Monetization Where is the money? George Voulgaris, Ph.D. Business Partner, VisionMobile Director, Falling Elephant
Outline Insights from DeveloperEconomics.com Dissecting Monetization Determining Value
Aims To help you make wiser decisions regarding your monetization strategy
Insights from Developer Economics 2013 Developereconomics.com
Big regional differences
ios still leads the game
More platforms more money
App Stores is not the answer
High pay-off revenue models are tough
Grow by expansion
App Categories with highest return Games (not highest but massive market share) Productivity Enterprise
Analytics and monitoring pay-off
Other interesting observations At least half of all downloads will never actually sign up and start using the app Each and every step in your sign-in process is going to cut about 25% of your potential users Apps using cross-promotion get on average 2-3x more downloads and earn 40% more Even where push notifications are clearly not essential to the app (less than half of users opt-in), the retention after 4 months of users who opt-in is ~80% greater than of those who don t.
Want more? Go to: developereconomics.com Many free data- and analysis-packed reports and infographics
Dissecting Monetization
What is monetization?
What is monetization? Who is willing to pay me for a problem I solve? Why? How much? Over what period?
But business is not only about exchanging money
44 Business is exchange of value The Business Model Canvas Key Partners Key Activities Value Proposition Customer Relationships Customer Segments Key Resources Channels Cost Structure Revenue Streams
Traditional Merchant model company customer
Being replaced by asymmetric business models in several sectors
Asymmetric business models: two key concepts Network effects Core vs complements
Network effects "multi-sided platforms bring together two or more distinct but interdependent groups of customers. Such platforms are of value to one group of customers only if the other groups of customers are also present. The platform creates value by facilitating interactions between the different groups. A multi-sided platform grows in value to the extent that it attracts more users, a phenomenon known as the network effect." Source http://businessmodelgeneration.com
Network effects: positive feedback AppStores
Network effects
Core vs Complement Economics of complements Microeconomics: Every product has substitutes and complements. Core Product Complement A product consumed with the main product Product demand increases as complement prices decrease Page 2 Copyright VisionMobile 2007-10
How Google uses complements Core vs Complement Google Core Product Google Complements On-line advertising mobile networks handsets browsers Commoditisation of mobile increases demand for Google products Closed ad network net neutrality open source OS Chrome, WebKit Page 3 Copyright VisionMobile 2007-10
Core business Your core business will be defined by your vision, aims, market, know-how, competition etc.
Monetization Considerations In order to plan a successful monetization strategy you need to: Clearly map value exchange(s) across all stakeholders/ecosystem (*) Test the correct parameters for sustainability / growth A good pricing strategy
Finding out who and why is going to pay Tools of the trade
Money Money Less Money Less Money My organization Company Product Product Mapping the stakeholders and value Consumer Supplier Service Service exchange Experience Experience Government Non-profit Right Right Money Money Data Data Less Money Less Money My organization Company reputation reputation Product Product Example Credits Credits Service Service Consumer Supplier Exposure Exposure Experience Experience Government Non-profit Right Right Business Model Kit Source http://boardofinnovation.com/ Data Data
Source and http://boardofinnovation.com/
Source and http://boardofinnovation.com/
Get your pencils out #1 Draw a simple diagram of all stakeholders and valueexchange within your company s ecosystem
Conclusion Having a clear picture of value exchange between stakeholders helps you identify opportunities for monetization
De/Refining the value proposition The Value Proposition Canvas Designed for: On: Designed by: Day Iteration: Month Year No. Do they Which savings would make your customer happy? Create savings that make your customer happy? Do something customers are looking for? (e.g. in terms of time, money and effort, ) (e.g. good design, guarantees, specific or more features, ) (e.g. in terms of time, money and effort, ) Produce outcomes your customer expects or that go beyond their expectations? Fulfill something customers are dreaming about? (e.g. help big achievements, produce big reliefs, ) What outcomes does your customer expect and what would go beyond his/her expectations? (e.g. better quality level, more of something, less of something, ) Copy or outperform current solutions that delight your customer? (e.g. regarding specific features, performance, quality, ) Make your customer s job or life easier? (e.g. flatter learning curve, usability, accessibility, more services, lower cost of ownership, ) Create positive social consequences that your customer desires? (e.g. quality level, more of something, less of something, ) Produce positive outcomes matching your customers success and failure criteria? How do current solutions delight your customer? (e.g. better performance, lower cost, ) (e.g. specific features, performance, quality, ) Help make adoption easier? What would make your customer s job or life easier? Rank each gain according to its relevance to your customer. Is it substantial or is it insignificant? For each gain indicate how often it occurs. (e.g. flatter learning curve, more services, lower cost of ownership, ) (e.g. lower cost, less investments, lower risk, better quality, performance, design, ) What positive social consequences does your customer desire? Rank each gain your products and services create according to its relevance to your customer. Is it substantial or insignificant? For each gain indicate how often it occurs. (e.g. makes them look good, increase in power, status, ) What are customers looking for? (e.g. makes them look good, produces an increase in power, status, ) (e.g. good design, guarantees, specific or more features, ) Products & Services List all the products and services your value proposition is built around. Gain Creators Gains Describe how your products and services create customer gains. How do they create benefits your customer expects, desires or would be surprised by, including functional utility, social gains, positive emotions, and cost savings? Describe