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The Automatic Customer: Creating a Subscription Business in Any Industry by John Warrillow
Airbnb, airport security, Amazon Web Services, asset allocation, barriers to entry, call centre, cloud computing, commoditize, David Heinemeier Hansson, discounted cash flows, Hacker Conference 1984, high net worth, Jeff Bezos, Network effects, passive income, rolodex, sharing economy, side project, Silicon Valley, Silicon Valley startup, software as a service, statistical model, Steve Jobs, Stewart Brand, subscription business, telemarketer, time value of money, zero-sum game, Zipcar
My hope, however, is that by seeing the range of subscription models that are out there, you’ll be able to jot down a few possibilities for launching your own subscription business or complementing your existing business with some recurring revenue. I hope you agree that while cloud-based software companies and media titans have pioneered the subscription business, it is a model that you too can leverage, whether you own a law practice, a coffee shop, or a day-care center. Next, let’s dig into the hard work of actually building a subscription business. PART THREE Building Your Subscription Business Many traditional businesses become successful based on the sheer force of the owner’s personality.
Therefore, if you think you’re competing in a winner-take-all category, where time to market is the key determinant of success,* then “rob Peter to pay Paul” may not be your best choice for funding your subscription business. Cash Source 2: Outside Money Your second option when building your subscription business is to go outside for capital. If you can prove your LTV:CAC ratio is north of 3:1 at scale, and your market is large enough, you’ll probably have a line of investors willing to give you money to fund your subscription business. Here you’re giving up equity, and usually some control, in return for the cash to build your subscription business. Outside investors can bring a fresh perspective to your company, along with wisdom and hard-fought experiences, which they’ll likely be eager to share.
We’ll look at the psychology of selling your subscription and how to overcome something I call “subscription fatigue.” Then we’ll turn to financing the growth of your subscription business and explore whether you want to raise venture-capital funding, as WhatsApp and Dollar Shave Club did, or self-fund your growth, like FreshBooks and Mosquito Squad. Part Three ends with a discussion on scaling your subscription business. Let’s get started. PART ONE Subscribers Are Better than Customers Why are Amazon, Apple, and many of the most promising Silicon Valley start-ups leveraging a subscription business model? In Part One we’ll look at how automatic customers make your company more valuable . . . and a whole lot more enjoyable to run.
Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It by Tien Tzuo, Gabe Weisert
3D printing, Airbnb, airport security, Amazon Web Services, augmented reality, autonomous vehicles, blockchain, Build a better mousetrap, business cycle, business intelligence, business process, call centre, cloud computing, cognitive dissonance, connected car, death of newspapers, digital twin, double entry bookkeeping, Elon Musk, factory automation, fiat currency, hockey-stick growth, Internet of things, inventory management, iterative process, Jeff Bezos, Kevin Kelly, Lean Startup, Lyft, manufacturing employment, minimum viable product, natural language processing, Network effects, Nicholas Carr, nuclear winter, pets.com, profit maximization, race to the bottom, ride hailing / ride sharing, Sand Hill Road, shareholder value, Silicon Valley, skunkworks, smart meter, social graph, software as a service, spice trade, Steve Ballmer, Steve Jobs, subscription business, Tim Cook: Apple, transport as a service, Uber and Lyft, uber lyft, WeWork, Y2K, Zipcar
Here are some of the topics I’ll be covering: How the subscription model is transforming every industry on the planet, including retail, journalism, manufacturing, media, transportation, and enterprise software The basic financial model and most important growth metrics for subscription businesses How the subscription model changes your approach to engineering, marketing, sales, finance, and IT The eight core growth strategies of all subscription businesses A customer-centric operating framework for subscription businesses I want to note that this isn’t just a Silicon Valley story, nor is this a Silicon Valley book (there are already lots of those). This is a business story.
Shortly after Tyler and I presented our upcoming plan to the board, we realized that this model may have worked fine for the last five hundred years, but it was entirely wrong for a subscription business, for three key reasons. First, the traditional income statement does not differentiate between recurring and nonrecurring dollars. It’s like saying there’s no difference between a dollar and a dollar that keeps happening every year for the next ten years. Recurring revenue is the cornerstone of subscription businesses, but traditional accounting concepts were never designed to recognize this fact. Second, sales and marketing is matched to past goods sold. It’s essentially a sunk cost. I’ll get into this later in the chapter, but subscription businesses need to think strategically about sales and marketing spend going toward driving future business.
For those companies that have enough cash to fund an acquisition, it can be a smart move to reinvest that cash into future growth. But access to capital is only one of many requirements for subscription businesses contemplating strategic acquisition. In addition to cash, an acquiring company also needs a strategic plan that fits in with its business model and day-to-day operations. It also needs the infrastructure in place to support all service lines in one system so that upsells and cross-sells across service lines are workable and the customer experience across service lines is seamless. Successful acquisitions can help a growing subscription business increase its market visibility and market share while enhancing its offerings to build out a more comprehensive solution.
The Network Imperative: How to Survive and Grow in the Age of Digital Business Models by Barry Libert, Megan Beck
active measures, Airbnb, Amazon Web Services, asset allocation, autonomous vehicles, big data - Walmart - Pop Tarts, business intelligence, call centre, Clayton Christensen, cloud computing, commoditize, crowdsourcing, disintermediation, diversification, Douglas Engelbart, Douglas Engelbart, future of work, Google Glasses, Google X / Alphabet X, independent contractor, Infrastructure as a Service, intangible asset, Internet of things, invention of writing, inventory management, iterative process, Jeff Bezos, job satisfaction, Kevin Kelly, Kickstarter, late fees, Lyft, Mark Zuckerberg, Oculus Rift, pirate software, ride hailing / ride sharing, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, software as a service, software patent, Steve Jobs, subscription business, TaskRabbit, Travis Kalanick, uber lyft, Wall-E, women in the workforce, Zipcar
Brand Finance, press release, “Lego Overtakes Ferrari as the World’s Most Powerful Brand,” http://brandfinance.com/news/press-releases/lego-overtakes-ferrari-as-the-worlds-most-powerful-brand/. 4. Innocentive website, “What We Do,” http://www.innocentive.com/about-innocentive. Principle 6, Revenues 1. Brent Leary, “Amir Elaguizy of Cratejoy: Good Subscription Business Models Focus on Relationships Not Transactions,” Small Business Trends, August 14, 2015, http://smallbiztrends.com/2015/08/elaguizy-cratejoy-subscription-business-models.html. Principle 7, Employees 1. Travis Kalanick, “The Charms of the Sharing Economy,” Economist, The World in 2016 (single issue), November 6, 2015, http://www.theworldin.com/article/10631/charms-sharing-economy. 2.
