Monday, November 16, 2009

Generating revenues from mobile applications

Some interesting examples from companies such as Copilot Live, Shazam, Financial Times, and 63336.



Related videos:

Saturday, November 14, 2009

Business models turning products into platforms

Most products can be subdivided into smaller parts (modules) that can be independently created and then used in different systems for multiple uses. Classical examples of modular systems are complex products such as airplanes, cars and computers, comprising of many different subsystems. Technology and IP based business models take further steps breaking down each invention, algorithm or other valuable asset into the smallest possible components consisting of isolated, self-contained functional elements, to be used in different technology, products and systems for multiple uses.

What is a platform product?
A platform product can be seen as a product that enables one or more additional products or services to expand the platform product's capabilities and features such as functionality, performance or design. Digital examples are Microsoft's Windows, Google's Android platform, Facebook and Twitter, where application developers are able to develop software for users to chose, adding functionality not included in the original platform product. Some physical examples are cars, bicycles, SLR cameras or computers, with their spare parts, tuning kits, peripherals and other accessories. Increasingly physical components becomes connected and integrated with digital ones with fundamentally physical products such as houses or trucks becoming platforms for numerous of digital services for its owners, users, and other stakeholders.

Enabling flexibility and customization
Customers or users seldom want the same thing and have different price sensitivity and prioritizations for different features such as performance, design, portability or functionality of a product. At the same time few are those who are willing to pay for more things or functions than they need, unless they have to. Providing a product as a platform, it can be made more simple and flexible, often to a lower cost, enabling alternations and extensions into many different directions based on customer preferences. It might also enable upgrades and new features not yet discovered when the platform is being sold. Different components or modules can also be sold with different rights or license terms tied to them.

Platform compatibility
Different control mechanisms, such as trademarks, product design, design protection, patents and contracts are often used in combination to control the compatibility of a product platform from other companies' additional products. Depending on the competitive setting, the developed control position and chosen business strategy, the company offering both the product platform and extensions can either compete or be a monopolist in the market for platform products and/or additional products. Companies may for various reasons, such as decreasing the time of development or to provide bigger variety of additional products, chose to allow competition and allow customers to choose additional products offered by competing or complementary firms.

Closed, semi-open and open platforms
The product platform can be totally closed or totally open in many different ways such as "open for everyone to develop and sell additional products", "open for licensees signing away certain rights to develop and sell additional products", "additional products must be sold through the platform owner" or as with news platforms "open for everyone to comment", "open for registered users to comment" "open for adding of links" etc.

Ten years ago mobile phone operators wanted to provide all services to their subscribers themselves and the place to download games and ringtones was theirs. After only 8 months of operations the number of iPhone applications surpassed Windows mobile applications that had been developed for 9 years. Before the year end the iPhone app store is believed to have more than 100 000 applications, still the iPhone app store has only been semi-open and perhaps we will see an even faster development for the Google Android platform.

Actors playing multiple roles
Subdividing the value creation into smaller parts that can be independently created enables companies to focus on their core activities based on their core assets and capabilities, and use external actors to develop and provide the rest that is needed. In many cases this creates complex relationships where actors together build platforms or ecosystems of products and services, at the same time competing with their products and services. One example is Microsoft that provides the Windows platform for others to develop applications on, at the same time it competes in several application areas such as browsers and media players. Together Microsoft and external developers might compete against Apple's or Google's platforms and software applications. In technology and licensing intensive industries such as telecom each actor can any day be a supplier, buyer, competitor, partner and licensee.

Designing the value network
A key challenge for companies providing products as platforms is to design the value network surrounding the company and its value propositions. What role should the platform provider have in relation to external actors? With whom should you cooperate, how and under what terms? What are the external actors' incentives or disincentives to get a successful product platform to emerge? How do they look at your role in their business model? What are your value propositions towards the different actors that you need in your value network? How do your value propositions support customers' customers, suppliers' suppliers and partners' partners? What about your long term position in the value network?

Need for business model innovation
Think of all products that can be seen as platforms still controlled by one company where the speed of development could increase dramatically together with the available options for customers to customize and personalize the final product. This is not as much an engineering challenge as it is a business model challenge.

What products and services can be built and provided by others as add-ons to your platform product? What companies or other organizations make money or get benefits today based on your products and services? How could this be taken one step further...?

Further reading:

Wednesday, November 4, 2009

Shanda Literature - An interesting business model for more than 800 000 authors

Shanda Literature, a subsidiary of Shanda Interactive Entertainment known for its online games, is an online publishing company based in Shanghai, with a very interesting business model.

