31 Startup Business Model : Best Course for Entrepreneurs

1. Class Introduction : So if you are an entrepreneur and wanted to build a successful startup, then the deciding factor would be our business model. So you have to build a business model which either have a very strong network effect like Amazon are maybe I'll asset-light business model like Airbnb. And that's why I have decided to make this course on 31 different types of business model by analyzing more than 1000 different types of unicorns startup based out of Silicon Valley. Now using these different types of business model, I have personally scaled many brands from $0 in revenue to millions of dollars in revenue. So my name is not deep. I'm an MBA graduate and I have bought in multiple startups in the past, and I also co-founded few companies. I have divided this business model course into three different sections. In section number one, we will build a very strong foundation by understanding about the basic concept of a startup. And in this section, we will understand about the different types of startup. We will also understand about the business model. And finally, we will build a business model canvas for your startup. In section number two, we will understand about all these 41 different types of business model that is coming to your screen. In this section, we will understand about business model like subscription business model, which is used by companies like Shopify, Netflix, where the charge a specific amount to their customer every single month. We will also understand about freemium business model, which is used by companies like HubSpot and Zoho. Then we will understand about network effect business model, which is used by companies like Uber. After that, we will understand about a B2C business model which is used by all these e-commerce companies that we see around us. Then we also have brokerage business model, which is used by all the stock trading platform. And the list goes on and on. You can have a look at all these different types of business model that is there on your screen. And finally, in the court section, we will do a case study to understand all the processes involved in a business model. I think this is the best course available on the Internet about business model. And I'm sure after watching this course, your prospective about startup will change in the end. I always believe in giving back to the society. And that's why I have priced this course as Louis, the price of a movie ticket, so that everybody can afford it. If you're excited for this course, Let's dive in. 2. What is a business model: So this is the first video of business model course. And in this video we will talk about what exactly is a business model in a single statement, business model is a framework for how your company will create value. The way by which your company can create value is by taking a product, offer it to the market, and then driving sales. And to understand this value creation part, I'm going to take an example of three of my favorite companies. The first one is Amazon. Now, Amazon use a marketplace kind of business model. A marketplace normally bridge a gap between buyers and sellers. All of these buyers will purchase some product that are listed by these sellers on the marketplace, that is Amazon. The second company is Netflix. Netflix is a video on-demand platform. And you can watch your favorite web series or a movie on this platform. But for that, you have to pay a monthly subscription fees. That can be $5 or $10 depending on the type of country you live in. The third company, which is also a part of Amazon, is your AWS. That is Amazon Web Services. So if you're into programming or web development, I'm sure you have heard of this company. Now, AWS is a Cloud computing platform and they use pay as you go kind of pricing in their business model. Now just like these three, we have hundreds, maybe thousands of these different types of business models and pricing strategy. And we will talk about all these different business model in the coming videos. But let's come back to our same topic, which is what exactly is a business model? And to understand that, I'm going to take an example of a business model of a hospital. Before understanding about the business model that is used by a hospital, we first have to understand about the lifecycle of a patient. So a patient normally go through these three important stages in their life cycle. The first one is appointment. The normally reach out to these hospitals, their website and they book an appointment, then the console to a Dr. and if they have some problem, the Dr. normally suggest them to go for a diagnosis and then the billing process will happen. And if the patient is having a severe problem, the Dr. normally recommend them to revisit after a week or two. And that's the life cycle of a patient. Now the main part of a business model is value. And let's understand about three core pillar of value. That is your value creation, value delivery, and value capture. So let's expand on this. Let's understand about all these three different types of values in a business model. The first one is your value creation. And value creation is a technique by which you take a problem and then you try to solve that problem. And that's how they are creating the value. And that's your value creation part. The second one is your value delivery. And now it's the best time to execute on the problem that you're solving. So the best way you can deliver value is by making sure that you are taking the good care of your patient in a hospital. And that's your value delivery. The third part is your value capture. And what I'm going to see me sound a little counter-intuitive. But a hospital want you to be chronically sick, saw that you would keep coming back. So these are the three core value pillars in a business model. The first one is value creation, where you take a problem and you try to solve that problem in the best possible p, then you have value delivery where you execute on that specific problem. And finally, the value capture, which is also known as retention. So you need to make sure that you are retaining your customers so that you can generate more profits or more income, or maybe you can deliver more value. Now when we talk about business model, some people confuse the business model term with revenue model. So let's talk about what exactly is revenue model. So revenue model is how your business will own income and produce profit by generating a higher return on investment. So in a business, if you have invested some capital and if you're able to generate more money from that specific business, well, you have a positive cashflow business, and these businesses are normally good. But on the other side, if you have invested more amount of capital into a business and you are able to generate less money while you will soon go insolvent, and you should avoid these kind of businesses. Now the way you understand a positive cashflow business and a insolvent business is by understanding these two important terms. That is your customer acquisition cost and customer lifetime value. So let's say if you are investing more amount of money, acquiring a customer, you're not able to generate enough money from that customer. Well, that's not a good value proposition and you may not be able to continue the operation because you are losing out on revenue on every single customer. So now that you understand about revenue model, I'm sure you may have some other questions related to business model as well. Like, who is my customer? What kind of value should I offer to that specific customer and at what price? And maybe what source of revenue stream can I pursue? Now we will get an answer of all these cautions in the coming videos. In the next video, let's talk about business model innovation. 3. Business Model innovation: Now that you understand the basics of business model, in this video, we will talk about business model innovation. And in this video, I'm gonna give you a couple of frameworks that you can use if you want it to build your own business model. But take these business model framework as a pinch of salt because you can always start building your business model from a blank Canvas. So let's start with the first framework that I got after reading multiple frameworks that were available on the internet. Now, business model is all about solving a problem. When you solve a problem, you always solve for a smaller segment. So if you're building a business model, you first have to pick your segment. And in this framework, I'm going to use our example of one of the companies that we chose in the last video. Let's take Amazon as an example. When Amazon started their e-commerce store, they chose a segment of age 25 years to 40 years who are interested in buying books online. That was their customer segment. Once you have a customer segment, then you have to find a value proposition. The value proposition of Amazon back then was, you don't really have to go to an offline bookstore to purchase a book. You can find all these different variety of books online. That was their value proposition. The third one is the process. How can you build a process around this specific business so that you can make it profitable. While your value proposition will generate revenue for your brand because you are allowing people to buy books online, it will generate revenue for your business. But your processes will help you understand the cost structure. Things like how will you ship the product and how much will it cost for you to ship the product? And if you take this revenue model and the cost structure, you will have your profit model. If you look at all these things in case of Amazon, things like revenue model, cost structure, and your profit model, you will see that Amazon will provide you a wide variety of product at the most affordable price. And they will also make sure that they're delivering this product at your doorstep in the shortest amount of time. So providing variety is their value proposition. Making it more affordable and faster delivery is the process. Now this business model framework reminds me of something that was said by Gary ten. Now, get it in country runs Y Combinator. And he said that all winning products make it faster, cheaper, and better. And we'll expand on this in the coming videos. But basically, a successful product or a successful business makes the process faster, better, and cheaper. Now this can be phi of x foster a3x cheaper, or maybe two x vector. It all depends on the competition and the kind of solution you are bringing to the market. Apart from this, I also have one more business model innovation framework. I call this as a business model triangle. And this triangle have three vertex. At the top you have your customer, then you have your distribution channel, and then you have your profit formula. If you want to solve a problem for your customer, you have to find different distribution channel so that you can reach out to different customer. In today's world, you have so many people who are connected to Internet, but you also have some people who are not connected to Internet. But you have to reach out to all the customers who are facing the problem. So you have to find these different channels by which you can reach out to the end consumer. Maybe some online channel is there for all the people who are tech savvy. And let's say you also invest in offline channel. For all the people who are not connected to Internet. Distribution channel will help your brand to connect with all these different types of customer. Then you have your profit formula. That means what is the piece of technology that you will be using to serve all these customers at scale. And in the end, you have to invest a lot more amount of capital in these different assets so that you can make this overall business model work. In case of offline store, you need to invest heavily on all these different asset because you're buying a piece of land and then you're opening our retail store. In case of a e-commerce app, you are investing in the technology of building the tap. Now just like this, we can have multiple different types of business model innovation framework that you can find on internet. But I think these two are enough for you to understand how exactly you can think about building a business model and how you can think about all these different Lego blocks that you can use and connecting different piece. Let's talk about few ingredients of a good business model. The first one is pricing. You're selling a product to all these different people. You have to find a sweet spot where you can maximize your revenue by adjusting price and then you can sell it to more number of people. Now, as you all know, revenue is equal to price and number of customer. Now if you're selling a product at a higher price, you will have less number of customer. On the opposite side, if you're selling a product at a cheaper price, you will have more number of customer. That means if you wanted to maximize your revenue, you have to sell your product at such a price so that you can have maximum number of customer. So our overall revenue will depend on price multiplied by the number of customers you can get. So pricing is one of the factor that you need to think about when you're building a good business model. Now there are multiple pricing strategy that you can use, and we will talk about these different types of strategy in the coming videos. The second ingredient that you need to understand in a good business model is the frequency. You have to ask how frequently these customers are buying your product. And to understand that, let's take two different products. Let's take e-commerce as a product and let's take software as a product. If you look at e-commerce as a product, people purchase multiple product in a month. So your frequency will be higher in case of e-commerce. In case of software, people just purchase once in a month or maybe let's say once in a year. So the frequency for purchasing a software is less. So you have to find the frequency of your product, how frequently people are purchasing that specific product. The third thing is average revenue per user, also known as ARPU. Average revenue per user means what is the average ticket size of your product? And if you understand the average revenue per user, you will have a lot more opportunity of up-selling and cross-selling your product. And then you can use these multiple techniques like product bundling, selling, add-ons and plugins. And we will also talk about all these things in the coming videos. But these are the few ingredients that you need to know in a good business model. And just to let you know are in the coming videos, we will also talk about these 31 different types of business model, like subscription business model, freemium business model, on-demand business model, Peer-to-Peer ecosystem, and many more business model. So if you wanted to skip these few videos, you can always do that. Just go to the second section and you can watch all these different types of business models. But I personally recommend you to watch all these videos in a proper sequence so that you can build up very strong foundation and you can think about building your own business model. 4. Business Plan Vs Business Model: So in the last two videos, we had a discussion about business models and business model innovation. But I've seen some people getting confused in business model versus business plan. So in this video, we will understand about the difference between business model versus business plan. So are these two terms exactly the same or they have any differences? So business model is a single diagram of your business. On the other side, business plan is a document that investors make you too, right? They don't creed. And this business model is one of the part of that specific business blend document. So now let's understand the difference between business plan and business model with the help of an example. If you are selling eyewear, online, e-commerce is your business model. And figuring out how will you sell these Ivy's online is your business plan. Let's start with business plan. If you want to figure out how exactly will you sell this product in the market, then you have to focus on business plan. Business plan can be long and time-consuming process. And in this business plan, you have to write things like your go-to-market strategy. That means, how will you market this product? All these different customer segment you have. What is the target size of this market? So you will write things like your total addressable market, the growth rate you have in that specific market, and in business plan, you will also write your future projections, the kind of past directions you have in your business and all of that long and time-consuming stuff that you need to write in a document. On the other side, business model is a single page document that is easy to understand and it is less time-consuming. Now to simplify our business model, so many people have started using something known as Business Model Canvas. Business Model Canvas is a oversimplified version of your business model. You can write down almost everything in a single page document. But before we understand about business model canvas and we have a dedicated video on Business Model Canvas. Let's start with business plan. So as we all know, business plan is a document and this document will have at least ten to 12 different slide. Now recently so many people have given a new name to business plan, and that is your pitch deck. And this pitch deck will have 12 different slides. In business plan, you will cover things like what problem that people are facing and how exactly are you solving that problem for those people at scale. It will also cover things like product demo. So if you have solved that specific problem for people, how does that product looks like? So you will show that product in this specific business plan or directly to investors. You will also like things like your market size. What is your target market that you're targeting? Then this business plan will also have a business model. What kind of business model are you solving to solve this problem as an e-commerce marketplace aggregator or a subscription business model. So you have to mention the type of business model in this business plan and other things like the kind of competition you have in the market. What is the unique advantage that you have? Maybe your past experience or all your team members have the core expertise in that domain, then things like your go-to-market strategy. That means, how will you market this product to these different customer segment? You also need to mention your team members and the kind of tractions or milestones we have achieved so far. And what is the fundraising information that you want it to give? This business plan document will cover almost every single possible thing that you can imagine in your business. So business plan will roughly cover things like your company overview, your market overview, the kind of product and services you have, the financial projections. And finally, how will you execute all of these things in your business? On the other side, business model canvas is a single page document. And this single-page document is very easy for any person to understand. In Business Model Canvas, you will mention things like your customer segment for different distribution channels you have. How will you build customer relationship and your value proposition? And then you will also mentioned things like all the key resources and partners you need to run this business along with few key activities. And in the end you will mention things like your revenue stream and cost structure. You will fill in almost every single detail about your business in these nine different boxes in the Business Model Canvas. Now that you understand the basic difference between business model and business plan, let's understand why do you need business model and business plan. Most entrepreneurs start with a strong initial vision, and they have a specific plan to achieve that vision. But unfortunately, almost 95% startup ended up pivoting from their initial plan, that is the plan a. And now they have to quickly I Aykroyd their product and change their plan before they run out of all the resources they have. And that's why they need business model more than a business plan. Because they can quickly create all of these things quickly on a business model because it's a single piece document. Now there are two things that you need to understand bought in case of business plan and business model, that is your key resources and key partners. So let's understand business model and business plan and the critical difference between these two things in terms of resource perspective. So when we talk about all the resources that you have in a business, you have some internal resources, like a top management or leadership position that you have in your company. All of your employees, that's your internal resource. And then you also have some external resource like your investors, your other stakeholders. If you're looking to raise some capital and if you're talking to these different investor, they are more interested in your business plan then in your business model. So they will force you to write a business plan or a pitch deck so that you can pitch to them and you can show them your five-year or let's say ten year plan. They wanted to see whether your business model is scalable or not. Netbeans, if you're able to serve millions of customers without hiding so many people, then your business model, it's scalable. If you look at companies like Airbnb or Uber, they don't really need to hire all of these drivers or hotel owners. They just need to act as a platform between customer and the hotel owners. On the other side, a bad business model is when it is difficult to scale. That means if you need to serve your customer, you need to quickly hire more and more number of employees or stakeholders. On the other side, business model is super helpful for your internal resources. So let's say if you're hiding some top executive, like it's Chief Revenue Officer or a Chief Technical Officer. Then you can quickly show them a single-page business model canvas and they can easily understand about your business. Apart from Business Model Canvas, lean startup is also very effective over here. And this single-page document that is also known as business model canvas, can help them understand your customer segment, the resources you need, and all your distribution channels. So that's all about your best. So that's all about your business model and business plan. In the next video, we will understand one of the most widely used framework for business model, that is your business model canvas. In the next video, we will understand about business model canvas. 5. Types of startup: Hey everyone, My name is null deep. And in this video, we will understand about the different types of startup. Now before we understand about the different business model we have, we first have to understand the different categories of startup. And that's why in this video, we will build a very strong foundation, understanding the different types of startup in different customer segment. You have your business to business segment, business to customer segment, business to government segment. Now, I have broadly classify all these different startup in three different categories. You have startup who solve a B2C segment, that is your business to customer segment. So if a startup, it's selling their product to the end consumer, that's a B2C startup. Companies like Uber, Airbnb, Amazon, Netflix, spotify. All of these are B2C startup because their product is used by the end consumer. And that's why these are B2C startup or business to customer startup. Then you have B2B startup. That's your business to business. If a business is selling its product to the other business, that's a B2B startup. If I'll give you a couple of examples, you have companies like Slack, HubSpot, Amazon business, or Alibaba. These are all the business who are selling their product to other businesses. Then you have your P2P startup that is peer to peer. So if a company is just acting as a platform between two different people, well, that's a P2P startup. You have companies like Indiegogo or Kickstarter or Alex coinbase. These are all the example of P2P startup. Let's start with B2C startup. In B2C, you have different types of startup. You have aggregators, marketplace and subscription. Let's start with aggregators. The only role of Uber is to aggregate a large number of driver so that users can book there, right? In case of Airbnb, their main role is to aggregate a large number of hotel owners so that people can book a hotel. That's the aggregator in B2C segment. Then we have marketplaces. And a good example of marketplaces, Amazon, Amazon's main job is to act as a bridge between a seller and buyer. So all these sellers can list all the different products that they have. And these buyers can purchase those products from the marketplace, that's the Amazon. Now let's talk about the subscription. Subscription is normally used by all these video on-demand platform, or let's say these media apps. So companies like Netflix, Amazon Prime, or Spotify, use the subscription business model. So you can watch your favorite web series or movie on Netflix. You have to pay a subscription price or a subscription fees. You can listen to your favorite music. You can create a playlist. You can download these music in offline mode if you have a Spotify subscription. So that's your subscription business model. Now let's come to the B2B side. In B2B we have SAS. Sas is also known as your software as a service. When one company is building a software and then they're selling that software to other companies. That's the example of SaaS. Companies like HubSpot and Slack or the few example obsess. Now Slack is a messaging app, and I'm sure if you are working in some company, you might be using Slack or Microsoft Team. That's the messaging tool. They are built by Microsoft and Slack is obviously built by sales force. So they are used by all these different companies. Similarly, HubSpot is a CRM tool and multiple companies are using HubSpot as their CRM. That's the software tool which is built by one business and it is used by another business. Then we have marketplace and Alibaba is a really good example of B2B marketplace. Let's say if you wanted to sell some product on some e-commerce website or let's say if you are opening an offline store, well, you can buy these products in bulk quantity from Alibaba. Alibaba is a Chinese B2B marketplace where you can find all these Chinese manufacturer and then you can buy these products in bulk quantity. Then you can sell these products on your own website, on Amazon or eBay, or let's say from your offline store. That's the example of B2B marketplace. In B2B, you also have our services companies. So let's say if you are having a digital marketing agency or a design agency, that's the example of B2B service black bar. Then we have a P2P startup or Peer-to-Peer. Now, Peer-to-Peer startup can be a lending startup, crowdsourcing platform, or maybe an exchange. Let's start with Lending. Let's say you're investing your money in cabbage at an interest rate of five per cent. And cabbage is lending the same money to someone at the interest rate of 7% and they are earning 2% as their margin. That's the P2P lending. That means they are connecting to different people. One who is ready to invest and another person who wanted to borrow some money. Then we have crowdsourcing platform where other people can invest in some ambitious project. So let's say if you're building a tech product or a hardware product or anything cool. In that case, you can list your product on Indiegogo or Kickstarter and other people can fund your project for early access. Then you have exchange, exchange like Coinbase. So let's say if you have a cryptocurrency or equity of a company or stock, then you can create those stock or equity or cryptocurrency on all these P2P exchange. Coinbase or Robinhood or on finance. And there are multiple P2P Platforms. So these are the different types of startup you have. I have broadly classified lead startup based on the customer segment that they're targeting. Cfl revise this topic. You have three different types of startups. B2b startup, P2P startup, B2B startups, and B to G startup. B2c is your business to customer. P2p is your peer to peer. B2b is your business to business. And you also have B2 G, which is business to government. But we're not focusing on that for now. In B2C, we have aggregators and marketplace aggregators like service aggregator or social aggregator. And similarly in marketplace, you have your service marketplace, an e-commerce marketplace. In B2C, you also have couple of subscription business model. And this is also there in case of B2B and B2C. A good example of subscription is Netflix. In B2B, a good example of subscription is slack, or let's say HubSpot. These are softwares. As we all know, in business to business, you have software as a service and some digital marketing and design services. And software as a service, you have two different types of software. You have horizontal software and vertical software. We'll talk about that in the next slide. So in B2C, you have four different categories, and you have all of these different startup in aggregator, Uber and Airbnb, our service aggregator. And Facebook is a social aggregator. In marketplace. Amazon is a marketplace that connects a buyer with a seller. In P2P, Peer-to-Peer, you will have platforms like Oil X, where one person can sell their used item or use product and another person can buy it. In services. You have super apps like Go Jack and Postmates. Now, one other thing that you can also understand is B2B SaaS, or software. In software, you have two different types of software. You have horizontal software and vertical software. I don't really have to focus so much on the software side because we'll be covering a lot more consumer company in this course. So if software is used by multiple companies irrespective of the domain, that's a horizontal software. If you look at tools like Slack, Slack can be used by a hospital or construction company, a digital marketing agency, a consumer company. So this is a messaging tool that can be used by any company. Just like this, HubSpot can be used by any company irrespective of domain tools like Intercom, fresh work, Mailchimp, Zoho, sales force. These tools can be used by any company irrespective of their domain. But on the other side you have vertical software that can only be used by companies in a specific domain. If you look at topics like Zen naughty, naughty is a spy and sellae software. And this is only used by people who are operating their spouse along or a barbershop. And that's a good example of vertical SAS. Similarly, if you have tools like capillary, capillary is only used by companies were having offline retail store. And that's a good example of vertical software or vertical sass. And then you have your B2B commerce. That's the business to business marketplace. That is your Amazon business and alibaba.com. 6. Introduction to business model Canvas: So in the last few videos, we were discussing a lot about business model canvas. And that's why in this video, I'm going to talk about what exactly is Business Model Canvas. Why do we need it? How do we going to implement business model canvas? And finally, I'm going to give you a couple of example. And you can also complete one assignment if you want to implement the learning from this specific video. Let's start with Business Model Canvas. Business Model Canvas is made up of these nine different building blocks. And these building blocks can help you understand how exactly a business work. If you wanted to hire a new employee or let's say if you're talking to these different investor or to your friend, you can simply show them a Business Model Canvas. It's a single-page document. You just have to fill all the details in these nine different building blocks. And you can answer all these questions like, what is your customer segment? Which all marketing channels are you using? How are you building customer relationship? What's your value proposition? And you can mention other details like all your key activities, key partners, your resources, and finally your cost structure and revenue stream. Now there are multiple reasons why we need a business model canvas instead of a business plan. The number one reason is focused. In a business plan, you will normally have 40 to 50 page document. Business model canvas is just a single diagram. And then you can show this diagram to your new hire. They can quickly understand what all is going on in your business. The second reason is fast. You can quickly create a business model canvas within like one or two are. On the other side. You have to invest at least one week if you wanted to create a business plan. The third reason is flexibility. If you wanted to change something in your business model canvas, you can quickly do that because it's a single page document and you can quickly change anything you want, so it is much more flexible. The fourth reason is transparency. If you wanted to communicate some ideas or some changes in your business, you can quickly change all of those things in this business model canvas. And then you can share this with your team members. They can quickly go through it and they can quickly realize that this is what the team is planning to change in the business. And that's the advantage of using Business Model Canvas, our business plan. Now let's understand about all these nine different building blocks that are there in a Business Model Canvas. We will move step-by-step. We will first start filling in the customer segment. Then we will write about the value proposition. Then all the marketing channels or sales channels we have in our business. Then we will talk about how exactly we are building relationship with that customer. Then we will talk about all the revenue streams we have in our business. Then we will talk about all the key resources that we need to run this business. Then we will talk about all the partnership or collaboration we are doing with different people or companies to run the business. Then we will talk about a couple of key activities that we need to focus in order to make this business successful. And in the end, we will summarize all of this information and then we will talk about the cost structure that is there in this business. And after filling all of these details, your business model canvas will look something like this. So let's start with customer segment. The customer segment will be the starting point of your business model canvas. Before you provide any solution to anyone, you first have to select a very small customer segment. Now you can choose your customer segment based on the needs they have, the kind of behavior they have, or let's say a specific demographic profile or some interest areas. There are multiple ways by which you can choose a customer segment. If I talk about Amazon, When Amazon would starting out, the mean customer segment was all the people who are interested in buying books online. Those people need to be tech savvy. They are interested in buying books online. So they should be somewhere in the age group of 25 years to 35 years. Because at that time, only people in that specific age group we're having access to Internet. Second is your value proposition. And this value proposition will help other people understand how exactly you're bundling up different product or services to provide value to that specific customer segment. In case of Amazon, all the people who are interested in reading books, but they don't want to go out and look out for these books in these different bookstore. That's their value proposition. The third one is channel. You have to mention all the channels that you will be using to reach these customers segment and communicate with them. So back then, Amazon was using Internet as a channel to acquire customer. Other companies are also using some offline store in order to communicate with customer. But it all depends on your business. For 20 is your customer relationship. You have to mention how exactly will you build a strong relationship with your customer. So things like social media, engagement, influencer marketing, all of these is a part of customer relationship. Then we have key partnership. And you need to describe the network of suppliers and partners that will make the business model work. So when Amazon started its e-commerce business, they were not having a very deeper penetration of the logistic network. And that's why they had partnership with multiple companies so that they can distribute these books to the end consumer, then you have key activities. And key activities are the most important actions a company must take in order to operate successfully. When Amazon would starting out, they had three important key activities. The first one is obviously making sure that the website is up and running and accepting order. The second key activity was they need to accept payment from the end consumer. Third one is that they need to make sure that they are able to successfully deliver all these books to the customer doorstep. Then we have revenue stream. If a customer is the heart of the business revenue stream or the arteries, revenue stream will help you understand all the different areas by which your company's generating money and revenue. So in nineties, Amazon had just one revenue stream. That is their e-commerce platform. Today in 2023, Amazon have multiple revenue streams like degenerate, a massive amount of revenue from their cloud computing service, that is AWS. They also generate huge revenue from their e-commerce ad, and they also have few other revenue streams. In the end we have cost structure. And in this specific building block, you have to mention all the cost incurred to operate this specific business model. 7. How to make Business Model Canvas: So now that you understand all these nine different building blocks in a Business Model Canvas, let's start filling in the details. We will start with customer segment. You have to mention which customer segment are you targeting in this specific business model. So you can divide your customer based on the geography, their age group, or the different interests they have. If I'll give you a couple of examples, like Coca-Cola. Coca-cola is a mass-market product. That means no matter whether you are five-year-old or 50-year-old, anyone can drink Coca-Cola. But when we look at other products like beauty product or let's say pet food, these are targeting some specific niche. For beauty product. You are targeting females from each group of 18 years to let say 40 years, who are comfortable with trying new beauty products online. So you can have multiple customer segments and their profile. The next one is the value proposition. And you have to explicitly mentioned what differentiate your product when compared with other competitors in the market. Your product can have a newness of performance improvement. You can allow these people to customize the product. You can have a design or a branding power, or you can have a price power or convenience. Let's say if you end up building a new hardware or a software, that's the newness. Let's say if your product is two x posture, That's the performance improvement. Let's say if you allow these people to customize a gift or a product, then that's the customization. And let's say if you have some design, some unique design or let say some branding power. Well, all of these can be a value proposition. You have to mention the value proposition for your business. The third one is channel. You have to mention all the channels that you are using to market your product to communicate with your target audience. Let's say if you are selling some product, well, you can sell all of your products using a website or an e-commerce store, or a mobile app. But on the other side, you can also use some offline channels like a retail store. You can also have some partnership with these retail giant like Target or Walmart. So you have to mention all those channels that you are using to communicate with your customer or maybe let's see, distributing your product. Then you have to mention how are you acquiring your customer and building relationship with them. Let me give you a couple of example. So if you go to an airport and if you want it to print your boarding pass, well, that's a transactional relationship. The second example would be, let's say if you're going to a hospital, Well, they always try to make a long-term relationship with you. Third one is your software. And they always try to have a self-serving relationship. So you have to mention what kind of relationship are you building with your customer. Then we have our revenue stream. So you have to mention things like, how exactly are you generating revenue? Are you generating revenue through subscription business model? Are you generating revenue through brokerage fees, through usage fees or asset Z? You have to mention all the different revenue stream you have in your business. If I'll give you a simple example of companies like Amazon, Amazon have ads as their revenue stream, Cloud computing platform as the revenue stream. They have e-commerce margin as their revenue stream. And they also have few other revenue stream from hardware devices like Kendall or from Amazon Prime. And maybe they have hundreds of other revenue stream as well. Then you have to mention all the key resources that you need in order to operate your business. And these give you sources can be physical store like Walmart have their physical store as their key resources. This can be our intellectual resource like human capital. So companies like Qualcomm use intellectual human capital as their key resource. This can be humans. Again, Tesla have the exactly same intellectual capital, which is human capital as their key resource. This can be financial key source like Netflix. Then you have to mention key partners which all people or companies you need in order to make sure that your business is operating successfully. So you can mention all of the companies where you have strategic alliances, joint ventures, acquisition. And finally, you have to mention key activities. So what is the most important things your company must do in order to make sure that your business model work. In case of Tesla, manufacturing the car, is the key activities they have to do. Production can be a key activities for a consulting firm. Problem-solving is the key activities that they have to do. For some platforms, for companies like Uber and Amazon, maintaining the platform or network effect is the key activity they have to focus on. The last one is obviously your cost structure. So you have to mention these different types of cost structure. If you look at companies like v work, they follow a fixed cost structure. That means they are leasing these property for 1020 years. And that's your fixed cost. That means if you buy more number of properties, your fixed cost will rise. You have your cost driven. So if you are creating affordable airline or affordable product, you have to have a cost driven cost structure. Then you have your value-driven. If you're focusing more on value less than cost, then that's a value-driven cost structure. If you look at a couple of luxury hotel or these luxury brand or cars, these have the value-driven cost structure and then you have your variable cost. If your cost will increase with the number of employees they are. In case of service companies, that's a variable cost. 8. Business Model Canvas - Uber: Let's understand the business model canvas of Uber. So let's start with customer segment. So Uber is a two-sided platform. That means they will bridge the gap between a driver and a writer. So they have two different customer segment. In case of rider, they are looking for all those people who wanted to travel from point a to point B and they have some transportation need. The second customer segment is called driver. So all those people who have a car and they wanted to generate some side income. So that's their customer segment. The second is their channel, which all channel does Uber use in order to make sure that both of these parties are interacting with each other. And they use app and website as their channel so that they can facilitate the communication and reach to their customer segment. Second one is the customer relationship. Now, open is using a rating based system so that they can understand how many customers are happy with their right. If you will, rate five-star, that means you are super happy with the right u hat on the other side. If you're giving one star, that means you had a bad experience with Uber. Then we have value proposition and the mean value proposition. Then we have a value proposition. That means what will differentiate Uber from a normal taxi? The first one is convenience. You don't really have to go out and find a taxi. You can just book or Uber in your mobile app. Second one is affordable because you have more number of people who can drop you from point a to point B. This is more affordable than offline taxi. Third one is additional income. All these car owners can own some additional income driving three or 4 h a day. And also, this is reliable because after booking a cab, you can track where exactly you want to go and how much time will it take. This is more reliable when compared with offline tech C. Then we have revenue stream. And the v, Uber generate money is by taking a small cut and that small cat can be ten per cent or 20 per cent from one single right? Now, if you talk about key resources, key resources that they need to make sure that their tech platform, which is the mobile app and website is up and running 2047. Another key resources that they need to make sure that their brand, next key resources, branding. They need to make sure that they have a good brand value all the time. Third key resources that they need to make sure that they have a strong network of drivers and rider so that they can balance out the supply and demand. If you talk about key activities, platform development is a key activity. They have a lot more engineers who are constantly developing new features so that they can predict the price more accurately and they can also maintain a support staff to resolve these queries. Then we have key partners. They also need a few key partners like payment processors, like stripe. So Uber is using Stripe as their payment processor, and Stripe is accepting payment on their behalf. And then they are transferring all of this money by the end of a specific month. While other key partners that Uber need is your API provider. Will, Uber is using third-party APIs like Google Map, so that they can show you where exactly your car is and how much time will it take from point a to point B. And that's why they're using so many third-party APIs like Google Map, Twilio to send you the estimates, some e-mail marketing APIs. In the end we have the cost structure. And here they will mention what is the cost they need to maintain their tech platform. The cost associated with marketing and maintaining some support staff. So that's the business model canvas of Uber. 9. Business Model Canvas - Assignment: I'm gonna give you a small assignment where you have to make a business model canvas for a company like Netflix. So spend some time and make a business model canvas for Netflix. And I'm also going to give you the solution where you can just refer to the business model canvas of Netflix and vetted if you wanted to know whether you are doing this right or not. 10. Freemium Business Model: Imagine you are a kid and your summer vacations are going on. Let's say you wanted to earn some extra income. So you decided to open a lemonade stand. Now, you started selling these lemonade, but nobody was really purchasing these lemonade from you. So one of your uncle came up to you and he advised you to sell the plane laminate for free. And the value proposition was you sell this plane lemonade for free. And anyone who drink this plane laminate, you will offer them around five different flavors of lemonade, like watermelon, strawberry at the price of $1 or class. That means after drinking this plane lemonade, if they are interested in one more glass, then they have to pay for these flavored lemonade. Then this so a lot more coupled started coming up to them and started getting a free plane lemonade, along with a flavored lemonade loss for $1. And that's what a freemium pricing strategy looks like. You give the basic version of your product for absolutely free. Actin wanted to try it out further than they have to pay for it. If you're using Google Drive to upload all your media documents and file LinkedIn to network with all these different people. Slack to communicate with your team member. Or let's say monday.com to manage all your teams. In that case, you are already using a product that use freemium business model. Hey everyone. In this video, we're going to talk about freemium business model. Freemium business model is used by multiple digital apps and mobile services. So let's talk about what exactly is freemium business model. In this video, we will first understand about what is freemium business model. Then we will understand how different companies use freemium business model. And in the end, I'm gonna give you a couple of examples and how you can implement freemium business model in your business. Now, freemium is made up of two different word, free plus premium. That means you allow users to utilize the basic feature of a product or service for free and then charge for upgrade to the basic package. Let's say you have customer on one side and accompany on another site. Now, the company gets their basic product for free to these users. And then they will charge for these extra refills are complimentary product. And that's the whole idea of having a freemium business model. If you have used products like google Drive, iCloud, or Dropbox, they have a free product where you get a certain amount of space for free. In case of Google Drive, you will get 15 GB of storage space for absolutely free. If you are a Google user or for Dropbox, they will give you two GB of space for absolutely free. And for iCloud, they give five GB of storage space for free. But if your media file or let's say storage space will exceed this limit, then you can buy some additional space at a premium price. E.g. Google Drive can give you 200 additional gigabyte of space for around seven to $10 every single month. Now let's understand why companies are using freemium business model. I mean, why they are giving their product for free to these users. But freemium business model is widely used by web based services, specifically these software product and some digital apps. And the main idea is you provide the basic functionality of your product for free to some user, and then you will entice those users to pay for your premium product. Let's say those users wanted to have some advanced feature or a premium feature in their product. In that case, they can take a paid plan of your product. If you look at companies like Spotify, spotify use free and premium as two different vectors. Use free plan as a growth vector. If you give me a product for free, then you end up attracting millions of people. So Spotify normally give of 14 days free trial on their product. And that's how they're able to get more number of customers on their app. Now, out of those millions of customer, some customer will end up taking a premium version of Spotify and the paid plan will act as a revenue vector. Now some people call this strategy as a top of the funnel strategy because when you launch a free plan or a free trial, your top part of the funnel will widen and you can attract more number of users who can try out your app. And then you can show how good your product is. And some of the people might end up taking a premium version of your product. In case of Spotify, spotify generates the majority of their revenue and profits from the subscriber. These are the paid subscriber and they generate a very little amount of revenue from advertisement. If you're using the free version of Spotify, you may have seen these ads coming in between these different songs. Now let's understand how these different companies are using Freemium pricing model in different ways. So when we talk about the different types of premium pricing, we have capacity based freemium, we have feature-based premium, and we have time-based freemium. Let's understand these three with the help of few examples. So Google Drive use capacity base freemium business model, and they will give you 15 GB of storage space for absolutely free. But if your media files or let's say document will exceed this limit, then you have to pay a premium price if you wanted to buy additional space. So that's why they use a capacity based freemium. Then we have feature-based premium. That means you can use this product for as long as you want. But if you want it to have access to these certain feature, then you have to pay for the product. If you look at products like LinkedIn or slack on LinkedIn, you can use LinkedIn for absolutely free. But if you wanted to reach out to so many people are, let's say if you wanted to access their learning platform, in that case, you have to take LinkedIn premium, and that's your feature-based premium. Then we have time-based freemium, or some people call this as time-bound Freemium. That means you can use this product for free, for a certain period and then you have to pay for it. We call this sorted period as a free trial period. One of the good example of time-based freemium is monday.com. Monday.com is a CRM and you can use this product for absolutely free just for 14 days. And that's the free trial they give. And because of these different types of freemium pricing model, some companies were able to attract millions of user. If I'll give you a simple example, companies like Dropbox. Dropbox was able to attract more than 500 million user just because they were giving a free version of their product. That was just two GB of space for free. And if you want it to store your media files or let's say asset. For more than this freespace, then you can take our premium version or you can buy some additional space. After Dropbox, these digital apps or software companies started using these different types of freemium business model. Some started using this capacity based freemium companies like Dropbox, Evernote, Google Drive, iCloud, all these, all these media storage or asset storage platform started using capacity based freemium. Then software product normally use a feature-based premium. Products like buffer, Skype, notion, slag, LinkedIn. All these software product normally use of feature-based premium. And then we have time-based freemium products like Shopify, audible. Shopify is free for 14 days. Audible for is free for seven days. And these product use a time-based freemium or at time-bound Freemium, where the normally give you a free trial offer for 14 days or seven days. Some will give you this free trial offer for a month as well. If I'll give you a couple of more example of, let's say, other companies who are also using freemium business model. Well, you have millions of companies using freemium business model on things like air table, iCloud, Google Drive, fresh work, Zoho, slag, Mailchimp. All these software companies and digital app use freemium business model. 