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Business Models 2.0 - Freemium & Platform based business models

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70% from the 115 Unicorns worldwide are platforms. As the life expectancy of companies went down from 90 years to 15 years there are new business models which influence the business today

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Business Models 2.0 - Freemium & Platform based business models

  1. 1. VALUE CREATION  IN COMPANIES 2.0  > FREEMIUM,  > PLATFORM BASED BM  > TWO SIDED PBBM  > MULTISIDED PBBM MICHAL GROMEK  RESEARCHER ON FINTECH & CROWDFUNDING  #SE.LINKEDIN.COM/IN/MGROMEK STOCKHOLM SCHOOL OF ECONOMICS  1320 ENTREPRENEURSHIP AND OPPORTUNITY  STOCKHOLM, MARCH 3RD 2017   PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/
  2. 2. "100 YEARS AGO THE LIFE EXPECTANCY OF FIRMS WAS 90 YEARS. TODAY IT IS DOWN TO 10-15 YEARS " SOURCE: HTTPS://WWW.YOUTUBE.COM/WATCH?V=DBRXOXJUV_C, SSE, MASTER IN BUSINESS AND MANAGEMENT, ACCESSED 15TH OF FEBRUARY 2017
  3. 3. STOCKHOLM SCHOOL OF ECONOMICS  "HALF OF THE FORTUNE 500 COMPANIES HAVE  DISAPPEREAD  SINCE 2000" PIERRE NANTERME, CEO ACCENTURE, 2016, BASED ON HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL- REVOLUTION-AND-DIGITAL-BUSINESS-MODELS?QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 
  4. 4. SOURCE: HTTP://WWW.VISUALCAPITALIST.COM/CHART-LARGEST-COMPANIES-MARKET-CAP-15-YEARS/ HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  IN ORDER TO GROW, WALMART HAD TO BUILD MORE STORES - AND FACEBOOK? 
  5. 5. MARKET CAP VALUATIONS —INTERNET VS. PLATFORM COMPANIES STOCKHOLM SCHOOL OF ECONOMICS  SOURCE: HTTPS://WWW.ACCENTURE.COM/FR-FR/_ACNMEDIA/PDF-2/ACCENTURE-PLATFORM- ECONOMY-TECHNOLOGY-VISION-2016-FRANCE.PDF (ACCESSED 3RD OF MARCH) 1995 2015  Alibaba Alphabet Amazon.com Apple Baidu eBay Facebook JD.com LinkedIn Netflix Priceline.com Salesforce Tencent Twitter Yahoo! Tech Companies and Born-Digital Organizations Apple  Axel Springer Copart Fox Communications IAC/InterActive Corp iLive iStart Internet Live Microsystems Netcom Online Netscape PSINet RentPath Storage Computer Corp. Wave Corporation Web.com Internet Companies  $2,560,902 $MM $16,752 $MM +15,187.1% GROW OF PLATFORM  COMPANIES 1995-2015
  6. 6. ADAPTED FROM PARKER & VAN ALSTYNE, WITH CHOUDARY, 2016, AND UPDATED JANUARY 2017  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  VALUATION OF THE COMPANIES FROM THE (UPCOMING) "FOURTH INDUSTRIAL REVOLUTION"
  7. 7. ADAPTED FROM PARKER & VAN ALSTYNE, WITH CHOUDARY, 2016, AND UPDATED JANUARY 2017  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  POWER OF MULTISIDED PLATFORM  WORLD LARGEST ACCOMENDATION  PROVIDER OWNS NO PROPERTY WORLD LARGEST TAXI COMPANY  OWNS NOT A SINGLE CAR WORLD LARGEST RETAILER DOESN'T OWN  A WEARHOUSE WORLD LARGEST MEDIA COMPANY  DOESN'T CREATE CONTENT
  8. 8. CLICK HERE FOR MORE INFORMATION ABOUT PIPES VS PLATFORM BUSINESS MODEL  TRADITIONAL PIPE BUSINESS MODEL  EXAMPLE: CAR  CO N SU M PTIO N   D ISTRIBU TIO N   LO G ISTICS  PRO CESSIO N   PRO D U CTIO N   IN PU T  ADAPTED FROM PARKER & VAN ALSTYNE 2016  FROM  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  SELLER OF PRODUCTS AND / OR  SERVICES SMACIT TO MAKE LINEAR PROCESS EFFICIENT SUPPLY-SIDE ECONOMIES OF SCALE MANAGER OF THE FIRM WITH DISTINCT BOUNDARIES FIRST MOVER ADVANTAGE OWNERSHIP OF RESOURCES
