Netflix: Netflix Long Term View. "Over the coming decades and across the world, Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear, and screens will proliferate. As Internet TV grows from millions to billions, Netflix, HBO, and ESPN are leading the way." Netflix view of the world. A must read and rare glimpse into a company's thinking.
New York Times: Netflix Looks Back on Its Near-Death Spiral. "“But the phrase I used was, ‘There are no shortcuts.’ We weren’t going to find an idea or gesture that would make people love us again overnight. We had to earn their trust by being very steady and disciplined. And we had to be careful because we were on probation. We had to stick to what we do well and not lose confidence. I couldn’t say for sure we’d recover. But I was confident that our best odds were to be very steady and focus on improving the service.”" Good read about Netflix' reaction to adversity.
TV4 Nyhetsmorgon: Spotifygrundaren Daniel Ek om musiken, pengarna och idéerna (video). "Enligt flera stora affärstidningar är han en av framtidens stora entreprenörer och redan nu är han värderad till över 2 miljarder kronor. Jesper Börjesson träffade Daniel Ek och samtalde om musiken, Spotify och pengarna."
This Week In Startups: Mattias Miksche CEO and Co-Founder Stardoll (video). Jason Calacanis interviews Mattias Miksche of Stardoll.
Henrik Torstensson's Weblog
It is simple but not easy
April 29, 2013
April 27, 2013
Weekend reading and viewing
Kinnevik: E-commerce and market places (Capital Markets Day 2013) (video). Kinnevik talking about its online investments (€1+ billion in investment) and Zalando founder Robert Gentz talking about Zalando. A relatively detailed look at Kinnevik's online investments and Rocket Internet's flagship Zalando.
VentureBeat: King overtakes Zynga as the largest social gaming company. "“King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile,” said Riccardo Zacconi, the chief executive of King, in a statement." Another leading Stockholm-originated company becoming large internationally together with Spotify and Klarna.
Reaction Wheel: Andy Weissman on entrepreneurship, product development and the future of the Internet (video). "Andy talks about what an entrepreneurial environment looks like--even in a company that's no longer a startup, how Betaworks did product development, where he sees business on the internet going, and what USV looks for in a startup."
Swedish Startup Space: Joacim Nitz (Smartbudget): ‘It takes more than time, knowledge and a pretty website to deliver a good product’ "Until that model is possible for us we offer a “plus service” to those who want to get even more out of the tool. It has worked well in the way that these types of users are very happy with what they get, but also the users with less needs are happy with the free service."
VentureBeat: King overtakes Zynga as the largest social gaming company. "“King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile,” said Riccardo Zacconi, the chief executive of King, in a statement." Another leading Stockholm-originated company becoming large internationally together with Spotify and Klarna.
Reaction Wheel: Andy Weissman on entrepreneurship, product development and the future of the Internet (video). "Andy talks about what an entrepreneurial environment looks like--even in a company that's no longer a startup, how Betaworks did product development, where he sees business on the internet going, and what USV looks for in a startup."
Swedish Startup Space: Joacim Nitz (Smartbudget): ‘It takes more than time, knowledge and a pretty website to deliver a good product’ "Until that model is possible for us we offer a “plus service” to those who want to get even more out of the tool. It has worked well in the way that these types of users are very happy with what they get, but also the users with less needs are happy with the free service."
April 23, 2013
Andreessen, Fishbrain and Netflix
Harvard Business Review: In Search of the Next Big Thing. "The best founders are artists in their domain. They operate instinctively in their industry because they are in touch with every relevant data point. They’re able to synthesize in their gut a tremendous amount of data—pulling together technology trends, their companies’ capabilities, their competitors’ activities, market psychology, every conceivable aspect of how you run a company." Interview with Marc Andreessen.
Swedish Startup Space: Startup of the week: Fishbrain. "Our focus is now on growing outside Sweden and we want to dominate the US market. Long term we are starting developing for Google Glass. The fit for anglers is exceptional!" I met with Fishbrain's CEO Johan Attby last week and wouldn't be surprised if they do well.
Netflix Investor Relations: Investor Letter Q12013 (pdf). "In Q1, we added over 3 million streaming members, bringing us to more than 36 million, who collectively enjoyed on Netflix over 4 billion hours of films and TV shows." Netflix passed $1 billion in quarterly revenue and made a profit of $3 million.