11. Pro and Cons of Freemium Business Model: Let's talk about the pros and cons of using freemium business model. Let's talk about pros of using freemium business model. Number one is obviously the customer acquisition because the basic version of your product is absolutely free. You can attract more number of users and you don't really have to invest a lot of money in paid marketing. Secondly is obviously the marketing effort. Because the basic version of your product is free, you don't really have to invest a lot more capital in paid marketing. And we call this as a word of mouth strategy because they are promoting your product by themselves. Third one is network effect. And this is more applicable in case of digital apps. Or let's say if you're building a social media app or a networking platform like LinkedIn or Instagram. Where if some user are already using the product, they always invite other users to use the product they wanted to increase the value of that specific platform. Well, the best way is to invite other users. If I'll give you a simple example, the reason why we are using Instagram or WhatsApp is because our family members and friends are also using those platform. The value of a flat form will increase significantly if you invite other users on the platform, and that's your network effect. The fourth advantage of using freemium business model is usage behavior. Now because you have a lot more free users on your platform, some of these free users can also take a premium version of the product. And this will help you understand which feature is enticing these users to upgrade. And that's why in freemium business model you can understand the usage behavior much better than subscription business model, because now you have a lot more people into the funnel and you can analyze a lot more behavior and touch points. Apart from some advantages and Freemium, you also have few disadvantage stack freemium brings in your business. The first disadvantage is because you have a large number of free users and they might not be interested in paying for your product, will sometime you end up owning up very little money from your product. And that's the disadvantage that comes with freemium business model. Now that you understand the freemium business model, which all companies use this business model and what are the advantages and disadvantages of using freemium business model? Now let's understand what all other options you have in the freemium business model. And we will also understand which business model is better for your product. And to understand that we will consider our average free to paid conversion rate. If you use a free trial versus freemium free trial, you give your product for free, for 14 days. In freemium, you give the basic feature of your product for absolutely free for the lifetime. So when we talk about the conversion rate in free trial, you can calculate that with the number of free trial to the paid user divided by the number of trial user. So let's say if you have a product that has 500 trial user and 90 of those trial users converted into the paid customer. In that case, you have 90/500200. That's your 18% conversion rate from free trial. And similarly, you can also calculate the conversion rate from your Freemium as well. Just need to divide your premium customer with your free customer. And that's how you can calculate your Freemium conversion rate. So when you're giving your product for free, you have three different options. Either you can give the basic feature of your product for absolutely free, for lifetime. And for that you can use a freemium pricing strategy. So in free trial you have two different options. Free trial without credit card information and free trial with a credit card. So if you're selling software product, then you need to ask the customer that please enter your credit card so that we can deduct the amount after your free trial is over. On the other side, if you're selling a digital app like calm or Spotify, in that case, people might not be comfortable adding their credit card details when they are using a free trial. In free trial without credit card, you can offer a try before you buy kind of experience without taking the credit card information. Now this is very effective for generating buzz about your product because you don't really require little or no commitment from the user because they're not adding their credit card in your digital app. And if you look at some benchmark, you will have a 25 per cent free trial to conversion rate. And there is research that is done by use proof. On the other side, if you're offering a product where people can use the free trial for, let's say 14 days, but they have to add their credit card. In that case, you end up attracting less number of people, which means you will have less sign-up. But the conversion rate is very high in case of free trial with credit card. Because all those people who are genuinely interested in your product will only sign up. And that's why you will have a 60% conversion rate, which is your free trial to conversion rate. In case if you use a pricing strategy that is free trial with credit card. Now one question you may have in mind, how do we decide which kind of pricing strategies should be used in our product? Well, if you asked me and I'll give you a single line answer to that question. Well, it all depends on the complexity of your product and audience. So whether you are selling a B2B product or a B2C product, what kind of product are you selling to your target audience? How much disposable income they have? What is your geography? And there are so many parameters you have to take before you decide about which kind of pricing strategy should you use? Then if I'll give you a couple of examples from free trial to conversion rate so that you can consider which kind of pricing strategy you want to use in case of free trial or the average industry conversion rate is 57 per cent for B2C product. And that's the conversion rate in case of free trial without credit card. In B2B, it's 14 to 25 per cent. And let's see if I'll give you a simple example of free trial in B2C for, let's say, two video on-demand platform that is Netflix and Amazon Prime. The conversion rate of Netflix is 93%, while the conversion rate for Amazon Prime is 73%. Now there are other reasons as well behind this conversion rate. Because the audience who is using Netflix is much more attractive towards the platform when compared with Amazon's Prime Video. So that's all about the freemium business model or pricing strategy. And let's quickly summarize what we have learned so far. In freemium business model, you will give the basic version of your product for absolutely free. And this business model is used by all the web-based services or software companies. And the main idea of giving your product for free is that you allow so many people to try out the basic functionality of your product. And once they are comfortable with the product, and if they wanted to use the premium features, then they can buy a premium version of your product. And this is used by multiple companies. Now a lot more software company have started using freemium business model. And so many digital apps, software companies and consumer app use freemium business model. A simple example is Dropbox that offers two GB of storage space for absolutely free. But if you wanted to store more media files or asset, then you can buy some additional space at a premium price. I promised at the start of the course that I'm going to give you a couple of assignments and case study that you have to complete. So right now I'm giving you one case study. You just have to read this case study. You don't really have to do anything. But in the next video, I'm gonna give you a few assignments as well. This is the case study of Mailchimp. And how Mailchimp was able to create a successful email marketing tool by using a freemium business model or pricing strategy. So previously Mailchimp was a paid tool. They were they were forcing you to add a credit card before you wanted to use the platform. But soon Mailchimp realized that multiple small business wanted to use their platform for free for a routine user. So let's say if you are starting out your business and you don't really have a lot more money to invest in email marketing tool while you can use the free version where you can send 500 emails. 12. What is Subscription Business Model: So whether you are drinking a coffee, reading a newspaper, or maybe enjoying your favorite web series on Netflix, there is a very high chance that you'll be using a subscription product or service. And that's why in this video we will understand about subscription business model. Before we understand about subscription business model, let me ask you a very simple question. How many subscription, product or service to use in a D? You can answer this question in the discussion section. And I would love to know who is that person who is using the maximum number of subscription, product or service? So let's understand about subscription business model. Now subscription is the idea of selling a product or a service to receive monthly or yearly recurring revenue. And to understand subscription business model, you have to understand this simple diagram. Let's say there is a company who is selling a product or a service to these customer. And in return of that specific product or service, these customers are doing a periodic payment to these companies. Now this periodic payment can be on monthly basis or on a yearly basis. I'll talk about few companies who use subscription business model. Well companies like Shopify, Dollar Shave Club, and Netflix use a subscription business model. In Shopify, you just need to pay 30 dollar every single month. And you can build your online e-commerce store with the help of Shopify. In Dollar Shave Club. They will ship the favorite tracer every single month. In Netflix. They allow you to watch your favorite web series or movie on-demand on their platform. And there are many companies that use this subscription business model. If I'll give you a simple diagram to understand how different businesses and customer use subscription business model. Then you have your B2B business and B2C business, and then you have your subscription service and subscription product. If a business is offering a service on a subscription basis, that's your service. And if they're offering a product on subscription basis, lets the product and B2B is your business to business and B2C is your business to customer. If you look at B2B, service subscription, we have companies like Brex and we work. Now we will provide co-working spaces to other businesses. And that's a B2B service subscription. Just like that, Brex is, they provide business credit card to other small startup and businesses. Then you have B2C service subscription. If you look at products like Prime Video or Instacart, That's a B2C subscription. You can take a subscription of Instacart and they will deliver groceries at your doorstep every single month or maybe every single week. That's a B2C subscription. If I'll give you an example of a B2B product subscription, then products like Shopify and fresh work. Shopify will allow you to build your e-commerce store. And fresh work is a great alternative to CRM or chat bot. Then we have B2C product subscription. So things like Dollar Shave Club, bark box, Dollar Shave Club will ship razor every single month at your doorstep. And it's a subscription box. Similarly, bark box will ship bad food every single month on your doorstep. That's a B2C product subscription. And just like this, there are many other companies like Warby Parker, me and these are we'll ship a personalized product every single month at your doorstep. And that's a really good example of B2C products subscription. Now that you understand B2B, B2C service and product kind of subscription. Let's understand the different types of subscription business model that is used by all these different companies. We have six different types of subscription business model. Number one is umbrella subscription. And this is used by companies like Amazon. And Amazon Prime covers the umbrella of services like Amazon Prime, Video, prime music, one day delivery, and couple of more benefits. Second is your subscription Pass. Subscription pass will give you a special access to the platform. Let's say if I talk about few subscription pass, you have to enter gold on Tinder. So if you take two into Gold subscription pass, they will recommend your profile to more goals. And it will increase the chances of you getting a date. Apart from that, they will also get few other excess of certain features like super like and few other things on other subscription pass is dash pass. So DoorDash, which is a food delivery platform in United States, they have a dash pass. And if you take this dash pass, you will get free delivery. You don't really have to pay the surcharge on the platform. And that's the advantage of taking a subscription pass. Basically they will make your elide member on the platform. Third type of subscription is subscription box. So they will send a personalized box every single month. If I'll give you a couple of example of subscription box, you have products like me on these Dollar Shave Club and bark box, and maybe few others like Warby Parker in the Andes. They will send a personalized underwear every single month at your doorstep. That's a really good example of subscription box. Similarly, Dollar Shave Club will send you the result of your choice, the shaving form of your choice every single month on your doorstep. And similarly, bark box will send the mill for your pet every single month. That's your subscription box. Then we have ecosystem subscription. So if we look at platforms like Shopify and fresh work, if you take the subscription of Shopify, you will get access to their platform for one month. So you can install any app you want. You can build your own e-commerce store. You can accept order. You can do whatever you want on your e-commerce store. If you have a Shopify subscription. Similarly, you have fresh work. If you take fresh work one subscription you can access. You can build your own chat bot on your website. You can create CRM. You can manage all the people in your team and they have multiple products. In the end, we have newsletter and publication subscription. If you have heard of this product, that is Morning Brew, if you take their subscription, they will curate latest tech news, business news, marketing news in your inbox every single day. And that's the advantage of taking all these different types of subscription. From umbrella subscription to newsletters subscription. You have multiple types of subscription business model. Now let's understand a little more about these different types of subscription business model. The first one is subscription box. Here, the company will send a personalized experience at your doorstep every single month. If I'll give you a couple of examples, brand like Warby Parker, me on these and Dollar Shave Club ship their product every single month on your doorstep. And that's the example of subscription box, where we Parker will send you the contact lens every three month, me and these will send two pair of gt underwear every single month. And Dollar Shave Club will send a razor blade of your choice every single month on your doorstep, and that's your subscription box. The second one is your spatial subscription path. That gives you the advantage of standing out from the crowd. If I'll give you a couple of example, you have subscription past like dash paths and tender gold. And they'll give you a couple of x's. So two into Gold subscription will recommend your profile to more goals. Third one is your Amazon umbrella subscription. So if you take Amazon prime, they have umbrella of services like Prime Video. Prime music can do a couple of more things. And in the end, you have your ecosystem subscription that is used by Shopify. And you have your publication and newsletters subscription that is used by companies like Morning Brew. 13. Pro and Cons Business Model: So now let's understand about the advantage and disadvantage of using subscription business model. Let's talk about few advantage or benefits of using subscription business. The number one advantage is predictable cash flow. If people have taken subscription of a specific product or service, you can at least predict how much revenue will be there in the coming quarter or in the coming month. Because those people have to keep buying the product if they really want to enjoy the service or a product. And this will lead to reoccurring profit. And you can predict your cashflow in a much better way. So you have a predictable cash flow if you're using subscription business model. Because even if some people stop using your product, you will still have a certain amount of John and revenue in the next quarter. The second advantage is goods up-selling and cross-selling opportunity. If I'll take Dollar Shave Club as an example. Dollar Shave Club started by selling good-quality razor, but now they're also selling couple of other products like shaving cream after shave gel on their platform. And that's why subscription gives you a really good opportunity so that you can upsell and cross-sell different product. So now, Dollar Shave Club is selling their razor, shaving cream, aftershave gel, and couple of other products as well. And they are sending all these products in the same subscription box. The third benefit is higher margin. So all these subscription brand have a hero product and they always sell their hero product at a loss. But they generate more money or revenue by selling high-margin product. In case of Dollar Shave Club, their hero product is there, razor, the cell, all of these Fraser at loss, but they end up generating more revenue and profit from these other products like you're shaving cream, after shave gel. So they have a cheap heat up product and they generate the profit from these add-ons or other product. Now if you want it to implement subscription business model in your brand, then you have to understand about subscription revenue cycle. So subscription revenue cycle is made up of these five steps. And if you follow these five steps, you can build this subscription revenue cycle for your business as well. The first part of this subscription revenue cycle is acquiring new customer. So you have to acquire a new customer from your inbound marketing effort, paid advertisement. Maybe you will do some influencer marketing or rank your brand in the Google search so that people can know about your brand or product. That's the first part of subscription revenue cycle. Then we have to deliver a consistent, high-quality product or service. You constantly have to speak with all of your customer. You have to solve their problem. And that's how you're able to deliver a high-quality service or product. Third is you have to look out for all these different opportunities of up-selling and cross-selling. So in case if you don't know, the acquisition in a business is four times more expensive than upselling. Just like Dollar Shave Club, you have to find all the products that you can sell with the primary product. The primary product is your hero product. You have to sell some add-ons, some services, some other product so that you can increase the overall ticket size, also known as your average revenue per user. The fourth step to this revenue cycle is retaining these user. The biggest problem with the subscription business model is that they have the highest amount of churn. That mean people will use the product for a month or two and then they will cancel their subscription. So you have to battle with this shown every single month. You have to find different ways by which you can control this. Joan, give some benefit to the end-user. Give some cash back into their bullet every time they purchased some product and they can use that cashback or let's say credit in the next order. There are multiple ways to control the tone, and we'll talk about that in the coming videos. We have a dedicated section on these different metrics. In the fourth section of this course. In the end, we have to repeat the complete process so that our subscription can compound and we can achieve a flywheel where we're generating huge amount of revenue and everything is so well connected to each other. These are the five steps in a subscription revenue cycle. You first have to acquire some customer, then you have to deliver consistent, high-quality experience with your product or service. Then you have to look out for up-selling and cross-selling opportunities. And finally, you have to control your churn with different ways like introducing cashback credits that you can use in the next order, giving some offers, doing some infants and marketing. And finally, you have to repeat the whole process over and over again. 14. Cross-selling in Subscription Business Model: One of the most important part in a subscription business model is cross-selling and up-selling the product. And that's why let's understand a simple strategy that was used by Shopify to increase their cross-selling and up-selling opportunity in subscription business model accompany normally sell a free or achieved basic product to their customer. And then they will sell the expensive refills. For Shopify have a free basic product that you can use and you can build your own e-commerce store in just $40. But if you wanted to increase the functionality of your e-commerce store, let's say you wanted to introduce a chat bot in your e-commerce store, or email marketing tool to drop emails to your customer. Or let's say R2 like privy, that allows you to post customer review. Then you have to use Shopify apps. And these apps will cost you a specific amount. Let's say a chat bot will cost you ten or 15 dollar. And similarly, an email marketing tool and a review tool will also cost you ten or $15. And you have to pay additionally for all these add-ons that are there on Shopify. Now, if I'll give you a comparison, Let's say if you just use the basic version of Shopify, then you are paying $30 every single month and that's your monthly recurring revenue. And if you multiply it this 30 dollar, that is your monthly recurring revenue with, well, you will have your yearly recurring revenue as $360 per year. This is using Shopify without apps, but every single e-commerce store is using at least ten different apps, like chatbots, email marketing, or attribute to evaulate tool. And that's why they are using ten apps on an average. And if those people are paying $10 for every single app on an average, then they are paying $1 as a monthly recurring revenue. And if you multiply a 1000-dollar with 12, they are paying $1,560 every single year. So now you can see that this is the power of cross-selling or upselling your product. So Shopify is cross-selling and up-selling all of these things in the form of their add-ons or refills so that people can install as many functionality as they want in this e-commerce store. They can install a plugin to manage their wallet. You have a plug-in for SEO, you have a plug-in for product recommendation. And just like Shopify, there are so many companies that use subscription business mobile companies like air table, iCloud, Google Drive, fresh work, LinkedIn, Zoho, Slack HubSpot Monday. There are thousands of companies that use the subscription business model. Now if you want to create a successful subscription business model, then you have to meet your success in your business. So I'm gonna give you five important metrics that you have to measure so that you can measure success in your subscription business model. And we'll go deep into all these five metrics by the end of this course. But let me give you a high-level overview of these five important metrics that you have. Two major. The first one is your MRR. That is your monthly recurring revenue. What is the amount of revenue that you are generating from the exact same customer every single month. That's your monthly recurring revenue. This is super-important for all subscription business model. So whether you are setting a software product or a consumer product, MRR is super important if you are using a subscription business model. Second is your average revenue per user. That means what is the average revenue you're generating from every single user? And to increase the average revenue per user, you always try to cross-sell and up-sell the product. The third one is your customer lifetime value. That means what is the total amount of value or you are generating from one single customer? If a customer will last with your brand for a longer period of time, they will have a higher customer lifetime value. There are multiple ways by which you can increase the customer lifetime value. For 20 is your customer acquisition cost. So what is the amount of money that you're spending in acquiring one customer? That's your customer acquisition cost. So you need to make sure that your customer lifetime value should be greater than your customer acquisition cost so that you can make your unit economics positive. And that's a super important metrics you need to measure. We'll talk about all of these metrics by the end of this specific course. 15. Assignment: So now I'm gonna give you a very small assignment related to subscription business model. And I personally request you to complete this assignment because these assignments will make sure that you are implementing your learning from the course. So let me give you one problem that you will face if you work in any startup or business that is using a subscription business model. So let's say you're working in a software company who is selling their product for $5 per user to these ten different companies. And these companies have almost 50 employees in them. And let's see. Your marketing team were able to acquire these ten different companies by spending $40,000 as the marketing effort, you have to calculate the break-even point. So you have to calculate in how much time your company will become profitable. So your customer acquisition cost, that is your CAC, is 40,000 dollar. You have to calculate the customer lifetime value by multiplying your product price with the number of companies and employees you have. Now this is a very simple assignment. You can complete this assignment by yourself. And I'm also going to attach the solution. But if you're able to do this assignment by yourself, then great congratulation. I have an advanced version of this assignment. Let's say if the churn rate is 10% every single year. Now you have to calculate the lifetime value and your customer acquisition costs to lifetime value ratio. And this is exactly the same. You just have to consider the churn rate now, that is your 10% every single year. 16. Freeterprise Acquisition strategy: Now this is not a video about business model. Rather, in this video, we'll talk about a customer acquisition strategy that was used by companies like Zoom, loom or slack. And the name of this unique customer acquisition strategy is free enterprise model. And this freighter price is made up of two word free enterprise. So in free enterprise model, you will try to give the free version of your product if the people sign up using their professional e-mail ID. Once you identify the opportunity where multiple people or using your product from the same company. In that case, you will assign our account executive or a salesperson who will convert all of these free account into the enterprise or paid account. And this strategy was used by companies like Slack, Zoom, or if you look at the sales funnel of these companies, their main aim was to give these product for free to all the people who are signing up using their professional account. And once they find enough people under the same organization, in that case, they use their inside sales team and the field sales team so that they can convert those free account into SMEs customer or enterprise customer. Let's understand if you work for a software company, how you can use a team collaboration as a powerful customer acquisition strategy. If you have used product like Loom or scribe half, you may have seen this prompt. If you sign up in these products using your professional e-mail ID that is given by your company. In that case, they will give you a small prompt saying that we found a workspace that will have all other team members of your company. Why don't you join the same workspace instead of creating a new workspace. So you can see that 22 members are already the part of this workspace. And you will have a lot more benefit if you join the same workspace. Once the company identifies that there are a lot more people that are there in this workspace. Why don't we send our account executive or a sales guy to convert these free account into an enterprise account so that you can charge the company instead of taking the individual amount from these free customer. Once they convert these bunch of free account into enterprise account. Now every month, they can simply generate an invoice directly to the company. And the company is paying for all of these individual people in the same workspace. And that was the unique strategy that was used by companies like Zoom loom or Slack, where they use collaboration as the customer acquisition strategy. So if you are signing up into any of these products, they will try to add you into the common workspace so that they can charge the company every single month instead of taking a small amount from you independently. I mean, this is not a business model video, but I've still shared this strategy with you so that you can understand how exactly you can acquire customer without spending a lot more money. 17. What is Platform?: Hey everyone. In the last two videos we had a discussion about freemium business model and subscription business model. Now in this video, we'll understand about platform business. So today in 2023, we do almost everything online. So from buying a book online to booking a cab, to ordering food, or let's say looking at hotel, every single thing is there on your mobile. And that's why to understand how exactly these economy work, we have to understand about platform business. In the coming videos, we'll talk about marketplace and aggregate with business. But before that, let's understand what exactly is a platform business? What is a platform? Platform will create value by facilitating the transaction between a buyer and seller in an ecosystem. And these platform will take a piece of the pie in the transaction. And if I'll give you a couple of example, your favorite companies like Uber, Airbnb, and Amazon. Other really good example of a platform because their main role is to act as a platform between a buyer and a seller and they take a small piece of the pie in the transaction. Now that small piece can be two per cent or let's say 20 per cent. It all depends on the kind of business model these companies have. Now let's pick one company and let's expand on that. Let's understand why these platform business are so powerful. Let's take Airbnb as an example. So let's understand all the factors that make these platform business very powerful when compared with traditional businesses that we had. The first reason why these are so powerful is that all these platform business are asset-light. Well, if I'll give you a simple example, Airbnb doesn't own their buildings, but on the other side, Marriott does. Now you may have one question in mind. Now, what's the problem with owning our asset? So if you look at companies like Marriott and we work, they used to own a lot more buildings and properties because they have taken these properties in buildings on lease. And because of COVID-19, nobody was traveling and these companies faced huge losses because they own these property and buildings. And that's the problem with owning the asset. All these platform business like Airbnb or Uber or Amazon, they are asset-light that doesn't own any of their property. The second reason why these platforms are so powerful is because they have zero marginal cost. So what do you mean by marginal cost? So every time a business add a new customer, they have to employ some people to manage that customer. In case of Airbnb, they have zero marginal cost. And same goes with Uber and with Amazon as well. Because these brands are acting as a platform, They don't really have to employ their own people. Anytime they add a new customer or a new seller. If I'll give you a simple example in case of Airbnb, Airbnb benefits from external resources like their host, and they don't really have to employ their own people to manage that property. And that's why all these platform business have zero marginal cost. The third reason these platform businesses are so powerful is that the benefits from the network effect and let me simplify network effect for you. So the reason you use WhatsApp is because all your family members and friends are also there on WhatsApp. And that's the network effect. Anytime you use a product, the value will multiply if you have more people using the exact same product. And that's your network effect. In case of Airbnb. If more host will register themselves on the platform, more guest will automatically book their hotel or their property on Airbnb. And this is a good example of network effect. If all the best property in a town are listed on Airbnb, people will automatically use this platform. And that's the network effect. It's there in case of Amazon, network effect is also there in case of Uber and Airbnb, I guess network effect is there in almost every single platform business model. Now Brian jet ski, who is the co-founder of Airbnb. He summarized all these learning in a single tweet in 2014. Let me show you that tweet. In 2014, Brian Chomsky said that Marriott wanted to add 30,000 room this year, but we will add that in the next two weeks. And one of the reason AirBnB was able to expand really fast is because they don't really own any assets. They have zero marginal cost and they have achieved a network effect. And that's how they're able to scale their business so fast. And that's the reason why platform business model are so powerful. Now that you understand what exactly is a platform business? Let's understand two different types of business model. All these platform businesses use. The number one is marketplace business model, and number two is aggregator business model. In the next video, let's talk about marketplace business model. 18. Intro to Marketplace business model: So in the last video, we had a discussion about black non-business. In this video, we'll talk about marketplace. But if you are purchasing things online, then there is a very high chance that you are already using a marketplace. Before understanding marketplace, let's talk about what exactly is a market. Now in simple term, a market is a place where people buy or sell things. Now there may be a special building for this marketplace, or these can be held in an open area where sellers can put up their stall. Like a kind of tanked in the marketplace existed way back in the ancient time where people used to go out to buy or sell things. But in 2023, we all are lazy and we are buying all of our products online. And that's why let's understand about online marketplace versus offline marketplace. The best way to understand offline versus online marketplace is by looking at the distribution of a product. So let's understand that with the help of this diagram. If you look at a product, normally a product is produced by a producer or a manufacturer. Then the cell, all of these products in bulk quantity to a wholesaler. And then these wholesaler will sell this product to all these different retailer that are very close to our house. And we end up purchasing these products from retailers. That's a normal supply chain or a distribution of a product that is there in case of offline marketplace. But in online marketplaces like Amazon or whatever e-commerce site that you are using. They are acting as a bridge between producer, so-called manufacturer and consumer. And they have removed these two parties, like wholesaler and retailer because you don't have these two parties in-between. These producer or manufacturer, we'll end up selling their product directly to the consumer at a much cheaper price. And that's the beauty of online marketplace. So if you look at companies like Amazon that directly ship you the product with the help of a logistic partner. Or some time, Amazon use their own logistic network to ship you the product. Now before going deep into that, let's understand about what exactly is a marketplace. Marketplace create a trusted place for buyers and sellers to discover a product and exchange products and services. Now this marketplace can be a mobile app or an e-commerce website, but their main role is to bridge a gap between buyers and sellers. These marketplace can provide you a product or a service. If you look at companies like fiber, they are more into service. And if you look at companies like Amazon, they are more into product. But their main role is to bridge a gap between a buyer and seller. Now, if we talk about a company like Amazon, on Amazon, these producer or manufacturer can sell their product directly to the end consumer with the help of this platform, that is their e-commerce website and a mobile app. Now these producers are getting value from the platform because they are able to sell their product directly to the end consumer. And they don't really have to worry about the logistic part. In return of that value. Amazon is taking a small cut that can be 15% or 20 per cent in different countries. And that's the marketplace business model in case of Amazon. Now when we talk about marketplace, they have three important role. Number one is to balance out the supply and demand of a product. Let's say on Amazon, if more people are purchasing the same product and those producers are not able to produce that product, then it's a loss for Amazon and the producer as well. And the customer will be unhappy, and we'll understand how exactly Amazon solves that problem. Now the second row of a marketplace is to facilitate the transaction. Now, Amazon have multiple payment options. Can pay using your credit card, your debit card, or let say if you're using some third-party apps, amazon provides you payment flexibility and they will ensure that if they accept the payment from you, they will transfer that payment to the producer so they facilitate the transaction between two different parties. The third main role of these marketplace is to make sure that they have created a trusted and safe environment for both the people, the producer, and the consumer. If a consumer is not happy with the product, they can always write one-star or they can return the product back to the producer as well. So these are the three important role of a marketplace. Balancing of the supply and demand, facilitating the transaction, and creating a trusted place for users. Now, before we go deep into this, let's understand about the different types of marketplace we have. I have divided the different types of marketplace based on the control and interaction. So let's talk about the different types of marketplace based on the control, that how much control does a marketplace have? And we can divide marketplace in three different types. So you have a light marketplace, then you have managed marketplace. And in the end we have heavily managed marketplace. Let's talk about light marketplace. So if you look at companies like Craigslist. Or thumbtack or Zillow. These other really good example of light marketplace. That means anyone can list their property or their legal service or a carpenter service on Craigslist or Zillow. And other people can contact that specific person. That's a light marketplace. That means companies like Craigslist and Zillow don't really have strict standard or quality control on all the services that are listed on their platform. And that's the example of a light marketplace. Then you have managed marketplace. Companies like Airbnb and Uber. These companies have very strict control on the product that are there on their platform. They have strong quality check and standard to make sure that all the people who are listing their product on the platform are of good quality. So if someone is not following their quality standard on Airbnb, they will throw them out of the platform. And that's why we call these as managed marketplace. Because companies like Airbnb and Uber make sure that everything that is there on the platform is top-notch. The third one is heavily managed marketplace. If you look at companies like Amazon, they have the best quality product on their platform. So they have strong quality standard. They are shipping their product by themselves. So they are using their own logistic network. And they're also helping these sellers in the payment part. And they also have their own warehouse in case epsem seller wanted to use their warehousing service. So these are the different types of marketplace based on control. So enlight marketplace, they don't really have a very strict control on their platform. In managed marketplace, they have a specific guidelines that you have to follow. If you wanted to list your product on their platform, then you have heavily managed marketplace. They will provide you almost everything you need to sell your product. From warehousing, logistic to payment integration. They will help you in almost everything you want. So these are the three different types of marketplace based on control. So now let's talk about the different types of marketplace based on the product type. Marketplace can sell a digital good or a physical good, or a service, or maybe a mix of all. Let's talk about a marketplace with physical or digital good. So if we talk about Amazon and add z, they are basically simple marketplace that will bridge a gap between a seller and a buyer. On the other side, eBay is a peer to peer marketplace. So if you have a product and if you wanted to sell that product to different people, or let's say if you want other people to bid for your product, well, you can do that on eBay. And I've seen carry be doing a lot more stuff on eBay. You can watch the videos. But on Eventbrite, you can buy the tickets of these concert or latest events that are happening in a specific area or in a city. And that's your physical or digital good marketplace. Then you have a marketplace that will provide you some service. Things like Uber or Airbnb. And you already know about this, Uber will provide you taxi service and Airbnb help you find good places where you can stay. Then you have your service marketplace. And they will help you find a freelancer that can do a job for you. So platforms like Upwork or TaskRabbit, these are all the example of a service marketplace. So let's say if you're looking for someone for your website design, all you're looking for a UI designer. You can find all these people on Fiverr or Upwork or task rabbit. In the end you have your connection marketplace. And a good example of this is Bumble or match.com, which is the parent company of Tinder. So you have all of these different types of marketplace based on the product type. 19. How to build a Marketplace business Model: Hey everyone. In this video, we will talk about all the important things you need to understand in a marketplace business model. So in this video, let's talk about the fundamental difference between offline marketplace and online marketplace. So in offline marketplace, you can simply visit our retail shop. You can touch and feel the product even before you purchase it. You have proper trust and safety because you can always go back and return the same product if you're not satisfied with the quality. And on the shopkeeper side, if they are getting more demand from the customer, they can increase the price. In the offline marketplace. Those people have already solved the problem of touch and feel, trust and safety, return and demand and supply. Let's understand how do you solve all these problems in an online e-commerce store like Amazon? Let's talk about all the important things you need to understand in an online marketplace business. I have broadly classify these things into four different categories. In the first part, we will talk about Marketplace economics. And in that part will understand how do you manage growth in a marketplace business model. How do you balance out the supply and demand? And how do you increase the price of a product? The second part is Marketplace signs. And in this part we will understand how Amazon will recommend you the product. So in this part, we will understand them all. The recommendation engine of Amazon that will recommend you the product. And in this part we will also talk about marketplace liquidity. In third part, we will talk about marketplace conversion, optimization. And in this part we will talk about your funnel optimization and how a marketplace achieve network effect. In that part, we will understand about growth loops and fly wheel concept. In the fourth part, we will talk about marketplace trust and safety. So how do you build trust and safety between your customer and your reseller? So in this section we'll talk about disintermediation and how do you keep the bad actors out of the business? Let's start with Marketplace economics. So how do you manage growth in your business and how do you balance out demand and supply issues? Now let's say if you're starting out your marketplace business and you don't really have a lot more customer on your e-commerce site, then deed seller may not show interest in listing their product on your platform. And same goes with customers as well. If these customers are not able to find multiple product on your platform, they will not purchase it. So you have to solve the problem of onboarding more number of seller and customer at the same time. And that's how you solve the chicken and egg problem. And all the marketplace. Companies like Amazon or Uber or Airbnb, all of these companies have solved this problem. If you are on-boarding more number of sellers on your platform and they are listing more number of product. In that case, you are adding value to the buyer. And if you are adding value to the buyer, in that case, you end up attracting more number of customer. And if you have more number of customer, you will end up attracting more number of sellers as well. And that's your chicken and egg problem. And this was solved by almost every single company. You know, you have to ask questions like, do you have enough supply to meet the demand and to make your customer happy, you'd have to generate two-sided growth with a good balance of supply and demand. If you are working in Amazon, then you need to make sure that you are balancing out the demand and supply across all these different categories you have. So you have to maintain demand and supply in beauty in electronics across all the locations you have. And in case of fiber, you need to maintain demand and supply across all the different skills that people are looking for. And that's your demand and supply and maintaining the growth engine as well. Second thing you need to understand in marketplace economics is your price equilibrium. And to oversimplify this topic, let me give you a very small example. If you have used apps like Uber or DoorDash to order food online, you may have seen a surge pricing, especially at the time of evening, which means the price will normally go up during the moment of peak demand and that's your surge price. And that's one of the strategy that is used by almost every single marketplace. So an x-axis, you have demand, on y-axis you have price. And these practicum use something known as dynamic pricing, where the price of the product will increase if the demand of that specific product is increasing. Because the final goal of any brand is to make sure that they are generating the maximum amount of revenue. And the way you can calculate revenue is by multiplying your price with the number of products that you can sell. If you're able to sell more number of product, you have to increase the price so that you can balance out the demand and the supply in the marketplace while making sure that you are generating the maximum amount of revenue. Now there are some companies who use this dynamic pricing more often than the other. If you look at companies like Uber or DoorDash, Uber, you will see a peak demand, especially between 06:00 P.M. to let say 08:00 P.M. in case of DoorDash, you will see the peak demand, especially around 08:00 P.M. to 10:00 P.M. because at that time people normally order food. And that's why these four tech companies normally have surge pricing or dynamic pricing during the moment of peak demand. And if you're working for a company that is using marketplace, then you have to work on this as well. The second thing you need to understand in marketplace is the marketplace signs. So you need to work on algorithm and data science mobile to make sure that you are recommending the right product to the end customer. Or let's say if you're working for dating app, in that case, you have to pick the right kind of tag or interest profile, and then you have to match both the people. Because the main aim of your company is to make sure that people get what they want in the shortest duration of time. And that's why you work a lot on this recommendation engine or recommendation model. Now I may not have enough time to cover all the different types of recommendation model, but I've made a course on retail management. And in that course I've made a video about lift that is used by Amazon in their recommendation engine. If a lot of people are purchasing bread with butter than the liftoff bread and butter is very high. And then the algorithm will start recommending both the product that if you like this, you might also end up liking this. So that's why they recommend the similar kind of products that have a higher lift. But let's not talk about that. Let's understand a little about how Amazon recommend product based on the rating of a product. Let's say if you're giving a five-star rating to a product than Amazon will consider that as a good experience. And they will recommend that product to more number of people. But if you're giving a low rating to a product than Amazon will not recommend that product to many people. If you don't really have a rating at all, then then they won't be even interested in showing that product to people at all. Second thing you need to understand in marketplace signs is Marketplace liquidity. Liquidity is a term that is often used in stock trading platform like Coinbase or finance or Robinhood. But marketplace also use this concept of marketplace liquidity. In simple terms. Liquidity means our seller can quickly find a buyer without having a cut through the asset price to make it attractive. When we talk about a buyer's liquidity, that means what is the likelihood of a customer? If he's searching for a product that end up in a transaction. That means if ten people are searching for a product, how many of them will end up purchasing that product? That's the buyers liquidity. And Amazon always try to optimize for that. So if that requires them to drop the price based on the past transaction history, they will always do that. So let's say if you have not purchased anything in the last six months or a year. And now we're visiting on Amazon for the first time. Amazon will always reduce down the price so that they can increase the buyers liquidity. On the other side, let's say if you have purchased expensive stuff from Amazon and you are a repeat user of the app. In that case, they will not reduce down the price of the product. And they call it as such to fill rate. So in case of Amazon, the percentage of sorts session over a given month and the amount of purchase that happens on the platform is your search to fill rate. In case of Uber, this could be the percentage of requests that you are meeting per week and the number of rights that have booked on the platform. That's your search to fill rate for Amazon and Uber. Now in case of supplier, these marketplace also measure the suppliers liquidity. So they will understand what is the utilization rate of all the products that the supplier is selling on the platform. So let's say if the supplier was having handled number of stock keeping unit at the starting of the month and now he have, let's say five units remaining. In that case he has the 95% utilization rate, and that's the suppliers liquidity. Now, Amazon normally measures the suppliers liquidity as the percentage of stock at the beginning of the month compared with the percentage of stock that is true, meaning by the end of the month, and that's the suppliers liquidity. Now for AirBnB, this is super-important because they quickly had to book this room every single day. The majors, the suppliers, liquidity every single day. So what is the proportion of rooms booked every single night? And that's their utilization rate. So you measure these things. So maybe every single day or every single week, or maybe every single month, depending on the type of business you have. Now the third thing that you need to understand in marketplace is the marketplace conversion optimization. And I'm sure a majority of you understand the conversion optimization. So you have a normal funnel. At the top of the funnel, you will look at all the sessions that are there on your app or website or your business. And at the bottom you will see the total number of transaction or successful order. That's your fun. In e-commerce. You will track the session, then you will track the individual product page view. Then you look at how many people are adding the product to their cart, and finally the successful transaction. Now, in order to optimize a funnel, you have to work on so many different parameters. Let's say you have to work on user design, then you have to see all the keystrokes, or let's say all the steps that are required to do a purchase on your platform and you have to optimize all those steps. Let's say which all step can you reduce and how can you optimize it further? So you have to use a lot more product analytics tool to make sure that you're optimizing this one. So now that you know all the important things you need to understand in a marketplace. Now let's talk about how exactly does a marketplace business work? So as you already know, marketplace is an e-commerce site, and this can be an app or a website where these third-party seller sell their product or service to these customer. Now if you look at the distribution of a product in a traditional supply chain and marketplace, you will find a huge difference in a traditional business. So if you look at a traditional supply chain, the producer makes the product. And then these wholesaler will purchase these products in large quantity from a manufacturer. Now these wholesaler will then distribute this product to all these different distributor. And finally, it's the distributors dropped to distribute this product to all these entry tailor that are very close to our home. And then we will go to these retail shop and we'll end up purchasing these products. And that's the traditional supply chain. But if you look at a marketplace business like Amazon, amazon directly on-board these wholesaler on their platform. And then they will take, let's say, ten to 15% commission. And then they sell this product to the end consumer at the most affordable rate. And they are removing distributor and retailer from the supply chain. That's how you will always find a price difference if you buy the same product from offline store versus online. So you can see that if you buy the same product from an offline store, you will find it a little expensive than on Amazon or let's see, any other e-commerce store. The simple reason is they have removed these distributor and retailer from the supply chain. So now let's understand how exactly Amazon implement their marketplace strategy. So Amazon normally reach out to all these wholesaler, or sometime these wholesaler reach out to Amazon and they will list their product on this platform. And finally then Amazon sell all of these product to the end consumers like you and me. Now once these wholesaler, or let say, resellers started selling their product on Amazon. These people have realized that they don't really have to open a retail store. These people started storing all of their product in the fulfillment center of Amazon. In traditional way, you call these Fulfillment Center as warehouse. They will purchase all of their product from Alibaba, from China. And then they will ship all these product directly to the warehouse Amazon. And it's the Amazons responsibility now to make sure that they are shipping the product to the end customer. And then these reseller, or let's say wholesaler will get their cut. 20. Introduction to Aggreggator business model: Hey everyone, My name is now deep. And in this video, we're going to talk about aggregator business model. Now in the last video, we had a discussion about marketplace business model. And in that video, we had a discussion about all the important things you need to understand in a marketplace business model. Unlike Amazon, if you look at companies like Uber or Airbnb, these companies use aggregator business model where they aggregate all these different properties are let's say car driver on their platform. And then they provide service to the people under a single brand name. Now, aggregator and marketplace work exactly the same way, but they have some differences in their business model. And that's why in this video, we will talk about aggregator business model. And in the next video, we will discuss some differences that are there between aggregator and a marketplace. But before that, let's understand about aggregator business model. Just like marketplace, aggregators create a trusted place for buyers and sellers to discover the product and service under a single brand name. Now, aggregator and marketplace work exactly the same way, but they have few differences. I'll give you a couple of example of aggregators. You have companies like Airbnb, which is a hotel aggregator or a property aggregator. And then you have companies like Uber, that's a car aggregator. Now, unlike marketplace aggregator have a single brand name. They have a single terms of service that you need to accept an almost the same price. But these things may not be the same in case of marketplace business model. Now before we talk about the difference between an aggregator and a marketplace, Let's talk about a company that use our aggregator business model. So in this video, I'm going to explain the business model of AirBnB, which is a good aggregator of properties or let's say hotel. So you have your AirBnB and their main job is to make sure that they are bridging the gap between a customer and a property owner. So AirBNB have different hotel on their platform. So a customer can simply book a hotel by doing the payment. And apart from that, you can also compare prices of all these different hotel. He can check the rating. And in case if he's having any dispute after the booking, he can also resolve that dispute with Airbnb. But on the other side, Airbnb also provide multiple benefits to these hotel owners. So let's say they don't really have to do a lot more marketing because Airbnb is doing marketing by themselves. All they need to focus on is the comfort of the customer. If the customer is happy, Airbnb will manage all the things. And Airbnb will also ensure that the hotel is having a good occupancy rate or utilization rate. And the way Airbnb do that is by using a dynamic pricing. So that's your aggregator business model. Now I don't really want to go deep into aggregator because we already had a discussion about these concepts in the last video. So let's understand the difference between an aggregator and marketplace in the next video. 