Digital Business Models by FourWeekMBA: Recent Episodes
Gennaro Cuofano
Digital business models podcast is hosted by Gennaro Cuofano, creator of FourWeekMBA.com, a leading source of insights for digital entrepreneurs. You can get the top-tier business education by following the Digital Business Models Podcast. We'll dissect business models, what makes tech and digital companies successful and more!
Section 230, Google Business Model, And The Evolution of The Generative AI Industry:
https://thebusinessengineer.org/posts/the-end-of-big-tech
How To Redefine Your Career In The AI Era:
https://thebusinessengineer.org/posts/moving-through-complexity
For a full picture, check this out:
https://thebusinessengineer.org/posts/the-innovation-paradox
Listen to the full story of Silicon Valley with Federico Faggin:
https://open.spotify.com/episode/2WkyQZmbbBzSUu7KSbXFNX?si=dsel-7bKRIeLocnHNBwb7g
In this episode, we cover the following:
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Neural networks, past vs. present
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How human and artificial intelligence are fundamentally different
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What's consciousness, and how it goes beyond classical physics
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The limitations of AI
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Is AGI coming?
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How humans should make sense of this new AI revolution
Google vs. Microsoft: Google Advertising Machine, The New Google Search, Bard, BingAI, and ChatGPT
- ClaudeAI by Anthropic,
- Poe by Quora,
- Google LAMDA,
- Meta BlenderBot
- Neeva,
- You.com
- Sparrow by DeepMind,
What other news is worth mentioning?
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Zuckerberg announced he wants to make Meta a leader in the AI Generative race!
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First of all, an incredible stat, ChatGPT might have reached 100 million users by January! For a bit of context, one of the latest successful consumer app, TikTok made it in nine months. So you can grasp the massive scale of ChatGPT adoption.
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In addition, ChatGPT finally (and officially) announced the paid version at $20/mo (ChatGPT Plus). This is an interesting price point, as it shows that OpenAI wants to keep the tool, yes for B2B, but also enable it to become, potentially a premium consumer tool. Indeed, the pricing is not that far from a Netflix's subscription plan! Will it pull it off?
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Another key point about ChatGPT's premium is that right now this Plus version is priced at $20/mo, but we might assume that OpenAI might be releasing a more powerful premium version with a higher pricing point, to tackle B2B. That segment, if priced well can become an incredible cash cow for OpenAI!
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This week OpenAI also released an AI Detection tool. And I've seen a lot of people commenting how the game was over for AI content creation. That doesn't make sense to me, as AI content generation is a mouse and cat game. Of course, if OpenAI's ChatGPT is the only AI content generation tool out there, no doubt OpenAI has advantage if catching AI generated content. But otherwise, if the AI generated content can come also from other language models this will become a real cat and mouse game. In addition to that, even if ChatGPT is the only content generation tool out there, smart AI developers can still build various AI engines on top of those to make the content generated by ChatGPT indistinguishable from that of humans! Indeed, I played with AI detection in late December, and we also launched a tool here, which was slightly updated in early January. Yet, again, what matters when it comes to AI detection is the classification model, and that isn't something static, it needs to be continuously updated, as large language models get better, and as other developers build content engines on top of those large language models. So for those who believe to the results of AI detection tool religiously, you might be up for a great disappointment! Unless you'll build a company investing millions a month (as large language models become more and more complex) in AI detection technology, this will always be a cat and mouse game!
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In the meantime, Microsoft seems to be moving fast in integrating OpenAI's technology into Microsoft's products.
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This of course has awakened the sleepy AI giant: Google! Indeed, it seems that Sergey Brin, co-founder of Google was reviewing the code for LaMDA, the company's large language model (GPT-3's competitor), which might be the underlying model for Google's ChatGPT-like tool!
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Indeed, Google has a huge amount of pressure as its revenue slew down substantially in the last quarter of 2022, and the only segment that made it strong was Google Cloud (which though runs at negative margins as Google is trying to win cloud deals).
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In fact, as I explained, in AI business models, AI Supercomputers (part of the Cloud Infrastructure at Microsoft and Google) have become a key component to the AI race!
So, if you are Google, you want to make sure to quickly fill the market gap between ChatGPT (which over time might turn into a Google's killer) and get back on track to the AI race!
As this will help, not only, to keep Google's dominant position, but also to strengthen Google's Cloud segment, which in the future, might be the most important segment for the company and the infrastructure the will power up the AI Industrial Revolution!
As I explained in yesterday's newsletter, today, ChatGPT is trapped into a web app, which doesn't access the web (for now) and it can't be hooked to your device (for now).
And yet, once it does, with prompt engineering and in-context learning it might be able to unleash a set of custom experiences that we've never seen before.
That might unleash what I like to call real-world generative experiences.
Visit: https://www.chatbusiness.ai/
How do you improve a model like GPT-3 if you are a small business owner?
For one thing, it's extremely complex/or impossible to do it at scale.
Instead, my main argument here is that, by simply verticalizing (creating a ChatGPT for every niche) this incredible tool, we can make it much more factual and grounded, of course, also more limited.
In fact, one of the main issues of this current technology (large language models) is that they work (for the first time) extremely well on generalized-tasks.
And if you were to restrain them too much, you would get. As a result, a much more constrained ChatGPT.
So, as a way to learn, experiment, and limit the drawback of a technology/product like ChatGPT, we created ChatBusiness.ai, an AI business assistant, which has been fine-tuned on a crafted and curated Knowledge Base from FourWeekMBA.
This, fine-tuning process, helps verticalizing GPT-3, while trying to limit its ability to allucinate, or give inaccurate answers.
How?
Well, let me break down the proces:
- First thing is to make sure the AI model can be fine-tuned, on a set of highly curated data/content (Knowledge Base).
- Then, you need to make it sure that the prompt, which is "the natural language coding interface" - if you wish - keeps the model grounded to the context it was given, while still being able to give a wide range of answers.
- A last piece of the puzze is the reinforcement learning process, where you enable users to provide a feedback into each answers, and based on that prioritize again the learning and fine-tuning of the model.
At least, as entrepreneurs, building tools on top of OpenAI, this is what we have control over, unless we build a foundational model ourselves (which might now might be a multi-million dollars endeavour).
Thus, for now, ChatBusiness.ai is a limited version of the above, and if it gains traction I'll be investing more resources to further fine-tune, and leverage on reinforcement learning to make this a much better vertical tool for business people.
In addition, for now, to keep things simple, this has been trained on the FourWeekMBA's knowledge base.
Yet imagine, how, in the future this might get enriched from other knowledge bases of publishers that might want to opt-in.
The interesting part? It is a traffic generator, in short, the tool speeds up the process of giving you the short, answer, to very specific business questions, and it sends you back the the article where this answer can be found.
Thus, that is a win-win-win (a win for the user, a win for the publisher, and a win for the tool provider).
Feel free to play ChatBusiness.ai, and beyond the feedback which you might be able to live when you get an answer, feel free to ping me back and let me know what you think!
Keep in mind this is a first iteration, the interface is still quite simple and we're planning to further fine-tune it.
But for now, you can start playing with it!
Microsoft and OpenAI finalized a multi-billion, multi-year deal, where Microsoft provides the infrastructure to OpenAI to keep developing and operating its products. And Microsoft gets a commercial exclusivity in the integration and distribution of these products.
As OpenAI explained:
This multi-year, multi-billion dollar investment from Microsoft follows their previous investments in 2019 and 2021, and will allow us to continue our independent research and develop AI that is increasingly safe, useful, and powerful.
As Microsoft announced the deal will move around three pillars:
Supercomputing at scale
Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.
New AI-powered experiences
Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology. This includes Microsoft’s Azure OpenAI Service, which empowers developers to build cutting-edge AI applications through direct access to OpenAI models backed by Azure’s trusted, enterprise-grade capabilities and AI-optimized infrastructure and tools.
Exclusive cloud provider
As OpenAI’s exclusive cloud provider, Azure will power all OpenAI workloads across research, products and API services.
Read:
- https://fourweekmba.com/how-does-openai-make-money/
- https://fourweekmba.com/who-owns-openai/
- https://fourweekmba.com/openai-microsoft/
From: https://thebusinessengineer.org/profile
- For the first time, in twenty years, Google was threatened at the point, of summoning up Page and Brin back to the company, to figure out an AI strategy which moves along, launching over 20 AI-based products within the Google's ecosystem. These might go from simple product enhancements to search, voice and productivity. Up to the launch of a ChatGPT-like product, anytime in 2023, called Sparrow, which might be an AI-based search assistant, that might be more grounded, factual and able to cite sources.
