Revenue: Of Moats & Models

Jay JamisonCo-Founder & President,

Moonshoot

Co-Founder & President English learning for children

everywhere Launching 2010

About Me

The Borat Rule of Revenue:It is Nice!

The Beavis & Butthead Rule:Everything matters

The Warren Buffett Rule 1:Keep It Simple

“Invest in businesses that

an idiot could run,

because at some point,

an idiot will.”

1. Understandable business

2. Strong, passionate team

3. Defensible moats

4. Models that generate cash

Tonight’s Scope

The Warren Buffett Rule 2:Build & stick with a concrete method

Moats & Models

Moats (in 1610)

Moats (in 2010)Deliver users

something they want.

Build share & leadership.

Attract second stakeholder

group to reinforce value

to users.

Improve value to users & repeat.

Users want PCs that are cheap,

lots of apps.

Developers need audience for

their products

WinTel gains share.

Developers build for Windows.

Apple builds Iphone.

Apple offers developers a

platform.

Users drool & buy.

Developers build for Iphone.

Advertisers need to spend most

effectively.

Google offers

outstanding search product.

Google grabs share.

Ad revenue funds

improvements in search.

Large user base & commissions

draw best teachers.

Users are drawn to service

with best teachers

20% royalty to teachers.

Teachers create and

market great classes

Megastudy

Collect data on children & learning,

reinforce value to parents,

educators, and children.

Build something

children love,

parents value

Grow share &

credibility

Reinforce core value with more

fun content, better results

to parents

Moonshoot

Attract another stakeholder to build on your

value.

Build something users love

Grow shareReinforce core value Your Company

Models—Part IBusiness Models

Types of Business Models Figure it out later / Ads

Market maker

Freemium & Subscription

Virtual goods

Price for product or service

Others

Figure it out later / Ads

Examples Google; TwitterLots of others

Pros Focuses team on building awesome product

Cons Requires awesome user traction & retention.

Assessment

Works well if you are “the future of x,” where ‘x’ equals something universal—e.g., communication, television, etc.

Market Maker

Examples PayPal; Ebay

ProsYour users make money through your serviceVery powerful

Cons Need excellent positioning & differentiation

AssessmentGreat work if you can find a scalable opportunity

Freemium & SubscriptionExamples

World of Warcraft, Club Penguin, Dropbox, Animoto, Salesforce.com

Pros Puts value on your service. Very crisp.

Cons Conversion, pricing may lack scale.

Assessment

Think very hard about whether you have a good trip wire for value. (Animoto, e.g.)

Virtual goods

Examples Facebook apps, Habbo

ProsShockingly profitable, can always add stuff

Cons Fickle

Assessment

Cool to start, but have a strategy to extend.

Price per user or copy

Examples

Microsoft Office, Enterprise apps, Iphone Premium Apps

Pros Crisp pricing and licensing model

ConsNot free for users, slows distribution & uptakeDiscounting

Assessment

Can work extremely well, esp. in B2B.

Models—Part IIIndustry Models

“Know Your Numbers”

Ask tons of questions, do the analysis

Connect with customers & market

Build conviction that model works

Close to pin works

Recent Example

Entrepreneur’s

Estimate to VC:

“Microsoft Small

Business Server has an

Installed Base of 30M”

--Unsourced analyst

Jay’s EstimateM

units

Total Server shipments 8.0

X86 share @ 90% 7.2

Windows Server share 70%

5.0

33% to small business 1.6

50% is Small Biz Server

800K

5 year avg lifespan 4m

VC emails me. Microsoft Small Business Server has an Installed Base

of around 4M

Closing

Moats ABC: Always Be Constructing

Business Models Have a plan. You can always change it later. Monetize when it makes sense.

Industry Models Always be hungry to learn more Work to stay grounded in reality