1. Allan Chao
Startup Consultant
Startup V8
allan@startupv8.com
UC Berkeley Extension, Summer 2012

2. Question of the day:
What is the difference between
an idea, a product, a business, and a company?
Humor of the day:

3. The Agenda
 Quiz
 Quick review of last session
 Marketing
 Distribution, Advertising, and Promotion
 Revenue Models and Sales

4. Quiz Time
Good luck!
10 minutes max

5. Quick review of prior material
 Hosting
 Server  Advanced Deployment tools
 Data Center  Release planning
 Hosting Options  Firefox example of staggered releases
 Dedicated Hosting  Project Management
 Shared Hosting  Gantt Chart
 Virtual Private Server (VPS)  Agile Development
 Colocation  Project Management tools
 Cloud Hosting  Budgeting
 Buying hosting  Ninety-ninety rule
 Cheap options
 Deployments on closed platforms
 Rackspace, Softlayer
 Hiring Developers
 Deployment
 Managing developers
 FTP = File Transfer Protocol
 Extreme Programming
 Filezilla
 Code Reviews
 Multiple environments
 Outsourcing
 Dev > QA > Staging > Production
 Build Process

7. Positioning and Targeting
 Once sentence description of what your product is and who
the customer is
 In-class exercise, go around the room, everyone say your
one-sentence description.
 Position
 Differentiation from Competitors
 Value Proposition = what’s special about your product
 Targeting
 Who is your target audience
 Demographics, psychographics
 Segmenting

8. Differentiation
 Positioning and Targeting
 USP = Unique Selling Proposition
 What do you offer that no one else does?
 What do you offer better than competitors?
 Examples
 Newest, coolest, best?
 Cheapest, Best value?
 Most convenient?
 Most prestigious?
 Most features?
 Unique features?

9. Competitors
 There will be competitors
 They could have VC funding
 Their team is equally or more passionate than you
 As soon as an opportunity is recognized, competitors
pop up everywhere.
 Usually not exact clones, but have some differentiation
 Generally, only one big winner will emerge.
 Network-effect startups are in winner-take-all markets

10. Handling Competitors
 What are your competitors doing right?
 What are they doing wrong?
 Use their mistakes to differentiate and push them out
 Portable music existed before iPods
 Search existed before Google
 Social networks existed before Facebook

11. First Mover Advantage is a myth
 Why?
 Finding the product-market fit is much harder
 Market may not be ready for your product, even if it is better
 Product is much costlier to build
 Make all the “first timer” learning mistakes
 Investors are wary of first-to-market
 Highest risk among the high risk
 If there are no competitors, maybe there is no opportunity
(other entrepreneurs tried and failed)
 Requires high capital to “land grab”
 If there is an opportunity, competitors will appear quickly

12. Focusing on Niche
 Niche = small section of the total market
 E.g. Facebook Policy Year
Harvard Feb, 2004
 Why? Stanford, Mar, 2004
 Better product for the niche Columbia, Yale
 Focused marketing message Ivy league schools 2004
 Easier to reach critical mass All universities 2004
 Brand recognition
Universities Oct-Dec 2005
 Exclusivity effect internationally
High schools Sep 2005
 After success, expand Anyone Sep 2006

13. Critical Mass
 Is the minimum number of users you need for your
service to be useful for a new user.
  Reaching “traction”
 Mostly relevant to startups with strong network effects
 Social Networks
 Facebook
 Crowdsourcing sites
 Yelp
 Anything requiring concurrency
 Real time gaming
 Two sided markets

14. Two-sided markets
 Most commonly buyers and sellers
 Ebay
 Airbnb
 elance.com
 Which side are you making free or cheap?
 Which side are you charging?

15. Source Data analysis

16. Conversion Funnels

18. If you build it, they won’t come.

19. If you build it, they won’t come.

20. Options for a Web Startup
 Online marketing
 SEO
 PPC
 Social Media
 PR
 Offline Marketing
 “on-the-ground” campaigns
 Events
 Traditional marketing
 TV, radio, magazines, etc.

21. SEO = Search Engine Optimization
 aka “organic” listings
 “I want to be on the top of Google!”
 For small businesses, target “long-tail” keywords. E.g.
“San Francisco flood repair”, not “flood repair”
 Very complex algorithms, constant changes
 Can be very challenging, depending on market
saturation
 “Guaranteed rankings” are “blackhat”! Google will ban
the site!
 Trust is very important, fraud/cheating is pervasive

22. SEO Implementation
 Search engine friendly website design and code
 URLs
 HTML tags
 Keyword research and keyword targeting
 Content
 Create meaningful content, bring people to your site
 Blog
 Links
 Learn more
 SEOmoz.com

23. SEM = Search Engine Marketing
 aka Keyword advertising
 Google Adwords, Bing, Yahoo
 Pay per click, $0.50-$20,
depending on keywords
 Much more stable source leads
 Must be set up correctly, or else
could be wasting money
 Many factors still at play, such
as quality score