21. Aggregator Vs Marketplace business model: Hey everyone, In the last two videos we were discussing a lot about aggregator and marketplace and how these business model are somewhat similar, but they have some differences as well. So let's talk about all those slight differences that are there between an aggregator and a marketplace. Let's start by understanding some companies that use marketplace business model, and few companies that use aggregator business model. So companies like Amazon simply connect splendor or third party seller with the customer. And then they also provide services like payment, logistic. On the other side, companies like Uber and Airbnb onboard all these vendors like property owner or card driver, under a single brand, that is Uber or a and B and B. And then they provide services to these different customer. But let's understand about all the differences that these two have. The first difference is branding. If you go to an e-commerce website or a marketplace like amazon.com, you will find variety of product of different brands. But on aggregator, all these goods are aggregated under a single brand name. If you book a cab on Uber. Now in that case, it's the Uber responsibility to make sure that you are having a safe, right? The second difference is industry. If you look at a marketplace like Amazon, on Amazon you can buy anything from a yoga mat to a ceiling fan. But on aggregator, all these goods belong to a single industry. Airbnb is exclusively, therefore property and Uber is exclusively there for transportation. The third difference is quality, because all these marketplace have variety of sellers and they are having their own personal identity and pricing, you may not be able to find a uniform quality in their product. But on aggregator, they have a strong quality standard. And that's why you will find a uniform quality across all the different products, at least in case of Uber, not in case of Airbnb. The four differences price on Marketplace. You can buy anything from a yoga mat to a MacBook, and that's why you will see a white price difference. But on aggregator, you will find all these product at almost the same price. So if you look at Uber, you will still have to pay anywhere between $5 to, let's say 20 dollar. In case of Airbnb, you have to pay somewhere between maybe 50 dollar to let say $150. So they doesn't have a huge difference in the price range of different products. The fifth one is Thompson condition. Because in marketplace, multiple sellers are selling their product. They may have these different terms and condition. But on aggregator, you just have to accept one terms and condition. Sixth one is responsibility. Marketplace still take some shots of responsibility if the product is damaged or let's say if the product is not meeting their guidelines. But they still are not very strict in terms of the responsibility. But on aggregator, they're fully responsible for anything that goes wrong with their product. And that's the basic difference between an aggregator and a marketplace. In the next video, I'm gonna give you a problem-solving assignment. And I personally request you to complete that assignment so that you can implement your loan. 22. Assignment - Platform Business Model: So in the last few videos, we had a discussion about these different types of platform business. In those videos we had a discussion about marketplace business model that is used by companies like Amazon and eBay. And we had a discussion about aggregator business model like Airbnb or Uber. Now, let me give you a problem-solving assignment so that you can implement your learning. So let's say your family is running a traditional beauty salon. And now you have to reinvent this traditional beauty salon in a black consciousness. Now, in a beauty salon business, you have three important parties. The number one is the beauty salon itself. Then we have a hairdresser that provide you all these different types of services you need. In the end, you have your user who is availing these services. So if you are reinventing your traditional salon business into a platform, then obviously you have to make a website or a mobile app. And in that case, you can use all of these different types of business model. Now there is a slight difference between all these different business model. And by the end of this assignment, I'm going to tell you which business model is good for you. So let's start with our first business model, that is pipeline model. Now, in the pipeline model, you will simply connect your user with the hairdresser. This is super simple. But the second kind of business model is listing fees model, where you take a small fees, so-called a platform fees from the hairdresser so that you can list them on your platform for that you may charge, let's say, 100 dollar or 150 dollar, so that you can make the profile of a hairdresser visible on your platform. And that's your listing fees model where you charge a platform fees so that you can list those hairdresser. Third is the two-sided platform model, where you take a small cut from the hairdressers amount. So let's say if the hairdresser is owning 100 dollar, you can take a five per cent or let say 10% cut because you're giving them the customer. That's your two sided platform model. The fourth one is multi-sided platform model, where you take a small cut, both from the hairdresser and from the user. Let's say to book a hairdresser or user have to pay, Let's see, maybe $5 or $10. And you will take, let's say 5% or 10% commission from the user. And let's say maybe five to 10% commission by the end of the month from the hairdresser as well. Then in the end we have subscription business model where you charge a subscription amount to the user so that you can avail these different services on your platform. So all these different types of business models have some advantage and some disadvantage, but you have to figure out which business model is best for your business. And we will do that by the end of this assignment. This assignment, you have these three important parties. Your hairdresser, your mobile app or website, and your end-user. You can show all these different types of business models using this diagram. So please take out a pen and a piece of paper and you can spend ten to 15 min completing this assignment. And after that, we'll talk about the solution. So I assume that you have spent some time solving this problem by yourself using all these different types of business model. So now let's solve this problem with the help of linear or pipeline model. Now this is the simplest form of business model that you can use. So you have your website or let's say mobile app. So you are the intermediary of this business model. And let's say you have hairdresser on one side and a user on another side. As an intermediary, your role is to make sure that you're connecting the hairdresser with the user. So in the linear or pipeline model, the beauty salon will hire these independent hairdresser and they will rent them out to these end-user. And if you look at this business model, they have some major risk of bypassing. Let's say for hairdresser is reaching out to these customer, then they can make a strong bonding or connection with these user. They don't really need these platform anymore. I mean, they can directly reach out to these user and they can give them the service. So there is a major risk of bypassing the platform. In technical terms, we call this as a disintermediation or platform leakage. And let's fix this problem with the help of one more business model. That is, a listing fee, small listing fees model, a platform or a beauty salon will charge a flat fees to these hairdresser so that they can list their profile on their platform. So let's say you will normally charge 50 dollar or let's say 100 dollar, so that you can list these hairdresser on your platform. So you have your beauty salon, your mobile app, or your website in the middle. And you have hairdresser on one side and user on another side. And let's say you are taking a listing fees from these hairdresser so that you can provide a market access because you have the access to these many customer and these hairdresser need the axis. And that's why they are paying with the platform fees or listing fees. And then these user can talk to these hairdresser and they can tell them about the requirement, that kind of budget they have, and that these hairdresser can provide them a service by giving offer. And that's your listing fees model. So if the platform is connecting these hairdresser with the end-user, then they still have the bypassing risk or platform leakage. So let's talk about the third type of business model. That is the two-sided platform model. Now in two-sided platform model, you will try to take a small cut, maybe around ten to 15% from the hairdresser every time he gets a booking on your platform. Let's say anytime a hairdresser get a booking of a user, they will pay a platform fees. This can be ten to 15%. And for that, a platform will provide them the market access, and they will also help them in accepting the payment from the end-user. They will have all of these payment integration, payment settlement. And they are giving market access for these customer. Now this two-sided platform model is used by almost all the different types of aggregators like Airbnb or Uber. Now, another advantage of using a two-sided platform model is network effect. Now I'm skipping network effect for awhile because we have a dedicated video on network effect. Let's say after thinking about these three different types of business model, you started talking to these different hairdresser. End-user saw that you can understand what kind of problem these people are facing and how exactly you can solve this problem. And after talking to your user, or let's say a hairdresser, you came up with this multi-sided platform model. So after talking to these different hairdresser, you will realize that these people don't really have a lot of money to buy these expensive equipment. You will take a small commission of Ron, 15 to 20 per cent from these hairdresser because you are giving them the market access and you are accepting and settling payment from the customer. And in return of that, these hairdresser or getting a booking. But the best way you are doing now in the multi-site black foam model is that you're lending your equipment to these hairdresser and you're giving them the proper training so that they can perform their role. And this is also considered as one of the best business model in this case. The fifth one is the subscription fees model, which may not work well in this business, but we are still discussing about it. In subscription business, you will take a subscription fees from your user and then you will release the money directly to the hairdresser without any commission. And leads users can avail these different types of services on your platform. So hairdresser is getting market access from you and these users are being used in monthly fees. And in return of that, these hairdresser or providing services to these user. So one of the best business model you should implement in this case is multi-sided platform model. And let me explain why I am interested in choosing this business model. In a platform business, you have to make sure that you are maintaining a strict quality control. You also need to make sure that your service provider are giving you the right kind of service at the right time. And then you also need to make sure that you are taking a small cut from both the side so that you can provide these services. You are taking a 15% commission from hairdresser or let's say a 10-person commission from user. And you're getting money from both the end. In return of this money, you are providing proper training to these hairdresser and lending equipment so that they can perform their service. And that's why multi-sided platform is considered as the best business model. 23. Introduction to Network effect: Do you ever wonder why people use WhatsApp when they have so many messaging apps like Viber, telegram, signal, line, and many others. This is not just about WhatsApp. If you look at their e-commerce preference, majority of people use Amazon. Instead of using other e-commerce marketplace like wish or eBay or Etsy and many others. So what's the reason behind people using WhatsApp for messaging and Amazon for e-commerce. And the reason behind that is network effect. These two companies are able to defeat all other companies because they have a very strong network effect. So in this video, we'll discuss what exactly is a network effect. How these brands are able to win or maybe lose the market because of network effect. And how you can implement this network effect in your own startup. So to understand network effect, just take a second and think about few large US companies that are booming right now. So you may think about companies like Apple, google, Microsoft, and many others. All these companies are successful because of this network effect. Now a network effect is a phenomenon whereby a product or a service gains the additional value as more people use it. To help you understand network effect, let me ask a very simple question. Why do you use WhatsApp or Instagram? Well, your answer would be because all your friends and family member use these app. Let's say if you have ten members in your family, majority of them are using WhatsApp, and that's why you also have to use the same messaging app. Similarly, if majority of your friends are using Instagram, but in that case you also have to use the same social media app. Bot network effect is not just about messaging app or social media telecom software blockchain. Almost all these companies from different sectors use network effect. In fact, 70% of value in tech is driven by network effect. And that's why in this video, we will understand about network effect. One of the simplest way you can understand this network effect is with the help of this simple diagram of some people call this diagram as the flywheel of Amazon. And this fly wheel is driven by network effect. If you fundamentally look at any business, majority of the business are winning the market because of lower cost structure. Now to maintain this lower cost structure, you have to maintain the lower prices on the platform so that more and more people can purchase the product. Now, imagine if Amazon have the lowest price of product on their platform, and many people are buying these products on that specific platform. Customer experience will be great. If you are providing a great customer experience to all these customer, then they will attract other people as well. So lower prices will leads to customer experience and better customer experience will attract more number of customer. And if you have more number of customers on an e-commerce platform, that will automatically attract more number of seller. And if you have more number of sellers on the platform, they will end up listening more number of product. And now you have more product on your platform. It will automatically attract more number of people because people like variety of products, network effect is more prominent in case of social media app or messaging app. If you look into e-commerce, you may find some other companies as well, like eBay, Etsy, or maybe Walmart, apart from Amazon. But if you look into messaging, then you will find that majority of people are using WhatsApp, maybe 90% or 95 per cent of people are using Whatsapp. Some business will have more prominent network effect than other business. Now let's understand what value does this network effect to bring to the business? And the number one value is cost reduction in the customer acquisition. Now, imagine there are ten members and your family. And let's say out of those ten members, eight members are using WhatsApp as their messaging app. Let's say your dad is giving a new smartphone to your grandma. So now everyone in your family will advise your grandma to use WhatsApp because every single one of you is using the exact same messaging app. Now, metta or Facebook have a new customer without spending a single penny. That is possible because of network effect. And the same concept goes with Instagram. If she wanted to use a social media app, there's a very high chance that she will install Instagram because each one of you is using the exact same platform. The second value and network effect bring to the business is the higher liquidity. This is more prominent in the marketplace. So if you have more number of sellers on the platform, they end up listening more number of product and that will attract more number of customer. And those people will end up buying all of their product. And that's why these marketplace have higher liquidity if they have a strong network effect. The third value these businesses get out of network effect is deeper relationships. If you have used apps like Instagram, if you open the app, Instagram will normally suggest you to upload a picture or maybe a video or a story so that other people will also get to know about you that what exactly are you doing in life? And that's how you end up building relationships with your colleague or with your friend. And the app is also strengthening your relationship in your own network. Now, these network effects are super difficult to break. So let's say if you uninstalled Instagram, you will lose all your connection. And it is super difficult for you to find the exact same people on some other platform. And that's why you are stuck on Instagram. Similarly, you don't really have any other replacement for Amazon because you cannot really find a large variety of products that will reach to your doorstep at the most affordable price. And that's why you're locked into the ecosystem of Amazon, mete and all the credit goes to the network effect. Now let's understand how these network effects are built. And to oversimplify this, let me give you a simple example where people are talking to each other on a cell phone or on a mobile phone. Let's say if two user talk to each other, That's a single interaction. Let's say if you're giving a cell phone or a mobile phone to these five different user. They can have ten different ways of interaction. So let's say this person can talk to all these four people. And similarly, this guy can talk to all these four different people. With five user, you will have ten different interaction. Let's say if you increase the user count from five user to let say 12 user, in that case, you will have 66 different interaction. So if you increase the user, you will have more number of interaction. Now these users are also called as nodes, and the interaction between them is connected with the link. So in simple term, all networks are formed by nodes and links. Now, these nodes participate in the network. And if the central node has the higher number of links, then it will have a higher value when compared with marginal nodes. So if you look at this diagram, you will see that the central node have less than number of links when compared with this one. And that's why it's a strong network effect when compared with this one. So the strength of a network can be measured by two different parameters. The total number of links in the central node, that is this one, and the value of these links in the network. So we understand the first part. If you have higher number of links in the central node, the network effect will be stronger. But what about the second part of the network? How will you decide the value of the network? So let's say you have two different scenario. In scenario one, you have hundred connections on LinkedIn. And let's say out of these hundred connection, ten of them are CEOs of some company. In other scenario, you have the same hybrid connection, but you're connected with normal people. The value of your network in first case is higher than the value of network. In this second case, the strength in your network will be decided by the total number of links in the central node and the value of those links. That's all about the basics of network effect. In the next video, we will understand how these different companies are using the different forms of network effect. So in the next video, we'll talk about the different types of network effect. 24. Types of Network effect: Hey everyone. In the last video we had a discussion about what is network effect and how these companies are implementing the network effect. This video, let's talk about the different types of network effect. I have broadly classified the different types of network effect into four different parts. The first one is marketplace network effect. And this is used by companies like Airbnb and Amazon. If you have all the good properties listed on AirBnB, then people will automatically install the Airbnb app, and then they will book their property or stay on this platform. Same goes with Amazon. If all the different sellers are selling their product on Amazon. And there's a very high chance that people will install just Amazon in their smartphone. Then we have data network effect. And to really good example of data network effect is Netflix and Google. So one of the reasons why Google is giving you saw accurate answer is because so many people are using the search engine. The search engine will improve over time. So if more and more people use the same search term, then the search engine will improve the result it is shown to be. And that's the data network effect because they have large amount of data, they are able to give you the answer much better than others search engine. And the same thing goes with Netflix. Because so many people are watching these different movie series or web series on Netflix. Their recommendation engine is able to recommend you a better movie than the others. And that's the data network effect. Next is the platform network effect. And a really good example is operating system. So in mobile, we have Android and iOS. In computer we have Windows and MacOS. And one of the reasons other operating system died is because it is super difficult to attract all of these app developers to build these millions of apps for your operating system. So today, if you wanted to build a new operating system, it is difficult to invite companies like Facebook or independent developers to build an app for your OS until you don't really have a large number of users. So you will have a chicken and egg problem. So to attract large number of users, you need to have a lot more app on your OS. And to get so many apps on your OS, in that case, you have to have more number of users. So it's a typical chicken and egg problem, and you have to solve that problem side-by-side. The fourth type of network effect is your physical network effect. So let's say if your family members are connected with the telephone network, and if new person joins the network, it will increase the value for other people in the network. Now, when it comes to the execution side, there are broadly two different types of network effect. The number one is your direct network effect. So if a network effect is powered by directly connecting to different people, then it's a direct network effect. And this is there in case of social media app or messaging app. And this is the strongest network effect. So if you have more number of users using your app than that specific thing, we'll add more value for the existing user. So if you have new users using your social media app or let's say a messaging app, then they will add more value to the existing user. And a really good example is Facebook, WhatsApp, Instagram, Snapchat, or TikTok. And you already know about this direct network effect. Now the second type of network effect is two-sided network effect. And it's there in companies like Amazon and Uber, where if you have more number of drivers or let's say sellers on your platform, this will automatically attract more number of users. But you also have pulled part, that is the distribution. So in case of Amazon, their mean value proposition is logistic network. If they have a strong logistic network, they will be able to ship all of these product at a very cheaper price. And same goes with Uber if they have more number of people using the service. In that case, they can also attach food delivery or shipping product within a city and all of these things. So that's a good example of two-sided network effect, where user, supplier and the value proposition is there. Now let's talk about one of the most interesting and important part of this video, why these companies are interested in building the network effect. And the number one reason is business mode. 25. Network effect and Business Moat: Now you may have one question in mind that now why these many companies are interested in building a strong network effect around their business? And the answer would be because they wanted to build business model. So now let's understand what exactly is a business mode. Now, business model came from the word more. So if you have seen a castle or afford, you may have observed that they are all surrounded with water. And the idea is that they wanted to prevent the building from these enemies. And the businesses started using the same concept and the name-date business mode. Business mode is the unique advantage that your business have saw that they can prevent themselves from the competitors. Now let's understand how these businesses, like WhatsApp or Amazon, or using network effect to build business mode so that they can prevent themselves from the competitor. So let's understand about the different types of business mode. Now, the first type of business mode is switching cost. Now if you look at the ERP ecosystem, that is enterprise resource planning, you have companies like SAP and Oracle. Oracle have a product with a nim net sweet. And it's a really good example of ERP software used by enterprise. Now because these enterprise are using these ERP software from decades, it is super difficult to switch to a new product because every single person in the company is comfortable with using SAP or Net Suite. And that's why in ERP you have less competition because it is super difficult to enter into this space and acquire enterprise company. Because if you implement a new ERP software in your company, you have to train every single employee on how to use that ERP software. And it is also difficult to integrate your database and some other plugins with that ERP software. That's why it's switching cost is one of the type of business model that you can build in your business. So if you make it difficult for other people to switch from your product, that's a business mode. The second type of business mode is brand habit. Now if you look at clothing brands like balance sheet yoga or LV, you will realize that people are just varying these clots because they wanted to show off to other people. And they are very emotionally attached with these brand. And that's why brand habit is also a type of business mode. Now the third type of business mode is proprietary tech. If you have built a product that is difficult to replace, that is also an example of business mode. And if you look at products like Google Maps, Google Map is used by more than 1 billion people. And because so many people are using this product, this product is constantly improving itself. Because Google is collecting millions of data points from these customer, they're constantly training those data model so that they can give much more accurate result. So that is also a type of business mode that is proprietary Tech. And this kind of business mode can be built on the top of data, network effect, economies of scale. This business model is built by companies like Oculus, Tesla, and Amazon. So I'll give you a simple example of Amazon, because Amazon is the market leader and majority of the people are buying all of these product from Amazon. The power unit logistic cost of Amazon is very less. And that's how they are able to ship the best quality product at the most affordable price. And that too in a single day on your doorstep. And that is possible because of economies of scale, because they are shipping these products in millions of quantity every single day. And the beauty of these network effect is that these network effects grow exponentially over time. After a point of time, it is super difficult to break these network effect. 26. Introduction to Pay-as-you go pricing model: So when I was a kid, I was really fascinated by these video games. I used to borrow some money from my mom. And the pricing model was super simple. You just buy a token, play the game, and maybe repeat the process if you want. And that reminds me of are interesting pricing model. That is p As you core pricing model. So hey everyone, My name is now deep. And in this video, we're going to talk about P as you go pricing strategy. This pricing strategy is used by multiple digital apps and Cloud computing platform. Now, pay-as-you-go pricing model is also known as your usage-based pricing or consumption-based pricing, or maybe transaction based pricing. Now these different companies use this pricing model in different ways. And that's why in this video, we're going to talk about the different types of p as you go pricing model. But before that, let's understand what exactly is pay-as-you-go pricing strategy in pay-as-you-go pricing model, or user p based on how much they consume. So if you are consuming more of a service, you end up paying more amount. Now let me give you example of all the companies that are using p As you go pricing strategy. The first example is AWS. Aws is also known as your Amazon Web Service. It's a cloud computing platform from Amazon. And if you're a developer or if you're into tech, I'm sure you have heard of this company. Aws will charge based on the amount of storage or cloud computing power you are using. Now, similarly, your phone carriers like AT&T or let's say if you're using any other company, their bill amount is based on the amount of minutes that you are using. And similarly, the third example is Stripe or square. So these two companies are a payment gateway provider and they will take one to two per cent of commission on every single transaction. Now, apart from these Cloud computing platform and these payment gateway provider, as you go, pricing model is also used by software companies. So let's look at few benchmark on how these software companies are using different pricing strategy and business model. This benchmark is from a report published by I-N-C, 5,000. So they were analyzing 5,000 software companies. So 42% of those 5,000 companies are using piracy subscription pricing model. 37% companies were using flat rate pricing model, and 21% companies are using the usage-based pricing model. That's your p.sit as you go pricing. So you can see that apart from flat rate and pulse, each subscription pricing model, some companies are also using P as you go pricing. And these are all the companies that are charging their customer based on the amount of usage they have. Now that you understand what exactly is P As you go pricing, let's talk about the different types of p as you go pricing plan. Broadly, we have two different types of p as you go pricing plan. We have consumption-based and credit base. In consumption base, you will get a bill based on your consumption. So if you're using more of a service, you will get a higher bill. In credit paste. You have to purchase some credit and then you can use in whatever way you want. Let's talk about consumption piece. Now you can divide consumption-based into three main categories. You have transaction based, storage space, and bandwidth piece. And let's understand these with the help of few example. If I'd give you a simple example of a transactional bes p as you go pricing. You can understand this by looking at the business model of Stripe or square. So stripe is a payment gateway provider. And if you wanted to use this service, they take 2.9 per cent on every single transaction and 30 cent as their transport charge. So whether you do ten transaction in a month using Stripe or let's say 10,000 transaction. They will charge 2.9% commission on every single transaction with this additional 30 cent as a transfer charge, then you have storage piece consumption pricing. Now a really good example of this is amazon Simple Storage Service, also known as Amazon S3 bucket. So if you're using a software or a digital app, then chances are you might be storing some of the media set into that app. And there is a very high probability that those guys are using Amazon S3 bucket to store all the media, asset or document of their user. And if more and more people store their document or media asset, then those companies have to pay a higher amount to Amazon. And that's the storage piece pricing. Third one is Bandwidth based pricing. And this pricing model is used by goblet and I used to work for this company. The video streaming platform. So you can ingest your media asset. And if other people will stream your video, then you have to pay for the charge. So it's a bandwidth based pricing. If you are using more of their bandwidth, you have to pay a higher price. Then we have credit based pricing. And this pricing strategy is used by companies like audible. Audible. You will get some credit and people can use these credit to listen to these different types of audio books on the platform. Now while we are discussing about P as you go pricing, you may have one question in mind that why there is a need to introduce pay-as-you-go pricing when you already have a subscription pricing or a flat rate pricing. Let's understand this with the help of one example. Let's say you have taken a Netflix subscription for your family members, or let's say a Microsoft Office subscription for your family. And let's say less than 50% family member is using that subscription. In that case, the amount of value that you're getting from that subscription is less than the cost. So you literally have to convince all your family member to use that subscription so that your value will exceed your cost. And that's the problem with subscription business model. And subscription, you literally have to use the product so that your value will increase your cost. Otherwise, your costs will be higher than the value. But in Pay-As-You-Go, you are getting the value from your product from the very start. If you're using one GB of service, then you are paying for just that one GB. If you are using maybe 1 tb of service, then you're paying for 1 tb only. And that's the beauty of PSU core pricing model. So let's talk about some advantage of using p As you go pricing oversubscription. The first advantage is low barrier to adoption. Now because you're not paying a flat subscription fees, you don't really have to think twice before you start using the product that is using P as you go. I mean, you can simply add your credit card and if you find the product interesting, they will charge for the amount of usage you have. Unlike in subscription, if you add your credit card and if you're not using the product, you still have to pay a specific amount. The second advantage is that you end up capturing the latent demand for subscription. Let's say your brand have so many competitor and few of them are using a subscription business model. Now, all those customer who don't really want to pay a specific amount every single month will come to you because now you're using pay as you go instead of subscription. So you end up capturing the latent demand for subscription. The third advantage is that you will have strong customer retention. But the biggest problem we saw in the subscription is that people were canceling their subscription because they were not using the service. In pay-as-you-go. Don't really have to cancel the subscription. I meant if you're not using, we will not charge you. Add simple as that. So in pay-as-you-go, you will have a strong customer retention because you're only charging for the amount of service they are using. 27. Amazon's AWS pay-as- you go pricing: Now, while we are discussing about P as you go pricing, you may have one question in mind that why there is a need to introduce p As you go pricing when you already have a subscription pricing or a flat-rate pricing. Why there is a need to introduce p as you go kind of pricing model? The simple answer to this question is to tackle the problem of under-utilization and over utilization. Let's understand this with the help of an example. Let's take Amazon web service as an example. And these guys are using p As you go pricing in their business model. Let's talk about this. So pay-as-you-go pricing model is widely used by Cloud computing platform like AWS, that is your Amazon web service, gcp, that's your Google Cloud platform and Microsoft Azure. Now let me help you understand why these companies are using this pricing strategy with a simple example. So an x-axis, you have time, on y-axis, you have your compute power. So let's say you are the Chief Technical Officer of a digital app or a software, Let's say a food tech company. In a food tech company, you will see a peak in the demand in terms of usage, especially at the time of evening. Let's say your peak active users or 10 million. And your average active users are somewhere between 1 million. And let's say you have two options. Either you can build your own cloud infrastructure and set up your own datacenter, or you can use these Cloud computing platform. I know these are two very extreme choice. In 2023, you will use a Cloud computing platform like AWS or GCP. But let's take these two extreme choice so that you can understand why P, as you call pricing, strategy, is the best. If you set up your own datacenter. In that case, you have to bring your own server. So let's say for these 10 million user, you have five server. One server can only handle 1 million user. So when you have an average 1 million user, in that case, these four server are sitting idle and they are just wasting energy. But when you have 10 million user in your app, then you are over utilizing these five server. And some of the user might not be able to access your app. You have a problem of under-utilization and over-utilization. Under utilization when you don't really have a lot of user and over utilization is fine. You have more number of user. So the simple solution to this problem is that you need to take a Cloud computing platform that will scale with the number of user. In technical term, we call it as auto-scaling. And anytime you have more number of user in your app, your system will automatically create a new server in Amazon Web Service. In technical term, we call that as an instance. You will automatically create an instance. And that's your auto-scaling. But will not go deep into these technical term. Because I guess majority of you were watching this course, may not know much about programming or Cloud computing platform. Let's stick to the basics. Now just like these server instance, Amazon have more than 200 cloud services and majority of them are using this P As you go pricing model. Where if you use more of a service, you have to pay a higher amount. So if you have more number of users on your app, then you will program your app in such a way that a new EC2 virtual server will be created. Or let's say it will be allocated to you. And then you just need to pay for the computing resources that you're using in that specific time. Now, Amazon use a mix of all these different types of pricing strategy, apart from pay-as-you-go pricing, you can just pause the video and you can read about it. I mean, these things are little more technical. But just like this, Amazon have more than 1,000 different types of cloud computing service. So let's say if you want to store all of the media asset of your user, in that case, you can use their Simple Storage bucket or S3 bucket. If you want to create a new server, you can use Amazon EC2 service. Or let's say if you want to use a CDN or content delivery network, you can use CloudFront. And just like this, they have more than 1,000 services. But the main idea is if you use more of the service, then your bill amount will increase. If you have more API call, you have to pay a higher amount. On the other side, if you have less number of API calls for the service, you have to pay a lower amount. Now, apart from pay-as-you-go pricing, Amazon also use few other pricing strategy and that's the part of their business model. So apart from pay-as-you-go pricing, Amazon use On-Demand Reserved Instances, spot instances, and dedicated hosts. So let's say there is a special game going on in your country. And you are assuming that you will have some peak load at a specific time, you can resolve your instances or solver. Now let me tell you a small story on why these companies have to resolve these instances or server. There's a company in India called Hot star and IPL match was going on. The platform normally have around five to 7 million concurrent user. But suddenly something happens in the match and the concurrency goes 7000000-25 million user. And when a concurrency goes 7000000-25 million within a minute, it is super difficult to auto-scale. And that's why hot star had to resolve these instances on Amazon web service so that they can scale these over quickly. And they have a dedicated team to do that. Who will resolve these server or instances if they have any peak demand in the next few hours or in the next few days. Now let's look at the pay-as-you-go pricing for one of the service that is given by Amazon. That is a storage bucket or a Simple Storage bucket where you can store all the media asset or a document file. If you look at the price of Amazon S3 bucket, you will see that you will get first 50 TB of storage every single month. And if you exceed this amount, then you have to pay 0.023 dollar per GB. And let's say you have all these three different tier. You will have for 50 dB per month and then you have to be $0.022 per GB if you exceed this amount. So they also use a mix of tiered pricing with pay-as-you-go pricing. Now, Amazon web service don't really use pay-as-you-go pricing. They also use Amazon mix this P As you go pricing with tiered pricing. And let's understand that with the help of a really simple example. Let's look at one of the service that is provided by Amazon Web Service. Let's their Amazon Simple Storage bucket, also known as Amazon S3 bucket. Amazon S3 Bucket have three different pricing plan and they are using pay as you go pricing if you exceed the limit given in these three different pricing. And if you exceed your limit given in three different tier, then they are using pay-as-you-go pricing. Tier one, you will get 15 TB of space every single month. And if you exceed this space, then you have to pay 0.0 to $3 per GB into your tube. They will give you 450 dB of space every single month. And if you exceed the limit, you have to pay $0.022 per month. So Amazon is using tiered pricing along with pay-as-you-go pricing. 