business model canvas examples _ understanding business models

11/30/13 Business Model Canvas Examples | Understanding Business Models

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ALL POSTS TAGGED BUSINESS MODEL CANVAS EXAMPLES

Understanding LinkedIn Business Model

In the post titled, Understanding Business Model Fundamentals, we learnt why do we

need to understand business models and how to visually represent a business model using the

Business Model Canvas. In this post, we will try to understand LinkedIn business model using the

Canvas.

LinkedIn is the worlds largest professional network. As of 31 March 2012, LinkedIn had 161

million members in over 200 countries. LinkedIn helps the professionals stay connected with each

other by creating and managing a professional identity and building a professional network.

LinkedIn has implemented a Multi-sided Platform, which offers different solutions to different

categories of users.

LinkedIn provides the following categories of solutions to its network members for free: An ability

to manage professional identity using tools such as Profile and Profile Stats; An ability to build and

manage professional networks using tools such as LinkedIn Connections, Invitations, and

Introductions; Access to knowledge and insights using tools such as LinkedIn Groups, Network

Updates, News, Answers etc.

LinkedIn is a good example of a Freemium business model. While the core offering is free for

its network members, premium offering comes for a price. The premium offering includes tools

such as LinkedIn InMails and Profile Stats Pro. The users can upgrade from a basic account type

to Business, Business Plus, or Executive account types. The premium account types provide access

to the premium offerings.

LinkedIn platform induces the same-side network effects among its members. This helps in

growing the network through word-of-mouth or connection-request-emails. As the average

number of member connections grows, the strength of the network improves. The more the

network becomes strong, the more attractive it becomes to the users on the other sides of the

platform. The users on the other sides of the platform include Recruiters, Marketers &

Advertisers, and Developers.

LinkedIn offers LinkedIn Corporate Solutions, LinkedIn Jobs, and Subscription products to the

st



Recruiters. LinkedIn Recruiter is their flagship hiring solution to find, contact, and hire candidates.

Self-service postings help recruiters to post and manage job opportunities. LinkedIn Referral

engine helps organizations leverage their employees network to find qualified candidates. LinkedIn

provides job recommendations to its members over Job You May Be Interested In (JYMBII)

section of a member home page. LinkedIn offers Talent Basic, Talent Finder, and Talent Pro as

subscription products to recruiters and hiring managers. LinkedIn offers Job Seeker family of

products Job Seeker Basic, Job Seeker, and Job Seeker Plus to its members to stand out to

recruiters and hiring managers.

LinkedIn marketing solutions enable marketers and advertisers to reach their target audience.

LinkedIn Ads is their self-service product to target advertisements to specific members based on

their profile information. Advertisers can setup and manage multiple campaigns and continuously

monitor clicks, impressions, click-through rates, and average cost-per-click. LinkedIn Ads for

Enterprise product targets larger advertisers that receive dedicated account management and get

access to additional marketing solutions such as Display Ads, Custom Groups, Sponsorships,

Whitepapers, and Recommendation Ads.

LinkedIn provides a set of open APIs and embeddable Widgets to the developer community.

These APIs and Widgets provide access to the content in the LinkedIn database and help the

developers build third-party applications leveraging LinkedIn data.

LinkedIn revenues come from 3 key revenue streams: Hiring Solutions, Marketing Solutions, and

Premium Subscriptions. For CY 2011, these 3 streams represented 50%, 30%, and 20% of total

revenues of $522 Million. LinkedIn sells Hiring and Marketing solutions through field sales

organization and through their website. The Premium subscriptions are primarily sold online. Field

Sales organization comprises of direct sales force, agencies, and resellers. While online channel is

characterized by lower average selling prices, the offline channel is characterized by longer sales

cycle, higher average selling prices, and longer contract terms. During CY 2011, Field sales

contributed 55% of the total sales, whereas online channel contributed 45% of the total sales.

LinkedIn business model can be represented over the business model canvas as follows. Click the

image to see it on Full Screen.