Turn your gaze outward, and leverage your most essential network: your customers. PRINCIPLE 6 REVENUES From Transaction to Subscription In a transactional business, the person really is probably only going to come around once or maybe twice if you have a really high repeat order rate. But in a subscription business, you’re going to see them by definition, over and over and over and over again. And you’re going to have an opportunity to impress them every single time. You’re in a relationship. —John Warrillow, author, The Automatic Customer DO YOU BOX? We don’t mean the sport with the big gloves.
Most people don’t love paying bills, and locking people into a contract where they have no choice but to subscribe will not increase affinity. But getting your customers to subscribe in order for you to form and develop a positive, two-way relationship provides many advantages on top of more revenue. Customer contributors (principle 5) and the subscription business model are complementary ways of inviting your customers into a mutually beneficial, long-term relationship with your organization. Take Every Opportunity to Delight Your customers’ lives are busy. The time they spend interacting with your organization is only a minute fraction of their week—although for most firms, it’s the only fraction they care about.
Netflixed: The Epic Battle for America's Eyeballs by Gina Keating
activist fund / activist shareholder / activist investor, barriers to entry, Bear Stearns, business intelligence, collaborative consumption, corporate raider, inventory management, Jeff Bezos, late fees, Mark Zuckerberg, McMansion, Menlo Park, Netflix Prize, new economy, out of africa, performance metric, Ponzi scheme, pre–internet, price stability, recommendation engine, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Steve Jobs, subscription business, Superbowl ad, telemarketer, X Prize
Its share price had risen nearly 400 percent, and its steady average revenue growth of more than 100 percent each year was starting to attract attention. Even though they’d had no real competition since launching the subscription plan, Netflix had nevertheless continued smoothing out kinks in its subscription business and was pushing ahead in all areas: consumer satisfaction was high; cancellations were low; and finally the service was being noticed by regular Americans, who were signing up at a clip of nearly three thousand per day. The potential online rental market was huge, maybe as large as twenty million subscribers, based on the penetration they were seeing in their first market, the San Francisco Bay Area, where more than 5 percent of residents were members, Hastings told investors.
Shortly after Blockbuster dropped its rates, Walmart cut its prices below both services, to $17.36 per month. Hastings also wanted to gauge whether Fleming was open to a possible offer from Netflix to buy Walmart’s meager subscriber base. The talks that night went nowhere, mainly because Fleming was trying to negotiate a partnership with Yahoo! in hopes of making the subscription business work. As luck would have it, a young Netflix executive ran into a female acquaintance who worked for Walmart.com at a San Francisco Bay Area music venue. The two often joked about the rivalry between their two companies. One night the woman told him over drinks that Walmart’s online service had little support from its corporate parent.
Kaltschnee had started a Web design firm with three other guys in the mid-1990s that became one of the first subscription services for graphics. They sold the company a few years later, and Kaltschnee stayed on to create a second subscription service for the buyers’ stock photography collection. He knew about subscription businesses from that experience, and he wanted to learn how Netflix had been so successful. In November 2003, he launched the blog HackingNetflix.com, in keeping with his pledge to deconstruct the service and learn how it operated; its masthead was Netflix-red and its observations, gentle. Kaltschnee was an unabashed advocate for Netflix from the start, and he’d joined a generation of bloggers who wanted to share their personal experiences with a product or corporation.
Working Backwards: Insights, Stories, and Secrets From Inside Amazon by Colin Bryar, Bill Carr
Amazon Web Services, barriers to entry, business process, cloud computing, coronavirus, Covid-19, COVID-19, delayed gratification, en.wikipedia.org, iterative process, Jeff Bezos, late fees, loose coupling, microservices, Minecraft, performance metric, search inside the book, shareholder value, Silicon Valley, six sigma, Steve Jobs, subscription business, Toyota Production System, web application, why are manhole covers round?
We also learned that the $30–40 million figure we had heard was off. By the time we got started, Netflix was spending twice that on content. In the subscription business, it’s no good to come out second with a copycat offering. We had to offer movies and shows that Netflix didn’t have available. We also had to have a different offering from Hulu, which had a lock on most of the best series from Fox and NBC. In the TVOD business, differentiation based on selection wasn’t possible—Amazon, Apple, Microsoft, and Sony all had the same titles—but in the subscription business, a unique catalog was key. We brainstormed countless concepts. One approach was to go deep in specific genres like horror or documentaries.
When it came to content controlled by the studios, nothing much had changed. Content creators like HBO had an advantage because they had a unique and exclusive content offering—shows like The Sopranos and later Game of Thrones—and had exclusive movie licensing deals with the studios. At that time, no other company was in the internet-delivered subscription business, so HBO had the field mostly to themselves. They could license and accumulate a lot of great movies and TV shows with very little competition. But as the Apple and HBO business models demonstrate, there was one important way that the world of digital media was the same as the old, analog media world: there was still a great advantage to be had in control.
