Class 8: Introduction to web technology entrepreneurship


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Class 8: Introduction to web technology entrepreneurship

  1. 1. Allan ChaoStartup ConsultantStartup V8allan@startupv8.comUC Berkeley Extension, Summer 2012
  2. 2. Question of the day: What is the difference betweenan idea, a product, a business, and a company? Humor of the day:
  3. 3. The Agenda Quiz Quick review of last session Marketing Distribution, Advertising, and Promotion Revenue Models and Sales
  4. 4. Quiz Time Good luck!10 minutes max
  5. 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. 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. 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. 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. 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. 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. 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. 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. 13. Two-sided markets Most commonly buyers and sellers  Ebay  Airbnb  Which side are you making free or cheap? Which side are you charging?
  14. 14. Source Data analysis
  15. 15. Conversion Funnels
  16. 16. If you build it, they won’t come.
  17. 17. If you build it, they won’t come.
  18. 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. 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. 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 
  21. 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. 22. Google Adwords Pay-per-click Set up ads Set up keywords
  23. 23. What about Social Media? What is Social Media?  Blogs (Wordpress, Blogger)  Social Networks (Facebook, LinkedIn)  Microblogs (Twitter)  Location-based (Foursquare)  Events (, 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. 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. 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:
  26. 26. Analytics Track everything!  Usage statistics  User sources  Referrals  Errors  Etc. Google Analytics HubSpot SEOMoz
  27. 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. 28. The most effective marketing Word of mouth, personal referrals
  29. 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. 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. 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. 32. 3 Basic Revenue Models(for websites) Advertising Subscription  Freemium = Free + Premium Transaction models-for-startups.html
  33. 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. 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. 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. 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. 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. 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. 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. 40. Homework Individual, read the following:  10 business models that rocked  Browse this: The noob guide to online marketing  Browse this: How to get Media Coverage for your Startup 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.)