Swedish Startup Space: Startup of the week: Fishbrain. "Our focus is now on growing outside Sweden and we want to dominate the US market. Long term we are starting developing for Google Glass. The fit for anglers is exceptional!" I met with Fishbrain's CEO Johan Attby last week and wouldn't be surprised if they do well.
Netflix Investor Relations: Investor Letter Q12013 (pdf). "In Q1, we added over 3 million streaming members, bringing us to more than 36 million, who collectively enjoyed on Netflix over 4 billion hours of films and TV shows." Netflix passed $1 billion in quarterly revenue and made a profit of $3 million.
April 21, 2013
Sunday reading
Information Arbitrage: Breaking Through. "The fact is that no matter how smart or hungry you are, it just takes time to network, acquire knowledge and experience and to feel comfortable in your own skin as a member of the start-up community. And this is a good thing. Life is a marathon, not a sprint, so be purposeful and focused without feeling like you’re behind where you should be."
Above The Crowd: A Rake Too Far: Optimal Platform Pricing Strategy. "High volume combined with a modest rake is the perfect formula for a true organic marketplace and a sustainable competitive advantage. A sustainable platform or marketplace is one where the value of being in the network clearly outshines the transactional costs charged for being in the network. This way, suppliers will feel obliged to stay on the platform, and consumers will not see prices that are overly burdened by the network provider."
Fortune: The second coming of Facebook. "When designers and engineers file in to show off their products, his first question is nearly always, "What's that look like on mobile?""
Index Universe: Nate Silver: Confidence Kills Predictions. "People tend to underestimate what the uncertainty that is intrinsic to a problem actually is. If you have someone estimate what they think a confidence interval is that’s supposed to cover 90 percent of all outcomes, it usually only covers 50 percent. You have upside outcomes and downside outcomes in the market certainly more often than people realize."
Yahoo! Finance: Twitter: Great Investor Tool That Won’t Make You Money. "But the true advances for small investors have come in free or cheaper investment information, tax-efficient exchange-traded funds and ultra-low trading costs – not real-time performance advantages."
Silicon Alley Insider: The Bull Case For Apple. "Now, however, the stock is priced at such a low level that almost everything has to go wrong for the stock to continue its collapse."
Charlie Rose: Bill Gates and Michael Bloomberg on the Global Polio Eradication Initiative (video).
Above The Crowd: A Rake Too Far: Optimal Platform Pricing Strategy. "High volume combined with a modest rake is the perfect formula for a true organic marketplace and a sustainable competitive advantage. A sustainable platform or marketplace is one where the value of being in the network clearly outshines the transactional costs charged for being in the network. This way, suppliers will feel obliged to stay on the platform, and consumers will not see prices that are overly burdened by the network provider."
Fortune: The second coming of Facebook. "When designers and engineers file in to show off their products, his first question is nearly always, "What's that look like on mobile?""
Index Universe: Nate Silver: Confidence Kills Predictions. "People tend to underestimate what the uncertainty that is intrinsic to a problem actually is. If you have someone estimate what they think a confidence interval is that’s supposed to cover 90 percent of all outcomes, it usually only covers 50 percent. You have upside outcomes and downside outcomes in the market certainly more often than people realize."
Yahoo! Finance: Twitter: Great Investor Tool That Won’t Make You Money. "But the true advances for small investors have come in free or cheaper investment information, tax-efficient exchange-traded funds and ultra-low trading costs – not real-time performance advantages."
Silicon Alley Insider: The Bull Case For Apple. "Now, however, the stock is priced at such a low level that almost everything has to go wrong for the stock to continue its collapse."
Charlie Rose: Bill Gates and Michael Bloomberg on the Global Polio Eradication Initiative (video).
April 17, 2013
Osom mobile marketplace for vintage and fashion launches
Established web (desktop/laptop) category leaders are facing new challengers as the online world is going mobile (smartphone/tablet). One category that ought to be better fortified than most due to the buyer/seller liquidity requirement is the classifieds category with companies like eBay, Craigslist, Blocket and Avito. However, Swedish startup Osom thinks it can attack the market from an angle where the established companies have a chink in their armor.
Osom has built a classifieds app for iPhone and iPad, an Android version is coming later this year, dubbed as Instagram meets Craigslist (or Instagram meets Blocket for Swedes). The idea being that a beautiful marketplace, especially when compared to incumbents, focused on vintage and fashion could gain traction.