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As discussed earlier, LinkedIn drives almost half of its revenues from Hiring solutions. Here,

LinkedIn competes with established online recruiting companies such as Monster+HotJobs,

Careerbuilder, and Indeed.com, talent management companies such as Taleo, and traditional

recruiting firms. Then, there are companies new to the recruiting industry such as BranchOut,

which offers a Facebook application for finding jobs and recruiting employees. In a span of less

than 2 years since its launch in July 2010, BranchOut has grown into largest professional

networking application on Facebook with over 25 million registered users and 400 million

professional profiles. With over 3 million jobs, it operates the largest job board on Facebook.

How big, you think, is the threat of BranchOut to LinkedIn? In case Facebook decides to acquire

BranchOut, then how big the threat can become? On 3 May 2012, LinkedIn announced acquisition

of Slideshare, a leading professional content sharing community, for $118 Million. How acquisition

of Slideshare is going to help LinkedIn boost its revenue growth and overcome the threat from

companies such as BranchOut?

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Posted by businessmodelinnovationmatters on May 16, 2012

http://bmimatters.com/2012/05/16/understanding-linkedin-business-model/



Understanding Facebook Business Model



Business Model Canvas. In this post, we will try to understand Facebook business model using

the Canvas.

Facebook is the leading Social Networking Site (SNS) of the World. Facebook mission is to make

the world more open and connected. Facebook has built a Multi-sided Platform (MSP) that serves

different customer segments with different value propositions.

Facebook helps Internet users stay connected with their friends, families, and colleagues. It helps

them discover and learn more about what is going on in the world around them. It helps them

express themselves by sharing their opinions, ideas, photos, and activities. Facebook provides a

number of products, free of charge, to its users. These include: Timeline, News Feed, Photos and

Videos, Messages (Email, Chat, Text Messaging), Groups, Lists, Events, Places, Subscribe, Ticker,

Notifications, and Facebook Pages.

Facebook had 845 Million Monthly Active Users (MAU) by the end of 2011. The following

statistics are further illustrative of Facebook size and scale: 100 Billion friendships; 250 Million

photos uploaded every day; 2.7 Billion Likes and Comments per day. More than 425 Million

MAUs, nearly half of Total MAUs, used Facebook products on Mobile. With so many users using

Facebook on a regular basis, it has become an attractive destination for advertisers and developers

alike.



Facebook offers a unique combination of reach, relevance, social context, and engagement to the

advertisers. Advertisers can engage with users based upon the information shared by users such

as Age, Gender, Location, Education, Work history or specific Interests. Facebook offers

advertisers an ability to include social context in their Ads. Social context highlights a users

connections with a brand or business. Businesses can also create Facebook Pages to engage with

interested customers and simulate an ongoing dialog with them.

Facebook offers development tools and APIs that enables developers to easily integrate with

Facebook. Developers can use Facebook platform to build apps and websites that are more

personalized, social, and engaging. Facebook offers developers Open Graph API and Social Plugins

that developers can use build different user experiences, including Apps on Facebook, Desktop

Apps, Mobile Apps, and Platform-integrated websites. At the end of 2011, more than 7 million

apps and websites had been integrated with Facebook. Facebook offers developers an online

payment infrastructure that enables developers to receive payments from the users in an easy-to-

use and secure environment.

While advertisements remain a key source of revenue for Facebook, the contribution from

payments is increasing consistently. Payment revenues increased from nearly 2% in 2009 to 15%

in 2011. Ad revenues contributed 85% to the total revenues in 2011.



Facebook is investing heavily into Facebook-owned data centers. This is to support user growth,

increased user engagement, and delivery of new products. Facebook data centers currently store

more than 100 petabytes (100 quadrillion bytes) of photos and videos. This is going to increase

further in the future as users engage more on Facebook. To support these massive storage and

computing needs, Facebook custom designed and built their software, servers, and data centers

from the ground up.

To increase the user engagement even further, Facebook has partnered with companies such as

Netflix, Hulu, Spotify, Washington Post providing online movies, TV shows, music, and news. Their

apps help users share what they are watching, listening, or reading with their friends and family.

Facebook business model can be represented over the Canvas as follows. Click the image to see it

on Full Screen.

