Henrik Torstensson's Weblog

Startuppodden interviews Sorosh Tavakoli

noreply@blogger.com (Anonymous) — Thu, 05 Mar 2015 21:09:00 +0000

Mikael Zackrisson (Startuppodden) has conducted a very, very interesting interview with Sorosh Tavakoli, founder and former CEO of Videoplaza (as a former investor and board member , I'm likely quite biased with regard to the interestingness :-)). 1 hour and 44 minutes about Videoplaza and building a company.

Outcomes follow actions

noreply@blogger.com (Anonymous) — Tue, 03 Mar 2015 22:04:00 +0000

When running a startup (or probably any organisation), it's important to remember that achieving a target or changing a specific metric require certain actions taken by specific people. One way to sanity check if a metric can be met at a specific time is to:

Understand what actions (a new feature, increased marketing etc) are the primary drivers of the metric
Estimate how long it will take to implement that action with a given number of resources
Understand what resources (people with specific knowledge, money etc) are needed to take those actions
If you don't have the resources, how long will it take you to acquire them (hire a new engineer in Sweden = 4.5-6 months with ramp-up time, raise more funding = varies a lot etc)

So even if you know how to increase a key metric, it's as important to understand how long it takes to do the job that will drive the change.

Breakit launches Swedish startup and tech coverage

noreply@blogger.com (Anonymous) — Mon, 02 Mar 2015 22:46:00 +0000

Today Stefan Lundell and Olle Aronsson launched Breakit.se, a "Swedish TechCrunch". The site looks nice and it will probably be a daily read for me.

The dots will connect (Omaha Edition)

noreply@blogger.com (Anonymous) — Sun, 01 Mar 2015 21:51:00 +0000

I'm using Blogg100 as an excuse to try write a couple of sentences or paragraphs on this blog on a regular basis again. I won't limit the subjects to quite the extent I, at least mentally, have done so far. If I find it interesting to write about, I might just do that.

Yesterday Berkshire Hathaway's 2014 Annual Letter to Shareholders was published. Berkshire Hathaway is the corporation through which Warren Buffett, the world's most successful investor the last 60 years, does most of his investments.

The annual letter is not quite like a normal, dry annual report and is normally worthy to read (if you're finance or business nerd, at least). This year it was made even more interesting due to the fact that Warren Buffett has been CEO and Chairman of Berkshire Hathaway for 50 years and he and Vice Chairman Charlie Munger looked at the past, present and future of the company and the driver's of success.

While failure and hardship often are better teachers than success, studying organisations or people that have been successful for long periods can also be a good teacher.

While there are many lessons to be learnt from the quotable Warren Buffett, a few basic takeaways for business success, small or large, are:

Find something you like (or even love) doing and can do for a long time. That will have a major impact on your happiness.
Skill and knowledge accumulate over time (but I'd add, in the words of Steve Jobs, that one must remember to "stay foolish").
Networks and relationships grows too, opening up new opportunities.
Understanding what you're good at and understand (your circle of competence) is very valuable.
Incentives matter. Over long periods of time incentives matter a lot.

Lifesum is hiring!

noreply@blogger.com (Anonymous) — Mon, 27 Oct 2014 18:33:00 +0000

At Lifesum we're currently hiring Performance Marketing Manager, Test Automation Engineer, Senior Platform Engineers and other roles. Check'em out!

Sunday reading on company building and more

noreply@blogger.com (Anonymous) — Sun, 26 Oct 2014 10:57:00 +0000

An old, I cannot find the date but guess early 2000's, Harvard Business School interview with Tom Murphy (ex-CEO of Capital Cities that's now part of Disney). Some very good food for thought around building a company in no particular order: 1) management running the company like owners for the long-term, 2) responsibility to employees, customers and shareholders, 3) hire smart people and give them responsibility and share of the financial upside, 4) never do improper or unethical things, 5) care about costs, 6) be in a good business.

Business Insider: Why Selling A Startup For $20 Million Can Be Better Than Selling It For $200 Million. Some math that's crucial to understand for entrepreneurs. It all starts with understanding why you are doing something and what you're trying to achieve. More capital can help you achieve your goal, but it can also make it practically impossible to get there.

