The Root of All Evil?

How does one make money from a venture?

Surely They Don't Make Money?

One of the most common questions that this writer gets based on his involvement with Sixty60 is "surely they don't make money?"

In 2024, there are of course many ways to monetize platforms such as apps, super-apps and apps-stores. (We'll dump a list at the bottom of this post.)

Can you make money with a new idea?

We (as consultants) sometimes field a similar question: "Surely there is no money to be made with new idea X?"

I.e. companies are often not hesitant because they think they cannot build a business around a new option. Rather, they are hesitant because they do not really believe that it is a good commercial option.

They're simply unsure how to make money from the idea.

The short response to such reluctance is almost always a 'yes-you-can-probably-make-money'. If the idea exists in the public sphere and it is already on your radar, others are probably already profiting. While admitting that fads do exist, there are thus good reasons to assume that you may also be able to build a profitable business around that idea.

Should you and how should you?

So, the question of whether-to-pursue should rather be asked within (a) the context of your strategy and (b) what your brand represents - not within the context of 'can-we-make-money'.

If the idea then fits within your strategy and brand constraints, the following applies. If you cannot figure out (a) how to build it right and (b) how to make that money, then, yes, you won't make money. But, such failure will be as a result of your inability to succeed in one or both of these two areas though. It will not be an inherent attribute of the idea.

We'll do it anyway

Interestingly enough, many companies then proceed with the implementation even though they do not believe they can make money doing so. This is often justified with a 'we have to be there otherwise we look stupid' type of reasoning. Of course, some of them then do look stupid with their bad or mediocre efforts.

Some of Sixty60s competitors possibly fall into this category. The Woolworths CEO is on record saying exactly that. At around 20:20 in the conversation in that link he says "you don't make money out of online". Does he believe that? Are they viewing this as a loss-leader? Who knows?

Facebook and WhatsApp

Facebook/Meta bought WhatsApp for $19-billion when WhatsApp's revenue (not profit) was around $700-million.

That $19-billion is more than twice the Shoprite Group's market capitalisation. I.e., it is more than twice the total value of Checkers, Shoprite, Usave, OK, Medirite, Transpharm, Freshmark, K'nect, Computicket (and many more constituent business in that group).

Making money from WhatsApp

There are two questions here:

  1. How did WhatsApp founders (Jan Koum and Brian Acton) make money from their idea to replace SMSs with a better tool?
  2. How does Facebook make money from that idea now?

Koum and Acton's plan

Koum and Acton's plan was simple:

(1) Build something that solves a problem and users will come.
(2) Get more investor funds to make the solution even better.
(3) Then more users will get on board
(4) Repeat steps 2 and 3 until you have a huge number of users
(5) Each time, at step 4, wait for an offer from the really big guys.

So, in this case, Koum and Acton approached this as disruptors building a new solution through Venture Capitalist funding. I.e., they simply solved the 'how-do-we-make-money' question using (a) tried and trusted VC-friendly approaches, (b) iteratively building a really good product by deeply understanding their users' needs and (c) cashing out by selling.

Facebook's Plan

Facebook (at this point) was already a huge monster. Hence, as is the case with most large corporates, they struggled to build something of equal quality. Facebook Messenger was simply inferior to WhatsApp in many ways.

To Zuckerberg's credit, he did not doubt that he could make money from this new thing. He invested the $19-billion.

And, whatever one thinks of Fakebook's revenue models (described by some as being a surveillance business), Zuckerberg then made money from it. He did so in more than one way, one of which was that WhatsApp (inter alia) helped them to massively grow their footprint in global developing markets; the 3rd world space.

The two questions

So, (given strategy and brand fit) the two questions to ask when one considers which new innovative options to pursue are:

  1. "Can we make money from this?"
  2. "Can we implement/build this?".

The answer to the first question is almost always related to another question, namely "does this solve a customer need?" If so, then not only will you make money from your existing customers, you will almost certainly get many(!) more customers. This was the case for Koum and Acton, for Facebook, and for Checkers - through Sixty60.

The answer to the second question, if you are a corporate, is almost always, at least partly to be found in "Joy's Law". Buy expertise from those who have it - either by buying their input into your effort (as Sixty60 did), or by buying the output of their genius (as Facebook did). Your corporate culture will probably make it difficult for you to do this work yourself.

That's all!

List of Monetization Options

And, finally, as promised above, here is a list of some monetization options:

Profits from sales (e.g. part of the many Sixty60 profit-engines).
Pay for use (e.g. software-as-a-service)
In-app purchases (e.g. many online games)
Platform use (e.g. Takealot with 3rd party sellers)
Ads (e.g. Google)
Commission (e.g. App Store's 30%)
Freemium options (e.g. Dropbox, Spotify, LinkedIn)
Selling/using data (e.g. Oracle Data Cloud, Shoprite Rainmaker)
Subscriptions (e.g. Netflix, Amazon Prime, Xtra Savings+),
Using the data to boost your other business (e.g. Shoprite)
App-position fees (my goods appear before other brands' in the app)
Sponsorship (e.g. event apps)
Affiliate marketing
Efficiencies and reach (e.g. dark kitchens, dark stores, etc.)
Options galore (e.g. super-apps such as Alipay)
As a means to access other profitable work (e.g. our free posts here)
...and more.