Business Opportunities Hidden Inside the Bitcoin Landscape
Let's take a look at the Bitcoin industry as a whole. It's important to familiarize yourself with the industry analysis since one of the main questions you should ask yourself when deciding on your Bitcoin business is, "Where is the industry headed?"
You shouldn't try to figure out what's hot right now, but rather predict what will be the next hot thing and target it before everyone else.
In Part II - Creating your Bitcoin business, I'll show you specific tools and techniques to figure this out. But for now let's focus on what data we can find on the Bitcoin industry today.
As we near the middle of 2015 there are currently:
■ Over 8.5 million Bitcoin wallets
■ Over 88,000 merchants that accept Bitcoin
■ More than $676 million invested in Bitcoin startups through venture capital
■ 103 VC (venture capital) backed start-ups
At the time of writing this book the Bitcoin market cap is $3.4 billion, but this may change due to fluctuating exchange rates4.
You'll notice that throughout this book I don't talk much about Bitcoin's price since I think it's irrelevant. In order to create a successful Bitcoin business you need to make sure that there is a market for you product, in this case Bitcoin. And if the price goes up or down it doesn't matter, there is still a market for Bitcoin.
Even when the biggest Bitcoin exchange MTgox collapsed in 2014 it didn't affect the rate of adoption for Bitcoin. There is a steady increase in the number Bitcoin wallets opened each year and even though the price may be lower than last year the adoption rate is still positive. The price decline has not stopped the exchange trading volume from trending up.
Finally, since the Bitcoin price has dropped but mining difficulty remained more or less the same, the incentive to mine Bitcoins has diminished and less people are dealing with home mining and mining is becoming more consolidated.
Chapter 2.1: Using the Bitcoin protocol to disrupt industries worldwide
Bitcoin has certain rules, also known as the Bitcoin protocol, which makes it work. The ingenious part of Bitcoin is not necessarily the creation of the currency but rather the creation of the Bitcoin protocol. For the first time in history, technology makes it possible to transfer property rights (such as shares, certificates, digital money, etc.) in a fast, transparent and very secure way.
Moreover, these transactions can take place without the involvement of a trusted intermediary such as a government, notary, or bank. Companies and governments are no longer needed as the "middle man" in all kinds of financial agreements.5
Using the Bitcoin protocol to create Bitcoin the currency is just one out of many uses you can have for this protocol. A lot of businesses are also forming around the idea of Bitcoin 2.0 - which means the decentralization of previously centralized businesses.
Some examples for Bitcoin 2.0 projects are Etherum (a platform for decentralized apps) and Gems (a sort of decentralized social messenger). Creating a Bitcoin 2.0 project also requires technical knowhow since you'll need to implement the Bitcoin protocol into other forms of assets.
If we look ahead at what's coming there are several business categories that may utilize the Bitcoin protocol to create new products:
Applications that eliminate spam by requesting a small amount of Bitcoin for every delivery. So for example let's say a "normal" person sends out 100 emails a day (I know I went a bit overboard). If we request 10 Satoshis (the smallest amount of a Bitcoin available = 0.00000001BTC) for every email he sends he will need to pay 100 Satoshis daily or 360,500 Satoshis yearly. This is equivalent to $0.0867167 at today's exchange rate. Not too bad - paying $1 a year for email to avoid spam.
Why would this eliminate spam you ask? Well imagine that a spammer needing to pay for 100,000 emails a day - this will cost him $1000 each year. Suddenly email spam takes a toll and isn't free to abuse as it is today.
Video
Applications that eliminate video advertising by charging a small BTC amount for the time viewed.
Crowdfunding
Global crowdfunding applications that allow project creators to raise funds easily from around the world using Bitcoin.
Payouts
Applications that allow creators or service providers to get paid by a global audience. ChangeTip is a great example of how people can tip Bitcoin to Internet users who helped them out.
Remittances
One of the hottest industries Bitcoin is trying to disrupt. Through Bitcoin you can create applications that enable worldwide, cross-border payments. Many Bitcoin startups are basically trying to "bank the unbanked".
