Monetization

Where is the money?

George Voulgaris, Ph.D.

Business Partner, VisionMobile
Director, Falling Elephant
Outline

¤  Insights from DeveloperEconomics.com

¤  Dissecting Monetization

¤  Determining Value

Aims

¤  To help you make wiser decisions regarding your

monetization strategy
Insights from
Developer Economics 2013
Developereconomics.com
Big regional differences
iOS still leads the game
More platforms more money
App Stores is not the answer
High pay-off revenue models are tough
Grow by expansion
 App Categories with highest return

Games Productivity Enterprise

(not highest but massive market share)
Analytics and monitoring pay-off
Other interesting observations

¤  At least half of all downloads will never actually sign up and
start using the app

¤  Each and every step in your sign-in process is going to cut
about 25% of your potential users

¤  Apps using cross-promotion get on average 2-3x more

downloads and earn 40% more

¤  Even where push notifications are clearly not essential to the
app (less than half of users opt-in), the retention after 4
months of users who opt-in is ~80% greater than of those
who don’t.
Want more?

¤  Go to: developereconomics.com

¤  Many free data- and analysis-packed reports and

infographics
Dissecting Monetization
What is monetization?
What is monetization?

¤  Who is willing to pay me for a problem I solve?

¤  Why?

¤  How much?

¤  Over what period?

¤  But business is not only about exchanging money…
 Business is exchange of value
The Business Model Canvas
44

Key Key Value Customer Customer

Partners Activities Proposition Relationships Segments

Key Channels
Resources

Cost Revenue
Structure Streams
Traditional Merchant model

company customer
Being replaced by asymmetric business
models in several sectors
Asymmetric business models:
two key concepts

¤  Network effects

¤  Core vs complements

Network effects

¤  "multi-sided platforms bring together two or more distinct

but interdependent groups of customers. Such platforms
are of value to one group of customers only if the other
groups of customers are also present.

The platform creates value by facilitating interactions

between the different groups.

A multi-sided platform grows in value to the extent that it

attracts more users, a phenomenon known as the
network effect."

Source http://BusinessModelGeneration.com
Network effects: positive feedback

AppStores
Network effects
 Core vs Complement
Economics of complements

Microeconomics: Every product has substitutes and complements.

Core Product Complement

A product consumed
with the main product

Product demand increases

as complement prices decrease

Page 2 Copyright VisionMobile 2007-10

 How Google uses complements
Core vs Complement
Google Core Product Google Complements

On-line advertising mobile networks handsets browsers

Commoditisation of mobile
increases demand
for Google products
Closed net open source Chrome,
ad network neutrality OS WebKit

Page 3 Copyright VisionMobile 2007-10

Core business

¤  Your core business will be defined by your vision, aims,

market, know-how, competition etc.
Monetization Considerations

In order to plan a successful monetization strategy you need

to:

¤  Clearly map value exchange(s)…

¤  …across all stakeholders/ecosystem (*)

¤  Test the correct parameters for sustainability / growth

¤  A good pricing strategy

Finding out who and why is going
to pay
Tools of the trade
 Money Money

Less Money
Less Money
My organization Company

Mapping the stakeholders and value

Product
Product

exchange
Consumer Supplier
Service Service

Experience Experience
Government Non-profit

Right Right
Money Money

Data Data Less Money

Less Money
My organization Company

reputation reputation Product

Product

Example
Consumer Supplier
Service Service
Credits Credits

Experience Experience
Exposure Exposure
Government Non-profit

Right Right

Business Model Kit Source http://boardofinnovation.com/

Data Data
Source and © http://boardofinnovation.com/
Source and © http://boardofinnovation.com/
Get your pencils out #1

