attention-business-models-compared

Attention Merchants Business Model: Asymmetry In Business

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Understanding asymmetric business models

To me, the distinction between the attention merchants and the rest was clear, as I developed the idea of asymmetric business models. Let me further explain.

With the risk of sounding redundant, business models can be classified in many ways. For the sake of this piece, we’ll classify them according to the fact that companies break down the walls between product and distribution, to enhance the value proposition for potential customers/users. 

When these conditions are met that is when we have a digital business model. And perhaps that is how we assist to the so hyped digital transformation. When you have not crossed that border where product and distribution have come together to enhance value proposition, thus enabling scalability, you’re still experimenting with digitalization. 

Therefore a digital business model is such, when the digital part embraces product development and distribution, as a whole. 

Thus, digital business models evolve into tech business models, where the technical component, the technology, becomes a key enhancer for the value proposition of the customer, thus making the company primarily a tech player.

business-model-template
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

And a further evolution from digital/tech business models to blockchain-based business models is also a further step we’re looking at in the coming decades. In the case of blockchain-based business models as we’ll see, they in part resemble open-source, but with built-in economic incentives to align developers, users, investors, and more. Understanding this transition is critical!

Let’s take a quick look at what asymmetry means, and let’s compare it with symmetric business models. 

Asymmetric business models

In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users‘ data, combined with the algorithms that repackage that data and sell it to advertisers for visibility.

Let me get back to further clarify what makes up an asymmetric business model

  • Asymmetry 1 or customer asymmetry – Key user ≠ Key Customer: The product is usually free and it’s not monetized directly (it’s not linear, like a freemium, where there is a free version and a paid, upgradable version). Instead, the core asset is supported by a key customer which is different from the key user (Google, Facebook, YouTube Free, Instagram, TikTok).
  • Asymmetry 2 or monetization asymmetry – Non-Linear Monetization Pattern: The way the product is monetized is hidden from the average user’s eyes (in short, the average user doesn’t know and doesn’t care about how the free product is getting monetized as long as it works seamlessly). In fact, while the free users do represent the most important asset for the company (none would buy advertising from Google or Facebook if they hadn’t a large user base) they don’t pay directly through the product’s usage. They pay indirectly, as the data is repackaged, refined, rechanneled within an attention-based marketplace (as we’ll see below). 
  • Asymmetry 3 or Data/Information Asymmetry – Attention-based Marketplace supported by advertisers/marketers/businesses: The data provided by the users is repackaged in multiple ways, and usually resold on an attention-based marketplace. The attention-based marketplace is the monetization platform, which is highly scalable and built to draw in a large number of small to medium businesses, and also larger enterprise accounts (Google Ads, Facebook Ads). 

Conversely, symmetric business models usually follow the opposite route: 

  • Key user = Key Customer: in this case the user is also the customer. It might be that the user can benefit from the free service, to a certain extent either through a free trial, or a free version of the product. But in general the user will be prompted to upgrade based on usage, premium  features and more, or perhaps through an enterprise version of the same product (Netflix, Fastly, WordPress.com).
  • Linear Monetization: connected on the previous point, monetization happens more linearly, as the same asset consumed by users is also the one they pay for. As an example, you get a free trial from Netflix, after the trial, you convert from user into paying customer, thus benefiting from the platform and by sustaining it as well.  
  • Pay-as-you-go/Upgrade/Subscription-based: usually these symmetric business models rely on usage-based models, or on premium-based models or yet on subscription-based models. 

It’s important to note that when we look at very large organizations, they might be using both symmetric and asymmetric models. Perhaps, YouTube is both a free and asymmetric platform and a paid and symmetric one (with YouTube memberships). Amazon is both a symmetric platform, with Amazon prime, while at the same time selling the users’ attention on the platform via Amazon Advertising. However, each business model can be skewed toward one or the other.

For instance, Google and Facebook are skewed as asymmetric business models, whereas Netflix, WordPress, and Fastly are symmetric. 

googles-business-model
facebook-business-model
Facebook is an attention-based business model. As such, its algorithms condense the attention of over 2.4 billion users as of June 2019. Facebook advertising revenues accounted for $31.9 billion or 98.66% of its total revenues. Facebook Inc. has a product portfolio made of Instagram, Messenger, WhatsApp, and Oculus.

Examples of asymmetric business models:

Connected Business Model Types

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c-business-model
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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