The Personal MBA: A World-Class Business Education in a Single Volume by Josh Kaufman
Albert Einstein, Atul Gawande, Black Swan, business cycle, business process, buy low sell high, capital asset pricing model, Checklist Manifesto, cognitive bias, correlation does not imply causation, Credit Default Swap, Daniel Kahneman / Amos Tversky, David Heinemeier Hansson, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, discounted cash flows, Donald Knuth, double entry bookkeeping, Douglas Hofstadter, en.wikipedia.org, Frederick Winslow Taylor, George Santayana, Gödel, Escher, Bach, high net worth, hindsight bias, index card, inventory management, iterative process, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Kickstarter, Lao Tzu, lateral thinking, loose coupling, loss aversion, Marc Andreessen, market bubble, Network effects, Parkinson's law, Paul Buchheit, Paul Graham, place-making, premature optimization, Ralph Waldo Emerson, rent control, side project, statistical model, stealth mode startup, Steve Jobs, Steve Wozniak, subscription business, telemarketer, the scientific method, time value of money, Toyota Production System, tulip mania, Upton Sinclair, Vilfredo Pareto, Walter Mischel, Y Combinator, Yogi Berra
If you cancel a Netflix subscription, three to six months later you’ll receive a postcard and/ or e-mail from Netflix with an offer to resubscribe at a reduced rate. If you don’t reply, they’ll send another message every few months until you resubscribe or request to be removed completely from their system. Since Netflix is a Subscription business, every reactivated customer means a new monthly stream of income, which greatly enhances the Lifetime Value (discussed later) of each customer. Reactivation is typically a quicker, simpler, and more effective approach to increasing revenue than attracting new customers. Your old customers already know and trust you, and they’re aware of the value you provide.
Lifetime Value is the total value of a customer’s business over the lifetime of their relationship with your company. The more a customer purchases from you and the longer they stay with you, the more valuable that customer is to your business. One of the reasons Subscriptions are so profitable is that they naturally maximize Lifetime Value. Instead of making a single sale to a customer, Subscription businesses focus on providing value—and collecting revenue—for as long as possible. The longer a customer remains Subscribed and the higher the price they pay, the higher the Lifetime Value of that customer. The higher your average customer’s Lifetime Value, the better your business. By understanding how much your average customer purchases and how long they tend to buy from you, you can place a tangible value on each new customer, which helps you make good decisions.
The Lifetime Value of each new Proactiv customer is so high that it doesn’t matter that Guthy-Renker “goes negative” on the initial sale—the company makes a ton of money, even if it loses money on a few customers who don’t continue with the program. The first sale is sometimes called a “loss leader”—an enticing offer intended to establish a relationship with a new customer. Many Subscription businesses use loss leaders to build their subscriber base. Magazines like Sports Illustrated offer gimmicks like football phones and spend a fortune on their annual Swimsuit Edition in an effort to attract new subscribers. These enticements may absorb up to a year’s worth of Subscription revenue, but the company comes out ahead when you consider the Lifetime Value of each customer.
Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman, Chris Yeh
activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, autonomous vehicles, bitcoin, blockchain, Bob Noyce, business intelligence, Chuck Templeton: OpenTable:, cloud computing, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, database schema, discounted cash flows, Elon Musk, Firefox, forensic accounting, George Gilder, global pandemic, Google Hangouts, Google X / Alphabet X, hockey-stick growth, hydraulic fracturing, Hyperloop, inventory management, Isaac Newton, Jeff Bezos, Joi Ito, Khan Academy, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, margin call, Mark Zuckerberg, minimum viable product, move fast and break things, move fast and break things, Network effects, Oculus Rift, oil shale / tar sands, Paul Buchheit, Paul Graham, Peter Thiel, pre–internet, recommendation engine, ride hailing / ride sharing, Sam Altman, Sand Hill Road, Saturday Night Live, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, social graph, software as a service, software is eating the world, speech recognition, stem cell, Steve Jobs, subscription business, Tesla Model S, thinkpad, transaction costs, transport as a service, Travis Kalanick, Uber for X, uber lyft, web application, winner-take-all economy, Y Combinator, yellow journalism
Internet delivery and self-service allow new forms of distribution that weren’t possible in the packaged software world, such as Dropbox’s viral incentive of additional free storage for referring new customers. Nor is the pattern of Internet subscriptions limited to enterprise software. The dominant players in both music (Spotify, Pandora) and video (Netflix, Hulu, Amazon) also enjoy lower overhead and greater distribution by using the subscription business model. Another, less obvious benefit to this model is that once a subscription business achieves scale, the predictability of its revenue streams allows it to be more aggressive with long-term investments, since it isn’t obliged to maintain large cash balances to weather short-term variations in the business. This financial firepower can represent a major competitive advantage.
Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success by Sean Ellis, Morgan Brown
Airbnb, Amazon Web Services, barriers to entry, Ben Horowitz, bounce rate, business intelligence, business process, correlation does not imply causation, crowdsourcing, DevOps, disruptive innovation, Elon Musk, game design, Google Glasses, Internet of things, inventory management, iterative process, Jeff Bezos, Khan Academy, Kickstarter, Lean Startup, Lyft, Mark Zuckerberg, market design, minimum viable product, Network effects, Paul Graham, Peter Thiel, Ponzi scheme, recommendation engine, ride hailing / ride sharing, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, software as a service, Steve Jobs, subscription business, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, working poor, Y Combinator, young professional
The best way to do this is to craft what Johns dubbed a company’s fundamental growth equation. This is a simple formula that represents all of the key factors that will combine to drive your growth; in other words, your core set of growth levers. This equation is different for every product or business. Here’s an example for the company Morgan runs, Inman News, which is a subscription business: (WEBSITE TRAFFIC × EMAIL CONVERSION RATE × ACTIVE USER RATE × CONVERSION TO PAID SUBSCRIBER) + RETAINED SUBSCRIBERS + RESURRECTED SUBSCRIBERS = SUBSCRIBER REVENUE GROWTH For eBay the formula is: NUMBER OF SELLERS LISTING ITEMS × NUMBER OF LISTED ITEMS × NUMBER OF BUYERS × NUMBER OF SUCCESSFUL TRANSACTIONS = GROSS MERCHANDISE VOLUME GROWTH Johns even created this equation for Amazon to illustrate the value of these formulas:6 VERTICAL EXPANSION × PRODUCT INVENTORY PER VERTICAL × TRAFFIC PER PRODUCT PAGE × CONVERSION TO PURCHASE × AVERAGE PURCHASE VALUE × REPEAT PURCHASE BEHAVIOR = REVENUE GROWTH While all products will share common drivers of growth, such as new user acquisition, higher activation, and better retention, each product or business has a more specific combination of factors that are uniquely its own.