¤  Draw a simple diagram of all stakeholders and value-

exchange within your company’s ecosystem
Conclusion

¤  Having a clear picture of value exchange between

stakeholders helps you identify opportunities for
monetization
De/Refining the value proposition
The Value Proposition Canvas
Do they…
Create savings that make your customer happy?
(e.g. in terms of time, money and effort, …)
Produce outcomes your customer expects or that go
beyond their expectations?
(e.g. better quality level, more of something, less of something, …)
Copy or outperform current solutions that delight your
customer?
(e.g. regarding specific features, performance, quality, …)
Make your customer’s job or life easier?
(e.g. flatter learning curve, usability, accessibility, more services, lower
cost of ownership, …)
Create positive social consequences that your
customer desires?
(e.g. makes them look good, produces an increase in power, status, …)
Products & Services
List all the products and services your value proposition is built around.
Which products and services do you offer that help your customer get either a
functional, social, or emotional job done, or help him/her satisfy basic needs?
Which ancillary products and services help your customer perform the roles of:
Buyer
(e.g. products and services that help customers compare offers,
decide, buy, take delivery of a product or service, …)
Co-creator
(e.g. products and services that help customers co-design
solutions, otherwise contribute value to the solution, …)
Transferrer
(e.g. products and services that help customers dispose of
a product, transfer it to others, or resell, …)
Products and services may either by tangible (e.g. manufactured goods, face-to-
face customer service), digital/virtual (e.g. downloads, online recommendations),
intangible (e.g. copyrights, quality assurance), or financial (e.g. investment funds,
financing services).
Rank all products and services according to their importance to your customer.
Are they crucial or trivial to your customer?
Do they…
Produce savings?
(e.g. in terms of time, money, or efforts, …)
Make your customers feel better?
(e.g. kills frustrations, annoyances, things that give them a headache, …)
Fix underperforming solutions?
(e.g. new features, better performance, better quality, …)
Put an end to difficulties and challenges your
customers encounter?
(e.g. make things easier, helping them get done, eliminate resistance, …)
Wipe out negative social consequences your
customers encounter or fear?
(e.g. loss of face, power, trust, or status, …)
Value Proposition
Create one for each Customer Segment in your Business Model
www.businessmodelgeneration.com
Source and © http://businessmodelalchemist.com/
http://BusinessModelGeneration.com
Day Month Year
On:
Designed for: Designed by:
No.
Iteration:
Do something customers are looking for? Which savings would make your customer happy?
(e.g. good design, guarantees, specific or more features, …) (e.g. in terms of time, money and effort, …)
Fulfill something customers are dreaming about? What outcomes does your customer expect and what
(e.g. help big achievements, produce big reliefs, …) would go beyond his/her expectations?
(e.g. quality level, more of something, less of something, …) Rank each gain according to its relevance to
Produce positive outcomes matching your customers your customer.
success and failure criteria? How do current solutions delight your customer? Is it substantial or is it insignificant?
(e.g. better performance, lower cost, …) (e.g. specific features, performance, quality, …)
For each gain indicate how often it occurs.
Help make adoption easier? What would make your customer’s job or life easier?
(e.g. lower cost, less investments, lower risk, better quality, (e.g. flatter learning curve, more services, lower cost of ownership, …)
performance, design, …)
What positive social consequences does your
Rank each gain your products and services create according to its relevance to your customer desire?
customer. Is it substantial or insignificant? For each gain indicate how often it occurs. (e.g. makes them look good, increase in power, status, …)
What are customers looking for?
(e.g. good design, guarantees, specific or more features, …)
What do customers dream about?
Gain Creators Gains
(e.g. big achievements, big reliefs, …)
How does your customer measure success and failure?
Customer Job(s)