James Montier: Sharholder Value Maximization (video). A critique of the idea of shareholder value maximization and why it doesn't seem to work from an investor point-of-view.

NYMag.com: In Conversation Marc Andreessen. On technology, regulation and economics.

Don't invest to be an angel, but do recycle capital

noreply@blogger.com (Anonymous) — Sat, 25 Oct 2014 20:45:00 +0000

I don't think the title angel investor is a helpful or accurate way to describe early investors in startups. Capital is crucial for all companies, but individuals and funds that invest in startups aren't angels. There are many good reasons that drive people to invest that aren't captured by standard financial return calculations, like paying it forward, learning new stuff, building relationships and making the place you live and work in more interesting. But angel? I think not.

Anyone who makes a little or a lot of money from a startup should do whatever she wants with it. Spend it on alcohol, men and fast cars. Or just squander it by paying off debts, making a downpayment on a mortgage, investing in the stock market or buying a well-deserved vacation.[1]

But if there's some capital left after personal needs are taken care of, a fundamentally good ethos in the startup world is paying it forward and investing in new companies. Recycling capital, as Fred Wilson puts it.[2] But even more valuable than only investing capital is to also help a startup with relationships, experience and maybe even some wisdom.

Investing and advising can be very rewarding both mentally and emotionally in the short-term, and if you're lucky financially in the long-term (startup investing is very slow money). But just because an investment isn't entirely captured by a traditional valuation model and is personally rewarding doesn't make anyone an angel, just a mensch.[3]

Going beyond the 10 slides. Make sure your startup has a plan and a budget.

noreply@blogger.com (Anonymous) — Sat, 18 Oct 2014 11:04:00 +0000

When raising seed or venture capital, having a traditional 10 slide presentation (plus backup slides) works well to communicate what your doing to traditional VCs and seed-stage investors and will go along way in raising capital.

However, you should spend quite some time thinking about different scenarios for the next 12 to 24 months and creating traditional budgets for those scenarios and not only create the slides. Having a plan and budget is much more valuable than most first-time technology entrepreneurs probably think.

It might be all about product, product, product the first 12 months of a startup, but if you run out of money you're dead, dead, dead and then product won't help you.

You should build a budget and a plan that allow you to raise enough cash to cover your costs for 12 to 18 months. At the end of the period you should be at cash-flow breakeven or have reached a milestone that will allow you to raise more capital.

If you're building digital services for mobile or the web, guessing your revenue is very difficult and quite risky unless you have some sales already. So assuming zero revenues is reasonably conservative from a cash perspective. But you should be able to estimate your costs quite well once you think through your team, business model, market and product.

By doing that thinking, you should have a good sense of how many people you need and how much to pay them, how much you need to spend on marketing (you're unlikely to grow entirely for free), office space, insurance, attorneys fees, travel etc. Figure out when different costs materialise and add it all up.

You will be a lot smarter about your business and more likely to succeed in both raising capital and building a company if you put in the time to understand how your costs will develop.

As the saying goes: "Plans are worthless, but planning is everything."

Apple mentions Lifesum at Special Event

noreply@blogger.com (Anonymous) — Thu, 16 Oct 2014 19:50:00 +0000

Today at Apple's Special Event (14:30 minutes in) Apple mentioned Lifesum as an example of apps that are integrated with HealthKit. Very honored to be highlighted and proud of the team's work.

We are hiring.

If you're getting healther in 2014 - use Lifesum

noreply@blogger.com (Henrik Torstensson) — Wed, 01 Jan 2014 11:22:00 +0000

If you've made a New Year Resolution to become healthier in 2014, you really should use Lifesum (formerly ShapeUp Club). Available on the App Store for iPhone, in Google Play for Android and on the web. Active members lose, on average, 6 kgs in 3 months and this year I personally intend to be one of them.

We made lots of improvements to Lifesum in 2013 and James Pember of Swedish Startup Space summarized them very well in a tweet: "Holy shit. The new @Lifesum app is beautiful. Masssssiiiive improvement!"

