Companies often make $ in ways that you may not expect.

People learning that Robinhood monetizes via PFOF is just one case.

Decoding companies & their biz models equips you to build more creatively, with more tools in your toolbox.

A few examples... 🧵

1/ Amazon: they just sell stuff online, right?

Yes... and no. Their profit center is AWS, making 50%+ of all profits ($Bs) for the giant.

Another sneaky tidbit about AMZN: their advertising business outperformed Twitter's last decade in 2020 alone.

2/ Airlines just sell flights, right?

No. In fact, their mileage programs are worth billions.

An appraisal of the U.S. part of the AAdvantage program was between $19.5-$31.5B... MORE than American is worth, total.

Airlines used these programs to secure $Bs in pandemic loans.
3/ Qualcomm:

A leading chip maker makes most of its revenue from... making chips.

BUT, most of its profits are made from licensing, where it sells 3G and 4G patents to other companies in the space.

Its margins on licensing are 3x, as it gets a piece of all future device sales.
4/ Garmin, a company originally known for its GPS navigation tools, only actually sees 15% of their revenue from the auto segment.

The rest falls into other segments, which are seeing the most growth: fitness, outdoor, marine, and aviation.

A masterclass in diversification.
5/ Subscription boxes:

You think the biz model works as so:

1. Customer pays for box
2. Company pays for products in box to be sent to customer

Wrong.

Many companies get PAID to incl products in their boxes.

Why? They guarantee eyeballs and in this case, a "100% open rate"👇
OK, I gave you a sampling, but now it's time to do your own homework.

Go learn about how:

1. HP uses loss leaders (hint: 🖨)
2. GoodRX sells such cheap 💊
3. Italic used Costco's biz model to deliver products at cost
4. Airpods bring in more $ than Spotify or Snap

What else?

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More from @stephsmithio

2 Mar
There's a lot of hype around NFTs and very little nuance around them.

I tend to see 2 arguments:

1. This is the future
2. This is worthless

The world is not black & white.

NFTs are not useless, nor are they that useful intrinsically. But so are many other things in life.

🧵
1/ Let's first agree on a definition:

NFTS are unique, digital assets. You may liken them to a trading card or art.

Scarcity is built into the asset, so is often worth more than its inherent utility.

In buying an NFT, you are betting that ppl will care about it in the future.
2/ Now let's address whether "NFTs are worthless"

NFTs = tech, allowing you to monetize & track ownership of the underlying asset.

Ex: An artist can sell X to A, but also get a cut when A sells that asset to B.

This tracking mechanism is worth something. How much? It depends.
Read 13 tweets
17 Feb
After covering numerous companies at Trends, I've noticed: people think of competition too narrowly.

This is indicative of not understanding the root problem being solved.

Competition != products w the same features
Competition = anything overlapping w core value provided

🧵
Ex 1: Quibi died quickly. Some blame it on COVID. Others on frivolous spending.

But their oversight was thinking that they were competing with Netflix or Disney Plus.

Their competition was Twitter, TikTok, or your #1 podcast. Free, on-demand entertainment.
Ex 2: Neflix has fared much better.

Why? They understand the complexity of their competition graph.

Reed Hastings has astutely noted that it's not just Disney+ or HBO. They also compete with... sleep.

Their goal is to get more of your overall entertainment timeshare.
Read 7 tweets

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