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
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
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?
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
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
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
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
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
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?
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.
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
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
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
Google Adwords Pay-per-click Set up ads Set up keywords
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
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
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
Analytics Track everything! Usage statistics User sources Referrals Errors Etc. Google Analytics HubSpot SEOMoz
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
The most effective marketing Word of mouth, personal referrals
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.
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
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
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
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
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
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
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
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
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)
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.)