Yesterday, on 9 April 2012, Facebook announced a decision to buy Instagram for $1 Billion.

Instagram is a photo sharing application that allows its users to apply digital filters to the photos

and then share them on different social networking services. The acquisition news is generating lot

th



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of buzz because Instagram had no revenues and only 13 employees. However, following statistics

of Instagram are impressive: 30 million+ Registered Users; 1 billion+ Photos Uploaded; 5 million+

Photos Per Day; 575 Likes Per Second (~50 Million Likes per Day); 81 Comments Per Second (~7

Million Comments per Day).

In your opinion, how Instagram complements Facebook Business Model? Facebook spent about a

quarter of cash they had at the end of 2011 on the acquisition. Was it worth it? Does the Canvas

representation of Facebook business model helps you in assessing the acquisition fit?

Posted by businessmodelinnovationmatters on April 10, 2012

http://bmimatters.com/2012/04/10/understanding-facebook-business-model/





Understanding Google Business Model



Business Model Canvas. In this post, we will try to understand the business model of Google using

the Canvas.

Google is among the leading Technology companies in the World. Google is most popular for its

Search engine, which helps Internet users get useful results in response to their queries. Google

maintains vast index of websites and helps users search different types of content such as Text,

Images, Audio, Video, Blogs, News, and Maps through its products. Gmail is another very popular

product of Google, for free email services to the users. Google provides social networking services

to its users through its Google+ product.

Google provides its services to the Internet users for free. Google makes the revenues from

Advertisers who are interested in reaching out to the online users. Google helps them create text-

based Ads through Google Adwords a self-serve auction-based advertising program. These ads

appear next to the search results. Most advertisers pay Google on a Cost per Click (CPC) basis,

which means advertisers pay when users click their Ads. Google helps advertisers extend their Ad

campaigns to the Google Network members websites through its Adsense program. Google

Network members get a share of Ad revenues in return. Google provides Display Advertising

services through DoubleClick advertising technology. Display advertising comprises of video,

text, images, and other interactive ads. Display ads appear on Youtube, Google Finance, and

Google Network member websites.

Google has developed Android an open source mobile software platform that can be used by

handset manufacturers to install on their devices and by developers to create applications for

mobile devices. Google provides Chrome browser for web browsing. Google is working with several

OEMs (Original Equipment Manufacturers) to bring computers running Chrome OS. Google

serves the Enterprise market through hosted web-based applications called Google Apps. Google

Apps include Gmail, Google Docs, Google Calendar, and Google Sites. People need a browser and

an Internet connection to use the Google Apps.

Google has developed a Global Sales and Support infrastructure with specialized teams across



different industries. Google multi-product sales force sells campaigns that include Search, Display,

and Mobile advertising. Google helps most of its customers with a self-serve approach and tries to

bring automation where possible. Google has built a global support team to help advertisers and

Google Network members to get the maximum value out of its offerings. Google sales team focus

on building relationships with largest advertisers and leading Internet companies.

Google business has 4 key costs elements: R&D, Data center operations, Traffic Acquisition, and

Sales & Marketing. Google invests heavily into R&D to create new products and improve existing

products. Google is estimated to have over 1 million servers in data centers around the world that

process nearly 1 billion search requests every day. Google has invested heavily in these data

centers and managing their operations continue to be a key cost element. Traffic acquisition costs

comprises of money paid to the Google Network websites under the Adsense program and to the

distribution partners who distribute Google Toolbar and other products or drive traffic to the

Google websites. Google Sales & Marketing costs include the cost of managing global sales and

support teams as well as advertising and promotional expenditures.

Google generates over 96% of its revenues from advertising and this has remained true for last

several years. Though Google has evolved its Search offering, got into Mobile space, trying to get

into Operating systems, and has build offerings for the Enterprises, any of them has not yet

resulted into major revenue streams. Apple, on the other hand, earned 70% of the revenues from

products (iPhone and iPad) that didnt existed 5 years ago. Can Google do that? Can Google

innovate its Business Model so that 50% of revenues in 2017 will not come from advertising, but

from Google new value propositions in next 5 years? In your opinion, what can be the new

revenue streams for Google?