For example, users in Germany may be more likely to purchase using a specific set of payment options, which are different from the preferred payment method in Russia, resulting in markedly different monetization rates for each country. By the same token, certain business models may be better understood in one country compared to another. Subscription businesses are well understood in the United States, for example, but may be less well received in other countries. Growth teams can experiment with offering different sets of options to different countries to increase monetization within each.4 LEARNING WHO YOUR CUSTOMERS ARE As we’ve seen already, there are numerous ways to segment your customer base to find new insights.
European Founders at Work by Pedro Gairifo Santos
business intelligence, cloud computing, crowdsourcing, fear of failure, full text search, hockey-stick growth, information retrieval, inventory management, iterative process, Jeff Bezos, Joi Ito, Lean Startup, Mark Zuckerberg, natural language processing, pattern recognition, pre–internet, recommendation engine, Richard Stallman, Silicon Valley, Skype, slashdot, Steve Jobs, Steve Wozniak, subscription business, technology bubble, web application, Y Combinator
Santos: Okay, and the objective of that round of funding, was it to grow internationally? Hinrichs: The company was cash-flow positive as of ninety days of operation. So when I funded the company, the company was already cash-flow positive. I wanted to hire some more people. Since it's a subscription business, we had the issue of that we have liabilities on the one side. You can't book the entire revenue you get into the months, so you have to have accrual over the time. In bookkeeping, it's a liability, and to solve this kind of liability problem, yes or no, it's a theoretical problem—does it work?
You could point to both yourself and also to a potential investor and say, “Hey, this is actually a real business. It's working. It's generating revenues. There is a clear revenue stream. You take money from people. You send them discs. And as long as you keep offering them a good service, you've got a good business.” People at the time really understood, this was in a down economy, that a subscription business was a very good, predictable revenue model. People looked at mobile phone companies. People looked at cable companies and said, “Okay. I understand the economics of a business like this.” In terms of “Is there a need? Is there a market? Is there a good business model?”—it ticked all the boxes.
Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business by Arvid Kahl
"side hustle", business process, centre right, Chuck Templeton: OpenTable:, continuous integration, coronavirus, Covid-19, COVID-19, crowdsourcing, domain-specific language, financial independence, functional programming, Google Chrome, hockey-stick growth, if you build it, they will come, information asymmetry, information retrieval, inventory management, Jeff Bezos, job automation, Kubernetes, minimum viable product, Network effects, performance metric, post-work, premature optimization, risk tolerance, Ruby on Rails, sentiment analysis, Silicon Valley, software as a service, source of truth, statistical model, subscription business, sunk-cost fallacy, supply-chain management, trickle-down economics, web application
You will have reached that state when you create a subscription business with negative churn. In a subscription-based business, churn is the percentage of customers that discontinue their subscriptions month over month. Churn hurts your growth twice. For each churned customer, you need to find a new customer just to get back to a net-zero. To grow, you effectively need two new customers. Negative churn happens when the customers who stay with your business spend more time on upgrades than you lose from customers canceling. That is the holy grail of subscription businesses: when your churn is negative, you don't even need to add more customers to grow.
Startupland: How Three Guys Risked Everything to Turn an Idea Into a Global Business by Mikkel Svane, Carlye Adler
Airbnb, Ben Horowitz, Burning Man, business process, call centre, Chuck Templeton: OpenTable:, cloud computing, credit crunch, David Heinemeier Hansson, Elon Musk, housing crisis, Jeff Bezos, Kickstarter, Menlo Park, remote working, Ruby on Rails, Sand Hill Road, Silicon Valley, Silicon Valley startup, Skype, software as a service, South of Market, San Francisco, Steve Jobs, subscription business, Tesla Model S, web application
Of course, that’s not the case for all startups—there are definitely examples of companies that have come a long way on their own positive cash flow—but the general rule is that if you optimize for profitability, you sacrifice growth. And for a startup, it’s all about growth. Being a SaaS company, and therefore technically a subscription business, makes the need for cash even more urgent. A good small-business customer would pay us something like $500 a month. Considering the expansion and upgrade profile of our customer base and our churn rate, we can calculate the lifetime value of this customer as something around $50,000. That’s a significant amount and a good value customer, but the problem is that it will take us years—maybe many years—to see that total amount.
Side Hustle: From Idea to Income in 27 Days by Chris Guillebeau
"side hustle", Airbnb, buy low sell high, inventory management, Lyft, passive income, ride hailing / ride sharing, sharing economy, side project, Silicon Valley, Silicon Valley startup, subscription business, TaskRabbit, the scientific method, Uber for X, uber lyft
Here are just a few to consider: • Long vs short copy on your sales page • Word order, especially in headlines and calls to action • Website navigation and user experience • Free trial vs low-priced trial (or vs no trial) • Testimonials from happy customers vs experts’ ratings or reviews *2 • Hard sell vs soft sell (or both) Just remember that all this testing can turn into a side hustle rabbit hole, so don’t jump down it until you’re sure that your offer itself is solid. BE CAREFUL OF FALSE POSITIVES A friend told me a story of some A/B testing he was doing for a larger brand. He had what he thought was a great idea: to change the call to action on the order page for a software subscription business. His change resulted in a major increase in click-throughs—more than 40 percent! Before he congratulated himself and booked a trip to Vegas, though, he watched the data for a few more days. Alas, something was wrong. More people were clicking through, but far fewer were converting to actual sales.
The Open Organization: Igniting Passion and Performance by Jim Whitehurst
Airbnb, cloud computing, crowdsourcing, en.wikipedia.org, Google Hangouts, Infrastructure as a Service, job satisfaction, market design, Network effects, new economy, place-making, platform as a service, post-materialism, profit motive, risk tolerance, shareholder value, side project, Silicon Valley, Skype, Snapchat, Steve Jobs, subscription business, The Wisdom of Crowds, Tony Hsieh
Without a doubt, engineering and sales would jump in and begin working to better communicate our value proposition and improve usability, but my team and I realized that much of the work required to address unpaid usage of the product and renewals would come from other areas of the business. So the team worried that, without a bit more direction, a broad statement of “free to paid” would send some groups scurrying, while others would feel it was not relevant to their area. Renewals are a great example. Obviously, for a subscription business, renewals are a key value driver. Much of what drives renewals is hard-core operational work. Because our products are often sold preloaded on a manufacturer’s hardware or sold in less developed areas through multiple distribution levels, we often do not know who the end customer is. Improving renewals entails working on myriad operational and legal issues.
Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World With OKRs by John Doerr
Albert Einstein, Bob Noyce, cloud computing, collaborative editing, commoditize, crowdsourcing, Firefox, Frederick Winslow Taylor, Google Chrome, Google Earth, Google X / Alphabet X, Haight Ashbury, hockey-stick growth, Jeff Bezos, job satisfaction, Khan Academy, knowledge worker, Menlo Park, meta-analysis, PageRank, Paul Buchheit, Ray Kurzweil, risk tolerance, self-driving car, side project, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, Steven Levy, subscription business, web application, Yogi Berra, éminence grise
Voluntary attrition spiked every February, as waves of contributors reacted to disappointing reviews by taking their talent elsewhere. In all, the company devoted a total of eighty thousand manager hours—the equivalent of nearly forty full-time hires—to a mechanical process that created no discernible value. Adobe was transitioning full speed ahead to a cloud-based subscription business model, which it needed to keep winning. But even as the company moved its products and customer relations into a contemporary, real-time operation, its approach to HR remained shackled to the past. Adobe’s leap into the future, as reported in the India Times in 2012. In 2012, during a business trip to India, an Adobe executive named Donna Morris vented her frustrations over traditional performance management.
Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest
23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, Ben Horowitz, bioinformatics, bitcoin, Black Swan, blockchain, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, Dean Kamen, dematerialisation, discounted cash flows, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, game design, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Joi Ito, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, low earth orbit, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, NetJets, Network effects, new economy, Oculus Rift, offshore financial centre, PageRank, pattern recognition, Paul Graham, paypal mafia, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, prediction markets, profit motive, publish or perish, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, subscription business, supply-chain management, TaskRabbit, telepresence, telepresence robot, Tony Hsieh, transaction costs, Travis Kalanick, Tyler Cowen: Great Stagnation, uber lyft, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game
In his 2005 book, Free: The Future of a Radical Price, Chris Anderson built on the lower cost positioning of the disruptor, noting that pretty much all business models, and certainly those that are information-based, will soon be offered to consumers for free. The popular “freemium” model is just such a case: many websites offer a basic level of service at no cost, while also enabling users to pay a fee to upgrade to more storage, statistics or extra features. Advertising, cross-subsidies and subscription business models are other ways of layering profit-generating operations on top of what is essentially free baseline information. Kevin Kelly expanded further on this idea in a seminal post entitled “Better than Free,” which appeared on his Technium blog in 2008. In digital networks anything can be copied and is thus “abundant.”
Broad Band: The Untold Story of the Women Who Made the Internet by Claire L. Evans
"side hustle", 4chan, Ada Lovelace, Albert Einstein, British Empire, colonial rule, Colossal Cave Adventure, computer age, crowdsourcing, dark matter, dematerialisation, Doomsday Book, Douglas Engelbart, Douglas Engelbart, Douglas Hofstadter, East Village, Edward Charles Pickering, game design, glass ceiling, Grace Hopper, Gödel, Escher, Bach, Haight Ashbury, Harvard Computers: women astronomers, Honoré de Balzac, Howard Rheingold, HyperCard, hypertext link, index card, information retrieval, Internet Archive, Jacquard loom, John von Neumann, Joseph-Marie Jacquard, knowledge worker, Leonard Kleinrock, Mahatma Gandhi, Mark Zuckerberg, Menlo Park, Mondo 2000, Mother of all demos, Network effects, old-boy network, On the Economy of Machinery and Manufactures, packet switching, pets.com, rent control, RFC: Request For Comment, rolodex, San Francisco homelessness, semantic web, Silicon Valley, Skype, South of Market, San Francisco, Steve Jobs, Steven Levy, Stewart Brand, subscription business, technoutopianism, Ted Nelson, telepresence, Whole Earth Catalog, Whole Earth Review, women in the workforce, Works Progress Administration, Y2K
Having never worked in the magazine world, she had no idea what that meant. In fact, putting a magazine on the Web at all was a new proposition: Word would be among the first. To say there was no business model is an understatement. Word’s backers assumed that online publishing would be a subscription business: like traditional magazines, readers would subscribe, and because there’d be no printing or distribution costs, the profit margin would be huge. They’d be selling something ineffable, again and again, without ever running low on inventory—the dot-com era’s delusion of choice. Icon thought they’d make millions in a matter of months.
Television disrupted: the transition from network to networked TV by Shelly Palmer
barriers to entry, call centre, commoditize, disintermediation, en.wikipedia.org, hypertext link, interchangeable parts, invention of movable type, Irwin Jacobs: Qualcomm, James Watt: steam engine, Leonard Kleinrock, linear programming, Marc Andreessen, market design, Metcalfe’s law, pattern recognition, peer-to-peer, recommendation engine, Saturday Night Live, shareholder value, Skype, spectrum auction, Steve Jobs, subscription business, Telecommunications Act of 1996, There's no reason for any individual to have a computer in his home - Ken Olsen, Vickrey auction, Vilfredo Pareto, yield management
For whatever reason, the only successful pure subscription-based content businesses in America seem to be HBO and the other premium channels (some of which are still all movies, all the time) and businesses that provide one of the “Four G’s”: girls, God, games and gambling. (A fifth “G,” gay, has developed a significant following in recent years.) But, you can simply place the subscription businesses into their actual business categories: pornography, religion, video games (casual and console) and gambling. Pay-per-view Pay-per-view (PPV) has been around since the late 1970s.The modern version of PPV is simple: you select a program, pay for it, and watch it. There are several technological versions which we will discuss in more detail later.