Ecommerce
Bitcoin focused merchant directories that offer a beautiful Ul for consumers.
Identity
Applications that give people control of their own identity (without the need of a 3rd party like the government).
Attribution
Applications that allow users to prove ownership of assets.
Voting
Blockchain-based tech is already being used in elections throughout the web. This way you know your vote was counted while still keeping your anonymity.
The advantages of creating a Bitcoin 2.0 business are that you are inside a blue ocean - meaning there's little competition (no sharks, unlike a red ocean) and also this is definitely the place the industry is headed.
Probably not all of what I've written here makes sense to you and that's OK. Heck, it doesn't even all make sense to me sometimes. You don't need to be an expert on Bitcoin; you just need to understand the basics of where the industry is headed so you can choose your Bitcoin business idea more wisely.
One of the best sources that consolidates all the Bitcoin industry's information is Coindesk's state of Bitcoin report. This report comes out once a quarter (every three months) and sums up everything nicely. A lot of the data brought here is from that report. So make sure to sign up for report updates and keep your finger on the pulse of the Bitcoin industry.
What business opportunities lie within the Bitcoin 1.0 industry?
Since Bitcoin came to public awareness in late 2013 (when the price spiked to around $1200 for one Bitcoin) a lot of new Bitcoin businesses started to show up.
This Bitcoin boom brought in new opportunities; now not only can you open a new Bitcoin business that caters the demand of the general public who all of a sudden is interested in Bitcoin, but also you can cater those exact same Bitcoin businesses that came about in 2014.
Simply put, two new markets have emerged: The consumer Bitcoin market and the Bitcoin businesses market. So when I say the consumer Bitcoin market I mean the market in which you will open a Bitcoin exchange business, or a Bitcoin wallet business and your customers will be mainly consumers. This is also known as B2C - Business to Consumer.
When I talk about the Bitcoin business market I'm talking about supplying leads to Bitcoin businesses and getting paid for bringing them new customers. This is known as B2B - Business to Business
Most people tend to focus on the first market; I made most of my profits from focusing on the second. The difference is that while the Bitcoin B2C market is larger it has way too much competition, and if you don't have a good market penetration strategy it's going to be hard to gain customers.
The Bitcoin B2B market on the other hand has almost no competition, mainly due to the fact that it's smaller. But it's still large enough to be able to profit from.
In this book I'm going to cover marketing tactics that will fit both markets so don't worry, it will be totally up to you to decide which market you'd like to focus on.
Chapter 2.2: Bitcoin B2C market opportunities
Bitcoin Exchanges
Probably the most common Bitcoin B2C market opportunity is to open up a Bitcoin exchange. When I say exchange I mean either an actual trading platform where people can trade Bitcoins with one another, or a broker (e.g. Coinbase) which is kind of a Bitcoin shop that lets you buy Bitcoins from it.
Examples for some of the more known Bitcoin trading platforms are Kraken, Bitstampand and BTC- E. Trading platforms make their profit by charging a commission for each transaction that is made. They are usually the cheapest place where you can by Bitcoins, since the Bitcoin price is determined by the market.
Examples for some of the more popular Bitcoin brokers are Coinbase and Circle. Brokers make their profit by selling you Bitcoins at a premium.
The advantage of opening up a Bitcoin exchange is pretty clear - you're really "close to the money" and the business model has been tried and tested many times. All you need to do is get enough people onboard and you're good to go.
In my opinion opening up an exchange nowadays has more disadvantages than actual advantages. First, you're going to face fierce competition. Just to give you some reference Coinbase is considered to be the 5000th largest website on the web today6. It is estimated at 5M monthly visitors? and has already secured $106 million in venture capital funds8.
So as you can see the Bitcoin exchange market has some tough competition. Here's a list of all of the available Bitcoin exchanges today.