ShapeUp Club upgrades and becomes Lifesum

noreply@blogger.com (Anonymous) — Wed, 11 Dec 2013 07:24:00 +0000

Today ShapeUp Club is announcing its new name and brand: Lifesum. The Lifesum brand better captures our ambition to help people change their behavior and improve their lives.

Head over to Lifesum.com or download the updated Lifesum app from the App Store or Google Play.

Swedish Syndicates Better Than Angellist? (if implemented by 3rd party)

noreply@blogger.com (Henrik Torstensson) — Mon, 30 Sep 2013 19:02:00 +0000

I got a comment to yesterday's post on Angellist Syndicates, unfortunately unsigned.

"Agree. Frustrating that Syndicates are only applicable to Delaware based startups. My question is how long will it take for Angelist to move into the Nordics with Syndicates - or will someone copy the model first?"

I agree with the issue, which also includes US tax filings for investors, and hope that someone will copy the model and implement locally. Maybe FundedByMe?

Angellist Syndicates could boost Swedish seed investing

noreply@blogger.com (Henrik Torstensson) — Sun, 29 Sep 2013 19:36:00 +0000

Angellist recently launched Syndicates. Syndicates allows active seed-stage lead investors to expand their capital base by allowing other angel investors to co-invest in startups. In exchange for access to good startups, the other investors pay carry, i.e. a share of any profits, to the lead investor. Basically it is a very lightweight fund structure.

As a structure, Syndicates could be helpful for the Swedish startup environment. Given that individual Swedish seed stage Internet investments are small (around 100 000 SEK being a common), ways to simplify pooling capital to a 1-2 million SEK seed round would be helpful to Swedish startups. Some of the advantages with the Syndicate fund structure seems to be:

The company gets to deal with one fund headed by one active investor instead of a party round of 10-20, mostly passive, individuals. Having one investor to deal with instead of 20 makes the day-to-day work of running a company easier.
An active investor gets additional upside from taking the lead investor role, which generally includes negotiating initial terms and board/advisory board work. The clear lead role also creates one angel investor that has the incentive to make sure that the company and new venture capital investors don't steamroll the rights of seed stage investors.
For individual seed stage investors it is difficult to get portfolio diversification without investing about 1 million SEK. With Syndicates, where the investment can start at between 6000 and 15 000 SEK, it is possible to get diversification at 100 000 SEK. This should make it more interesting to invest some savings in early-stage companies.

The structure would be helpful both for traditional private rounds and equity crowdfunding rounds (like Angellist and FundedByMe).

If there were a few Swedish Syndicates, my guess is that another 10-15 million SEK in annual qualified private seed stage capital would open up. With that direct private capital, another 10-20 million SEK would likely be available from venture investors and public funds as matching capital. It doesn't sound like much, but it would be a significant addition to the available Swedish Internet/mobile startup funding.

Exit proceeds needed to fuel the growth of the Stockholm startup scene

noreply@blogger.com (Henrik Torstensson) — Sat, 28 Sep 2013 15:23:00 +0000

The latest rumor is that King has filed to go public in the US. Going public is a fairly natural step once a company grows big, especially if it has external investors. As King has large operations in Stockholm, the proceeds from an exit could be very good for the Stockholm startup environment. What Stockholm have in terms of, by European standards, larger technology startups (Klarna, Spotify and King being the big three) and a growing growing pool of startup talent, it lacks in early-stage financing (also known as angel or seed-stage investing).

My hope is that employees, and potentially the founders, of the big three and other startups will take some of the gains from shares and share options and invest in the next generation of startups (in addition to building their own). Capital from individuals with operational experience and personal networks is one of the things that are needed to take Stockholm startup environment to the next level.

Delayed egoblogging

noreply@blogger.com (Henrik Torstensson) — Sun, 09 Jun 2013 19:41:00 +0000

Swedish Startup Space: After Selling to Blackberry, Hampus Jakobsson reveals his new project. "So the idea with Dexplora was to build tools for sales people.What we very quickly stumbled over was the fact that sales people were so unsatisfied with their tools (the so called Customer Relation Management – short CRM – system) that they didn’t use it except when they really had to." I'm a small investor in Dexplora's seed round (pdf).

