A business model is a crucial part of the life of any business. In fact, although there are many ways of monetizing.
A business model isn’t only about monetization. Instead, that is more about the overall value unlocked by the business and how it affects several stakeholders.
In fact, if we look at most of the companies that have been wildly successful in the last decades (Microsoft, Apple, Google, and Facebook), those companies were able to involve several players before being able to scale up.
For instance, Google before becoming wildly profitable spent some time tinkering with several monetizations strategy before coming up with its advertising networks which involved three main players as explained here.
In this article, we’ll look at five companies’ business models:
Quora recently started to monetize the platform by testing an advertising program that allows publisher and businesses to add their product or service to Quora’s feed with a text ad.
The company has been very successful in building a trusted platform where users post any question, asked by committed non-professional writers.
Besides, on Quora often famous writers and authors host Q&A sessions that make the platform even more engaging.
Quora is among the most popular Q&A platforms, where people can post questions and get answers to any question. Quora is also a great content marketing platform, where it’s possible, with the right strategy to amplify your content and build a strong brand and convert traffic in potential customers.
Wolfram Alpha is the search engine created by a former physicist turned a successful entrepreneur: Stephen Wolfram.
Today, Wolfram Alpha, a computational engine is the smartest engine around. Its business model is based on subscriptions, APIs, and applications.
As Google is getting smarter and smarter from a computational standpoint, one might wonder whether Wolfram Alpha will lose competitiveness over time.
And by the way, if you thought you didn’t know Wolfram Alpha, most probably you’re wrong. In fact, Wolfram Alpha powers some queries of the iPhone’s voice assistant, Siri.
When Airbnb came into the hospitality industry a few years back.
Few players realized how disruptive it was until it was too late for stopping its growth.
Today Airbnb is one of the wildest tech successes of the last decade, based on a simple businessmodel, which relies on the trust between guests and hosts.
In 2021, Airbnb generated enabled $46.9 Billion in Gross Booking Value, and it generated $6 Billion in service fee revenues. In 2021, there were $300.6 Million Nights and Experiences Booked, ad an average service fee of 12.78%, at an Average Value per Booking, of $155.94.
Also, over the year as quality pictures have become an essential aspect of Airbnb’s growth, the company started to work regularly with a freelance that would take photos of hosts’ accommodations for free so that the listing could be more appealing to guests.
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees.
DuckDuckGo is a search engine that doesn’t track its users. In short, it gathers the data that might be useful to offer a localized search, but it throws it away on the fly.
Thus, Google mainly monetizes thanks to the information, it gathered from users. DuckDuckGo does the opposite.
It allows its users to rely on a private navigation experience; while it monetizes mainly through localized keywords and affiliate earnings.
DuckDuckGo makes money in two simple ways: Advertising and Affiliate Marketing. Advertising is shown based on the keywords typed into the search box. Affiliate revenues come from Amazon and eBay affiliate programs. When users buy after getting on those sites through DuckDuckGo the company collects a small commission.
LinkedIn is the most significant professional network on earth and also one of the most engaging social networks as of the time of this writing.
The value of the platform comes from its multi-sided customer focus. In fact, LinkedIn, on the one hand, offers services to HR professionals that allow them to find the right fit for the open positions.
At the same time, LinkedIn offers its users a learning platform useful to bridge the gap with the professional world. Thus, making the platform more valuable for those HR professionals.
Microsoft has a diversified businessmodel, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $168 billion in revenues, of which over $52 billion came from Server products and cloud services and $39.8 billion came from Office products and cloud services. Windows generated over $23 billion, Gaming generated over $15 billion, LinkedIn over $10 billion, and search advertising (through Bing) over $8.5 billion.
Tell us in the comments below which business models you’re curious to hear about! In the meanwhile the list of some of the business model types I identified throughout my research:
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 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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
