizes by advertising, it has to give results quickly as possible. Wolfram Alpha main strength is its ability to provide an answer to complex queries (like comparison among companies’ financials).
Summary and Conclusions
Wolfram Alpha is a computational knowledge engine that computes answers on the fly by getting the data from its curation pipeline and after manipulating it gives back answers to its users. It is a powerful engine that has a different logic compared to Google. While Google uses its massive index to provide search results, Wolfram Alpha uses its powerful algorithms and its curated data pipeline to find an answer to complex queries.
It is true though that the difference between Google and Wolfram Alpha is getting narrower. In fact, Google uses more and more computational power to give back relevant answers to users’ queries.
Wolfram Alpha Business Model Explained
[image error]
Handpicked related articles:
Wolfram Alpha: The Physicist Turned a Successful EntrepreneurThe Power of Google Business Model in a Nutshell
DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game
The post How Does Wolfram Alpha Make Money? Wolfram Alpha Business Model Explained appeared first on FourWeekMBA.
March 5, 2018
Ryan Holiday on Influencer Marketing: This Is How to Scale up Sales with Influencer Marketing
I took the opportunity to ask some questions to Ryan Holiday, bestselling author & media columnist as he was hosting a Q&A open session on Quora, on occasion of the launch of his new book, Conspiracy.
I asked him what kind of media coverage he has found most effective for his distribution and selling strategy. The answer from Ryan Holiday was quite surprising and plenty of useful tips if you’re trying to scale up sales.
The approach Ryan Holiday suggests I believe is well-fit for scaling up sales of products and services which are in the range of $20-$100. In fact, this playbook I believe does not apply to those companies that rely on the sale of services that involve more stakeholders for a final decision.
This kind of sales, which we can define as complex sales require the effort of experienced sales professionals able to deal with several parties before the transaction gets closed. For other products and services that mostly target a large audience or individuals which are the ones who make the purchase decision, the sales playbook showed in this article can be very effective.
NYT vs. Tim Ferris Blog
There is no way a few years back it would have been possible to compare a historical newspaper like The New York Times with a blog, even if that is the blog of the most renowned author, podcaster, serial investor and start-up mentor, Tim Ferris. Yet that is not what Ryan Holiday suggests. In fact, when the NY Times profiled Ryan Holiday’s book, “The Obstacle is the Way” he jumped to Amazon on #1,500; That you might expect. It was December 2016.
[image error]
However, when Tim Ferris posted a picture of the same book on his Instagram page on January 2017, Ryan Holiday‘s book jumped at #44 on Amazon!
A post shared by Tim Ferriss (@timferriss) on Jan 1, 2017 at 9:30am PST
This is the chart that Ryan Holiday shared on Quora:
[image error]
Does it mean that Influencer Marketing is more powerful than media coverage? Not necessarily. Both need to be used in conjunction. However, here influencer marketing has a precise meaning, and it does follow some basic rules.
Before we get into that, when is influencer marketing effective?
It’s all about time, the place, and the tenor of the coverage
When Tim Ferris posted about Ryan Holiday‘s book, the time was right for it to go viral. In fact, Tim Ferris is famous for getting things that aren’t yet mainstream to a broad audience. When he posted another picture of the coin produced by The Daily Stoic store this fueled sales even further, at the point that orders were pouring in each minute,
A post shared by Tim Ferriss (@timferriss) on Jul 5, 2017 at 8:33am PDT
However, judging the media coverage from NY Times only from the short-term sales standpoint would be reductive.
Short vs. long-term strategy
As Ryan Holiday pointed out about his new book,
The New York Times recently reviewed my book Conspiracy and while the review sold little in the way of copies in the short term, the fact that the Times called the book a “profound masterwork” will almost certainly impact sales in the long run (we’ll put that blurb on the cover) and it will likely be transformative for my career.
Therefore, something like a review from The New York Times rather than having an immediate impact on sales it will have it in the long run. That is in part because these reviews are featured on the book cover. Thus, over time this makes people that are thinking to buy the book more prone to do that.
But what’s the magic formula to scale up sales?
