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Technology for Business: How Facebook Economics and The Amazon Effect Can Help Your Small Business Become Big

By Brent Leary has enabled millions of users and hundreds of thousand small businesses to use its sophisticated business apps for unbelievably low prices. But being able to service millions of users while charging them very affordable prices is something Zoho CEO and cofounder Sridhar Vembu calls the Facebook Economy.

I recently sat down with Vembu to get his take on what lessons Zoho has learned from Facebook and, and what small businesses, in general, can learn. Below are a few takeaways to consider.

What’s the Facebook Economy and how is it driving some of the approach you’re doing with Zoho?

Sridhar Vembu: As of January, Facebook has about 1.2, 1.3 billion daily active users, give or take. They do about $2.5 billion in revenue per month, approximately. It’s about $2 per active user. Facebook users are pretty intense; they use it a lot. They’re always on the phone uploading photos; and spend hours on it watching videos.

It’s fascinating that they’re able to not only service all these users but actually make money doing so. Not just make small amounts of money, Facebook actually prints money as I like to say. That’s Facebook economics, where $2 a month they’re able to serve users profitably. I don’t know any enterprise that can adjust to that economics but I believe that’s where we are heading as a world.

This is the consumerization of IT to me — that the kind of Facebook economics comes to dominate how enterprise software and enterprise infrastructure is given out. Amazon Web Services has proved that that’s the direction it’s heading.

Amazon is another company that you seem to track and look at how they do things. What lessons can small businesses learn from what Amazon has done?

Sridhar Vembu: The first thing is the way they have democratized mass markets and infrastructure. They sell compute by the hour and now per minute pricing, more and more. That’s pretty incredible; five cents, 10 cents, 20 cents. These added up. Initially I remember when they were launching it, the prices were so low, people thought they wouldn’t make any money, but there’s lots of money there. In a sense they dispatched a lot of traditional enterprise vendors because of their pricing model and their “easy to do” business approach. That’s something that’s a lesson for any business: Be very accessible. Keep your pricing model very simple and very customer friendly. Those are the big lessons I draw from it.

It seems like the business models for small business are changing as rapidly as the technology is. How does Zoho play a role in that?

Sridhar Vembu: I always like to quote the example of the person who does my garden work for me. This person today still gives me an invoice on paper, monthly. In five years, I can envision everything will be done through a mobile app, including the invoice generated from his phone. My payment will be made through my phone. No other transaction of any kind happens. All of the exchanges happen through our apps installed on our phones. Everything will happen that way. Let’s say he needs to fix our sprinkler system. He just sends that quote, I approve it, he proceeds, he invoices me and I pay.

All the transactions should happen at that level. I think about how this technology applies there; and what kind of price points are relevant. That’s where the Facebook economics is important because this person is not going to pay $200 a month. Maybe he’ll pay $5. That’s what we are going for. AT

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