Munjal Shah on Revenue - The Founder Institute

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Munjal Shah on Revenue - The Founder Institute

  1. 1. Proprietary & Confidential
  2. 2. Revenue Frameworks Symmetric vs. Asymmetric Steps to Revenue Avoid Death Valley Watch the Scoreboard Everyday
  3. 3. Symmetric vs. Asymmetric Business Models Symmetric models Asymmetric models are ones where the are ones where the user of a product user is different from the person paying the person paying for it are the same the company for the product
  4. 4. Symmetric vs. Asymmetric Business Models Amazon.com Facebook Salesforce.com Google.com Yahoo Mail (old) Gmail.com iTunes Store Yahoo.com (mostly) All virtual goods eBay.com Hyatt.com Twitter.com iphone games Like.com Notice a trend...
  5. 5. Symmetric Business Models Are easiest because your team only has to focus on 1 type of customer There is no butterfly model of focusing users and customers No push and pull within internal teams on “selling out the UI to advertisers” Revenues and up a very accurate proxy for user interest / satisfaction so you only have to focus on one variable but there is friction to distribution (huge) Unfortunately for B2C companies usually asymmetric models dominate... I’d say 80% of the market cap (my very rough back of napkin) of Internet companies is essentially asymmetric
  6. 6. Why Are So Many Success on the Web Asymmetric? Because the cost of distribution is almost zero: so very easy to make it free for consumers Source: The super smart Mike Spieser @ http://laserlike.com/2009/04/18/microeconomics/
  7. 7. How Many Steps to Revenue
  8. 8. Background Story - History of Like.com Ojos/Riya Like.com Style Shopping Engine Face Recognition Visual search engine Visual search + all features Technology focus but mostly used for and sites needed to build shopping for soft the best way to shop for goods soft goods $0 rev $10MM rev $20MM+ rev Proprietary & Confidential
  9. 9. Don’t Be Too Oblique. Oblique = Miracle Case Study - Original Riya Model Step 4 Step 5 80% will be UGC Google public like Images w/o Flickr copyright Step 1 Step 2 Step 3 Face rec They will We will tag will get users upload lots and they of photos Step 4 Step 5 They will CPM monetize come back often
  10. 10. Shortest Distance Between Two Points... Case Study Like.com Step 1 Step 2 Get users to Sell their clicks search for to merchants products on a CPC
  11. 11. Note to Self: Silicon Valley and Death Valley Are Both in CA
  12. 12. Two Dimensions - Traffic and Intent to Transact
  13. 13. Consumer Intent to Do Commercial Transaction Don’t Be Low Traffic and Low Commercial Intent Lead Gen Nirvana High Intent Billshrink Only Google Search Like.com Twitter? Top 20 sites Death Valley Facebook Low Intent Most Web 2.0 Twitter? companies Online Games Low Traffic High Traffic Scale in Terms of Number of Users
  14. 14. Consumer Intent to Do Commercial Transaction Corollary: Relevancy Doesn’t Equal Intent Any ad with Budweiser Girls on a Botox ads on dating sites Mommy blog High Intent Geriatric shoes on a MMORPG Dogfood ads next to photos of gaming site dogs Low Intent Low Relevancy High Relevancy Relevancy of the Ads Put
  15. 15. Revenue: How to Build it. Step 1: Focus on it You can’t move a number you don’t focus on everyday
  16. 16. Start Early - Takes 1 year of tuning to make it work Daily Average Revenue at Like.com from Launch 2007 2008 First year
  17. 17. Do A/B Testing for Causality Data Information Knowledge Wisdom One Two points Correlations Causation point compared It is 72 3 degrees When there Jet stream moving degrees today warmer than are clouds south brings yesterday it tends to be storms to CA cold You don’t want a data warehouse you want a small room of causations
  18. 18. Keys to Wisdom Tracking A/B testing environment that is parallel - not serial Multiple independent machines (We have 7 sets now) Define one or two key variables (CTR and CR for us) Run tests with error bars on the results so you know when to stop Don’t do releases where any new feature is on - turn on later 20/80 Have scale - as you divide you traffic it will take a while to get results Hire Ph.Ds (we have 3) as they are better at experiment design
  19. 19. Parting Thoughts Successful entrepreneurs are more interested in being successful than in being right One self serving note: We are hiring for backend Java developers and front end engineers munjal@like.com munjalshah (twitter)

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