humble-bundle-business-model

How Does Humble Bundle Make Money? The Humble Bundle Business Model In A Nutshell

Humble Bundle is an online marketplace for the purchase of bundled video games. The platform was founded in 2010 by Jeff Rosen and John Graham, who met in elementary school. Humble Bundle revenue generation depends on the donations it receives for game bundles. Humble Choice is a subscription service giving customers access to several games for a flat monthly fee. Humble Store is an online marketplace enabling users to purchase games in a more traditional process. Humble Games also works with developers to have their games published and then promoted True to its origins.

History of Humble

Humble Bundle is an online marketplace for the purchase of bundled video games. These games are sold at a price determined by the buyer with a portion of the proceeds going to charity and the game developer.

The platform was founded in 2010 by Jeff Rosen and John Graham who met in elementary school. In 2003, Rosen had started a development company with his brother called Wolfire Games while the pair were still in high school.

After graduating in 2008, the brothers sought to assemble a team and make Wolfire a dedicated development studio. 

As an independent producer, the founders experimented with promotional strategies to get their products noticed. Initially, they teamed up with developer Unknown Worlds to promote the new release Natural Selection 2.

The game would be offered for a limited period and at a significant discount if pre-ordered with Overgrowth, a game Rosen was developing. The experiment proved successful, with both companies seeing record sales days.

Bundling was then combined with the pay-what-you-want model after Rosen saw it employed to great effect elsewhere.

The first Humble Bundle launched in May 2010, with a collection of six games netting $1.27 million in just ten days. Rosen and Graham then decided to join start-up accelerator Y Combinator and focus on the bundling strategy full-time.

The platform expanded to include music bundles, games, and a digital products store.

In 2017, Humble Bundle was acquired by media giant IGN in an undisclosed deal. The company continues to operate as an independent organization with a focus on charitable donations and promoting unknown developers.

Humble Bundle revenue generation

Donations

Humble Bundle revenue generation depends on the donations it receives for game bundles.

It’s helpful to note that donations are defined as the total price a customer wishes to pay for each bundle.

The donation as such is then split amongst the charity and the game developer. In some cases, customers can opt to send a portion of the donation to Humble Bundle itself.

To encourage donations, the company publishes a list of top contributors. Some entities have been known to spend a lot of money to appear on the list and promote themselves as charitable.

More importantly, this enables Humble Bundle to make more money.

Subscription service

Humble Choice is a subscription service giving customers access to several games for a flat monthly fee.

For $12/month, additional features include 20% off purchases in the Humble Store (see below). Subscribers also get access to Trove – a collection of Humble-owned games and other classics.

Humble Store

Humble Store is an online marketplace enabling users to purchase games in a more traditional process.

For each sale, revenue is again split between three parties:

  1. 75% to the game developer.
  2. 15% to Humble Bundle.
  3. 10% to charity.

Humble Games

True to its origins, Humble Games also works with developers to have their games published and then promoted. The company provides initial financing and a team to help produce and market the finished game. 

Pricing for this service is based on a contractual agreement between the company and the developer. Revenue may be in the form of royalty fees or a commission for each sale facilitated on the Humble Bundle platform.

Key takeaways:

  • Humble Bundle is an online marketplace for the production, development, marketing, and promotion of video games. The platform was created by Jeff Rosen and John Graham in 2010 to promote games as an independent developer.
  • Humble Bundle accepts donations for each game bundle it sells. This donation is then split with the game developer and a charity in a proportion determined by the buyer.
  • Humble Bundle makes money by offering a monthly subscription service giving users access to additional games and discounts. It also makes money through the sale of single games in the Humble Store digital marketplace.

Read also: Inside The Epic Games Empire, How Much Money Has Fortnite Made?Gaming IndustryEA Sports Business ModelHow Does Discord Make Money, The Free-To-Play Business Model, The Nintendo Business Model, How Does Unity Work And Make Money, Roblox Business Model.

RelatedWhat Is A B2B2C Business Model?

Related Business Model Types

Platform Business Model

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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.

Marketplace Business Model

marketplace-business-models
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.

Network Effects

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A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

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In an asymmetric business model, 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.

Attention Merchant Business Model

attention-business-models-compared
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.

Wholesale Business Model

wholesale-business-model
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.

Retail Business Model

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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.

B2B2C

b2b2c
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.

Crowdsourcing Business Model

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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.

Open-Core Business Model

open-core
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.

Open Source vs. Freemium

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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.

Freemium Business Model

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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.

Freeterprise Business Model

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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.

Franchising Business Model

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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.

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