No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings, Erin Meyer
Airbnb, Downton Abbey, Elon Musk, en.wikipedia.org, global village, hiring and firing, job-hopping, late fees, loose coupling, loss aversion, out of africa, performance metric, Saturday Night Live, Silicon Valley, Skype, Stephen Hawking, Steve Ballmer, Steve Jobs, subscription business, super pumped
Then, within a few weeks, for a reason I couldn’t initially understand, the atmosphere improved dramatically. We were in cost-cutting mode, and we’d just let go of a third of the workforce, yet the office was suddenly buzzing with passion, energy, and ideas. A few months later the holidays arrived. DVD players were popular that Christmas, and by early 2002, our DVD-by-mail subscription business was growing rapidly again. Suddenly, we were doing far more work—with 30 percent fewer employees. To my amazement, those same eighty people were getting everything done with a passion that seemed higher than ever. They were working longer hours, but spirits were sky-high. It wasn’t just our employees who were happier.
Upstream: The Quest to Solve Problems Before They Happen by Dan Heath
Affordable Care Act / Obamacare, airport security, Albert Einstein, bank run, British Empire, Buckminster Fuller, call centre, cloud computing, cognitive dissonance, colonial rule, correlation does not imply causation, cuban missile crisis, en.wikipedia.org, epigenetics, illegal immigration, Internet of things, mandatory minimum, millennium bug, move fast and break things, move fast and break things, payday loans, Ralph Nader, RAND corporation, randomized controlled trial, self-driving car, Skype, Snapchat, subscription business, urban planning, Watson beat the top human players on Jeopardy!, Y2K
The recruiting product, offered on a subscription basis, was designed to help companies find and attract new hires. It was selling incredibly well, but the “churn” was high. The churn rate is the percentage of customers who don’t renew their subscriptions, and it’s a critical diagnostic of health for any subscription business, from Netflix to People magazine. When Saxena joined the company, the churn rate was roughly 30%, meaning that 3 out of 10 customers stopped using the recruiting product every year. The company’s traditional approach to managing churn was to assign people to work closely with customers—especially those feared to be at risk of leaving—around the time of renewal.
The End of Ownership: Personal Property in the Digital Economy by Aaron Perzanowski, Jason Schultz
3D printing, Airbnb, anti-communist, barriers to entry, bitcoin, blockchain, carbon footprint, cloud computing, conceptual framework, crowdsourcing, cryptocurrency, Donald Trump, Edward Snowden, en.wikipedia.org, endowment effect, Firefox, George Akerlof, Hush-A-Phone, independent contractor, information asymmetry, intangible asset, Internet Archive, Internet of things, Isaac Newton, loss aversion, Marc Andreessen, means of production, minimum wage unemployment, new economy, peer-to-peer, price discrimination, Richard Thaler, ride hailing / ride sharing, rolodex, self-driving car, sharing economy, Silicon Valley, software as a service, software patent, software studies, speech recognition, Steve Jobs, subscription business, telemarketer, The Market for Lemons, transaction costs, winner-take-all economy
Kashmir Hill, “Samsung Wants You to Put a Motion Tracker under a Loved One’s Mattress—What Could Go Wrong?” Fusion, September 4, 2015, http://fusion.net/story/193514/samsung-sleepsense-loved-ones-mattress/, accessed November 20, 2015. 8. Rob Price, “The Smart-Home Device That Google Is Deliberately Disabling Was Sold with a ‘Lifetime Subscription,’” Business Insider, April 5, 2016, http://www.businessinsider.com/revolv-smart-home-hubs-lifetime-subscription-bricked-nest-google-alphabet-internet-of-things-2016-4, accessed April 10, 2016. 9. Arlo Gilbert, “The Time That Tony Fadell Sold Me a Container of Hummus,” Medium, April 3, 2016, https://medium.com/@arlogilbert/the-time-that-tony-fadell-sold-me-a-container-of-hummus-cb0941c762c1#.nhl96qogu, accessed April 10, 2016. 10.
An Ugly Truth: Inside Facebook's Battle for Domination by Sheera Frenkel, Cecilia Kang
affirmative action, augmented reality, autonomous vehicles, Ben Horowitz, Bernie Sanders, blockchain, clean water, coronavirus, Covid-19, COVID-19, disinformation, don't be evil, Donald Trump, Edward Snowden, global pandemic, hockey-stick growth, Ian Bogost, illegal immigration, immigration reform, independent contractor, Jeff Bezos, Marc Andreessen, Mark Zuckerberg, Menlo Park, natural language processing, offshore financial centre, Peter Thiel, QAnon, RAND corporation, ride hailing / ride sharing, Robert Mercer, Sam Altman, Saturday Night Live, Shoshana Zuboff, Silicon Valley, Snapchat, social web, Steve Bannon, Steve Jobs, Steven Levy, subscription business, surveillance capitalism, Travis Kalanick, WikiLeaks
Zuckerberg set off on a one-month trip, with stops in Germany, Turkey, Japan, and India, where he spent time at an ashram that Jobs had suggested he visit. The trip was perfectly timed, affording Sandberg the opportunity to plot out the reinvention of the revenue-generating part of the company. “What business are we in?” she asked the leaders while scribbling furiously on a whiteboard. A subscription business or an advertising business? Did they want to make money by selling data through payments or through commerce? There wasn’t much deliberation. Of course Facebook would be free, the executives said, so their best path to make money was through ads. Sandberg nodded. To do this well, she continued, they would have to pinpoint what Facebook really had to offer.