(e.g. performance, cost, …)
Describe how your products and services create customer gains. Describe the benefits your customer expects, desires or would be surprised by.
How do they create benefits your customer expects, desires or would be surprised This includes functional utility, social gains, positive emotions, and cost savings. What would increase the likelihood of adopting a solution?
by, including functional utility, social gains, positive emotions, and cost savings? (e.g. lower cost, less investments, lower risk, better quality, performance,
design, …) Describe what a specific customer segment is trying to get done. It could be the tasks
they are trying to perform and complete, the problems they are trying to solve, or the
needs they are trying to satisfy.
What functional jobs are you helping your customer get done?
(e.g. perform or complete a specific task, solve a specific problem, …)
What social jobs are you helping your customer get done?
(e.g. trying to look good, gain power or status, …)
What emotional jobs are you helping your customer get done?
(e.g. esthetics, feel good, security, …)
What basic needs are you helping your customer satisfy?
(e.g. communication, sex, …)
Besides trying to get a core job done, your customer performs ancillary jobs in differ-
ent roles. Describe the jobs your customer is trying to get done as:
Pain Relievers Pains What does your customer find too costly?
(e.g. takes a lot of time, costs too much money, requires substantial efforts, …)
Buyer (e.g. trying to look good, gain power or status, …)
Co-creator (e.g. esthetics, feel good, security, …)
Describe how your products and services alleviate customer pains. How do they Describe negative emotions, undesired costs and situations, and risks that your What makes your customer feel bad?
eliminate or reduce negative emotions, undesired costs and situations, and risks customer experiences or could experience before, during, and after getting the (e.g. frustrations, annoyances, things that give them a headache, …) Transferrer (e.g. products and services that help customers dispose
your customer experiences or could experience before, during, and after getting job done. of a product, transfer it to others, or resell, …)
the job done? How are current solutions underperforming for
your customer?
(e.g. lack of features, performance, malfunctioning, …) Rank each job according to its significance to your customer. Is it
crucial or is it trivial? For each job indicate how often it occurs.
What are the main difficulties and challenges
your customer encounters? Outline in which specific context a job
Eliminate risks your customers fear? (e.g. understanding how things work, difficulties getting things done,
is done, because that may impose
(e.g. financial, social, technical risks, or what could go awfully wrong, …) resistance, …)
constraints or limitations.
What negative social consequences does your (e.g. while driving, outside, …)
Help your customers better sleep at night?
(e.g. by helping with big issues, diminishing concerns, or eliminating worries, …) customer encounter or fear?
(e.g. loss of face, power, trust, or status, …)
Limit or eradicate common mistakes customers make? Rank each pain according to the intensity it
(e.g. usage mistakes, …) What risks does your customer fear? represents for your customer.
(e.g. financial, social, technical risks, or what could go awfully wrong, …) Is it very intense or is it very light.?
Get rid of barriers that are keeping your customer What’s keeping your customer awake at night? For each pain indicate how often it occurs.
from adopting solutions? (e.g. big issues, concerns, worries, …)
(e.g. lower or no upfront investment costs, flatter learning curve, less
resistance to change, …) What common mistakes does your customer make?
(e.g. usage mistakes, …)
Rank each pain your products and services kill according to their intensity
for your customer. Is it very intense or very light? What barriers are keeping your customer from
For each pain indicate how often it occurs. Risks your customer experiences or
adopting solutions?
(e.g. upfront investment costs, learning curve, resistance to change, …)
could experience before, during, and after getting the job done?
Customer Segment
Use in Conjunction with the Business Model Canvas Copyright of Business Model Foundry GmbH
Value Proposition design is about
Product – Market fit

