Class 8: Introduction to web technology entrepreneurship

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  • 1. Allan ChaoStartup ConsultantStartup V8allan@startupv8.comUC Berkeley Extension, Summer 2012
  • 2. Question of the day: What is the difference betweenan idea, a product, a business, and a company? Humor of the day:
  • 3. The Agenda Quiz Quick review of last session Marketing Distribution, Advertising, and Promotion Revenue Models and Sales
  • 4. Quiz Time Good luck!10 minutes max
  • 5. Quick review of prior material Hosting  Server  Advanced Deployment tools  Data Center  Release planning Hosting Options  Firefox example of staggered releases  Dedicated Hosting  Project Management  Shared Hosting  Gantt Chart  Virtual Private Server (VPS)  Agile Development  Colocation  Project Management tools  Cloud Hosting  Budgeting Buying hosting  Ninety-ninety rule  Cheap options  Deployments on closed platforms  Rackspace, Softlayer  Hiring Developers Deployment  Managing developers FTP = File Transfer Protocol  Extreme Programming  Filezilla  Code Reviews Multiple environments  Outsourcing  Dev > QA > Staging > Production  Build Process
  • 6. Positioning and Targeting Once sentence description of what your product is and who the customer is In-class exercise, go around the room, everyone say your one-sentence description. Position  Differentiation from Competitors  Value Proposition = what’s special about your product Targeting  Who is your target audience  Demographics, psychographics  Segmenting
  • 7. Differentiation Positioning and Targeting USP = Unique Selling Proposition  What do you offer that no one else does?  What do you offer better than competitors? Examples  Newest, coolest, best?  Cheapest, Best value?  Most convenient?  Most prestigious?  Most features?  Unique features?
  • 8. Competitors There will be competitors  They could have VC funding  Their team is equally or more passionate than you As soon as an opportunity is recognized, competitors pop up everywhere. Usually not exact clones, but have some differentiation Generally, only one big winner will emerge.  Network-effect startups are in winner-take-all markets
  • 9. Handling Competitors What are your competitors doing right? What are they doing wrong? Use their mistakes to differentiate and push them out  Portable music existed before iPods  Search existed before Google  Social networks existed before Facebook
  • 10. First Mover Advantage is a myth Why?  Finding the product-market fit is much harder  Market may not be ready for your product, even if it is better  Product is much costlier to build  Make all the “first timer” learning mistakes Investors are wary of first-to-market  Highest risk among the high risk  If there are no competitors, maybe there is no opportunity (other entrepreneurs tried and failed)  Requires high capital to “land grab”  If there is an opportunity, competitors will appear quickly
  • 11. Focusing on Niche Niche = small section of the total market E.g. Facebook Policy Year Harvard Feb, 2004 Why? Stanford, Mar, 2004  Better product for the niche Columbia, Yale  Focused marketing message Ivy league schools 2004  Easier to reach critical mass All universities 2004  Brand recognition Universities Oct-Dec 2005  Exclusivity effect internationally High schools Sep 2005 After success, expand Anyone Sep 2006
  • 12. Critical Mass Is the minimum number of users you need for your service to be useful for a new user.   Reaching “traction” Mostly relevant to startups with strong network effects  Social Networks  Facebook  Crowdsourcing sites  Yelp  Anything requiring concurrency  Real time gaming  Two sided markets
  • 13. Two-sided markets Most commonly buyers and sellers  Ebay  Airbnb  elance.com Which side are you making free or cheap? Which side are you charging?
  • 14. Source Data analysis
  • 15. Conversion Funnels
  • 16. If you build it, they won’t come.
  • 17. If you build it, they won’t come.
  • 18. Options for a Web Startup Online marketing  SEO  PPC  Social Media  PR Offline Marketing  “on-the-ground” campaigns  Events  Traditional marketing  TV, radio, magazines, etc.