Bitcoin Wallets
Up next are Bitcoin wallets. Bitcoin wallets are also a great idea for a Bitcoin business. It means that you get to create the software/web app that will hold Bitcoins for its owner. There are many kinds of Bitcoin wallets - mobile apps, desktop apps, software wallets and web wallets. The more well-known Bitcoin wallets are Blockchain.info, Coinbase (again...), TREZOR and GreenAddress. You can find a complete list of the wallets available here.
Most Bitcoin wallets don't have a clear business model. Coinbase's wallet, for example, makes it easier for people to buy Bitcoins directly from Coinbase. Blockchain.info makes their revenue from advertisements on their site, but as far as I could tell I couldn't find a solid business model for almost any other wallet out there aside from these two.
Some Bitcoin wallet providers sell additional hardware thus creating an income stream. For example, MyCelium has their own products which they sell on their website.
A different approach to generating revenue from Bitcoin wallets is to create what is known as a hardware wallet. TREZOR and Ledgerare two companies which manufacture a Bitcoin hardware wallet. It's a physical device on which you can store your private keys and sign transactions for you (more on transaction signing here). It's one of the safest ways available today to store your Bitcoins.
Another form of wallets available are physical "dumb" Bitcoin wallets such as Bitkee and Cryptosteel.
The advantages to creating a Bitcoin wallet business would be the fact that once again you are close to your customers' funds. Also if your product is really good then people tend to pay more for greater security. Meaning the Bitcoin wallet product touches a lot of sensitive pain points for your customers.
The disadvantages are that the competition is even fiercer than the exchanges, because there's not that much room for differentiation. Another disadvantage is that you have to have extensive knowledge in Cryptography in order to create a good product.
Bitcoin Mining Companies
When we come to talk about Bitcoin mining as a business there are three options we can discuss:
Mining Bitcoins for a profit
This will include getting some state of the art mining rigs, a dedicated place to host those rigs, cooling systems (since they tend to overheat), etc. If you're thinking of making money through Bitcoin mining it can be done only if you consider this to be a full time business which will include a hefty investment for the equipment. Home mining as it is referred to is almost never profitable at today's difficulty rates9.
Creating and selling mining rigs
Another option would be to become a mining rig manufacturer. These companies create and sometimes also operate mining rigs for other individuals or companies who wish to buy them. An example for this kind of company would be Spondoolies. Creating this sort of business requires engineering knowledge, product design and more.
Cloud mining companies
This last option is more of a scam then an actual scheme in my own opinion (you can read why here). These are companies that "rent out" mining power that is (supposedly) located in some remote location so you'll be able to enjoy mining profits without all of the hassle.
I have yet to find one reliable company who does this but if this is a direction you wish to pursue it's something that will need to be researched deeply. Also it's impossible to set up such a business without either building your own mining rigs or buying them. That's exactly why so many of these businesses turn out to be a scam eventually since they are just a Ponzi scheme pretending to be an actual business.
Bitcoin CFD trading
One of the main motives the gets people interested in Bitcoin is the fact that they believe they can profit from the fluctuating exchange rate. For that exact same reason, a lot of companies supply CFD trading (contracts for difference). In this sort of trading you don't actually by the Bitcoins but rather buy a contract on Bitcoin. If the price then goes up you can sell the contract for a profit. If it goes down you lose. You can also short sell Bitcoin CFDs and buy a contract that will earn you money if Bitcoin prices go down.
The problem with this trading type is that it's usually too risky and 99% of the traders lose their money this way. It's much more suitable for experienced traders. Examples for companies who supply CFD trading are Avatrade and Plus500.
Another form of business that is similar to CFD trading are Bitcoin binary options. Bitcoin Binary Options are a form of trading in which you predict if the price of Bitcoin will rise or fall in a certain amount of time. If you're correct you earn the option's payoff, if you're incorrect you lose your investment.
Each Bitcoin binary option has a specific expiration date at which the option is checked to see if it's "In the money" (you were correct) or "Out of the money" (you were incorrect). Each Bitcoin binary option also has a specific payoff that you can win. They are called "Binary Options" because the outcome is
This form of "trading" is even more risky than CFD trading as it's almost pure gambling on what will happen with the price at a specific moment.