- Google AI strategy. In the meantime, the launch of ChatGPT seems to have awaken the AI tech giant. As Google has led the way in AI, being the first company, which in 2018, announced the transition of Google, to become an AI-first company. This week Google published its manifesto for AI. And it also published a research into the AI. Let me though tell you the most important part of it. Google explained that it's working on multimodality (generative models able to handle anything, from text, images, audio, video and more). Multimodality, if achieved, can be what would enable Google to get back on track, to the race of AI!
- In the meantime, it seems that OpenAI is already moving forward with a premium version of ChatPGT!It seems that OpenAI is moving forward with a very simple pricing structure (for now) where the premium version of the product might be priced at $42 per month. To understand how this fits into the OpenAI business model, read this!
- This week, Satya Nadella announced how OpenAI's products are getting integrated within all of Microsoft's business model! To understand how the whole thing is playing out read the OpenAI/Microsoft partnership structure here.
- AI and new job skills: The most exciting aspect to me, of this AI revolution resides in the fact that this current paradigm, is getting achieved through a new architecture, called transformer-based and scale. Indeed, once this new paradigm has been tested, the remaining part of it (beyond a few new minor techniques) was the result of scale! In the last six years, by using more data, in the pre-training phase, more parameters, and by training these models with better data, or for longer, we achieved incredible outcomes! For how long, and what scale can still do, on the current paradigm is very hard to say, but we'll see. In the meantime, the AI industry is already creating new types of jobs that didn't exist before. One example? Prompt engineering; and don't get fooled, as this isn't necessarily a technical role (indeed it requires minimum coding experience for now), it's a type of job, that is more closer to product development, than programming. In fact, my main argument is that, since coding might get - in part, commoditized - via new AI coding assistants, what will matter will be the intersection of technology, product, and distribution, to enable network effects into AI products. How much does a prompt engineer make? According to a job posting this week, it seems anywhere between $250-330K per year!
- Are we in an AI Hype Cycle? Yes, we are! I'm aware that we're going through a massive Hype Cycle for AI. Indeed, we'll see what AI will be able to achieve, and what will be its major limitations, as we go along. In the meantime, as business people, it's critical to draw the lines, between being skeptic (understanding limitations, drawback and dangers of AI) vs. being cynic (look at it as if it's all hype, without removing the noise and take the signal in).
- New conversational search engines are springing up like mushrooms. A first nice release was that of Perplexity AI, a conversational search engine, ChatGPT-like, which though is able to provide sources and references as it generates content on the fly, based on the journey of each user!
News:
- https://www.thestreet.com/technology/google-brings-back-founders-page-brin-to-fend-off-chatgpt-threat
- https://www.nytimes.com/2023/01/20/technology/google-chatgpt-artificial-intelligence.html
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Job posting: https://jobs.lever.co/Anthropic/e3cde481-d446-460f-b576-93cab67bd1ed#:~:text=Salary%20%2D%20The%20expected%20salary%20range,is%20%24250k%20%2D%20%24335k.
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
News: https://indianexpress.com/article/technology/chatgpt-users-spot-42-professional-plan-with-perks-8395865/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Read:
https://nvidianews.nvidia.com/news/nvidia-microsoft-accelerate-cloud-enterprise-ai
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
News:
- https://ai.google/our-focus/
- https://twitter.com/sundarpichai/status/1615820298305118221?s=20&t=8egplzkwwCsrDwuQ9hdumg
- https://ai.googleblog.com/2023/01/google-research-2022-beyond-language.html?m=1
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Read:
- https://fourweekmba.com/who-owns-openai/
- https://fourweekmba.com/openai-organizational-structure/
- https://fourweekmba.com/how-does-openai-make-money/
- https://fourweekmba.com/openai-microsoft/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
News: https://www.bloomberg.com/news/articles/2023-01-18/apple-postpones-ar-glasses-plans-cheaper-mixed-reality-headset#xj4y7vzkg
Relevant episodes:
- https://blubrry.com/digital_business_models/93132901/ai-wars/
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93070113/edge-artificial-intelligence/
- https://blubrry.com/digital_business_models/93005449/is-decentralized-ai-possible/
- https://blubrry.com/digital_business_models/93001038/the-business-architecture-of-ai/
Read:
https://www.theverge.com/2023/1/17/23558516/ai-art-copyright-stable-diffusion-getty-images-lawsuit
https://thebusinessengineer.org/profile
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Relevant Episodes:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
Listen:
- https://blubrry.com/digital_business_models/93130512/what-can-go-wrong-with-the-openaimicrosoft-partnership/
- https://blubrry.com/digital_business_models/93103387/how-does-stability-ai-make-money/
- https://blubrry.com/digital_business_models/93102800/how-does-microsoft-make-money-from-the-openais-partnership/
- https://blubrry.com/digital_business_models/93102405/how-does-openai-make-money-openai-business-model-explained/
- https://blubrry.com/digital_business_models/93070104/ai-revolution-as-a-result-of-scale-and-emergence/
- https://blubrry.com/digital_business_models/93046093/how-will-chatgpt-get-monetized/
- https://blubrry.com/digital_business_models/93046087/an-open-sourced-chatgpt/
- https://blubrry.com/digital_business_models/93030022/googles-competitor-to-chatgpt-sparrow/
What can go wrong with the OpenAI/Microsoft partnership? Read: https://thebusinessengineer.org/profile
How Does OpenAI Make Money? OpenAI Business Model Explained: https://fourweekmba.com/how-does-openai-make-money/
In a research paper, back in 1998, entitled, The Anatomy of a Large-Scale Hypertextual Web Search Engine, Page and Brin, Google's founder, explained:
Currently, the predominant business model for commercial search engines is advertising. The goals of the advertising business model do not always correspond to providing quality search to users. For example, in our prototype search engine one of the top results for cellular phone is "The Effect of Cellular Phone Use Upon Driver Attention", a study which explains in great detail the distractions and risk associated with conversing on a cell phone while driving. This search result came up first because of its high importance as judged by the PageRank algorithm, an approximation of citation importance on the web [Page, 98]. It is clear that a search engine which was taking money for showing cellular phone ads would have difficulty justifying the page that our system returned to its paying advertisers. For this type of reason and historical experience with other media [Bagdikian 83], we expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.
Yet, Google has become the most powerful advertising machine of our time! How will ChatGPT be monetized instead?
Reference: http://infolab.stanford.edu/~backrub/google.html
Competition in the AI industry is intensifying with a release of an upcoming release of an open-sourced version of ChatGPT.
Indeed, Emad Mustache, CEO and co-founder of Stability AI (which created Stability Diffusion) has announced that they are about to launch an open-source version of ChatGPT: https://twitter.com/EMostaque/status/1614432715444559875?s=20&t=3jFY5o1lwQ9t-foN-3UFiA
Google's Competitor To ChatGPT, Sparrow!
- https://time.com/6246119/demis-hassabis-deepmind-interview/
- Computational Engine vs. Generative Model: https://writings.stephenwolfram.com/2023/01/wolframalpha-as-the-way-to-bring-computational-knowledge-superpowers-to-chatgpt/
- How ChatGPT has been balanced with a human in the loop approach: https://openai.com/blog/instruction-following/
The way the AI industry is evolving right now:
- Closed-Centralized-top-down data processing: with the OpenAI-Microsoft partnership, Microsoft Azure offers the cloud infrastructure which enables OpenAI to pre-train its powerful models (right now, GPT-4 might be getting trained on trillions of parameters that require a huge amount of computation). And an Open APIs infrastructure where any business can access the OpenAI APIs to build business applications. Here you can’t download the model, and each iteration of your build will go through the foundational layer built by OpenAI APIs. So as you train and fine-tune a middle layer model on top of GPT-3, you’re interacting with OpenAI.