28. Benefits & Disadvantage of Pay-as-you go: If we talk about the benefit of using p as UCO pricing model, the number one benefit is that you will have a low upfront cost to attract user. Because in subscription, those people have to commit a specific amount, like a subscription plan. But in pay-as-you-go, they don't really have to commit. So let's say if they are sending 5,000 email in one month, they can pay for these 5,000 to email. And in the next month, if they are not sending any email, they don't really have to pay anything. So it is very flexible. And they have a very less commitment in pay-as-you-go pricing model. The second thing is that if their consumption is increasing, you can charge a higher amount. So in flat rate system, if their consumption is increasing, you still have to accept the flat fees that they are paying. But in P as you go pricing while you can charge a higher amount, and this will increase your net retention rate and logo retention. Now, I don't really want to go deep into net retention rate and logo retention because I have explained both of these two optic in my SAT scores, but in simple language. If you're using more of a service and if the company is using pay-as-you-go pricing, they end up selling some additional product or add-ons that will increase your net revenue retention. Now the third benefit that you will get from pay-as-you-go pricing is set. Your revenue will increase exponentially if the usage of your user is increasing. Now there are couple of benchmark in SAS in case of revenue growth, companies using a usage-based pricing will have a revenue growth of around 29.9 per cent. And the broader says index is 21%. The net dollar retention For usage-based pricing is 120 per cent. For other, that is 1110 per cent. And you can look into the rule of 40, the gross margin. And I've explained all these topic in my SAT scores. But this is a business model course. So I don't really want to go deep into that. But pay-as-you-go pricing is super important, especially if you have a Cloud computing platform now with multiple benefits, you also have some disadvantage and p as you go pricing, the number one disadvantage is retention. Because these users are not committing you anything. They can cancel their subscription anytime they want. And that's why you have a retention problem with pay-as-you-go pricing. Second thing is the revenue is unpredictable and it is also volatile. And you can understand that with the help of this diagram and subscription, you will convince customer to take your subscription for, let's say next two-year or three-year or five-year. It depends on your annual contract value or a CV. And you will have a low volatility in case of subscription. But in pay-as-you-go, you, they have not committed you anything. And that's why they can leave your product anytime they want. They have no commitment at all. And that's why the revenue is unpredictable, especially in case of pay-as-you-go. Or third disadvantage is that people normally find P As you go pricing. Little complex. This is a video streaming platform. So they have a developed plan, launch plan, and scaled plan. In developed plan, you have to pay $29 every single month. So in this $29, you will get 200 min of video transcoding, 3,000 min of video hosting, and 25,000 min of video delivery. And if you exceed that limit, then you have to pay this amount. So you have to pay $6 for every additional hindered minute, $0.5 for every additional 100 min and hosting, and 0.2 dollar for every hundred minute in delivery or streaming. And that's why you will see that P S Hugo pricing is little complex. Now in order to reduce the disadvantage, you sometimes have to mix your pay-as-you-go pricing with the flat rate subscription. And that's what these guys are doing right now. Now the most important part of this video, how will you decide whether you have to use p as you go up pricing in your business or not. Now, you first have to look into the diverse user base you have in your business. If you are not able to cover all the different types of users you have in three or four different tier. In that case, you may consider using a pay-as-you-go pricing. Because if you're not able to cover all of your user into three or four different tiered pricing, then you have a large variation in terms of usage and price. So let's say if someone is using one GB of your service and another guy is using one TB of service. So the dynamic range is so high that you have a very large variation. And in that case, you have to have at least two to three tier and you charge a flat subscription fees in those tier. And then you put pay-as-you-go off the top. Now the second thing you need to understand in your business is that are you preparing for a higher short-term usage in a project management tool that use our flat subscription pricing, you will see that the usage is almost the same. I'm in majority of people who use a project management tool, they might be having two or three projects and let's say maybe 5,200 different tasks in those project, their usage is almost the same. But if you look at cloud computing service or storage platform, you will realize that one person is using the platform ten times more than another customer. And that's why you will see a large variation. A sudden spike in the usage of your product by some user if your product is solving their core problem. And in that case, you should consider pay-as-you-go as your primary strategy. Then you need to ask yourself, is your customer moving between these different plants frequently? And if they are doing it, in that case, they are suddenly exceeding the plan limit. And then they go from number one to plan number two and maybe plan number three within few days. And that's why you need to use pay-as-you-go pricing. And you need to make sure that they stick to a single tier and you charge them based on the extra usage they have. 29. Ecosystem business model: So here we want, In this video we're going to talk about ecosystem business model. So in the last few videos, we were discussing about network effect in case of marketplace, in case of aggregators, in case of platform Business. In this video, we will see how these companies are creating multiple products and then they are connecting all of those multiple products in such a way that it's really difficult to come out of that ecosystem. Let's understand that with the help of examples, because examples are the best way to understand about any of these business model. So to understand the ecosystem business model, Let's take an example. Google. Google was a search engine initially and even not having a multiproduct portfolio. So let's understand the journey of acquiring YouTube by googling. Now let's look at the YouTube acquisition by Google. And let's understand how these two products we create an ecosystem for all of these customer. So in 2005, Google was noticing a very high bandwidth consumption in the US. And even though betrayed or the speed of the Internet was really good, that was the impulse. Then they had to identify if the video consumption is growing in case of us. And people also have a good internet speed. What all possible options that they have. And then they find out that the best possible option to integrate or to provide video to all of these people is to acquire YouTube. Now once they have acquired any specific plant com, now they have to integrate that at home into their own business. Then comes the process of integration. So obviously, Google have acquired YouTube. Now we have to make sure that they are integrating the product really well. So if people have to watch any videos on YouTube, they have to sign in through Google. And once they sign into Google, then Google can track all of their consumption pattern, like which we use. Are you watching? What is your interested domain? Or what kind of keywords are you focusing on while watching the videos? And that's how Google will start showing you ads based on your specific pattern from YouTube. And then they have to make sure that whatever work they have done with YouTube, they should get something good out of that. So we will was getting a good traffic, a good number of views from YouTube on their search engine as well. Then finally, they had to create some form of incorporation because initially Google was there, then they acquired YouTube, then they will build in Gmail. So now they have to form a corporation which will hold all of these products independently. So Google has created a company or an incorporation with an alphabet. And you can see that Google is listed in nasdaq with this name alphabet. So let's quickly understand why Google has acquired YouTube at the Foss place to create this ecosystem of the product. Now one other reason Google was integrating this YouTube video, Google search engine platform, was to make sure that they should convert cost center to revenue center. Because if people will only watch videos on YouTube and it, Google cannot show ads to people. How exactly will the monetize the platform? And that's where we have to convert this cost center in to the revenue center. Next is the only time trust. So if you do, we'll start using Google sign-in option. And then obviously people will have some form of trust because that's the plow product which is created by Google. And we will also take sample of data from this specific platform as well to show you a personalized ads, last one is the medium awesome pipeline, and we'll understand how YouTube help Google a lot in building a strong Video mustn't pipeline in case of Google Cloud Platform. So now let's quickly have a look at the ecosystem of Google. So you can see that Google have such a diverse portfolio of product. And all of these products are so well connected to each other that you will really feel that you are using an ecosystem. So let's say Google gives you certain form of Google Drive space. So we all know that Google have their own Cloud platform, which is Google Cloud Platform, GCP, or Google Cloud for sharp. Now because we will have their own Cloud platform. They have the muscle too. I'll create products like Google Drive, google DO Google Photos, Google Docs, and Google music. And all these products are free as of now. And because Google have their own Cloud platform, they can provide free speech in the home of Google Drive. They can provide you unlimited calling with Google DO they can provide you a certain threshold of your photos to store in Google Drive. And they can also help you access Google Docs, google music. That's the benefit of having your own Cloud platform. If you have your own Cloud platform, you can build services. You can give those services to different customers for free. Because you have your own platform and you have the bandwidth. Go an extra mile and provide all these free services to a customer to make sure that these customer will never go out of your ecosystem. Next one is Data Analytics. We're going is collecting massive amounts of data using all of their platforms. So the first one is obviously Google Analytics. So anybody who have any website, whether it's an e-commerce website or a blogging website. They can integrate Google Analytics for free on their website to track data like how many customers are visiting the platform or website, or how many of them are signing up? What's the conversion ratio? And all of these major growth metrics of their website. Google will take that data, then you have Google search engine. So obviously, search engine is also collecting the data anytime you search anything using Google and YouTube, and then they have Google Assistant and then they have messages. So Google is collecting massive amount of data because they have such a strong ecosystem of product. And people are so well connected into this ecosystem. So I hope from this video you've got a good understanding on how exactly google is creating such a strong ecosystem of product. So you can see that Google was building such a strong ecosystem of product. And I think from the last 23 years, we will have launched a new service. We will one, if you take the subscription of Google one, which will cost you somewhere around three to $5. You will get 15 GB extra storage in Google Drive. You will get unlimited Google Meet calls. And you will also get so many different kinds of sources. And that's how Google is bringing such a strong platform or such a strong ecosystem. They are cross-linking each and every service with each other. And they are generating massive amount of revenue by bundling all these things together. So in the next video, we will understand how Amazon is also doing the same thing with the ecosystem business model. 30. Wework business model: Hey everyone. In this video we're going to talk about space as a service business model. And this business model is used by companies like WeWork know, let's understand how exactly this business model work. So the main purpose of having this business mortar is to find a good property. And then you are going to invest your time, your effort, your design, and finally, you have to maintain this specific property. So if you look at companies like we work, we work usually our data, please, on lease for piped to ten years, and then they will invest their time, their money, the effort, and all of their design expertise into that specific location. And then they will maintain it. Because obviously, having a good space or having a good property is easy. Any company can find a good place, a good property, but it's super difficult to maintain that specific property. So if you look at examples like you have all these different types of light in a specific location. Then you also need our team floor. Then you also have to have good quality furniture. Then you also need these blanks. And it's super difficult for a normal company to maintain all of these things. And that's why we work use all of their expertise, which includes our design expertise. They also have smart people who will connect all of these things together in a very centralized way. And that's how they end up creating such a beautiful space where they have a proper set of procedure to maintain these blends, proper set of process to make sure that all of the prologue of lori clean are proper setup process to maintain these furniture, these lights are written and that's the core idea behind species as a service business model. Now we worked have different types of business mortar and the phosphate ion is powered by v. So we work also provide technology to all those different companies who wanted to, let's say, maybe want to install the software of WeWork in their buildings so that every employer can check in inside the building. They can use all of the digital technology which is buried by V work. So they also have this specific product core powered by V, where reworked provide all the advanced technology to all these different buildings. Then they also have on-demand workspace, let's say. And a company wanted to have a global presents and they wanted to operate in all these different countries, then they can take help from reverb and we work will help all of those companies in providing space across different geography. So you also have the right to move in space from the work. And then you also have configured building. Now these are standalone, separate dedicated species which were buried by the. So let's say tomorrow Google, microsoft or any big giant will come to be work and they request them to build a separate configured building for those companies. We work also do that. So you can see that using all these four different business model we work is targeting almost every single segment. So whether you are a freelancer or someone who is working for some company, or whether you only want technology from rework or you just want temporary space from the work or a configured building. We work is targeting every single segment that you can imagine, and that's the business model of the work. Now let's quickly have a look at all the benefits that you will get if you use any of these product of V work. So now we will understand the core business model, or I would say the core features and functionality which we work gives to all of their customers. So if you take any of the dedicated space of the work, so let's say for your company, I have sodium expertise and they don't really want to invest time on relocating to a particular species, providing benefits to all of the employees. Don't you don't really want to invest much more money in so strong in process, in machines. So these are the four different types of business model of BI work. In the next video, let's understand what all benefits that we work also provide apart from space. Because I know a lot of companies who don't really wanna invest. Indeed small process like establishing a gym, putting coffee machines for employees. And there are very small process where these companies don't really want to invest. And that's why they take help from the work to establish all these micro processes. So now in this video, let's quickly understand all the features, capabilities, and benefits that we were will provide to all these companies who will be using our VBox platform. So the first benefit is lifestyle. Let's say some company is obsessively focusing on their employee and they want to have some element of lifestyle, maybe a beauty parlor or a hairdresser or anything inside the building. And we work can also do that. Let's say your company also want a doctor. So we were all struck establish of Venice enter inside the building. Let's say your company also wanted to give some benefits to all of the employees like family insurance, then we can also do that. We weren't have a proper tie up with all these different other companies and they can provide you all these insurance facility to you and your family members. Then you also have food. So we will make sure that all of your employees are eating healthy food on time. Then you also have insurance. I've already covered, but let's say we work will make sure that all of your employees are covered and they all have some form of insurance which will protect themselves and their family members. Then you also have professional services and then you have technology. So let's say if your company won't also Dean quantity of computers or laptop, we work, we make sure that they have all of these machines are available all the time. So you can just quickly pay them and they can set up all these machines for you. Then do you have then you also have some HR support. So let's say if you're a small startup, you don't really have bandwidth for lecture. They may also help you in hiring couple of good professionals as well. And then they can organize events for you. So let's say if you have some major release coming or let's say if you wanted to organize some small events for all of your employees, they can also do that. Now the reason why companies are using rework is because we were just having a global authentication access. So no matter you wanted to have an office in India, China, US on in UK. We work is there in every single country. And this will help you provide a global authentication system. So let's say if you have ten different buildings in, let's say five different countries. So you want just a single dashboard where you can see exactly what is happening around the world in every single office. How many employees are there? How exactly diabetic benefit from the company and every single detail. Then they also have ready to move in office. So in, let's say the head office or the headquarter of your companies in the US. And he wanted to have office in UK, India, or China. You can easily get all those office space with the help of beaver because they provide ready to move in off this. Then they also have flexible configuration. So in case if you wanted to have, let's say, ten different speeds in ten different cities for only two employees. You can also do that. We will provide anywhere from a standalone building, which is very much customised according to your need to ready to move in kind of species to a freelancer. They can serve every single segment. Then they are pretty 47 available and flexible. So even in some countries you also have the shaft and night shift. So let's say if you wanted to work in the night shift, you can also do that because the building is available 24, 7. Then they also provide all of these amenities which are mentioned double. So things like lifestyle in randomness, family services, food insurance, professional services, technology. We work will make sure that every single employee getting all the services which are obtained by the concrete. So if we look at the key learnings from revert business model of the work or will bundle all these things together with the help of technology. So when we were crashed happen almost 23 years back, so many people were seeing that we were was a real estate company. But it was, but frankly, we were half bundle all of these services and things in such a way with the help of technology that they call themselves as a technology company, not as a real estate company. But the major cost of this technology company would still going towards the leasing of the property. And that's why people were concerned about the company. And because obviously, real estate is a very asset heavy business, you literally have to purchase all of these buildings for 510 years of leaves beard. And that's why people were not comfortable because the major cost of the company was going in leasing these property for next five to ten years. Then we work, was able to provide a good experience in a comfortable environment. And companies have the flexibility to make sure that they can choose what they want. So Europe exploiting them, expedience component flexibility. Also, you are Calibri, strong corporate brand. Major tech giant are using reverb for their offices, for their species. The technology vary by WeWork is really nice. They have some good partnership from providing you vending machines to providing you some very basic amenities like a tissue paper. They have a partnership or a supply chain for every single stock that you can imagine in your office, which means they can decrease, set up your office from scratch. And that's the kind of network that we weren't happy with all of their vendors and partners while establishing or building a new office for you. 31. D2C business model: Hey everyone. In this video we're going to talk about B2C business model, also known as your direct to consumer business model. So let's quickly understand the difference between B2C business mortar and traditional retail business model fast. And in the next slide, we will understand how companies are shifting towards DTC business mortar, nobody's instead of choosing that traditional retail business model. So let's understand this. So first, let's understand that traditional retail business, how exactly our traditional retail business work. And after that, we will understand B2C business mogul. So in a traditional 3D, you have your manufacturer, then you have your wholesaler, then you have your distributor, retailer, and finally the end consumer. So any product that you purchase from all these retailers, they follow this traditional retail business model. Let's take an example of a wallet. So let's say I have this wallet. Now, this wall, it was manufactured by all of these manufacturers. Then these manufacturers will supply all of these wallets to all of these wholesaler than these wholesaler will supply all of their products through distributor. The distributor will supply these products to retailer. And finally, the retailer will sell all these four externally end consumer. So now you have so many different parties. Let's look at B2C business model, which is direct to consumer. That means these manufacturers will directly sell all of their products to consumer. Or maybe you have one single retailer or one single company or a startup is just purchasing all of these product from manufacturers and directly selling it to end consumer. Let's quickly have a look. So you have your manufacturers. So obviously if you are saying any product, you at least need some manufacturer who can manufacture these products. And then you have your brand. Let's say this brand can be a startup or the sprint can be accompany or a retailer. And these people will be selling all of their products directly to the end consumer. Now, anytime you skip any of these parties from the supply chain, basically you are just saving on the commission because these people might be taking a small margin out of the complete transaction. I think we had a discussion about the exact same thing when we were discussing about the Amazon's business model. How Amazon was connecting all of these wholesaler, finally to the end consumer. And that's how they were able to sell all of their products at a cheaper cost tended traditional retail supply chain. So that's the mean per preserved DTC business model. In the next slide, Let's understand all these brands who are using this DTC business model. So you have some very famous company who are using B2C business model. I would say all the internet companies or all the e-commerce brand that you see around yourself. All of these companies are using this D to C business model. Now, I've taken some very famous brand. I'm not sure whether you are aware of these plants are not. So you have your gym sharp, which is a thickness brand of us. You have your golden nutrition, which is also a fitness gram of us. Gymshark is also there in UK and other countries. Then you have JVs, bought a mom art. All these companies are following the B2C business model. Net means these companies are directly purchasing all of their products from some manufacturers. And then they are directly selling to the end consumer. And then they are shipping product with the help of some logistic providers. So all of these companies have some form of partnership with all these logistic companies like VW, dark, FedEx, and all these. So if I device the concept, the main purpose of DTC brand direct to consumer brand is to make sure that they are directly shipping the product from the manufacturer to the end consumer with the help of some logistic partner. And that's how they are able to sell the product at a cheaper price, and they can also generate much more revenue. Now let's understand this B2C business model with the help of this example. And we had a good understanding about this specific example in the Amazon marketplace business model. But I'm still discussing this again so that things are very clear in reference to B to C business model. So if you look at the original supply chain, in a traditional supply chain, you have your manufacturer, then you have your wholesaler, then you have your distributor, then you have your retailer. And finally your end consumer say, Oh, we are talking about shoes. So a manufacturer is manufacturing these shoes in 99 dollar. And then the wholesaler is purchasing all of these shoes from manufacturer in 10 high dollar. Then obviously wholesaler also have two on some amount of money. Distributor is purchasing the same shoes from wholesaler in 11, $10. Then distributor also have to make some money. Then finally, the retailer is purchasing all of the juice from distributor and retailer is selling all of the tools to the end consumer. So you can see that the cost of this use gotta increase from 1990 to one turkey five-dollar. Now companies like Amazon or any e-commerce company that is there in your country. These companies will directly take product from wholesaler and select to the end consumer. So let's take an example of Amazon, because Amazon is a very femur, famous e-commerce company. So Amazon will take all of these product from the wholesaler. They will take temporary or 10 dollar as their profit. And let's say it will take extra $5 to ship this product to the end consumer. So Amazon might be using their own logistic arm, or they might be using a third-party logistic arm like blue loadings on countries. So let's say the logistic cost is $5. So Amazon will invest $50. So finally, if you add $15, which is 10 plus 5, 2, this 10, $5, this end consumer will get exactly the same product in just $120. You can see that with the e-commerce route or with a D to 0, this consumer was able to get the same product in 120 dollar with a traditional supply chain, this customer was getting exactly the same product in $135. And that's the beauty of B2C business model. If I summarize the video and highlight the benefits of B2C business model. In B2C business model, you have no middleman. If you do not have any middlemen like wholesaler, distributor or retailer. So if you do not have any middlemen, the company can have more profit. So all of these DTC brand who are selling the product directly from manufacturer to the end consumer. They can easily maximize their profits because they do not have to pass on a specific amount of that profit to all of these middle names. Second manifest is they can easily gain access to the more targeted customer data. Now because all of these B2C companies are directly selling their product with the end consumer. They can have a much targeted customer data when compared with the traditional retail business model. Let's say if I'm purchasing ten different product online from 10 different companies, those companies have access to my data. Let's say they have details like my name may please, my mobile number, how many products am I purchasing from that brand? And if those friend have that specific data, they can quickly weak on the product based on my specific requirement, they can understand it. They can quickly take a feedback. So because they are directly interacting with the customer, They have a much more targeted customer data. Third one is higher degree of personalization. And this is one of the most important point because if you look at traditional supply chain, biggest problem in the traditional supply chain is the inventory holding cost. Let's say you are making these wallets. And let's say, instead of just five different types of older, you can quickly make 20 different types of wallet. And then you can directly ship all these wallets to the customer. Now the problem with the traditional retail on supply chain is the inventory holding cost. Nobody in this supply chain wants to hold the inventory, the extra inventory. So let's say if you have 20 different wallet, you can just buy, let's say maybe 1 million piece of every single wallet. And then you can hold inventory or your manufacturer can hold inventory. And anytime you have a sudden boost or a certain supply of all of your products, people can directly poetry, is it not a problem with traditional retail? Wholesaler will only purchase the quantity that he can sell to a distributor. Distributor will only purchases or the level of quantity that he can sell it to a retailer. And retailer wants to sell the product as fast as possible. They don't really want to hold a specific inventory in their shelf because they have a limited storage capacity. And that's why B2C business model have a 10, had a height of your personalization because they have an inventory less plasmas, mortar. I don't really hold inventory or any of these parties or inventory. Let's say tomorrow you end up shipping a million pieces to your distributor and your retailer. And both of these people were not able to sell those products. Then these people have to send you back the product and then you had to receive those products. So technically the product is going in the forward logistic. You are just incurring some sort of cost in shipping those for E2, these people, and then these people are sending back the products because they are not able to sell it. Inventory holding cost is a big theme in the traditional retail. And then you have high inventory, then you can have less personalization. 32. Introduction to White Labels: Hey everyone, My name is now deep. And in this video we're going to talk about private label business moreover, or white-label business model. And this business model is widely used by B2C brand, which is direct to consumer brand. Because if we wanted to start your own e-commerce company or B2C brand, then it's really difficult for you to manufacture your own product. And if you cannot manufacture your own product and then you have to take the help of contract manufacturer. And that's why in this video we're going to talk about private label and white able brand. So let's quickly understand the meaning of private label and white label Foster. A private label and white label products are manufactured by contract manufacturer, also known as third party manufacturer. And you can sell all of those product under your own dynein. That's the Bennett adopt private label and white label brands or products. Let's understand this. If you want to start your own e-commerce website where you can sell supplements or nutrition or any product with your own branding. Then you have to get help from all these contract manufacturer. And that's why you'll be contacting them for white label and private label branding. So let's say you wanted to start a website where you can sell your own supplements, your own wallet, or any product. So you will reach out to all these manufacturer who will manufacture products for you. And they will be just a logo on DOD specific product. Let's say I will reach out to, let's say if I wanted to start my own eCommerce brand or supplements or nutrition, I will reach out to any of the manufacturer or contact manufacturer who is manufacturing deed supplement. And I will request him to paste my brand or my label on these product, and then I will purchase these products in bulk quantity. Now, obviously you have to purchase all of these product with so Dean MOQ, minimum order quantity. And then I will convince these people, do let say manufacture 5000 quantity of this product for me and then paste my label on this product. And then I will sell all of these products using my e-commerce website. And then I will ship all of these product with the help of some logistic partner. And that's how the privately blue and the white label business more group work. Let's understand this with the help of an example. Let's see, I am a fitness influencer and I wanted to start fitness brain where I can sell all of these supplements like we have protein, multivitamins, omega-3. So let's understand how exactly IV execute this brand. Or I would say I will start this E-Commerce trend, or supplement and nutrition. So first of all, I have to find a list of five to ten different contract manufacturer and I have to do an initial consultation with those contract manufacturer. At this stage, we will discuss about how many units we want for this specific product. Let's say they will give me a price quotation for n 1000 borders of this multivitamin. So let's say 5000 boxes of a specific way, a protein that will ask me about the flavor, the quantity, the minimum order quantity, the price, the quality standard, all of these details, and then they will give me a sodium price. So if you ask me about the price difference between the final price of any specific product, whether it's a supplement bearing on multivitamin omega-3, or any product. Manufacturer can give you all of these product adequate D Person price than the final price. So let's say if I am purchasing as a customer, if I'm purchasing any of these product like a multi-domain protein brand or anything that 10-dollar, the manufacturing cost of all these product is 20 percent of final price. So if you are purchasing this supplement brand or this multivitamin at, let's say 10 dollar than that manufacturing call stop. This product is just two or $3 and the remaining cost will goes to logistic, to marketing, to branding, and even as a profit as well. Then after I have finalized what I have done, the initial consultation, then I have to select a product which I wanted to sell. So let's say I'm choosing three different products like RB protein, Omega-3, or a multivitamin. Once I'm done with choosing all of these three products, then I have to do some bending and licensing with those people that have to finalize a logo. I have to finalize a label. And then those people will stick my label on their product and that's how I have to go for approval. And almost all these countries you have. So the who'd license, drug license and storage license that you have to take from your specific government. And then finally, you can start selling all of these product using your e-commerce website. So that's the final conclusion. If I summarize the video. If you wanted to sell your own VIII protein, your own image, omega3, your own multivitamin or any correct, even your own wallet. Then you have to talk to these contract manufacturer. These contract manufacturer will give you. So the minimum order quantity that you have to purchase at least. And then they will give you a price quotation. 33. How to start your own Private Label: Now once you understand the complete process, let's understand how exactly we implement the same process in case of private label and white label brand. So let's say you are a fitness influencer, or let's say any inferences or forsake. You have good number of subscribers on YouTube and you have good followers. Let's say you are a fitness influencer. You have a 100 thousand subscribers on YouTube and let's say a 100 thousand followers on Instagram. So you have a good audience. Now you can build your own bike label and privately will bend. And then you can sell all of your products to all these people, and then you can generate profits. So you first have to decide which all product you have to launch for that specific audience. Remember, if you are a fitness influencer, chances are that all those people who are into thickness, they might be following you. If you are a beauty influencer or I would say a fashion influencer, then all those people who are very frequent in purchasing new dresses, new fashion. I mean, they're trying they're hands-on new fashion. Those people are following you. So you have to choose project B is, or the type of audience you have. Once you choose those product, then you have to go through a special legal compliances. So let's say if you wanted to sell nutrition or supplement, then you have to take a drug license of food license because you're selling food to people. But on the other side, if you're a fashion influencer or if you're selling plots or let's say beauty products. And you have to give a normal on cosmetic license or a drug license. And then you have to do some basic taxation and legal compliances. You can take help from some legal advisor if you want. After that, you have to contact all of these contract manufacturer and then you have to pick a price. Quotation on the left is 81 if you wanted to sell the lipstick or let's say any, any other product and you have to find all those contract manufacturer what manufacturing lipstick for different brands. And once you find all those people, then you have to pick a price quotation from all those contract manufacturer what specifically upstroke. And then you have to ask for minimum order quantity. And then they will see you that we can manufacturer at least or the minimum of 5000 quantity. And then you have to ask them for the processing time. How much time we do need to manufacture these products from me. Now, obviously, they will paste your brand logo, your label and everything. So you have to ask for processing time as well. And finally then you have to list all of your products on your own personal website. Let's say if you also wanted to sell your products on Amazon or maybe some other e-commerce website, then you will take some nice photos, some nice pictures, maybe do some influencer marketing, and maybe then list out all of those products on Amazon, your own website, or maybe any other website that you can imagine. And finally, this is the time you have to focus on sales and marketing. So if you have a good personal brand on YouTube, on Instagram, then you can sell these products to your own influencer, your own follower. But on the other side, maybe you can also tie up with a couple of more influencers. Let's say, you know, 34 good influencers who have a very genuine, engaging audience. You can reach out to them. You can pay them some amount of money and then they can maybe do some short of sponsorship of your product. And if you are launching a new product, you may have some oil-in-water advantage, then you can sell your products on Amazon or maybe to your own audience. If you have a very unique product which is not there in the market, then people who do not have any choice because in case of supplements like the protein multivitamins, omega-3, people have maybe 1000 different choices, but you can launching a very unique product. People may not have choices and then they might end up purchasing your product. Now, once you have done a specific initial sales of your product or your brand, let's say you gave an order of 5 thousand quantity to all of these contract manufacturer and upper three to four months, you are able to sell all of these products to different customer. Now you have to find a way to scale all of these brands. If you look at some successful startups like Kylie Cosmetics from Kylie Jenner, those people were able to scale their brand. Now those people are blocking a revenue of three hundred and four hundred million dollars every single year. That's the scale we are looking for. Now to scale your brand. Now you have to invest in good team, good people, good partnership, good products, good research and development. And now you have to attract some investment from all of these venture capitalists or angel investor. So let's quickly summarize the video by understanding the difference between private label and white label. There is a very small or a slight difference between these two terms. But let's really understand this. So private label products are manufactured exclusively for a retail brand, while white label products are manufactured for multiple retailers. So if you look at big companies who are purchasing corrects in millions of quantity, all of these contract manufacturers usually manufacture product for them, which have some exclusive flavors on exclusive fragments or some exclusive content. And that is something called less private label. You are privately manufacturing all of your products or some brain. While on the other side, lightly with products are open for, open to everyone. Let's say you have a small audience on YouTube and Instagram, and you don't, and you can't really purchase those products in millions of quantity. In that situation, you will reach out to all of these white label people. Then you can ask for, let's say, a thousand pieces of any product or let's say maybe 2 thousand or 10 thousand pieces. And in that situation, they may not customize that product based on a specific flavor or fragments, and they will directly give it to you by putting your own label, your own branding in the private label. As usual, retailers have the ability to modify the products. And obviously these manufacturer will develop a unique product for them. But in case of white-label, retailers do not have any flexibility or they cannot request all of these white label manufacturer to customize or to rebrand couple of things for themselves. But it was just starting on your journey with startup entrepreneurship. You have to go through the route of white labeling and then you have to enter into the market. If we sell couple of billions of different products, you have to test them. And then you have to somehow find a way to sell your product to a specific niche. And that's the basic difference between white label in private limb. These two tones are some board saying. They can also be used interchangeably. But there are couple of differences between white label and privately. So apart from light table brand and private label brand, you also have been very unique DOM core contract manufacturing. And this contract manufacturing is used by Apple, not even Apple. Even if you look at any smart phone that you have in your hand, every single smartphone have more than 100 components. And it is nearly impossible for a single brand to make all these one hundred, ten hundred components. And that's why all of these smartphone manufacturer will take the help off contract manufacturing. Let's stick to iPhone for this specific video. If you take iPhone it as an example, your iPhone is assembled by Foxconn, withdrawn and positron. And all the components in your iPhone are manufactured by all of these companies. That camera, which is there in your iPhone. The camera and the camera sensor in your iPhone is made by Sony in Japan. Oleg display, which is tear in your iPhone that or like display is made by Samsung. The Bionic chip, which is there in your iPhone. That Bionic chip is made by TSMC, which is Taiwan Semiconductor Manufacturing Company. And I'm now on recently acquired by NVIDIA. But I'm also makes Bionic chip for iPhone. I think 11 and a 10 by 10 chip was made by r. Then the batteries in your iPhone are made by Samsung. The flash memory, or I would see the memory chip. The chip in your iPhone is made by Samsung and Toshiba. And that's why your iPhone is not made by Apple. The majority of the component in your iPhone is made by some other companies. Apple is just assembling all of these companies, maintaining the quality standard and making sure that the software is really nice. And Apple, that's the main work of Apple, and they're using this contract manufacturing, not only Apple, every single smartphone company is taking help from some other company in manufacturing their product. I think Samsung makes majority of the company, but they still take components from Qualcomm, from some other companies. But Samsung is the only company, which means around 80 to 85 percent of all their own components. And the only take help from other manufacturer for 15 percent of their components. 34. Pay as you go Business Model: So hi guys, My name is no deep. And in this video we're going to talk about pay as you go business model. And thus business model is used by AWS. Now, AWS is also known as Amazon Web Services. It's a subsidiary of Amazon that provide cloud computing services. So if you're using platforms like Netflix or Amazon Prime Video or Korra, or maybe any social media app. Chances are that they will be using AWS as their Cloud computing provider. And AWS on race charge, all these people or all these businesses based on the number of API request. Or maybe let's see instances those companies are making on AWS server. And that's the business model. Aws is following. I didn't not only AWS, google Cloud Platform, microsoft is also following the p.ball as you go kind of business model. So on x-axis you have time, on y axis you have computing power. Now let's understand the scenario where you are purchasing a specific amount of storage, Let's say maybe 10 dB or 20 dB. And that specific storage is not used by of your users. So technically you're resisting the space that you have taken from your Cloud computing provider. On the other side, if you are, let's say under purchasing something and suddenly you have a lot of users coming on your website, human bio lab. In that situation, your server will crash, and that's what people use. All of these PSU go business model, very do not. Bocce is our upper limit or lower limit. So let's say earlier you were producing a lot of bandwidth, but this bandwidth was getting wasted because you may not have that much of user flow. And if you end up purchasing less of bandwidth or less plan, then you may have some more users. So that's the disadvantage of and that's why these companies always prefer PS, you go business model. Now let's quickly understand this with the help of an example. Let's say over a span of one year, you're purchasing different bandwidth plan. Let's say you started with five dB of plan. All of your users can zoom almost 40 dB and you're just resting one TV. After six months, you end up purchasing a ten DB plan for your website. And let's say you end up utilizing 90 be, but you're still wasting one TB. And the situation goes on. With AWS. Aws we only charge on the amount of bandwidth that your website MY LAP is using. That means you will exactly before for BB 70 dB, 20 dB, whatever data that you're using, that means there is no under-utilization in case of p as you go business model. And that's why Themis, cloud computing companies like AWS, Google Cloud platform, and Microsoft Azure is using this p as you go business model because you don't really want to under utilize the things that you're purchasing. Now, I know some of you may ask that, does Amazon only provide Pay-As-You-Go business model? And the answer is no. They have multiple flexible, different BIM adoption or business model. Let's say they also have a EC2 On-Demand as you go business mortar. But on the other side, they also provide result instances. They also have spot instances, and they also have dedicated host or dedicated server. Obviously, this will be very expensive and this is used by some large-scale corporation spatially, the enterprise client. On the other side, amazon, s3 also whole OPS, you go business model, so easy to follow all these four different types of business model. But as three follows tapirs, you're going to kind of business model. Now this is the formula which will help you understand how exactly Amazon is using this PSU go business model in case of there S3 storage buckets. Now let's understand the different plans of AWS are in the US East region. So let's say if you're using your first 50 terabytes of data every single month, then you will be paying $0.023 per GB. If you're using next 450 terabytes of data every single month, you'll be paying $0.022 per GB. And let's say if you're using above 500 TV per month, then you'll be paying 0 to $1 per GB. That's the plan that Amazon is giving in case of there S3 storage bucket. Now, S3 storage bucket is just like Google Drive, which means you can store your image file, your video, acid, your document, whatever you want. S3 is like our advanced version of Google Drive. It will allow you to store all of your data on your website. Now obviously, you can store your code, you can store your files, whatever you want. 35. What is an API?: So if you look at apps like Google Map and WhatsApp, these apps are used by billions of people around the world. But how do they make money? Well, the simple answer to that question is that the license, their APIs. Now before we go deep into how exactly a business or a startup can license their API, we first have to understand what exactly is an API. And to answer that, I'm gonna give you three simple example. So whether you book a cab, pay for a product, or send a e-mail, you will be using some form of EPI. Let's start with booking a cab. So if you book a cab on Uber, then you are using the Google Maps API. Every time you enter your drop location, you are basically hitting an API request to Google Maps. And Google Map is giving the data back to the Uber, like the distance between two different location and the time it will take to reach to a destination. And based on that specific data, Uber is calculating the fear of your ride. And that's why Uber is using the most trusted Google Map APIs in their ride-hailing service. We'll talk more about that. But the second example of API is authentication API in e-mail. If you're using a Gmail, in that case, you are using the Google authentication API. Every time you send a mail to your colleague or one of your friend. That's authentication API in your e-mail. Then we have a payment gateway API. So if you are a seller and you are selling a product online, in that case, you might be accepting payment from PayPal or Stripe. And all of these payment gateway provider are a really good example of payment gateway APIs. So if I give you a small definition of API, API is also known as your application programming interface, or API is basically a software intermediary that will allow two different application to talk to each other. Now, let me oversimplify this by giving an analogy of a waiter working in a restaurant. Imagine you go to a pizza place. You check the menu, order through a waiter who will simply take your order to the kitchen and brings back to the pizza. Now in this example, the waiter who is taking a request from the user and giving that request to the kitchen, acting as an API. And the function of EPI is that you will simply take a request from your user, gave it to the back-end system, which is kitchen over here. And then you will take the response from the kitchen, that is to prepare a meal in this case. And then you will show that response to the end-user. And that's the basic function of API. Api normally connect a user with the application. So it will take a request, give it to the back-end system, and then the back-end system will respond. And the API will simply take that response and show it to the user. That's the only function of an API. Let's relate this analogy in case of Uber. So every time you put your drop location in Uber, you are simply hitting the Google Maps API. And Google is giving back the response to the Cooper map, like the distance between two different location and the time it will take to reach to your destination. And Uber is using that specific data to calculate the fear of your right. Now, these APIs are not only used in Uber, so whether you use a food tech platform or grocery app or an online software, there is a very high chance that you'll be using hundreds of these different TPAs. Basically, these APIs are the building blocks of a complex program. And these are defined as an independent set of functionality with reusable piece of code. Now if you look at developers, they got one problem that they don't really want to re-invent the wheel over and over again. And that's why they use these APIs so that they don't really have to build everything from scratch. And these APIs can save their time writing new programs over and over again. So let's say if you want to integrate SMS service in your mobile app, you can simply use Twilio's API if you want to send email to your customer, let's say every time they sign up, you can simply send them an e-mail. Or let's say if you wanted to do any promotional campaign on a specific occasion, you can also do promotional e-mail. Well, for those e-mail, you can simply use Mailchimp API or SendGrid CPI. Third one is payment. If you want to accept payment, you don't really have to build your own infrastructure from scratch. You can simply use the APIs of PayPal and Stripe in your app. And you can accept payment from the customer. So that's how a developer can use all these third-party APIs in their mobile app so that they can save a lot of time. Because these APIs are making the job of a developer easy and he's saving a lot of time. And that's why the company has to pay for the number of API requests they are hitting. So if you are a developer, let's understand how exactly a EBI work from a techies mind. Every time you press a button in your mobile app, you're simply sending a request to the remote server with the help of these APIs. The server will then collect the data from the database of your request. Then it will process it and sends back the response to your mobile app. And that's the function of API. Api will act as an intermediary between the front-end system and the back-end system. You can also understand that with this analogy where a Beta is acting as an API. So the vector is simply taking the request from the customer, giving that request to the backend system, which is kitchen over here. And once the meal is ready, then it will take the response and give it back to the user. And that's how the API work. So if I summarize this video for you, EPI act as a communication bridge between the front-end system and the back-end system in your mobile app or in the software. If a company have really built some feature in their back-end system, they can build an API for that feature. And they can monetize that with different monetization model. So you simply have to take an authentication token and you will hit an API request. And you can utilize these API to understand the different types of monetization model available for these API. In the next video, we will understand the different types of APIs. 36. Types of API licensing business model: Hey everyone, My name is null. And in this video, we're going to talk about the different types of APIs we have. Let's say there is a company who have built a unique piece of technology. This company won't Other companies to use that piece of technology. So they can use two different approach. Either they can open source the code base so that other companies can use it. The second option is they can monetize that unique technology by building an API on the top of that specific function. So broadly, we have these four different types. The first one is free, and it is the simplest API driven business model that allows developers to access the API freely. So if you look at the APIs of Google Translate or all the government database you have, you can simply fetch the data and they don't really charge anything for that. Now for government and public sector, that makes sense because those people wanted to provide information to the people. But the reason Google is giving their Google Translate APIs for free is because Google wanted to make sure that they have a lot more data, this technology so that they can improve the translation. And that's why they are giving out this specific piece of technology for free so that people can use it. They can feed more amount of data to this system. And we can improve that. And later maybe they're going to monetize it. So that's your free APIs. Then we have developers p. So if a developers is paying a specific amount for using an API, and a good example is AWS or Stripe or Twilio. And these companies can use for different types of pricing model. So if you look at companies like AWS, they use B as you go pricing along with tiered pricing. If you remember, in the last video, we were discussing about how Amazon Web Service, which is a Cloud computing platform of Amazon, is using P as you go along with tiered pricing into their S3 bucket. That is a simple storage bucket where you can store all your media acid. We saw that AWS has three tier. In tier one, you will get 50 TB of space for a specific amount. And if you exceed that space, you have to pay a small amount for every additional gigabyte of data you use. That's your p.sit as you go. Bundle up with tiered pricing. Now another company that will charge developer to use their API in P As you go pricing model is OpenAI, and this company is getting a lot more popularity recently because they have announced a new product called Jet GPT-3. So every time you hit a request to check GPT-3, you're using an API and Open AI company is charging based on the amount of APIs you are using. If you are hitting more number of request to OpenAI, they will charge a higher amount. And that's your p.sit as you go pricing where developers are paying for these API, then you have freemium. A really good example of Freemium APIs is that in freemium, these companies will give you an API calls for free. And if you exceed that limit, then you have to pay for the additional API calls. So if you look at companies like GitHub and gum light, I used to work for this company that's come late. And they were giving a certain API calls for free. And if you exceed that limit, then you have to pay for that. The fourth one is unit base. And a really good example of unit-based pricing model is Twilio and Mailchimp. So if you send more number of emails or messages to your customer, you have to pay a higher amount to Twilio and Mailchimp. And the last one is transaction fees. If you accept more payment from Stripe, in that case, you have to pay them on every single transaction. So stripe normally charge 2.9 per cent on every single transaction with 30 cent as the transfer fees. And that's your transaction fees pricing model. So over here, the developers are paying to utilize these API services given by all these different types of businesses. In the next part, let's understand how developers will get paid if they use these APIs. So now we have an API monetization model where the developers get paid. If they use these API, you can divide these into two different parts. You have your revenue share and affiliate. So if you're using Google AdSense EPI in your website than Google will show their ads on your website to your user. And that's your Google AdSense API. Let's say if you have a website with 1 million user and your user are reading a lot more on your website. In that case, you can simply sign up for Google AdSense. If they approve your website, you can simply take their API or a JavaScript snippet. And you can integrate that in your website. And every time your website to load up, they will simply show the ads from Google. And you will get a 45 per cent revenue share from Google. That's your revenue share, EPI. You're using an API and the company's paying you for that. The second one is affiliate, which work exactly like Google AdSense. Let's say if you have a lot more YouTube subscriber, or let's say if you have a good blog and if you wanted to promote some product, well, you can simply give the affiliate link of those products on your website or let's say on your YouTube description. And your audience can just buy those products with these link and you will get paid affiliate commission maybe let's say around five to ten per cent. And that's your affiliate APIs that you are using in your blog post or in your YouTube video, so that the company can share the revenue with you because you are giving them the customer. So you may have one question in mind that how exactly does the company decide how much amount to pay to a specific developer if they are using their affiliate API? Well, there are three different types of ways a company can decide the amount. You have CPA, CPC, and signup slash reference. Let's start with TB. Now, CPAs cost per action. So let's say you're giving an affiliate link of a product, customer or clicking on that link, but only two people are paying for that product. In that case, you only have to purchase. You will only get the commission for these to purchase. That is cost per action. Then we have cost-per-click. So let's see if these ten customer or clicking on a link. You will get paid for all these ten customer because they are just technology product and you are building awareness for that specific product. That's your CPC, then you have sign-up or reference. So let's say if I have a medium account and I'm giving my reference link or sign-up link to you. And if you sign up using that link, and if you take a premium subscription of medium, then I will get some referral bonus. And that's your sign-up and wrapper. So in short, in this monetization model that developers get paid by using these APIs. Now, you understand three different monetization model of an API. Let's talk about the last monetization model, where a company speed indirectly if somebody else will use their API. And this have four different category. The number one is content acquisition. And a really good example is Google Business Review, APA. So if you search about a business or a startup on Google, you can simply look at the review and the rating of that business along with the opening and closing time. And Google is taking the help from other people so that they can review these businesses. Now Google took it a step further, and they have opened these Google Business Review APIs. So if a mobile developer wanted to integrate these Google Business Review API in their mobile app, they can do that. So let's say if you like a business, you can simply give the review about that business within the mobile app. And once you submit that review, that review will reflect on the Google business page. If somebody searched about their business on Google, and that's your content acquisition. Second is content syndication. And if you have seen product comparison apps or classified or vertical search platform, That's a really good example of contents syndication. Let's say platforms like eBay and Amazon have opened their APIs so that other businesses can build a website. And they can compare all these different products across these E-commerce app. And they do it by utilizing their API. So let's say you have a website where you can compare the price of MacBook across all the e-commerce platform. Now what you are exactly doing is that you are fetching the data from all the e-commerce platform in the real time with the help of these API, these e-commerce companies have intentionally open these APIs for you so that you can compare a product and then buy that product from one of these e-commerce website. And that's your content syndication, All the product comparison app and the classified. Or let's say if you are booking your flight ticket or train ticket from all these super app, then all of this is a really good example of content syndication, where the company is paid indirectly if a customer really liked the price or the value proposition. Third one is upselling. So let's say you are a developer and you have built a unique piece of technology and you have open sourced it. So majority of people can use it by themselves. But if some enterprise wanted to build a custom solution on the top of your technology than they may need your help for that. In that case, you can upsell a premium service or you can maintain their product and work maybe full-time or part-time with them. And that's your up-selling value proposition for 20s brand building. But Facebook has built an open source documentation platform called archosaurs. Facebook is just giving that for free to the people so that they can build a brand in the open-source community. Now, just like this, you have all these different APIs in different, no mean in payments you have striped square Phoenix. In e-commerce, you can use APIs of Shopify, big commerce, Magento, and messaging. You have Twilio SendGrid message board. Then you have Identity API, verification, data management, logistic bombs. You can dispose the video and you can look at how these different companies are giving their APIs to these developer so that they can utilize their service. They are charging on the number of requests they are hitting. That's all about the API licensing business model and how these different companies are licensing their API. So that the developer can use a specific product or a service and they can pay on the amount of API requests they are hitting. 