More than 800 000 amateur authors have been providing around 50 million Chinese characters daily, to Shanda’s literature portals with around 500 million page views daily. Any writer can register with Shanda and post their works on any of its sites. Content is made available as Internet literature, mobile literature, traditional print, and Shanda has also its own E-Reader in development. Most known portals are Qidian, Jinjiang and Hongxiu, targeting different groups of readers with different types of content. Shanda Literature’s original online literature site Qidian has released more than 600 000 online novels.

Revenues are generated from micro transactions, advertising and for non-professional writers copyrights are acquired and licensed to other publishers, mobile, gaming, TV and film industries, with the great majority being from micro transactions. Readers can read the first half of a book for free and then, if they like the book, pay about 2-3 cents per 1000 characters, for the rest of the book. The total cost is about one-tenth of the paperback price to read a book online.

Revenues from micro transactions are shared 50/50 with the authors “that’s why writers in China can make a fortune” says Zhou Hongli, Chief Copyright Officer in the first video below.

The company that was founded in 2007 controls over 90% of China’s online-reading market, and generated $15 million in 2008 from a total readership of 25 million, and is still growing at 10 million new readers per year. It has received awards such as “China’s most promising enterprise”, “One of the ten best Internet brand names of China” and “China’s cutting edge media by Forbes”.

See the last 2 minutes in the video below:


Interview with Hou Xiaoquiang, CEO Shanda Literature. (noisy)

Related posts:

Friday, October 30, 2009

Twitter - a de facto standard for real-time data?

I wrote a comment on Twitter's Business Model: Brilliant or Non-Existent? on the Harvard Business blog, that turned out to be rather long, so I post it here as well:

I believe Twitter has done the right thing given the funding they have had and the potential value they can create, extract and control. The potential value lies in the number of users and the number of sent messages, so by improving the user experience the number of users, and the number of messages per user, increases along with the number of applications using Twitter streams. In comparison with most other internet services, Twitter has the ability to become a de-facto standard for a new type of data to be mined. The key question is how much of the value created that will be captured and controlled by the company, and how much of the value that will be extracted by others mining their data. What I find perhaps most impressive is that Twitter has managed to get so many application developers to build applications on top of its API without an outspoken business model, assuring the continuous ability to do so with or without fees or advertising.

There are many speculating about future premium versions using a Freemium model, but with or without paid versions I believe there are so many great ways to monetize the Twitter data. Twitter is increasingly becoming a standardized platform for real-time data, now used by actors such as Microsoft and Google, and their search algorithms will probably be updated with algorithms ranking pages on links from Twitter users, RTs by other Twitter users, by the number of followers, by webpages linking to Twitter profiles etc. This is of course of great value for Internet users, as well as for search- and content companies, and brand owners, that want to know what is going on right now, what are the latest reports within a certain area, who are the people in the world that by interest or profession stay on top of everything that happens within their field, local community etc. It is of course also of great value for the Telcos getting increased amount of data transfer from mobile phones.

Content in Twitter messages will probably soon trigger other services. Say that I Twitter about a book that I have read, it would be in the interest of Amazon to ask me to comment the book on Amazon and recommend a new one, in the interest of the writer to get my feedback, in the interest of my local cinema to tell me about when the movie is coming out, and in the interest of mine to know what friends also read the book and who liked it and who didn’t. By cross-referencing twitter messages with past messages, messages by others or from friends in social networks such as Facebook or LinkedIn, there will be great opportunities for interesting services and business models.

My twitter stream (@sundelin) will probably not be ranked as high as @NYTimes for general news but perhaps my stream will be considered more important in relation to business models, where I tend to find things faster than most others.

Related posts:

Friday, October 23, 2009

Videos from the Web 2.0 Summit 09 (Day3)

At the center of both the destruction and creation of new business models is the World Wide Web. At the Web 2.0 Summit, held in San Francisco October 20-22, some of the leading companies share their views on business models and what is next on the horizon. The Summit is arranged by O'Reilly Media and TechWeb, and moderated by John Battelle and Tim O'Reilly.

Videos from Day 1
Videos from Day 2

A Conversation with Paul Otellini Paul Otellini (Intel Corporation), John Battelle (Federated Media Publishing)


HOB: A Windows for the Web? Sundar Pichai (Google)


HOB: Burning Algae: The Green Crude Revolution Cynthia Warner (Sapphire Energy)


High Order Ignite - Sponsored by Omidyar Network Brady Forrest (O'Reilly Media, Inc.), Bre Pettis (I Make Things), Daniel Fletcher (CellScope), Rolf Herken (mental images GmbH), Jacquelyn Ford Morie (USC Institute for Creative Technologies), Dennis Crowley (foursquare)


A Conversation with Shantanu Narayen Shantanu Narayen (Adobe Systems Incorporated), John Battelle (Federated Media Publishing)


A Conversation with Jonathan Miller Jonathan Miller (News Corporation), John Battelle (Federated Media Publishing)


Discussion: Web Squared and the Economy of Work Liam Casey (PCH International), Maynard Webb (LiveOps), Josh Green (Panjiva), John Hagel (Deloitte & Touche)


A Conversation with Austan Goolsbee Austan (President's Economic Recovery Advisory Board), Tim O'Reilly (O'Reilly Media, Inc.)