- Open-Decentralized-On edge data processing: with Stable Diffusion getting pre-trained on AWS, once the model is ready, it can get downloaded by anyone and run on a device, like the iPhone and on edge. Meaning you download and use it on your device without the data needing to go back to the centralized cloud provider. The reason why here I say it's open, it's because you can download the full, open-sourced version once the model has been released. And you don't need to interact with its APIs, but you can download Stable Diffusion and run it, let's say, on your iPhone. And therefore, it's on edge because there is no data that goes back to Stability AI, which develops Stable Diffusion. You can use it on your device at a local level.
A rerun of one of our most listened-to episodes!
Full story here: https://fourweekmba.com/tesla-business-model/#Tesla_founding_story
What is the most significant risk of ChatGPT right now?
The Dunning-Kruger effect!
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform it well.
Not only that, but ChatGPT goes to the extent of providing an answer that seems always grounded and factual, but it’s fake and misleading!
An example?
I asked ChatGPT to tell me “what’s FourWeekMBA,” but I also told it to cite its sources.
caption for image
ChatGPT first defined it, and it made total sense, thus making you believe that the answer was grounded and based on facts it found.
Yet, when it cited its sources, those were mostly invented!
In short, the AI - as long as something is plausible and it makes sense - it will make stuff up only to have you believe that what it says is factual when it’s not!
Of course, the AI doesn’t know what it’s doing neither it’s trying to deceive as it’s not conscious.
In short, the example below it answers the question of what’s FourWeekMBA by making up sources which do not exist on the website!
Thus, to make its argument convincing, ChatGPT produces links for those fake sources as if they really existed on my website when they do not exist!
This can generate a huge amount of misinformation if employed at scale…
Therefore:
1. AI-generated content is not - in many cases - factually correct
Beware of these limitations when you do use AI-generated content like this one.
2. AI-generated content as misinformation wave
Right now, this is the greatest threat to Google, as if this AI-generated content gets employed at scale on the web, it might quickly destroy the value of Google’s index.
3. Information vs. Knowledge and Understanding
It shows that one thing is the form or the understanding of the machine of how to structure an argument; another is the substance or whether that argument is grounded in reality or experience!
Which is an incredible limitation of AI right now.
Information can be vague, noisy, ambiguous and even misleading.
Knowledge and understanding on the other hand, are grounded in reality and real-world experience!
4. Negative externalities for society
That is a major obstacle to the scalability of these AI assistants.
As of now, with a limited user base, misinformation has a low externality. Yet if it were to be carried on a large user base, the externality might become unbearable.
5. Staged roll out vs. mass release
To enable scale, those AI assistants might need proper guardrails and confidence scores to give answers, and they will need to be grounded in reality as the risk of hallucination is substantial.
Therefore, to be viable they’ll need to be - initially closed assistants available for very specific features, before they can be employed as general-purpose engines!
How will AI evolve in business?
We look at the three layers theory, where you get:
- A foundational layer made of general-purpose generative models.
- A middle layer comprised of more specific intelligence-based models (AI Lawyer, AI Accountant, AI HR).
- And the applications layer.
Let's look at the evolution of AI business models as of now to understand what's commercial use cases are coming up to understand the landscape, threats, and opportunities.
Full video here: https://www.youtube.com/watch?v=r4enjNvU57M&t=57s
In the FourWeekMBA AI interviews series, we look at an AI marketplace discovery platform.
The History of Amazon With Brad Stone, author of The Everything Store and Amazon Unbound
Understanding the business engineering discipline, framed in the context of the FourWeekMBA research (since 2015) on digital business models.
How Netflix is transitioning into a media company and what that implies for its business model.
The Silicon Valley, an area in the southern San Francisco Bay Area of California, was commercially kicked off in the 1960s when William Shockley, leaving Bell Labs on the east coast, moved to California to start the Shockley Semiconductor Laboratory. The company ceased operations by 1960, and yet Shockley had put together a team of people that turned out to found the first wave of semiconductors company, which created the PC market, on top of which the whole Silicon Valley would be built.
Founded in 2003, by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor, and thereafter, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences, until 2018. And yet, by 2021, Tesla became a trillion-dollar company.
Passive investing is a long-term investment strategy based on holding securities that mimic the main financial indexes, thus mirroring stock market indexes and holding them long term. It's the opposite philosophy of active investing. Where active investing tries to beat the markets. Passive investing mimics them. The main advantage of this approach is the low-cost structure (given the low frequency of trading) and the lack of management fees that over time might eat up the whole ability of the portfolio to compound.
Between the end of the 1800s and until the 1950-60s, Bell Labs played a crucial role in developing the most critical innovations (from scaling the phone business to the first transistors), it revolutionized various industries. It opened the way to information theory and microprocessors. Therefore, giving birth to Silicon Valley.
Trader Joe's is an American chain of grocery stores, founded by Joe Coulombe, in Pasadena, in 1967. Trader Joe's evolved from a first small chain called Pronto Markets, which eventually led to Trader Joe's, the grocery store chain guaranteeing quality and low prices by leveraging intensive buying and virtual distribution and by targeting what Joe Coulombe called the overeducated, and underpaid, which was a niche market in the 1960s and yet it turned out to become the American middle class.
Initially an outsider, SpaceX has become the dominant player in the space industry. Started in 2002, by Elon Musk, after the exit from PayPal, SpaceX has changed the whole space industry, with its reusable rockets, and its ability to bring iterative design, in a hardware-heavy industry.
This is a recap of the WeWork story.
The full episode is here.
Or here: https://fourweekmba.com/wework-scandal/
https://fourweekmba.com/what-happened-to-wework/
WeWork was one of the most valuable startups in the 2010s, as it grew to become a multi-billion dollar company by 2015. It claimed it run a business model called space-as-a-service and it had managed to secure billions of dollars in investments from venture capital, mutual funds, and the most prominent tech investment funds until it almost went bankrupt as it tried to IPO in 2019.
Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.
PayPal was born as the merger of two early Internet startups, Confinity (founded by Max Levchin and Peter Thiel) and X.com (founded by Elon Musk). Both companies stumbled on a commercial killer feature (enabling Internet payments via email) and ended up being extremely useful on a nascent auction platform: eBay. From the merger of these companies, PayPal was born. And it wrote the Internet business playbook for startups. In this episode, we see the history of the early years with the author of The Founders, Jimmy Soni.
In this episode, we explore the evolution of the Internet, from the perspective of AOL, and the rise of the first big tech giants. And how new players, like search engines, took over at the end of Web 1.0.
- What drove your interest in Chinese tech giants in the first place?
- Can you tell us a bit more about the current scenario for China’s tech giants?
- What other Chinese tech companies are your following?
- Is Facebook TikTok’s copy enough as a counterattack?
- Where are Chinese tech companies investing right now?
- China is also investing a lot in India, right?
- Is there any template China is using to invest in India?
- Why mini-programs are so important to understand the rise of super apps?
- Are there examples of US companies that successfully entered China?
- What about companies that failed to enter the Chinese market?
- Are there upcoming China’s tech giants?
- Are there any business people in China you suggest following?
- Do you have any suggestions for anyone who is willing to start a business with dealing as well with China?
- Final remarks
- How did you get to research one-person one-million businesses?
- What are some of the factors that really push people to start their own solo business in the first place?
- What are the primary business models of solo businesses?
- But tell me your experiences as well, also on your side. What do you think?
- How do you build the branding for a solo business if you have very few financial resources?
- What do you think is probably the less risky way to build your solo business?
- How do you know when it’s the right moment to move full time on your side hustle?
- What would you suggest to someone who actually trying to start a side hustle today?
- Key takeaways
- Key resource
- What drove you to focus on a blockchain?
- What are the key elements of the Enterprise Blockchain?
- Blockchain in a nutshell
- A crash course in Enterprise Blockchain
- How do you need to change the mindset in a blockchain-driven business world?
- Does the blockchain make centralized platforms irrelevant? Or is it an evolution of them?
- What is a Minimum Viable Ecosystem (MVE) and how to kick it off?
- How does the blockchain inject trust in a business model?
- How does economics change?
- Key takeaways and quotes
How do you understand what people really want? How do you uncover unsaid truths? How do you build an effective product that people want? The answer to all these questions is all about revealed preferences.
Show notes: * Is Netflix Profitable? An analysis beyond profits * How Does Netflix Make Money? Netflix Business Model Explained
- Amazon profitability 1994-2018
- Amazon Business Model
- What Is the Receivables Turnover Ratio? How Amazon Receivables Management Helps Its Explosive Growth
- Amazon Case Study: Why from Product to Subscription You Need to “Swallow the Fish”
- What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
- Why Is AWS so Important for Amazon Future Business Growth?
