The Billion Business Model

Did you know?

2004, Google got US$ 23 billion in its IPO

2005, eBay Inc. acquired Skype Technologies for US$ 2.6 billion

2006, Google bought Youtube for US$ 1.65 billion

2007, Microsoft bought shares in Facebook for US$ 240 million (Facebook has a market value of US$ 15 billion)

2008, Microsoft offered US$ 48 billion for Yahoo

Etc, etc, etc.

Did you know? In the last 10 years there were more than 1,150 web 2.0 acquisitions for around US$ 30 billion (strategy & business magazine)

Did you know that?

Can we learn something from them?

What can we (the mere mortals) learn from them?

Why are they so valuable?

What they have in common?

Are there any rules behind scenes?

Can I apply these rules in a new venture?

The answer is yes

1 Share something 2 Sell something 3 Build a community Billion Dollar Business 4 Build a ecosystem 5 Build an infra. of cooperation 6 Use information technology The Billion Business Model

Share something

Take the initiative and be altruistic

Share something valuable for a large group

The good must be a digital one

(if not you’ll be in bankruptcy)

Give it universally (do not discriminate)

Make it a social currency:

Video, music, jokes, photos, etc.

Democratize everything

The more useful your free good

the more audience you’ll get

Share something

Share something examples

Google: free search engine

Google has around 127 million users per month

Skype: free calls pc to pc

Skype has around 10 million users per day

Monster: free job searching

Monster has around 20 million visits per month

Sell something

It is what will make you rich

It is the traditional packaged set of benefits

There must be a close relationship between the gratuitous good and the paid one (complementary goods)

Advertising is the universal complementary good

It can be physical or digital goods

Sell something

Sell something The more relationship between the free good and the paid one the more probability of sales

Sell something examples

Google sells advertising Are searching and advertising good complementors?

Google sold US$ 16 billion past year

Skype sells paid calls pc to phone Are free calls and paid calls good complementors?

www.ipdemocracy.com Skype sold almost US$ 400 million past year

Monster is paid for employers Are free job searching and paid job posting good complementors?

Monster sold around US$ one billion past year

Build a community around your offering

Community is about flow of value not necessarily money

Communities make more valuable your offering

Encourage participation, worth of mouth, and feedback

Use blogs, forums, reviews, ratings, etc.

Be tolerant with diversity (clients and non clients)

Create a social currency

Videos, pictures, music, jokes, etc

Make a social network

Include users, clients, non-clients, etc.

Democratize innovation

Build a community around your offering The bigger the community the more valuable your offering and the more the chance of sales

Community examples

IBM academic initiative This is a community of computer science professors who teach their courses using IBM’s content and products

Microsoft “cinco estrellas” program This is a community of programmers trained gratis by Microsoft and rewarding them with “starts” accordingly its MS products expertise

SAP community programs SAP encourage participation of the community using several rewarding programs

Build an ecosystem around your offering

Ecosystem is about money flow

Allow others gain money in your website

Open the doors to your partners, suppliers, clients, etc.

Encourage the selling of complementary goods

Charge a commission for others’ sales or encourage cross-selling

Evaluate the selling of competitive goods

Democratize innovation

Build an ecosystem around your offering The bigger the ecosystem the more the opportunity of cross-selling

Ecosystem examples

Amazon

E-Bay

SAP ecosystem and partner programs

Build an infrastructure of cooperation

It is the web site

It is where everything happens

For giving your free good

For selling your paid good

For the community

For the ecosystem (the others selling their goods)

It is preferable owning your own website

It is possible to use others websites but not recommendable

Build an infrastructure of cooperation The better the experience in your website the more audience you get

Infrastructure examples

MySpace

Flickr

iTunes

Audience

1 Share something 2 Sell something 3 Build a community Billion Dollar Business 4 Build a ecosystem 5 Build an infra. of cooperation 6 Use information technology The being-billion strategy

Use information technology

IT is the steroids of human relations

Use IT in creative ways

Prepare for the success not for failure

Make your website scalable

Hire good programmers

Use algorithms to create free and paid goods

Make your offering mobile

Make your website mashable

Use information technology The more sophisticated the technology the better the offerings

Use of information technology examples

Google maps

Second life

MyCybertwin (democratizing artificial intelligence)

Don’t forget to make your offering mobile Mobile users: 3+ billions Internet users: 1.4+ billion Source: ITU

1 Share something 2 Sell something 3 Build a community Billion Dollar Business 4 Build a ecosystem 5 Build an infra. of cooperation 6 Use information technology Remember

Common mistakes of web 2.0 entrepreneurs

Sharing something without selling anything

Selling something without sharing anything

Building a community without allowing the selling of related items

Building an ecosystem without allowing spontaneous cooperation

Not using Information Technology in creative ways

Cooperate without being a saint Compete w/o killing the competition (Branderburger & Nalebuff)

Final words

Today you can create value in a unprecedented scale

Money does not make happiness, but it is the consequence of creating value in great scale

Web 2.0 business is about create value first and extract value later

Cooperation in business is the science behind Web 2.0 and is still an emergent field of study. Therefore, I will appreciate feedback, examples, and counter examples

For more detailed methodology contact me

Thanks for sharing

Howard Rheingold and Andrea Saveri (www.cooperationcommons.com)

Brandenburger and Nalebuff (mayet.som.yale.edu/coopetition)

Don Tapscott (www.wikinomics.com)

www.wikimedia.org

www.webshotspro.com

finance.yahoo.com

www.strategy-business.com

www.rtpi.org.uk

www.communityplantshare.org

www.compete.com

www.webwombat.com.au

services.alphaworks.ibm.com/manyeyes

Marcelo Honores Economist Master in E-Busienss 15 years of experience in IT [email_address] marcelo-honores.blogspot.com Not billionaire yet Looking for partners