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

• Founded Early 2005
• Over 200 employees in 3 offices:
• Cologne (Germany)
• Chicago (USA)
• Tokyo (Japan)

3rd place in Germany and 42nd place in EMEA (growth rate of 2698%).

• Over 20 million paid transactions
• Many clients already using subscription
• r SaaS

Full-service cloud-based e-commerce partner: Highlights: Sample clients:

Agenda

I. What’s in the Cloud and what’s driving Cloud adoption? 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?

Wikipedia definition: Examples: “Cloud computing is Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand, like the electricity grid.” Salesforce.com, LinkedIn, Dropbox, Amazon Web Services Market Size: $40.7 billion (2011) growing to $241 billion (2020)

(Source: “Sizing the Cloud”, Forrester Research, April 21, 2011)

Market in 2011:

• Public cloud

– 63%

• Virtual private cloud – 18%
• Private cloud

– 19%

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 share of global software vendor revenues:
• 2010: $25 billion (7% of $354 billion)
• 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.

SaaS Disrupts – How Does it Affect You?

(Source: Forrester Research, Jan 12, 2011, “Which Software Markets Will SaaS Disrupt?”)

224% growth

Recent SaaS Acquisitions

Company Acquisition & Date Amount

Permira Ancestry.com (Q1‘13) $1.6 billion Dell Quest Software (07/12) $2.4 Billion Salesforce GoInstant (07/12) $70 Million Buddy Media (06/12) $689 Million Oracle Vitrue (05/12) $300 Million Taleo (02/12) $1.9 Billion LinkedIn SlideShare (05/12) $119 Million 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 Deezer $130 Million (10/12) $600 Million BranchOut $25 Million (04/12) $80-85 Million 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

My Account Renewals Web Orders Channel Partners Front Office Contact Center Fraud Screening

E-commerce Services Platform

Payment Gateway Sales Tax Engine Merchant Account

Existing in-house systems

CRM GL / ERP

pricing subscription billing BI & analytics quotes chargebacks entitlements / provisioning payments customer accounts API’s revenue recognition

Back Office

license keys

CDN

asset mgmt

• rder mgmt

Core Solution

Business Models and Customer Acquisition

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

B2C Provider Examples: Business Models

(Source: Q2’12 filings for publically listed companies and other public domain sources)

Facebook Zynga Pandora YouSendIt! Carbonite Box Acquisition Tactics Freemium

  

 % of members paid (est.) 0% 2.2% 2.5% 2.0% 100% <8% Free trial 

 (w/CC)  

"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

B2C Provider Examples: Acquisition Tactics

Caution! (Source: 10Q filings for publically listed companies and other public domain sources)

Freemium: not a silver bullet for everyone

• Potential to scale to millions of users
• Strong network effect
• Ad / Sponsorship model
• High switching costs for user
• Range of features or products to

induce non-paying customers to buy

• B2C or SMB focus
• Freemium is treated as Marketing cost
• A fraction of users become buyers
• Attracts large numbers of people that

will never buy

• Ongoing operational costs associated

with non-buyers (Chargify)

• Can take time to pay off (Dropbox)
• Generally doesn’t fit enterprise market

(Sources: “When Freemium Fails, Wall Street Journal, Aug. 22, 2012; “Is Freemium Right for My Business?”, Building Keystones blog)

Attributes that align with Freemium Caveats

Convert Free to Paid: process starts at registration

Convert Free to Paid: display premium functionality throughout user experience

You will lose your current InMail credits when you cancel your account.

InMail Messages Full Profile Views Profile Organizer

• Your Premium Account will be canceled on November 2, 2012.
• You will continue to have your LinkedIn profile as a Basic (free) Account holder.
• There are no partial refunds. You will have access to your account until November 2, 2012.

Retention Tactic: show benefits that will be lost

You will lose access to saved profiles, notes, and folders You will lose access to full profile views for out of network profiles.

Retention Tactic: Dunning process

Email notification

Email notification Pop-up window

Retention Tactic: Dunning process (cont.)

Email notification Pop-up window

Retention Tactic: Dunning process (cont.)

Email notification

Retention Tactic: Dunning process (cont.)

Facebook Zynga Pandora YouSendIt! Carbonite Box Acquisition Tactics Freemium     % of members paid (est.) 0% 2.2% 2.5% 2.0% 100% <8% Free trial   (w/CC)   "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

B2C Provider Examples: Acquisition Tactics (cont.)

Caution! (Source: 10Q filings for publically listed companies and other public domain sources)

Salesforce LinkedIn Twilio Business Models Ad / sponsorship 27% Paid subscriptions 94% 19%  Other (pro svcs, virtual goods, usage, API licensing, white-label) 6% 54%  Members / Users (active) 104K businesses 108M >100K % of members paid (est) 100% 1.2% Unknown

• Avg. Rev per User

$27,445 (account) $7.72 Unknown

• Avg. Direct Rev per User

$27,445 (account) $91 Unknown % of Rev from E-comm. Unknown 45% Unknown

B2B Provider Examples: Business Models

(Source: 10Q filings for publically listed companies and other public domain sources)

Salesforce LinkedIn Twilio Acquisition Tactics Freemium   % of members paid 100% 1.2% (e) Unknown Free trial   (w/CC)  "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

B2B Provider Examples: Acquisition Tactics

(Source: 10Q filings for publically listed companies and other public domain sources) Caution!

Wrap-up – things to consider

Business Models Ad / Sponsorship Subscriptions Virtual goods Usage White label API licensing Customer Acquisition Freemium Free trial “Trojan Horse” White label 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?

Building Keystones blog clever ideas about digital e-commerce

http://www.buildingkeystones.com

Craig Vodnik Co-founder cleverbridge Elan Sherbill Blogger cleverbridge

Chief Bloggers Recent Postings

• Who Killed Download Software?
• E-commerce Eye Candy – Enterprise Cloud

Adoption

• The Dunning Process in E-commerce
• The Trouble with Offline Payments for Subscription

Products?

• Is SaaS Right For Your Business?
• How Do You Handle Subscription Renewals?
• Conversion Rates: A False Sense of Security?

Q & A

Thank you