There is no magic bullet
The point: There is no magic bullet. Sometimes you think a piece will blow everything up and it does nothing. Other times, something you weren’t even expecting changes everything.
Generally though, I am of the mind that influencer matter more than media. It’s also more in your control and costs less money. A good publicist might cost $15k a month…sending product to cool people costs only the cost of the product.
Ryan Holiday has a point. At times what scale-up sales might be something unexpected. Also, as of now, there is not yet a comparison between the cost of a publicist (that as Ryan Holiday points out might cost $15k a month) and an influencer. I’d like to remark “as of now.” In fact, the influencer marketing industry is still at its embryonal stage. Would influencers start asking for money to feature products, that, of course, would reduce the advantage of using influencer marketing over PR.
But what is the sales playbook to follow for influencer marketing?
The sales playbook
According to Ryan Holiday‘s answer, there are a few basic principles:
Pick up the right influencer
At one point, Ryan Holiday tells the story of Marc Ecko who built his clothing brand Ecko Unltd into a billion-dollar company. As Ryan Holiday explains:
Marc wasn’t just sending out random stuff to random people—he knew who mattered and he knew what they liked. When Spike Lee directed the movie Malcolm X, Marc “sent him a sweatshirt with a meticulously painted portrait of Malcolm X on it.” The sweatshirt took two days of work to make—even though there was no guarantee Spike would even see it. It turned out that Spike loved the gift and sent Marc back a signed letter. Two decades later, Spike Lee and Marc Ecko are still working together.
If you’re trying to use influencer marketing as a way to scale up sales, then you have to know who to focus on. You can’t just randomly pick any influencer in your industry. Like in Tim Ferris’ case, when he mentions something or someone that product or person instantaneously gains traction. That is because Tim Ferris has a very engaged community. In short, don’t look for the most popular but to the person that has an engaged community.
This leads to the second point.
Fante and the influencer network effect
Ryan Holiday also tells the story of John Fante, and how his works were wholly forgotten until Charles Bukowski didn’t pick up his book, Ask the Dust, in Los Angeles public library. Bukowski started to tell anyone he knew about that. It awoke interest about that novel till these days:
I heard about Fante from another one of his champions, the writer Neil Strauss, who had called Ask the Dust his favorite novel in an interview. I picked it up because of that recommendation. In turn, I have become a champion of Fante and helped sell thousands of copies of his work to my own fans. I tell this story to illustrate the power of champions—it can bring art back from the dead.
Therefore, don’t pick up just an influencer, look for champions. Those people that when figuring out about something exciting they need to tell anyone they know!
Never dismiss anyone
This principle is easy to forget. We tend to judge people based on their following and influence. However, you don’t know how that person can turn out in the future. So, Ryan Holiday says:
Never dismiss anyone — You never know who might help you one day with your work. Tim’s rule was to treat everyone like they could put you on the front page of The New York Times . . . because someday you might meet that person.
Play the long game
If you stop thinking about who can boost your sales right now. But about who can be a trusted friend in the year to come:
Play the long game — It’s not about finding someone who can help you right this second. It’s about establishing a relationship that can one day benefit both of you.
Focus on “pre-VIPs”
Another critical aspect is that you might want to grow together another person when he/she is not famous yet but on the rising. In fact, as Ryan Holiday points out:
Focus on “pre-VIPs” — The people who aren’t well known but should be and will be. It’s not about who has the biggest megaphone. A great example for me was meeting Tim in early 2007 before The 4-Hour Workweek was published. He hadn’t sold millions of books then and didn’t have a huge platform. Now he does and I am writing this post.
Be interesting and take risks
None is going to bother to sponsor you or your product if you don’t take a risk:
As for getting media, the best thing you can do is be interesting and take risks. Nobody at my publisher thought writing a book about ancient philosophy would be exciting or interesting…but when I made it work, I was a refreshingly different person to profile for the Times.