37. What is open source ?: So if you look at few open-source product like WordPress or Android, you will realize that these products are absolutely free for people and they can use these product without paying a single penny. In that case, you might be thinking than how exactly these companies make money. Well, to understand that in this video, we're going to talk about the open source business model. Now before we go deep into open source business model, let's understand the difference between open source and closed source. So let's look at few open-source product. The first one is Android. Now Android is an open source operating system. And if you a mobile manufacturer, then you can manufacture a mobile and you can use Android as the operating system. And you can sell your mobile in the market. Now, apart from the operating system, we also have few programming language like R programming, Java, Linux, and open to. And we also have a browser with the name Firefox. And this Firefox browser is absolutely free and it is also open source. So let's understand what exactly is the difference between open source and closed source product. So in an open source product, the source code of that specific product is publicly available. Means people can inspect, modify, and enhance the source code. So let's say if you wanted to build a new feature in Android, well, the source code of Android is publicly available and you can build a new feature if you are an OS developer. Similarly, if you know C sharp or C plus plus, in that case, you can inspect, modify, and enhance the source code of Firefox browser because their source code is publicly available and these are all open source product. On the opposite side, we have some closed source product whose source code are not publicly available. And if you work for a Cloud Source company, then only you can access the source code of that specific product. So all your social media apps like Twitter or Instagram, their source code are only available to their employees. And if you're not working in that company in that case, you never know how exactly the algorithm work. Now to understand the difference between open source and closed source. Let me explain that with the help of a really good example. So WordPress is an open source CMS. So you can simply build a blogging website or an e-commerce website with the help of WordPress. And WordPress is an open source product. But even after having an open source product, WordPress have two different type of product. So if you go to wordpress.com and wordpress.org, you will find two different version of WordPress. So let's understand the difference between wordpress.com and wordpress.org. Wordpress.com is developed and run by a private company called automatic. And if you look at wordpress.com, you can simply buy your domain on this specific platform. And they will also provide you the hosting of your website or e-commerce platform. And because they are contributing a lot on wordpress.org, which is the community open-source version. So they have resolved these integrations and performance issues that a single developer will face if he will try to integrate this open-source product into their Cloud by themselves. So they make money by allowing other people to host their website and use their services, like buying a domain or SSL certificate and all of these things. On the other side, wordpress.com is the open-source version. And you can install wordpress.org from your cPanel if you take a third-party hosting. Wordpress.com, normally makes money from the marketplace, where if you purchase an add-on or a plug-in or a theme, in that case, they will take a small cut every time a transaction will happen on their marketplace. So let's say if you're buying a theme for your website or maybe an add-on to enhance the security or SEO. In that case, you have to pay a small amount of, let's say 57 or ten dollar. And wordpress.com will take a small cut on every single transaction that will happen on their marketplace. Just like Shopify. Now, wordpress.org run majorly through donation. And you might be wondering, okay, which all company will donate to wordpress.org. If you look at these third-party hosting platform and plug-ins, well, if you look at the hosting platforms like Bluehost or host finger, while they are the commutator of wordpress.com. And that's why these companies are funding wordpress.org because they want this platform to survive so that they can also make money because they are, majority of the revenue is coming from WordPress user. Apart from this other WordPress plug-in, Yoast, SEO and element or are there because WordPress user install this plugin from their marketplace. And that's why these people also donate to wordpress.org so that they can improve the product. So that's the difference between an open source product and a closed source product. Let's understand the different types of approach these companies use. In the open source business model. 38. Types of open source business model: Now we will understand all the different types of approach you can use as a company or an open-source product creator if you wanted to monetize your product. Now in open source business model, our company will try to create a value by making their products publicly available. And they will also try to capture some part of that value. So let's discuss about all the different ways you can monetize our open-source product. The first approach is open core, where we open source the core part of our product. Then we have system integration where you have open source, the complete product. But you will help couple of companies or let's say some enterprise client if they wanted to have some integration in their product. Third one is the constellation of value-added libraries or services. So let's say you have an open-source product, but you are also writing libraries or some plug-in for that product. So that if some people wanted to use those library or plug-in, they can pay you a small amount for that. Let's say you have open source or database product. And you also have built analytical tool on the top of that. If somebody wanted to use that analytical tool, they can pay you a small amount. The fourth one is hosting. And we have already seen that in case of wordpress.com, you can use the free version of wordpress.org. But if you want performance improvement or you don't really have to worry about the hosting and the domain name. In that case, you can try out wordpress.com and they're paid plan. Let's start with open core. Now, open chord is a business strategy where a company offers the Core version of the product with some limited features as free. But they tried to sell some add-on on the commercial version as if proprietary software. But the free call product will act as a growth channel. But the company is generating massive amount of revenue from the enterprise version of the product. As a company, you don't really use individual open source product. You want a complete version of the product. And that's why if you want these companies to help you in gluing all of these individual pieces together. In that case, you pay them a small amount. And that's how open core business model work. And this is used by multiple companies like darker, elastic, git lab, and radish. These are all technology company. So GET Lab is a version control GUI or graphical user interface. Radius is for caching. Then you have elastic and darker. Now if you closely observe these tool, you will realize that the mix of how functionality is open and how much a paid add-on can vary a lot across tools. So let's look at all of these different types of open core business. So you have a thin open chord layer, then you have a lean open core layer and a thick open core layer. So if the 90% of the software is open-source, then it's a skinny OSS score. If the 70% of the core product is open-source, then you have your thin open core. And if the 50 per cent of the software is open-source, then you have your lean open core. And if only ten per cent software is open source, code is publically available, in that case, That's a thick open core. So you can look at all of these different types of product and how much of their portion is open source. So if you look at products like HashiCorp or Databricks, you will realize that 90% off their software is publicly available. I mean, that's open source. On the extreme side, if you look at products like GitHub or Fastly, they're only ten per cent of their software is publicly available and 90% of it is closed source. So that's why you will realize that they are open source version and paid add-ons can vary a lot across different tools. Second way by which are open source business can make money is with the help of system integration or service model. Let's say you are the owner of the product and you have open sourced it to the public. And let's say an enterprise client wanted to build a complex application on the top of your product, then you can charge them for technical support or consulting service. Or let's say, you can also build an add-on and you can also set it to them. But we all know that the service revenue is always unpredictable. If you want it to scale that specific operation so that you can serve so many enterprise client. In that case, you literally have to increase the headcount and your margins will be very less. Because now you literally have to hire people and you have to train those people for your specific technology so that you can help these enterprise client to implement your software in their company. Now some companies like Red Hat have figured out some ways to monetize their business. So Red Hat have an open source business and they make a3x revenue from consulting. But their margin from these consulting services is just 31%. And when you compare that with a subscription margin, in subscription you have 93% gross margin. So a really good example of providing services for your product is Red Hat and video js. Now VGS is a video player and the builder of video JS is still helping these big tech company so that they can implement this video player into their tech stack. The third way by which you can monetize your open source product or software is by charging a small hosting fees if those people wanted to use your product end-to-end. So let's say if you use an open source CMS. So there are many content management software like wordpress.org or sanity, CMS or cost CMS. Now all of them are open source and you can use these products for free. But let's say if you are a big company and you have a lot more user, in that case, to manage the infrastructure, you literally have to hire a DevOps team. And that will increase your operational overhead. Now to minimize that, you can use the hosting of these platform. And they have built the hosting for scale. So they have these hosting options from AWS to Google Cloud Platform to Microsoft Azure. So it can deploy the software in any Cloud computing platform by being a small piece. So if you look at products like MongoDB, mongodb is the open-source database and their core product, that is, the open-source database, is absolutely free. But if you want to have a reliable service, or let's say you wanted to use the analytical software that work on the top of MongoDB. In that case, you can take their enterprise version. So in their enterprise version, you will get Mongo Atlas, that's their data analytics product. And you will also get some level of support so that you can resolve all the queries you have. And that's why if you look at their gross margin, the gross margin is somewhere around 65 per cent. So there are many hosting platform for content management software. You have sanity, they have an open source enterprise version. Similarly for data analytics, you have post-hoc, they have open source software and enterprise version, and then you have MongoDB. So the fourth way by which you can monetize your open source product is with the help of marketplace business. If you look at product like WordPress. So if you're having a blogging website on WordPress, then you may have seen their marketplace where you can find millions of themes or plug-in or add-ons. And you can install or maybe by those plugin add-ons or theme. So every time you purchase anything on the marketplace of WordPress, you are basically paying a small cut to the WordPress so that they can maintain the platform. And that's the beauty of having a marketplace. So WordPress is absolutely free, but every time you purchase an add-on or a theme on WordPress marketplace, they will get a small cut. Now the example of this is Android. Android make majority of their money from the Play Store fees. So if you buy an Android smartphone, you will get Play Store as the default app apart from YouTube, Google and Gmail. And that's how they are earning their money. But they are core piece of technology. That is, the operating system is absolutely free. So we have WordPress and you already know about this. The third one is Mozilla Firefox. That's a browser page and great majority of the revenue by making Google as their default search engine. So every year Google Pay them somewhere around $500 million So that Mozilla can make the default search engine as Google. So broadly, we have six different methods that you can employ if you want to make money using open source business, you have paid support. So if you are the creator of that open source product, you can charge a small amount to these enterprise client or big companies so that you can maintain the product. Then you can build a software product on the top of the open-source product you have built. So if you look at a product like Mongo Atlas, that's an analytical tool for a database and that's not free. I mean, you have to pay for that. You can give your core product for free. And if they wanted to use some add-on or something else, they have to pay for it. Third one is open core model, where the core product is free. And you are helping these different enterprise clients so that they can glue all of these different pieces together. Then you have GitHub sponsor. And if you have open source business or open source library, then you can put these logo of these different brand saying that this product is sponsored by these many people. Why don't you try out their app? If you look at few libraries of NPM or so many packages, you will find that they are advertising companies like Fastly or versa. These are all Cloud computing platform so that people can try out those product. So GitHub sponsor is also a way by which developer can make money. Another one is paid feature request. So if you understand the product in that case, you can develop a paid feature or an extension or an add-on for some specific client. And sometimes these companies will also be us small amount to build the open-source product. 39. What is blockchain technology: So I understand that the crypto market is not doing good right now. But I feel in 2023, you should learn about the blockchain technology because this is the underlying technology behind multiple cryptocurrencies, Tao and FTEs, or even some metaphors project. So let's understand about the different types of blockchain business model. And they will understand how these different companies are monetizing their code blockchain technology. Now before we understand the different types of business model in blockchain, we first have to build a very strong foundation. And I know some of you may have some questions in mind like, what exactly is blockchain and how does it work? And that's why to build a strong foundation, we will first understand about the core blockchain technology and then we will understand all the different types of business model. So blockchain is a technology of distributed ledger that will give control to people instead of giving control to a single authority or an entity. And let me simplify that. So if you look at all the different types of bank you have in your country, those banks are maintaining a centralized ledger. So every time a person do a transaction, they are basically logging all of those transaction in decentralized ledger. And whether you visit any branch of the bank, you can see all of those transaction that you are doing. That's a really good example of centralized ledger. And this centralized ledger is maintained by all the different types of financial institution and bank you have in your country. But in blockchain, they maintain a distributed ledger. That means no single entity or person or authority is maintaining your ledger. Your ledger is maintained by all these different types of node. These nodes are also known as your computer, and they are running the blockchain technology. And every time a transaction will happen on this blockchain technology, all of these computer will maintain the record of these transaction. And that's why people say that blockchain is nothing but a distributed ledger. Now some of you might be thinking that, okay, That's fine. We understand the blockchain technology. But what if a person who is maintaining these ledger, we'll try to change the transaction or let's say if he will try to delete the transaction, what will happen in that case? Well, to answer that question, let's understand what makes this blockchain technology so unique. So when we talk about blockchain, blockchain is nothing but a chain of these data block. Then we can consider these data block as a single page in a ledger. And all of these data blocks are connected to each other. And that's why we call it as blockchain, not a blog group, a blog family. Every time a bunch of transaction happened on the blockchain technology, they will bundle all of those transaction in a single block, and then they will add that block into this specific blockchain. Now you might be thinking, okay, what if someone tried to change the sequence of these block in order to do some fraud or spam. Well, if you closely look at a blockchain, the first block of this blockchain technology is known as genesis block. And if we talk about Bitcoin, which is the most famous blockchain technology. This genesis block was created by the founder of BitCoin, which people assume that it's, it is Satoshi Nakamoto. So every time you add a new block into this blockchain technology, this block will refer to the previous hash. You can see that the previous hash is one A4 z. And this block is referring to the previous hash of this block. And similarly this block is referring to the previous hash of this block. And the benefit of graphing these previous hatches that you cannot add a random block in-between. You have to have a block that is referring to the previous hash. And that's why you cannot change or alter the blockchain technology. So now you have a basic understanding of a blockchain technology and why it is difficult to remove or add a new block into the blockchain technology because this block may not have the exact same previous hash. Now we might be thinking, perfect, we understand the blockchain, but what exactly this, they're inside a single block. And that's why let's understand what is a block in a blockchain. So if you look at a block, block will have a block header. And this block header will contain information like block number, the previous block hash, the Merkle root, this timestamp or neurons. Then they have the block body that will store all of the data in this block. Now, if I'll give you a simple analogy so that you can understand about individual block in the blockchain. Consider this block as a truck. In a truck, you will have the cockpit of the truck. And this cockpit will have all the information or let's see, papers related to what exactly they have inside the truck and the pickup and the drop location of these codes. So all the important information is there in the cockpit of the truck. The truck driver. So the header will have all of these important information like the blog number, the previous block hash, the Merkle root, the nonce, and the timestamp. And the blog body will contain all of the data. Let's see our transaction data in case of Bitcoin or maybe a smart contract in case of Ethereum. If you wanted to increase the data capacity of a block, in that case, you can increase the block size, but a bigger block will have some other issues as well. So now that you understand everything about individual block and the blockchain technology, let's understand what makes this blockchain technology so unique. And you have a different reason. The number one reason is trustless. In blockchain, they use a distributed ledger. And that's why no single entity or person is controlling this ledger. Every time a transaction is happening on the platform, every single node or computer is maintaining the same lecture. And that's why it is also trustless. The second reason is unstoppable. If you have deployed a blockchain technology across all of these different nodes, than it is super difficult to stop even if a single computer is up and running, the Blockchain technology will still work. And that's why it is unstoppable. Unlike a centralized Cloud computing platform or database we are maintaining. The third reason is immutable. So every time a transaction happened in a blockchain technology, this block will group all of those transaction to the other, and then they will add a new block into the blockchain. And then you cannot remove that block. And that's why people call this as immutable. Because you cannot remove a block. And you know the reason that a single block will have a header, and that header will contain the previous hash. And that is why it is super difficult, or I would say, impossible to remove a block from the blockchain technology. Fourth reason is de-centralized. That obviously means no single person is controlling the blockchain technology. Every single node around the world have the exact same ledger. And that's how people are facilitating the transaction. The fifth reason is lower-cost. And I know this may not be true in case of Bitcoin or Ethereum. But if you look at couple of other blockchain platforms like Solana, the transaction cost is very less. Six this Peer-to-Peer, that means every time you send a cryptocurrency, let's say a Bitcoin or Ethereum, two other person. It will take a few seconds, a few minutes. Once the transaction is validated, though, cryptocurrency will reach to the wall it and that's why it is peer to peer. That means there is no central authority who validate the transaction. Seventh is transparent, and we already understand that the blockchain technology is a distributed ledger and it is distributed across all of these NADH. And you can also run the same blockchain technology and you're not going to look at all of the transaction that is happening on the platform. So you cannot remove, hide, or erase a transaction. And that's why it is transparent. Eight reason is universal banking. So whether you live in United State or in Africa, or maybe in Australia, have a computer that is connected to Internet. You can simply don't the blockchain ledger and you can transfer or accept money from anywhere you want. So that's why blockchain provide you a universal banking. You don't really need a bank account. So now that you understand what exactly is a blockchain technology and how does it work? Now let's understand the difference between web Q2 and Q3. And if you're into programming, or let's say you have written any code in your life, then you can easily understand this topic. So if you have built a mobile app or a software, then I'm sure you have heard of these three things. The front-end, the backend, and the storage. So when you build a software or a mobile app, you need a front end that interact with the end-user. And you can build this front end with the help of HTML, JavaScript, and CSS. Then behind the scene there is a back-end where all of these logics are written. And you can build this back-end in Node.JS, in Python and Java or in Ruby. And that's your back-end system. Now, along with this backend, you have a database that is storing all of the information of your customer, or let's say, the kind of product that they are purchasing from your mobile app or from your software. So in a web app you have three important part of front-end or back-end, and a storage, also known as your database. And you will host all these three important part on AWS or either on Google Cloud Platform. And that's your web app. Let's look at a web app. Now. In a Web three AP, you will still have a front-end that is made up of HTML, JavaScript, and CSS. But you don't really have a back-end or a storage. In a Web three app. The backend is nothing but the core blockchain technology, that is your ethereum, polygon and Solana, then you will write a smart contract in solid a T or invest. So if you wanted to write a smart contract in Ethereum, you will use a Solidity programming language. If you are writing a smart contract in, let's say Solana, then you can use Rust programming language. Then you need a node provider. So you can get all of these different nodes from quick nodes or alchemy. And we'll discuss about alchemy. Alchemy is an NADH aggregator, and then you can simply connect your front-end. And that's your web app. In Web three app you need additional part, that's your wallet. So you can use MetaMask or phantom vallate in your browser. And then you can interact with this Web three app. So every time you do an action in this Web three app, let's say you are buying or selling an FTEs or digital asset, or let's say, even if you're doing a normal function, some amount will get deducted from this Web three wallet, like phantom or MetaMask. And that's your Web three app. Web three app doesn't have their back-end or storage, and they are not hosted on a Cloud computing platform like AWS or Google Cloud Platform. The backend is nothing but the code blockchain technology, that is Ethereum, Solana or polygon. And you are simply writing a smart contract with the help of a nod provider. And then you are interacting with that specific code blockchain technology. And every time a transaction happened on the platform, it is visible to every single user around the world. And that's the basic difference between a web app and a web app. So now that you understand everything about blockchain technology, in the next video, let's understand about the different types of business models in blockchain. 40. Blockchain business model: Hey everyone. In this video we will understand about four different types of business model in blockchain. So at first we have utility token. So if a blockchain technology is issuing these utility token, then that's their business model. The second one is blockchain as a service aggregator. So if a company is aggregating all these different types of blockchain technology on a single platform. That's your bass, also known as blockchain, as a service aggregator. At third, we have core development platform that we will understand about the core blockchain technology like Ethereum, Solana, or polygon. In the end, you have your wallet and other services like Dow or an FTEs. Let's start with utility talker. And in this part, we will understand what exactly is a utility token and Y company will issue it. So as you know, blockchain is a distributed ledger technology and that requires consensus. And that's why these companies will issue the token, because it's one of the mechanism to reward the token minor, or let's say the token holder. So let's say as a company you are building a unique blockchain technology. And you wanted to reward the early adopter or all the people who have some trust and who believe in your technology. In that case, you will simply issue a utility token and you will launch your ICO, also known as Initial Coin Offering. And you will give it to people at a discounted price than people will hold it. Or let say they will use those token in the Blockchain technology to do an action. Or if they wanted to sell those token after few years, they can also do that. And that's your token economy where all of the transaction that will happen in your blockchain technology in the future will be facilitated by these utility token. So in short, these companies will issue some token in there, Initial Coin Offering in all of these exchanges like finance or Coinbase. And if you hold these token, you end up making profit. Or sometime people lose some money as well. So these are risky investment and I will not recommend you to start buying some random token. Now one thing you need to keep in mind when you are looking at these different cryptocurrency project or let's say these different types of utility token is the economics. If you look at the top economics of two different cryptocurrency project, Let's pick Ethereum and Solana. If you look at helium, almost 85% of Ethereum is there with public. So people like you and me, 15% of lithium is hold by the insider and five per cent of Ethereum is hold by the Foundation. On the other side, if you look at Solana, more than 48 per cent Solana is owned by the insider. They gave more than 30% of these talking to the community as well. And they have distributed less than 5% of these token to the public. And that's not really a good sign. And that's why you will realize that people trust Ethereum more than Solana. That's your token economy. Now, let's understand about the second type of business model. That is your blockchain as a service aggregator, also known as bass. Now, if you're into programming or let's say if you're a tech savvy person, I'm sure you have heard of AWS. Aws is also known as Amazon Web Service and it's a cloud computing platform. If you are building a mobile app or let's say a software, you simply have to do an API call AWS. And you can store all of your media asset in their S3 bucket. And you can use the different product using a simple API call. So they have products like load balancer, content delivery network. So you can use a bunch of service of AWS with some simple API call. Now, just like that, you also have a blockchain aggregator like alchemy. Alchemy will provide you all of these different node for a variety of blockchain. So ultimately will simply act as a bridge between all of these different technology like Ethereum. So Lorna or polygon and alchemy will provide node to all of your d Phi or daps platform. Now, d phi stands for decentralized finance and tap stands for decentralized apps. So let's say if you're building an NFT marketplace like OpenCV, or if you're building a decentralized finance platform like RB or dy by dx. Or whether you're building a wallet or a gaming app, or maybe a web tour in for our app, you can use these notes provided by alchemy. And then you can do all of these transactions across different blockchain. And that's where blockchain as a service aggregator. Let's talk about the core development platform. There is very less to explain in the core development platform. So this basically contains all of the code blockchain technology like helium blockchain or the polygon blockchain or the Solana blockchain. And you already understand that how exactly these blockchain technology work. So you have a sender and on the opposite side you have a receiver. Let's say in case of Ethereum and Solana, you will build a smart contract. And then you will deploy that smart contract by paying a small gas fees. And whatever logic and rules you have written in that smart contract, they will execute those rules and it will, and the transaction will be facilitated. And that's your code development platform. And in the end you have your web wallet called Web 3 v like Phantom and MetaMask. Apart from business model, if you wanted to understand more about blockchain technology. So let's say you wanted to know more about digital signature or smart contract or Dow's. In that case, you can watch my six to seven hour long course on blockchain. Just tap on my profile and you can find a course on blockchain. In that specific course, I've explained everything from consensus mechanism to digital signature, to smart contract, to LFTs and many other things. So you can simply watch that course and then you will understand about blockchain. 41. D2C business Model: So in the United States, many powerful companies such as blockbuster, Borders, Forever 21 and see yours all have filed for Chapter 11 bankruptcy. So why these companies with offline store are shutting down? Now, there are list of problems that even you will face if you open your own offline retail store. The number one problem is excess product. So if you wanted to buy these products at the most affordable price from a wholesaler, or let's say from a manufacturer. In that case, you have to buy these products in bulk quantity. And if you do a volume purchase, in that case, we will have to sell these products. But in majority of cases, these brands were not able to sell all these product that they bought in bulk quantity. And that's why they end up increasing the inventory holding cost. And if you have more inventory in your warehouse, and if it is not moving, then it will reduce your cashflow. And that was the first problem with all these retail brand. The second problem is that people were not purchasing these products at all. So if you go to these retail store, you will see that they have a peak demand specialty on Saturday and Sunday. But people are not visiting the retail store on Tuesday afternoon, on Wednesday afternoon. That's why less people are going to these retail store and buying product. The third problem that these retail store we're facing, or maybe you will face if you open a retail store. Now, if you look at all the areas that have high footfall or that have high intention of people buying the product, you will see that the rent is super high, and it will be hard for you to justify the rent when you have less revenue in your business. Now in this video, we will understand a better business model. That's your direct-to-consumer business model. And we will understand how these different startups and companies are using direct-to-consumer business model in 2023. So in simple term or direct-to-consumer business model will cut out the middleman and sell all of their product directly to the end consumer with the help of a third party logistics provider. Now if I give you a couple of example, you have brands like Gymshark, Casper, and golden nutrition. Now, all of these brands are selling all of their product directly from a manufacturer to the end consumer with the help of some third-party logistic provider like FedEx and UPS. And they don't really have all of these middlemen or intermediary, like a wholesaler or distributor, because they are selling product directly from a manufacturer to the end consumer. And that's why this business model is used by all modern brands in the package code or glassware or furniture or home goods space. Now, in order to understand direct-to-consumer business model, let's compare the B2C business model with a traditional retail business. So if you look at a traditional retail business, you have your manufacturer. Then these manufacturer will sell all of their products in bulk quantity to these wholesaler. Then these wholesaler will a small cut, and then they will sell all of these products to the off-line retailer with the help of these distributor. And finally, a consumer like you and me will purchase these products from a retail shop. So that's your traditional retail supply chain or business. Now let's talk about a direct-to-consumer business model. In direct-to-consumer business model, you have to cut out all the middlemen. So let's say you have a manufacturer who is manufacturing these products. And as a B2C brand, you will list all of these products on your website, or let's say on your marketplace like Amazon, eBay. And then you will sell all these product directly to the end consumer with the help of logistic provider. So you have cut out all the middlemen, like wholesaler, distributor, and offline retailer. You will simply take a product from a manufacturer, lists that product on your website, or let's say a marketplace, and then sell that product directly to the end consumer by removing all the intermediary. Now there are multiple examples of companies using the B2C model. So if you look at companies like Gymshark, Dollar Shave Club, Gold nutrition, Shelby's, Warby Parker and bought. All these companies are using direct-to-consumer business model. But if you closely look at these T2X, some of these B2C brand may also operate a brick-and-mortar store in addition to their digital channels. And we'll talk about the reason why they do that in the coming video. But let's look at all the different brands in the B2C space. So you can see that all the different DTC brand across these different domain. So you can pause the video and look at all the B2C brand in clothing and accessories piece in health and beauty space. Now let's understand about D to C business model by doing a small comparison. Let's look at a traditional retailer like Nike. And A B2C brand like Gymshark. Now let's understand how pricing will work in a traditional retailer. Let's say a manufacturer is manufacturing a pair of shoes at 99 dollar. And I know it's a higher amount, but let's start with $99. So a manufacturer is taking a small commission of $6, and then he's selling these products at 01:05 dollars to a wholesaler. The wholesaler is also taking a small cutoff, let's say $5. And he's selling this product to the distributor at 110 dollar at 01:10 dollar. The distributor is also taking a small cut off ten dollar and selling the same product to a retailer. And finally, a consumer is buying these shoes from a retail shop at the price of 135 dollar. So you can see that how the price has increased from $99 to 135 dollar till the time the product reaches to the end consumer. Now let's look at a brand like Gymshark and how they can sell the exact same product at a cheaper price. Brand like Gymshark normally buy this product from a wholesaler or directly from a manufacturer. And they will take a small cut off, let's say ten dollar. And they will also pay a five dollar as a logistic piece to the companies like FedEx. And they are still able to sell the exact same product at just 120 dollar. And that's the beauty of using a B2C business model. Now, let's understand the benefits and drawbacks of using a B2C business model. Let's start with benefits. Because you have removed all of these middlemen, like a wholesaler or distributor and retailer, you will have more control over your profits because you're just buying these products from a manufacturer. And with the help of a logistic provider like UPS or FedEx, you are directly selling these products to the end consumer. So you are removing the middlemen and that's why you will have more profit. The second benefit of using a D2, same business model Is that not because we are selling all of your product on your website or let's say in these marketplace, you will have more access to the customer data. So if you're selling your product using your own website, or let's say a marketplace like Amazon. In that case, you have your customer data. You can simply get their name, their email ID, their gender, or maybe there is as well. And if you have all of these details, then you can personalize your product. Or let's say you can make your product much better than your competitors who are operating in offline space. Because in that case, these retail store or these distributor may not be giving back to the data about the customer. The third benefit of using a B2C business model is that because you don't really have a wholesaler or distributor or a retailer, you can have a higher degree of personalization in your product range. So maybe you can launch multiple colors online. Or let's say you can launch a special kind of addition in your product. And you can simply sell all of these personalized product on your website or mobile app, or let's say on a marketplace. So you can have a higher degree of personalization If you don't really have all of these intermediary. The fourth benefit is that you can simply have a higher control over your profit. So if you have recently bought anything online, you will see that these plants would normally try to upsell and cross-sell you the product. We have seen that in case of Dollar Shave Club. So Dollar Shave Club started as a brand that used to sell these razors online. And soon they started selling shaving cream after shave gel and all of these other products as well. So a B2C blend can easily up-sell and cross-sell you the product on their platform. But the fifth benefit of using a B2C business model is that you have more room for product testing. Now, if you have offline channel, in that case, you have to launch your product in hundred thousand quantity. And that's the only way you can test your product. But in direct-to-consumer business model, you can launch a special edition with, let's say, 1,000 quantity or 100 quantity. And you can simply test whether people like this special edition of your product or not. You have more room for product testing because you can quickly get the feedback and you can quickly look at the sales every single day. But in an offline retail channel, you literally have to push that product to a wholesaler than these wholesaler have to push the exact special edition product to distributor than to retailer. The feedback loop is very long and you have to wait for a longer time in order to test these different variant or flavors of your product. Let's look at some limitations over D to C business. The biggest limitation is that you will have some hurdles to growth. So all the brands that are using B2C business model, they are fighting for the same digital native customer. So you have a limited set of people who are buying online. Now to solve that problem, the brand normally pivot to a omni-channel approach, where they opened these small offline retail store so that they can expand their business. The second limitation of a B2C business model is that it will increase your responsibility. Now, in offline retail business, you just have to make sure that your manufacturer is manufacturing the high-quality product. And after that, you don't really have to worry about our distributor, wholesaler or a retailer. But in direct-to-consumer business, you have to have a full accountability for every facet of supply chain. You have to manage everything from packaging to warehousing logistic by yourself. The third limitation is you will have a street marketing cost. So as discussed, you have a very limited number of digital native customer. And without the big box department store, you will be fighting for the exact same customer. And in that case, you might be paying a higher fees to these expensive influencer so that you can promote your product online. 42. Click to Brick Store - Warby Parker: So in the last video, we had a discussion about all the limitation of a direct-to-consumer business model. Now, in this video, we will understand how these consumer brand can implement the omni-channel strategy so that they can go deeper into the market. So in this video, we're going to talk about a unique strategy that all these brands are using right now so that they can expand deeper into the market. The name of this strategy is omni-channel strategy. That means you will have more than one sales channel. And some people also call this strategy as a click to break strategy. That means you are going from your website where people used to click and buy your product to opening or retail store, also known as your brick-and-mortar store. So let's discuss about it. Now to understand click to brick strategy, I'm gonna give you three example of all the DTC brands that have expanded from online website or mobile app to hundreds of retail store. The first name of that brand is Warby Parker. Warby Parker is an eyewear brand. They used to sell these eyewear online using their mobile app and website. But now they have more than 200 retail store in the United States. But people can still buy these products online using their mobile app and website. But they have retail presence. And we'll talk about that in a while. That why a brand like Warby Parker is opening these retail store. The second brand is all bird. And they are selling shoes online. They started their first store in San Francisco and New York. And now they have more than 30 store where they are selling all of their product. The third brand is Casper. Casper sells mattresses online. They started their first brick-and-mortar store in NYC. And now they have more than hundred store. Now recently I saw that Casper is somewhat struggling, but I still thought of including the brand in this video. Now let's just pick one out of these brand and let's go deeper into that and understand why the brand is opening the retail store instead of just allowing people to buy online. Let's go deeper with Warby Parker. Well, if you look at the overall eye-wear market in United States, you have brands like Warby Parker. In India, you have brands like Lynn Scott. And in the United Kingdom, you have brands like speck square. And all these three brands are doing the exact same thing. They started online by selling their eyewear on their website and mobile app. Now, all of these grand have multiple retail store. Now before we go deeper and understand about all the reasons behind the Omnichannel expansion. Let's start understanding about Warby Parker, how they decided to start their brand by solving a problem, and how they are expanding into these offline retail store so that they can go deeper into the market. So Warby Parker started with this home try-on program. So they had a website and a mobile app. So if you really want to try out all these different frame, you can simply order five different types of frame. And the Warby Parker will meal all those frames to your address. You can simply try out these five different frame for one single month. And once you're comfortable with maybe a single frame out of these five different frame. Well, you can simply choose that frame. And Warby Parker will ship at just $95. But if you don't really like any of these five frame, while you can return all of these frames back to Warby Parker and they will manage everything. So that was their value proposition when they were selling all of these products using their website or mobile app. After few years of aggressive expansion, Warby Parker realized that they wanted to have more than one touch point. Because in online you can just see the product. You can use AI to just try out those spectacle on your face, but you still need to touch and feel the product. And that's why to have a full omni-channel retailing experience. Warby Parker have decided to go with brick and mortar retail store. Now these retail store, we're having more than 1,000 different types of frame. So you can simply pick a frame, see whether that frame is good for you or not. And then one of the sales executive will place your order online, and then Warby Parker will ship that ordered to your doorstep within like two or three days. Or if you like a product, you can order online by yourself as well. So that was their strategy. They wanted to increase the touch point. So these retail store. Now acting as a touch point so that people can walk in into these retail store. They can see the different kinds of frames they have. And the order will be delivered to their doorstep within like two or three days. Now, after the first purchase, if the customer is feeling comfortable with the brand, then there is a very high probability that the customer will place a second-order without actually visiting the retail store. Because in most of the cases, on an average, a customer is trying out maybe 20 or 30 different types of framing the retail store. And he ended up liking multiple frame. So he can add those frame in their wish list or in the cart. And maybe he can purchase those products using the mobile app after six months or a year. Now, by opening these retail store, Warby Parker was having the omni-channel strategy where they have a very tight integration between their online and offline store. The reason Warby Parker was so much interested in opening these retail store is because 75 per cent of the people who purchase these products from the retail store, we're really interested in the brand. And they tried out couple of frames as well on their website. But those people were not really comfortable buying those product online. And that's why they need additional touchpoint. They can touch and feel the product. And once they are comfortable with the quality and the kind of look the frame is giving to them. In that case, they can walk in into these retail store, touch and feel, maybe 2030 different types of frames they have. They can see which one is good for them, and then they can buy those products from this store. And obviously Warby Parker will ship these products to their doorstep within two or three days. Now in omnichannel, when you have more than one sales channel, let's talk about all the metrics that you need to measure so that you can understand how your offline and online store is contributing to your revenue, profits, or purchase. The first one is obviously revenue. So you have to track how much revenue you are generating from your offline store versus online store. Then you also need to track the channel mix. That means, what is the contribution of your online seeds to the offline sales? Third one is growth and retention. So you have to track growth and retention separately for these two different sales channel. So what is the growth of your retail store versus your online growth? And the retention of customer. Retention is nothing but repeat purchase. Then we have a new matrix called four-wall margin, also known as your average sales per square foot. So let's say if you have two different retail store in an area. So how will you exactly know that these two stores are performing? And one of the way you can do that is by looking at the average sales per square foot, how much revenue they are generating, divided by their total store area. And that's how you can calculate your average sales per square foot. That's one of the metrics that is only used by retail brand. Last one is contribution margin. And I'm going to cover this topic by the end of this video, where we will look at the financial statement of a company. And then we will understand how can you calculate the contribution margin. 