24. Google Adwords
 Pay-per-click
 Set up ads
 Set up keywords

25. What about Social Media?
 What is Social Media?
 Blogs (Wordpress, Blogger)
 Social Networks (Facebook, LinkedIn)
 Microblogs (Twitter)
 Location-based (Foursquare)
 Events (meetup.com, Eventbrite)
 News and Bookmarking (Digg,
Delicious)
 Much, much more
 Free or very cheap, but massive time
investment without obvious ROI
 Very common, almost necessary, for
startups

26. Public Relations
 Hiring PR too early is a
common mistake for startups
 Newsworthy?
 First Launch
 Launch or feature or offer
 Current events, like
partnerships
 What’s the message?
 Message for the startup
 Target a specific writer
 Someone who already writes
about the topics

27. Launch Strategy
 Do a hot launch, not a cold launch (Launch page)
 Optimize SEO and blog
 Advertise if necessary
 Use social media
 List the company on startup sites (e.g. Crunchbase)
 Target specific PR journalists
 Learn more here:
http://www.quora.com/Whats-the-best-launch-strategy-for-a-web-startup

28. Analytics
 Track everything!
 Usage statistics
 User sources
 Referrals
 Errors
 Etc.
 Google Analytics
 HubSpot
 SEOMoz

29. Virality
 K-factor
 On average, how many
new users will one user
refer
 >1 … sustained growth
 <1 … sustained loss
 must be covered with
advertising
 All those sharing buttons

30. The most effective marketing
 Word of mouth, personal referrals

32. Money…
 Profit (or pursuit of profit)
is the difference between a hobby and a business
 You need revenue to make a profit. Lots of revenue.

33. Importance of a Revenue Model?
 How high are you aiming?
 IPO / acquisition / lifestyle business
 The higher you aim, the less important revenue is at the
beginning
 But without revenue… need venture capital

34. Different Business Models
 Business to consumer
 Fastest, highly analytics driven
 Business to SMB
 Medium, sales cycle with analytics
 Business to enterprise
 Slowest, long sales cycle

35. 3 Basic Revenue Models
(for websites)
 Advertising
 Subscription
 Freemium = Free + Premium
 Transaction
 http://startupmodels.blogspot.com/2012/02/revenue-
models-for-startups.html

36. Advertising
If you’re not paying for it, you’re not the customer;
you are the product being sold
 Significantly Detracts from user experience
 Requires broad reach and massive scale to generate large revenues
 Easier for lifestyle business, much more difficult for IPO/Acquisition
 Revenue depends on conversion rate, which depends on many factors
 RPM (revenue per mille) How much to make $1000/month
 General: $1 RPM  1 million pageviews/month
 Demographic targeting $5 RPM  200,000 pageviews/month
 Endemic advertising $20 RPM  50,000 pageviews/month

37. Subscription based
 Freemium = Free + Premium
 Free plan to get registered users
 Free plan is limited, must pay monthly for more
 Metrics
 Conversion rate
 Churn rate
 CLTV
Customer lifetime value
 CPA
Cost per acquisiton

38. Conversion Funnel
 Starts at all visitors
 Loss at each step
 Eventually, a small number
 Free  Paid conversion rate tends to be around 1-3%
 Those few paying users must cover the expenses of free
users

39. Churn Rate
 = the rate of people unsubscribing
 Example
 500 monthly subscribers at $10/month
each  $5,000/m
 8% monthly subscribers leave each
month  40 leave
 Just to stay steady, you need 40 new paid
subscriptions monthly
 To grow, you need more than 40 per month
 Conversion rate applied (in reverse)
 40 new subscriptions
 2,000 (2% CR) total subscriptions
 10,000 (20% CR) total new visitors

40. Other Revenue Models
(for websites)
These models are less common
 Selling data to data miners
 In-app sales
 Virtual items in games
 Patenting technology and Licensing it
 Donations / pay-what-you-want

41. Product Market Fit
 Achieving “Product Market Fit” means success
 How to do it?
 Customer development
 Release early
 Listen to feedback
 Sell it to customers
 Learn and iterate

42. The Pivot
 Back to disruptive innovation
 Never been tried before
 No one knows if it will be successful
 It’s like an experiment
 If it fails, change your hypothesis, try again
 Change a core section of your business model
 Product-market fit
 Examples
 Online game “Game Neverending” → Web photo sharing (Flickr)
 PDA payments → Email/web payments (Paypal)
 Animation equipment → Animated movies (Pixar)

44. Homework
 Individual, read the following:
 10 business models that rocked
http://www.slideshare.net/boardofinnovation/10-business-models-that-rocked-2010-6434921
 Browse this: The noob guide to online marketing
http://www.seomoz.org/blog/the-noob-guide-to-online-marketing-with-giant-infographic-11928
 Browse this: How to get Media Coverage for your Startup
http://onstartups.com/tabid/3339/bid/80121/How-To-Get-Media-Coverage-For-Your-Startup-A-
Complete-Guide.aspx
 (Team) Prepare your Final Presentation
 Use the pitch deck from class 2 as a basis
 Product Demo should be max 5 min of your 10-15 min presentation
 (Team) Keep Going!!
 Keep programming
 Keep working on the pitch deck
 Keep marketing your new startup
 Occasionally review the market research data (Google Analytics, etc.)