Tuesday, April 29, 2014
Monday, April 28, 2014
Developer Platforms - another growth hacking trick
Companies like Stripe and Twilio have built their entire businesses around providing a better platform for developers to build B2B apps and integration off of. By providing their service as an API for developers to use, they allow for many different new products and use cases to pop up that wouldn't otherwise be built, which in-turn they receive increased revenue from when they succeed. A true win-win model for growth.
If you look at Facebook' s acquisition of Oculus, in Mark Zuckerberg's blog , he clearly points how the $2bn acquisition benefits Facebook's developer community; including building next generation games as well as Facebook being the center of all new & upcoming gaming apps & startups; albeit, they are aware of Whatsapp in its infancy.
Having a vibrant developer ecosystem is an essential condition to success in the new Cloud era. There are couple of reasons why companies would want to have one
1) Introduce new products and use cases like the Facebook and Stripe examples. Once a developer creates an app they plug into these systems - Facebook(user ads) or Stripe(payment rails) and eventually these platforms benefit from increased users or increased payments through their systems
2) Interoperability with other apps - Customers are looking to use best in class apps and they want these best in class apps to seamlessly talk to each other. If your product does not connect with other apps, you run the risk that the customer is unhappy and not sticky and will likely switch once somebody else makes products which do. Clearly, any company does not have enough internal resources to do these integrations themselves; so if one wants to focus on their products and let the developers create these integrations it's a win-win for everyone. More ever, now that your product is visible in other apps (through integrations), the other apps become a source of new user additions. here your cost of customer acquisition is almost zero (no marketing, no development), no CFO would shy away from such growth.
So the next obvious question is how can a company go about building a vibrant developer ecosystem - the simple answer is be in the developer's shoes and think what is important for them - develop apps easily and cost effectively (lower cost) and help market apps (higher revenue). Some companies that have done an excellent job in both of these areas are Salesforce & Box.
1) Lower cost - Being an app developer requires one to have business logic, programming language knowledge, hosting, back end, billing, customer support skills. A lot to ask from a couple people small app developer company, at times a single app developer. Successful platforms that have been successful in this area are ones that have enabled their programmers to be the business idea guy, while they take care of the rest.
2) Higher Revenue - Access to users as well as the ability to get to these users is paramount. This means, conducting educational seminars to create awareness about the app, promoting developers amongst the user base to help in discovery of the app, social marketing kit etc are all essential elements of this strategy.
Developer platforms are examples of two sided networks, once you get the fly wheel going one could see exponential benefits, most prominently in customer stickiness & growth channels. But as folks know, developer platforms are tricky as well - how should your pricing strategy be, who do you charge and at what point, the classic egg and chicken situation but worth the effort.
If you look at Facebook' s acquisition of Oculus, in Mark Zuckerberg's blog , he clearly points how the $2bn acquisition benefits Facebook's developer community; including building next generation games as well as Facebook being the center of all new & upcoming gaming apps & startups; albeit, they are aware of Whatsapp in its infancy.
Having a vibrant developer ecosystem is an essential condition to success in the new Cloud era. There are couple of reasons why companies would want to have one
1) Introduce new products and use cases like the Facebook and Stripe examples. Once a developer creates an app they plug into these systems - Facebook(user ads) or Stripe(payment rails) and eventually these platforms benefit from increased users or increased payments through their systems
2) Interoperability with other apps - Customers are looking to use best in class apps and they want these best in class apps to seamlessly talk to each other. If your product does not connect with other apps, you run the risk that the customer is unhappy and not sticky and will likely switch once somebody else makes products which do. Clearly, any company does not have enough internal resources to do these integrations themselves; so if one wants to focus on their products and let the developers create these integrations it's a win-win for everyone. More ever, now that your product is visible in other apps (through integrations), the other apps become a source of new user additions. here your cost of customer acquisition is almost zero (no marketing, no development), no CFO would shy away from such growth.
So the next obvious question is how can a company go about building a vibrant developer ecosystem - the simple answer is be in the developer's shoes and think what is important for them - develop apps easily and cost effectively (lower cost) and help market apps (higher revenue). Some companies that have done an excellent job in both of these areas are Salesforce & Box.
1) Lower cost - Being an app developer requires one to have business logic, programming language knowledge, hosting, back end, billing, customer support skills. A lot to ask from a couple people small app developer company, at times a single app developer. Successful platforms that have been successful in this area are ones that have enabled their programmers to be the business idea guy, while they take care of the rest.
2) Higher Revenue - Access to users as well as the ability to get to these users is paramount. This means, conducting educational seminars to create awareness about the app, promoting developers amongst the user base to help in discovery of the app, social marketing kit etc are all essential elements of this strategy.
Developer platforms are examples of two sided networks, once you get the fly wheel going one could see exponential benefits, most prominently in customer stickiness & growth channels. But as folks know, developer platforms are tricky as well - how should your pricing strategy be, who do you charge and at what point, the classic egg and chicken situation but worth the effort.
Wednesday, February 19, 2014
Is this the beginning of the end?
The Whatspp acquisition by Facebook looks like we are in a bubble, where valuation is based on number of users - granted these are ”engaged users” however, paying $19bn is crazy, especially if you are going to make 99c per user in the best possible case. The original Whatsapp model is one where the user is not served any ads and Whatsapp has no intel on the user based off their messages. How then would Facebook monetize this acquisition?
It would take Facebook 42 years to break even, paying $42 for a user, where in the best case you are only going to make 99c per user. I want to see the assumptions in the financial model to see how Facebook is going to monetize this. Begs the question – is this the beginning of the end?
In the world where 90% of the companies are valued on profit and revenues, isn’t this crazy that we value companies based on users and expect them to be profitable one day.
Some people might argue that Facebook got the users for much lower valuation than their current base. Facebook has 1bn users with 173bn market cap ($173/user) while they only paid $42/user. But are these users the same in terms of revenue and profitability- atleast not to the native eye. Facebook has revenue of $8bn meaning each user brings in $8 vs Whatsapp user bringing in $1/year. Clearly, wall street is sensing this and in after hours shares of Facebook were down 5%.
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