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Revisiting Value
|Estimating Costs and
Revenue
Jim Morris
John Zimmerman
Spring Semester 2011
Let’s revisit Value/Revenue
Flow Diagrams
Think of this as a social ecology. Design a stable and
sustaining social-system.
1.
Update diagram using distinct markings for implicit value, intrinsic
value, extrinsic value, and revenue
2.
Use personas to replace roles in diagram. Question if your persona
would be motivated to act based on the implication of the diagram.
3.
Iterate persona and/or diagram to improve the fit in terms of persona
believability/motivation to act
4.
Apply a time-unit to your diagram (1 month, 1 quarter, etc.). Estimate
the number of transactions across each flow line. Capture rationale for
estimates and keep the values as variables for financial analysis.
This is the Refinement/Evaluative Phase … so refine and evaluate,
then refine and evaluate …
05.899 & 499
Designing Mobile Services
Spring 2011
2
Value/Revenue Flow Key
Extrinsic value
Revenue
Intrinsic value
Implicit value
Persona
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Designing Mobile Services
Commercial
Entity
Spring 2011
3
example
Translation of TV Shows
Broadcaster
TV show
exchanged for
money
Extract names
and contacts of
fans who speak
Chinese
TV Show Fan
Websites
Web TV Show
Distributor
Invite to
translate.
Share
reputation
ratings
from
watchers
Love to talk about
specific TV show.
They are a fan
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TV show ad
exchanged for
money
Watch Ads.
Share ratings for
translators.
Share comments
on translation
Translate
TV shows
into
Chinese
Chinese/(
English)
speaking
TV Show
Fan
Designing Mobile Services
Companies
that want to
advertise
Watch TV
shows with
Chinese
translations
and ads
Spring 2011
Buy
product or
service
Chinese
speaking
TV Show
Watcher
4
Estimating market
How many people fall within the range of all
of the personas?
How many of these will you get to use your
product (3%)?
05.899 & 499
Designing Mobile Services
Spring 2011
5
Estimate transactions
per month
Estimate for 100 most popular TV shows.
Purchase TV shows (on average) 5 per broadcaster; need to
negotiate 20 contracts per year; 1.67 contracts per month.
Each show has 24 episodes per year … roughly 2 per month.
Need 8 fans to translate each TV show. (First pass, proofer, timer,
final edit; at least 2 teams per show)
At 200 unique episodes per month, need 1600 translators.
Estimate 0.5 year effort per translator.
Must recruit 267 translators per month.
Estimate 10 million+ streams per show; 2 billion episodes
streamed per month.
Estimate 12 ads per episode; 24 billion ads played.
200 unique episodes; 2400 ad spots to sell each month.
05.899 & 499
Designing Mobile Services
Spring 2011
6
Upfront development costs
Hours of software development based on use cases.
Initial marketing budget to recruit translators and
viewers.
Negotiations with broadcasters.
Negotiations with advertisers.
Server purchase or rental.
Initial connection cost.
Misc. startup costs.
05.899 & 499
Designing Mobile Services
Spring 2011
7
Maintenance costs per month
Software support, operation and
maintenance (hosting, connection)
Ad sales
Content negotiations (labor costs)
Translator recruiting
New product development
General business operations (Staff, HR,
payroll, accounting, space, etc.)
05.899 & 499
Designing Mobile Services
Spring 2011
8
Revenues per month
+ Ads shown across 24 billion episodes
- Cost of TV purchase, maintenance costs
Will you make more money each month
than you spend? What is the magic number
of users to hit a profit point? What is
realistic based on market of potential users?
05.899 & 499
Designing Mobile Services
Spring 2011
9
Terms
BOA: back of the envelope
WAG: wild ass guess
YAGNI: you ain’t gonna need it
05.899 & 499
Designing Mobile Services
Spring 2011
10