  9. 9. STOCKHOLM SCHOOL OF ECONOMICS  SMACITS = Social M = Mobile A = Analytics C = Cloud IT = IoT TRADITIONAL PIPE BUSINESS MODEL MULTI & TWO SIDED PLATFORM MODEL ADAPTED FROM PARKER & VAN ALSTYNE 2016  FROM  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017) 
  10. 10. STOCKHOLM SCHOOL OF ECONOMICS  UNICORNS TEND TO BE PLATFORMS (115 UNICORNS) SOURCE: P. EVANS, CGE; CB INSIGHTS, CAPITAL IQ, CRUNCHBASE, 2015 NON PLATFORN 30% PLATFORM 70%
  11. 11. STOCKHOLM SCHOOL OF ECONOMICS  PLATFORMS BY TYPE
  12. 12. CLICK HERE FOR MORE INFORMATION ABOUT PIPES VS PLATFORM BUSINESS MODEL  TWO SIDED & MULTISIDED PLATFORM BUSINESS MODEL  CU STO M ERS  PRO D U CERS   ADAPTED FROM PARKER & VAN ALSTYNE 2016  FROM  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)         DESTINATION FOR SOLVING CUSTOMER NEEDS SMACIT TO CO-CREATE VALUE DEMAND-SIDE ECONOMIES OF SCALE (NETWORK EFFECTS) LEADER OF AN ECOSYSTEM WITH FUZZY BOUNDARIES FIRST TO SCALE ADVANTAGE ACCESS TO RESOURCES PLATFORM 
  13. 13. PLATFORM BASED BUSINESS MODEL  STOCKHOLM SCHOOL OF ECONOMICS  EXAMPLE.  PHILIPS HEALTH SUITE, PARTNERED UP SALESFORCE, AMAZON AWS, IOT, AND ALI CLOUD. ALLOWS PERFORMING PATIENT MANAGEMENT, DATA COLLECTION, AND MANAGEMENT OF HOME DEVICES. SOURCE: HTTP://WWW.USA.PHILIPS.COM/HEALTHCARE/INNOVATION/ABOUT-HEALTH-SUITE (ACCESSED MARCH 3RD 2017) 
  14. 14. PLATFORM BASED BUSINESS MODEL  STOCKHOLM SCHOOL OF ECONOMICS  EXAMPLE PRODUCT PLEASE START WATCHING AT 2:02 MIN SOURCE: HTTPS://WWW.YOUTUBE.COM/WATCH?V=8QPUUC6GH4G (ACCESSED 3RD.03.2017) 
  15. 15. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ TWO SIDED PLATFORM    SOURCE:2016  PARKER & VAN ALSTYNE, WITH CHOUDARY – LICENSED UNDER CREATIVE COMMONS ATTRIBUTION-SHAREALIKE 4.0 INTERNATIONAL (CC BY-SA 4.0).   Phone Callers Uber Drivers eBay Sellers Xbox Developers Amex Merchants Aga Khan Doctors YouTube Videographers AirBnb Rooms Tesla Charge Stations Mechanical Turk Laborers LinkedIn Employers Upwork Projects Android Developers Phone Callees Uber Riders eBay Buyers Xbox Gamers Amex CardHolders Aga Khan Patients YouTube Viewers AirBnb Renters Tesla Car Drivers Mechanical Turk Jobs LinkedIn Employees Upwork Freelancers Android Users
  16. 16. HTTP://WWW.SLIDESHARE.NET/MARKETREVOLUTION/SHSU-SHARING-ECONOMY-COLLABORATIVE-CONSUMPTION  FROM  HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  POWER OF MULTISIDED PLATFORM 
  17. 17. STOCKHOLM SCHOOL OF ECONOMICS  USERS ARE CREATING VALUE FOR OTHER USERS.   SOURCE: CAÑIGUERAL “PLATFORMS ARE EATING THE WORLD” SLIDESHARE.NET
  18. 18. CLICK HERE FOR MORE INFORMATION ABOUT PIPES VS PLATFORM BUSINESS MODEL  PLATFORM LEVERAGE NETWORK EFFECTS >>> HTTP://WWW.SLIDESHARE.NET/ETEIGLAND/NEW-INDUSTRIAL-REVOLUTION-AND-DIGITAL-BUSINESS-MODELS? QID=61CF5C5C-CE83-4E1E-BEBF-4571B011D7C4&V=&B=&FROM_SEARCH=2 (ACCESSED FEBRUARY 2017)  METCALFE’S LAW:  MORE USERS = MORE VALUE = MORE USERS…  2 PHONES  12 CONNECTIONS  5 PHONES 12 PHONES 60 CONNECTIONS 
  19. 19. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ TAKE ONE MINUTE AND LIST  FIVE POINTS WHY WHAT MIGHT NOT WORK WITHIN THE PLATFORM  BUSINESS MODEL?  