- Amazon Flywheel: Amazon Virtuous Cycle In A Nutshell
- Amazon Value Proposition In A Nutshell
- Why Amazon Is Doubling Down On AWS
- The Economics Of The Amazon Seller Business In A Nutshell
- How Much Is Amazon Advertising Business Worth?
- What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model Explained
- Jeff Bezos Teaches You When Judgment Is Better Than Math And Data
- Alibaba vs. Amazon Compared in a Single Infographic
- Amazon Mission Statement and Vision Statement In A Nutshell
- The Amazon Leadership Principles Crafted By Jeff Bezos
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In this episode about WeWork we'll look at:
- Is there a private valuation bubble?
- Why timing is all
- The financial prospectus as a marketing document, and the wework buzzwords
- Bad financials and bottom-line
- Is WeWork a tech company?
- Addressable market, how big?
- How's WeWork different from a commercial real estate company?
Referenced and reads on the topic:
- The Power of Google Business Model in a Nutshell
- How Does Google Make Money? It’s Not Just Advertising!
- How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
- How Amazon Makes Money: Amazon Business Model in a Nutshell
- How Does Netflix Make Money? Netflix Business Model Explained
- How Does Spotify Make Money? Spotify Business Model In A Nutshell
- The Trillion Dollar Company: Apple Business Model In A Nutshell
- DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game
- How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained
- Micro-soft, the name
- Who owns Microsoft?
- What is the Microsoft pay mix?
- What are Microsoft Segments?
- Productivity and business processes
- Intelligent cloud
- More personal computing
- Corporate and other
- Microsoft revenues breakdown for 2018
- How does Microsoft really make money?
- How Does LinkedIn make money?
- What is Azure? How the Microsoft cloud service is growing at a fast speed
- How much money does Bing make?
- GitHub acquisition: how will Microsoft monetize that?
- What are the Microsoft distribution channels?
- Does Microsoft spend more on Research and Development or Sales and Marketing?
- What are Microsoft top products and services?
- Is Microsoft still innovating?
- Key takeaways from the Microsoft business model
- What drove you to research Shenzhen tech landscape?
- Is Silicon Valley in trouble now that Shenzhen is becoming a key player in the global digital economy?
- Will Shenzhen economy become also a key player in the software space?
- How did Shenzhen rise to the top?
- Why is it important to understand China in terms of clusters?
- What companies most represent the rise of Shenzen?
- Why is it important to understand the Shenzhen entrepreneurial mindset?
- Where would you need to start if you wanted to build a business in Shenzen?
- What are some of the biggest risks to be aware of doing business in China?
- What’s coming next for Shenzhen?
- What are you working next?
- Suggested reading
- Audio interview
For this episode, we have with us Jeffrey Towson, a keynote speaker on Digital China and Asia tech trends, a business professor at Peking University and author of a great book, which is really a great reading to have a deeper understanding about China, very quickly. The book is called the One-Hour China Book.
Let’s dive into China’s economy and more particularly into China’s digital economy.
- How did you get to study the Chinese market economy?
- What are the six mega-trends that shaped and are shaping China’s economy?
- What are those trends that you see are losing momentum and which ones are the ones that are really gaining momentum?
- Did this digital megatrend change the way China looks like in terms of society, consumers?
- How is the Internet affecting modern China?
- How did the Internet evolve in China compared to the US?
- How has (digital) word of mouth influenced the way the Chinese digital economy is evolving?
- Has the Internet also affected Chinese government influence on the economy?
- What tech companies are you following right now?
- How does voice search look like in China?
- For anyone trying to expand and build a digital business in China, what suggestions do you have?
- What’s the “coolest” thing right now in the digital marketing space in China?
- What kind of content are Chinese users consuming the most?
- What sources do you suggest to stay up to date with China’s digital economy?
- What’s the best way to contact you?
For this episode, we have with us Jeffrey Towson, a keynote speaker on Digital China and Asia tech trends, a business professor at Peking University and author of a great book, which is really a great reading to have a deeper understanding about China, very quickly. The book is called the One-Hour China Book.
Let’s dive into China’s economy and more particularly into China’s digital economy.
- How did you get to study the Chinese market economy?
- What are the six mega-trends that shaped and are shaping China’s economy?
- What are those trends that you see are losing momentum and which ones are the ones that are really gaining momentum?
- Did this digital megatrend change the way China looks like in terms of society, consumers?
- How is the Internet affecting modern China?
- How did the Internet evolve in China compared to the US?
- How has (digital) word of mouth influenced the way the Chinese digital economy is evolving?
- Has the Internet also affected Chinese government influence on the economy?
- What tech companies are you following right now?
- How does voice search look like in China?
- For anyone trying to expand and build a digital business in China, what suggestions do you have?
- What’s the “coolest” thing right now in the digital marketing space in China?
- What kind of content are Chinese users consuming the most?
- What sources do you suggest to stay up to date with China’s digital economy?
- What’s the best way to contact you?
In the last years, I’ve been dissecting business models of any type, and companies of any size. At the same time, I’ve been talking, interviewing, and discussing business model and business model innovation with dozens of entrepreneurs and practitioners.
I’ve been doing that for several reasons:
- To gain a better understanding of businesses around me. As I had the option to gain a Ph.D. on the topic or to create my Ph.D. I went for the latter, and in the process, I thought to document it all on FourWeekMBA. Over time I wanted to create the business school I always dreamed of.
- Business models enabled me to gain insights into how companies worked at a holistic level so that I could become a better digital entrepreneur.
- Business modeling also helped me test the assumptions around the business I was trying to build, thus reducing the time or potential financial resources spent on a project which was doomed to failure.
In short, I found myself using business modeling for several reasons, and those I believe are all legitimate.
At the same time, while researching the topic with the mindset of an entrepreneur but the depth of reach of a Ph.D. I noticed how business model and business model innovation had become widely adopted concepts. And also (and probably for that reason) widely misunderstood.
Let me then clarify a few things that I’ve found out over the years, which if you’re starting out; but also if you’re passionate about the topic might help make sense of it.
Contents [hide]
- Business model innovation enables you to create competitive moats
- A multi-faceted concept
- Analysts use business models to produce financial analyses
- Academics study business models for the sake of classifying things
- Most people confuse business models for business plans
- Startups confuse business models for monetization strategies
- Business model innovation is an experimentation mindset for entrepreneurs
- An entrepreneur is not a scientist
- Business model innovation is at the same time a mindset, a framework and a set of tools for entrepreneurs
- Key takeaways
Business model innovation enables you to create competitive moats As technology becomes over time a commodity, creating a lasting advantage requiresbusiness model understanding, experimentation, and execution.
That’s because business model innovation shifted the focus from the competition; which is what in the last decades we’ve all been looking at with frameworks like Porter’s Five Forces, to customers.
Without going through all the reasons why that happened today, business model innovation has become more important than technical innovation.
A quick caveat, before we move on.
When I say that the focus has shifted to customers, it doesn’t mean that you don’t need to understand your competition. It just means you need to start from customers and the problems they face. Only after that, you want to move to competition and what existing alternatives exist.
A multi-faceted concept Although we like to give a single definition to each of the concepts we know. Those concepts will adapt based on the context they sit into.
In short, that is fine to have multiple definitions of the concept, based on the objective that each practitioner might have.
Therefore, it’s okay that a concept translated in several fields will have different meanings.
Thus, let’s see some of those meanings.
Analysts use business models to produce financial analyses Business modeling can be seen as a technique to dissect any organization and business for analysts and business people trying to gain a better understanding of those businesses.
Business and financial analysts use business modeling to have a better understanding of tech companies. They do it to give investment recommendation, financial reviews, and investment advice.
Academics study business models for the sake of classifying things For academics, a business model might be just a holistic way to describe a business. And the purpose of an academic might seem more rigorous than an entrepreneur. The academic has to prove the business has certain features that make it different or similar to other businesses.
And from those features, the academic will derive classifications, that as they become more and more complex only live in theory land.
The research, therefore, doesn’t have necessarily a practical purpose. But instead the goal of uncovering universal classification systems for things in the real world. As such, they might lose a practical application.
Most people confuse business models for business plans
Among the top results, Google suggests “How to write a business model” when typing “how to … business model. When you click on the result that Google suggested, see what happens.
