Predictable Revenue Models
Viral Components | Design for Self Expression | Network Effects | Bundling Recurring Payment
A digital revolution is sweeping the globe and changing the business landscape. What was possible before billions of people were networked together was completely different. The rate of growth became exponentially faster if applied correctly. We will explore how to systematize this business model so that you’ve baked in predictable revenue that avoids common fail points. Monetizing this model correctly is tricky. It’s using pull techniques rather than push. It’s strategically avoiding monetizing where it could cause negative network effects and carefully adding it where it consistently creates positive network effects. It’s aligning with exponential growth curves that use customers to attract new customers that work while you don’t. It’s creating platforms instead of pipes.
The following is a cheat sheet of practice flash cards that I use to remind myself where the proven repeatable monetization moments are in platforms that succeed, rather than cause friction and negative network effects. To be clear, some of the most successful platforms fail with one one of these methods and pivot to another or choose more than one. We’ll dive into when to use one over another with case studies that show what must be present when it works.
They include: Pay Per Transaction | Pay For Access | Pay For Attention | Pay For Tools
Hover or tap on each flash card to flip over
Pay Per TransactionMatchmaking - Reduce Barriers
Curate 2-Sided Marketplace
Seed the platform with producers that create value to attract consumers by reducing the barrier to finding vetted, high quality producers and charge only after value is exchanged.
Pay For AccessProducers Pay For Access To The Consumers
Dating & Lead Generation
Create a vibrant community of consumers and optimize for the 3 F’s: Fun | Fame | Fortune. Once they are there, tactfully, without turning them off, charge producers for access to them.
Pay For AttentionProducers Pay For Consumers
Provide Traffic For Views
This is an open and public platform that has obvious traffic from consumers, viewers or social interaction. Charge for the attention of those users.
Example: ads on Youtube/Facebook • recruiters on Linkedin/Indeed
Pay For ToolsMake It Easier To Do
Automate a Task
Automate a time consuming task that people don’t like to do. Charge for use of the tool.
A platform needs more than viral elements. Salesforce.com is now the largest sales platform but it required outbound sales teams to grow. This will include a fully rounded case study of outbound sales methods by Aaron Ross’. Aaron is the creator of the outbound/inbound sales process, people and teams that grew Salesforce.com to $100 million in revenue in just a few years. To be fair, his methods would not have worked if the foundation of salesforce didn’t include the monetization methods above. Both are critical to your success.
Includes: bundling services for recurring payment packages that create compounding growth. How to avoid cold approaches using what Aaron calls:
Seeds | Nets | Spears
Hover or tap on each flash card to flip over
When tracking your Seeds, you should make sure to look closely at Account Management activities: Opportunities from referrals, revenue from upsells, and the percentage of your customers you’re losing to churn.
The important metrics to track when evaluating your Nets are: Lead velocity, number of opportunities from each campaign, and the rate at which marketing leads convert into opportunities.
One-to-one outbound prospectors or Business Development Reps who actively find and reel in prospects. When analyzing Spear production, pay attention to: Number of activities by sales rep, efficiency ratios for those activities, and achievement of sales goals.
1. Offer a tool
2. Create spartan tandems
3. Seek mutual fits
4. Build in a viral coefficient
5. Demos vs sales meetings
6. Identify an NGP (New Growth Platform)
Harvard Business Review: What Is a New Growth Platform?
Opportunities for building NGPs lie at the intersection of a company’s actual or potential capability set, unmet customer needs, and forces of change in the broader environment
Spartan Tactical Strategy: a small core elite group of Tandem teams, each person protects the other from knee to chest… One only sets layups for the other.
Your “pitch” is rooted in
“How can I help them as quickly as possible from the moment our conversation starts?”
Answer: Offer Them A Tool. This is your Viral Coefficient: a user makes a credible referral without the intention of making you a sale.
The “tool” you offer is your viral coefficient. Do not overlook the power of the tool approach.
Does your startup have a wallet-acquisition strategy?
1. Subscription SaaS models
2. Credit card on file allowing for a one-click checkout, e.g. App Store, Amazon.com
1) Structuring a very clear and tangible incentive for the user to part with payment details
2) Creating the right levels of control for the user over her wallet information
3) Allaying security fears
1) Recurring billing: In the SMB/Consumer SAAS space, billing is self-serve and recurring. In such cases, payers are more comfortable surrendering their payment details when they feel they have adequate control over changing or terminating payment schedules.
2) The actual price is unknown: In automated bidding mechanisms (AdWords, auction sites), the payer needs to have the right level of control to ensure a cap on price (e.g. maximum keyword CPC that an advertiser is willing to pay) as well as outflow (e.g. daily budget).
The Intersection Of Freemium, Networks and Marketplaces
ENTER: THE FREEMIUM MARKETPLACE