TechCrunch: ShapeUp Club Pulls In Ex-Spotify And Stardoll Execs To Go Big. "Henrik Torstensson, formerly a senior exec with global music service Spotify, and Marcus Gners, from at teen girl gaming giant Stardoll, are now joining the company in the roles of CEO and Deputy CEO. Both have a history as advisors to the company, with Gners having been involved for over 3 years."

ArcticStartup: ShapeUp Club Recruits Spotify & Stardoll Execs. "The service is available in 12 languages, and they claim 4 million downloads, with 450,000 monthly active users and a growth rate of more than 10,000 new installs per day. These are already big numbers, but ShapeUp Club still seems to fly under the radar when talking about Stockholm. Perhaps we'll hear some new changes in the near future."

Netflix x 2, Daniel Ek and Mattias Miksche

noreply@blogger.com (Henrik Torstensson) — Mon, 29 Apr 2013 20:12:00 +0000

Netflix: Netflix Long Term View. "Over the coming decades and across the world, Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear, and screens will proliferate. As Internet TV grows from millions to billions, Netflix, HBO, and ESPN are leading the way." Netflix view of the world. A must read and rare glimpse into a company's thinking.

New York Times: Netflix Looks Back on Its Near-Death Spiral. "“But the phrase I used was, ‘There are no shortcuts.’ We weren’t going to find an idea or gesture that would make people love us again overnight. We had to earn their trust by being very steady and disciplined. And we had to be careful because we were on probation. We had to stick to what we do well and not lose confidence. I couldn’t say for sure we’d recover. But I was confident that our best odds were to be very steady and focus on improving the service.”" Good read about Netflix' reaction to adversity.

TV4 Nyhetsmorgon: Spotifygrundaren Daniel Ek om musiken, pengarna och idéerna (video). "Enligt flera stora affärstidningar är han en av framtidens stora entreprenörer och redan nu är han värderad till över 2 miljarder kronor. Jesper Börjesson träffade Daniel Ek och samtalde om musiken, Spotify och pengarna."

This Week In Startups: Mattias Miksche CEO and Co-Founder Stardoll (video). Jason Calacanis interviews Mattias Miksche of Stardoll.

Weekend reading and viewing

noreply@blogger.com (Henrik Torstensson) — Sat, 27 Apr 2013 18:12:00 +0000

Kinnevik: E-commerce and market places (Capital Markets Day 2013) (video). Kinnevik talking about its online investments (€1+ billion in investment) and Zalando founder Robert Gentz talking about Zalando. A relatively detailed look at Kinnevik's online investments and Rocket Internet's flagship Zalando.

VentureBeat: King overtakes Zynga as the largest social gaming company. "“King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile,” said Riccardo Zacconi, the chief executive of King, in a statement." Another leading Stockholm-originated company becoming large internationally together with Spotify and Klarna.

Reaction Wheel: Andy Weissman on entrepreneurship, product development and the future of the Internet (video). "Andy talks about what an entrepreneurial environment looks like--even in a company that's no longer a startup, how Betaworks did product development, where he sees business on the internet going, and what USV looks for in a startup."

Swedish Startup Space: Joacim Nitz (Smartbudget): ‘It takes more than time, knowledge and a pretty website to deliver a good product’ "Until that model is possible for us we offer a “plus service” to those who want to get even more out of the tool. It has worked well in the way that these types of users are very happy with what they get, but also the users with less needs are happy with the free service."

Andreessen, Fishbrain and Netflix

noreply@blogger.com (Henrik Torstensson) — Tue, 23 Apr 2013 19:22:00 +0000

Harvard Business Review: In Search of the Next Big Thing. "The best founders are artists in their domain. They operate instinctively in their industry because they are in touch with every relevant data point. They’re able to synthesize in their gut a tremendous amount of data—pulling together technology trends, their companies’ capabilities, their competitors’ activities, market psychology, every conceivable aspect of how you run a company." Interview with Marc Andreessen.