Summary and Conclusions
Ryan Holiday is the author of The Daily Stoic and many other successful books. If there is one thing he has mastered; that is how to scale up sales by using PR and Influencer Marketing. As Ryan Holiday explained, a Media coverage might help more in the long run. While influencer marketing is done right can scale up sales quite fast. However, to make it effective, there are few necessary things to look out to:
pick up the right influencer
make sure he’s a champion
never dismiss anyone
play the long game
focus on pre-VIPs
be interesting and take risks
These are some of the advice from Ryan Holiday. Here you can find the whole answer on Quora.
The post Ryan Holiday on Influencer Marketing: This Is How to Scale up Sales with Influencer Marketing appeared first on FourWeekMBA.
March 4, 2018
What Is Google’s Featured Snippet Framework? How to Get a Featured Snippet for Your Blog
Google‘s featured snippet framework is a digital marketing strategy to trigger Google‘s featured snippet. A box that gives answers to users’ questions. It consists of five tactics: target a long-tail keyword; answer in 50-52 words; use Alt Tag consistently; implement Schema markup and publish it as open linked data.
Your best email below to get great content straight to your inbox!
With the team at WordLift, I’ve been fixated in the last year about the Google‘s featured snippet. That is a little box that Google triggers before the search results which main is to give a short answer (usually about 50 words) to users.
I argue that the featured snippet is a critical feature, that is bridging the gap between traditional search and voice search. Indeed, getting a featured snippet isn’t only about ranking. That is also a matter of branding. When Google is picking up an answer coming from your site, that is – I argue – in the mind of users a powerful branding effort that Google is doing toward your site.
Even though many argue and fear that the snippet might reduce organic traffic toward their site – the argument is “if you give a direct answer to the users why do they have to click through your site?” – I still believe getting a featured snippet is effective for branding. In fact, although the snippets might reduce organic traffic. It is also true that direct traffic might increase over time. If more and more people find an answer that mentions your site, you’ll become a trusted source in your industry!
Also, in part, the featured snippet is connected to voice search. In fact, as of now (things are swiftly changing in voice search) that featured snippet also helps you trigger voice search answers to users as shown by a recent study by Backlinko. In fact, the study says:
Appearing in a Featured Snippet may help you rank in voice search. 40.7% of all voice search answers came from a Featured Snippet.
So, how do you improve the chances to get the featured snippet? There is a framework I’ve been using with the team at WordLift and that I’ve been testing myself on this blog. I want to show you how I got “snipped” by Google after one day after publishing an article.
The Google’s featured snippet framework
Recently I wrote an article about Google‘s business model. More precisely, about how Google uses a business model, called “hidden revenue business model.” I targeted that long tail keyword to get Google‘s featured snippet. After one day of the publication this is what I got:
[image error]
How did I get there?
There are five factors I make sure to focus on each time I’m targeting the Google‘s featured snippet.
Target a long-tail keyword
A long-tail keyword for me is just a specific question I know a user – landing on an article – would like to have answered right away. For instance, as I’m talking about Google‘s business model regarding “hidden revenue pattern” I’m going to address right away the question “what is a hidden revenue business model?”
That approach – I argue – is effective because you can target a lower competition long-tail keyword, and at the same time rank for other more competitive keywords. In this case, in the title, I have both “hidden revenue business model” and “Google business model.” While it will be easier to rank for the former; it will be way harder to get on the first page of Google‘s SERP for the latter.
Therefore, with this approach, I can target both a less competitive keyword, while still competing for a more difficult keyword.
Answer in about 50 words
The first 50-52 words or the meta-description are critical to trigger the Google‘s featured snippet. That is why I’m obsessed with making the first lines perfect. That means three things. First, provide an answer, stripped of story-telling in the first few lines. Second, make sure you’re in the 50-52 words count limit. Third, include the main keyword so that both Google and the users know that is the relevant answer you’re providing.
Be consistent with the Image and Alt Tag
When you upload an image on your site, Google doesn’t know what that is. Unless of course, you facilitate that with the Alt attribute. In fact, that is a feature which primary goal is to let visually impaired people what is in the image by allowing screen readers to read the image description.
However, that is also a signal presumably Google uses to understand what the image is about. I believe that is critical because it also allows the search engine to understand the context of the article better. That is why – I believe – is vital to include in the Alt attribute the main keyword you have in the title. In this case, for instance, I used “Google-business-model” as Alt tag.
