Monetizing Cloud Services My Journey into the Cloud Doug Caviness, - PowerPoint PPT Presentation

Monetizing Cloud Services

My Journey into the Cloud Doug Caviness, Head of SaaS Solutions, cleverbridge Over 20 years of software industry experience, including: General Manager, Desktop Publishing, IMSI VP Business Solutions, Egreetings Network Manager, Hewlett Packard VP Marketing, Riverdeep (now Houghton Mifflin Harcourt) Co-founder CustomCD (acquired by Digital River, Inc.) SaaS consulting engagements: AwardWallet, Gracenote, Photobucket, etc.

cleverbridge Snapshot 3 rd place in Germany and 42 nd place in EMEA (growth rate of 2698%). Full-service cloud-based e-commerce partner: Sample clients: Highlights : • Founded Early 2005 • Over 200 employees in 3 offices:  Cologne (Germany)  Chicago (USA)  Tokyo (Japan) • Over 20 million paid transactions • Many clients already using subscription or SaaS

Agenda What’s in the Cloud and what’s driving Cloud adoption? I. II. How is the Cloud being monetized? a. Choosing the right business model b. Using E-commerce to make money c. Acquiring customers III. Q&A

What is the Cloud? “Cloud computing is Internet-based computing, whereby Wikipedia definition: shared resources, software, and information are provided to computers and other devices on demand, like the electricity grid .” Examples: Salesforce.com, LinkedIn, Dropbox, Amazon Web Services Market Size: $40.7 billion (2011) growing to $241 billion (2020) Market in 2011:  Public cloud – 63%  Virtual private cloud – 18%  Private cloud – 19% (Source: “Sizing the Cloud”, Forrester Research, April 21, 2011)

SaaS Dominates the Cloud SaaS forecast for 2013:  $33 billion or 81% of Public Cloud revenues  17% of the $476 billion Software market (Sources: Forrester Research, Jan 12, 2011 “Which Software Markets Will SaaS Disrupt” Report; and Forrester Research, April 21, 2011, “Sizing the Cloud”)

SaaS Disrupts – How Does it Affect You? • SaaS share of global software vendor revenues:  2010 : $25 billion (7% of $354 billion) 224% growth  2013: $81 billion (17% of $476 billion) • SaaS will be disruptive in products that comprise about 25% of the worldwide software market (CRM, HR Mgt, IT Mgt, Security). • Examples of projected market share (2013):  >90%: blogs, wikis, web conferencing, talent mgt, compensation mgt  50% to 90%: electronic invoice presentment and payment, expense reporting  26% to 50%: sales force automation, HR mgt, customer service and support • But SaaS is unlikely to replace all categories. For some, SaaS might just complement traditional software. (Source: Forrester Research, Jan 12, 2011, “Which Software Markets Will SaaS Disrupt?”)

Recent SaaS Acquisitions Company Acquisition & Date Amount Ancestry.com (Q1‘13) $1.6 billion Permira Quest Software (07/12) $2.4 Billion Dell Salesforce GoInstant (07/12) $70 Million Buddy Media (06/12) $689 Million Oracle Vitrue (05/12) $300 Million Taleo (02/12) $1.9 Billion SlideShare (05/12) $119 Million LinkedIn Intuit Demandforce (04/12) $424 Million Facebook Instagram (04/12) $1 Billion SAP SuccessFactors (02/12) $3.4 Billion

Recent SaaS Funding Company Funding Valuation Dropbox $250 Million (10/11) $3.5 Billion Spotify $100 Million (06/11) $2 Billion Box $125 Million (7/12) $1.2 Billion Evernote $70 Million (05/12) $1 Billion ZocDoc $75 Million (9/11) $750 Million $130 Million (10/12) $600 Million Deezer $25 Million (04/12) $80-85 Million BranchOut SugarSync $10 Million (06/12) Unavailable Fuzebox $22.5 Million (7/12) Unavailable

Questions?

Salesforce

Box

Adobe

Microsoft Launched June 28, 2011

Quickbooks Online

QuickBooks Pro

Cloudability

Questions?