  • 19. SEO = Search Engine Optimization aka “organic” listings “I want to be on the top of Google!” For small businesses, target “long-tail” keywords. E.g. “San Francisco flood repair”, not “flood repair” Very complex algorithms, constant changes Can be very challenging, depending on market saturation “Guaranteed rankings” are “blackhat”! Google will ban the site! Trust is very important, fraud/cheating is pervasive
  • 20. SEO Implementation Search engine friendly website design and code  URLs  HTML tags Keyword research and keyword targeting Content  Create meaningful content, bring people to your site  Blog Links Learn more  SEOmoz.com
  • 21. SEM = Search Engine Marketing aka Keyword advertising Google Adwords, Bing, Yahoo Pay per click, $0.50-$20, depending on keywords Much more stable source leads Must be set up correctly, or else could be wasting money Many factors still at play, such as quality score
  • 22. Google Adwords Pay-per-click Set up ads Set up keywords
  • 23. What about Social Media? What is Social Media?  Blogs (Wordpress, Blogger)  Social Networks (Facebook, LinkedIn)  Microblogs (Twitter)  Location-based (Foursquare)  Events (meetup.com, Eventbrite)  News and Bookmarking (Digg, Delicious)  Much, much more Free or very cheap, but massive time investment without obvious ROI Very common, almost necessary, for startups
  • 24. Public Relations Hiring PR too early is a common mistake for startups Newsworthy?  First Launch  Launch or feature or offer  Current events, like partnerships What’s the message?  Message for the startup Target a specific writer  Someone who already writes about the topics
  • 25. Launch Strategy Do a hot launch, not a cold launch (Launch page) Optimize SEO and blog Advertise if necessary Use social media List the company on startup sites (e.g. Crunchbase) Target specific PR journalists Learn more here: http://www.quora.com/Whats-the-best-launch-strategy-for-a-web-startup
  • 26. Analytics Track everything!  Usage statistics  User sources  Referrals  Errors  Etc. Google Analytics HubSpot SEOMoz
  • 27. Virality K-factor  On average, how many new users will one user refer  >1 … sustained growth  <1 … sustained loss  must be covered with advertising All those sharing buttons
  • 28. The most effective marketing Word of mouth, personal referrals
  • 29. Money… Profit (or pursuit of profit) is the difference between a hobby and a business You need revenue to make a profit. Lots of revenue.
  • 30. Importance of a Revenue Model? How high are you aiming?  IPO / acquisition / lifestyle business The higher you aim, the less important revenue is at the beginning  But without revenue… need venture capital
  • 31. Different Business Models Business to consumer  Fastest, highly analytics driven Business to SMB  Medium, sales cycle with analytics Business to enterprise  Slowest, long sales cycle
  • 32. 3 Basic Revenue Models(for websites) Advertising Subscription  Freemium = Free + Premium Transaction http://startupmodels.blogspot.com/2012/02/revenue- models-for-startups.html
  • 33. Advertising If you’re not paying for it, you’re not the customer; you are the product being sold Significantly Detracts from user experience Requires broad reach and massive scale to generate large revenues  Easier for lifestyle business, much more difficult for IPO/Acquisition Revenue depends on conversion rate, which depends on many factors RPM (revenue per mille) How much to make $1000/month  General: $1 RPM  1 million pageviews/month  Demographic targeting $5 RPM  200,000 pageviews/month  Endemic advertising $20 RPM  50,000 pageviews/month
  • 34. Subscription based Freemium = Free + Premium  Free plan to get registered users  Free plan is limited, must pay monthly for more Metrics  Conversion rate  Churn rate  CLTV Customer lifetime value  CPA Cost per acquisiton
  • 35. Conversion Funnel Starts at all visitors Loss at each step Eventually, a small number Free  Paid conversion rate tends to be around 1-3% Those few paying users must cover the expenses of free users
  • 36. Churn Rate = the rate of people unsubscribing Example  500 monthly subscribers at $10/month each  $5,000/m  8% monthly subscribers leave each month  40 leave  Just to stay steady, you need 40 new paid subscriptions monthly  To grow, you need more than 40 per month Conversion rate applied (in reverse)  40 new subscriptions  2,000 (2% CR) total subscriptions  10,000 (20% CR) total new visitors
  • 37. Other Revenue Models(for websites)These models are less common Selling data to data miners In-app sales  Virtual items in games Patenting technology and Licensing it Donations / pay-what-you-want
  • 38. Product Market Fit Achieving “Product Market Fit” means success How to do it? Customer development  Release early  Listen to feedback  Sell it to customers  Learn and iterate
  • 39. The Pivot Back to disruptive innovation  Never been tried before  No one knows if it will be successful It’s like an experiment  If it fails, change your hypothesis, try again Change a core section of your business model  Product-market fit Examples  Online game “Game Neverending” → Web photo sharing (Flickr)  PDA payments → Email/web payments (Paypal)  Animation equipment → Animated movies (Pixar)
  • 40. Homework Individual, read the following:  10 business models that rocked http://www.slideshare.net/boardofinnovation/10-business-models-that-rocked-2010-6434921  Browse this: The noob guide to online marketing http://www.seomoz.org/blog/the-noob-guide-to-online-marketing-with-giant-infographic-11928  Browse this: How to get Media Coverage for your Startup http://onstartups.com/tabid/3339/bid/80121/How-To-Get-Media-Coverage-For-Your-Startup-A- Complete-Guide.aspx (Team) Prepare your Final Presentation  Use the pitch deck from class 2 as a basis  Product Demo should be max 5 min of your 10-15 min presentation (Team) Keep Going!!  Keep programming  Keep working on the pitch deck  Keep marketing your new startup  Occasionally review the market research data (Google Analytics, etc.)