As you can imagine since this area is very risky to traders it's also very profitable to the business owners and that is one of its major advantages. On the downside, setting up such an operation requires a lot of hard work and paperwork to fill out (most of these companies are regulated believe it or not).
One option you may want to consider is to get a white label from such a company. White labelling is simply the practice of buying another firm's product and then marketing it as your own.
In the forex market, white labelling is used for trading software, platforms, and other additional services that brokers may offer. So all you need to start such a business are relevant customers and just white label all of the infrastructure from one of the major trading companies.
Bitcoin Gambling Sites
One of the earliest forms of Bitcoin businesses were the gambling sites. The most notorious of them "SatoshiDice" has taken over $15 million in bets and was eventually sold for $12.4 millionlO. I will not go into details about the online gambling world in this book since it's not my area of expertise, but this too is another business model you may want to consider. You can find a list of updated Bitcoin gambling sites here.
Bitcoin Faucets
A Bitcoin faucet is a site that gives its users free Bitcoins.The original Bitcoin faucet was operated by Gavin Anderson, Bitcoin Foundation's chief scientist. It started out around late 2010 and it gave visitors five Bitcoins (yes....five whole Bitcoins) for free. Of course back at the time Bitcoin was worth something like $0.08.
The general idea of today's faucets is this:
- Drive massive amounts of traffic to the site by promising free Bitcoins.
- Place a disturbing amount of ads on their website.
- Hand out insignificant amount of Bitcoins so they won't have to pay you because they know you won't be able to withdraw the coins. There's usually a minimal amount you need to reach in order to withdraw.
- Keep you on the page for a certain amount of time - probably so you'll click on of the ads and that the website will rank better on Google.
- Make you keep coming back by promising you more Bitcoins within the hour.
It's a pretty spammy sort of business and you can see examples of the most successful faucets today here and here. This sort of business requires huge amounts of traffic to be profitable but
alsoattracts a lot of "junk" traffic from around the web - since it's mainly people looking to earn free money.
If you want some more examples here's a list of faucets from around the web.
Bitcoin Information Sites
My personal favorite! Bitcoin blogs and news sites, or information sites for lack of a better term are a bit of a hybrid. They serve consumers but their business model is B2B. So even though they need to find ways to attract individuals they also have to find a way to monetize their site through other business. Whether it be through placing ads on their website, writing sponsored stories or promoting specific content through affiliate marketing (I'll explain what affiliate marketing is later in detail).
Some of the best examples you can find for great information sites are Coindesk, CryptoCoinsNewsand of course...99Bitcoins. The advantages of setting up an information site are that it's pretty easy and you can get it up and running quickly. I'll talk more about how to set up such a specific site in Part II - Creating Your Bitcoin Business.
But setting up an information site is not all sunshine and rainbows. Since it's probably the easiest business to set up, you're going to have tons of competitors. You're going to have to differentiate yourself - meaning find a way to add value to your customers that other businesses don't supply.
In 99Bitcoins, I chose to cater to Bitcoin newbies; that was my differentiation. So instead of trying to compete with Coindesk on writing the best news stories, I focused on creating the best Bitcoin tutorials I could. I also differentiated myself from other tutorials by making my tutorials non¬technical and easy to understand.
Another disadvantage for creating an information site is that you're going to have a hard time monetizing it unless you have tons of traffic. Luckily for you, I'm going to teach you how you can make great income from these sort of sites without needing 100K visitors each month.
If you decide you want to go down the path of information websites you'll also have to choose your "angle". Are you going to be a news site that delivers the latest stories? Are you going to be a personal blog that describes your personal view about Bitcoin? Are you going to be a tutorial site that helps newbies get started? Whichever angle you choose, make sure it's something you're passionate about or that has a solid business model behind it. We will speak more in detail about that in Part II
Bitcoin Information Products
Information products are products that help you navigate your way around the Bitcoin space. They can be books about trading, video tutorials about Bitcoin, membership websites that give the latest review of the Bitcoin market, even this book you're reading at the moment is an information product about Bitcoin.