When you click on the Google suggested result for “How to write a business model,” you get “how to write a business plan.”
For most people (those that didn’t study the topic), business models often resonate with business plans. I noticed it when I started to research the topic.
As Google makes accessible the searching data and behaviors of billions of people, it also adapts to those search behaviors.
To my surprise, in the past, I noticed how for the query “how to write a business model,” Google served results around “how to write a business plan.”
I’ve learned to appreciate those “mistakes” as Google is a commercial search engine. And as such, it follows what most people search. If collectively people think that a business model is a business plan, Google might enable that to be true.
This means that if you are an entrepreneur searching for valuable resources either you are lucky to find the resource you need or you might end up writing a hundred-page business plan which won’t help much with your business.
If at all will prevent you from starting it. As you will start making things more complicated than what they should be.
Startups confuse business models for monetization strategies
An example of how Airbnb “confused” its business model for its monetization strategy(Slideshare)
How WeWork described its business model in the report before the IPO. You might notice that what they’re talking about is their revenue generation strategy. (WeWork Financials)
And for many startups, business model resonates with monetization strategies. I’m not saying this is right or wrong; it’s just what it is.
Overall that is fine. Startup pitches or financial forms are in many cases, also a marketing tool meant to communicate and simplify a concept.
Thus, if most investors want to know about your business model but what they mean is how you make money, that is fine to simplify it.
However, as an entrepreneur, if you do believe yourself that a business model is how you make money that might limit your options, as all day long you’ll think about monetization strategies, rather than having a more holistic and strategic approach.
Business model innovation is an experimentation mindset for entrepreneurs Business model design is not about sketching a plan on a piece of paper, but rather a mindset of experimentation.
In business modeling, you can manufacture experiments (business models, and business model variations) that enable the entrepreneur to test the assumptions around the business quickly, cheaply, and with minimum effort.
It is important to start testing (as practitioners like Ash Maurya highlighted) from the riskiest assumptions.
Those assumptions for which the business might not become sustainable over-time. Things like monetization strategy or key customers understanding are some of the riskiest assumptions , and they need to be tested, quickly.
An entrepreneur is not a scientist An entrepreneur has different goals than a scientist. Where the scientist might try to uncover more universal truths. The entrepreneur needs business model experimentation to test the assumptions, uncover market opportunities, reduce the time to market, and eventually build a valuable business.
In short, an entrepreneur is a market-driven animal. Rather than starting from theories to find if that is true through experiments. An entrepreneur starts from a problem, and she, or he goes back to theory to understand what are the underlying assumptions which are preventing the business to succeed.
Once those assumptions have been streamlined, they can be tested, so that the entrepreneur can move on and make the product or service in target with the market.
Business model innovation is at the same time a mindset, a framework and a set of tools for entrepreneurs Business model innovation, therefore, can be seen as a mindset, framework, and a set of tools for entrepreneurs to build relevant businesses in today’s marketplace.
Key takeaways Business model innovation is a popular topic, and as such, there are a lot of misconceptions around it.
In my research around the topic, I’ve figured the reasons behind those misconceptions and how and why they exist.
We also uncovered how business modeling has a meaning based on the reason why you’re using it. At the end of it all, business model innovation is a dynamic concept, at the apex of its evolution, and as such, it’s interesting to see how it can have different meanings and interpretations.
At the same time, if you’re an entrepreneur, it’s essential to understand what it can do for you, and this article might clear things up.
Read Next: Business Models Guide.
In this session we explore how the concept of business model evolved over the years.
For more go here: fourweekmba.com/what-is-a-business-model/
Sangeet Paul Choudary is the best selling co-author of Platform Revolution and Platform Scale. Sangeet is also the young global leader at the World Economic Forum and founder at Platform Mission Labs and keynote speaker.
- What actually drove you to this research into the platform business models?
- How do you think platform business models have impacted business strategy?
- What strategic framework can we use to understand the competitive landscape today?
- What are the key differences from pipeline to platform business models?
- What are some of the metrics that platform business models need to track?
- Is there a difference between growth tools and network effects?
- What are network effects?
- What are negative network effects? And why it is important to understand them?
- What is the chicken and egg dilemma? Why is that important?
- Where should you start to build a platform business model today?
- What are you working next?
- Where can people find valuable resources to understand platform business models?
In this session of Business Pills offered by FourWeekMBA, we'll look at why it's important to understand the difference between growth tools and network effects, which are often confused.
While positive network effect can help a platform become more and more valuable, thus also help to become more solid. Negative network effects can dilute the value of the platform. That is why in this episode of the Business Pills from FourWeekMBA we'll look at this concept.
In this session, I'm drawing from an interview of FourWeekMBA with Sangeet Paul Choudary, co-author of Platform Revolution and author of Platform Scale to grasp the key differences between linear or pipeline business models and platform business models.
You find the reference to 60 business model patterns here: fourweekmba.com/business-model-generation/
In this article, I want to focus on drawing a clear line between sales and marketing. In fact, in some cases, marketing and sales work together, and they are the same thing. Yet in many other cases, you need to keep in mind this distinction if you want to build a successful business. Thus, we’ll see why sales and distribution are critical, how it is different from marketing and how it can also be used as a marketing enabler to leverage for the branding of any company.
Read: fourweekmba.com/marketing-vs-sales/
Niche marketing is a strategy which premise is to target a subset of a market which can be of various sizes. Where a marketing strategy focused on the whole potential market used to be effective when mass advertising was possible. A niche marketing strategy can help position your brand more efficiently, nowadays.
A microniche is a subset of potential customers within a niche. Identifying a microniche nowadays has become critical to kick off the strategy of an online business.
Read: https://fourweekmba.com/microniche/ https://fourweekmba.com/niche-marketing/
The key and foundational element of an effective growth strategy around your product and service is the aha experience! What's that, and why it matters? We'll see it in a new episode of business pills part of the Digital Business Model Podcast, offered by FourWeekMBA.com
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
Why do network effects matter so much? Network effects have become an essential element of a successful digital businesses, for several reasons. First, the Internet itself has become a facilitator for network effects.
As it becomes less and less expensive to connect users on platforms, those able to attract them in mass become extremely valuable over time.
Also, network effects facilitate scale. As digital businesses and platforms scale, they gain a competitive advantage, as they control more of the total shares of a market.
Last but not least, as we will see, network effects are considered among the defendable, or what confers to digital business, a competitive advantage.
Where in the past linear businesses gained a competitive advantage by buying assets and controlling supply chains. Digital companies gain competitive advantages by building network effects.
Read: Linear Vs. Platform Business Models In A Nutshell
Read: fourweekmba.com/network-effects/
In today’s session, I had the pleasure to have Bo Burlingham, contributing writer at Forbes, co-founder of the Small Giants Community, former editor-at-large for Inc. Magazine and author of several books among which I really loved and enjoyed Small Giants, which is going to be the topic of this conversation.
For the full transcript of the interview: fourweekmba.com/small-giants/
A venture capitalist generally invests in companies and startups which are still in a stage where their business model needs to be proved viable, or they need resources to scale up.
Thus, those companies present high risks, but the potential for exponential growth. Therefore, venture capitalists look for startups that can bring a high ROI and high valuation multiples.
That’s because of the set of investments venture capitalists make; only a few will succeed. Therefore, they have to place more bets to make the system work in their favor.
In the end, the venture capitalist makes money (the so-called exit) by either reselling the stake in the company at a much larger valuation or with the IPO of the company they invested in.
When that happens, venture capitalists make substantial returns for their partners. Indeed, the venture capital firm is usually comprised by a group of partners which raised capital from another group of limited partners to invest for them.
The limited partners (or LPs) can be either large institutions or wealthy individuals looking for high returns.
Usually, venture capital firms invest in growth potential. Therefore, when a startup receives venture capital money, the venture capital firm – usually – expects aggressive growth.
Before we get to the advantage and disadvantages of taking venture capital money, let’s first understand the explicit and hidden incentives that drive venture capital firms. Indeed, at the end, taking venture capital money is mostly about interests alignment.
And if those interests do not converge, that is when probably it might be not a good idea to take that money.
A bootstrapper isnʼt a particular demographic or even a certain financial situation. Instead, itʼs a state of mind.
That is how Seth Godin described bootstrapping in his “The Bootstrapper Bible.”