  20. 20. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ PLATFORM  BASED MODEL  ENOUGH RESOURCES ON THE SUPPLY SIDE. (UBER PL DEMAND 3X HIGHER THAN SUPPLY)  CUSTOMER SERVICE THAT FITS THE CULTURE OF CUSTOMERS (DIDI VS. UBER)  LIMITATION OF BAD QUALITY PROVIDERS ON THE PLATFORM (UBER'S 4.5 RATING) CHICKEN EGG PROBLEM  WINNER TAKES ALL MARKET  
  21. 21. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ SOURCE: PROF KARIM LAKHANI, OPEN INNOVATION HOW CAN I USE THE CROWD, ESBRI 26.02.106  FREEMIUM BUSINESS MODEL  EXAMPLE:  CHARACTERISTCS:  YOUR COST OF ADDING ONE ADDITIONAL USER IS MARGINAL OR ZERO. (ECONOMY OF SCALE)  YOU HAVE OR WILL SIGNIFICANT TRACTIONS OF USERS. FREEMIUM IS NOT ONLY FOR IT SERVICES, BUT MUSIC (SPOTIFY), ANALYTICS (STATISTA), PRESENTATIONS, VIDEOS, ....  ONLY 8% OF THE USERS BUY PREMIUM SERVICES 
  22. 22. FREEMIUM EXAMPLE:  STOCKHOLM SCHOOL OF ECONOMICS  TOONIA COLOURBOOK  1 million downloads doubling of price paid no traction SINCE 2013:  2 MILLION DOWNLOADS  (40K IN FEBRUARY 2017)  PRICE 9,99 EURO  BETTER RETENTIONS  BIG AMOUNT OF PROFIT ON THE "PACKS" SOURCE: PARTLY FROM, HTTPS://WWW.SLIDESHARE.NET/JESSICATAMS1/RUNNING-A- FREEMIUM-BUSINESS-MODEL-IN-THE-KIDS-CATEGORY-GORAN-IVASIC? QID=16B1E5D5-50D7-41AC-99DD-ED4CD69FEBAE&V=&B=&FROM_SEARCH=4 (ACCESSED MARCH 2ND)  launch of free app
  23. 23. FREEMIUM EXAMPLE:  STOCKHOLM SCHOOL OF ECONOMICS  TOONIA COLOURBOOK  THE DEVELOPERS DECIDED TO CREATE AN ENTIRE PACKAGE OF SUBSIDIARY BRANDS SOURCE:  HTTPS://SENSORTOWER.COM/ ACCESSED MARCH  2017
  24. 24. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ SOURCE: HTTP://WWW.BUSINESSINSIDER.COM/PROBLEMS-WITH-FREEMIUM-MODEL-2013-5?R=US&IR=T&IR=T (ACCESSED 2ND OF MARCH 2017)  FREEMIUM “IT CAN WORK WONDERFULLY OF COURSE, BUT USUALLY IT CRUSHES AND DESTROYS COMPANIES, NOT ONLY BECAUSE IT  …. “ 
  25. 25. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ SOURCE: HTTP://WWW.BOTHSIDESOFTHETABLE.COM/2012/05/23/ITS-MORNING-IN-VENTURE-CAPITAL/ (ACCESSED 1ST OF FEBRUARY)   ADVANTAGES OF FREEMIUM CONVERSATION. CUSTOMER SERVICE. MARKETING EXPENSES:  EASY TO UPSET  STATS FROM INVESTORS  LOWER AND LOWER COSTS TO START  BIG USERBASE FOR USER ANALYTICS. NOT USING THE COMPETITION. 
  26. 26. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ TAKE ONE MINUTE AND LIST  FIVE POINTS WHY WHAT MIGHT NOT WORK WITHIN THE FREEMIUM BUSINESS MODEL?  