A good example for an information product (aside from this book) is the Bitcoin for beginners course by Udemy. Other examples of Bitcoin info products can be found on Clickbank and Amazon (we'll talk about Clickbank later on in this book).
The advantages of creating an info product are that just like an information website; you can get started right away. You don't even have to be an expert in your field; you can just research as you go along. Also, if you create a digital product and not a physical one, the costs for manufacturing it are usually quite low.
There are disadvantages of creating an information product. Since the barriers to entry are low you'll probably have lots of competition and you'll need to figure out a way of bringing traffic to your product; you can't just expect it to be viral. But since this is exactly what this book is about you don't have to worry since soon enough you'll know all you need about brining traffic to your Bitcoin business.
Information products can also cater the B2B space. For example, this book can also serve someone who already owns a Bitcoin business and wants to learn how to bring more traffic to it.
Physical Bitcoin products
A lot of Bitcoin lovers, their friends and family members are on the lookout for Bitcoin gifts and other sorts of merchandise. A few cool examples would be casascious coins, shirts and pinsand practically anything else you can think about.
Create your own currency - Altcoins
Last and definitely least (in my honest opinion) is the option to create your own cryptocurrency or Altcoin. After the success of Bitcoin, numerous other digital, peer-to-peer currencies have emerged to attempt to emulate Bitcoin's success. Some also attempt to address perceived short¬comings in Bitcoin and to provide competitive advantages.
These alternative currencies are often referred to as "Altcoins", mimicking the Bitcoin moniker, while also emphasizing that they are "alternatives" to Bitcoin itself. More on Altcoins here.
I personally think that creating revenue from an Altcion is extremely hard. It took Bitcoin almost five years to become mainstream so just imagine how much work a new Altcoin will require. Also, most Altcoins produced today are just plain pump & dump scams where the owner creates a coin, generates a lot of buzz about it so the price will go up and then sells big amounts of it at a profit only to leave the coin's supporters with nothing.
At the time of writing this book, Bitcoin's market cap is 14X larger than the next Altcoin in linell. I don't see many advantages to creating a new form of coin whereas there are major disadvantages such as fierce competition, lack of a clear business model and basically - no real need.
Chapter 2.3: Bitcoin B2B Market Opportunities
Now that we've covered most of the Bitcoin B2C market opportunities let's move on to B2B market opportunities. The Bitcoin B2B space will usually be less crowded but also have fewer potential customers since in this case you're selling to businesses and not to individuals.
Bitcoin Infrastructure Services
Bitcoin infrastructure companies build security tools, develop protocol enhancements and provide APIs for other Bitcoin businesses to build on. Some good examples for infrastructure companies would be Blocktrail and Chain.
These are extremely technological companies and while owners of such companies will benefit a lot from this book, I will not focus on this type of business, simply because I don't have the technological know-how that's relevant.
Bitcoin infrastructure companies are one of the best B2B opportunity examples since they cater almost all of the Bitcoin businesses out there.
Bitcoin Add-Ons For Websites
One of the most overlooked opportunities in the Bitcoin space is the website add-ons market. This involves anything thing from creating Bitcoin related WordPress themes, to different Bitcoin widgets such as price tickers, donation buttons or the latest Bitcoin news.
For example, with all of the Bitcoin websites popping up each day, I can't believe I could find only one Bitcoin WordPress theme. Other examples are the Bitcoin toolboxplugin (sold for $17) and the unique payment page which supports Bitcoin.
If you're a designer you can also consider designing and licensing Bitcoin artwork on stock photo websites like iStockPhoto and Shutterstock. This way every time a website would like to license one of your photos on his website you'll get paid. More on that here.