Google Business Model is represented over the Canvas as follows. Please click the image to see it

on full screen.



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Posted by businessmodelinnovationmatters on March 29, 2012

http://bmimatters.com/2012/03/29/understanding-google-business-model/





Understanding Banking Business Model



Business Model Canvas. In this post, we will try to understand the business model of a Bank using

the Canvas.

A Bank has broadly two types of customers: One who deposits their money with the bank and one

who borrow money from the bank. The banks are a kind of an intermediary between the depositor

and the borrower. The business model of a bank is very simple: Offer lower interest rate to the

depositor and higher interest rate to the borrower. Make the money from the interest rate

differential.

People whether salaried or businessman prefer to keep their money with the bank. It is a better

option than keeping it at home because this helps them earn interest income. They trust the bank

with their money and believe that it will always be available when they need it. The same people in

a different situation would want to borrow money from the bank. The banks offer them the

money, but at a higher interest rate.

The depositors and borrowers can be segmented into Retail and Corporate customers. Retail

customers are individual consumers, whereas corporate customers can be segmented to small

companies, mid-size enterprises, and large corporates.

Banks offer different value propositions to different customer segments. To retail customers,

banks offer Home loans, Education loans, Auto loans, and Personal loans. Corporate customers in

different industries have different loan requirements. For example, Power sector companies need

money to fund power projects. Airline companies need money to purchase airplanes. Construction

companies need money for building projects. Before offering them money in form of loans, one

critical exercise that banks do is the risk assessment. This is to ensure that they will get back the

money, along with the interest, they are lending.

Banks use multiple channels to reach out to their customers. They open branches at convenient

locations where their customers can physically meet them. They encourage self-service through

ATMs at convenient locations. Banks operate call centers to resolve any issues or queries and to

service different kinds of requests. Banks are increasingly leveraging Internet and Mobile channels



to offer more convenience to their customers.

In order to reduce their channel costs, banks increasingly look forward to automation. However,

they appoint relationship managers to enhance their relationships with their wealthy customers.

The operations of a bank are highly IT intensive. To fulfill their IT needs, banks partner with

technology vendors. The technology vendors provide IT solutions in areas of customer experience

management, multi-channel integration, business process improvement, loans origination and

processing, Risk Management, Business Intelligence, Predictive Analytics etc.

Banking industry is highly regulated by the government. It is very important for regulatory

agencies to maintain control over the banks because they are the lifelines of an economy. The

control is also needed to protect the depositors against any fraud. One example of a regulatory

requirement is the Reserve requirement. It sets the minimum reserves that each bank must hold.

Banks have two key revenue streams. First is the interest income from lenders. Second is the fee

that they charge for different kinds of operations. Banks also make money through Credit cards

business. We learnt that in the VISA business model case study. Channel costs are the key

component of the cost structure of a bank. The interest paid by the bank to the depositors is also

one of the important cost structure components.

There exist several different types of banks such as commercial banks, community banks, private

banks, state-owned banks, credit unions etc. Some operate within a countrys boundaries, whereas

some operate globally. Some focus just on banking, whereas some get into insurance and

investment banking businesses as well. Whatever be the case, the basics remain the same.

The basic business model of a bank can be represented over the Canvas as follows. Does the

Canvas help you quickly understand how does a bank works? In your opinion, what are the

differentiation strategies that banks can use to differentiate their business models?



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http://bmimatters.com/2012/03/24/understanding-the-business-model-of-a-bank/





Understanding VISA Business Model



Business Model Canvas. In this post, we will try to understand VISA business model using the

Canvas.

VISA business model is very different from a traditional business model. It is not very intuitive

enough. Though most of us use VISA credit cards for our payments, very few of us would know

how VISA works. In fact, many of us would not even know that VISA is a public-traded company

and is listed in the New York stock exchange.

VISA is a Technology company providing global payment solutions to the banks. Its payment

product platforms are used by the banks to develop credit and debit card programs for their

customers. VISA does not issue credit cards or extends credit to the consumers. Instead, it

operates an Open-loop payments Network to manage the exchange of information between

different financial institutions.