As firms which are venture capital backed get so much media attention, it’s easy to miss the other 99% of businesses out there which made it and which built a sustainable business model by bootstrapping.
That’s because by definition firms that are looking for venture capital needs a continuous PR coverage to play the “look cool game” to ease the hand in the pocket of the venture capitalist’s next door.
Thus, it’s easy to forget of the army of entrepreneurs that from day one decides to go the other route and first build a viable business model, then and when they feel the time is right (if it ever is) take outside money to scale the business.
Let’s start from a simple definition of bootstrapping.
When does make more sense to use venture capital and when to use bootstrapping to build and grow a company? We'll look at both perspectives in this episode offered by FourWeekMBA.
A venture capitalist generally invests in companies and startups which are still in a stage where their business model needs to be proved viable, or they need resources to scale up.
Thus, those companies present high risks, but the potential for exponential growth. Therefore, venture capitalists look for startups that can bring a high ROI and high valuation multiples.
That’s because of the set of investments venture capitalists make; only a few will succeed. Therefore, they have to place more bets to make the system work in their favor.
In the end, the venture capitalist makes money (the so-called exit) by either reselling the stake in the company at a much larger valuation or with the IPO of the company they invested in.
When that happens, venture capitalists make substantial returns for their partners. Indeed, the venture capital firm is usually comprised by a group of partners which raised capital from another group of limited partners to invest for them.
The limited partners (or LPs) can be either large institutions or wealthy individuals looking for high returns.
Usually, venture capital firms invest in growth potential. Therefore, when a startup receives venture capital money, the venture capital firm – usually – expects aggressive growth.
Before we get to the advantage and disadvantages of taking venture capital money, let’s first understand the explicit and hidden incentives that drive venture capital firms. Indeed, at the end, taking venture capital money is mostly about interests alignment.
And if those interests do not converge, that is when probably it might be not a good idea to take that money.
For more: fourweekmba.com/venture-capital-advantages-and-disadvantages/
- What is bootstrapping?
- Not all businesses can bootstrap
- The Bootstrapper’s commandments
- Customers are your investors
- The company’s vision is in your hands
- Focus as the North Star
- Speed of execution
- Mastery and Passion
- A little to lose but a lot to gain
- Salesmanship
- In it for the long-term
- Bootstrapping is about survival
- Start from a proven business model
- Differentiate from the incumbent
- What the bootstrapper has that the big corporations don’t?
- Beware, a bootstrapper is not a freelancer, but an entrepreneur
- When to play venture capital game?
- Scale requires money, and network
Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.
This funnel goes through:
- Acquisition
- Activation
- Retention
- Revenue
- Referral
It is important to highlight that this is a model, and as such, it doesn’t represent the actual behaviors of users or customers. Instead, that is a simplification that helps identify the crucial actions and marketing tactics to implement to make sure a user becomes a paying customer.
https://fourweekmba.com/pirate-metrics/
There isn’t a single way to define a business model, and any tool that helps identify it from a different perspective – I argue – is useful for an entrepreneur building a different kind of business.
In this article, I’ll focus on the Blitzscaling business model canvas. This is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.
Blitzscaling is not a magic formula Rather than a magic formula that works in each scenario, Blitzscaling follows a framework that revolves around three key ingredients:
- business model innovation
- management innovation
- growth strategy
Those three key ingredients of Blitzscaling.
What’s Blitzscaling then? There are a few key elements I think are worth highlighting.
Related: What Is a Business Model? 30 Successful Types of Business Models You Need to Know
- What happens when you use Growth Hacking?
- What is Growth Hacking and what is not
- The Growth Hacking Mindset
- From Personal to Incremental: Two Approaches to Learning
- The Power of Yet: The Growth Mindset
- It Got to Be Data-Driven: The Feynman Approach
- The Method
- The Skills: Multidisciplinarity is the rule of thumb
- Growth Hacking is about the whole funnel
- The Top 20 Tools
- Suggested Reading
- Online Course
- Websites to read
- People to Follow on Twitter (source stuck study from GrowHack.com)
Episode offered by FourWeekMBA.com, the leading source of knowledge and insights about business model innovation and digital entrepreneurship.
Business model canvas in a nutshell
- Key partners
- Key activities
- Value proposition
- Customer relationship
- Customer segment
- Key resource
- Distribution channel
- Cost structure
- Revenue stream
- Breaking Down Value Proposition In Business
- Jobs-To-Be-Done Theory of value
- Value proposition: tell me why I should buy from you
- It all starts with a profitable and scalable business model
- The value proposition canvas
- What is a value in the value proposition canvas?
- The customer profile
- Understand what’s important and what’s insignificant about customer jobs
- Understand what extreme and what’s moderate about customer pains
- Understand what’s essential and what’s nice to have by generating customer gains
- The value map
- It’s all about product-market fit!
- Alternatives to the value proposition canvas
- Key takeaway
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
This process is well known within Amazon and as explained by Jeff Wilke, CEO of Amazon Worldwide Consumer this idea was first sketched by Jeff Bezos back in 2001 and would become Amazon marketing strategy for years to come. That contributed to the Amazon business model success.
More than a tool this is a mindset, a way to seize opportunities within industries, where inefficiencies are the rule. At the same time, it helps speed up growth by investing as much as possible on customer experience.
For more on that: fourweekmba.com/amazon-flywheel/
The reference to this session is here: medium.com/@yegg/the-19-channels-you-can-use-to-get-traction-93c762d19339
More on the framework and channels below:
Contents
- Why DuckDuckGo?
- What is DuckDuckGo?
- DuckDuckGo at the time of this writing
- Before DuckDuckGo: Who is Gabriel Weinberg?
- The Solopreneur’s Way
- Time for some more tinkering: what did Gabriel Weinberg do after selling his first successful startup?
- Flipping the switch: The Solo-launch
- A short interview with DuckDuckGo first user
- Challenge the Status Quo: How do you make people switch to your service when you’re the last to enter the market?
- The 19 Channels of Growth: how did DuckDuckGo start to get traction?
- What is the Bullseye Framework?
- DuckDuckGo Growth, Explained
- Stage One, the Billboard
- Stage Two, Google privacy policy change
- Stage Three, surveillance revelations
- How do you make money if you don’t track users?
- Finding the Hook: privacy as the mission statement
Marc Andreessen defined Product/market fit as “being in a good market with a product that can satisfy that market.”
In an article entitled “The only thing that matters” Andreessen also highlights a few points:
At any given startup, the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.
- The Lean Startup Methodology in a nutshell
- The Minimum Viable Product in a nutshell
- Problem/Solution Fit comes first
- Product-market fit myths
- Myth #1: Product market fit is always a discrete, big bang event
- Myth #2: It’s patently obvious when you have product market fit
- Myth #3: Once you achieve product-market fit, you can’t lose it
- Myth #4: Once you have product-market fit, you don’t have to sweat the competition
- Product-market fit tools
Other resources for your business:
- What Is a Business Model? 30 Successful Types of Business Models You Need to Know
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- How to Write a One-Page Business Plan
- How to Build a Great Business Plan According to Peter Thiel
- What Is The Most Profitable Business Model?
- The Era Of Paywalls: How To Build A Subscription Business For Your Media Outlet
- How To Create A Business Model
- What Is Business Model Innovation And Why It Matters
- What Is Blitzscaling And Why It Matters
We’ll see a few one-page tools to give entrepreneurs clarity of mind on their overall business to take actions to build a sustainable venture that unlocks value for many players in the long-term.
To go more in-depth into the topic, check out:
Business model canvas Lean startup canvas Value proposition canvas Blitzscaling business model innovation canvas The business model navigator methodology Other resources for your business:
- What Is a Business Model? 30 Successful Types of Business Models You Need to Know
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- How to Write a One-Page Business Plan
- How to Build a Great Business Plan According to Peter Thiel
- What Is The Most Profitable Business Model?
- The Era Of Paywalls: How To Build A Subscription Business For Your Media Outlet
- How To Create A Business Model
- What Is Business Model Innovation And Why It Matters
- What Is Blitzscaling And Why It Matters
For more you can access the free guide at FourWeekMBA.com
- What is a business model?
- A business model is also about how you make money but how you make money isn’t your business model
- It’s all about business model design
- What are the primary components of a business model?
- How many types of business models exist?