Bitcoin Affiliate Programs
And now for the crown jewel....Bitcoin affiliate programs. In short, an affiliate program is a program that pays you money for bringing new customers to a business. So, for example, Coinbase has an affiliate program where they pay you $1 for each new depositing customer you bring on board.
Through affiliate programs you basically become a marketing agent for a Bitcoin business and can now generate revenue without ever having a product. All you need to do is make sure you bring targeted customers to your vendor. Affiliate programs are amazing in the sense that they allow you to start creating revenue from day one, and they are super simple to get started.
I've made most of my revenues online through affiliate programs and I believe that it's the most overlooked Bitcoin business opportunity available today. The next chapter is going to talk all about Bitcoin affiliate programs and I'll show you exactly how to get started with them.
Chapter 2.4: Coming up with different ideas for a Bitcoin business
So up until know we've talked about the known businesses that are available for you. But what if you want to think about an idea that's not on this list. Well this is exactly what this section is about - tools to help you brainstorm additional Bitcoin business ideas.
Tool #1 - Brainstorm with friends
I know it sounds mundane, but getting together with a group of friends and just "shooting the shit" so speak, is probably one of the most effective ways to come up with new ideas. The rules for brainstorming are pretty simple - there is no such thing as a bad idea. So if someone yells out an idea which you think has no chance of working, you don't rule it out, the time for testing if these ideas will work is in the next part of this book.
At the moment just focus on generating the biggest list of ideas that you can. Sometimes an idea which you think is horrible will make you think of a different idea that you wouldn't of thought about otherwise.
Tool #2 - Use Google's Keyword Planner to see what people are already searching for
Google has a pretty neat tool called Keyword Planner that shows you what people are already searching for online. You'll need to sign up for an Adwords account in order to use this tool, but registration is super easy and if you find yourself getting confused just refer to the Adwords section in Part III - Marketing Your Bitcoin Business Like a Pro.
Once you have an account just go to Keyword Plannerand select the "Search for new keyword and add group ideas". You'll see a screen that looks like this:
Go a Head and Type some sort of general Keyword or Key phrase you want to get ideas for in the first box on top marked in red. After that, choose your targeting by letting the keyword planner know which country and language it should target and finally click "get ideas".
Let's say I want to get ideas for what people are searching for around Bitcoin. I'll enter the keyword Bitcoin, set my targeting and click "Get ideas". I also make sure that once I get the results I click on the "Keyword ideas" tab (as shown in the picture below) and then I scroll down. Here's what I got:
On the left side I can see keyword ideas by relevancy (which Google decides on) and on the right side I can see the average monthly searches. Don't worry too much about the other columns for now; we'll deal with them in the next part of the book. Right now just try and get some new Bitcoin business ideas.
For example, we already get some new ideas by using this KW (keyword) tool. We see there's a demand for Bitcoin faucets (sites that hand out free Bitcoins) and also a demand for a Bitcoin calculator (usually refers to a Bitcoin mining profitability calculator). Browse around this list and try different keywords to get different Bitcoin business ideas.
Tool #3 - Search around forums
One of the best sources to get ideas for Bitcoin businesses is around Bitcoin forums. Today the biggest Bitcoin forum is BitcoinTalk. What I like to do is go to the "Beginners & Help" section and see what topics people are posting about. This can give you ideas about needs inside the Bitcoin community. Of course if you prefer to deal with mining or trading, just go to the relevant topic, but since Km focusing on information products the most helpful category would be "Beginners & Help".
Tool #4 - Use Google's autocomplete feature
Another great way of finding out what people are looking for is to use Google's autocomplete features. Just go to google.com and start typing in a Bitcoin related query. Google will then autocomplete phrases for you, whatever it suggests it means that people are looking for and may be a good business idea. Here's an example from the term "Bitcoin trading bot" which is a robot that does the trading of Bitcoin for you. See how many different business ideas you can get from this autocomplete:
Other than just creating a trading bot, you can also create a trading bot review site (and become a Bitcoin trading bot affiliate) or create a trading bot in the Python language.