43. Omnichannel business Success MetricsOmnichannel business Success Metrics: Now let's go deeper into all these five metrics and how a brand can look at all of these different types of metrics to understand how well they're doing in their offline retail business. Now, to go deeper into that, I'm going to take the last year data for Warby Parker. I don't really have the latest data for it. So I have the Warby Parker straight off for 2018, 2019, 2020, And maybe 2021. But I don't really have the data for 2022. Or if you have the access to that data, you can just pick the data online and you can go through it. Let's start with the journey of Warby Parker. Parker started as a New York-based IVR retailer and they started in 2010. They got their first order in 2010. Then they started selling sunglasses in 2011. They started selling progressive lenses in 2013. They built their first e-commerce app in 2015. Than in 2019, they end up distributing 5 million glasses. And the journey is still going on. And they did that by using three important strategy. They started at home try-on program where you can order these five different classes online. And you can get all of those losses within like one or two days. And you can pick which one is best for you. You can simply return the remaining four frame. And Warby Parker will ship you the glasses once you submit your prescription. And that was their home try-on program. Then they started having the omni-channel presence, which means they have more than one sales channel. And those sales channel are tightly integrated. So instead of opening a brick-and-mortar store that is not connected online and they have a disconnected experience. They started opening click and brick store. That means you visit a retail store, you explored the product and if you like the product, you can simply buy those products online inside the retail store and you will get the product within a day or two. Now let's understand all the five important metrics in case of Warby Parker, Let's start with the revenue. More than half of their revenue was coming from these offline retail store. So you can see that the kind of channel mix they are having 2018-2020. In 2018, they were getting 38% of their sales from their e-commerce platform. But in 2020, they are getting around 60% of sales from e-commerce and 40 per cent from these offline store. Not the reason they have a lower sales in the retail business and a higher sales in the e-commerce business. And the reason behind that is that these click and brick store are acting as the first touch point. So people are going into these click and brick store. They are trying out all these different types of frame. And then they are buying these products from the store itself. But after the first purchase, if they are really happy with the product than they are doing the repeat purchase online from their mobile app and website. And that's why you can clearly see in the channel mix that even after their overall growth there, online e-commerce contribution is increasing because people have done their first purchase from these click and brick store. And now they are doing the repeat purchase from their e-commerce platform. Now let's look at their growth, especially in the click and brick kind of store or let's say the offline store that they were opening. If you look at the growth rate, you can see that in 2018 they had 42% growth rate. In 2020, the growth rate slows down a bit because of obviously COVID-19. And in Q2, 2021, they have 23% growth rate. And because they are having a higher growth rate and their revenues also increasing in the long term. There CapEx or capital expenditure will reduce. Now let's talk about the most important part of a business that is retention. That means how many customers are doing the repeat purchase from the same brand. If you look at this diagram, you can see that they have 12 months retention, 24 months retention, 36 months retention, and 48 months retention. So they have more than 50 per cent sales retention rate within 24 months of their first purchase and nearly 100% retention rate over 48 months. You can see that customers are really happy with the product. Because the offline store, also known as your click and mortar store, is acting as the first touch point where people are going out. They are trying out all these different types of frame. And if they are comfortable with those frame, then these people are buying one of the frame. And then they started buying all of these products online from their e-commerce platform. And that's why the retention is perfect. Now let's talk about the last metrics that we need to track in an omni-channel business. That's your contribution margin. Now before we go deeper into contribution margin, we first have to have the basic understanding of income statement. So I don't really want to go deep into income statement, but let me give you a high-level overview of the income statement so that you can easily understand about the contribution margin. Income statement. At the top, you have your net sales. And net sales is the total amount of revenue that a retailer is generating during a given period of time. This is the total revenue you have. Then you have COGS. Cogs is also known as cost of goods sold. So this is the amount you are spending to make a product or acquire a product. So this is the product cost. If you reduce your product costs from your next is you will have your gross margin or gross profit. Gross profit is the difference between your net sales and the cost of the product, also known as cost of goods sold. Then we have operating expenses, which is the cost of running a business. So things like the rent of your click and brick store, the salary of your employee, all of that is operating expenses. Now if you add your operating expense and other cost, you will have your total cost. And if you subtract this total cost from the gross profit, then you will have your EBITDA earnings before interest tax and amortization. And then you subtract texts from it, and then you will have your net profit after-tax. Now, let's look at the contribution margin of Warby Parker. And you can understand that with the help of this diagram. So to calculate the contribution margin, Let's take the average revenue that a brand is strong rating from their customer. So Warby Parker was generating almost $188 as the average revenue from a single customer. And in that average revenue, 40% was there COGS or Cost of manufacturing a product. So 75 dollar was there COGS in 2018. And then they have customer acquisition cost. That means what is the amount of money you are spending in acquiring a customer? So 14% was their customer acquisition cost. And then they were spending almost 21%, that is 39 dollar to sell that product and just giving a basic service to the customer. And that was 20, 1%. And in the end, if you subtract your COGS, customer acquisition cost, and service cost, you will have your contribution margin of 25 per cent. So in 2018 they were having a 25% contribution margin. So they were having a 48 dollar as a contribution margin that could decrease in 2020 to 45 dollar, that is 21% contribution margin. The simple reason behind the decrease in the contribution margin in 2020 was the customer acquisition cost. So their customer acquisition goals got increased from 26 dollar to $27.20, 19 to 40 dollar in 2020. They were spending a lot more amount of money in online advertisement. And you can see that split on the right side. In acquisition cost. They had media spend their home try-on program. They were spending a lot of money on that because they also have a reverse pick up. Once the customer pick one frame out of those five different frames that they were sending. That was all about the contribution margin. Let's look at the bottom line. That's your EBITDA. Earnings before interest, taxes, depreciation, and amortization. Ebitda margins are also quite tight. If you look at their adjusted EBITDA margin, you can see that in 2018 they had EBITDA margin of 3.2 per cent. In 2020, they are having an EBITDA margin of 1.9 per cent. And the simple answer to this is that they are spending a lot more money on acquiring a customer so that they can increase their top line. And that's why the bottom line is getting affected. So these are all the five important metrics you need to track in an omni-channel business. In the next video, Let's talk about few pricing strategy that are used by many e-commerce brand and business. 44. Dropshipping business model: Hey everyone, My name is now deep. And in this video, we're going to talk about all the different types of logistic business model. So in logistic we have three different types of business model. The number one is your drop shipping business model. And this kind of business model is used by many freelancer or many individual creator who are simply selling the product in a different country. Nine majority of the drop shipping business model. People have there supplier or fulfill or in China. And they are selling all of these products in United State or in UK. And that's your drop shipping business model. The second type of logistic business model is third-party logistic business. Let's say if you're a manufacturer or a small business owner, in that case, you need someone who can handle your complete logistics and supply chain. And that's why you have these third-party logistic company or third-party logistic aggregator, who can manage your supply chain and distribution. The third type of business model in the logistic business is Your last-mile delivery business. So if you look at all your food tech platform, Let's say all the startup who are shipping the product within a city from one location to a different location. These are last-mile delivery business. Let's start with drop shipping business model. Now this is used by a lot of freelancers who wanted to generate some side income. And that's why they are doing side hustle using drop shipping business model. And the idea, It's super simple. You don't really have to worry about the quality of the product. You don't really have to maintain the inventory and you don't really have to worry about header called logistic shipment and reverse fulfillment. You just have to maintain your website and you will list these product. And if a customer purchase these products, then you will transfer both of these details, like the shipment detail and the customer detail to a supplier and they will supply these product. So if I talk about the three important parties that are there in a drop shipping business model. You have a retailer and the retailer in and drop shipping business. So your responsibility is to make sure that you have a good product portfolio. Then you have your full filler, which shipping the product on your behalf directly to the customer. So this supplier, all the full failure is there in China. And they are having these products in bulk quantity. And they are managing your shipping logistics and fulfillment by themselves. And you are giving them a small cut out of the complete transaction, then you have your customer who is purchasing the product. So let's say as an online retailer, you are selling a sofa for a cat or a door online. So you have to find a full filler or a supplier for these products, who can ship these products on your behalf directly to the customer with the help of a logistic company. And that's your drop shipping business model. Now interruption in business, you have sauteing advantage and few drawbacks as well. Let's talk about the advantage of using a drop shipping business model. And again, this is widely used by a lot of freelancers who are doing side hustle. The first advantage of using a drop shipping business is that you need a very less capital. Now in drop shipping business, you don't really have to maintain any of this inventory because it's the full fillers or the seller's responsibility to make sure that they always have this inventory in the warehouse. So you just need to create your own e-commerce store using Shopify or WooCommerce. And you need to drive traffic on that e-commerce store so that people can purchase it. That's your job. The second advantage of drop shipping is that you can easily start this business. You can easily start your e-commerce store with 30 dollar a month. And then you can integrate these other tools like e-mail marketing, product recommendation. So Within 100 dollar, your e-commerce store or a digital store will be up and running. The third advantage of drop shipping is that you have low overhead. Because in a drop shipping business, your only job is to make sure that your online website is up and running. You don't really have to hire a lot more people to manage your inventory or to manage your warehouse. You can do this drop shipping business all by yourself. The fourth advantage of drop shipping is that you can do it from anywhere you want. You can be in India, Vietnam, Australia, or in any African country. And you can start your drop shipping store. You can sell this product in US or UK. And I'll tell you exactly how will you sell these products to different people. And you can have a full filler or a supplier from China. So you can start this e-commerce store, water drop shipping store from anywhere you want. And you can easily test out these different products. So normally people start by testing out one product. Let's see if you know a lot more about dog or cat. In that case, you can start with. Dogs of our cat so far. But you can always research more about it and we'll talk about that in a while. Let's talk about few problems that are there with drop shipping. Now the first problem that a lot of people have started facing with drop shipping is that the competition is increasing because a lot more people have started selling these products online with a drop shipping business. And that's why the margins are very less. So if you are advertising a lot, then less people will convert. And that's why your customer acquisition cost will be very high when compared with the margin. The second problem with the drop shipping is that you will have a higher shipping complexities and time. Now majority of the drop shipping product comes from China. And if a product is directly coming from China to a different country than it will take at least ten to 15 business days for that product to reach the customer. Now, I'm giving you a very high level overview of drop shipping business. If you want it to start this business, I always recommend you to dig deep into this and do your own research. So let's say if you're interested about selling the product related to your dog or your cat, or let's say if you are a pet owner in that case, you have a higher probability that you can figure out different ways to sell these products online. So you can pick your niche based on the kind of core competency you have. Second thing you need to keep in mind that your product selection should appeal to the impulse buyer. So you would be only selling all those product that people wanted to instantly explore. If the CD4 T of that product. In short, they are solving the burning pain point of your customer. Now I'll show you all those different types of products in a while. And I'll also tell you how exactly can you research about those products. Another thing you need to keep in mind while you're picking your niche is that you have to sell unique products that are currently not on Amazon. If you go to alibaba.com and if you search for the unique product that are being purchased by people in China or in Japan that are not there in US or UK right now, in that case, you can pick all of those products. In order to pick a niche. You have to keep all these four things in mind so that you can create a strong brand in the long run. Then the second thing you need to do in a drop shipping business is that you have to perform a competition research. You have to look at your competition, what kind of product they are selling, what's their value proposition? Once you have picked your niche and you also have performed the competition research. Now you have to create your own drop shipping store or a website using Shopify. You can use platforms like Shopify or godaddy to pick your domain name. And then you can quickly integrate that domain name with Shopify. And that's how you can establish your online presence by creating a website or a digital store. Then you can source all of these product on your website using a plugin called Over Lou and AliExpress. And then you can sell all of these products globally on your e-commerce platform. Now let's understand the most important part of this video. How exactly will you sell these products online to different people? So let's say you are picking a product, a dog, or a cat. So phone line. In that case, you have to go to Instagram and you have to find all the pages where people are posting dog and cat videos online. So you have to ask them that if I promote my product on your Instagram page, using your story, where you simply have to put up a video and you have to give a swipe up link of my drop shipping store. How much charge will you take? Let's say the admin of that Instagram or Facebook page will say that I'm going to charge you 100 dollar and I'll put up your promotional story on my Instagram page. And then people can swipe up and they can buy the product because I have, let's say 500,000 or 1 million followers. So in that case, you will simply send a video of your product. And they will put that video into their Instagram story. And then people will swipe up. And if they find that product interesting, they can buy that product. You are paying, let's say 100 dollar to that specific person. And let's say you're getting a sale of 1000-dollar. And let's say if your contribution margin is 20 per cent, in that case, you can generate a profit of $200. You can see that with a hundred-dollar of promotional offer, we are generating 200 dollar of profit. But again, in drop shipping business model, you have to make sure that your video and the product is attractive enough. And they are having an impulse buying behavior so that people can quickly buy those products from your drop shipping store. And you can also generate a decent amount of profit so that you can justify your cost that you are paying to this admin offer, Instagram page or a Facebook page. And you can look at all of these different products from Alibaba. And you can source these products using our balloon on your Shopify or WooCommerce store. And that's all about your drop shipping business model. In the next video, let's talk about third-party logistic business. 45. Third Party Logistic business model: So in the last few videos, we were discussing a lot about third party logistics provider. And that's why in this video, we're going to talk about third-party logistic business model. Now, a third party logistics business is essentially when a business will outsource all of its product distribution, warehousing, and fulfillment to an external logistic company. Let's say if you're a small business owner and you don't really want the headache of warehousing, fulfillment, reverse logistic, and all of these processes. So you can completely outsource all these processes like distribution, warehousing, fulfillment to a third-party logistic provider like **** Bob. So if you look at ship Bob as a company, they have all of these warehouses distributed across the United States. And our small seller can send all of their inventory or product to ship Bob in their warehouse. And then Shabaab can manage everything from warehousing to packaging the product, to distributing that product to the end customer with the help of other logistic provider like UPS or FedEx. And they can also manage the reverse logistic. So on every single order, Shabaab will cost you somewhere around two to five dollar so that they can manage all of this end-to-end process. And that's your third party logistics business. Now before we dig deep into third-party logistic business, Let's understand about the different types of logistic companies. Now, apart from third-party logistic, you have first-party logistics, second party logistic, and fourth party logistics. So let's understand about one PL2, PL three P, L and for PL In this video, let's say you are a TV manufacturer and you are manufacturing all of these product by yourself. If you will manage every other process by yourself, like the packaging and the storing of this product than warehousing, logistic, and delivery. If you manage all of these process by yourself, then you are a first party logistic business. Then we have to peel or second party logistic. So let's say if your job as a manufacturer is to manufacturer TV and back that product by yourself. And then you are only outsourcing the delivery part of the process, then you are a second party logistic company. On the other side. Let's say if your only job is to manufacture the TV and you are outsourcing everything else like packaging, storing up the product, and the delivery of the product. In that case, you are a third-party logistic business. Then we have 04:00 P.M. so at 04:00 P.M. you will have companies like private label and y label. You don't really handle anything by yourself. The focus of this video is third-party logistic business model. And that's why we only go deep into that specific part of the business. So let's understand how exactly ship Bob, which is a third-party logistic company, goes from your online store to the customers door. So a third-party logistic business like ship Bob handles both the inbound and outbound logistics of your company. And they handle things like warehousing, fulfillment, and the return of certain goods for free. Let's talk about inbound logistic. So as a business owner, let's say if you are procuring some product or material from one of your distributor or supplier, then you also need a warehouse to store all of those product. Inbound logistics include things like purchasing and arranging the transportation so that you can pick all of your product from your supplier to your warehouse. Second part of this process is outbound logistic. So when your product is flowing out of the warehouse and you are delivering that product to the end customer, that's your outbound logistic ship. Bob will manage both your inbound logistics, outbound logistics. Now, this is not a sponsored video, but let's understand how exactly Shabaab take your product from your online store and ship that product to the customers doorstep. The first part of this process is to connect your e-commerce store with FIT BOP. So whether you have built this e-commerce store using Shopify or WooCommerce are using Magento. You can simply connect your store with ship Bob. And then you can import all of your product. If you want Shabaab to handle all of these processes by themselves, then you can also send your inventory. Now once they receive your product in bulk quantity, then they will distribute all of your product across all the fulfillment center they have. And every time you get an order from a customer. It will also reflect into the dashboard of ship Bob. And they will simply pack the order and ship that order from the nearby fulfillment center. So that's the business model of a third-party logistic provider. Now let's understand how different companies are using these third-party logistics service. So let's understand about the different types of third-party logistics service. At first we have third party procurement service. So if you look at companies like Apple, they are assembling partner Foxconn will make sure that. They are handling the procurement surveys on behalf of Apple. So they are procuring all of these different component of an iPhone. Let's say they are procuring the OLED display from Samsung, the memory chip from Toshiba. And they have more than 250 component manufacturer. And it's the Foxconn's responsibility to make sure that they are procuring all of these different components from all these OEMs or Original Equipment Manufacturer so that they can assemble the product. Then we have third party transportation service. So we have logistic companies like UPS, FedEx, DHL, or United States Postal Service. We'll handle the supply chain and this shipment of the product. Then we have third party distributor Service, also known as third-party logistic aggregator. You have these platforms like ship Bob, who will handle all of your logistic operation like warehousing and distribution and packaging of your product. And they have tied up with logistic companies like UPS, FedEx, and DHL, saw that they can ship the product from there nearby fulfillment center to the end customer. And in the end we have Cloud service. And there are multiple digital marketing companies who provide performance marketing surveys, or let's say they manage the catalog for all these different reseller. They also do a couple of designing job as well. So you have all these different types of third party logistics service. So let's go deep into all of these things. Let's start with third-party procurement service. If a company is providing third-party procurement service, it is handling things like buying of raw material or sourcing pre-made product, also known as semi-finished good. Sometime they are also negotiating the terms and condition with the supplier. And they are also making purchase. If the terms and conditions are aligning with the buyer or the product owner. And they are also maintaining all of these records. So companies like Foxconn do all of these things by themselves on behalf of Apple. Now, apart from procurement surveys and sourcing the pre-made product, sometime these third-party procurement provider will also do a couple of more service. Let's say they also handle the product development and they will assist the primary company in designing and engineering of an item. And sometime they also help them secure repeating. They also do our raw materials sourcing. So they will help them identify the best raw material supplier which can supply them in large quantity. That too, at an affordable price. They also work closely with these manufacturer and they can also schedule the manufacturing. The fourth part is customization. So let's say if a component is manufactured by an OEM and if they are working with different company. So if you look at Foxconn is a company, they work closely with Apple, Samsung, and with one plus S well, so if some level of customization is required with these different brand, they also work with these OEM so that they can customize these component for different brands. So that's your third party procurement service that will also do things like product development, raw materials, sourcing, scheduling of manufacturing, and few other things. Let's talk about the second type of 3PLs service. That's your transportation service. Now you have multiple companies that will help you in transportation service, like finding the right carrier to ship your product. How can you streamline the paperwork? They will also facilitate your schedule and they will also accomplish all of these process cost-effectively. A simple example of this process is companies like ship Bob or ship rocket, who worked closely with FedEx and DHL so that they can ship your product to the end customer. Now if you're selling your product in a single country, than 1 h to transportation service provider is more than enough. But if you are selling internationally in that case, you have to close the understand the different types of transportation service. So you have to work closely with logistic companies like UPS that can get you the best deal on domestic US rail and truck feed. And they can also manage your pickup and delivery schedule. The second thing is import export. If you are exporting your product to a different country, or let's say if you are importing some raw material from a different country, in that case, you also need a logistic provider that can handle all of your paperwork or duties or transportation cost. And in that case, you can reach out to companies like FedEx because FedEx have the largest logistic network in the world. The third one is you have to look for an overseas shipping provider. So you have to look out for shipping provider who can help you get the fastest air transportation, trans oceanic transportation, and free shipping at the lowest cost. Let's say if you are only distributing your product in a single country, In that case, let's look at all the third party distribution service. So let's understand if you only want to focus on manufacturing your product, or let's say selling your product online. And you want it to outsource things like warehousing, packaging, fulfillment, and reverse logistic. Then you can reach out to companies like fulfillment by Amazon or Shabaab. Their main job is to make sure that they have multiple fulfillment network so that they can reduce the delivery time. So every time you ship your inventory in bulk quantity to these warehouses, they will distribute that specific product equally across these fulfillment center. And anytime a customer places an order, they will fulfill that order from the nearby fulfillment center. The second thing they do is that they provide a fulfillment platform so you can transparently see everything that is going on in your business. So you can see that how many orders you got in a single day and from which state or area you are getting the maximum number of orders. And that's how these third party distribution service provider can also locate their product across these different fulfillment center. The third thing these distribution provider provide is customization. So they can customize these packaging bags for you. So you can choose the different material type of these packet. You can do some branding if you want. So these distribution partner or aggregator can handle things like warehousing, inventory management, product packaging, order processing, assembling the product and customizing the product based on the customer need. They can also do batching and kitting. They can pack your order, they can do the bulk shipping for B2B client. These are all the full range of services that is provided by these distributed partners or aggregator. If you're running a small business, as a business owner, you need the four type of service, and that is your growth service. Let's say if you are a single business owner and it is getting difficult for you to do everything like designing the level of your product or maybe handling your website. Or let's say, maybe running a performance marketing campaign on Facebook and Google. In that case, you can take help from these broad service provider or a digital marketing company by making sure that they have a proper branding strategy so they can design a new logo for you. They can improve the brand messaging, copywriting, or the packaging of your product. And they can also manage multichannel platforms like Amazon, eBay, or Facebook sales. Apart from developing and managing your online store or website. And in the end, they can collect and analyze the data. And maybe they can pass on the feedback so that you can understand what's going on in your business. 46. What is Last mile delivery: So now let's understand about the third important business in the logistic business model. And in this video, we'll talk about the last mile delivery business. Now you can divide last-mile delivery business into all of these options. So at first, you have end-to-end commerce, then we have hyper-local delivery. Then we have quick commerce. And in the end we have last-mile aggregator and last-mile sets, also known as software. Let's start with end-to-end commerce. If you look at companies like Amazon, amazon S3, clear example of the end-to-end commerce. Because if you are present at the bottom most part of a country, and let's say the salary is present at the topmost part of a country. Amazon can literally ship the product from the topmost part of the country to the bottom most part of the country, within a day or two. And without taking help from any of their partners or let's say logistic provider. So Amazon is a really good example of end-to-end commerce. Then we have hyper-local delivery. So a really good example of hyper-local delivery is grab. And grab is a super popular company in Southeast Asia, especially in Philippines, Indonesia. You can order any product or service like food or a makeup artist. So a hyper-local delivery app can simply help you ship a product between two different location in a single city. Well, you can use Grab to send a mobile charger to your friend. You can use this platform to send your favorite meal to your husband. If he is working in a different part of a city. So you can use these hyperlocal delivery app to perform a variety of function. Then we have quick commerce. So if you look at apps like Instacart and zap don't. These are grocery delivery app and they will deliver groceries at your doorstep within like 20 or 30 min. So if you pick companies like Instacart that deliver cross street across the United States. And if you look at some densely populated place like New York City or San Francisco, then you will realize that those places have a lot more corporate offices. And that's why these companies have established dark store in those places. And that's how they're able to deliver grocery at your doorstep within like 15 to 20 min. And that's your quick commerce. Then we have last-mile SaaS or software. And if you look at products like lockers and far I, these are two software product that will help these companies to easily manage the complex logistics and operation. With the help of the software, the company can see what is the average time or delivery guys taking. They can manage delivery. And they can also ensure if something goes wrong in the delivery process. And that's your last-mile delivery software. And a really good example of this is lockers and far away. These two software company can help you enable hyperlocal delivery or quick commerce functionality in your business. Now let's understand about the supply chain of an e-commerce platform and how exactly last-mile delivery work. So let's say on one side you have ED taylor. This can be a website or a marketplace like Amazon. On the opposite side, you have a customer who is buying all of these product online. And in-between both of these two people, you have a mobile app or a website where people can browse and they can buy all of these products. These ED tailor our listing all of their product or services online on this website or mobile app. Then they are shipping all of these product with the help of a logistics service provider to these end customer. And that is the high level overview of an e-commerce business. 47. Quick commerce - A new trend in the last mile delivery: So now let's discuss about the problems with last-mile delivery. So in this video, we will first discuss about the problems that a company will face if they are doing the last-mile delivery. And then we will discuss about the solution. And in that part we will understand how exactly can you solve the problem. Now, the first problem that a company will face is the per unit cost. So as a business, you want it to reduce down the per-unit logistic cost of a product. But the problem is that last-mile delivery accounts for 53% of the total shipping cost. That means in the first and the second stage, which is the first and the middle mile delivery, both will account for just 47 per cent cost. The simple reason is if you look at the first and the middle mile delivery, you will realize that products are getting shipped in bulk quantity using Sea Route or rail route. But in the last mile of person is literally carrying these individual boxes using a van or a two-wheeler. And that's why last-mile delivery is expensive. Now if you wanted to solve this problem, you have to bring network effect in your business so that you can achieve economies of scale. Let me oversimplify these two complex tone for you. At first, let's understand about network effect. So I made a video about network effect in this course. In that video, we had a discussion about how Amazon is reducing the price on their platform so that more and more people will place the order. If you have more number of people placing the order, then automatically the delivery guy who is delivering these parcel at your doorstep will be more number of parcel. Let's say yesterday if that delivery guy was carrying 30 different parcel and today if he has around 60 different parcel, in that case, the per unit cost will be less. And that's why Amazon will always try to make sure that all of their product on their platform or at the most affordable rate so that they can reduce down the per unit cost. The second problem with the last-mile delivery is the road infrastructure. Now if you look at few developed countries, they don't really have this problem. But if you look at some developing countries, especially in Southeast Asia, then you will realize that this is a big problem because 70% of our logistic still happens through rod. And if a country is having a bad infrastructure, in that case, it will take more time to deliver a product and the vehicle requires a little more maintenance. And that's why that's a problem. Now one of the way by which a company can solve this problem is by separating the logistic based on the margin. If you order a smartphone using Amazon, you will realize that they end up delivering that product within a day or two. But on the other side, if you order a low margin product from this platform, this sometime won't be able to deliver that product even after a week. The reason behind that is that these companies use a different supply chain based on the margin or the ticket size of the product. Third problem with the last mile is handling peak demand. This is there, especially in case of Uber and a food tech platform. And this is also there in case of marketplace. So if you look at a platform like Amazon, you will see that these platform have a peak demand specially on weekend and on festival season. Now, let's understand how exactly Amazon solves the problem of peak demand that happens at the time of weekend or at the time of festival season. Well, if you closely observe Amazon, you may find this option, just subscribe and save 10% on this product. And their main motivation behind that strategy is that if you subscribe for this product, we will ship the product every single month so that we can maintain a uniform demand of a product on the platform. And you are also saving or ten per cent cost on this product. And you don't really have to order every single month. So that's their strategy. They are flattening out the peak demand curve. So majority of people get their salary in the first week of the month. And that's why they start placing order for all of these different products. And that's why Amazon tried to stabilize the peak demand so that they can ship the product in the last week of month or maybe in the second week of a month. And that's how they handle peak demand. Now other companies like Uber Eats or Uber cab, handle the peak demand with a strategy called so charge. So they put additional one dollars surcharge. If you open the Uber Eats App, especially at the time of dinner. Or if you book a cab, especially in the evening, you will see a surcharge or around $1 in both of these app. Now let's understand about quick commerce. Now, quick commerce is the new trend in the last-mile delivery. Let's understand from last two decades how the market has evolved from the first-generation commerce, then to e-commerce and finally to quick commerce in 2023. Let's understand about that with the help of this diagram. If you go back almost 15 years back, you saw that back in 2005 for an early 2000s, one of our family members, especially our dad, used to go out to buy all of these product from the nearby grocery store. And that was the first-generation commerce that was self-service. And where all the products were available in small. Grocery store. And we used to go out to purchase those products. And back then discount with super-important for us. We used to go from one grocery store to a different grocery store to make sure that we're getting the best price. Then somewhere around 2010 or 2015, we started getting second-generation e-commerce, where we need a product at our doorstep within like two or three days. And we can buy all of these product using a mobile app or a website, sitting on a couch, and a delivery truck will come to our doorstep and they will deliver that product. Platforms like Amazon and few other apps started getting popular at this point of time, especially in these second-generation e-commerce. These companies used to have mega, we're houses in the outskirts of the city. And that's how they were able to fulfill the product faster to the customer's doorstep. And that was the second-generation e-commerce that was used by companies like Amazon, eBay, or even by Walmart. And even in those second-generation e-commerce, discount was important. And that's why we keep browsing across different website to make sure that we're getting the best price. That was the second-generation e-commerce. Now we have third-generation Q commerce, that is quick commerce. Now we need a delivery of a product in less than a r. But we have a small selection available because obviously it is super difficult to maintain these mega warehouse in different parts of a city. And that's why we have small selection available in these dark store. And these dark stores are available in every five to ten mile. Then we have third-generation Q commerce, also known as quick commerce. If you look at all the grocery app, these other really good example of quick commerce. Now they have a very small selection because they have the small dark store in every five or ten mile. And they are able to deliver these products in less than a r. Because these people have a lot more delivery guys with two will be equal. And the reason quick commerce, stare and people want all of these product in less than an hour. That's because they are not really concerned about discount. And these quick commerce companies are often present in areas where you have high density of population. Working in these corporate offices who have a lot more disposable income, but they don't really have a lot more time. And that's why the main focus of these quick commerce companies is time and not the cost. Because majority of people who are placing the order in these quick commerce app are often single person household who is staying in a densely populated area because so many corporate offices are there. Now let's understand how exactly last-mile delivery work in case of gouache commerce. Commerce are using the software. I'm giving you an example of a software named locus. Locus is a last-mile delivery logistics software. And multiple companies are using this software so that they can track every single order. So at first, let's discuss about the store type. In quick commerce, they will normally have these dark store that are present in every two to 5 mi or kilometers. And these dark store are comparatively very small. They have around 1,000 SKUs. And these stock keeping unit can cover almost 90% of your kitchen. And that's why these companies have started opening all of these small dark store in every two to 5 mi or kilometers. So that's their store type, their North Star metrics, which is a matrix that will decide the ultimate success of a business, is that if a customer is placing a second-order, they will have a retention of more than 90 per cent if you are able to deliver the order within like 15 to 20 min. And that's their North Star metrics. Metrics is used by multiple businesses to determine whether they are succeeding in their business or not. Not start metrics is the primary metrics where business will focus. And this matrix will help them understand whether they are succeeding in the process or not. Now, quick commerce work really well. If you have a high population cluster with high disposable income, and you can find these clusters, especially where you have a lot more corporate offices, then you have delivery time. And these weak commerce app, let's say a grocery app or a food platform will normally deliver the product within ten to 30 minute, depending on the service area. And this area can go anywhere 2-5 km or miles. If you are living in the United States. 48. What is Affiliate marketing ?: If you check the video description of all your favorite YouTuber, you may find them using these short affiliate link. And you might be wondering, well, how exactly these links are helping the content creator makes more money. And that's why in this video, we're going to talk about affiliate business model. And we will understand how exactly as a creator, you can make money. Now, not only YouTube, if you read a blog post, let's say yesterday I was reading a blog post about the best CRM that I can use in 2023. And when I open that blog post, I found out that those people have compiled a list of all the CRM. But when I click on the CRM, they will take me to a specific landing page that will have these UTM medium, UTM shores and UTM parameters. Now, we'll talk more about UTM by the end of this video. But even if you click on this YouTube affiliate link, then they will take you to the Amazon page. So you can see that they are taking me to the Amazon UK and Amazon US speech. And if I purchase anything from the speech, then the content creator will get around five to seven per cent affiliate commission on every purchase. So basically this YouTuber is giving a costumer to Amazon, and that's why Amazon is paying them around five to seven per cent commission. In this video, we will understand what is the affiliate business model, why and how companies use this type of business model. Then we will understand about the different types of affiliate business model. And we will also understand how your favorite creators make money using this business model. In the end, we will understand how exactly does affiliate business model work, and we'll understand how does it work under the hood. So let's start by understanding what is affiliate business model. Affiliate business model, also known as affiliate marketing, is a process of promoting and selling the product of other companies so that you can own a small commission. Let's say there is a company who has a product. Now that company can have a physical product or a software product. And let's say you are a content creator. You create content on YouTube, on Instagram, on TikTok, or let's say you have a simple blogging website. In that case, you have the network of people who trust you. So a company will have a product and you have a network of people who trust you a lot. And if your customer aligned with the kind of product that they are selling, then you can sell all of these product to your customer. And in return of that, you will get a small commission of around five to 7%. Now in this process, you have four different parties. At first we have affiliate, and this is the promoter of the product. I mean, as a content creator, if you are promoting a product, then you are the affiliate. Then we have product creator, who are the creator or the owner of the product. Then we have a network. And you can use a third party network software that can help you manage all of these affiliate commissions or let's say these affiliate campaigns. And finally, you have a consumer who is using that specific product. Well, in general, almost every single company, irrespective of their domain, is using the affiliate business model. But let me give you a couple of example if you wanted to understand it. You have some website hosting platforms like Bluehost, a marketplace like Amazon, or e-learning platform like Skillshare, a CRM software like HubSpot or trading platform like Robinhood or zeros. And then you have a VPN product like Nord VPN. Now all of these companies are using affiliate business model. In fact, I feel almost every single company nowadays is using affiliate business model. Because they feel that if some people are liking their product and they can also promote that specific product to other people. And they can also generate a bit of revenue as well. I'm going to pick Amazon as an example because I believe that almost every single person have used this marketplace. And that's why it's going to be easy for us to understand this. On Amazon, you have some sellers who are selling their product to the end customer. But Amazon also need a continuous flow of customers who are buying their product from their platform. And that's why Amazon have an affiliate program. Let's say if you are an influencer and if you make videos on YouTube, TikTok, or Instagram, then you can create an affiliate page. Or you can share a product individually with the affiliate link. And you can promote that product on your video description or on your Instagram bio, or maybe on your TikTok profile. Influencer is promoting the product to all of these end customer by creating a video or by giving a small call to action in the video. And if these customer will purchase the product on Amazon, in that case, the Amazon will give a five to seven per cent affiliate commission to all of these influencer. Now if you closely look at this process where our influencer is giving a customer to Amazon. And Amazon is paying around five to seven per cent of the complete transaction. You will realize that this is a win-win deal for both the people. Because in this case, the influencer, or let's say if you are a content creator, you are happy because you are earning a commission on every single transaction that is happening. The company that can be Amazon or any company. The company is also happy because they are getting a new seeds from the customer. And this is because acquiring a new customer is expensive. And the company could have run a campaign on Google, or they could have done some marketing to get those customer. But you are giving them a customer by creating the awareness about a product using a video or a blog post. The customer is also happy because he learned a lot about the product from the video or the blog post. And he's also getting the product at the same price. Now, let's understand about the different types of affiliate business model and how a company can use all of these different options. When we talk about the different types of affiliate business, we have pay-per-click, pay per lead, and P per sales. Let's say if I influencer is giving these affiliate link in the description and the value proposition of that product or that company is not that good. The content creator is doing their job. The product is not attractive enough to entice these customer. And that's why some content creator will normally tell these companies that we're going to promote your product using our platform by creating a video or a blog post. But if people are not finding that product interesting and if they're not buying it, we still want some money from you. And that's why these companies will pay that specific content creator based on the number of clicks they are giving. Or let's say if hundred people are visiting a specific landing page of a software product, they will pay that specific content creator based on the number of visit or the clicks they got. Second type of monetization model is p per lead. Let's say if there is a software product and if the company wanted to promote that product using a YouTuber, and they don't really want people to purchase the product or the first place. They only wanted to take a email id or the mobile number of that customer. In that case, they will give a link and they will ask the user to enter their email id or a mobile number so that they can connect with them and they can sell that product. In that case, the company will pay these content creator based on the number of leads they're getting from their campaign. In the end, we have paper seal and this is there in case of marketplaces like Amazon. In Amazon you will always have a small ticket size or you normally purchase product from, let's say $10 to $30. In that case, amazon is not really bothered about the number of clicks you are giving to them or the number of leads who are providing. They are more concerned about whether your customer is buying the product or not. But in case of software product, where the ticket size can go up to $10,000. In that case, they only want some details of the prospect so that they can talk to them and they can convert them. 49. Benefits of affiliate business model: So these are all the different types of affiliate business model. Now, apart from this, you might be thinking, well, if I wanted to make some money as a content creator, do I really have to create videos and post those videos on YouTube, Instagram or TikTok? Or is there any other marketing channels as well? Well, now we will understand the common type of affiliate marketing channels that you can use if you want it to generate some affiliate income. So let's say if you're a content creator and you love writing blog posts, in that case, you can also provide these affiliate link on your blog and website. Let's say if you are someone who have a good understanding about a specific domain, and you also love writing about that specific domain. In that case, you can start a blogging website. So imagine you are a pet owner and you have a deep understanding about all the products that are available in the market for pets. Or let's say you love reviewing beauty product. So in that case, you can pick your niche and you can start writing about all the products in that specific niche on your website. And then you can give affiliate link of those products and you can start generating income. Then we have influencer marketing. If you create a lot of video content on TikTok, Instagram, and YouTube. In that case, you can simply give an affiliate link in the description of your YouTube video or in the bio of your Instagram page, or maybe on your TikTok profile. And if people will buy the product from that specific link, you will get an affiliate commission of around five to seven per cent. Then we have email marketing. So if you're running a newsletter, Let's see, You pick the niche of software and you have a good understanding about all of these low-code, no-code software. And let's say you are running a newsletter. In that case, you can promote a product every single month or two. Then we have coupon site, or you can create a comparison website where you can compare all of these different beauty products. So let's say pet product or even software product. You can compare the pros and cons of all these different software. And then you can give an affiliate link of those software. And if people will purchase that software from your link, then you will get a commission. Same goes with coupon site. You can tie up with all of the different website and you can ask them for 15, 20% coupon code. And you can give that coupon code on your website. And if people will purchase that product from your website, you can generate a five to seven per cent commission. That's your coupon site. So not just video on YouTube or TikTok, you can use a bunch of these marketing channels to promote a specific product of a company. Affiliate marketing have many benefits. Let's talk about the benefits of using affiliate marketing. Well, the first benefit is passive income. You can generate some passive income by giving these affiliate link on your blog post or the description of your YouTube video and you can make money while you sleep. The next benefit is flexibility. I mean, you don't really have to own a product and you don't really have to maintain the inventory of that specific product. You can simply promote the product of other companies. And that will take away a lot of your headache. I mean, you simply have to create content and you have to promote a product and rest. All will be taken care by that specific company. It is also cost-effective and it doesn't have any risk. I mean, you don't really have to invest any capital. You can simply pick a niche that you understand really well and you can start creating content and on that specific niche. So now let's understand as a content creator, how can you start affiliate marketing? You have to pick a niche where you have a good expertise. I mean, let's say if you're a pet owner, then I'm sure you have a good understanding of the different foods you can give to the pet. Or let's say if you are someone who understand a lot about beauty products or makeup, in that case, you can just start fighting about those products. And then you have to start creating a lot of content on regular basis. So let's say you are creating a video every single week. Or maybe you are writing to blog posts every single week. And you have to maintain that consistency so that you can drive more traffic on your platform. And once enough people are reading your content or watching your videos. In that case, you can join these affiliate network like Amazon. And you can sell all of these different products using those affiliate link, apart from getting sponsor deal from the brand. And that's how you can start your affiliate marketing journey. And you can also generate some side income from this. So if I summarize the video, you have to pick a platform and a niche. And then you have to start creating content around that specific niche. You can pick YouTube or WordPress to create the content. Then you have to build a large and engaged audience with consistency and quality content. Then you can sign up for all of these affiliate program like Amazon associate. And you will get 5% commission on every purchase. 