The bullseye framework is a simple method that enables you to prioritize over the marketing channels that will make your company gain traction.
The premise is that when you grow a company from scratch, in most cases, you don’t have a massive marketing budget. This requires a scientific method for marketing experimentation to prioritize on those channels that have the highest potential.
Often, this marketing prioritization process will bring you to experiment with new marketing channels which might still be underutilized by your competitors, and for such reason also the ones with the highest potential.
The bullseye framework was manufactured by Gabriel Weinberg, Justin Mares, in their book, Traction.
Let me give you a bit of background about the story of one of the authors, Gabriel Weinberg, and how they came up with this framework.
You find the full free guide here: fourweekmba.com/bullseye-framework/
For more you can access the free guide at FourWeekMBA.com
- What is a business model?
- A business model is also about how you make money but how you make money isn’t your business model
- It’s all about business model design
- What are the primary components of a business model?
- How many types of business models exist?
Nick Johnson is the Principal at Applico; he is also the co-author of the best selling book “Modern Monopolies,” which is incredible reading to understand the business model that is dominating today’s business world.
With Nick, we explored the dynamics of platform business models.
Contents
- How did you get to study business modeling and the platform business models?
- How has the business world changed since platform business models dominate?
- What is a diseconomy of scale?
- How have economies of scale changed in a world dominated by platform business models?
- What’s the definition of a platform business model?
- What is the core transaction?
- Why is the core transaction so crucial for a platform business model?
- How are platform business models primarily categorized?
- Are traditional business strategy tools like Porter’s five forces still useful?
- How do you build network effects?
- Uber network effects case study
- How do you know when you reached the critical mass to scale?
- Do platform business models create more prominent and larger markets?
- What’s the critical difference between a modern monopoly to an old monopoly?
- Is scale an essential element for any platform business model?
- What suggestion do you have for anyone starting a platform business model from scratch?
- Key takeaways
Walker Deibel, is an entrepreneur, investor, and advisor. He also the author of a book that is critical to master a framework to become an acquisition entrepreneur: Buy Then Build.
With Walker, we covered the key steps to get into the mindset and process of acquiring businesses, to then scale them up further.
Contents
- How did you get started as an acquisition entrepreneur?
- Inside acquisition entrepreneurship
- How did the name “acquisition entrepreneur” came up?
- What are the critical elements for a good acquisition strategy?
- Lack of urgency
- Accusatory mindset
- Create a sense of urgency
- Pitch the seller
- What mistakes should you avoid when acquiring a business?
- Go after a great opportunity
- A growth mindset is critical
- Why is not a good idea to start looking for businesses to buy online?
- What do you suggest to people that are getting started in acquiring other businesses?
- Understand your strengths but also your weaknesses
- Visualize the outcome and take action
- Find your sweet spot
- Is there an example of the perfect acquisition you’ve made?
- When does it make sense actually to use leverage to acquire a company?
For this interview, I have with me Thales Teixeira, professor at Harvard Business School and author of “Unlocking the Customer Value Chain,” which is an incredible book and an incredible reading, especially if you’re trying to understand how today’s business world works.
I asked Thales a few critical questions to understand the business landscape and each of them uncovers insights that will make you a better business person!
Contents
- What brought you to study business model disruption and business innovation?
- What’s for you that the most effective definition of a business model?
- What is the customer value chain and how does that work?
- What is decoupling and why is it so important?
- How did Birchbox break the customer value chain?
- Is disruption about business model innovation?
- Didn’t Uber start as a tech company?
- What are the three phases of digital business disruption?
- Unbundling in a nutshell
- Disintermediation in a nutshell
- Summarizing the three waves of unbundling, disintermediation and decoupling
- How do we know what the consumer is looking for? And how to use decoupling in our favor?
- The three customers’ currencies
- How important is branding in consumers’ choices?
- In this context, are traditional business tools, like Porter’s Five Forces, still useful?
- How should I start a disruptive company today?
- Is specialization the key to decoupling?
- What’s next? Is decoupling the main disruptive force in the coming decade?
- Key takeaways
Nick Johnson is the Principal at Applico; he is also the co-author of the best selling book “Modern Monopolies,” which is incredible reading to understand the business model that is dominating today’s business world.
With Nick, we explored the dynamics of platform business models.
Contents
- How did you get to study business modeling and the platform business models?
- How has the business world changed since platform business models dominate?
- What is a diseconomy of scale?
- How have economies of scale changed in a world dominated by platform business models?
- What’s the definition of a platform business model?
- What is the core transaction?
- Why is the core transaction so crucial for a platform business model?
- How are platform business models primarily categorized?
- Are traditional business strategy tools like Porter’s five forces still useful?
- How do you build network effects?
- Uber network effects case study
- How do you know when you reached the critical mass to scale?
- Do platform business models create more prominent and larger markets?
- What’s the critical difference between a modern monopoly to an old monopoly?
- Is scale an essential element for any platform business model?
- What suggestion do you have for anyone starting a platform business model from scratch?
- Key takeaways
For this interview, Greg Satell, international keynote speaker, advisor, and the author of a book, which I loved, a best selling book, called “Mapping Innovation: A Playbook for Navigating a Disruptive Age,” has answered a few key questions about innovation strategy and business model innovation.
Let’s dive into them!
Contents
- How did you fall in love with the quest for understanding innovation?
- Is innovation about making quick decisions?
- What are some of the myths surrounding innovation?
- How does the Innovation Matrix work?
- How important is sustaining innovation?
- In which scenario, the lean startup helps to find the right path toward business innovation?
- What instead is a classic example of breakthrough innovation?
- Are tools like Porter’s Five Forces and SWOT Analyses still useful in today’s business landscape?
- How has the business world changed?
- Is the business model canvas a useful tool for that?
- How do we understand ecosystems?
- How important is to build ecosystems for scaling up a business?
- Key takeaways
Barry O’Reilly, is a business advisor, entrepreneur, keynote speaker, and is the author who has pioneered the intersection of business model innovation, product development, organizational design, and culture transformation.
Barry is the founder of ExecCamp, the entrepreneurial experience for executives, and management consultancy Antennae.
He wrote an amazing book, “Unlearn: Let Go of Past Success to Achieve Extraordinary Results” and he is also the author of “Lean Enterprise: How High Performance Organizations Innovate at Scale.”
We’re diving deep into “unlearning” and how it can help organizations thrive in this era.
Contents
- How did you get into the study, research and practice of unlearning?
- A change in mindset
- What’s the learning organization and what’s unlearning instead?
- Recognizing what’s not working
- Learn fast and rapidly innovate
- Is disruption organizational or it happens at an individual level?
- How does the Cycle of Unlearning work?
- Not a one-and-done cycle
- What are the key characteristics of unlearning?
- Curiosity
- Ownership
- Commitment
- Recap of the key characteristics to master unlearning
- What’s status quo leadership and why it might be damgerous?
- Avoid to just copy and paste frameworks
- Define the outcomes
- Build a system to continuous innovation through unlearning
- How to use the Three Cultures Model to build a successful company?
- What are unlearning prompts? And why they matter?
- How do you know you need to unlearn?
- Is there a number one reason people don’t unlearn?
- Build a growth mindset
- Fixed vs. growth mindset
- Switch the focus from the person to the process
- Recap about growth vs. fixed mindset
- What suggestions do you have for executives to bring this process in their organizations?
- Key takeaways
Ash Maurya is a practitioner and entrepreneur. Author of Running Lean, Scaling Lean and the Lean Canvas, built on top of the Business Model Canvas. Ash is also the founder of LEANSTACK.
In this session, we focused on continuous innovation and scaling lean.
Contents
- How did we go from lean manufacturing to continuous innovation?
- What’s the key difference between an entrepreneur and a scientist?
- What are the key ingredients for an effective entrepreneurial experiment?
- Why monetization is a building block you want to test early on?
- What can we learn from the early Facebook on monetization and execution?
- How did Tesla instead execute a staged rollout?
- How do you go from problem/solution fit to scale?
- When is the right time, if there’s any, to take venture capital money?
- When does it make sense to bootstrap?
- How do you build the optimal business model?
- How is traction different from revenue and why is it a key metric?
- What is throughput accounting, and how it works?
- How does the 10x growth model work?
- Why do we need to remove failure from our vocabulary?