I also make sure to have a nice graphics as an image. There are several reasons why I do that. In the context of the featured snippet, I use well-designed graphics or compelling images so that I improve the chances of the user clicking on the featured snippet.
Indeed, when triggering a featured snippet Google at times gets images not related to your site. Therefore, Google might opt for pictures coming from other sites. However, if it picks up the image coming from the article that triggered the snippet; with a graphics, you will improve the click-through rate.
Schema markup to facilitate Google understanding of the page
With Schema markup I will allow Google to understand better what’s on the page by deciding what to emphasize. This is a critical step as Google has been recommending the use of Schema markup since a few years. Yet, Google now is suggesting to use it more and more as this facilitates its job of understanding web pages. I’m not a programmer, so I use WordLift to add this Schema markup on the page, in a few clicks.
Open linked data to better discoverability
When you create Schema markup on a web page, that Schema can be added in several formats. Among those formats, Google suggests using a format called JSON-LD. This is great because it allows passing critical information to Google without affecting the performance of the page.
Also, JSON-LD can be published as open linked data, which makes it easier for a search engine to discover the content on the page. Put it shortly, after passing critical concepts to the search engine through Schema. You allow the search engine to see how those concepts are connected to each other on the page. Also here, I do that with a tool, WordLift, which does it automatically.
Summary and Conclusions
The Google‘s featured snippet framework is a marketing strategy which main aim is to trigger Google‘s feature snippet. This is based on five main tactics:
1. Long-tail keyword addressing a specific question
2. Use a short definition (50-52 words) that gives a specific answer, stripped of any narrative
3. Fill the alt tag field and make it consistent with the title
4. Add Schema markup on the page to pass critical information to Google about the key concepts the article is talking about
5. Publish that data as open linked data which makes it easier for Google to discover the content on the page
[image error]
Now it’s your turn to test that out! Ready? If you need more info feel free to comment below.
Handpicked related articles:
How RankBrain Algorithm Affects SEO and What You Can Do About It
The post What Is Google’s Featured Snippet Framework? How to Get a Featured Snippet for Your Blog appeared first on FourWeekMBA.
March 3, 2018
How Does Pat Flynn Make Money? The Smart Passive Income Business Model Explained
Pat Flynn, creator of Smart Passive Income makes money by affiliate marketing, book sales, and course sales. He has also built niche sites that generate passive revenue streams. Additional income comes from podcast sponsorships, software, and apps. The smart passive income model purpose is to automate revenue generation.
Your best email below to get great content straight to your inbox!
What is Smart Passive Income?
Pat Flynn was being fired as an architect back in 2008. That is when he started to launch niche sites to earning money online. He first launched an ebook about the LEED exam (Leadership in Energy and Environmental Design). As he had studied for the same exam, he put together the info product. That is how he started to generate his first passive income. From then on, in 2008 he put together a blog – smartpassiveincome.com – where he shared his experiences and income reports.
How much money does Smart Passive Income make?
As of the year ending in December 2017, Smart Passive Income generated $2,171,652. Most of the revenues come from affiliate marketing; while the remaining are related to selling Smart Passive Income Info products. It also recently launched a software product called Smart Podcast Player, which in December 2017 generated $9,646.70 in revenues.
That is how Pat Flynn described first online business:
My passive income story begins in 2007, when I was employed in an architectural firm. I enjoyed my career and, in an effort to both improve my skills and my position in the company, I began studying for the LEED exam.
I needed an easy way to organize my study notes, so I bought the domain intheleed.com and started a blog. Each entry I made explored a topic that was likely to come up on the exam.
and he continued:
In October 2008, I published The LEED AP Exam Walkthrough, an 89-page study guide available for $19.95.
The book sold 309 copies within the first month! Combined with advertising earnings on the website, the business earned a total of $7.906.55 in October 2008, and my life was forever changed.