Tool #5 - User UberSuggest to get even more autocomplete ideas!
Sometimes the Google autocomplete feature gives you only a limited amount of suggestions. Using Ubersuggest allows you to Google's autocomplete feature for your core keyword + additional suggestions for every letter in the alphabet. It's Google suggest on steroids! Try it out....
Tool #6 - Look around marketplaces
Checking out websites like Amazon and eBay for Bitcoin related products may give you an idea of what you want to create. Another cool website you can check out is Kickstarter. Kickstarter is the world's largest funding for creative platforms. You may find some interesting Bitcoin crowdfunding ideas.
Tool #7 - Find out what already works
In order to save you a lot of time you can try and look for which sites are already brining in a large amount of traffic. In order to do so we're going to go over the first 100,000 sites on the web according to Alexa's ranking.
Alexa is a web analysis company which ranks websites according to the amount of traffic they have.
When browsing through this list try to search for sites with the words "Bitcoin" or "coin" inside them and you can see what type of sites are already getting massive amounts of traffic. For example, BitcoinTalk.org is rated #7255 out of all websites across the web.
Chapter 2.5: Creating a SWOT analysis for your Bitcoin Business Idea
Soon this chapter will end and you'll be face with the task of choosing your Bitcoin business idea. You could just copy and paste what I did with 99Bitcoins but you'll still have to put in your own fresh angle to it if you want to be successful.
One of the main tools you can use to find out which idea suits you best is called a SWOT analysis and it stands for Strengths, Weaknesses, Opportunities and Threats. This is a very common analysis in the business world and amazingly enough no one takes actual credit it for inventing it until todayl2.
For each business idea you come want to test write down the following:
Strengths
What gives you an advantage in creating this sort of business? Are you an expert in this field? Do you have a certain edge that no one else has? Don't make the mistake of saying there is no competition in this area; competition doesn't belong in this section. The strength section is only about you, not about the environment.
Weaknesses
What gives you a disadvantage in creating this sort of business? Perhaps you know nothing about this type of idea, or you want to create an informational product but lack the writing skills to do so.
Opportunities
What elements of the environment can you exploit? What is your the loophole in which you will enter the market. Competition is relevant to this part since it talk about the outside environment and not about yourself.
Threats
What elements of the environment may hinder you efforts? If for example you want to promote a small merchant, there is always the threat that he may shut down. If you plan on setting up a home mining operation the decline in the Bitcoin exchange rate is a major threat.
I highly advise putting a number from 1 to 10 next to each category of this analysis and then summing up the positives and subtracting the negatives. This way you can compare different business ideas with the numbers you get.
SWOT Analysis Demonstrated On My Dirty Little Bitcoin Secrets Project
Imagine that I'd like to create an eBook about making money through Bitcoin (how on earth did I think of that??). Now I'll show you how I create my own SWOT analysis for this specific project:
Strengths
I've been dealing with the subject of Bitcoin and how to make money from it for a pretty long time, so I consider myself an expert in the subject. I have above average writing skills. I know how to bring traffic to Bitcoin-related projects. I have a website that generates daily visits from people looking to make money from Bitcoin. I'd say overall my strength score is 9.5. Remember this is my own opinion about things. I may be completely wrong, but some analysis is better than no analysis.
Weaknesses
I have never published an eBook before successfully. I'm not a native English speaker. I don't know if people are interested in what I have to say. Since I can see a way to overcome most of these weaknesses I'll say my weakness score is 4.
Opportunities
People are constantly looking for new ways to make money online. Bitcoin is (relatively) new and a lot of people are interested in what it has to offer. There are almost no (good) products out there that explain about Bitcoin and affiliate marketing. I guess my overall opportunities score is 7. Again, this is just a wild hunch and is more of a gut feeling based on what my analysis of the industry is.
Threats
The book is in digital format so it may be copied in a second and given away for free on different websites. By the time the book is out, maybe some of the tactics I will explain will not be relevant any more. My website relies on organic traffic from Google. If my rankings drop I may not sell my predictions as well. After thinking about how I can overcome most of these threats, I'll give my threats the score of 5.
