This is an article by Jude Gomila, co-founder of Heyzap.com

(see http://www.judegomila.com/2009/05/mapping-out-your-web-startup.html)

Intro

Modeling startups is interesting, especially for entrepreneurs, once you get all the elements of your site down onto a map, you can start seeing the interconnections, new opportunities, strategies and optimizations. I recommend doing this for your site on a large whiteboard.

Building on Dave McLure’s article from almost 1 year ago, I have gone ahead and added in an extended viral engine view, more revenue options, retention methods and customer acquisition strategies. Thanks to Immad Akhund my co founder at Heyzap.com for adding in his insights into the model and James Smith.

The Model

The model doesn’t pretend to be the only way to look at the system. Depending on your definitions and view point, boundaries can move as can the interconnections. Furthermore, the elements in the model are not a complete list. I’m sure there are better ways to look at this system. It’s a 2D view on a complex interlinked system.

Focus

An important point to note is that there are many options present that you may select within each section of the model. E.g. an SEO strategy will just not work for certain keyword areas that you may be trying to win or SEM may not have a positive ROI for your kind of site. Each strategy has a time and a place. Start with a few and get them right. Depending on your product, you should focus your effort on different areas.

Acquisition Engine

You have to get users into your site. These are the classic methods. Many different methods here and channels to explore. Bear in mind what methods are efficient use of your resources, you can’t and shouldn’t pick them all. You will also need a specific seeding strategy for when you launch, which I should go over in a future post.

Core Product

The users have to interact with something. This could be focused around a website, app (or widget) or infrastructure play. This could also be a combination of these elements. This core product can be distributed into the acquisition, viral and revenue engine so that the boundaries become very blurry.

Viral Engine

You want to greatly accelerate the user acquisition process. You need a viral engine. I have split this into Method and Channels. Methods constitute specific driving forces behind the viral transfer. Channels are the specific channel by which the method occurs. Not all methods and channels are compatible - bear that in mind. The are specific motivations and corresponding incentivizations that lay behind the methods, which I won’t go into now. This is not an exhaustive list.

Retention Methods

I have kept this section brief. Once you have users coming into your system you want them to keep coming back.

Revenue Engine

There are two main groups inside here. Trade Methods and Trade Objects. Trade Methods are the method by which the trade object is traded. The trade object is the actual value representation your are trading. E.g. Amazon EC2 trade method is the utility model and they trade bandwidth/storage, ebay is a commission basis (paypal) and a market place which trades mostly real goods (some virtual) but it also has a subscription model upgrade for pro accounts. Wikipedia has its donations. Compete has its freemium to access data but they also license data, pogo.com has its subscriptions to access content, google adwords/adsense is kind of a utility model. Oracle licenses. You can stack combinations of monetization strategies.

Funnels

Each area has it own funnel by which users fall out along the specific processes they have to go through. E.g. a user is on the point of buying something on Amazon - they have to go through 5 screens to get to the end and there is loss of users during this process. Every funnel section has its own specific complex mechanics and related game theory. Optimize the funnels that matter.

Interconnections

In a way, everything is interconnected. The special extra connections to get a mention are the fact that the viral engine can affect the retention, also the viral engine affects the revenue engine is certain products. The retention model also affects the revenue engine.

Things left off the map

You also have a cost engine to go with this. Don’t forget to model this as it is affected by the revenue engine, acquisition engine, retention methods and sometimes even the viral engine.

Summary

Remember, this is only a model and a view of the situation. This should help you navigate your product structure and come up with new strategies and ideas. Good luck and leave some comments so I can improve the model for all the entrepreneurs out there.

Real Marketing

abasov:

One of my business profs was saying that marketing is cheating. He truly believed that marketers are convincing people to spent some ridicules amounts of money on the things they don’t need. Quite a common misunderstanding, eh? On the other hand, quite a surprise to hear such things from a business teacher.

One of the examples, I’ve been hearing for hundreds of times, is about Nike’s products. Those are made somewhere in Asia almost for free, but the price in stores is a hundred times higher. Basically, the power of the brand, the promise of some ‘coolness’ or whatever you will get by wearing this pair of sneakers, is what you pay for. And the point people make is that you pay for nothing. Looks like cheating.

However, is the brand power really nothing? In the world, where majority of people believe in brands, buy brands, and even are brands, it’s not nothing! Actually, those sneakers do enhance your characteristics in the ways you expect, because people have the same expectations (or perception) as you. For example, if everyone believes that it’s 3 o’clock in Vancouver right now, then my watch works properly, and I didn’t buy some crap.

In other words, as long as not only buyer believes that his purchase is reasonably priced, but also people around him, the price is truly reasonable, and brand delivers its promises, and everyone’s happy. No cheating detected.

Part 1. Rethinking the Product Development Process

Part 2. Assessing Customer and Market Risks

Part 3. The Customer Development Process

Part 4. Engineers and Founders; the First Sales Team

Part 5. Don’t Seek Publicity Too Soon

Part 6. Company Building as a Shakespearean Tragedy

Part 7. Acting on Customer Discovery

Steve Blank describes the Customer Development process for creating Lean Startups. Talk given at Stanford.