Swedish Startup Space: Startup of the week: Fishbrain. "Our focus is now on growing outside Sweden and we want to dominate the US market. Long term we are starting developing for Google Glass. The fit for anglers is exceptional!" I met with Fishbrain's CEO Johan Attby last week and wouldn't be surprised if they do well.

Netflix Investor Relations: Investor Letter Q12013 (pdf). "In Q1, we added over 3 million streaming members, bringing us to more than 36 million, who collectively enjoyed on Netflix over 4 billion hours of films and TV shows." Netflix passed $1 billion in quarterly revenue and made a profit of $3 million.

Sunday reading

noreply@blogger.com (Henrik Torstensson) — Sun, 21 Apr 2013 13:47:00 +0000

Information Arbitrage: Breaking Through. "The fact is that no matter how smart or hungry you are, it just takes time to network, acquire knowledge and experience and to feel comfortable in your own skin as a member of the start-up community. And this is a good thing. Life is a marathon, not a sprint, so be purposeful and focused without feeling like you’re behind where you should be."

Above The Crowd: A Rake Too Far: Optimal Platform Pricing Strategy. "High volume combined with a modest rake is the perfect formula for a true organic marketplace and a sustainable competitive advantage. A sustainable platform or marketplace is one where the value of being in the network clearly outshines the transactional costs charged for being in the network. This way, suppliers will feel obliged to stay on the platform, and consumers will not see prices that are overly burdened by the network provider."

Fortune: The second coming of Facebook. "When designers and engineers file in to show off their products, his first question is nearly always, "What's that look like on mobile?""

Index Universe: Nate Silver: Confidence Kills Predictions. "People tend to underestimate what the uncertainty that is intrinsic to a problem actually is. If you have someone estimate what they think a confidence interval is that’s supposed to cover 90 percent of all outcomes, it usually only covers 50 percent. You have upside outcomes and downside outcomes in the market certainly more often than people realize."

Yahoo! Finance: Twitter: Great Investor Tool That Won’t Make You Money. "But the true advances for small investors have come in free or cheaper investment information, tax-efficient exchange-traded funds and ultra-low trading costs – not real-time performance advantages."

Silicon Alley Insider: The Bull Case For Apple. "Now, however, the stock is priced at such a low level that almost everything has to go wrong for the stock to continue its collapse."

Charlie Rose: Bill Gates and Michael Bloomberg on the Global Polio Eradication Initiative (video).

Osom mobile marketplace for vintage and fashion launches

noreply@blogger.com (Henrik Torstensson) — Wed, 17 Apr 2013 07:02:00 +0000

Established web (desktop/laptop) category leaders are facing new challengers as the online world is going mobile (smartphone/tablet). One category that ought to be better fortified than most due to the buyer/seller liquidity requirement is the classifieds category with companies like eBay, Craigslist, Blocket and Avito. However, Swedish startup Osom thinks it can attack the market from an angle where the established companies have a chink in their armor.

Osom has built a classifieds app for iPhone and iPad, an Android version is coming later this year, dubbed as Instagram meets Craigslist (or Instagram meets Blocket for Swedes). The idea being that a beautiful marketplace, especially when compared to incumbents, focused on vintage and fashion could gain traction.

It's a tough challenge the alumni of companies like Videoplaza, Twingly, Headler and MTG have taken on, but it will be interesting to follow.

Download Osom from the App Store.

(disclosure: I'm friends with the founders of Osom).

Freemium strategy, paid acquisition and the leaky bucket

noreply@blogger.com (Henrik Torstensson) — Mon, 01 Apr 2013 19:30:00 +0000

Many freemium services start out planning to attract users for free via PR, word-of-mouth and viral growth. Regardless of if actual growth is slow or quick, the question to grow via data-driven, trackable and paid marketing, a.k.a. paid acquisition, is likely to arise.

Looking at the entire conversion flow from a user registering for the free service, free users engaging with the service and finally converting to paid the flow looks like a leaky bucket. A significant percentage of users drop out during each stage of then funnel.