Image source and © http://businessmodelalchemist.com/

 Value Proposition design
¤  Jobs
¤  Functional jobs (tasks)
¤  Social jobs (status / peer
recognition)
¤  Emotional jobs (feel good)
¤  Basic needs (communications)

¤  Pains
¤  Negative emotions (frustrations)
¤  Costs and situations (time, money,
mistakes, performance)
¤  Risks (Technical, Social, Financial)

¤  Gains
¤  Expected, desired and surprise
benefits
¤  Functional, Social, Emotion, Cost

Image source and © http://businessmodelalchemist.com/

 JTBD #1

Focus on the customer

Problem, not on your
solution

Source: twitter @susyjacks

JTBD #2

¤  Scenario: a social entrepreneur has created a 2nd hand

toys and clothes-swapping store aiming to help families
that have financial difficulties.

¤  Can you identify some of the potential JTBDs for two
stakeholder groups: parents and donors.
 Value Proposition design

¤  Product/Services:
¤  Tangible
¤  Digital/Virtual
¤  Intangible (quality, copyrights)

¤  Pain relievers

¤  How does your solution
eliminates the customer pains?

¤  Gain creators

¤  How does your solution create
expected, desirable, surprise
benefits?

Image source and © http://businessmodelalchemist.com/

Get your pencils out #2

¤  Draw a Value Proposition Canvas for your primary

customer and core solution

¤  Product/Services:
¤  Tangible
¤  Digital/Virtual
¤  Intangible (quality, copyrights)
¤  Pain relievers
¤  How does your solution
eliminates the customer pains?
¤  Gain creators
¤  How does your solution create
expected, desirable, surprise
benefits?
¤  Jobs
¤  Functional jobs (tasks)
¤  Social jobs (status / peer
recognition)
¤  Emotional jobs (feel good)
¤  Basic needs (communications)
¤  Pains
¤  Negative emotions (frustrations)
¤  Costs and situations (time, money,
mistakes, performance)
¤  Risks (Technical, Social, Financial)
¤  Gains
¤  Expected, desired and surprise
benefits
¤  Functional, Social, Emotion, Cost
Pivoting
Remember to compare value propositions by using the same variables
e.g. price, risk, quality
 Pivoting; comparing value
propositions

Design, Compare, Observe, Ask, Validate

Iterate
Conclusion
Closing remarks

¤  Monetization strategy needs a continuous out-of-the-box

view of your stakeholders and value exchanges.

¤  The one with biggest pain and pocket is usually your
primary customer.

¤  Monetization strategy involves:

¤  Identify and quantify the value exchange between all
stakeholders
¤  Identify a sustainability/growth strategy that will ensure your
income exceeds your burn rate (at a minimum…)
Important topics not covered

¤  Pricing (see Further Reading) … but start high!

¤  Metrics and Analytics (see Further Reading); Vanity Metrics;

Growth Strategies & Hacking;

¤  Value Proposition design can provide valuable input to your

marketing strategy (subject of other talk)

¤  Get familiar with decision making & brainstorming

techniques and tools. It will pay off.
Fall in love with post-it notes vs notepads when constructing
any form of canvas ;)
Further reading
(disclaimer: I am not affiliated with nor endorse any of the following paid books or products, except
VisionMobile’s Developer Economics)

¤  http://Developerconomics.com
¤  Guide to growth hacking
http://www.quicksprout.com/the-definitive-guide-to-growth-hacking/
¤  Great article series on pricing an app:
http://www.developereconomics.com/how-to-price-your-app-by-michael-jurewitz/
¤  List of several revenue models, good for inspiration:
https://hackpad.com/Web-and-Mobile-Revenue-Models-Ch2paBpUyIU
¤  Dave McClure’s Pirate Metrics:
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
http://vimeo.com/26277733
¤  On MVPs: Noah Kagan’s How to Create a Million-Dollar Business This Weekend:
http://www.fourhourworkweek.com/blog/2011/09/24/how-to-create-a-million-dollar-business-this-
weekend-examples-appsumo-mint-chihuahuas/
¤  “Lean Analytics”, Alistair Croll, Benjamin Yoskovitz (2013) O’Reilly
¤  “Four steps to Epiphany: 2nd edition” Steve Blank (2013) K&S Ranch
¤  “Gamestorming: A Playbook for Innovators, Rulebreakers, and Changemakers”, Dave Gray, Sunni Brown,
James Macanufo (2010) O’Reilly
¤  “The Decision Book: Fifty Models for Strategic Thinking” Roman Tschäppeler, Mikael Krogerus, Jenny
Piening (2011) Profile Books
¤  https://www.udemy.com/startup-how-to-7-steps-to-creating-a-successful-product/?
couponCode=LEANFTW
¤  http://Custdev.com
Thanks! Keep in touch
George Voulgaris, Ph.D.

george@visionmobile.com
Business Partner, VisionMobile

george@fallingelephant.com
Director, Falling Elephant

@gevou
linkedin.com/in/voulgaris