50. How Affiliate marketing work under the hood?: So in the last video, we had a discussion about affiliate business model. And in that video, we understood concepts like, what is affiliate business? How does it work, and why it is a win-win deal for a customer, accompany and the influencer. Now in this video, we will understand how exactly does affiliate business model work under the hood. And for that, we're going to talk about the UTM. I hope you remember this from the initial part of the last video. Now let's start by understanding what exactly is UTM. Utm stands for arching tracking parameters, and it's a little piece of data that you will add as a company in your URL so that you can see where exactly the traffic is coming from. So if you look at a normal UTM URL, a normal UTM URL will look something like this. And let's break down this UTM URL into multiple parts. So empty starting of this URL, you have your normal pH URL. So this is your site and you are taking your customer to the pricing page. Then we will add things like UTM source, UTM medium, UTM campaign, and UTM content. Let's say you have a promotional campaign in mind where you are giving a 20% discount coupon to all of your existing customer because we are launching a new feature. And he wanted to do this process using an email campaign. So in that case, you will add a UTM source saying that we are giving a 20 per cent discount coupon. So you can see that UTM source is equal to active person taste 20 users. Then you will enter a UTM medium that will help you understand from which channel these audience are coming. So you will add e-mail as your UTM medium because we are doing email campaign where you are giving 20 per cent discount coupon to the existing user. Then you will add details like UTM campaign and you are launching a new feature. And that's why you are giving a 20% discount. And that's why you will write feature 20 launch. And in the end, you have all of these different calls to action on a single page. And you also want it to understand where exactly people are clicking on the page. And that's why you will give a UTM Content button. So let's say you have three different button. So you will right things like button 20 CTA button. And let's see if you have 23 different types of buttons. You can write button TO TCT of button density, all of that. So that's how a normal UTM URL looks like. Now, as a startup founder, if you wanted to create a UTM URL for a specific campaign, you can do that because Google have a UTM builder. And let me create this from my startup. Let's say I wanted to run a campaign where I can promote a product using a YouTuber. And let's say I wanted to create a UTM URL for that. I have to go to this specific link. So I'll click on this link. So at first, I have to enter the URL of my website. So I will simply add the URL of my startup that is at flawed.com. Then I have to create a campaign ID or campaign source, a campaign medium and campaign name. So campaign ID is optional, so I'm not going to create that. Let me write the campaign source. So let's say if I'm promoting my software product with the help of YouTube, so I'll simply write YouTube as my campaign source. And if we are running affiliate commission, then I will write affiliate. And if we are doing a sponsor D, Then I'll write a sponsor. And here I have to write the content creator name. So I'll write content creator. And then I'll simply copy this URL. So if you look at this, you are, you will see that this URL will have a UTM source, that is YouTube. This will have a UTM medium that is affiliate and the UTM campaign name, that is the name of the content creator. And that content creator will use this link. And anytime a purchase will happen using this link, we will transfer five to seven per cent commission to that specific content creator. So this is just an example. I mean, I don't really advise you to promote this link. But you got the point. That's how our affiliate business model work. So now that you understand how exactly does affiliate business model work under the hood with the help of a UTM URL. Now, if you wanted to understand more about data analytics. So things like, what metrics do I need to track as a company or as a startup? Or you want it to understand which all tools can I use? For that? I have created a course on product management and data analytics. I'm still working on that course. So by the time you're watching the video, the course might be live on the platform. So you can click on my profile and you can watch that course. In that course, I have explained things like all the business metrics unit to track. How will you track the product usage? How will you understand whether your customers are satisfied with the product or not? And a couple of more things. In that course, I have used tools to understand user characteristic, user behavior and some financial metrics. In that course, we have used tools like Google Analytics, Mixpanel, and charged molecule. So if you're interested in data analytics and understanding how exactly these things work under the hood. In that case, you're going to watch my product management or data analytics course. 51. Types of Fintech Business Model: Hey everyone, My name is null deep. And in this video, we're going to talk about finance as a service business model. Now almost a decade back, one of the most famous venture capitalist in Silicon Valley, That's Marc Andreessen. He said that software is eating the world. And I wasn't sure about this treatment back then. But now I personally believe that software is eating the world. Because today if you look at a normal company, we will realize that they are using a software to solve every single problem related to money. And that's why in this video, we're going to talk about the different types. Finance as a service business model. And that's why I have divided these business model based on the kind of problem that they're solving. So in this video, let's talk about fast vertical category. Now the first category we have this payment. And if you look at softwares like Stripe or Square or PayPal, These are all payment gateway provider. And if you are a business owner or let's say you run a small startup. In that case, you need a payment gateway so that you can accept payment from all of your customer. Now all of these payment gateway provider will normally take around one to two per cent cut on every single transaction and that's your payment. Then we have Spend Management. And obviously as a business, you also need to manage how much you are spending in all of these processes. And that's why you need to spend management software like bill.com. Portability. And the software can help you understand how much spread is there across different sector and processes. Then we have payroll and benefit. If you are a startup founder or a business owner, in that case, you may have some employees. And those employees may have their bank account with different bank or let's say they might be present in a different country. In that case, you need a software so that, that software can automatically manage your payroll and benefits you are providing to all of your employees, like health insurance. In that case, you need payroll and benefit kind of software. So softwares like Jennifer, kids, replaying and Workday can help you manage your payroll and benefit. Then you have your equity and financing. And if you are a Chief Product Officer or a Chief Financial Officer, in that case, you need a platform that can help you manage Aesop's or your future investment or your cap table. In that case, you need softwares like Carta, AngelList, and cabbage. Now right now, I'm giving you a high-level overview. We'll go deep into all of these vertical category in the few minutes. Next we have accounting and reporting. And I'm sure if you are into finance, then you have heard of these platforms like QuickBooks and net suite, where you can do the audit process or you can look at all of the transaction with these different vendors or suppliers. In the end, you have your financial analysis and planning. And for that you don't really need these fancy software. I mean, you can do your financial analysis using Microsoft XL. And you can present that with the help of PowerPoint. But you can still use these fancy tools like air table, Smartsheet, and bone chart. But I think Microsoft Excel and PowerPoint can do the job. You don't feed any other software. Now let's go deep into all of these vertical category and then we will understand how all of these software are solving one single problem. Let's start with payment. As a business owner, your main role is to accept payment from your customer. But if you look at our startup, I think it's more than just accepting payment. You also have to send money to a different vendor or to a customer. In that case, you might be having so many employees who need a credit card or something so that they can send the payment to the vendor directly using their laptop. And they don't really have to communicate back and forth with the finance department. In that case, you can issue corporate credit card using brackets or ramp. And that's how you can easily send money to all of your different vendors. Or let's say if your employees are doing small transaction while they are traveling to a different city for some business meeting and all of that, then you also need a bank that can help you in ACH or a wire transfer. And I guess different countries have different bank. But if I talk about the United States, then you have your Silicon Valley Bank and couple of other banks like mercury. And you can use these platforms to send money to a different person. In the end, you also need a payment gateway. And with the help of that, you can accept money from your customer. Let's say if you have a software product or if you are selling some service. In that case, your customer can directly PU, with the help of Stripe Square or PayPal. You have all of these payment gateway provider. If I summarize a video in the payment vertical, you need to solve the problem of sending and receiving money. If you want to give more flexibility to your employees, you can simply issued these credit card and you can simply drag all of their payment. You can easily do reconciliation and you can do a fast settlement in order to save some time of your finance department. And that's how you send money. That the second part is receiving money. And you can use all of these payment gateway, like Stripe, PayPal and Square to accept payment from the customer. And these payment gateway can also help you in fraud analytics or maybe in financing like stripe Capital. And that's the payment vertical. Now, in case if you are still confused with how exactly does this payment processing or these payment gateway work. Let me give you a high-level overview of these payment gateway business model. Let's say as a company, you can't really accept payment from these customer. And that's why you use these payment gateway provider like Stripe, PayPal raise a P or P U. And these customer will send the money to these payment gateway provider. And they have integration for any kind of debit card or credit card you have in any country, then your customer can simply send the money to these payment gateway provider. And they will take us around 2%. And then they will send the rest of money to your bank account. And that's the high level overview of payment gateway business model. I don't really want to go deep into this, but that's how you can look at a payment gateway. The next vertical you need to understand is Spend Management. Once you got the payment in your bank account, then you also need to track how exactly you are spending money. So let's say in a company, majority of spend goes into the salary of your employee, then you are also paying a small amount to all of these different vendors or suppliers you have. You need a platform so that you can manage things like expenses and traveling, procurement fees that you are being too these vendor and your upcoming account receivable and payable. And that's why you need to spend management software. The first part of Spend Management is accounts payable and receivable. So let's say you have sold some product to a distributor or to a supplier and you are expecting a payment from them in like ten or 15 days. Or let's say you have to pay to someone in the coming one week. In that case, you need a software where you can exactly see your account receivable and account payable so that you can put a couple of team members into that process and they can manage all of that process. We have procurement. And you need a software that have the centralized procurement dashboard where you can negotiate with these different supplier and you can sign all of these contract. And that is also a part of Spend Management where you negotiate the contract and you also manage it. Apart from just looking at the account receivable and payable third parties expenses. If you have issued some credit card to all of your employees, then you need a dashboard where you can look at all of these expenses in real time. You can also control the spending limit of all of these employees based on the kind of position they hold. And if they have spent any amount of money from their own personal pocket, then you can also reimburse the amount. And that's your expense management. Let's talk about the third part, that is payroll and benefit. Now, the largest expense accompany can incur is payroll and benefit. And this will include things like onboarding a new employee, looking at their productivity with time tracking, managing their retirement fund, and making sure that the employee and their family is having an insurance, health insurance. And for that, you can use payroll and benefits software. And there are multiple categories to that. You have enterprise resource planning, human resource information system, and the human resource management system. So products like SAP, Workday, rippling, all of these products are that really good example of payroll and benefit. You have other products like Zenefits, Kusto work. They are rippling Bamboo HR. You need a product that can manage all of your human resource function end-to-end, from on-boarding to try and tracking to payroll and benefit. Now these companies have tied up with all of these other finance platform so that they can manage the process end-to-end. Now if you look at a company like rippling, they have the tie up with these payment gateway provider and these banks as well so that they can transfer your monthly salary or payment to all of the individual employee's account. And they also have tie ups with couple of insurance providers so that they can provide insurance. And they also have a time tracking software. So if I'll go deep into just one single process, Let's talk about insurance. So in case if you don't understand about this domain and insurance, normally a bank is ensuring you are, a financial institution, is ensuring you. They will give you personal insurance, asset insurance, or educational insurance. Let's say for an employer, it's the health insurance. And the way they give this health insurance is by reselling that health insurance product to all of these different companies who will further resell the product to our tech company like replaying or workday. These individual company have the partnership and they do a lot of marketing for this specific bank or financial institution so that they can sell this insurance to all of these companies are employed. The fourth vertical is equity and financing. And I have divided equity and financing into three important part. At first, we have treasury, then we have equity, and then we have credit inquiry. You can use platforms like betterment so that you can automatically invest your capital and you can manage the return on cash. Then you need equity platforms like carta or AngelList. Let's say if you are a startup founder and you are planning to raise capital from a group of angel. In that case, you can use AngelList. And once you have raised some capital from all of these angel investor, or let's say a group of angel investor. In that case, you need a platform where you can manage your cap table. And you can also issue some employee stock options to all of your employees. And you can easily structure your company. In that case, you can use platforms like Carta, and that's how you can manage the equity. Or let's see, stocks in your company or in your startup. Third one is credit. Now, in order to successfully run a business, you need to take some credit and then you need to manage that money with the help of all these different platforms. Now if I'll give you a simple example, cabbage is a company that will provide you credit for your business by looking at your past transaction. They will look at all of the transaction in your QuickBooks or in a payment gateway provider like Stripe or Shopify. And then they will give you a small loan or some credit so that you can expand your business. In the end, we have accounting and reporting. And the main idea here is that you need to maintain visibility into accurate financial. And for accounting, you can use product like QuickBooks, Net Suite, or fresh book. And the main idea here is that with the help of the software, you can do auditing in your company or you can look at all of your accounts receivable, account payable, your total turnover, or how much payment are you doing with all of these different vendor? Accounting software like QuickBooks and fresh book can help you in looking at all of these transaction. Then we have reporting. With the help of these software, you maintain a real-time visibility. And you can use these analytic software like Tableu or Power BI that will connect with your data warehouse. And you can simply pull the data and slice the data based on your need. And for that you can use Power BI axle w, and then you can share this report with a senior executive. And you can use PowerPoint as well if you want. If I will quickly summarize the video, these are all the five different vertical category in finance. And all these category are helping you in solving one single problem in your business. From accepting and sending payment to all of these different vendor, to managing the spend, to providing payroll and benefits to all of your employees, to managing your cap table equity and Aesop's with the help of carta or maybe facing capital with the help of AngelList. Then we have accounting and reporting with the help of QuickBooks or Net Suite from Oracle. And in the end we have financial planning and analysis. I hope you will be able to understand all the different types of business models that exist in finance. And if I've missed out on something, please let me know in the Q&A section and I will love to reply. 52. Razor blade pricing model: So if you look at the price of a coffee machine or a printer, you will soon realize that the company is selling these products at a loss. I mean, their hardware cost is much lesser than the price. But why these companies are selling these two product at a loss? I mean, what's the strategy behind that? And that's why to understand the reason behind that. In this video, we will discuss about a unique pricing strategy called razor-blade pricing model. Now this pricing strategy, or let's say beta and hook kind of business model was first started by Gillette, where they felt that selling eraser is a lousy business. And that's why they started selling these blades at a premium price. In the first year of business, Gillette sold 51 racer and around 168 blades. And if you look at the blades per eraser, they sold around 3.3 blade pervasive. In the second year of business, Gillette sold somewhere around 90,000 tracer and they sold 123000 blade. And if you look at the plate per racer, this all around 1.36 blade per razor. Now, after few years, Gillette realized that they could sell these rays are at a loss and still make money by selling a lot of bleeds. And that's why 11 year later they sold are on for 50,000 tracer and around 70 million blades. And they were selling somewhere around 15.5 blade razor. And that's why people started using this razor-blade pricing strategy in their business. So the core idea of having a bacon hook kind of business model, or let's say using a razor blade pricing strategy is that, that selling something repeatedly is far more profitable than selling something wants. That's the whole idea of using the razor blade pricing strategy. Now after Gillette, this kind of pricing strategy was also used by companies who are selling printers and cartridges. They were selling all of these printers at a cheaper price. And they were owning majority of their revenue by selling these premium cartridges. And today, this kind of business model is widely used by all these hardware companies where they are selling their primary product or the core product at a loss. And they are generating majority of their profit from all these three fields and unknowns. If I'll give you a couple of example, you have gaming console like PlayStation two printers to a coffee machine, like Nespresso, to even a juicer like to Sarah. Sarah already filed for bankruptcy. But you got the point. These companies are selling their core product at a loss and they are generating a huge amount of revenue from these expensive refills or add-on. In case of printer, these expensive refills are these cartridges. In case of Nespresso, they are selling their coffee bean. And in case of Chu cero, they were selling their gold press juice packet, but this company doesn't exist anymore. So I will not talk about that. You have so many different companies who still use this kind of pricing strategy. Now if you look at the price of a coffee machine, a coffee machine will cost you somewhere around 120 dollar. But every time you make a coffee, you are basically using these expensive beans or let's say a section of that specific brand and you're paying them almost $1. Same goes with Gillette. Razor will cost you somewhere around seven dollar. And these expensive refills or blade will cost you somewhere around four dollar. And that's why on an average, a person end up using maybe 20 to 30 different types of blade on a single racer. The main point is that you have to develop a unique product that will require some refill. And then your main aim is to provide these refill conveniently to the end consumer. And that's all about beta and hook business model, also known as razor-blade pricing strategy. Now let's talk about the advantage for the benefit of this razor-blade pricing approach. The number one advantage or benefit is that it will reduce the customer risk of trying out new product. Now because the core product, in this case is not that expensive. So people can try out these different types of product and if they are comfortable with that, they can buy these expensive refill and they can start using it. So it will reduce the customer risk of trying out these expensive product. The second benefit of using this pricing strategy is that the brand will get the constant revenue from the customer. So let's say you bought all affordable printer and now you're using the sprinter every single day. In that case, you will end up purchasing a refill in every two or three months. So a company like cannon is cutting the constant revenue from the customer if they are using the product. And that's why they always try to sell you a less expensive core product, like a printer. They will churn rate the massive amount of revenue from these cartridges. Now let's take one product and let's discuss more about that specific product and how this strategy can also go wrong if you don't use it properly. So if you remember a 699 dollar, just arrow. Now that company was using a razor blade strategy where they were setting the core product not at a cheaper price. The core product was super expensive. You have to spend somewhere around 700 dollar to buy this machine. And then you can use these individually refill that will cost you somewhere on five-dollar and you can enjoy the cold press Choose at your home. So some guy posted a video on the Internet. And that video proved that you can simply press these five dollar juice back and you don't really need a 700 dollar machine in order to get cold press Choose. And suddenly this machine became useless. And after few years the company filed for bankruptcy. And there might be multiple reason behind the bankruptcy, but I guess selling your core product at an expensive price can be one of the reason. If we talk about the pros and the cons of using the razor blade pricing model. The first advantage is that the company can generate reoccurring profit. See if the customers are buying the core products like coffee machine or a racer. They will somehow end up purchasing these add-ons or refills as well. And that's how a brand can generate reoccurring profit every single month. Because somehow they are selling their core product at a price point. The second reason is loyalty. Now, because people are using your core product, then there is a very high chance that they will still use the free field or add-ons of your brand. Now, some people can bypass that. I mean, I've seen multiple people using a different coffee brand on a different machine. And same goes with these plate, but the probability is very less. Now the third benefit is higher margins on the company might be selling their core product at an affordable price or maybe at a loss, but they can generate a good amount of profit from these premium product or add-on. The fourth benefit is that these companies have a good up-selling and cross-selling opportunities. And we had a discussion about this in case of Dollar Shave Club, where the company started selling there razors online and then they started selling other products like aftershave gel or shaving cream along with the eraser. So if your brand have a hero product and people loved the hero product, then you will always have some up-selling and cross-selling opportunities. The fifth advantage of using the razor blade pricing model is that you will have a stable owning model because you have some household, the core product, and you don't really have to worry about your income every single month or every single quarter. If you are sending your core product, then people will buy all of these add-ons or refilled. Now let's talk about few things that you have to keep in mind if you wanted to avoid failure in case of razor-blade pricing strategy or Beta and Hook Model. So at first, you need to make sure that you have a killer basic product and you have to sell that product at an affordable price. So if you look at a company like to sorrow, their core product or their basic product was not good. And they were selling that product for $699. And that's why you need to fix the quality of the core product and the price point. So if you sell your core product at a loss, then you have to figure out the right kind of business model so that you can make money on all of these add-ons. And roughly, now, because you would be selling your core product at a loss, in that case, you have to figure out a business model where you are selling all of these refills or add-ons at a premium price. Third thing you have to keep in mind is that you have to focus on the frequency and the distribution of all these refills that you are selling. You have to sell these refill maybe every single week or every single month. But you have to figure out the right frequency and the distribution channel so that you can sell all of these add-ons and refill. 53. Crowd sourcing business model : Hey everyone, My name is known V. And in this video we will understand about the crowd sourcing business model. In crowdsourcing business model, you will take help from people around the world without actually hiring those people as a full-time employee. So crowdsourcing means you will take help from other people in case if you're solving some social problem, Let's understand crowd-sourcing with the help of two example. There is a, B is AB, which will allow different user report traffic jam. That means other people will be helping out to make this app much more better by reporting the traffic jam in their own specific city or country or pleased that they are living. Next example is McDonald's and leaves. In Donaldson, leaves have launched their own crowdsourcing campaign so people can build their own McDonald's burger and their own lays chip. And they can have that unique flavor in that. And then they can post that on their specific crowdsourcing platform, the one that will get highest vote. These companies would consider that specific flavor in their specific restaurant or product. Now let us understand the different types of benefit that crowdsourcing provide. Now the first one its speed, then you have engagement, cost, scalability, and knowledge transfer. Let's understand that one-by-one. First one is accelerated process. Let's say you wanted to build a social app to solve any problem. That is, they're around you. And if you take the help of other people with these crowdsourcing platform, it will make the task process quicker and faster because knob you have more number of people contributing to the same work. Next one is your consumer engagement. Now, all of these crowdsourcing platform will allow you to interact with different people. Saw that you can share your ideas and opinions with them and they can also contribute to that specific discussion. Todd, one is reduced cost because a lot of people are working in solving the problem for you or for any social cause. And these people are not your full-time employees. You will always end up sitting cost in building that specific type of product. Because you do not have any full-time employee in solving that problem or building that product, then you have scalability. And you can scale the operation by dividing that big project into microtasks. And then these people can complete those microtasks within a very short period of time. So crowdsourcing platform will allow you to scale your operation process and end result, then you have knowledge gaps. The Cloud. So many people are working on a very specific part of the problem at the same time. And they can also discuss that on that specific outsourcing platform, it will allow them to transfer the knowledge very, very fast. Imagine a problem, require expertise from 70 different domain. If you look at the first cryptocurrency, which is Bitcoin. Bitcoin declared a domain expertise of five different domain, like your cryptography, distributed ledger technology, computer science and economics. And it's super difficult for one person to have these many domain expertise. That's why these crowdsourcing platform are super-useful. Now when we talk about crowdsourcing platform, people normally have a couple of assumptions in mind. The thing that crowdsourcing means you will raise capital from other people if you wanted to launch a product. Now when we talk about crowdsourcing platform, people usually think that you wanted to build some product or you wanted to sell something. And that's why you will raise capital from different people. Well, that's one use case, but you also have so many other use case. Number one is your open source software. All of these open-source software that we use in our day-to-day life. Let's say if you're using a Linux operating system, a flat box browser, all of these are open source and that's the best example of crowdsourcing where drought is maintaining the core of these open-source software. Then you also have your crowdfunding, which is the major part of outsourcing. When we talk about crowdsourcing, the first idea people have in their mind is that people will accept some money from random people just because they wanted to build some product. I agree on that. People do that. In fact, the Oculus headset was created just because of crowdsourcing. Somebody wanted to create a VR headset and then list on all of his requirement on starter. And then people started funding that specific project. All of that because of crowdsourcing platform. Now enough theory for now, let's understand how exactly these crowdsourcing platform mixed money. Because obviously the main purpose of this course is to help you understand how different companies actually make money. This is the business model of all these different parts sourcing platform, so-called crowdfunding platform. If you look at platforms like Kickstarter, Indiegogo, Patreon, all of these platform will allow independent people are creators or followers to fund a specific project or an influencer so that he can accelerate these things faster. And then you also have crowdfunding platform for those who need some help. You have platforms like Quito or MyLab. These platform will allow other users to help someone who need some medical assistant. So let's say if I'm having a disease or something, if I need some medical assistant or help from other people, let's not financially storm or something. That situation I can post that I'm having this disease or this problem. Can you help me reach to a specific goal or among or whatever? If you look at these crowdsourcing platform, let me take this laser pointer. So you have all of your support over here. And then you have a creator wanted to create something, a new piece of technology, a new smartphone cover or a new water bottle or whatever idea he had in mind. This creator, the list on all of its requirement or ambition or project on a specific website. That can be Indiegogo or Kickstarter or Patreon or anything. It will project the goal. So let's say I wanted to raise a $100 thousand within maybe next one month. Can you help me do that? And he can also provide you some benefit or some early access to the product as well, but that's optional. Then he will also assign a project timeline that I want a $100 thousand within one month so that I can build this product within the next six months. And then I can give you a 20% discount or an early access to the product. It all depends on terms and conditions. Then that person will connect all of that amount, gives some commission to that specific platform. So you have your Kickstarter and Indiegogo. They will also take a commission from this specific creator, because obviously these are platform business and they have to make money. And then they will pass on the remaining amount to this specific neater. So all of these people will pay money and some part of this money will go to the website owner. When I'm saying term sourcing, crowd funding is just one part of crowd sourcing. Crowd funding. Half so many different moving elements and so many different types that you need to understand. But for this video, I think funding will help you explain all of the concepts. That's all for now. Let's go to the next video. 54. Cloud kitchen business model: Hey everyone. In this video, we're going to talk about cloud pigeon business model. Now, glycogen is also known as your cost Christian doctrine, black-box scripture. So many questions out there. But in this business model, our restaurant will exclusively sell the food through delivery channels. And it doesn't provide any sort of physical dining experience. Now if you wanted to open your own Cloud pigeon, you have to use these food tech platform, so-called food and technology. And these platform will provide doorstep delivery to the end consumer. And if you'll be running your own cloud picture and then you have to list down all of your product or food products into all of these different platform. Obviously, if you are from the United States, you have to list down your menu or food items on platforms like Uber Eats, DoorDash, and Grab Hub. If you are from UK, then you have to list down or food items on platforms like just treat Delivery Hero or takeaway.com. And if you're from Southeast Asia or India, you can do the same process with Zomato and 3D x-ray. Let's understand the different types of cloud kitchen business model. And then we will understand what is the basic difference between all these different types of cloud kitchen. So at first we have traditional location. We also have dw, cloud kitchen, created on cloud kitchen, multi branded cloud kitchen and outdoors plot pigeon. Let's understand all of these different types of glycogen business model. And let's start with brand on blockage in, let's say you're new to the Cloud region game and you just have one location, one brand, and one kitchen. In that iteration, you will only have delivery only operation. You cannot have the Gobi or dining. And to set up this specific kind of clock region, you will usually take a small property in the lower end Grant area, which is not very far from the density populated spot because obviously in all of these would take platform this trends is also one of the most important factor. If your cloud kitchen is located at a location where a lot of people are also stream, then chances of you getting more number of orders is always high. And let's say if your brand will become very popular after six to eight months, Then you can also provide dining or maybe takeaway I squared. But the main purpose of Cloud region is to have, is less interaction with customer as you can, because obviously you have to choose our space which have low rank, and that is also very close to the density populated spot. Chances of you getting a location where you can interact with the customer are very minimum. If you look at the upfront investment, upfront investment in brand on cloud kitchen, which is exclusively selling all of their product on all of these food tech platform is very low because obviously you're not providing any dining option. The tiny provide dining option to different customer. Now you have to be at the financial costs, the maintenance cost, electricity, staff, operation, your overall upfront investment will go very high in that case, in terms of scaling your operation, obviously, all of your orders are coming through all of these food tech black bombs so you can easily scale your brand by opening multiple target, generate different location in the same city. So it's doable because it doesn't require involvement of a lot of people. Now in this specific type of cloud kitchen, obviously you're providing dining to different customer. On the other side, you're also providing a pickup option to set up this specific type of cloud kitchen business model where you have dining and online delivery as well. The setup cost will be electric high because now you need a very high investment in finding location where you can attract different customer or so-called walk-in customer. You have to find the location where there is a high visibility of your restaurant, so-called footfall. If you have more and more people come into a restaurant, chances of converting them is always very high. You will find the ADL where you have higher footfall of customer. And that's why you end up looking for a place which have a higher rate because you are paying a very high rank, then you have to create an operation or a process where you can also sell all of your products to all of these food tech platform. That's how you will end up generating double the revenue. Opening a new block pigeon separately with a separate delivery production line is very beneficial for your brand. And obviously in the longer run, you can generate more and more revenue. In terms of upfront investment, it is comparatively low because you're opening your cloud kitchen in a separate area with separate delivery production line, but add soon as you start your own delivery in this specific type of cloud kitchen, your investment will go up because now you have to recruit your own delivery boys and you have to set up your own process. The best advice is to open your dining and just start a separate production line for your food tech platform, like Uber, in terms of scaling this business, because you have a dining option or at a restaurant which is physical to a lot of people. It's super difficult to scale these kind of businesses because now you have a storefront and duplicating storefront is super difficult. I'm showing you may not have that much amount of capital as well. Because every single time you have to look for a new storefront and then you'll have to pay a very high rent. And to break even from that specific storefront, you have to give it some year. Scaling. This specific type of cloud kitchen business model is little difficult. And the reason behind that is this specific cost structure. Let us look at the cost structure of a restaurant and the cloud kitchen. If you look at the cost structure of a restaurant, let me take the laser pointer. You can see that 24% of your total revenue goals into random salaries, 24% of your revenue goes into commission because obviously you might be selling all of your products to these different food tech platform like Uber, DoorDash, and 3% is your profit margin. 24% will go into your ads and discount. 17.18% goes into your food cost and 5% will go into your packaging. You can see that in a restaurant, the majority of the cost goals to your rent and salaries and your ads and discount. When we look at the cloud kitchen, 40% is your raw material costs, 10% is your profit margin. Twenty-five percent will go into commissions and twenty-five percent is your fixed cost. Obviously this profit margin is ten, but I think now because a lot of people started creating their own cloud kitchen. So this profit margin is now not exactly 10%. It got reduced by adding four to 5%. But it depends if you have a very unique brand and if you're able to charge a higher price for that specific brand, you can sell your product or food items at a higher price and you can generate the same amount of profit margin. Now you have taught type of cloud kitchen business model where you have dining facility, but you also have a cloud kitchen which is shared by other people as well. This specific type of business model, you already have dining option, but you have removed the cloud kitchen from the existing facility and now you're operating out of a shared kitchen space. Obviously, if you are separating out your dynein with your cloud kitchen, which is shared by some other people as well. It will always look out for space which have low ranked and totally separate operation so that you can streamline the process. Now because all of these cloud kitchens are shared and they are pooling all of their resources. They have different kitchen in the same area. So let's say they have the flexibility to run all of the cloud kitchen on weekend, on holiday, or in the evenings. And this has the same profit potential, and it doesn't require that much upfront investment because you are sharing your cloud kitchen space with other people as well. But obviously in the future, if your operation grows, then you have to hire some additional staff or Chef of people to manage all of these tasks in terms of scaling this specific operation, because you have a separate cloud kitchen production line. So this is do-able, but obviously because we are sharing space with other people, it can often leads to unscalable logistic nightmare. Then we have hub and spoke cloud kitchen business model. And this specific type of cloud kitchen business model is used by almost all the fast food chain that we know. Fast-food chain like McDonald's, Burger King, dominoes. All of these fast-food chain has a centralized production unit where most of these items are pre-made. So if you look at a burger, burger bun is already made by these people in this centralized production, or let's say if you look at all of your chicken brings, those chicken wings are already made by these people in this centralized production line. And then these people who are running all of these separate retail front or restaurant or outlet, they just have to hate it up and it's ready. If you look at the setup processor in this specific type of cloud kitchen, they have a centralized kitchen, which is usually located into a lower-end area. And all of these retail outlet have a standard operating procedure to prepare the food. I won't call it prepare the food, they just have to vomit up in terms of profit potential. Obviously, these friends have a very good profit potential because they are operating from past so many years and they have sold almost every single problem that we can imagine. Not only that, they also have a very good branding marketing and other strategy in please, in terms of upfront investment, obviously, if you're opening these many retail store in such a small city and then you have such a high volume and a dedicated centralized kitchen, you have to be a higher cost in terms of scaling the operation because you have a very high upfront cost to establish the centralized kitchen, then scaling will become very easy because now you have to open multiple restaurants in a small city because we have a centralized location which can supply to all of these different restaurant. And these restaurant, we'll just have to prepare the food within a certain set of m or processor. In the end, you have shared kitchen space or shared cloud kitchen. In this specific type of cloud kitchen business model, you are running several different brands, so-called cuisine, and you do not have any dining or takeout option. And it just have delivery option and this specific type of business model. Now in this specific cloud kitchen, because you have different types of cosine or different types of brands, then obviously you will have several production line where different brands are being prepared. Obviously these brands will be closely connected. So let's say if you look at cutscenes like sushi or the ingredients are some of the same. I mean, you'll have to purchase all of these ingredients in the bulk quantity, or so-called volume purchases. And the ordering and delivery of all of these ingredients is usually handled by our aggregator partnership. In terms of upfront investment, you need low to medium upfront investment because you are preparing different cuisine or different types of brands, then obviously you need some expensive equipments. These things really depends on the kind of volume and cosines that you are preparing on day-to-day basis. As usual, scaling the business is very subjective. You can do that if you are able to understand that specific market scaling on multi-brand shared cloud kitchen is not gonna be a big deal for you if you understand this domain. 