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…

Business is exchange of value 44

The Business Model Canvas

Cost Structure

Key Partners

Key Resources

Channels

Key Activities

Value Proposition

Customer Relationships

CustomerSegments

Revenue Streams

bmgen_final.indd 44 6/15/10 5:33 PM

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

Copyright VisionMobile 2007-10 Page 2

Economics of complements

Microeconomics: Every product has substitutes and complements.

Complement Core Product

Product demand increases as complement prices decrease

A product consumed with the main product

Core vs Complement

Copyright VisionMobile 2007-10 Page 3

How Google uses complements

Google Complements Google Core Product

On-line advertising mobile networks handsets browsers

Commoditisation of mobile increases demand

for Google products

net neutrality

open source OS

Chrome, WebKit

Closed ad network

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

Mapping the stakeholders and value exchange

Business Model Kit Source http://boardofinnovation.com/

Product

Money

Less Money

Experience

Right

Data

reputation

Credits

Service

Exposure

Consumer

Company

Government

Supplier

Non-profit

My organization

Example

Product

Money

Less Money

Experience

Right

Data

reputation

Credits

Service

Exposure

Product

Money

Less Money

Experience

Right

Data

reputation

Credits

Service

Exposure

Consumer

Company

Government

Supplier

Non-profit

My organization

Example

Product

Money

Less Money

Experience

Right

Data

reputation

Credits

Service

Exposure

Source and © http://boardofinnovation.com/

Source and © http://boardofinnovation.com/

Get your pencils out #1

¤  Draw a simple diagram of all stakeholders and value-exchange 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

Gain CreatorsDescribe 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?

Pain Relievers

Do they…

Create savings that make your customer happy? (e.g. in terms of time, money and effort, …)

Produce outcomes your customer expects or that go beyond their 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. makes them look good, produces an increase in power, status, …)

Do something customers are looking for? (e.g. good design, guarantees, specific or more features, …)

Fulfill something customers are dreaming about? (e.g. help big achievements, produce big reliefs, …)

Produce positive outcomes matching your customers success and failure criteria? (e.g. better performance, lower cost, …)

Help make adoption easier? (e.g. lower cost, less investments, lower risk, better quality, performance, design, …)

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.

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?

Do they…

Produce savings? (e.g. in terms of time, money, or efforts, …)

Make your customers feel better? (e.g. kills frustrations, annoyances, things that give them a headache, …)

Fix underperforming solutions? (e.g. new features, better performance, better quality, …)

Put an end to difficulties and challenges your customers encounter? (e.g. make things easier, helping them get done, eliminate resistance, …)

Wipe out negative social consequences your customers encounter or fear? (e.g. loss of face, power, trust, or status, …)

Eliminate risks your customers fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)

Help your customers better sleep at night? (e.g. by helping with big issues, diminishing concerns, or eliminating worries, …)

Limit or eradicate common mistakes customers make? (e.g. usage mistakes, …)

Get rid of barriers that are keeping your customer from adopting solutions? (e.g. lower or no upfront investment costs, flatter learning curve, less resistance to change, …)

Rank each pain your products and services kill according to their intensity for your customer. Is it very intense or very light?

For each pain indicate how often it occurs. Risks your customer experiences or could experience before, during, and after getting the job done?

Products & ServicesList all the products and services your value proposition is built around.

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?

Which ancillary products and services help your customer perform the roles of:

Buyer (e.g. products and services that help customers compare offers, decide, buy, take delivery of a product or service, …)

Co-creator (e.g. products and services that help customers co-design solutions, otherwise contribute value to the solution, …)

Transferrer (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-to-face 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?

GainsDescribe the benefits your customer expects, desires or would be surprised by. This includes functional utility, social gains, positive emotions, and cost savings.

Pains

Customer Job(s)

Describe negative emotions, undesired costs and situations, and risks that your customer experiences or could experience before, during, and after getting the job done.

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, …)

What are the main difficulties and challenges your customer encounters? (e.g. understanding how things work, difficulties getting things done, resistance, …)

What negative social consequences does your customer encounter or fear? (e.g. loss of face, power, trust, or status, …)

What risks does your customer fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)

What’s keeping your customer awake at night? (e.g. big issues, concerns, worries, …)

What common mistakes does your customer make? (e.g. usage mistakes, …)

What barriers are keeping your customer from adopting solutions? (e.g. upfront investment costs, learning curve, resistance to change, …)

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?(e.g. perform or complete a specific task, solve a specific problem, …)

What social jobs are you helping your customer get done? (e.g. trying to look good, gain power or status, …)

What emotional jobs are you helping your customer get done? (e.g. esthetics, feel good, security, …)

What basic needs are you helping your customer satisfy? (e.g. communication, sex, …)

Besides trying to get a core job done, your customer performs ancillary jobs in differ-ent roles. Describe the jobs your customer is trying to get done as: 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, …)

Which savings would make your customer happy?(e.g. in terms of time, money and effort, …)

What outcomes does your customer expect and what would go beyond his/her expectations? (e.g. quality level, more of something, less of something, …)

How do current solutions delight your customer? (e.g. specific features, performance, quality, …)

What would make your customer’s job or life easier? (e.g. flatter learning curve, more services, lower cost of ownership, …)

What positive social consequences does your customer desire? (e.g. makes them look good, increase in power, status, …)

What are customers looking for? (e.g. good design, guarantees, specific or more features, …)

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, …)

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.

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.

On:

Iteration:

Designed by:Designed for:Day Month Year

No.

Customer Segment

www.businessmodelgeneration.com

Use in Conjunction with the Business Model Canvas Copyright of Business Model Foundry GmbH

Value PropositionCreate one for each Customer Segment in your Business Model

Source and © http://businessmodelalchemist.com/ http://BusinessModelGeneration.com

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

Source: twitter @susyjacks

Focus on the customer Problem, not on your solution

JTBD #2

¤  Scenario: a social entrepreneur has created a 2nd 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

Observe, Ask, Validate Design, Compare, Iterate

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-this-weekend-examples-appsumo-mint-chihuahuas/

¤  “Lean Analytics”, Alistair Croll, Benjamin Yoskovitz (2013) O’Reilly ¤  “Four steps to Epiphany: 2nd 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