A More Elegant Question About Pricing

Mitch JoelPosted by

What’s this thing worth?

Pricing has always been a fascinating area of interest. While many are quick to dismiss the merits of The Four Ps, and their current value in the marketing equation, I’m less quick to toss them aside. At their core I still believe that Product, Price, Promotion and Place retain their importance when trying to market a product and/or service. With that, pricing is now variable and quite elastic. Pricing is now much more dynamic than ever before. Because of platforms like Amazon, it’s increasingly more difficult to know if/when a consumer is even getting some kind of deal. Think about it this way: I could be seeing an entirely different Amazon pricing format than you are… And how would any of us be any the wiser to it?

Now, elevate these pricing and value models to the digital economy.

If we have seen anything in this digital economy, we’ve seen valuations of companies that can best be defined as stroke-inducing. Need I remind you that Snapchat turned down three billion dollars from Facebook back in 2013 (long before anybody had any real clue of what Snapchat could be)? How about Amazon acquiring Twitch for one billion dollars back in 2014? Twitch. The place where people go to watch other people play video games online. I’m in no way belittling these valuations or acquisitions. I am – without question – trying to understand how this pricing is both estimated and then agreed upon?

Question: how much is Bitmoji worth?

Bitmoji allows you to create a simple cartoon version of yourself (an avatar), and then enables it as an alternative keyboard on your smartphone, so users can up their emoticon game in text messages and emails. It’s a ton of fun (and you can bet that my Bitmoji rocks because I’m bald, sport glasses and wear all black… very easy to make into a caricature). Bitmoji just got acquired for $100 million by Snapchat (the dollar amount has not been verified, but it is the persistent rumour in the trades). Staggering? Bargain? Thoughts?

What does Snapchat know about pricing that the rest of us don’t?

I’m often asked how something like this can take place? Something like Bitmoji. A freemium model, where money is exchanged for a more customized caricature. On the other hand, there is a large and installed user-base (and once installed as a keyboard, I’m fairly certain users don’t bother to remove it). Perhaps Bitmoji on top of Snapchat will get users to tinker even more if they can integrate them. Maybe Snapchat needs to acquire other companies to build a portfolio of users across mobile-centric channels? Clearly, Snapchat has some logic there. What most people don’t understand about these businesses, is that it’s often less about how many people are paying to use a service, and more often about creating something that one company really wants to buy. Ultimately, Bitmoji’s only customer may need to be a company – like Snapchat – that wants it.

A more elegant question of pricing: who is your brand worth the most to?