The truth about the business model

This article, by Jeffrey Rayport even though being dated back in 1999 still has a lot of valid points.

"... the magic word these days is "monetize." The monetizing concept argues that on-line businesses must first capture large audiences of users or shoppers, and then later monetize those audiences through subscription fees, advertising and e-commerce...", "The idea is to encourage investors to supply what we used to call in the 1980's "patient capital," by suggesting that we are in a long-term investment phase in Web businesses. The investment is in customer relationships, and harvest time is yet to come."
"There is hardly an airline that runs a frequent flyer program or a credit card issuer that depends on card use for profits that does not know, and explicitly recognize, the profit potential of an enterprise of retained, and increasingly loyal, target-market customers. 


And the conclusion: "Business models themselves do not offer solutions; rather, how each business is run determines its success. So the success of e-commerce businesses will hinge largely on the art of management even as it is enabled by the science of technology. The scarce resource will be, as it is in practically all of business, the building block of free enterprise: entrepreneurial, and increasingly managerial, talent. "

A template for understanding how the economic machine works...

Ray Dalio: Man and Machine by The Economist
and the template

Interview with Twitter's Chief Revenue Officer

A highly-engaging video for half an hour about monetization from Twitter. Will write more when I have time.

a question after Facebook's Zuckerberg

This article is not very special but it brings me back the question: Would startups be more successful if their founders have a plan of building the company own their own, having a long term plan or would they be more successful if the founders know what to do and one of the plans would be selling the company?

It is, however difficult to say you know what's going to happen with your company, especially if the startup is in the Internet environment. Things are changing faster than you expect, normally. I'm not sure if there are a lot of people out there can say that they know what's going to be in the next 5 years with new technology, on web or mobile,... So having a plan of selling the company within 5 years, 10 years is also difficult. Your plan might be to get the company bought by one of the big companies, but you don't know if within 10 years Yahoo!, Nokia will still be able to do some acquisitions. Yahoo! is even being pitched by the other players.

Reading Steve Jobs, Mark Zuckerberg or even with my own good intention, I do hope that founders of startups have a long-term plan for the company. Those are companies built to last. There are yet opportunists out there, and entrepreneurs who are successful building and selling companies. Who are more successful? What's the rate of failing among the opportunists and the long-term planners? I don't know what reality and statistics shows at the moment. Yes, I have to do some research on this.

Last thought: if the people in the industry don't know what is going to happen in the next 5 years, how do VCs and Private Equity firms set their expectation? If it's not the technology they know thoroughly, shouldn't it be the experience with seeing the people and the resource of the company to make the evaluation? VCs and PEs can be those who set trends, who can have the view of what will be  in the future, because they are the one who sponsor company for the existence of startups. However, hanging around in the Internet industry for a while, I don't think it's the case. It must be the ideas, vision and the execution of the people inside the industry that make things happen.

The answer to Microsoft and Nokia's problem

Again, this is the problem of suppliers and relationship with suppliers and complementors, who are in this case the app developers.

A part of a model using Value Net concept by Brandenburger and Nalebuff (1995) that we drew out last year.

I thought it's very obvious for other mobile software developers that there is a shortage of apps on their platforms. A lot of people, use iPhone or iPad because of the variety of apps that they offer. And the apps looks beautiful on the device. (I wanted to buy an iPad because I can flip thru pages on Flipboard.)
It's a very good job for Nokia to develop a new smartphone within a very short time frame. Elop has just been to the company for less than a year. So, it's amazing they can develop a good hardware in short time. But, why don't they think about the complementors before that? They could also work together with Microsoft to boost the popularity of Windows Phone among the app developers.

Now, Nokia and eBuddy has just announced a partnership. Although I work for the company and the guy who closed the deal with Nokia sitting in the same room with me, asking me candies or cookies every day he comes to the office, I don't have a lot of information as the public has. (I tend not to discuss work-related things with my friends as well so normally have no idea what they are working on). eBuddy has partnership with a lot of OEMs and carriers, to make the eBuddy apps more popular among the users of the devices (Archos, Nokia,...) or among the carriers (Vodafone, T-Mobile, Singtel,...). Getting more users is beneficial to eBuddy. It's always good to have more users.
So in this case, what do you think the deal between Nokia and eBuddy? Did eBuddy have to pay Nokia for being pre-installed on their device? Or does Nokia pay eBuddy for installing our apps on their devices?

It will be clearer if you go back to the first paragraph, understanding the importance of the Suppliers or Complementors. Microsoft and Nokia did not do something on time, compared with Apple and Google to get the interesting apps out there in the market, on the platform.