Overview of business models used in on-line
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Transcript of Overview of business models used in on-line
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SaaS
E-commerce
Media site
2-sided market
User Generated Content
Mobile Applications
B2B Service
Retail
B2C Service
B2C Products
B2B Products
Freelancing
In this section we will be talking about 12 different business models
We will discuss for every model Definition of the
business model Examples KPIs Most important
issues How to analyze it
in Excel
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Each model we will evaluate according to 3 criteria: difficulty of implementation, money needed to achieve the break even, the scale that has to be achieved for the business to be sustainable
Difficulty level Money needed Scale
How difficult it is on a scale from 1 to 5 (where 5 is very difficult) to build a startup in a given model In the assessment we
take into account not only the coding but also the operational and sales aspect It is a subjective
assessment based on our experience
How expensive it is on a scale from 1 to 5 (where 5 is very expensive) to build a startup in a specific model? In the assessment, we
take into account both cash expenditures as well as opex for people on human resources, that sometimes do not require cash (certain aspect covered by founder)
Here you can determine at what market you need to be a leader for the startup to be sustainable business To simplify the matter
we will use 3 levels: Country Level Regional Level
(more countries i.e. Europe)
Global
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What we will show in this presentation is a part of extensive on-line course where I show the business models along with how to calculate whether they make sense or not in Excel
Click to check my course
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I recommend reading the following books to get more insight into business models. Click on the chosen cover to see details on each and every book
Click for more Click for more Click for more
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SaaS should not be confused with subscription models
Software as a Service SaaS company offers software on an on-demand
basis, usually delivered through a website it operates
SaaS =
SaaS ≠ Subscription model
Many SaaS generates revenue from monthly subscription fee but there are plenty of SaaS that are free or charger per usage
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Difficulty level Required funds Scale
Country level
Regional level
The product must be global
SaaS is not that difficult and requires relatively small budget. If you are interested in this model you immediately have to think at least about the regional market. Your country (provided it is not USA or China) does not suffice
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Just to remind you some examples of well known SaaS businesses
Service provided Revenue model
Virtual drive for storage and sharing files
Main sales tactics
Subscription fee Freemium
Mail service Free to users Revenue from ads
Free
Designing graphics – drag and drop ready made elements
Pay per used elements
Freemium
Access to books (library)
Subscription fee Pay per page/book
Free trial
Creation of animation movies
Subscription fee Freemium
Creation of webpages esp. blogs
Subscription fee Freemium
more
more
more
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When you look just at the sales funnel you can see how SaaS takes the visitor to trial and then to paid user. Some of the paid users may become your ambassadors and help you get new customers
Visitor
Freemium / Trial User
Paid User
Engaged Heavy User
Ambassador
Conv
ersio
n
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Conversion rates Churn rate
Customer Acquisition Cost (CAC)
Customer payback time
Average revenue per user (ARPU)
Life Time Value of the Customer (LTV)
Monthly Recurring Revenues (MRR)
Engagement metric
There are some KPIs for revenue side of SaaS model that you have to follow…
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Quick achievement of theproduct-market fit
Minimizing Churn rate
Acquisition tactics – customer acquisition plan
Integration with other SaaS and IT systems
You should test and find optimal solution for the following key topics
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For more check also my on-line course
Click to check my course
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In e-commerce you will have 3 types of players depending on their presence in off-line and their approach to both channels
E-commerce
Pure players
Off-line players with separate on-line presence
Multichannel /Omni players
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E-commerce due to the low margins (for physical products) is very difficult. It requires not that big budget but quite often country level is enough to have stable, profitable business
Difficulty level Required funds Scale
Country level
Regional level
The product must be global
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Customer behaviors has huge impact on the business model and on what the e-commerce should concentrate on
Less than 40% of the buyers will buy this year Focus is on customer acquisition Loyalty program are not good investment 70% of e-commerce businesses are in this
model
Acquisition mode
Description of the business model Examples
E-commerce selling only 1 type of Slow Moving Consumer Goods (SMCG) bought infrequently i.e. vacuum cleaner, scuba diving, furniture
E-commerce for 1-time in the life event: strollers,
40%-60% of the buyers will buy this year You have a nice mix of new and returning
customers Focus is on customer acquisition as well
increasing the value of the customer (increased frequency and increased purchase per visit)
Hybrid mode
E-commerce that sells SMCG with relatively big frequency of purchase(1.0-2.5 times a year ) i.e. shoes (Zappos)
More than 60% of the buyers will buy this year Focus is on increasing the value of the
customer (increased frequency and increased purchase per visit)
10% of businesses are in this model
Loyalty mode
Very strong brands with high frequency of purchase (i.e. Zara, Amazon)
Marketplaces i.e. Udemy, Uber
Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz
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Just to remind you some examples of well known e-commerce businesses
Products sold On-line / Off-line situation
Virtually everything esp. books, toys, fashion
Mode
Pure on-line player Loyalty mode
Fashion Multichannel player Loyalty mode
Tickets for events Pure on-line player Acquisition mode
Groceries Multichannel player Hybrid mode
Razors and cosmetics for men
Pure on-line player Loyalty mode
Fashion Pure on-line player Hybrid mode
more
more
more
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Conversion rates
Average shopping cart size / Average transaction value (ATV)
Abandonment rate
Life Time Value of the Customer (LTV)
% traffic generated by non-ad methods
Customer Acquisition Cost (CAC)
Number of purchases per visitors per year
Return rate
Average additional sales for click and collet
% click and collect orders
There are some KPIs for e-commerce model that you have to follow…
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Getting a lot of cheap traffic
Pricing – (multi-tier pricing, dynamic pricing)
Understanding your customer and marketing automation
Managing the long tail (both in terms of offer and logistics / availability)
Continuous optimization of your site - conversions, SEO, usability, etc.