- Key takeaways
David L. Rogers, is an author, speaker, and consultant. He is the Faculty Director of the Digital Business Strategy and Leadership at Columbia Business School. And he is also the author of a fantastic book which is The Digital Transformation Playbook.
This is a must-read because it helps you to understand how the business world has changed. I asked David a few key questions to understand what digital transformation is really about!
- How did you get into digital transformation?
- What are the myths surrounding digital transformation?
- How can we define digital transformation? What is it really about?
- How do you think the business strategy world has changed?
- What are the five domains of business strategy in the digital era?
- Customers
- Competition
- Data
- Innovation
- Value
- How have customers changed in the digital era?
- What are the customers’ core behaviors in the digital era?
- Access
- Engage
- Customize
- Connect
- Collaborate
- What is the business model most suited for this digital era?
- What are the fundamental principles for a successful digital strategy?
- Key takeaways
- Conclusion
Today we have here, Allen Gannett. He’s the Chief Strategy Officer of Skyword, founder of TrackMaven, which is a big data analytics company; and he’s also the author of “The Creative Curve“. A book that I loved and I suggest everyone reading it.
And today we’re actually going to explore with Allen, the insights about creativity, how it works. And also the misconceptions we all have about how creativity works. So thank you for being with us today Allen.
For the full transcript go to: fourweekmba.com/creative-curve-allen-gannet/
Dr. Adam J. Bock is an academic entrepreneur, financier, tech-venturing expert, and co-author of a must-read book which is called The Business Model Book.
The Business Model Book is an incredible resource which cut through the noise of understanding how to use business models and business model analysis to start your next venture.
With Adam, we went in-depth into the business models world.
- How did you get into the study of business models?
- What business models are not?
- Were business models born with the Internet? (A brief history of business models)
- What are some other common myths that surround business models?
- Is business models analysis a primary tool for business experimentation?
- What’s a definition or effective definition of business models?
- The academic definition
- The entrepreneurial definition
- What are some of the business models tools available, and how to use them?
- The lean canvas as an early stage business model tool
- RTVN framework for a very early stage venture
- What are the SHaRP resources and why they matter?
- What’s the customer journey map and why it matters?
- What’s a business model narrative, and why it is essential?
- What are some of the key obstacles to designing a great business model?
- Suggested reading
Alberto Savoia is the former Innovation Agitator and Engineering Director at Google, and Innovation Lecturer at Stanford. Founder of Pretotype Labs. He is also the author of a book that I loved, which is “The Right It: why so many fail and how to make sure yours succeed.”
I took the chance to ask Alberto a few questions, and he was very kind to answer them all!
Contents:
- How did you get passionate about understanding why startups fail? What is your background?
- What is pretotyping, and how did you find out about it?
- How different is pretotyping from prototyping?
- What’s the IBM Text-To-Speech and why it mattered so much to your idea of pretotyping?
- How did you manage to help people embrace projects which were highly risky?
- Why then it matters to get out from Thoughtland and why you need to collect your own data?
- What companion business books (to The Right It) do you suggest?
- Is there any business person nor entrepreneur you suggest following?
- What are you working next?
In this episode, I took the chance to ask, Felix Hofmann, CEO of the Business Model Innovation Lab, a spin-off from the University of St. Gallen, a few questions about business model innovation and more!
To give a bit of context the Business Model Innovation Lab is a spin-off from the University of St. Gallen, from which research, the book “Business Model Navigator,” came up. The Business Model Navigator is one of my favorite books when it comes to understanding business model innovation.
Key takeaways from the interview * Business model innovation implies a lot of testing and iterations * Beware of falling in love with vanity metrics * A business model comprises a revenue model, but they are not the same thing * A revenue model is part of the “why” dimension of a business model * The blueprint of a business model is called a pattern. This needs to be repeatable * Often a successful business model implies mixing up several business model patterns * Before a business model might become viable it might take up years of experimentation and testing * A business model scalability implies two dimensions: internal and external * The business models of the future are becoming more about creating ecosystems * Thus, circular business models might become dominant in the future
Questions:
- What brought you to study and research business model innovation?
- Did you find the freemium model to be an effective model in your first start-up?
- Do you think can we call a business model viable when we’re missing the profit formula?
- What is for you a good definition of business model?
- What’s the difference between a business model pattern and the business model?
- Is business model innovation about mixing up those patterns and blueprints?
- How does business model scalability work?
- Are there business models that you see will be dominating in the future?
- Are there any interesting business model patterns that you notice so far in the blockchain world?
- Is there any person, academics, that you suggest following from the business modeling side?
- Is there a companion book that you suggest reading together of course with the “Business Model Navigator?”
- Key takeaways from the interview
- Suggested readings from the interview
- A glance at the business model patterns from the Business Model Navigator
Ash Maurya is a practitioner and entrepreneur. Author of Running Lean, Scaling Lean and the Lean Canvas, built on top of the Business Model Canvas. Ash is also the founder of LEANSTACK.
I took the chance to ask Ash a few questions. I tried to limit those as I had so many things I wanted to ask him. And Ash was kind enough to answer all of them!
Key takeaways * Entrepreneurs are risk-averse * Entrepreneurship is about getting in love with the problem * Avoid to fall in the innovator’s bias, or getting in love with the solution * Demo-sell-build rather than build-demo-sell * There is a key metric to assess the success of a business: Traction! * Business models can be categorized according to the actors and interactions involved in three kinds: direct, multisided and marketplace * Business models are always evolving * Searching for the proper business model means making it profitable * Look for the smallest market, that is big enough to make your business sustainable * You need to be fast from idea to execution, as a few ideas will turn out to be successful
In collaboration with #SEOisAEO podcast, hosted by the great Jason Barnard. Gennaro Cuofano explores the key aspects of Facebook Business Model.
Facebook makes money with an advertising business model. Almost all the revenue comes from targeted advertising. Indeed, Facebook revenue breakdown in 2018 was:
- Advertising (over 98% of revenues): it primarily consists of displaying ad products on Facebook, Instagram, Messenger, and third-party
- Payments and other fees (less than 2% of total revenues): it consists of the net fee received from developers using Payments infrastructure or revenue from the delivery of virtual reality platform devices and others
But there are some others key aspects to take into account to understand Facebook Business Model!
Read: How Mobile Advertising Is Driving Facebook Growth
Key takeaways * Mobile is driving Facebook growth, and now it represents 92% of its total advertising revenues * In 2018 Facebook went all into advertising. Its business model isn’t becoming more diversified. Quite the opposite, advertising now represents 98.5% of its revenues * Facebook user base (comprising Facebook and Messenger) stalled in the US and Canada * Facebook user base kept growing a bit in Europe, and it kept increasing worldwide, thanks to substantial growth in Asia-Pacific (from 828 million users in 2017 to 947 million users in 2018) and in the rest of the world (from 692 million users in 2017, to 750 million users in 2018) * Nonetheless, a stalled growth in the US & Canada Facebook ARPU grew substantially. Why did that happen? A first clear reason is that Facebook is monetizing via mobile, and it seems a growing number of marketers joined the platform (we can’t know the number from its financials) and those same marketers are spending more. At the same time, Facebook ads are “performing” better * Instagram might be driving Facebook growth * Facebook got 13% more expensive in 2018, yet not as much as it did back in 2017 when it was 29% more expensive * A growing number of marketers are joining the platform and are spending more on ads * Marketers might be spending more on ads also due to Facebook cutting off their organic reach. In short, advertising remains the most effective mean to reach an audience on Facebook * Facebook profitability stands at 39.6% in 2018, which makes it (for now) a cash cow, even more than Google’s Alphabet (which profitability stand at 22.4% in 2018)
Amazon has a diversified business model. In 2018, online stores contributed to nearly 52% of Amazon revenues, followed by Physical Stores, Third-party Seller Services, AWS, Subscription Services, and Advertising revenues.
Zara Altair creator of Zara Altair Writes. Author of multiple books on Amazon and professional Ghost Writer. Zara loves writing. Future authors appreciate her years of experience and collaborative spirit for ghostwritten books. Website owners and their website designers appreciate her knowledge and skill creating semantically optimized text. She accomplishes the dual purpose of writing to customers and increasing search engine attention. Zara lives among trees and wildlife in Oregon where she appreciates her rich surroundings. She has two grown children and loves to travel.
She will explain to us how the business of ghostwriting works!