The Seven revenue models

Consider the following chart showing how the Revenue per User flows for each of the major mobile platforms:

dediu_rev_models

The chart belongs to a presentation where Horace Dediu looks at the future of online services. (Disclaimer: I have not been to the event, nor have I seen the presentation.)

At first glance, my first impression was: “Only four revenue models?” (Transaction, Subscription, Ad, or a mix of the three). On second glance: “Wow Advertising is pretty much the same size as Transaction.” But then later, in the shower, I started to ask: “What does ‘transaction’ mean anyways?”

Generally there are 7 revenue models:

  • Production
  • Markup
  • Fee-for-service
  • Commission
  • Advertising
  • Subscription
  • Licensing

Horace has split out Advertising and Subscription in his chart, but Transaction seems to fold a few of those rev models inside of it. So I decided to attempt to reverse engineer the chart. Let’s take a look (click to enbiggen):

Transaction is made up of four subcategories: Transportation, e-commerce, Travel and App. I reorganized each of the companies featured in the slide into their category, then labelled each with one of the five remaining revenue models (Production, Markup, Fee-for-service, Commission and Licensing). This is a complex endeavor since some of these companies do more than one thing. For example Amazon sells its own hardware, sells other people’s products, and licenses you Kindle and Audible books. Ridesharing companies charge you a fee-for-service and then take a commission from the driver (doesn’t sound like “sharing” to me, but that is another post).

Inside of the Transaction category the biggest group belonged to the Markup category. I have no way of separating out production and licensing revenues from those companies, but even simply adding them all up and comparing them you can see that Ads are bigger than any one Transaction subcategory.

dediu_ad_v_markup

Hey, ads are big (and growing), we know that already. But that fact may be hidden in Horace’s chart.

Why go through this exercise?

True, since I do not have access to the data set, and do not know what Horace’s intention is for this particular screencap, I could be speaking out of turn. That said, I find it very interesting to see how consumers are parted with their money, myself included. Think about what you spend your money on each day, and think about what you used to own, compared to what you merely rent or lease today. I don’t own much of anything anymore, not least my hundreds of Kindle and Audible books, iTunes tracks, or Google Play Movies and TV Shows. As a minimalist, I am okay with owning less, but I have issues with proprietary formats (I now use Downpour for audiobooks), and it seems especially egregious as they are pushed into the real world (ahem… John Deere).

For all the talk of innovation there has not been much on the business model side. We have had these 7 revenue models for a long time. Regardless of how dominant the Ads model is, it doesn’t work for everyone, and is in fact failing many of our vital institutions it once supported (ahem… public interest media). Unfortunately, most of the “innovation” around business models have been on the finance side, with very “innovative” accounting and debt models (ahem… [subprime lending](subprime lending)). The results have been runaway household debt and financial collapse. As with all things, technology helps out here too.

So, Innovators, we could use some new revenue models that are straightforward, and not detrimental to consumers.

500

500

This weekend I passed 500 read books on Goodreads. I started using the site Dec 27th 2009 and added a bunch of read books in early 2010. Since then I have logged 295 reads, averaging about 46 a year.

books_2010-present

My 500th book was Mindfulness in Plain English by Bhante Henepola Gunaratana aka. “Bhante G”.cover_mindfulness-in-plain-english I purchased this book five years ago, and read only a quarter of it before stopping. I wasn’t ready.

After reading about the life of the Buddha, listening to a couple of Jon Kabat-Zinn guided meditations, and prepping for my tour of Buddhist temples in Kyoto, I understood this book much better on the second attempt. I am glad I did. I will continue to explore how to integrate meditation in to my daily life. From the book:

Our mind is analogous to a cup of muddy water. The longer you keep a cup of muddy water still, the more the mud settles down and the water will be seen clearly.

I have tried to take that lesson and apply it to reading. Upon finishing a book, I usually let it settle in my brain for a few days, then look over the annotations I made, to get a good sense of it as a whole. Then I write a short review on Goodreads. When I read a related book, going back and looking at old reviews sparks a lot of interesting conceptual connections — insights I would have totally missed had I merely just picked up the next book. Books are part of a literary universe, you shouldn’t start tabula rasa every time you crack one open. Keeping notes helps you to navigate the connections. It is sort of like how a commonplace book works.

If you are looking for a similar experience, I recommend using Goodreads. If you become a member, connect with me.

Why NOT Uber?

What do people really want when they say they want Uber to come to their community?

Once they learn about all the scandals, lawsuits, riots and demonstrations, the many lists of reasons not to use Uber, most people come away with a nuanced opinion. But typically, at first blush, many people have a very positive reaction to Uber. Why?

One reason could be the marketing. Uber is a poster child for the “sharing economy” — a feel-good marketing term that is inaccurate and “needs to die.” In his excellent book What’s Yours is Mine: Against the Sharing Economy author Tom Slee digs into the hopes and promises of the new rash of sharing economy companies, and shows how they fail to deliver and can actually damage our society.

A key objective of marketing is generating demand. Recently in Kelowna Uber Canada held two information sessions to “gauge interest”. Uber is really good at this. They turn their users into lobbyists, use social media effectively (see the recent province-wide #bc4uber hashtag campaign), and they get local governments to lobby on their behalf. As of last summer they had 250 lobbyists and 29 lobbying firms registered in capitols around the US. Earlier this year our provincial political leaders jumped on the bandwagon and spent money on their own ad campaign for the sharing economy.

Uber is able to get many people on its side through marketing, but that cannot be the only reason people like (at least the idea) of Uber. There seems to be some deep-seated dissatisfaction with the state of transportation as it is today.1 Let us examine some of these arguments.

Often Uber proponents say 1) taxis are expensive and there is no competition; 2) that they can never get a taxi when they need one; and 3) the Uber experience is better.
Continue reading “Why NOT Uber?”

New camera: Canon G7X

New Canon G7X

Before going to Japan in March, I sold my Canon 60D and all my lenses. My intention was to buy a Sony RX100iii or a Canon G7X. I agonized over the differences. I like the Sony’s eye piece and fully flexible screen, but I don’t like their video formats. Also, that screen looks pretty delicate. The Canon’s touch screen was appealing, as was its video pull-focus feature. While at Yodobashi Camera at Umeda in Osaka, I did a side-by-side. In the end, I was able to negotiate the Canon down to just under $400, including a free neckstrap, screen protector and SD card. That is less than half the Sony!

After using it for a couple of weeks, I couldn’t be happier. It is an excellent little machine, super small and with 3 function rings I feel like I have as much control as my 60D. I am glad I bought it and I would recommend it if you are looking for a powerful yet pocketable camera. You can see a selection of G7X pics from my recent Japan trip here.

I plan on using the leftover money from my 60D towards a new laptop.