Hit Makers: The Science of Popularity in an Age of Distraction by Derek Thompson
Airbnb, Albert Einstein, Alexey Pajitnov wrote Tetris, always be closing, augmented reality, Clayton Christensen, Donald Trump, Downton Abbey, full employment, game design, Gordon Gekko, hindsight bias, indoor plumbing, industrial cluster, information trail, invention of the printing press, invention of the telegraph, Jeff Bezos, John Snow's cholera map, Kodak vs Instagram, linear programming, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Metcalfe’s law, Minecraft, Nate Silver, Network effects, Nicholas Carr, out of africa, prosperity theology / prosperity gospel / gospel of success, randomized controlled trial, recommendation engine, Robert Gordon, Ronald Reagan, Savings and loan crisis, Silicon Valley, Skype, Snapchat, statistical model, Steve Ballmer, Steve Jobs, Steven Levy, Steven Pinker, subscription business, telemarketer, the medium is the message, The Rise and Fall of American Growth, Uber and Lyft, Uber for X, uber lyft, Vilfredo Pareto, Vincenzo Peruggia: Mona Lisa, women in the workforce
With thousands of titles flowing through the book rows of 1920s America, discovery became a fashionable problem, and new organizations rose to solve it. The Book of the Month Club, born in 1926, promised to handpick only the best works for its select members. The very next year it got competition in the book subscription business from the Literary Guild of America. Neither organization is praised as an innovator today, but their business model anticipated a century of selling bundled content. Paying a greatly discounted per-unit price to get more stuff than you can reasonably consume is cable TV, Spotify, Netflix, and the modern subscription box business.
Free Ride by Robert Levine
A Declaration of the Independence of Cyberspace, Anne Wojcicki, book scanning, borderless world, Buckminster Fuller, citizen journalism, commoditize, correlation does not imply causation, creative destruction, crowdsourcing, death of newspapers, Edward Lloyd's coffeehouse, Electric Kool-Aid Acid Test, Firefox, future of journalism, Googley, Hacker Ethic, informal economy, Jaron Lanier, Joi Ito, Julian Assange, Justin.tv, Kevin Kelly, linear programming, Marc Andreessen, Mitch Kapor, moral panic, offshore financial centre, pets.com, publish or perish, race to the bottom, Saturday Night Live, Silicon Valley, Silicon Valley startup, Skype, spectrum auction, Steve Jobs, Steven Levy, Stewart Brand, subscription business, Telecommunications Act of 1996, Whole Earth Catalog, WikiLeaks
Spotify announced that it would launch in the United States before the end of 2010—after planning and postponing a 2009 debut—but couldn’t arrange deals with the major labels in time. The company uses a “freemium” model: users in the U.K. can hear a limited amount of music with ads for nothing, pay £4.99 a month to eliminate the restrictions and commercials, or pay £9.99 to use it on a mobile device. The major labels like the company’s subscription business—it has been reported that they own shares in the company99—but they’re concerned that its free service is good enough that consumers won’t feel they need to pay for it. “Our perspective is that you really need to restrict free, so that it’s basically a customer acquisition vehicle and not a service alternative,” says a major-label executive who deals with digital services.
Brotopia: Breaking Up the Boys' Club of Silicon Valley by Emily Chang
23andMe, 4chan, Ada Lovelace, affirmative action, Airbnb, Apple II, augmented reality, autonomous vehicles, barriers to entry, Bernie Sanders, Burning Man, California gold rush, Chuck Templeton: OpenTable:, David Brooks, Donald Trump, Elon Musk, equal pay for equal work, Ferguson, Missouri, game design, gender pay gap, Google Glasses, Google X / Alphabet X, Grace Hopper, high net worth, Hyperloop, Jeff Bezos, job satisfaction, Khan Academy, Lyft, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, Menlo Park, meta-analysis, microservices, paypal mafia, Peter Thiel, post-work, pull request, ride hailing / ride sharing, rolodex, Saturday Night Live, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Steve Jobs, Steve Wozniak, Steven Levy, subscription business, Tim Cook: Apple, Travis Kalanick, uber lyft, women in the workforce
These stories deserve our attention because they will have a lasting impact as a new generation of women struggles to climb the tech industry ladder. Wojcicki is the only one left at Google. As the CEO of YouTube, she’s grown revenues by billions of dollars (total YouTube revenues could surpass $12 billion in 2017, according to one third-party analyst) and launched a new TV subscription business to take on Netflix, streaming services, and cable companies. Forbes recently ranked her as the eighth most powerful woman in the world. Nevertheless, the media has never gushed over Susan Wojcicki, nor has it picked her apart. What it has done instead is virtually ignore her—an oversight that becomes more astonishing the more you look at her career.
Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US by Rana Foroohar
"side hustle", accounting loophole / creative accounting, Airbnb, algorithmic bias, AltaVista, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, Bernie Sanders, bitcoin, book scanning, Brewster Kahle, Burning Man, call centre, cashless society, cleantech, cloud computing, cognitive dissonance, Colonization of Mars, computer age, corporate governance, creative destruction, Credit Default Swap, cryptocurrency, data is the new oil, death of newspapers, Deng Xiaoping, disinformation, disintermediation, don't be evil, Donald Trump, drone strike, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Etonian, Filter Bubble, future of work, game design, gig economy, global supply chain, Gordon Gekko, greed is good, income inequality, independent contractor, informal economy, information asymmetry, intangible asset, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, Kenneth Rogoff, life extension, light touch regulation, Lyft, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Menlo Park, move fast and break things, move fast and break things, Network effects, new economy, offshore financial centre, PageRank, patent troll, paypal mafia, Peter Thiel, pets.com, price discrimination, profit maximization, race to the bottom, recommendation engine, ride hailing / ride sharing, Robert Bork, Sand Hill Road, search engine result page, self-driving car, shareholder value, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, smart cities, Snapchat, South China Sea, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, subscription business, supply-chain management, surveillance capitalism, TaskRabbit, Telecommunications Act of 1996, The Chicago School, the new new thing, Tim Cook: Apple, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, Upton Sinclair, WeWork, WikiLeaks, zero-sum game
When Beijing forced the company to move all of its iCloud data centers for Chinese customers to the mainland, where they would be run by a local company that doesn’t need to comply with U.S. laws about data protection, Apple quickly acquiesced, showing that there are limits to its philosophy of preserving civil liberties when there are true threats to its business model in key markets.19 Even Netflix, which is in some ways the Teflon FAANG, one that comes in for less criticism because of a subscription business model focused on less sensitive data about our entertainment preferences, has bowed to foreign censors. In early January 2019, it emerged that Netflix had pulled an episode of its popular comedy show Patriot Act in Saudi Arabia, after government officials complained about one of the actors on the show criticizing Crown Prince Mohammed bin Salman for his role in the murder of Saudi dissident Jamal Khashoggi and for the Saudi war atrocities in Yemen.20 Meanwhile, Big Tech is taking on the role of Big Brother right here in the United States, working with local, state, and national authorities to create what is starting to look a lot like a surveillance nation.