A Conversation with Sergey Brin (Google)


A Conversation with Tim Armstrong Tim Armstrong (AOL), John Battelle (Federated Media Publishing)


HOB: An API for the English Language Erin McKean (Wordnik)


HOB: Surviving the Hype Curve: A Case Study Tom Hale (Linden Lab)


HOB: The Rise of the Network Company Sean Parker (Founders Fund)


Relating videos:

Videos from the Web 2.0 Summit 09 (Day2)

At the center of both the destruction and creation of new business models is the World Wide Web. At the Web 2.0 Summit, held in San Francisco October 20-22, some of the leading companies share their views on business models and what is next on the horizon. The Summit is arranged by O'Reilly Media and TechWeb, and moderated by John Battelle and Tim O'Reilly.

Videos from Day 3

A Conversation with Qi Lu Qi Lu (Microsoft Online Services Division), Tim O'Reilly (O'Reilly Media, Inc.)


A Conversation with Aneesh Chopra Aneesh Chopra (Federal Office of Science and Technology Policy), Tim O'Reilly (O'Reilly Media, Inc.)


HOB: Changing the Energy Equation Shane Robison (HP)


HOB: The Infrastructure of Facebook Mike Schroepfer (Facebook)



HOB: Scaling Humans and Social Nets to Answer Questions Max Ventilla (Aardvark)



A Conversation with Sheryl Sandberg Sheryl Sandberg (Facebook), John Battelle (Federated Media Publishing)


Discussion: Whither Journalism? John Battelle (Federated Media Publishing), Marissa Mayer (Google), Eric Hippeau (The Huffington Post), Robert Thomson (The Wall Street Journal), Martin Nisenholtz (The New York Times Company)


Discussion: The Future of Content Richard Rosenblatt (Demand Media Inc. ), Dan Rosensweig (Guitar Hero), Peter Guber (Mandalay Entertainment)


A Conversation with Owen Van Natta Owen Van Natta (MySpace)


HOB: A Vision for Digital Art in San Francisco: The Launch of GAFFTA Aaron Koblin (Gray Area Foundation for the Arts)


HOB: When Can We Scale in The Mobile Web? Mary McDowell (Nokia)


Discussion: Humans As Sensors Brady Forrest (O'Reilly Media, Inc.), Markus Tripp (Mobilizy), Deborah Estrin (Computer Science Department, UCLA), Sharon Biggar (Path Intelligence), Di-Ann Eisnor (Waze)


A Conversation with Brooke Burke and Mark Cuban, Introduced by Richard Rosenblatt Richard Rosenblatt (Demand Media Inc. ), Brooke Burke (Modern Mom), Mark Cuban (HDNet, Landmark Theaters, Magnolia Pictures, Dallas Mavericks, FilesAnywhere, Radical Buy)


Relating videos:


Wednesday, October 21, 2009

Videos from the Web 2.0 Summit 09 (Day1)

At the center of both the destruction and creation of new business models is the World Wide Web. At the Web 2.0 Summit, held in San Francisco October 20-22, some of the leading companies share their views on business models and what is next on the horizon. The Summit is arranged by O'Reilly Media and TechWeb, and moderated by John Battelle and Tim O'Reilly.


Opening Welcome Tim O'Reilly (O'Reilly Media, Inc.), John Battelle (Federated Media Publishing)


A Conversation with Brian Roberts Brian Roberts (Comcast Corporation), John Battelle (Federated Media Publishing)


HOB: Economy + Internet Trends Mary Meeker (Morgan Stanley)




HOB: A Call to Arms for Technological Literacy Steve Schneider (WestEd)

Presentation (ppt): A Call to Arms for Technological Literacy

HOB: Do the Economics of Bandwidth Scale? Kevin Johnson (Juniper Networks)

Presentation (pptx): Do the Economics of Bandwidth Scale

HOB: The Case for Antitrust Carl Shapiro (U.S. Department of Justice)


HOB: An Open Platform For Payment Scott Thompson (PayPal, Inc.)

Presentation (ppt): An Open Platform For Payment

HOB: Casually Serving 130 Million with Games Mark Pincus (Zynga)

Presentation (ppt): Casually Serving 130 Million with Games

HOB: A Conversational Approach to Search Mark Drummond (Wowd, Inc.)

Presentation (pdf): A Conversational Approach to Search

A Conversation with Evan Williams (Twitter, Inc.), John Battelle (Federated Media Publishing)


A Conversation with Jeff Immelt (GE)



Relating videos: