New South African Revenue Service · 2013. 4. 8. · South African Revenue Service
Revenue As A Service
description
Transcript of Revenue As A Service
Revenue as a ServiceThe business end of SaaS
LA2M, January 13, 2010
2000
If you build it,they will come
2010
If they come,it’ll make money
Monumentsin the desert
www.work.com(www.business.com)
Mel Brooks’“The Producers”
www.bolt.com(www.ning.com)
2
Fields of Dream
Software as a Service
• Write-once, run-once - a/k/a “Timesharing” • Teletype, Uniscope, VT-100, Ontel, ...
• Diversity of terminals: • Web widgets, ... • Mobile apps, ... • MMORPGs (SL, Wii), ... • Chumby, iPod, Kindle, Tomtom, ...
• The A B C’S of SaaS: • Ads, Brokerage, Charity, and Subscription
3
NOT SaaS
• Brick-and-mortar e-Commerce sites, hollanders.com, e.g.
• Banks/brokers, service portals, e.g. bankofamerica.com
• annarbornews.com
• e-Commerce digital pure-plays, iTunes.com, e.g.
• Online financial service pure-plays, e.g. paypal.com
• annarbor.com
• SaaS businesses have entirely different economics that set them apart from other online businesses
4
SaaS Cost Centers
Marketing • Listening • Setting Expectations
Closed
Pipeline
Informable
Retention
Conversion
Attraction
5
SaaS Cost Centers
Engineering • Managing Infrastructure • Managing R&D - Enhancements and Escalations • Managing Release Trains
New FeaturesBug Fixes
DevelopmentTesting
StagingRelease
SaaS Cost Centers
Customer Service • Issue Resolution • Voice of the Customer • Issue Escalation • Voice of the Company
Customer
Issue
Happy
Pays
Service
V.o.Cust
V.o.Comp
HappyTouchpoint Branding
7
SaaS Cost Centers
Operations • Collecting Money • Spending Money • Saving Money • Making Money • Raising Money
8
SaaS Business Models
The A B C’S: • Ad-based revenue • Brokerage-based • Charity case • Subscription
9
SaaS Business Models
Ad model: • Content/functionality is the “Honey baits the trap” • The good: Woo-Hoo! Turn traffic into money. • The bad: Rust never sleeps - sustainability is a bitch • The ugly: Ad networks say, “thank you!” • Web 1.0: impressions (“banners and eyeball plays”) • Web 2.0: clickthroughs (“AdSense and PPC”) * • Web 3.0: behavioral targeting - very investor-friendly* Note: pay-per-conversion is not the Ad model!
10
SaaS Business Models
Ad model success factors: • Don’t commoditize - be jaw-droppingly compelling • Don’t try to attract traffic - widgetize • Don’t try to sell ads - use the ad networks • Gather as much info on your customers as you can • Tried and tired: web, mobile, streaming • Innovative: gaming, GPS devices • Listen, Listen, LISTEN
11
12
SaaS Business Models
Brokerage model: • Make connections, take a cut • One or many middlemen (MLM, franchise, e.g.) • The good: very attractive value proposition • The bad: needs exclusivity/IP to maintain market • The ugly: many swings, few hits • Pay-per-conversion incurs customer’s risk • (this model only works if you can manage that risk)
13
SaaS Business Models
Brokerage model success factors: • Better connections command better commissions • Don’t dig a big hole! Invest sparingly, incrementally • IP: algorithms (Shazam, eHarmony, e.g.) • Exclusivity: turf (Classmates, Hulu, e.g.) • Diversify and cross-sell: (Amazon, eBay motors, e.g.) • Give affiliates tools and put them to work!
14
How much for How long?
x
y t
$ revenues
investments
y2 y3 y4
15
SaaS Business Models
Charity model: • FREE content/functionality - ask for donation • The good: belonging/supporting/shame works • The bad: NO value proposition • The ugly: non-deterministic business • Freemium promotion moves charity to conversion • Community models spread work/risk/reward
16
SaaS Business Models
Charity model success factors: • Invest heavily in viral juice • Invest moderately in IP lawyers • Business model informs the balancing act • Seek out and amplify Opinion Leaders • Agility is key: don’t lock-in long-term resources
17
SegmentationCost Basis Revenue Basis
18
SaaS Business Models
Subscription model: • Tried and tired: Web Apps, Affinities, SocNets • Infomediary: (“publishing”) Edmunds, Nielsen, e.g. • Utility: infrastructure, desktop security, mobile • Pay per ... user, usage, time, or all three! • The good: recurring revenue, ca-CHING • The bad: human nature: people like to own stuff • The ugly: when you charge, expectations skyrocket
19
SaaS Business Models
Subscription model success factors: • Closely align fees and costs • Outsource like crazy - DWUD/DDWUDD • Clear ValProp: selling... Access? Functionality? Tiers? • Tease the release train - make it customer-driven • Open up your API’s - support 3rd party apps
20
CoSD ~ EngineeringProfit ~ from OpsCoCA ~ MarketingCoCS ~ Cust Svc
20%
80%
5%
20%
65%
10%
10%
20%
50%
20%
15%
20%
25%
40%
LaunchDevelop
Grow
Mature
21
SaaS Mutts
A? B? C? S? Why choose just one! • Freemium: the Charity/Subscription mutt • Affiliate Marketing: the Ad/Brokerage mutt • Be careful when hybridizing with the Ad model • The exception: house ads, community ads • Franchising: the Brokerage/Subscription mutt • Segment customers, NOT business models!
22
Investment and Return
Mktg Engrg CS Ops Founder OPM Revs
Ads
Broker oy meh hmm...
Charity w00t oh, ok nope
Subscrip-tion
The Money Shot
• Revs = Service Fees Collected per unit time
• this is easy: it’s just the gross price you charge(your Business Model determines how much of it you get to keep)
24
The Money Shot
• Revs = Service Fees Collected per unit time
• CoSD = Cost of Service Delivery per unit time
• this is a little trickier: it’s the total Engineering plus Customer Service costs divided by the total number of customers in a unit time - calculus!
25
The Money Shot
• Revs = Service Fees Collected per unit time
• CoSD = Cost of Service Delivery per unit time
• Churn = Customer Retention per unit time
• churn is the average lifespan of a customer engagement times the attrition factor - “how many customers lost” per unit time
• Example: avg lifespan = 3yrs & attrition = 5%/yr churn = 3 * (1 - 0.05)3 = 2.57
• Overlook churn at your peril!26
The Money Shot
• Revs = Service Fees Collected per unit time
• CoSD = Cost of Service Delivery per unit time
• Churn = Customer Retention per unit time
• CoCA = Cost of Customer Acquisition
• this is the total Marketing spend during the period, divided by the number of new customers acquired during that period - ugh, Calculus again
27
The Money Shot
• Revs = Service Fees Collected per unit time
• CoSD = Cost of Service Delivery per unit time
• Churn = Customer Retention per unit time
• CoCA = Cost of Customer Acquisition
• TLCN = Total Lifetime Customer Net Revenue
TLCN = ((Revs - CoSD) * Churn) - CoCA
28
The Money Shot
• TLCN = Total Lifetime Customer Net Revenue
• TLCN tells you how much money you can make off each customer, over the life of the customer
• My favorite dashboard metric
• Don’t freak out if it’s sometimes negative
• Do freak out if it’s never positive
TLCN = ((Revs - CoSD) * Churn) - CoCA
29
Thank You!
David C. Bloom866.205.9780
www.factotem.com
30
TLCN = ((Revs - CoSD) * Churn) - CoCA