Making Money with E-Commerce Infrastructure for scalable high-volume customer transactions

Choosing the Right E-Commerce Solution Channel Contact Front My Account Renewals Web Orders Partners Center Office E-commerce Services Platform quotes subscription billing pricing entitlements / provisioning CRM Back API’s chargebacks asset mgmt order mgmt BI & analytics Office GL / ERP license keys payments customer accounts revenue recognition Fraud Sales Tax Payment CDN Screening Engine Gateway Merchant Account Existing in-house systems Core Solution

Business Models and Customer Acquisition

B2C Provider Examples: Business Models Facebook Zynga Pandora YouSendIt! Carbonite Box Business Models Ad / sponsorship 84% 11% 88%     Paid subscriptions 12% Other (virtual goods, usage, API licensing, white label) 16% 89% Members / Users (active) 955M 187M 54.9M 28M (e) 1.3M 14M % of members paid (est.) 0% 2.2% 2.5% 2.0% 100% <8% Avg. Rev per User $5.12 $6.99 $6.63 (e) $1.40 (e) $37.73 Unknown Avg. Direct Rev per User (est.) N/A $71 (qtr) $32 $71 (e) $38 Unknown % of Rev from E-comm. 16%+ 89% 12%+ Unknown 100% Unknown (Source: Q2’12 filings for publically listed companies and other public domain sources)

B2C Provider Examples: Acquisition Tactics Facebook Zynga Pandora YouSendIt! Carbonite Box Acquisition Tactics     Freemium Caution! % of members paid (est.) 0% 2.2% 2.5% 2.0% 100% <8%  (w/CC)    Free trial   "Trojan Horse"  White-label partners     API for developers Network Effect H H L L L M Switching Costs H H L-M L-M L-M L-M (Source: 10Q filings for publically listed companies and other public domain sources)

Freemium: not a silver bullet for everyone Attributes that align with Freemium Caveats • • A fraction of users become buyers Potential to scale to millions of users • • Attracts large numbers of people that Strong network effect • will never buy Ad / Sponsorship model • • Ongoing operational costs associated High switching costs for user • with non-buyers (Chargify) Range of features or products to • Can take time to pay off (Dropbox) induce non-paying customers to buy • • Generally doesn’t fit enterprise market B2C or SMB focus • Freemium is treated as Marketing cost (Sources: “When Freemium Fails, Wall Street Journal, Aug. 22, 2012; “Is Freemium Right for My Business?”, Building Keystones blog)

Convert Free to Paid: process starts at registration

Convert Free to Paid: display premium functionality throughout user experience

Retention Tactic: show benefits that will be lost InMail Messages Profile Organizer Full Profile Views You will lose your current You will lose access to saved You will lose access to full InMail credits when you cancel profiles, notes, and folders profile views for out of network your account. profiles. • Your Premium Account will be canceled on November 2, 2012. • There are no partial refunds. You will have access to your account until November 2, 2012. • You will continue to have your LinkedIn profile as a Basic (free) Account holder.

Retention Tactic: Dunning process Email notification

Retention Tactic: Dunning process (cont.) Pop-up window Email notification

Retention Tactic: Dunning process (cont.) Pop-up window Email notification

Retention Tactic: Dunning process (cont.) Email notification

B2C Provider Examples: Acquisition Tactics (cont.) Facebook Zynga Pandora YouSendIt! Carbonite Box Acquisition Tactics     Freemium Caution! % of members paid (est.) 0% 2.2% 2.5% 2.0% 100% <8%   (w/CC)   Free trial   "Trojan Horse"  White-label partners      API for developers Network Effect H H L L L M Switching Costs H H L-M L-M L-M L-M (Source: 10Q filings for publically listed companies and other public domain sources)

B2B Provider Examples: Business Models Salesforce LinkedIn Twilio Business Models Ad / sponsorship 27%  Paid subscriptions 94% 19% Other (pro svcs, virtual goods,  usage, API licensing, white-label) 6% 54% 104K Members / Users (active) businesses 108M >100K % of members paid (est) 100% 1.2% Unknown $27,445 Avg. Rev per User (account) $7.72 Unknown $27,445 Avg. Direct Rev per User (account) $91 Unknown % of Rev from E-comm. Unknown 45% Unknown (Source: 10Q filings for publically listed companies and other public domain sources)

B2B Provider Examples: Acquisition Tactics Salesforce LinkedIn Twilio Acquisition Tactics   Freemium Caution! % of members paid 100% 1.2% (e) Unknown   (w/CC)  Free trial "Trojan Horse"  White-label partners    API for developers Network Effect High High Low Switching Costs High High High % of Rev spent on Mktg & Sls 52% 34% Unknown (Source: 10Q filings for publically listed companies and other public domain sources)

Wrap-up – things to consider Business Models Customer Acquisition Ad / Sponsorship Freemium Subscriptions Free trial Virtual goods “Trojan Horse” Usage White label White label API licensing API licensing A couple of other things to think about: • Does your service benefit from the network effect? • What are the switching costs for your customers?