This will prompt a version of the question: Should we pay for pouring more people into the bucket when it has so many holes? Shouldn't we fix the conversion issues first and then quickly scale aggressively by ramping up advertising?

Unfortunately, the real world won't let you turn on paid acquisition and immediately start running at high speed with a high degree of control. You need to learn to walk before you can run. Unless you have the basics in place, you won't be able scale with control (which you want to have).

In order to have control when you scale, you have to invest ahead of time in people, systems, processes and market knowledge even while the foundation is a somewhat leaky bucket.

As you're learning about acquisition and plugging engagement and conversion holes, a good plan is to invest more in fixed costs (online marketing staff, engineering time, tracking systems) while investing relatively less in media spend.

Among the things that take time to learn and implement as an organization are:

* Where can we buy registrations cheaply or at least cost effectively?
* Which ads are effective (per channel and country)?
* How do we quickly translate ads into multiple languages and produce multiple language versions?
* How do we track user behavior from click to registration to multiple transactions over time? (Will take engineering time to implement and quality assure.)
* What's the revenue over time, per channel, from user cohorts coming via paid acquisition? And the only way to learn about behavior over time is to have old cohorts. (They'll usually perform worse than organic users, but you want to know how much worse and adjust your target.)

More posts on freemium strategy:

Freemium strategy and product business model design

noreply@blogger.com (Henrik Torstensson) — Fri, 29 Mar 2013 17:19:00 +0000

I wrote that a freemium product needs to have at least one must have feature only available to paying users. That's a bit of a mental shortcut. Customers don't really pay for features, they pay to solve a problem. Like Ted Levitt wrote in the classic article Marketing Myopia: "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!"

But having certain features being paid-only, highlights that the paid version solves a customer problem. Which both pulls users to the paid version and makes it easier to communicate the advantages of the paid version.

From a business model design perspective, a freemium product should be designed to maximize revenue by taking advantage of both the user acquisition opportunities and virality of a free product and the monetization of a paid product.

User acquisition comes in many forms, but a free option makes it easier for users to sign-up and try out the product. Which should help to optimize registration and activation flows. Two well-known distribution channels that work well for free products are organic search and mobile app stores. In addition, free products are easier to link to from social media like Facebook and Twitter. A free product can also be designed to be inherently viral like Hotmail and most communication services.

However, the free part of the freemium product needs to have long-term utility to drive strong retention. Poor retention among free users offsets the positive effect of stronger acquisition. The reason is that without strong free retention, the product will not have a growing base of active free users that over time get more likely to convert to paid.

When designing a freemium product, one needs to create a path to paid. How does free and paid parts of the product interact in activating a free user, getting them highly engaged and getting the user onto paid? The product business model design decisions of what's free and what's paid thus become key drivers of both product quality and overall sales. With an integrated freemium model, sales cannot really be separated from product. In practice, the product organization needs a to have online marketing and sales skills in addition to product management skills in order to both create a great product and drive sales. Conversely, the conversion/sales team needs product managements skills and think long-term about the product in addition to hitting the sales targets.

The answers to the questions what's free and what's paid differ between products and industries. The answers depend on the product, the competition acquisition channels, types of customers and many other factors.

One thing that paid-only features should have in common should be that most users find them to be of high utility and have high willingness to pay for those features. Utility is a generic term to describe what the user might find valuable, like solving a business problem, having fun or saving time.

Some exempels of paid features in freemium products:

Users pay to have their classified ads highlighted at Avito or Tradera. To solve the problem of selling goods quicker and at a higher price.
People pay to see who have visited their profiles. Currently LinkedIn is the most famous example, but Swedish community LunarStorm did this in the early 2000's. Users pay to satisfy their curiosity or identify an opportunity.
Users pay to get additional currency in games. Often at its core in order to have more fun by saving time or getting access to better gear.

These decisions are almost always product specific, but the difference between getting them right and getting them wrong can mean the difference between financial success and bankruptcy.

(With more time this would have been a shorter, well-edited post.)