The idea of creating a passive income business frees you up from the venture. In short, conventional wisdom wants you to be tied to your business. Instead, a passive income business is meant to set up in a way that you can almost walk away from it, and it will still generate a consistent stream of revenues. That is how Pat Flynn described this process:
Sales hit their peak in March 2009. Here’s the incredible part: by that point, I only needed to spend a few hours each month to keep the business running. I had purposely automated nearly every part of the business; and while I can’t completely walk away from it, I’m darn close. I spend 2–4 hours each month split-testing my conversion points, keeping up with the industry, and making sure that nothing on the site is broken.
Summary And Conclusions
Back in 2008, Pat Flynn was working as an architect for a firm in San Diego. He was laid off, so he had to figure out right away how to make money as he was also about to get married. He started a niche site, based on the LEED exam. He realized right away that to make money online; he had to bet on niches.
In October 2008 he started to share his experiences on smartpassiveincome.com. Ever since, Smart Passive Income kept growing from $7,906 back in October 2008, up to its historical maximum at $321,642 in July 2017. In December 2017, 63% of total revenues come from advertising. While 25% comes from course sales. The remaining is software, niche sites, podcast sponsorship and book sales.
The logic behind a passive income business is slightly different from a traditional company. In fact, a passive income business is based on automating most of the processes until the maintenance required to run the business is minimal. Also, a passive income business can also be defined as a sort of lifestyle business. Therefore, it starts from defining the desired TMI (total monthly income), set up a digital business to meet those goals. In short, the passive income business caps its growth to meet the desired lifestyle.
[image error]
The post How Does Pat Flynn Make Money? The Smart Passive Income Business Model Explained appeared first on FourWeekMBA.
March 2, 2018
How Does TOMS Shoes Make Money? The One-For-One Business Model Explained
TOMS Shoes’ business model is called one-for-one. It means that for each pair of shoes sold, the company gives one pair back to kids in developing countries. The one-for-one model allows the company to monetize through consumers’ word of mouth and social campaigns, with a minimum effort in terms of sales and marketing.
Your best email below to get great content straight to your inbox!
The one-for-one business model has become so crucial to TOMS success that the company trademarked it.
What is TOMS’ shoes?
Toms (stylized as TOMS) is a for-profit company based in Santa Monica, California, that operates the non-profit subsidiary, Friends of Toms. The company was founded in 2006 by Blake Mycoskie, an entrepreneur from Arlington, Texas. The company designs and sells shoes based on the Argentine alpargata design as well as eyewear.
Source: https://en.wikipedia.org/wiki/Toms_Shoes
How much money does TOMS shoes make?
According to an analysis made by Moody’s TOMS Shoes recorded net sales of $379 million for the twelve months ended March 31, 2017.
How much is TOMS shoes worth?
In 2014, private equity firm Bain Capital purchased a 50% stake in the company, valuing the company at $625 million.
What are the key partners and value propositions for TOMS shoes?
TOMS’s key partners are:
Aware Consumers
NGOs part of TOMS distribution channels
Affiliates
TOMS shoes value proposition to its key partners
The value proposition is straight, simple, yet powerful: improve the lives of millions of people around the world while creating a for-profit sustainable business model, based on a fashionable product (shoes in this case) for aware consumers.
Aware Consumers: I want to be cool and feel good!
The simple value proposition attracts aware consumers (those concerned about sustainable causes): for every product purchased, one is given away to a person in need. That makes the purchase more appealing to consumers that want to look fashionable while giving their contribution to developing countries with a simple purchase. That makes donating simple for everyone. In fact, TOMS Shoes takes care of setting up partnerships around the world with NGOs to allow the distributions of the free supplies.
NGOs: The distribution channels
TOMS gives away shoes and other supplies and services in over 60 countries and works with hundreds of NGOs to distribute the donations.
The process for the selection of NGOs is the following:
Establish partnership
Make a match
Customize the order
Deliver and distribute
Pick up the tab
Review and improve
Repeat
The partnership with NGOs is critical to TOMS’ business model success as it allows the company to stay consistent with its mission, which makes the company’s products appealing to aware consumers.
Aware Affiliates: The army of resellers
Affiliates can apply to the affiliation program directly from TOMS website. They give support for updates, links, and banners for TOMS products. Including a full array of products including limited edition styles. Also, they get promotional links in a variety of sizes and unique creative including web banners, logos, and text links.