It's a tough challenge the alumni of companies like Videoplaza, Twingly, Headler and MTG have taken on, but it will be interesting to follow.
Download Osom from the App Store.
(disclosure: I'm friends with the founders of Osom).
Osom has built a classifieds app for iPhone and iPad, an Android version is coming later this year, dubbed as Instagram meets Craigslist (or Instagram meets Blocket for Swedes). The idea being that a beautiful marketplace, especially when compared to incumbents, focused on vintage and fashion could gain traction.
It's a tough challenge the alumni of companies like Videoplaza, Twingly, Headler and MTG have taken on, but it will be interesting to follow.
Download Osom from the App Store.
(disclosure: I'm friends with the founders of Osom).
April 1, 2013
Freemium strategy, paid acquisition and the leaky bucket
Many freemium services start out planning to attract users for free via PR, word-of-mouth and viral growth. Regardless of if actual growth is slow or quick, the question to grow via data-driven, trackable and paid marketing, a.k.a. paid acquisition, is likely to arise.
Looking at the entire conversion flow from a user registering for the free service, free users engaging with the service and finally converting to paid the flow looks like a leaky bucket. A significant percentage of users drop out during each stage of then funnel.
This will prompt a version of the question: Should we pay for pouring more people into the bucket when it has so many holes? Shouldn't we fix the conversion issues first and then quickly scale aggressively by ramping up advertising?
Unfortunately, the real world won't let you turn on paid acquisition and immediately start running at high speed with a high degree of control. You need to learn to walk before you can run. Unless you have the basics in place, you won't be able scale with control (which you want to have).
In order to have control when you scale, you have to invest ahead of time in people, systems, processes and market knowledge even while the foundation is a somewhat leaky bucket.
As you're learning about acquisition and plugging engagement and conversion holes, a good plan is to invest more in fixed costs (online marketing staff, engineering time, tracking systems) while investing relatively less in media spend.
Among the things that take time to learn and implement as an organization are:
* Where can we buy registrations cheaply or at least cost effectively?
* Which ads are effective (per channel and country)?
* How do we quickly translate ads into multiple languages and produce multiple language versions?
* How do we track user behavior from click to registration to multiple transactions over time? (Will take engineering time to implement and quality assure.)
* What's the revenue over time, per channel, from user cohorts coming via paid acquisition? And the only way to learn about behavior over time is to have old cohorts. (They'll usually perform worse than organic users, but you want to know how much worse and adjust your target.)
More posts on freemium strategy:
Looking at the entire conversion flow from a user registering for the free service, free users engaging with the service and finally converting to paid the flow looks like a leaky bucket. A significant percentage of users drop out during each stage of then funnel.
This will prompt a version of the question: Should we pay for pouring more people into the bucket when it has so many holes? Shouldn't we fix the conversion issues first and then quickly scale aggressively by ramping up advertising?
Unfortunately, the real world won't let you turn on paid acquisition and immediately start running at high speed with a high degree of control. You need to learn to walk before you can run. Unless you have the basics in place, you won't be able scale with control (which you want to have).
In order to have control when you scale, you have to invest ahead of time in people, systems, processes and market knowledge even while the foundation is a somewhat leaky bucket.
As you're learning about acquisition and plugging engagement and conversion holes, a good plan is to invest more in fixed costs (online marketing staff, engineering time, tracking systems) while investing relatively less in media spend.
Among the things that take time to learn and implement as an organization are:
* Where can we buy registrations cheaply or at least cost effectively?
* Which ads are effective (per channel and country)?
* How do we quickly translate ads into multiple languages and produce multiple language versions?
* How do we track user behavior from click to registration to multiple transactions over time? (Will take engineering time to implement and quality assure.)
* What's the revenue over time, per channel, from user cohorts coming via paid acquisition? And the only way to learn about behavior over time is to have old cohorts. (They'll usually perform worse than organic users, but you want to know how much worse and adjust your target.)
More posts on freemium strategy:
March 29, 2013
Freemium strategy and product business model design
I wrote that a freemium product needs to have at least one must have feature only available to paying users. That's a bit of a mental shortcut. Customers don't really pay for features, they pay to solve a problem. Like Ted Levitt wrote in the classic article Marketing Myopia: "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!"
