The Billion Business Model

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 somethingfrom 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

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

1 Share something

2 Sell something

3 Build a community

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

Share something

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 goodthe 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 20million visits per month

1 Share something

2 Sell something

3 Build a community

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

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 callspc 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 aroundUS$ one billion past year

1 Share something

2 Sell something

3 Build a community

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

Build a communityaround your offering

Build a communityaround 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 communityaround 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

1 Share something

2 Sell something

3 Build a community

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

Build an ecosystemaround your offering

Build an ecosystemaround 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 ecosystemaround your offering

The bigger the ecosystemthe more the opportunity of

cross-selling

Ecosystem examples

Amazon

E-Bay

SAP ecosystemand partner programs

1 Share something

2 Sell something

3 Build a community

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The Billion Business Model

Build an infrastructure of cooperation

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

BillionDollar

Business

4 Build a ecosystem

5 Build an infra. of cooperation

6 Use information technology

The being-billion strategy

Use information technology

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

BillionDollar

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 marcelo.honores@gmail.com marcelo-honores.blogspot.com Not billionaire yet Looking for partners