One-for-one business model: Hacking Sales & Marketing
In 2016 at TOMS’ charity event, Without Shoes, the company donated 27,435 shoes to children worldwide, as reported by Marketing Week. From that campaign more than 3.5 million people were engaged; While over 17 million impressions were generated with the hashtag #WithoutShoes. Those social media campaigns secured to TOMS over 250 media placements.
According to a 2009 CNBC show, it only costs TOMS $9 to produce each pair of shoes. If we take this number for good, this means that 27,435 at a $9 per unit, the cost to TOMS was $236,915. Taking into account the revenues for 2017 at $379 million, that means TOMS donation budget was 0.06% compared to net sales. If we compare the marketing and sales budget of companies like Nike this is way higher. In fact, in the second quarter ended November 30, 2017, reported a demand creation expense (sales & marketing) of $877 million. The revenues for the same period was $8.6 billion.
That makes the sales and marketing cost at 10.20% over the net sales ($877 million / $8.6 billion). Therefore, if we takeTOMS’ donation budget to revenues in 2016 at 0.06%. Then compare that with Nike’s sales and marketing budget in proportion to sales for 2017 that is 10.20%. Therefore, the latter spends almost 170 times more in marketing budget (assuming the donations can be considered as marketing budget for TOMS)!
[image error]
A little caveat: The numbers above are based on estimates and numbers found on the internet. For how much I fact checked those numbers, TOMS is not a listed company. Therefore, numbers might turn out to be inaccurate. The main point here is that TOMS with the one-for-one business model, it managed to create also financial value and what seems to be sustainable profits over time. Therefore, it proved to be effective from the economic standpoint, beyond ethical valuations.
Summary and Conclusions
TOMS Shoes was created by Blake Mycoskie, which came up with the one-for-one business model after traveling in Argentina when he found out kids were so poor that they couldn’t afford shoes. He decided to start a sustainable business model based on the principle of donating a pair of shoes for each pair of shoes sold. This business model has proved effective. In fact, in the last twelve months ended in March 2017, the company recorded $379 million in sales. Also, back in 2014, Bain Capital purchased 50% of the company, placing the valuation at $625 million.
The value proposition involves three key partners: consumers, NGOs, and affiliates. Consumers that want a fashionable pair of shoes at an affordable price; while feeling they’re improving someone else lives are attracted by TOMS’ value proposition. NGOs are selected from time to time to distribute TOMS donations. While affiliates are recruited to help the company distributes its products even further.
The business model has proved quite effective. In fact, the effort for the donations of shoes makes up for the momentum gained in sales. According to the estimates above TOMS Shoes donations effort for 2016, compared to net sales for 2017 was only 0.06%. Compared to Nike’s sales and marketing spending at 10.20% of total sales. That makes TOMS one-for-one way more effective than traditional business models!
TOMS Shoes Business Model Explained
[image error]
The post How Does TOMS Shoes Make Money? The One-For-One Business Model Explained appeared first on FourWeekMBA.
March 1, 2018
How Does Airbnb Make Money? Airbnb Peer to Peer Business Model Explained
As a peer to peer network, Airbnb allows individuals to rent from private owners for a fee. In fact, Airbnb charges guests a service fee between 5% and 15% of the reservation subtotal; While the commission from hosts is generally 3%. Airbnb also charges hosts who offer experiences a 20% service fee on the total price.
The digitalization happened in the last two decades has facilitated the creation of a peer to peer platform able to disrupt the hospitality model that was created in the previous century by hotel chains like Marriot, Holiday Inn, and Hilton.
Your best email below to get great content straight to your inbox!
How much money does Airbnb make?
Airbnb made $93 million in profits on a $2.6 billion revenues. This means the company net margin was 3.58%. That seems a low net margin compared to the 9% from the hospitality industry. However, Airbnb is a startup gaining traction and market share over traditional players. Also, its business model is based on the growth of its users base.
How much is Airbnb worth?
In March 2017 the company was valued $31 billion. As of that date, the company had $5 billion at the bank, and it rejected an investment offer by SoftBank. Airbnb might be the biggest tech unicorn IPO in 2018.
What are the key partners for Airbnb?
There are three key strategic partners:
Hosts
Guests
Freelance photographers
There are also other partners, from which it depends on the platform success, like IT experts, and interior designer.
Guests (travelers) can easily find hosts (pretty much anyone with a private home for rent) through the Airbnb marketplace. Also, Real estate agencies that have vacant units can use Airbnb as a way to rent the excess properties they were not able to rent on the market. Instead, freelance photographers can earn a living by joining Airbnb as independent contractors.
That value proposition Airbnb to its key partners?
There are several value propositions for both hosts and guests. And for freelance photographers.
Hosts
hosts to can earn an extra buck by renting additional space they have at home
hosts are provided with insurance and liability coverage, the “Host Protection Coverage.”
Guests
The booking process is straightforward and the digital platform very effective
travelers have affordable prices
guests can have unique experiences
For both hosts and guests
The review system for both hosts and guests guarantee standards of quality
For freelance photographers
Extremely flexible schedule, easy money
What is the revenue generation model?
Airbnb makes money in two ways:
1. It collects a commission from property owners, which is generally 3%. While it collects a commission fee from the same owners offering experiences, which is generally 20%.
2. It collects a transaction fee from guests of between 5% and 15% of the reservation subtotal
What are two key issues to Airbnb success?
There are two main issues Airbnb has to face:
Trust
When hosts are listing their rooms and homes, they’re trusting the platform to put them in touch with good people. The same applies to guests. Would this trust be eroded over time so will be the value of the marketplace.
Customer retention
Travelers nowadays have plenty of options. If they revert back to hotels or other solutions, Airbnb loses momentum. Also, another risk might be that of losing guests that make friends with hosts. In fact, they might choose to organize their next transaction privately. The paradox then is that Airbnb rather that strong incentive tie between hosts and guests. It has to create an experience so that both parties can trust each other enough to make the transaction but not so much to get out of Airbnb marketplace.
Summary and Conclusions
Airbnb is a start-up unicorn that disrupted the hospitality industry. As of 2017, it made $93 million in profits on a $2.6 billion revenues. Also, back in March 2017, it was valued at $31 billion. There are three key strategic partners: hosts, guests, freelance photographers. The revenue generation model is quite simple and its based on a commission fee of 3% on hosts (while 20% for hosts is offering experiences) and a transaction fee of 5-15% over guests.
Two main risks that Airbnb faces as a peer to peer marketplace are trust and customer retention. The company is growing quite fast, and it is planning to get listed. Will this growth continue?
Airbnb Business Model Explained in an Infographic
[image error]
The post How Does Airbnb Make Money? Airbnb Peer to Peer Business Model Explained appeared first on FourWeekMBA.
February 26, 2018
What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
The cash conversion cycle (CCC) is a critical metric that shows how long it takes for an organization to convert its resources into cash. In short, this metric shows how many days it takes to sell an item, get paid and pay back suppliers. When the CCC is negative, it means a company is getting financed by its suppliers to run the operations.
There are three aspects to take into account for the cash conversion cycle:
Days inventory outstanding
Days sales outstanding
Days payable outstanding
In other words, how long it takes for an item from when it sits in your inventory to when it is sold. How long it takes for you to cash the sale. And how much time you have to pay back suppliers.
Quick example: Imagine you buy from an online store (just like Amazon). You ordered an item and spent $50. You’ll get the item in 7 days. The online store has already collected the $50 and will ask the supplier to send it over to you within a week. But the store will pay the supplier only after 30 days. This means that now the store has $50 that can spend the next three weeks before the amount is due to the supplier. Those three extra weeks are crucial as the money could be spent to order other items and sell it with the same cash conversion cycle.
Therefore when an organization learns how to use its cash conversion cycle appropriately, it can become a sort of cash machine to fuel the growth of the business. In fact, I want to show you how Amazon uses a negative cash conversion cycle to generate extra liquidity to fuel its business growth.
