1. Priori Data Overview
Background
Priori Data is a provider of app store intelligence. We provide market data on the leading app stores, which helps app publishers, investors, and advertisers make better decisions with their mobile strategies.Our Product
Our SaaS analytics platform quantifies, benchmarks, and tracks the performance of players in the mobile app economy.
2. What is a (Data) Network Effect?
Definition of a Network Effect
"The effect that one user of a good service has on the value of that product to other people. When a network effect is present, the value of a product or service is dependent on number of others using it." - Wikipedia
Important Characteristics
- Critical Mass
- Diminishing Returns
- Lock-in/Switching cost
And what is a Data Network Effect?
"Data Network Effects exist when the value of additional data is compounded with time." - Tom Tunguz, Redpoint Ventures
A clarifier ...
"Just having gobs of data is not necessarily a Network Effect, nor any sort of competitive advantage per se. What your really need is unique data and algorithms that process that data into insights which then lead to decisions and actions. A flywheel effect comes when you get a critical mass of data that you mine for insights; pump that value back in to your product or service; attracts more users which get you more data." - Brian Ascher, Venrock
Examples:
Network: DriversGood produced (and consumed) by the network: Traffic Data
Network Advantages: Accuracy, Predictability, Shorter Trips!
Outcome: Acquired by Google for $1.1bn in 2013
Some benefits if you get it right ...
Provider Benefits: Moats
Can create "moats" or barriers to entry discouraging competitive entrants. Scale provides defensibility.
If a tree falls in the forest and it isn't posted on Facebook, did it really happen?
Provider Benefits: Switching Costs
Can create switching costs for network participants, making the product "sticky".
Examples:
"Will I have to rebuild my friends list from scratch?"
"I don't want to lose my historical data"
"no one ever got fired for buying IBM"
Provider Benefits: Word of Mouth
Word of mouth referrals can by very powerful and an inexpensive form of user acquisition.User Benefits: Incremental Value
The value proposition increases over time with no additional "work" and presumably at no additional cost.The beauty of a network effect is that if executed correctly, it fundamentally aligns incentives between the network provider and the network participant.
3. Network Effects in SaaS
Four common Network Effect Strategies in SaaS:- Connecting "Purchasers" to "Suppliers"
- Network of individuals, but massive ancillary B2B value
- Expose customers to 3rd party developers via APIs
- Data Pooling/Aggregation
4. Priori Data's Network Effect
Background
We mine, merge, and model public app store data with prorietary publisher data at massive scale. The result is download/revenue estimates for every app.
In Practice
Our estimate models get more acurate with every incremental "data observation". The result is a better product for partners and paying clients alike.
Our SaaS Model
An app publisher with a sports app...- Wants to benchmark performance and scout for new market opportunities
- "Connects" account to Priori Data, allowing us to enhance our estimates with the data.
- Receives free access to the "sports category" of our premium product.
- Can unlock data for other/adjacent categories on a paid basis.
5. Lessons Learned (so far)
A data network effect is not intrinsically a revenue stream. It is a driver of enterprise value.Critical mass is critical. Look for niches or verticals where you can achieve that critical mass while still at small scale.
Critical mass is easier when the offering is "open", but data businesses are traditionally "closed". This is tough to reconcile.
Think hard about entering the market if there is already an incumbent with a large network effect.
In a "network effect" business, competing on price has limited potential (and may ultimately hurt you).
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