  27. 27. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ DISCUSS YOUR ARGUMENT WITHIN YOUR GROUP - IF FREEMIUM IS A SUITABLE BUSINESS MODEL FOR YOUR STARTUP. (MIN. ONE PRO AND ONE CONT ARGUMENT?) YOU WILL BE ASKED TO PRESENT. 3 MINUTES. 
  28. 28. STOCKHOLM SCHOOL OF ECONOMICS  PICTURE: HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/ SOURCE: 4% + HTTPS://WWW.FORBES.COM/SITES/BENKEPES/2014/02/24/CONFIRMATION-OF-DROPBOXS-MONSTER- RAISE/#43B12BD17678 (ACCESSED 2ND OF MARCH 2017), 1% + HTTPS://WWW.FORBES.COM/SITES/VICTORIABARRET/2012/11/13/DROPBOX-HITS-100-MILLION-USERS-SAYS-DREW- HOUSTON/&REFURL=&REFERRER= (ACCESSED WND OF MARCH 2017)  CHALLENGES OF FREEMIUM CONVERSATION. CUSTOMER SERVICE. MARKETING EXPENSES:   USERS DON’T CONVERT TO PAID USERS. DROPBOX HAS A RATE OF 1 PAYING USERS PER 25 FREE USERS.  (OR 1% AS THE NUMBERS ARE DISPUTED)  FREEMIUM USERS OUTNUMBER THE AMOUNT OF PAID USERS 100-TO-1 IN SUPPORT FORUMS AND MIGHT DROWN YOUR CUSTOMER AND TECH SERVICE. COMPANIES STATE: “CUSTOMER SERVICE IS NOT INCLUDED IN THE FREE TIER, BUT CAN YOU REALLY IGNORE YOUR CUSTOMERS?”.  AS ONLINE MARKETING IS BEING BASED ON CTR AND AFFILIATE MARKETING RELIES ON USER CONVERSATION IT THE ONLINE MARKETING COSTS HAS TO INCREASE BY 96 TIMES TO RECEIVE FOUR PAYING CUSTOMERS. (DROPBOX EXAMPLE). VIRAL PRODUCT OR YOU CAN’T AFFORD TO ADVERTISE. 
  29. 29. STOCKHOLM SCHOOL OF ECONOMICS  1. MAKE SURE TO BE VERY CLEAR ABOUT WHAT IS AND IS NOT INCLUDED IN FREEMIUM. 2. CALCULATE THAT ONLY ONE OUT OF 100 USERS MIGHT PAY FOR YOUR SERVICE. 3. CREATE LEAN CUSTOMER SUPPORT TOOLS, SEE AIRBNB OR FACEBOOK AS INSPIRATIONS. 4. THINK ABOUT DIFFERENT PREMIUM PACKAGES CONNECTED TO SPECIFIC NEEDS. (TONNIA DRAW BOOK EXAMPLES)  5. MAKE SURE, THAT USERS UNDERSTAND THAT THEY USE A SERVICE THAT HAS BEEN CREATED BY SOMEBODY AND IS NOT MECHANICAL. 6. PLAN YOU MARKETING COSTS CLEARLY AND LOOK FOR UNIQUE PR STRATEGIES TO RECEIVE ATTENTION. 7. PAY CLOSE ATTENTION TO ONLINE MARKETING COSTS, (ADVERBS, SEO, AFFILIATE) AND BUILD IN BUDGET BORDERS. THE EXPENSES MIGHT RUIN THE BUDGET.  RECOMMENDATION  FREEMIUM 
  30. 30. STOCKHOLM SCHOOL OF ECONOMICS  SLACK, A REAL-TIME MESSAGING, ARCHIVING AND SEARCH FOR THE WORK PLACE, IS OFFERING ITS USERS $100 TO ANSWER 6 QUESTIONS.  I’LL SAY IT AGAIN, A NEW COMPANY THAT HAS MADE IT TO A 1.1 BILLION DOLLAR VALUATION WITH ITS FREE PRODUCT BEING IN THE MARKET LESS THAN A YEAR, IS PAYING USERS FOR INFORMATION. LIFEHACK  FREEMIUM SOURCE: HTTP://WWW.GEEKTIME.COM/2014/11/25/WHY-A-FREEMIUM-PREMIUM- BUSINESS-MODEL-DOESNT-WORK (ACCESSED  1ST MARCH 2017(  DO SOMETHING UNUSUAL TO GET TRACTION WHAT IS CHEAPER THAN TO USE TRADITIONAL ONLINE MARKETING TOOLS. 

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