Don’t be fooled by Amazon meager net income
If you look at Amazon income statement, you’ll see that its net income is meager. In fact, as of 2016, it was almost 2.3 billion dollars compared to its total revenues of nearly $136 billion. True, Amazon is a store, and as such it will have lower margins compared to other tech giants that operate in the advertising space (like Google or Facebook).
[image error]
As you can see Amazon net income in comparison to its revenues is 1.7%. It seems that Amazon primary strategy is to be entirely aggressive in both pricing and service offering. In fact, that is how it managed to disrupt a few industries along the way. But if its net income is so meager how’s the company generating cash to sustain the business?
Amazon and the cash machine business model
A cash machine pattern for generating additional cash starts from efficiently managing three aspects:
Days inventory outstanding (how long it takes before we sell that item we have sitting in the store?)
Days sales outstanding (how long it takes to get paid by our customers?)
Days payable outstanding (how much time we have before we are due to our suppliers?)
Amazon is quite successful in managing its cash conversion cycle. In fact, as of 2017, gurufocus.com reports that Amazon has a cash conversion cycle of -26.92!
Amazon.com Inc’s Days Sales Outstanding for the three months ended in Dec. 2017 was 19.87.
Amazon.com Inc’s Days Inventory for the three months ended in Dec. 2017 was 35.27.
Amazon.com Inc’s Days Payable for the three months ended in Dec. 2017 was 82.06.
Therefore, Amazon.com Inc’s Cash Conversion Cycle (CCC) for the three months ended in Dec. 2017 was -26.92.
Source: Gurufocus.com
It practically means that Amazon has almost thirty days before payments are due to its suppliers, while it has already generated available cash for the business by selling items in its online store!
But how and when does it make sense to operate a cash generating business model? I believe there are four main aspects to take into account:
Trust from customers
Digitalization
Negotiating strength
Inventory
First, you need to be Trusted by customers
Before Amazon could become so efficient in managing its cash conversion cycle it took years to become trusted by its customers, today Amazon.com is one of the most popular websites on earth, where each day billions of people purchased anything:
[image error]
Data: Similar Web
Digitalization makes it easier
With digitalization, it has become easier for online stores to manage their cash conversion cycle. For instance, think of the case in which you open up a store with a simple landing page. You don’t have anything down yet, but you start getting sales in. Once an item gets pre-ordered, you can get it from a supplier and send it over to a final customer. In short, digitalization helps companies keep a more efficient inventory based on what customers order online even before they have it sitting in the inventories. That is not Amazon case. In fact, Amazon played the opposite strategy: build giants super-organized inventories called Fulfillment Centers.
Fulfillment centers are the key to Amazon successful cash conversion cycle strategy
Amazon has been investing billions of dollars in automating and making more efficient its “fulfillment centers.” That, of course, helped the company to strengthen its cash conversion cycle:
How to negotiate longer credits terms with suppliers
Another aspect is the company’s ability to negotiate convenient payment terms with its suppliers. In fact, if you’re able to stretch the payments agreement terms in a way that allows you to run your business on credit, it becomes easier to have excess cash to invest in the business operations growth. Just like Amazon has been doing in the last years.
Summary and Conclusion
The cash conversion cycle is a crucial aspect of any business which success is based on short-term liquidity. In fact, that is given by current assets minus current liabilities, and when it is positive, it means the company can generate extra cash from its operations. In fact, if well managed the cash conversion cycle can become a sort of cash making machine that generates additional liquidity for an organization.
Amazon can teach you just that. It doesn’t matter how meager your net income is. If you have the cash to run the operations, you can grow wildly!
Below a summary of how it all works:
[image error]
Handpicked related articles:
How Do Tech Companies Make Money? Visualizing Tech Giants Business Models
The News Feed vs. the SERP: A Fight for Attention and Profits
Everything You Need to Know About Snapchat Business Model [Financial Infographic Inside]
How Tesla Loses Money: Tesla Business Model in a Nutshell
How Amazon Makes Money: Amazon Business Model in a Nutshell
The Power of Google Business Model in a Nutshell
The post What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained appeared first on FourWeekMBA.
