How do they make money Ash Ravikumar Entrepreneurship

How do they make money? Ash Ravikumar Entrepreneurship Development Officer CERN Knowledge Transfer EMU # 100

Simplistic view • Sell for more than what it costs • Sell a lot of it • Repeat Source: https: //www. reactiongifs. us/thank-you-captain-obvious/

Business Model – What and Why? • A business model is your company’s core strategy for profitability. It’s a blueprint. (Compared to Business Plan – which could be the roadmap; Strategy document to explain the execution) • Key levers – Pricing and Costs • Key measures– Metrics and unit economics

The canvas – Why is it so popular? g in n n la P s s e in s u B EMU # 101

Jargon busting time • B 2 B – Business to Business - Sell to another business • B 2 C – Business to Consumer – Direct to consumers • B 2 B 2 C – This needs some explanation and a slide by itself

B 2 B 2 C • Your company sells a product/service to a business, gaining customers and/or data from that business that you get to keep and use. • And where, most importantly, that group of customers becomes disconnected from the middle B — at some point, they recognize that YOU (the first B!) are the product they use. • Google – AOL partnership • Not to be mistaken with channel partnership or reselling (source – a 16 z)

Quick Summary of some models Freemium Low -touch Pay as you go Disintermediation Subscription 2 sided market Offer basic free; Lower price Charge for by decreasing premium service costs service Charge for actual Sell direct; Remove Charge a fee Both sellers and usage ( the traditional to gain access buyers meet on sometimes with middleman to a service a platform subscription) Linkedin Revolut Electricity AWS * IKEA Dell Netflix Airbnb Razor model – Sell the product at a loss and the consumable at premium – Gillette, Xbox, printers/ink. . . Reverse Razor model – Low margin item below cost and sell premium - Kindle

Software Business models • Software as a service (Saa. S) { Xaas} • API • Ad revenue • ….

Software Business Models USERS

Software as a Service - Metrics • Cost of Acquiring a customer (CAC) COST • Life Time Value (LTV) or Customer Lifetime Value (CLV) REVENUE • Churn COST/ Lost REVENUE • Monthly Recurring Revenue (MRR) Annual - (ARR) REVENUE • Monthly Active Users (MAU) REVENUE

Application Programming Interface (API) models – Deep dive • API is a tool that allows 3 rd party apps to communicate with your service • Rather than spending a lot of hours to develop a map and add routing functionality, you can implement Google Maps API and pay Google to use it • 22, 000 APIs available in the market • But why? How do they make money

API – Business Model • API provider — the company that creates and offers an API • API consumer, or simply developer — the developer who implements the API • End user — the person who uses the application containing the API Source: https: //yalantis. com/blog/api-business-models-for-scalable-online-businesses/

API – Business models Source: https: //yalantis. com/blog/api-business-models-for-scalable-online-businesses/

API – Monetization • Subscription model – Pay a monthly/yearly access fee • Freemium, Tiered options • Sandbox to test – Paypal provides this • Pay-as-you-go – AWS • Point based model – unit based. Pre-buy units to use. Google Ad. Words ( $ 0. 25 per 1000 calls) • Transaction based – mostly for payment gateways. Ex 2. 9%+$ 0. 30 for each transaction!

API – Revenue share • Make developers spread your product. • Share the revenue – • Example - ad revenue – Trip Advisor’s API has been shared by 700 partners and used in 50, 000 3 rd party applications • Trip advisor makes money from click-based and display ads • Raising awareness and more traffic generates revenue for Trip advisor and they share with the developers to drive more traffic • Referral/Affiliate program • Travel websites include the API. If a purchase is made, then affiliate shares 50% of revenue.