You should test and find optimal solution for the following key topics in e-commerce
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For more check also my on-line course
Click to check my course
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Have also a look at my presentation how to conduct properly market research
Market research Practical guide for startups and entrepreneurs
presentation
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Media site model is all about creating inventory of content and monetizing it
Create interesting content
Draw attention
Monetize the
attention
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As you guess on the most important aspects is content creation and monetization. There are many options available
You
Content creation
Outsourced
Aggregate other people’s content
Mix
Channels used
1 on-line channel
Multichannel yet only online
Multichannel – both on-line and off-line
Revenue sources
Ads (CPM, CPC, CPA,CPS)
Affiliation
Sponsorship
Licenses
E-commerce
Paywalls User Generated Content
Getting the traffic
Direct
Subscription (membership clubs)
Emails
Notification (from site where you subscribe to i.e. YouTube, mobile apps)
Product placement
Native advertising
SEO Interlinking
Social Media
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Media site is still cheap and relatively easy business – provided that you will find your niche and you will not be too greedy. Usually suffice to find a nice niche within the country to be profitable and stable
Country level
Regional level
The product must be global
Difficulty level Necessary money Scale
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Just to remind you some examples media site businesses
Content creation Channels used
In-house and subcontractors Some generated by users
Revenue sources
www and mobile apps YouTube Social media (esp. Facebook)
Native advertising Product placement
In-house and subcontractors Some generated by users
Printed newspapers www and mobile apps Social media (esp. Facebook)
Payment for newspapers – digital (paywalls ) and printed
Ads Native advertising Product placement Affiliate
In-house and subcontractors www / blog / podcast Social media (esp. YouTube,
Facebook, Twitter) Email list
Sponsorship Product placement Affiliate E-commerce (books,
trainings) Ads
In-house and subcontractors Mainly YouTube Social media to spread the
movies
Ads E-commerce (courses,
clothes) Sponsorship Product placement Affiliate
more
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Page inventory
Unique visitors (UV)
Average # of visits per UV
Average time per visit
Page per visit
Number of emails subscribing to your site
Click Through Rate (CTR) for ads
Conversion rate
Ad rates
Churn Number of subscribers
Views per movie
Total numbers of movies
Basic KPIs for media sites track the content creation side of the business
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Getting a lot of cheap traffic
Segmentation of the audience and achieving content-segment-fit
Creating community
Finding way to monetize the audience attention
Cross-selling (content and product)
You should test and find optimal solution for the following key topics in media site business
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For more check also my on-line course
Click to check my course
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2-sided market is trying to create a connection between the demand and supply enabling them to match and do the transaction
Patient Doctor Marketplace • On-line booking • Reviews • Statistics for doctors
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There are different types of 2-sided markets
On-line sale of physical products
Marketplace
On-line sale of on-line products
Purchase of services
Crowdfunding
Networks
Infrastructure
Energy market
Telecommunication market
Sharing platforms
Sharing physical resources
Sharing on-line resources
Matching models
Dating sites
Work Platform
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2-sided market is one of the most difficult and the most expensive type of business. Increasingly, you have to be a regional player for the business to make sense and to be stable in the long run
Country level
Regional level
The product must be global
Difficulty level Required funds Scale
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Just to remind you some examples of 2-sided markets
Type of 2-sided market Product offered
Marketplace
Revenue sources
On-line courses Commission from sold through Udemy courses (3%-50%)
Marketplace Driving / taxi services Commission from trips made (20%)
Marketplace Designs; mainly delivered through
Commission from contest (5-40%)
Revenue from sold ready-made designs
Sharing platform Shared trips Reservation fee around 10%
Sharing platform Sharing knowledge Donations
Marketplace Apartments rental Commission from provider – 3% and from guests 6-12%
more
more
more
more
more
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Just to remind you some examples of 2-sided markets
Type of 2-sided market Product offered
Matching model
Revenue sources
Peoples CVs and their strength appraisal
Advertising Added services (for
recruiters)
Matching model Tinder paid version Hot or not selection of interesting people with a chat service
Marketplace Subscription plan from 0-25 EUR per month for doctors
Booking visits at the doctor of your choosing
Marketplace Commission from sellers – above 10%
All sorts of mainly physical products
Marketplace Markup on store prices Commission from stores
Delivery of groceries fro chosen shop
more
more
more
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Engaged buyers
Active suppliers Total searches
Average transaction
Transaction to searches ratio
Average number of products per supplier
Average number of searches per engaged buyer
Life Time Value of the Customer (LTV)
Customer Acquisition Cost (CAC)
Supplier Acquisition Cost (SAC)
Basic KPIs for 2-sided market are connected with the supply and demand creation
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Chicken-and-egg problem
Level of centralization
Liquidity
Understanding the customer and loving the problem
Choosing the right side to concentrate on
Distribution and Activation
You should test and find optimal solution for the following key topics in 2-sided market
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For more check also my on-line course
Click to check my course
41
Check my extensive presentation on productivity hacks to see how you can me 10x more productive
Management consultant productivity hacks
How to be lazy and still get things done
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If you want to learn how to make in Excel advanced analysis that you would do as a business analyst go to my on-line course
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