So my final SWOT analysis result is 9.5 - 4 + 7 - 5 = 7.5
Now if I do another analysis on a different idea (which believe me I did) I can compare between the two. This last step of giving a number to each step and adding them up is something I made up and is not in the original SWOT analysis. I do believe it's easier to compare ideas this way.
Chapter 2.6: The Beigel analysis (for lack of a better name...)
One more analysis you can do is the one I did when I started out 99Bitcoins. It's some sort of a variation of the SWOT analysis which I will now call "The Beigel Analysis" (dramatic drum roll please....). By using this analysis I got to the conclusion that pursuing the road of creating 99Bitcoins will be the best use of my time and effort.
What I do is take each idea and give it a number from 1 to 5 in each of the following categories:
Need
How much is this product actually needed. Are people actively searching for it or for the problem it solves?
Viability
Am I actually capable of pulling this off? Meaning if I would want to build a blog the viability for me would be 5, but if I would like to design mining rigs the viability for me would be 1. Also if a large amount of money is needed to start such a product it will reduce the viability score.
Competition
How crowded is this specific space and how probable is it that I will be able to overcome the competition? A higher score means lower competition.
Profitability
How easy it is to make money, and large amounts of it from this idea? You should take into account the revenues you will generate and the expenses it will take to earn them.
When I'm done giving each category a score, I just add them all up and the idea with the highest score wins.
Keep in mind that if you have an idea that you're extremely passionate about and it gets a low score it doesn't mean you have to throw it out the window. This is more of a reality to check to make sure you're aware of all of the obstacles and opportunities that lie in your way.
Later on in Part II, I'll show you specific tools and tricks to check if your idea also has a need and the amount of competition it has. For now just go with your gut feeling and add some Google research to come up with the numbers. You can always come back to this analysis and change the numbers as you dig up more information.
Homework - Start Brainstorming your New Bitcoin Business
Now that you are familiar with the various business opportunities inside the Bitcoin space I want you to start thinking about which type of business is best suited for you. Pick three different ideas for Bitcoin businesses from any of the categories above, or if you have your own idea that isn't listed here even better!
I want you to pick three because in Part II of this book I'll show you how to test these ideas out to find out which one of them is most likely to succeed. When choosing an idea try to find something you can relate to in some sort of way and not just something that sounds profitable. As you'll learn later on, the only way to achieve success is to give actual value to your customers. And the only way to give great value to your customers is to do something you love (thanks Steve Jobs...).
When picking out ideas for your business I also want you to be as specific as possible. Don't just say, "I'll build a Bitcoin information site." Say something like, "I'll build a Bitcoin information site that focuses on reviews and comparisons of the major Bitcoin exchanges and wallets."
Focus is a major factor in any success. You need to focus on something that you're good at or want to be good at. If your idea for a business is too broad you won't know where to start and you definitely won't know how to define your initial target audience. But more on that in Part II.
For now pick three Bitcoin business ideas you'd like to test out and define them as detailed as you can. After you picked them out create a SWOT analysis or a Beigel analysis for them. You can even do both of them if you'd like.
Here's an example. When I started out in 2013 I actually had a few ideas lined up. Here is the listed of my initial ideas:
- Create physical Bitcoins as gifts (similar to Casascius coins).
- Create an exchange platform for Israel (my home country) - almost none were present at the time.
- Create a Bitcoin news site that would cover the different news stories from around the world (Coindesk was only starting out back then).
- Buy or sell Bitcoins on eBay.
- Create a video tutorials site that will help people get started with Bitcoin.
As you can see I was very particular about my business ideas -1 didn't just say, "I want to build a Bitcoin exchange." I thought about focusing my exchange only to my home country. Same thing goes for the information site -1 was very specific about having it video-oriented and targeted at Bitcoin newbies.
Well that's enough babble for now get to work and I'll see you in the next chapter!