To understand how VISA works, which customer segments it serves, what it offers to its customer

segments, and how does it makes money from them, we need to get familiar with few terms. VISA

classifies the banks as either Issuers or Acquirers. Issuers issue cards to the cardholders, whereas

the Acquirers manage the relationship with the merchants. The diagram below explains what

happens behind-the-scenes when a cardholder presents a card for payment to a merchant.



When a cardholder presents a card for payment to a merchant, the payment request is forwarded

to the acquirer. The acquirer contacts the issuer through the VISA network. The issuer shares the

information on whether sufficient balance is available to carry out the transaction. The information

is then routed to the merchant. In case sufficient balance is available, the payment is accepted.

Else, it is rejected. The issuer bills the cardholder on a monthly basis. The cardholder pays those

bills then.

This is a very simplified explanation of what happens behind-the-scenes. The actual process

involves separate loops for Authorization and Clearing & Settlement. VISA also offers several

value-added services such as risk management, debit issuer processing, loyalty services, dispute

management and value-added information services.

What the above diagram does not tell is how VISA and banks make money in the process. They

make money from the transaction fees charged to merchants. To understand how it works,

imagine a $100 payment from a cardholder to merchant. In case the merchant fee is 2.4%, the

merchant would get $97.60 from the transaction. $2.40 would get unevenly split between issuer

and acquirer, depending upon the interchange fee. In case of an interchange rate of 1.8%, the

issuer will keep $1.80 and acquirer will keep $0.60. Issuer gets to keep more of the merchant fee



because of a higher risk of payment default from the cardholder. VISA makes money on payment

volumes, transaction processing, and value-added services.

VISA creates value for all its stakeholders during the process. Cardholders benefit because of

convenience, security, and rewards associated with card payments. Merchants benefit from

improved sales by offering payment method options to the customers. Banks get new revenue

streams through card fees, late payment interests, and transaction fee cuts.

VISA captures value through the following revenue streams: Service revenues from banks for

their participation in card programs; Data processing revenues for authorization, clearing,

settlement, and transaction processing services; International revenues from transactions where

the cardholder issuer country is different from the merchants country.

In order to create the value, VISA has built a global processing infrastructure consisting of

multiple synchronized processing centers. These centers are inter-linked and are engineered for

redundancy. Managing these payment networks is a core part of VISA operations to ensure a safe,

efficient, and consistent service to the banks, cardholders, and merchants.

VISA is a great example of a Multi-sided Platform business model pattern. The platform induces

cross-side network effects. More the cardholders use VISA, more the merchants will accept it

and vice-versa. Since merchants are on the money side of the platform, VISA focuses its

marketing efforts on the cardholders who are the subsidy side of the platform. VISA sponsored

FIFA world cup in 2010 and will be Olympic sponsor through 2020. This marketing focus helps

VISA in building a strong brand and attracting more consumers.

All the aforementioned discussion is captured on the business model canvas below. Does the

Canvas help you quickly understand the big picture of VISA business? Who do you think can

threaten the strong business model of VISA?



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http://bmimatters.com/2012/03/19/understanding-visa-business-model/





Understanding Twitter Business Model

In the last post titled, Understanding Business Model Fundamentals, we learnt why do

we need to understand business models and how to visually represent a business model using

Business Model Canvas. In this post, we will try to understand Twitter business model design

using the Canvas.

Twitter is one of the most popular Social Networking Site (SNS) and Micro-blogging

platform in the world. It enables its users to share text messages with a length constraint of 140

characters. These messages (aka tweets) are publically visible, by default. Any user can subscribe

to tweets from other users by following them. Users can tweet through Twitter website or Twitter

clients and apps for desktops, tablets, or smartphones. The following video (from Twitter early

days) explains how it works:

While Twitter started as a service to enable an individual share short updates to a small group, it is

now being used for a variety of purposes by different set of users. Some users use it as

broadcasting medium to broadcast their own thoughts or the content they want to share. Some

users simply sign-in to listen to experts or celebrities or brands, whom they like and admire.

Some use it to discover what other people are saying about their topics of interests; while some

use it to follow content publishers to stay informed on the latest.