More posts on freemium strategy:

Freemium strategy and network effects

noreply@blogger.com (Henrik Torstensson) — Thu, 28 Mar 2013 20:57:00 +0000

A reason to have a freemium business model, which I didn't clearly point out in my last post, is to combine the network effects of a free service with the revenue-generation of a paid service.

Network effects are obviously core to social and communication services. Building a new service while being paid-only is difficult, as the initial utility is close to zero for users. Having free users make the service better for paid users.

Skype is an example of a freemium service that the majority of users doesn't pay for, while some users pay for premium features like international calling and group video chat.

That's not to say it is impossible to build a primarily paid-for communications service. WhatsApp has done just that. The reason likely being that its users see WhatsApp as a replacement to text messaging (which is more expensive than WhatsApp).

Generating advertising revenue in a communications online environment is tricky, even at massive scale (the history of ICQ, MSN Messenger and webmail). Successfully implemented premium features should generate high revenue per paying user, and with a decent conversion rate the average revenue per user (free and paying) should be quite good.

More posts on freemium strategy:

Freemium strategy and getting free users to pay

noreply@blogger.com (Henrik Torstensson) — Wed, 27 Mar 2013 19:50:00 +0000

Turning a product with a freemium business model into a great business is tough, but can be done both for B2B and B2C. The reason to have a freemium business model (instead of paid-only) is to get more users to try the product and effectively lower customer acquisition costs.

There are three different types of free economics for freemium services.

An online service can ideally be paid-for with advertising from third party advertisers. Marginal costs can be as high as the advertising-sales will cover.
If the service is not paid-for by advertising, the free service should provide brand awareness and leads for the paid service at lower cost than trial/traditional sales. Marginal costs needs to be low.
A downloadable software (like MySQL or WordPress) can be provided with no marginal costs (depending on how distribution is managed) can be provided for free.

In order to convert free users into paying users and revenue, a company needs to work on multiple areas. There's a lot of learnings to be had in each area, which a company will gain over time.

Premium business model - Is it a one-off payment, a membership/subscription or a virtual goods/usage based type model? Preferably the model matches the long-term costs of operating the service. Together with pricing it's the main driver of long-term revenue and customer lifetime value.
Pricing - Finding the right price point is essential. Just because 'everyone' in media charges $8-10 per month doesn't mean it's right for your service or product. B2B should likely be much higher. Offer pricing for 3, 6 and 12 months instead of one month makes a lot of sense too, not least to fight churn.
Premium product features - At least one must-have feature that highlights an important difference between the free and paid version. Preferably you have several strong features that give the users the reason to pay.
Promotion - You need to actively communicate with free users why they should upgrade. You need several channels (in-product, e-mail, notifications, text messages) and a plan that gives you reason to reach out to users over-time.
Conversion - You need to work on landing pages or other sales/closing techniques (which could be telephone or in-person meetings) to get users to upgrade.
Payment options - Need to be adapted depending on if the customer is a consumer or a business, the country of users and the age of users. Credit card and Paypal works well in the US to consumers older than 18 years old. Premium text messaging works well for teen audiences (even if premium text messaging is a pretty bad payment option technically). For a B2B product, offering invoicing makes sense. For Brazil, Germany, Netherlands, Sweden etc there are local payments options that drive sales. Payments also includes the important aspect of churn due to technical payment errors (a significant source of overall churn for a subscription churn) if the business model is a subscription model.
Language - If the service has many non-English speaking users, the service/product, communication and conversion pages need to be translated to drive conversion (and usage of free product).

(This post was adapted from a comment I made at the news community Quibb.)

Videoplaza launches Karbon 2

noreply@blogger.com (Henrik Torstensson) — Tue, 26 Mar 2013 21:51:00 +0000

Videoplaza has launched Karbon 2, the new version of its video ad-serving technology. The big news is that Videoplaza now enables publishers to do audience-based targeting in addition to content-based targeting. Its done by allowing publishers connecting its own or third-parties (like Nugg.Ad, Meetrics, Enreach, Eyota and Bluekai) data to the ad-server. It's not an out-of-the-box solution, but rather targeted towards the higher-end of online video publishers.

(Disclosure: I'm an investor in and former board member of Videoplaza.)