In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
To me, the distinction between the attention merchants and the rest was clear, as I developed the idea of asymmetric business models. Let me further explain.
With the risk of sounding redundant, business models can be classified in many ways. For the sake of this piece, we’ll classify them according to the fact that companies break down the walls between product and distribution, to enhance the value proposition for potential customers/users.
When these conditions are met that is when we have a digital business model. And perhaps that is how we assist to the so hyped digital transformation. When you have not crossed that border where product and distribution have come together to enhance value proposition, thus enabling scalability, you’re still experimenting with digitalization.
Therefore a digital business model is such, when the digital part embraces product development and distribution, as a whole.
Thus, digital business models evolve into tech business models, where the technical component, the technology, becomes a key enhancer for the value proposition of the customer, thus making the company primarily a tech player.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
And a further evolution from digital/tech business models to blockchain-based business models is also a further step we’re looking at in the coming decades. In the case of blockchain-based business models as we’ll see, they in part resemble open-source, but with built-in economic incentives to align developers, users, investors, and more. Understanding this transition is critical!
Let’s take a quick look at what asymmetry means, and let’s compare it with symmetric business models.
Asymmetric business models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users‘ data, combined with the algorithms that repackage that data and sell it to advertisers for visibility.
Let me get back to further clarify what makes up an asymmetric business model:
Asymmetry 1 or customer asymmetry – Key user ≠ Key Customer: The product is usually free and it’s not monetized directly (it’s not linear, like a freemium, where there is a free version and a paid, upgradable version). Instead, the core asset is supported by a key customer which is different from the key user (Google, Facebook, YouTube Free, Instagram, TikTok).
Asymmetry 2 or monetization asymmetry – Non-Linear Monetization Pattern: The way the product is monetized is hidden from the average user’s eyes (in short, the average user doesn’t know and doesn’t care about how the free product is getting monetized as long as it works seamlessly). In fact, while the free users do represent the most important asset for the company (none would buy advertising from Google or Facebook if they hadn’t a large user base) they don’t pay directly through the product’s usage. They pay indirectly, as the data is repackaged, refined, rechanneled within an attention-based marketplace (as we’ll see below).
Asymmetry 3 or Data/Information Asymmetry – Attention-based Marketplace supported by advertisers/marketers/businesses: The data provided by the users is repackaged in multiple ways, and usually resold on an attention-based marketplace. The attention-based marketplace is the monetization platform, which is highly scalable and built to draw in a large number of small to medium businesses, and also larger enterprise accounts (Google Ads, Facebook Ads).
Conversely, symmetric business models usually follow the opposite route:
Key user = Key Customer: in this case the user is also the customer. It might be that the user can benefit from the free service, to a certain extent either through a free trial, or a free version of the product. But in general the user will be prompted to upgrade based on usage, premium features and more, or perhaps through an enterprise version of the same product (Netflix, Fastly, WordPress.com).
Linear Monetization: connected on the previous point, monetization happens more linearly, as the same asset consumed by users is also the one they pay for. As an example, you get a free trial from Netflix, after the trial, you convert from user into paying customer, thus benefiting from the platform and by sustaining it as well.
Pay-as-you-go/Upgrade/Subscription-based: usually these symmetric business models rely on usage-based models, or on premium-based models or yet on subscription-based models.
It’s important to note that when we look at very large organizations, they might be using both symmetric and asymmetric models. Perhaps, YouTube is both a free and asymmetric platform and a paid and symmetric one (with YouTube memberships). Amazon is both a symmetric platform, with Amazon prime, while at the same time selling the users’ attention on the platform via Amazon Advertising. However, each business model can be skewed toward one or the other.
For instance, Google and Facebook are skewed as asymmetric business models, whereas Netflix, WordPress, and Fastly are symmetric.
Google is a platform, and a tech media company running an attention-based business model. As of 2021, Alphabet’s Google generated over $257 billion in revenues. Over $209 billion (over 81% of the total revenues) came from Google Advertising products (Google Search, YouTube Ads, and Network Members sites). They were followed by over $28 billion in other revenues (comprising Google Play, Pixel phones, and YouTube Premium), and by Google Cloud, which generated over $19 billion in 2021.Facebook is an attention-based businessmodel. As such, its algorithms condense the attention of over 2.4 billion users as of June 2019. Facebook advertising revenues accounted for $31.9 billion or 98.66% of its total revenues. Facebook Inc. has a product portfolio made of Instagram, Messenger, WhatsApp, and Oculus.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