the benefits your customer expects, desires or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings. What do customers dream about? (e.g. big achievements, big reliefs, ) How does your customer measure success and failure? (e.g. performance, cost, ) What would increase the likelihood of adopting a solution? (e.g. lower cost, less investments, lower risk, better quality, performance, design, ) Which products and services do you offer that help your customer get either a functional, social, or emotional job done, or help him/her satisfy basic needs? Customer Job(s) Describe what a specific customer segment is trying to get done. It could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy. What functional jobs are you helping your customer get done? Which ancillary products and services help your customer perform the roles of: (e.g. perform or complete a specific task, solve a specific problem, ) Buyer (e.g. products and services that help customers compare offers, decide, buy, take delivery of a product or service, ) What social jobs are you helping your customer get done? (e.g. trying to look good, gain power or status, ) Co-creator What emotional jobs are you helping your customer get done? (e.g. products and services that help customers co-design solutions, otherwise contribute value to the solution, ) (e.g. esthetics, feel good, security, ) Transferrer (e.g. communication, sex, ) What basic needs are you helping your customer satisfy? (e.g. products and services that help customers dispose of a product, transfer it to others, or resell, ) Products and services may either by tangible (e.g. manufactured goods, face-toface customer service), digital/virtual (e.g. downloads, online recommendations), intangible (e.g. copyrights, quality assurance), or financial (e.g. investment funds, financing services). Rank all products and services according to their importance to your customer. Are they crucial or trivial to your customer? Pain Relievers Pains Describe how your products and services alleviate customer pains. How do they eliminate or reduce negative emotions, undesired costs and situations, and risks your customer experiences or could experience before, during, and after getting the job done? Describe negative emotions, undesired costs and situations, and risks that your customer experiences or could experience before, during, and after getting the job done. Besides trying to get a core job done, your customer performs ancillary jobs in different roles. Describe the jobs your customer is trying to get done as: What does your customer find too costly? (e.g. takes a lot of time, costs too much money, requires substantial efforts, ) What makes your customer feel bad? (e.g. frustrations, annoyances, things that give them a headache, ) How are current solutions underperforming for your customer? (e.g. lack of features, performance, malfunctioning, ) Do they Produce savings? Eliminate risks your customers fear? (e.g. in terms of time, money, or efforts, ) (e.g. financial, social, technical risks, or what could go awfully wrong, ) What are the main difficulties and challenges your customer encounters? (e.g. understanding how things work, difficulties getting things done, resistance, ) Buyer (e.g. trying to look good, gain power or status, ) Co-creator (e.g. esthetics, feel good, security, ) Transferrer (e.g. products and services that help customers dispose of a product, transfer it to others, or resell, ) Rank each job according to its significance to your customer. Is it crucial or is it trivial? For each job indicate how often it occurs. Outline in which specific context a job is done, because that may impose constraints or limitations. (e.g. while driving, outside, ) What negative social consequences does your customer encounter or fear? Make your customers feel better? Help your customers better sleep at night? (e.g. kills frustrations, annoyances, things that give them a headache, ) (e.g. by helping with big issues, diminishing concerns, or eliminating worries, ) Fix underperforming solutions? Limit or eradicate common mistakes customers make? (e.g. new features, better performance, better quality, ) (e.g. usage mistakes, ) What risks does your customer fear? Put an end to difficulties and challenges your customers encounter? Get rid of barriers that are keeping your customer from adopting solutions? (e.g. make things easier, helping them get done, eliminate resistance, ) (e.g. lower or no upfront investment costs, flatter learning curve, less resistance to change, ) (e.g. big issues, concerns, worries, ) (e.g. loss of face, power, trust, or status, ) Wipe out negative social consequences your customers encounter or fear? (e.g. loss of face, power, trust, or status, ) (e.g. financial, social, technical risks, or what could go awfully wrong, ) What s keeping your customer awake at night? What common mistakes does your customer make? (e.g. usage mistakes, ) Rank each pain your products and services kill according to their intensity for your customer. Is it very intense or very light? What barriers are keeping your customer from adopting solutions? For each pain indicate how often it occurs. Risks your customer experiences or could experience before, during, and after getting the job done? Value Proposition Rank each pain according to the intensity it represents for your customer. Is it very intense or is it very light.? For each pain indicate how often it occurs. (e.g. upfront investment costs, learning curve, resistance to change, ) Customer Segment Create one for each Customer Segment in your Business Model www.businessmodelgeneration.com Use in Conjunction with the Business Model Canvas Source and http://businessmodelalchemist.com/ http://businessmodelgeneration.com Copyright of Business Model Foundry GmbH
Value Proposition design is about Product Market fit Image source and http://businessmodelalchemist.com/
Value Proposition design Jobs Functional jobs (tasks) Social jobs (status / peer recognition) Emotional jobs (feel good) Basic needs (communications) Pains Negative emotions (frustrations) Costs and situations (time, money, mistakes, performance) Risks (Technical, Social, Financial) Gains Expected, desired and surprise benefits Functional, Social, Emotion, Cost Image source and http://businessmodelalchemist.com/
JTBD #1 Focus on the customer Problem, not on your solution Source: twitter @susyjacks
JTBD #2 Scenario: a social entrepreneur has created a 2 nd hand toys and clothes-swapping store aiming to help families that have financial difficulties. Can you identify some of the potential JTBDs for two stakeholder groups: parents and donors.