55. Edtech business model: Hey everyone, my name is not deep. And in this video we're gonna talk about attack business mortar, which means you will combine your education with technology. Let's understand the business model. If you look at global attack market, you have different types of business, more room. You have direct-to-consumer business model where you will sell the courses or the glasses directly to students or to Appearance. Then you have business-to-business where you will sell software or classes that lead to different universities, school or different enterprise, then you have hardware, business, and software as a service, which is also known as says. And this is the global attacks brand in 2019. So you can see that there's a lot of money that is flowing into the apec market. You have a B2C or direct to consumer global attack spanned of a $100 billion. You have B2B global at the external API, $4 billion. Hardware Acts, $17 billion software, $90 billion and services, $77 billion. Let's look at the business model in AgTech. Number one, we have premium subscription. Now we all know freemium is made up of two words, three plus premium. That means you will give the product for free and then you will ask them to upgrade for that specific service. If you look at platforms like Coursera, coursera will allow you to complete their courses, but as soon as you ask them about the certificate, they will all always asked for money. And that's the typical example of Freemium. Some part of the product is free, and if you want something else or if you wanted to use some premium feature, then you have to pay for that. If you look at the product type, all of these attacked black bombs where you can prepare for a test or exam, or you can develop any skill or your monitor to get a certificate for that specific skill. You can do that with premium subscription type of ad tech businesses like Coursera. Then you have benefit. Obviously you can quickly acquire customer and don'ts customer will generate reoccurring revenue for you. Reoccurring means you're generating revenue every single month from the same customer. If you look at the downside of this, because we are giving the free service to all the student. The time you ask them about the money, They will not upgrade or they will not pay for your product. And also you need to have a very high customer acquisition cost. Then you have free trade. And companies like Skillshare and by juices using free, right kind of business model. If you look at the product type, they also have the exact same product type. Which means they will allow you to learn all of these different professionals scale. You can do test preparation and you will also get a certificate. If you look at the benefit of this specific kind of person smarter, it's exactly the same like Vimeo, regenerate reoccurring revenue for the brand. But because you are giving free ride to these people at the phosphorus, you're not basically hiding any feature of it from the customer. Customer can use every single feature that they want. And obviously free trial business model also have some of the same problem. I mean, it's super difficult to convert them into a paid customer or ask them to pay for your product and they will not use your product. Once the free trial is over, then you have your attack marketplace. One of the best examples of a tech marketplaces, Udemy, which means you will have different types of courses available on that specific marketplace and you can purchase any course you want. That means you have to pay for every single course. So let's say you wanted to learn web development approaches, a course or a bootcamp course for web development. Same goes with business. You'll have to purchase every single course and you will have a complete marketplace just like Amazon and you can learn whatever scale you want. Let's the attack marketplace kind of business model. Then we have AG base revenue business mortar. And this kind of business model is used by Duolingo. It's a language learning app which you can use a new mobile, and it is super easy for other people to learn any language, because learning a language is kind of a commodity right now. So it's super difficult for them to monetize the service directly from customer. Cannot really ask directly from customer saying that P SPS $5 because we wanted to sell you the subscription of this specific product. And that's why they usually run all of these different types of in-video ads or pop-up ads inside the app so that they can generate the revenue. Although right now they have some form of subscription for that specific product. Let's say if you want one-to-one mentorship, or you wanted to talk to an expert, or you wanted to have some feedback, then they have a small subscription of their product. But previously they were generating revenue by showing you different types of ads, which includes in-video ads or pop-up ads, all of these different types of n. That is the typical example of AG base revenue. Then you have institutional or B2B sees if you're using some SAS product or software as a service like school Zola. That's the typical example of B2B sales or B2B satisfying of product. Imagine you are the owner of a school or a university. It's super difficult for a person to manage the university. That's why we use these kinds of SAS product because they will allow you to manage your staff, your university. The parallel system v is collection. You can manage the operation, exam scheduling, and all of these small, small task, which is super difficult to manage by a single person into Excel sheet. Because you need to manage the database, you need to manage. You need to get the confirmation for every single activity that is happening in that specific university or school. And that's why you will have these kinds of ERP solution or SaaS-based product. Now let's understand how exactly these companies meet money. Let's start off with Coursera. Coursera will allow the French students to learn the French screw from a specific university. Let's say you wanted to learn a specific skill from MIT or from Hubbard, then you can do these mini courses from Coursera. And you will get a certificate and whatever amount that you will pay to Coursera, they will take a small part of that specific amount and they will pass on the remaining amount to that specific institute or university. Then you have Udemy. And whatever amount you will pay to Udemy, they will take a very small cut and they will pass on the remaining amount of different instructor. For example, if I have courses on Udemy and if you will be or you will purchase those courses, you'd maybe pass on small amount to me and they will also take a portion of it. It depends whether 6070 or 80% of the portion. So they will take like 60 to 70% of the course amount and they will pass on the 20, 30% of the amount to us. Then you have to you, which also provide the same kind of course material or videos to different students from different universities. Then you have by Jews and by just have their own content, which means they're on teachers or make their own courses or videos or material. And then different people will purchase their complete range of courses for that specific standard. Then you have by Jews and by juices, an e-learning app for students. Let's say if you are in your tenth standard or if you are in your glass by juice will give you a complete subscription of a glass or nine plus so-called yearly subscription. And then it will allow different students to learn those concepts with the help of bile juice app in that specific class, then you have spilled chair and Skillshare will give you an annual subscription. You have an annual subscription of $50. And with the help of tax subscription, you can learn whatever school you want. And there is no limit or threshold at such, it's a subscription service. And whatever amount you will pay to Skillshare will also pass a small chunk of data among two different instructor who is teaching on Scripture. If you look at a tech as an industry attack is growing at a rate of 16.3% and it will reach to a market cap of 40 $4 billion. Now this is your pen, which is your total addressable market. Then we'll distribute among these different categories of your AgTech. And if you look at which category will occupy the maximum total addressable market, here goes the diagram, and you can see that the maximum global expenditure goes to the capable category. Then you will have post secondary, then you have pre-K, and then you have your workforce. This is the final list of all the different types of business model that is there in the AgTech space, you have freemium business model, which means you will provide some feature of the product for free, and then you will charge for premium features. Then you have your free trial subscription, which means you will give free dry to access all the different types of feature of that specific product. And then you will ask your customer to upgrade for that product. That means you do not have any, which means you do not have any restriction that is there in freemium business model, then you have a tech marketplace which will allow people to discover what they wanted to purchase from that specific platform. Best example is Udemy. Then you have add base revenue business model. When you cannot really monetize your platform directly from customer by asking them to pay for a service. Then you will start showing them add. Then you will start showing them as just like you do. And that's how you will generate money. Obviously, different apps are different types of ad. So you have interstitial ad, you have skippable ads, you have pop-up ads, and you'll have other different types of ads as well that you can integrate inside your app or web application. Then you have institutional or B2B sales. Then you have institutional or B2B seats and includes all the different types of sales that happen in a university or in a school. Whether they are using a SaaS product or if the approaches in a subscription of a platform where students can learn anything that they want. The particular example of your institutional or B2B sales. 56. Franchises business model: Hey everyone, My name is null deep. And in this video we're gonna talk about franchisee business model. Let's dive in. Now, franchisee is a type of personas that is operated by an individual known as franchisee. And he's using the trademark or bending and the business model of a franchisor. That's understand the difference between a franchisee and the restaurant. And then we will understand the difference between a franchisee and the franchisor. This is the basic difference between a franchisee, or let's say you wanted to open your own restaurant. You can look at cost. Let me take this marker. So if you look at the cost, the initial cost of franchisee is less because you just need to take a license of that specific franchisee and you do not have to set up any of these process by yourself. If you look at the setup cost of a restaurant, then you have to buy a piece of property, and then you have to set up all the different process. You have to hire employees. You have a lot more effort when compared with the franchisee. Obviously, you have to be a franchisee. Fees and expenses might go beyond your limit, but you may not have a hassle of setting up every single process. If you look at the process, these franchisee have these standardized process. But in your own restaurant, you have to set up every single process, from deciding the menu of your restaurant to hiding different chef or people to manage the operation, you have to set up every single process by yourself. Look at brand. Franchisee already have valid recognized brand, but in your own restaurant, you have to build your brand by yourself from scratch. If you look at the business model, the business model or franchisee is already proven. That means people are spending their money in that specific product. In your own restaurant. You have to test different cuisine or different product in your restaurant and then you will find a specific product that it's selling or people are purchasing that product or they are eating that specific 40 new restaurants. If you look at the failure, the chances of failure in a franchisee is very less. But if you open your own restaurant, obviously you always have some chances of failure because you have to test different product. You have to build every single process. You have to hire the best people who can. The cosine, the people WE people wanted to eat. Let's understand the difference between a franchisee and the franchisor. Franchisee is someone who operate the business using the trademark license that they have taken from the franchisor. And franchisee is someone who owns the trademark and the business model. Now in this case, a franchisor can be McDonald's or Burger King or any, any debt stretching by the franchisee can be you or me, anyone who owns that specific place or restaurants, among other 10 thousand restaurants that, that specific franchisor half. But the main role of franchisee is to manage your day to day operation. That will also motivate recruit people on, because obviously they have to maintain every single process in their own restaurant. These franchisee will always make sure that they're meeting the quality standards that they have set. So obviously, if you eat McDonald's anywhere in the country, you will find the exact same piece. And that is happening because of these quality standard that these franchisor maintained for all these different franchisee, then you also have to support the local community. So normally I've seen franchisee organizing these small events. They also do small promotions on local level. And they also control the procurement from raw material to the n operation. These franchisee maintain every single process. If you look at the franchisor on the other side, these franchisor normally negotiate with supplier in bulk quantity. Let's say you have to prepare the product in a very small quantity. But these franchisor will make sure that you always have access to the best quality raw material from these different suppliers. They do bulk negotiation. Now these franchises and also manage their leases, the property negotiation. And apart from that, these franchisor also provide marketing support, IP or legal operation or the HR support. Because these franchisor needs to maintain a brand value. And obviously if you wanted to, you wanted to build a very strong brand. You have to do these marketing campaigns. You have to make sure that you are fulfilling all the legal compliances in that specific country. Also these franchisor to have a baby. So teen set of process for doing the recruitment, induction once they have hired some people, and finally they grow the brand and awareness. So all of the marketing campaign that you have seen on Instagram or across different social media channels or in your TV. All of these marketing campaigns or awareness are always done by these franchisor. Because obviously if they wanted to sell the license of their franchisee at a higher price. They have to maintain a very good brand quality, trust and awareness. That's why all of their brand campaigns and loyalty part is taken care by the franchisor. Although you have different types of franchisee across different domain in retail management. But let's say in this video we will just talk about the past footprint cheesy. Now when we talk about the phosphor franchisee, we have two different types of franchisee. We have master franchisee and Company on franchisee. In this video, let's talk about the master franchisee. As the name suggests, you have an international retailer or franchisee who charges and already fees from the franchisee who run the business luckily in that specific country by opening the different outlet under the franchisor's name. So you'll have international retailer. Let me take the laser pointer. You have international retailer on this side. This international retailer will sell the franchisee trademark to their master franchisee, which is located in that specific country. And this master franchisee will then open all of their soft franchisee or reading store in that specific country. In your town of this master franchisee will be a royalty fee or a franchisee fee to the international retailer. This is the business model which is followed by a branch like McDonald's or dominoes. They have a master franchisee located in the United States because obviously these two brands belonged to us and they have a country-specific partner. And they usually charge the franchisee fees or the rating feeds from that specific partner. And those partner can open as many restaurant or as many franchisee as default. On the other side, you have company on franchisee. That means these international franchisee will establish their own office in that specific country. And they will also help other franchisee or property owners to establish their own restaurant. You can see that you have your international retailer. You have, they will establish their office into that specific country and then they will sell their own franchisee to different people. And they will also operate that on franchisee with their own brand name, because obviously they are present in that specific country. You will operate your own franchise. Then we have company on franchisee business model. Now in this, your international franchisee will have their own office in that specific country. And they will operate all of their restaurant by them self. Or they will also allow other people to run their restaurant until this franchisee model. Let us understand this with the help of this specific diagram. You have your international retailer over here and they will open their own office or establish their own office in that specific country. And they always have two options. Either they can sell their trademark to some independent partner or people, and they will collect some franchisee piece from them. Or they will open their own restaurant. If they open their own restaurant, They will collect all of the revenue that they are generating. On the other side, if cell, the trademark gruesome franchisee will generate a bit of revenue. But on the other side, they do not have to manage the day-to-day operation. And both of these people will then open different restaurant or retail store or franchisee. Or both of these people will open their own retail store or so-called restaurant. Now in-company on franchisee, Because we are establishing our office in that specific country and we are opening our own restaurant. But imagine if you did not have that much amount of money or capital to open restaurant in that specific country. That's why you normally have joint venture. Let's say, you know, our company which is very famous in that specific country, or let's say you have a big conglomerate of that specific country who wanted to do some partnership with your company so that you can put open or run this specific food chain in that country. In joint venture, you can partner with a conglomerate of that specific country because they will provide you access to capital and they will also give you operational support. And you can also split down the profit based on the percentage of your joint venture. So let's say if you have a joint venture of 50, 50%, you have to split down your profit in the same way. And this is the specific diagrams. So you have international retailer, you have a country-specific, we wanted to do partnerships with you. And they will put some amount of capital and you will also put some amount of capital to enter that specific country. And finally, you do some joint venture so that you will start opening all of these different types of restaurant in that specific country. That's the typical example of joint venture. If you wanted to license all of your trademark or business model to some other company, then that's the example of master franchisee. If you wanted to enter into a specific country by deploying your own capital that you have. The example of company on franchisee. And if you do not have enough capital, but you'll still wanted to enter a specific country and you wanted to open all of those restaurant, then you can look for joint venture where you have to find a local conglomerate who is having ample amount of cash and who have some sort of expertise in helping you out in the processes or maybe managing workforce or any of these. 57. Brokerage business model: Hey everyone. In this video we will talk about brokerage business model. Same brokerage business model. You have a broker which usually charge a commission or fees, either from one party or from both the parties in exchange of service that is rendered. So let's say if you have two different customer and they wanted to use some service, they can take help from all of these intermediaries or blocker. And then that's specific blocker will facilitate the transaction between both of these two party, and it will charge a commission or a fees, also called brokerage fees. And this specific type of business model is there in almost every single industry that you can imagine. So from real estate to finance, to retail, to travel, to online marketplace. Let's understand this specific type of business model with the help of example, brokerages have different types of business model. Number one, we have buy and sell match more to. This specific type of business model is used by all these Fintech platform, which is your finance and technology. You will have all of these stock trading platform or cryptocurrency platform. This platform will match the buy and the sell transaction of all these different buyer. And in return of matching that specific transaction, these brokers will charge a small commission or a brokerage fees from both the parties or either from one party who is selling that specific stalk or cryptocurrency. This specific buy and sell business model is used by financial broker, insurance broker, or even travel agent. If you look at app like Robin Hood, you can buy and sell different share of a company using Robinhood. And let's see the time you sell that specific chair at a certain amount, this specific platform will match the price of that share with someone who is willing to buy that specific share. And that's how Robin Hood generate money. So imagine a scenario. Let's say you have a share of Google, and let's say you have purchased that share in $1000, and now you wanted to sell that specific share at a price of $1100. So it click on the sell price and you will choose different options that you have inside Robinhood. So you can sell that specific share at a market price, or you can put a limit order. And the time someone is willing to buy that specific share at $1100, Robinhood will match that specific order with the buyer who wanted to purchase that share at a price of 1100. And that's how Robinhood will make commission or money by charging you maybe 0.1% or 0.1% the time you sell that specific shared using their platform. Same goes with the Radha and coinbase or any other trading platform. You know, whether it's an equity trading platform or a stock trading platform or a cryptocurrency trading platform. The main role of all of these people is to match the buy and sell transaction of two different people. And charge commission on someone who is selling that specific equity stock or cryptocurrency. Then we have buyer aggregator business model, where this specific platform will aggregate all the different people or their property or products who wanted to sell on this specific platform. And then it usually charged a small commission or a small fees every single time, although people are purchasing their specific acid product or property. Let's understand this with the help of Airbnb. We all know in Airbnb we can list down all of our property or space we have. And other people can book that space for a certain period of time. And because we are listing our property on Airbnb and Airbnb is providing us discovery, visibility of our property to millions of users. At the same time, we have to pay 15, 20% commission to this specific platform. Well, that's also an example of a buyer aggregator model. Apart from both of these two, we also have classified advertiser business model. These platform usually charged a small fees from an advertiser who wanted to advertise their product to different audience based on location, time, size, nature, or interest of that specific audience. One of the example is credit list. Let's say if you wanted to list your own your property on Craigslist, you can select the visibility of your property based on location, based on time, based on the interest of people. Or let's say you wanted to sell some other products. Let's say you wanted to sell a tangible good or a smart Water Board will own that specific platform. You can exactly do that by selecting the time, the location, the size of the budget, and the interest of audience. That's the example of classified advertisement business model that is also used by companies like ONNX Greg list, that will allow you to increase the visibility of the product by paying them some extra bucks. I think that is also used by Amazon. Amazon also normally take some extra amount of money to make sure that your product have more visibility by showing them into the sponsored searches. And you can do that by targeting or bidding a specific keyword. Let's say if you are selling t-shirts online and you wanted to bid the keyword of black t-shirt. You can always do that. Anytime somebody will search for black T-shirt, your product will go up. Your product will have a sponsored symbol. And every single time people search for black t-shirt. That they can see your product on the top. That's the example of classified advertiser business model, where they provide you a higher visibility by taking a very small amount of money from you. But not only that, we also have the last type of blockers business model, which is our auction and reverse auction business model. Let's say if you have a product and you wanted to sell that specific product into the market, but you are not actually sure about the price. And that's why you use these platform called forward auction and reverse auction. And let me explain forward auction and reverse auction with the help of this specific diagram. You have to platform eBay and Alibaba. We use eBay for forward auction and Alibaba or reverse auction. Let's say if you have a unique coin or a unique ring or a unique acid that you wanted to sell on eBay. So let's say you have given a price and you have open bidding window, and then people can bid for that specific product. Now someone who will bid at the maximum price, he will get that specific product. That's the example of forward oxygen. On the other side, you have reverse auction that is there on Alibaba. Let's say if you wanted to purchase something, list on a price that I want one hundred, ten hundred quantity of smart bottle at a price of, if let's say $5 per bottle. And at that price, these different seller or manufacturer, who is manufacturing these water bottle, they will bid for the lowest price. So let's say one manufacturer will see that I can provide you all of these water, water 1000 quantity at a price of $4.50. Another one will give you a much lower price and then you will go for a manufacturer or seller who will be giving you all of these products at the cheapest price or at the lowest price. Now in forward oxygen and reverse auction, all of these platform like eBay and Alibaba, normally take a five to 7% of commission from someone who is either selling the product or bidding the lowest price. In case of forward auction, eBay normally takes a small cut from someone who's selling the product from that specific black. But in case of Alibaba, Alibaba normally take a small cut from someone who is bidding for this specific customer. And that's how forward and reverse auction business model work. So these two platforms are taking a very small fees or commission to facilitate this specific type of transaction. So a lot of these platform may have a different geography or location on a business model, but they exactly follow the same kind of strategy. As of 252022, Robinhood, half the market capitalization of $13 billion. And they are discount broker that offers the commission free trading. But a lot of you might be thinking then, how exactly these guys make money? Well, one of the reason is interest. Let's say I have maybe a $100 thousand inside the Robinhood app, which is not actually the case. Let's take a realistic number. Let's say I have $5 thousand in a Robinhood app. So there might be 1 million customer like me who have some amount of money inside the Robinhood app. And those people will then invest some parts of that money, earning interest in the uninvited cash deposit is one of the way by which Robinhood makes money. Second is your premium subscription. So Robinhood have a premium subscription of Morningstar research. They will provide you all of these research reports of nasdaq or some market data. If you take this subscription, they have a subscription with the name Robin Hood gold. And if you take this specific subscription, you will get all of this research data, the market data. We can also that all of these research report that is made by all of their expert and you can get all of that with a small subscription amount, then you have stocked loan. Let's say if you have a very small amount to invest, but you feel that this specific company can go very high from this current price, then you will take a small loan or a stock loan from Robinhood. And when the stock price will go up, you will generate the overall profit and money and then you will return back that specific stock loan back to the Robin Hood with interest. And that's how Robbins would make money. They make money by investing your uninvestigated cash deposit inside the app. They also make money by giving you a premium subscription of Robinhood gold, which will provide you all of the research data or reports like nasdaq or market data. And third, you have stock loan, and that's how Robinhood big money. In this video, I hope you got a decent understanding of different types of brokerage business model. 58. Razor blade business model: Hey everyone. In this video we will talk about razor-blade business model. In razor-blade business model, one item is sold at a lower price in order to increase the value of the complimentary good, such as consumed with someplace. Let's understand this with the help of an example. Now if you look at this coffee machine, the normal price of this coffee machine is around 180 or $200, but they still sell you this specific coffee machine at a price of $120, which is around 30, 40% discount. The reason they do that is because they want you to purchase this coffee machine and then use their own refills or their own copy. And that's how they generate money. This to energy was evolved from razor and blade. They normally sell you all of these razors at a cheaper price so that they can on money from all of these different types of blades that you use every single day. These plates are exclusively made for that specific type of razor. Now this business model is also known as your printer business model. And it will work exactly like rays of bleed. You sell all of your printer at a cheaper price. If you buy any Canon printer, it will be 30 or 40% cheaper than its price. But majority of the canvas revenue comes from all of these cottage. It's obviously an, a printer. You have to replace this every six months or every single ear. And then you have to refill these cottage. Generate majority of the revenue by selling these cottage. Or the refills are different types of ink. This is applicable in almost every single product that we purchase, whether it's a B2B product or a B2C product. Let's understand this, why these companies started using razor blades strategy. The first reason is obviously to reduce the customer risk to try a new product. Now the time you sell the main product or the primary product at a cheaper price. It will allow your customer to try out that specific product without paying an upfront cost. In case of a coffee machine, obviously, you have to sell the coffee machine at a cheaper price so that people will purchase that specific coffee machine. And then we will pay every single time they use the coffee beans of that specific brand, or even a Milk packet of that specific debt. That's the main purpose of selling a coffee machine at a cheaper price and then generating profit from coffee beans or refills or whatever. Same goes with razor and blade. They sell you the razor at a cheaper price so that at least it will become affordable for every single person to purchase a reserve. And then they will generate profit from all of these different types of exclusive blades that are made for that specific reason. And same goes with Printer. Now that doesn't mean that you do not have other options in that specific category. But majority of the people always prefer using the additional product. Let's say you're using the Canon printer. You will always prefer using the original Cartesian to get the best quality print. And that cartilage will, might be a little more compatible when compared with other alternatives that are also available in the market. But the second reason of using the razor blade strategy is to have a constant revenue from that complimentary product. Obviously, if you have purchased operator, you'll be using the sprinter for next three to four years. And the company will have a constant revenue stream from these complementary product or, or I would call these auxiliary product. Because you have to use these products that the mean machine can operate. That's why razor blade strategies, very interesting. A lot of brand use this strategy in a very different way. In fact, so many people also provide you the core software or the core game, or the core functionality of the product for free. The normally generate money by selling you all of these plugins or add-ons or in-game purchase or in software purchase, they normally generate revenue by selling you these extra plug-in, while the core product is always free. And that's why they use this razor blades strategy. Now in racing grade, you are selling your main product either at free or at a cheaper price. And you are generating revenue with these complementary product or refills. And let's understand this with the help of an interesting trend. Let's say, let's talk about Apple because Apple is one of my favorite brand. So if you look at Apple, Apple iPhone is nowadays very affordable. And one of the reason Apple is making these icons are electron more affordable by compromising on their brand value is because Apple wanted to sell these complimentary product or refill. If you look at iPhones, iPhone normally close to around 700 to one hundred, ten hundred dollars are good iPhone. And on that specific iPhone you have to purchase all of these 0s or bugs at a price of 200 or $300. Now the cost of making these earbud or airport is less than maybe 30 or $40. And they are literally making four times the money by selling you these airports. And that's why these complimentary refills are super useful because people are purchasing these iPhone soon. They will find all of these things necessary to buy because obviously they wanted to have something which is very compatible with the primary device. Same goes with Apple bulge and same goes with MacBook. Obviously, MacBook is expensive nowadays. But you got the point. They are selling you these primary product or the core product at an affordable price, even if it is not cheap or free. But they will make sure that you are purchasing all of the complimentary product or refills. In fact, airports have generated a $100 billion of revenue for Apple. So now let's understand how exactly Apple use this big and hook business model to make sure that you are purchasing these different types of products. Will Apple have this Apple product journey to make sure that you are purchasing all of these different types of products. All of our journey in Apple ecosystem started with this specific iphone. After purchasing this iPhone, we will end up buying iCloud because obviously we will run out of space after five GB. So a huge number of people will end up purchasing a subscription of iCloud by paying, let's say maybe three or $5 every single month after I Cloud, you also need some accessories. You need a data capable of fast charging adapter and all of that accessories. You will also purchase all of these items as well. And then you will also end up purchasing either a subscription of Apple Music or if you are into games, then you will end up purchasing arcade and maybe some other subscription if you are into fitness as well, because we are super tight into ecosystem now, it's super difficult to find an alternative to these airport. So you will end up purchasing these aswell. Now you have an iPhone, you have an iCloud, you have an airport, you have all of these different subscription. Now you also need some laptop as well. If you have used MacBook, you know it very well. It's super compatible with iPhone. You can use AirDrop now because you find MacBook, I'll let more compatible with Apple. You end up purchasing MacBook as well. Because we have invested a lot of money in these airport, you will normally get your Apple Music. And because now everything is so tight that you do not have any choice but to buy Apple TV. And let us say you are very tight into the ecosystem and you want some PC for your kids or maybe in your office, it will end up using this iMac. Because now we have a MacBook and the iMac and Apple have its own video editing software, so you end up purchasing Final Cut Pro, but this is a very normal journey and every single time you purchase a new product, the ecosystem will become much more stronger now because previously you had iCloud anomia also using a MacBook and iMac, you end up taking a backup of both your MacBook and iMac into this specific iCloud. And it will increase the subscription amount of iCloud because you're using MacBook, iMac, iPhone, video, AirPod, you will use this subscription of Apple Music because now we are constrained all of this music in all of these three different system. Every single thing is so tightly linked with this equal system that it will always allow you to purchase new and new things and add soon as you purchased that specific product, the equal system will become much more stronger. And then it will become super difficult for you to get rid of that subscription because things will break across all of these different devices. That's the example of who can beat business model, which is not exactly like razor blade, but it is somehow very closely linked with razor blades strategy. You have to use the exclusive complimentary product and to make sure that Apple always have a very tight ecosystem of products, they normally have a bundled up subscription like Apple One. Could take the subscription of Apple one, you will get Apple Music, Apple TV. You can play different games. You will have storage space or cloud computing space. And you can get all of these different services under one umbrella. The main purpose of getting you that umbrella is to feel the power of the equal system. Because if you are able to do more things with one subscription across all of these different devices. So if I summarize this journey of your journey in the Apple ecosystem, we'll start with the iPhone. Then you will end up purchasing these airport. Then you will end up purchasing a laptop because you obviously need some laptop to do your daily task or delivered, and then you will end up buying Apple Watch. And finally, you can connect both of these devices with your laptop and iPhone. And these things will literally talk to each other and it will form a very strong ecosystem. On the top of that ecosystem, then you will start using all of these different services across these different devices. So if you look at this specific ecosystem, the benefit of this equals this term is that you can use AirDrop. You can transfer a very big file from your iPhone to your laptop within few seconds. You can use iMac FaceTime at this time is at perfect example of gross device, strong ecosystem. Then you can also unlock your MacBook with the help of your Apple watch. Because these things are very tightly linked, you can auto pair and you can find your lost airport. You can play music both from your laptop and both from your iPhone in the same airport. I mean, you can connect the airport from both the devices. 59. Octopus business model - OYO: Hey everyone. In this video we will talk about octopus business model. Now in octopus business model, we put diversification of business activity at the heart of the width this business operate. And if you look at octopus, we all know that octopus have different tentacles by which normally octopus move at different places. So all of these tentacles are separate branch of your business and these are innovation branch and these are connected to the head of octopus are your main business. And these branch work independently with each other. Now we all know that oil have diversified all of these different types of businesses in such a way that all of these businesses will generate revenue for oil. If you look at businesses like oil rooms or your townhouse, or your home collection, or your life vacation home, or your workspace and oil, silver key. All of these different businesses of oil are connected to the head of the main business of oil, which especially in real estate. But all these businesses are targeting the different audience and they have different revenue-generating stream. Now some of these businesses have official tie-ups with multinational companies, while some businesses are purely consumer facing businesses, so-called B2C businesses, oil have presents in B2B market, B2C market. And even they have diversified all of their brand into other different domains as well, like workspace, vacation home, and all of these category. And this video, obviously I'm talking about oil, but you can take example of any company that have different tentacles or branches of innovation. And all of those branches are connected to the mean business. Even if you look at brands like Google or Microsoft, all of these companies have separate product line and those product line will innovate, expand, and operate separately. But all of them are connected to the mean branch. Now obviously in this video, I have just taken an example of oil. But even if you look at other companies like Google or Microsoft, all of those companies have all of these different tentacles and these tentacles operate separately. They have separate branch of innovation, but all of these tentacles are connected to the head of the business, which is Google, Microsoft, or Facebook, whatever the mean hat is, not for those people who are not really sure about all of these brands. Let's have a look at all of these different brands of oil and then we will understand how exactly oil make money or how exactly octopus business model work. So if you look at one of the brand of oil, which is oil townhouse, they provide you a very unique piece of property which is twenty-five percent hotel, twenty-five percent home, twenty-five percent cafe, and twenty-five percent store. Now, all of these properties are self managed by oil. If you visit any oil townhouse in that specific place, you can stay there. It will feel like a home to you. It will also have a cafe and you can also purchase something from that specific townhouse. So it will be a combination of home, hotel, cafe, and store. These are self-managed by o. Then you have all your life. And if you're a college student or a working professional, and if you're looking for some space where you can just stay there, you can just have your food, then oil life is the best option for you. It is exclusively designed for college student or working professional who is looking for a Being guest or a space where they can stay and digits, they can just go to the office or they can study. It's a separate place for bachelor's. Then you have oil vacation home. And let's say if you are planning some vacation with your family members and you're looking for some good state near some beach or exotic island or some villa, then oil vacation home is the best option. All of the oil vacation home are very close to beach or exotic island. Then you have oil, silver key and oil silver key is exclusively designed for corporate individual. Let's say if you are someone who is plotting for some multinational company and you're meeting some client or in a new city, then your company will book a stay for you in all your silver key because they might have some official partnership with oil. Same goes with airline. So let's say if you're a pilot or an air hostess and you're traveling to a different city or to a different country than you all airline company may have some partnership with oil, silver key. You will also get a stay in order. Silver key, the main purpose of silver key is to provide your comfort, peace, and silence. If you do not have children's playing around. Now let's understand the business model of oil. Now this is the business model of oil, but this business model is also applicable in case of Airbnb and Trivago. You have Holst on one side and your visitor or customer on other side. Now this host can be an individual person, or a property owner, or a hotel owner. This is your customer and you have your Airbnb or oil or tobacco in the middle. This platform will provide access to market, both to the host or to the visitor. In case of visitor, visitor can simply open the app and he can search for a property and then he will get the list of property based on price and distance from its location. And then you can select the property which is very close to the desired location at a good price. On the other side, host can also get the x's of different people from different areas. And that's why this platform will provide access to market brought to the visitor and to the host. Now because the visitor is visiting this specific platform to search for different rooms or different places to stay. Humble request for this specific room. And this Holst will entertain this specific person and he had to pay some amount of fees or platform fees. Good. This specific business, which can be oil to vagal or Airbnb. Now because this specific platform is giving a customer to this specific host than the host have to pay a service fees or orienting P of 3% because this visitor is booking this specific room with the help of this platform, He also have to pay six to 12% of service fees, so-called renting fees. Now, in case of oil, oil combined both of these pieces together. But again, this depends on the type of business model that you are following. 60. Peer to Peer business model - OLX: Hey everyone. In this video we will talk about B2B or business model. Let's say you have two different people. And if they are able to buy or sell something that activity each other with the help of technology. That's the example of P2P business model. Whether they are able to lend and borrow money with each other. That's the example of P2P lending business model. Let's say if they're able to buy or sell things to each other. Well, that's the example of peer to peer marketplace business model. And same goes with banking with transaction. That means, with the help of these Peer-to-Peer business model, who people are able to interact with each other with the help of technology. Let's start a video by understanding Peer-to-Peer lending business model. So all of these platforms or apps that are using Peer-to-Peer lending business model. They will match these lenders with the potential borrowers, without the official financial institution, normally a small business or a small borrowers will go to different banks. And then he will do all of these legal compliances, loan agreements, and then he will get money, so-called disbursement of node. But with the help of all of these platforms or mobile application, he can easily get these small loans or microfinancing by doing some very basic legal compliances. And these platforms will use artificial intelligence and machine learning by tracking all of their past history or transaction. And then they will assign a risk score to that specific business or individual on the basis of that specific risk score, they will give interest bracket and then you can take small loan from that specific platform with the help of these different individual or investor. A P2P lending offers you both secured loans and unsecured loan. And because you have so many legal compliances and so much of a hassle taking a small loan from all of these traditional bank. That's why P2P platforms are considered as an alternative source of financing. Let's understand if you wanted to start your own Peer-to-Peer lending business or let's say you wanted to build an app or a web application where all of these small businesses can come to our platform and they can take all of these small micro loans from different investor or individual who wanted to lend their own money. Now the first step is obviously the application. All of these small businesses or investor have to fill the application because they are applying for a loan. And then the platform assess the risk of that specific individual based on their process, transaction or credit rating or credit history. And then they will assign interest rate. And after that they will show them all of these different investor, or I would say the list of investor who wanted to give a very small loan on a specific amount of interest, they will have, let's say maybe five or ten different option that this investor can give you $10 thousand of loan at an interest rate of 5%. Another individual can give you a $15 thousand loan at an interest rate of 6%. You will see different types of investor with different interest rate and different amount. And it will also have the Thompson condition. So obviously if you are taking a loan from some investor or individual, you have to repeat them. Some form of interest every single month or let's say every single quarter. So it will also have some terms and condition or some amount that you have to pay periodically every single month or every single quarter, so-called interest payment. And it will also highlight the time duration in which you have to repeat the principal amount at maturity. Let's say you have to pay a specific amount every single month or every single quarter in the form of interest rate. Let's say you have to pay a specific amount every single month or quarter in the form of interest. And after four year or let's say five years, you can pay the whole amount at maturity. And that's how these P2P lending businesses were. The way by which these platform or mobile application makes money is that they take a very small cut, both from the investor side and the small, medium business who won't loan. Let's save the industry is getting 7% of interest from all of these small and medium business who is borrowing money from them, they will take maybe 0.1% from these investor and maybe 0.1% cut from these small and medium business who is borrowing the money? That's how these platform makes money. While their main purpose is to match both of these lenders and borrowers and just to make money on both the side. That's how these Peer-to-Peer lending businesses work. Apart from lending businesses, you also have Peer-to-Peer transaction business, customer to customer or C2C kind of business. Let's understand that. The best two example for these Peer-to-Peer transaction business or discovery business or platform business is your OLS x and quicker. Let's understand that you have two different customer and you have a website or mobile application which connects both of these customers together. Let's say if you have a used item and you wanted to sell that item, two different people. Well, you can list that specific product or item on this specific platform. Let's say I wanted to sell. Let's say I have this wristband or smart water bottle that I wanted to sell on this specific platform. So let's say I end up listing my product on that specific platform like Oil X and different costumer can now see this product on that platform. And add soon as the heat approaches request of this specific product, I will shift this product with the help of some logistic partner and that person will get this product. And this is old products. So obviously I had to sell this product at a cheaper price. And that's how these platform makes money. Obviously, facilitating the transaction is one way to make money and showing ads to different people is the other way by which these platform makes money. We will understand that in the next slide. But apart from facilitating the transaction, you also have peer to be your job portal. If we look at platforms like Indeed or Glassdoor, you have your company on one side and your workforce or employees who wanted to work for some company on other side. Well, that's the example of peer to peer transaction B is business model. Now all of these corporate will never ask for money from all of these different customer or employees. They always asked for money from these companies because obviously these companies have money to pay for this specific job posting. So they will allow you to list maybe three or four job posting. And after that they will always ask for money that P S $9. And you can list additional for job posting or maybe PS20 dollar and you can list unlimited job posting. All of these chalkboard tool will ask from all of these different companies to take a specific plan so that they can list unlimited amount of jobs in their specific job portal The apart from facilitating that transaction, one more V by which P2P marketplace business model make money is by showing them these different types of ads. Let's understand that with the help of an example. Let me take the laser pointer. If you have it used for Lx app, you can see that you have these feature product. The main purpose of these feature product is to allow someone to prioritize their product in the marketplace. Well, let's say you have an old used car that you wanted to sell. Your car will be one among other 5 thousand cards that other people also wanted to sell him this specific platform to make sure your car have more visibility. Just take five or $10 and show my product to as many people as you can. Well, that's the example of feature product or sponsored product. That is also one of the ways by which these P2P marketplace, or Peer-to-Peer marketplace business model, mixed money. Another way is by using Google AdSense. We all know that Google AdSense is the largest, I would say one of the largest advertisement product from Google. With the help of Google AdSense, You can use their pixel and you can embed Google ads on your website. Or Alex is using Google AdSense on their website and they're using Google AdMob Ads on their mobile application. And that's how they also make money. They showed these ads to different people who are using their web application and mobile application. So if you look at the P2P transaction or P2P marketplace business model log is by facilitating the transaction. Also they have the sponsored or featured post that you will see on OSX app or even in Amazon. So let's say you have 20 thousand different seller wants to sell their product on Amazon. And if one seller wanted to get more visibility on their specific product, they normally pay 510, $20. The normally bid a specific amount to make sure that their products have more visibility on that specific platform. All of these companies use Google ads. And when I'm saying Google ads, that means they use AdSense in their website and add more ads in demo by replication. These are two different types of products, which is the part of Google ad product. Then you have sponsored or banner area. I'm sure you have seen in some website that at the top you have a small banner. And the main purpose of that banner is to earn money because obviously you are putting the Battle of some other brand to do some basic marketing and advertisement stuff. And then you have in-app installation inside these different apps. They will also allow you to install some other apps. Let's say if it is a gaming app, then they will also list other gaming app inside the app so that you can also install them. And that's the typical example of in-app installation.