Businesses are also using Twitter in several ways. Content and Media companies are using Twitter

to drive traffic to their websites. It is being used by e-commerce and local businesses for deal

promotions. Some businesses are using it as a customer service channel; while some are using it

increase their brand awareness and monitor their brand perception. Some non-profits are using

Twitter as a fund-raising channel as well.

Twitter started as a service in 2006. It gained immense popularity in 2009-10. As on 8 Sep 2011,

as per Twitter official blog, Twitter had 100 Million active users. More than half of them logged in

each day. As on 26 Jan 2012, as per Twitter official blog, 1 Billion tweets were send every four

days, which means 250 Million tweets were shared every day.

With so many users connected to the platform and using it on a regular basis, it is becoming an

attractive destination for the advertisers. Unlike other SNS websites, Twitter hasnt yet started

offering the option of Display Ads to the advertisers. Instead, it has provided them with the

following innovative ways to reach the users:

1. Promoted Accounts Businesses can scale up their follower-base through Promoted

Accounts product. The promoted account appears in search results and within the Who to

Follow section (powered by Twitters account recommendation engine). Promoted Accounts

are offered through Cost-Per-Follow (CPF) auction, where a business is charged when a

user converts into a follower.

2. Promoted Tweets Businesses can promote key messages through Search Results to the

non-followers of their account. Promoted Tweets can also be targeted at followers of a

business or at the users having similar profile to that of a follower. Promoted Tweets are

offered through Cost-Per-Engagement (CPE) auction, where engagement is defined as

click, favorite, retweet, or reply of a promoted tweet.

3. Promoted Trends Businesses can leverage Promoted Trends product to scale

conversations and build mass awareness. Trends reflect hottest topics of discussion during a

moment. They appear next to a users timeline. Promoted Trends appear at the top in the

Trends section.

Twitter is an example of a multi-sided platform. Twitter has built an App ecosystem.

Twitter offers APIs that help developers build third party apps. Twitter for Websites (TfW)

allows easy integration of twitter into websites with Tweet and Follow buttons. Search API

allows a user to query Twitter content and find tweets meeting a search criterion. REST API

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allows access to core Twitter objects such as timelines, status updates, and user information.

Streaming API provides real-time access to Twitter firehose. It helps developers with data-

intensive needs. As per Twitter official blog on 11 July 2011,

Application developers play a fundamental role in helping people get the best out of Twitter. As

an ecosystem, weve just crossed one million registered applications, built by more than 750,000

developers around the world. This is up from 150,000 apps just a year ago. A new app is

registered every 1.5 seconds, fueling a spike in ecosystem growth in the areas of analytics, curation

and publisher tools.

Twitter business goal is simple: Increase the number of users using the service. This will help

attract more advertisers. While third-party apps help increase website traffic and content usage,

Twitter has entered into different kinds of partnerships to increase awareness and drive more

users to the service. Here are 4 kinds of Partnerships that Twitter has entered into:

1. Search Vendors Twitter licenses full feed of public tweets to search engine vendors such

as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling real-

time search and discovery.

2. Device Vendors Twitter partnered with Apple to enable deep integration of Twitter in

iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet

directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps

such as Flipboard, Livingsocial, and Instagram.

3. Media Twitter has entered into partnerships with companies such as Mass Relevance and

Crimson Hexagon to help media companies and brands deliver compelling Twitter integration

to their users more easily. This can help media companies capture real-time reactions to the

important news. Though these partnerships are not major source of revenue, they help in

expanding user base. Additional visibility drives further growth for Twitter.

4. Mobile operators Twitter has partnered with Telecom operators across the globe to

enable users to send and receive tweets from mobile phones using SMS.

All the aforementioned discussion is captured on the Business Model Canvas below. Though we

have attempted to capture all important aspects of Twitter Business Model, we might have failed

to capture some. What do you think we have missed? Does the Canvas help you quickly

understand the big picture of Twitter business?



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Posted by businessmodelinnovationmatters on February 18, 2012

http://bmimatters.com/2012/02/18/understanding-twitter-business-model-design/



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