Value Proposition design Product/Services: Tangible Digital/Virtual Intangible (quality, copyrights) Pain relievers How does your solution eliminates the customer pains? Gain creators How does your solution create expected, desirable, surprise benefits? Image source and http://businessmodelalchemist.com/
Get your pencils out #2 Draw a Value Proposition Canvas for your primary customer and core solution
Product/Services: Tangible Digital/Virtual Intangible (quality, copyrights) Pain relievers How does your solution eliminates the customer pains? Gain creators How does your solution create expected, desirable, surprise benefits? Jobs Functional jobs (tasks) Social jobs (status / peer recognition) Emotional jobs (feel good) Basic needs (communications) Pains Negative emotions (frustrations) Costs and situations (time, money, mistakes, performance) Risks (Technical, Social, Financial) Gains Expected, desired and surprise benefits Functional, Social, Emotion, Cost
Pivoting Remember to compare value propositions by using the same variables e.g. price, risk, quality
Pivoting; comparing value propositions Design, Compare, Iterate Observe, Ask, Validate
Conclusion
Closing remarks Monetization strategy needs a continuous out-of-the-box view of your stakeholders and value exchanges. The one with biggest pain and pocket is usually your primary customer. Monetization strategy involves: Identify and quantify the value exchange between all stakeholders Identify a sustainability/growth strategy that will ensure your income exceeds your burn rate (at a minimum )
Important topics not covered Pricing (see Further Reading) but start high! Metrics and Analytics (see Further Reading); Vanity Metrics; Growth Strategies & Hacking; Value Proposition design can provide valuable input to your marketing strategy (subject of other talk) Get familiar with decision making & brainstorming techniques and tools. It will pay off. Fall in love with post-it notes vs notepads when constructing any form of canvas ;)
Further reading (disclaimer: I am not affiliated with nor endorse any of the following paid books or products, except VisionMobile s Developer Economics) http://developerconomics.com Guide to growth hacking http://www.quicksprout.com/the-definitive-guide-to-growth-hacking/ Great article series on pricing an app: http://www.developereconomics.com/how-to-price-your-app-by-michael-jurewitz/ List of several revenue models, good for inspiration: https://hackpad.com/web-and-mobile-revenue-models-ch2pabpuyiu Dave McClure s Pirate Metrics: http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version http://vimeo.com/26277733 On MVPs: Noah Kagan s How to Create a Million-Dollar Business This Weekend: http://www.fourhourworkweek.com/blog/2011/09/24/how-to-create-a-million-dollar-business-thisweekend-examples-appsumo-mint-chihuahuas/ Lean Analytics, Alistair Croll, Benjamin Yoskovitz (2013) O Reilly Four steps to Epiphany: 2 nd edition Steve Blank (2013) K&S Ranch Gamestorming: A Playbook for Innovators, Rulebreakers, and Changemakers, Dave Gray, Sunni Brown, James Macanufo (2010) O Reilly The Decision Book: Fifty Models for Strategic Thinking Roman Tschäppeler, Mikael Krogerus, Jenny Piening (2011) Profile Books https://www.udemy.com/startup-how-to-7-steps-to-creating-a-successful-product/? couponcode=leanftw http://custdev.com
Thanks! Keep in touch George Voulgaris, Ph.D. george@visionmobile.com Business Partner, VisionMobile george@fallingelephant.com Director, Falling Elephant @gevou linkedin.com/in/voulgaris