But having certain features being paid-only, highlights that the paid version solves a customer problem. Which both pulls users to the paid version and makes it easier to communicate the advantages of the paid version.
From a business model design perspective, a freemium product should be designed to maximize revenue by taking advantage of both the user acquisition opportunities and virality of a free product and the monetization of a paid product.
User acquisition comes in many forms, but a free option makes it easier for users to sign-up and try out the product. Which should help to optimize registration and activation flows. Two well-known distribution channels that work well for free products are organic search and mobile app stores. In addition, free products are easier to link to from social media like Facebook and Twitter. A free product can also be designed to be inherently viral like Hotmail and most communication services.
However, the free part of the freemium product needs to have long-term utility to drive strong retention. Poor retention among free users offsets the positive effect of stronger acquisition. The reason is that without strong free retention, the product will not have a growing base of active free users that over time get more likely to convert to paid.
When designing a freemium product, one needs to create a path to paid. How does free and paid parts of the product interact in activating a free user, getting them highly engaged and getting the user onto paid? The product business model design decisions of what's free and what's paid thus become key drivers of both product quality and overall sales. With an integrated freemium model, sales cannot really be separated from product. In practice, the product organization needs a to have online marketing and sales skills in addition to product management skills in order to both create a great product and drive sales. Conversely, the conversion/sales team needs product managements skills and think long-term about the product in addition to hitting the sales targets.
The answers to the questions what's free and what's paid differ between products and industries. The answers depend on the product, the competition acquisition channels, types of customers and many other factors.
One thing that paid-only features should have in common should be that most users find them to be of high utility and have high willingness to pay for those features. Utility is a generic term to describe what the user might find valuable, like solving a business problem, having fun or saving time.
Some exempels of paid features in freemium products:
These decisions are almost always product specific, but the difference between getting them right and getting them wrong can mean the difference between financial success and bankruptcy.
(With more time this would have been a shorter, well-edited post.)
More posts on freemium strategy:
But having certain features being paid-only, highlights that the paid version solves a customer problem. Which both pulls users to the paid version and makes it easier to communicate the advantages of the paid version.
From a business model design perspective, a freemium product should be designed to maximize revenue by taking advantage of both the user acquisition opportunities and virality of a free product and the monetization of a paid product.
User acquisition comes in many forms, but a free option makes it easier for users to sign-up and try out the product. Which should help to optimize registration and activation flows. Two well-known distribution channels that work well for free products are organic search and mobile app stores. In addition, free products are easier to link to from social media like Facebook and Twitter. A free product can also be designed to be inherently viral like Hotmail and most communication services.
However, the free part of the freemium product needs to have long-term utility to drive strong retention. Poor retention among free users offsets the positive effect of stronger acquisition. The reason is that without strong free retention, the product will not have a growing base of active free users that over time get more likely to convert to paid.
When designing a freemium product, one needs to create a path to paid. How does free and paid parts of the product interact in activating a free user, getting them highly engaged and getting the user onto paid? The product business model design decisions of what's free and what's paid thus become key drivers of both product quality and overall sales. With an integrated freemium model, sales cannot really be separated from product. In practice, the product organization needs a to have online marketing and sales skills in addition to product management skills in order to both create a great product and drive sales. Conversely, the conversion/sales team needs product managements skills and think long-term about the product in addition to hitting the sales targets.
The answers to the questions what's free and what's paid differ between products and industries. The answers depend on the product, the competition acquisition channels, types of customers and many other factors.
One thing that paid-only features should have in common should be that most users find them to be of high utility and have high willingness to pay for those features. Utility is a generic term to describe what the user might find valuable, like solving a business problem, having fun or saving time.
Some exempels of paid features in freemium products:
- Users pay to have their classified ads highlighted at Avito or Tradera. To solve the problem of selling goods quicker and at a higher price.
- People pay to see who have visited their profiles. Currently LinkedIn is the most famous example, but Swedish community LunarStorm did this in the early 2000's. Users pay to satisfy their curiosity or identify an opportunity.
- Users pay to get additional currency in games. Often at its core in order to have more fun by saving time or getting access to better gear.
These decisions are almost always product specific, but the difference between getting them right and getting them wrong can mean the difference between financial success and bankruptcy.
(With more time this would have been a shorter, well-edited post.)
More posts on freemium strategy:
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