Network Effects

  • function
    • one way to create competitive “moats” in the digital world
  • categories
    • direct network effects -> more searchers, better search
    • indirect network effects -> more apps, more smartphone buyers
    • cross-network effects -> more searchers, more advertisers (e.g., keywords monetize the “long tail” of advertising)
    • social network effects -> social influence & local effects
    • demand-side network effects -> exclusivity, dynamic pricing, limited access, keyword auctions
  • example
  • power laws
    • n is the number of network links
    • tips: remember to multiply each link’s worth

PlentyofFish

  • business model analysis
    • itself
      • free online dating site
      • runs website and writes the love doctor quiz
    • adsense
      • Google Adsense Publisher Blogging for money
      • volunteers contribute to community
      • advertisers pay for access to community for related products
    • ad-based revenue
      • PPC and keyword pricing
      • 70% to publisher and 30% to Google
      • money/week or money/year, low fixed costs
  • canvas
  • social media monetization
    • RPU - average revenue per user
    • CAC - cost to acquire a customer
    • LTV - lifetime value of user
  • what can drive the balance
  • summary
    • PlentyofFish and “free online dating” changes the customer relationship to a “community platform”— with users contributing time and self-policing
    • PlentyofFish makes money on a free dating service through Google’s Adsense program
    • PlentyofFish is very profitable, and Google Adsense pays Marcus Fried $1M a month & costs are very low
    • we can calculate RPU—revenue per user—on a free or freemium service by taking $1M divided by monthly active users in the community
    • Lui Mama, the livestreaming Chinese pig farmer is also very profitable, but is “gift” not ad-supported

Updating Dating

  • some examples - profile, matching, monetization
    • Coffee meets Bagel - Facebook, bagels/beans
    • OKCupid - questionnaire, suggestions
    • Jiayuan – user data, proof of employment
    • Dating Ring - human & algorithmic matches
    • Hurry Date - 4 minute exchanges
  • monetization strategies
    • user engagement vs high quality/seriousness
    • pros and cons of
      • subscription
      • pay per message
  • summary
    • major shift in past 20 years to online dating
    • younger adults have newer experience and expectations of mobile dating
    • Tinder gamified the industry by fun “swiping”
    • online dating is big in China
    • dating apps address key “market failure” issues and monetization differently

Additional Reading