The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture by Scott Belsky
23andMe, 3D printing, Airbnb, Albert Einstein, Anne Wojcicki, augmented reality, autonomous vehicles, Ben Horowitz, bitcoin, blockchain, Chuck Templeton: OpenTable:, commoditize, correlation does not imply causation, cryptocurrency, delayed gratification, DevOps, Donald Trump, Elon Musk, endowment effect, hiring and firing, Inbox Zero, iterative process, Jeff Bezos, knowledge worker, Lean Startup, Lyft, Mark Zuckerberg, Marshall McLuhan, minimum viable product, move fast and break things, move fast and break things, NetJets, Network effects, new economy, old-boy network, pattern recognition, Paul Graham, ride hailing / ride sharing, Silicon Valley, slashdot, Snapchat, Steve Jobs, subscription business, TaskRabbit, the medium is the message, Travis Kalanick, Uber for X, uber lyft, WeWork, Y Combinator, young professional
Behance’s final mile began when our third round of discussions with Adobe about a potential partnership fell apart. There were so many reasons for Behance and Adobe to work together, but every time we got close to forming a partnership, Adobe felt they would be best building or running their own portfolio network rather than partnering with one. They were right to feel this way because, as a subscription business, Adobe needed to build relationships with the creative community. Online services like community and portfolio management were becoming a more central part of Creative Cloud, Adobe’s main business. They needed to build it themselves or acquire the best option out there. Several months later, I had the opportunity to meet David Wadhwani, who was Adobe’s senior vice president in charge of the company’s digital media business at the time.
Exponential: How Accelerating Technology Is Leaving Us Behind and What to Do About It by Azeem Azhar
23andMe, 3D printing, A Declaration of the Independence of Cyberspace, Ada Lovelace, additive manufacturing, Airbnb, algorithmic trading, Amazon Mechanical Turk, autonomous vehicles, basic income, Berlin Wall, Bernie Sanders, Boeing 737 MAX, Boris Johnson, Bretton Woods, carbon footprint, Chris Urmson, Clayton Christensen, cloud computing, collective bargaining, computer age, computer vision, coronavirus, Covid-19, COVID-19, creative destruction, crowdsourcing, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, David Ricardo: comparative advantage, decarbonisation, deglobalization, deindustrialization, dematerialisation, Diane Coyle, digital map, disinformation, Dissolution of the Soviet Union, Donald Trump, Double Irish / Dutch Sandwich, drone strike, Elon Musk, energy security, Fall of the Berlin Wall, Firefox, Frederick Winslow Taylor, future of work, Garrett Hardin, gender pay gap, gig economy, global pandemic, global supply chain, global value chain, global village, happiness index / gross national happiness, hiring and firing, hockey-stick growth, ImageNet competition, income inequality, independent contractor, industrial robot, intangible asset, Jane Jacobs, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Just-in-time delivery, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, low skilled workers, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, megacity, Mitch Kapor, Network effects, new economy, offshore financial centre, Panopticon Jeremy Bentham, Peter Thiel, price anchoring, RAND corporation, ransomware, Ray Kurzweil, remote working, RFC: Request For Comment, Richard Florida, ride hailing / ride sharing, Robert Bork, Ronald Coase, Ronald Reagan, Sam Altman, Second Machine Age, self-driving car, Shoshana Zuboff, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, software as a service, Steve Ballmer, Steve Jobs, Stuxnet, subscription business, TaskRabbit, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, Thomas Malthus, Tragedy of the Commons, Turing machine, Uber and Lyft, Uber for X, uber lyft, universal basic income, uranium enrichment, winner-take-all economy, Yom Kippur War
Ant Financial soon expanded to include five businesses: payments, wealth management, credit scoring, lending and insurance. It has persuaded 40 per cent of its customers to use all five products, and 80 per cent of its customers use three or more. This horizontal expansion is hardly unique to China. Apple, which started making computers, now makes phones, tablets and watches. It has a media subscription business and an App Store. Its products provide health information. And Amazon, a retailer, has moved from selling books to peddling virtually every type of tchotchke. It has a logistics wing, the world’s largest cloud computing business, and – like Apple – a media business. But nor does exponential logic lead solely to horizontal expansion into new markets.
Lean Analytics: Use Data to Build a Better Startup Faster by Alistair Croll, Benjamin Yoskovitz
Airbnb, Amazon Mechanical Turk, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, barriers to entry, Bay Area Rapid Transit, Ben Horowitz, bounce rate, business intelligence, call centre, cloud computing, cognitive bias, commoditize, constrained optimization, en.wikipedia.org, Firefox, Frederick Winslow Taylor, frictionless, frictionless market, game design, Google X / Alphabet X, hockey-stick growth, Infrastructure as a Service, Internet of things, inventory management, Kickstarter, lateral thinking, Lean Startup, lifelogging, longitudinal study, Marshall McLuhan, minimum viable product, Network effects, pattern recognition, Paul Graham, performance metric, place-making, platform as a service, recommendation engine, ride hailing / ride sharing, rolodex, sentiment analysis, skunkworks, Skype, social graph, social software, software as a service, Steve Jobs, subscription business, telemarketer, transaction costs, two-sided market, Uber for X, web application, Y Combinator
The pivot for Backupify was a success. The company is growing successfully. For now, it remains focused on MRR, but it also tracks how much a customer is worth in the entirety of his relationship with the company—the customer lifetime value (CLV). CLV and CAC are the two essential metrics for a subscription business. In Backupify’s case, the ratio of CLV to CAC is 5–6x, meaning that for every dollar the company invests in finding a customer, it makes back $5 to $6. This is excellent, and it’s partly due to its low churn. As it turns out, lock-in is high for cloud storage, which gives the company plenty of time to make back its acquisition costs in the form of revenues.