WHAT IS A BUSINESS MODEL ?
It is the method of doing business by which a company can sustain it-
self -- that is, generate revenue. The business model spells-out how a
company makes money by specifying where it is positioned in the val-
WHAT IS A
is the conduct of
on the Internet.
TOP TEN ONLINE
In exchange for the service, companies using the brokerage model usually earn by charg-
ing a fee or commission for each transaction processed. Again, this is a very powerful mod-
el because you are simply in charge of the technology, not the items which the sellers are
This type of model involves an additional layer between the two – usually in the form of a
transaction broker or a market place where buyers can find what they’re looking for.
Brokers are market-makers: they bring buyers and sellers together and facilitate transac-
tions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer
(B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or com-
mission for each transaction it enables.
Their job is to bring sellers and buyers together by providing a service that will make their
Elon Musk, Luke Nosek, Ken Howery, Max Levchin
$8.03 billion (2014)
173 million (2015)
PayPal takes a 2.9% transaction fee on the total sale
Transfer fees -there is a fee of 2.9%, plus $0.30, per transact
tion, plus a $0.30 fee per transaction.
September 3, 1995
US$17.90 billion (2014
It earns transaction fee from owning paypal
Sales from the service of listing customer’s product
PayPal Holdings, Inc. is
an American company
operating a worldwide
online payments system.
eBay Inc. is an Ameri-
can multinational corpora-
tion and e commerce company,
providing consumer to consum-
er & business to consum-
er sales services via Internet.
The broadcaster may be a content creator or a distributor of content created elsewhere.
The advertising model works best when the volume of viewer traffic is large or highly spe-
The payment can be delivered in three ways: Cost per impression, cost per click and a
The latter is when an advertiser pays a fixed amount regardless of how many times their ad
is clicked or viewed.
The web advertising model is an extension of the traditional media broadcast model. The
broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free)
and services (like email, IM, blogs) mixed with advertising messages in the form of banner
This is probably the most widely used model online (and now even on mobiles) and is the
sole stream of profit for many organizations.
US$ 10 billion (2014)
474 million (2015)
US$ 770 million (2014 )
18 million (2014)
Google AdSense is a pro-
gram run by Google that al-
lows publishers in the Google
Network of content sites to
serve automatic text, image,
video, or interactive media ad.
Monster.com is one of the
most visited employment web-
sites in the United States and
one of the largest in the world. It
is owned and operated
by Monster Worldwide, Inc.
Overall, this model can yield the highest revenue since you also have control over the pric-
The disadvantages are quite clear: Since you own the products, there is a lot more work
involved. You need to provide support and worry about delivering the products in a timely
manner. It also has a high level of risk because of the high investment needed to run the
Wholesalers and retailers of goods and services. Sales may be made based on list prices
or through auction.
The merchant model is used by all the online wholesalers and retailers of good and ser-
vices. In some cases, some companies exist solely online while in others, the website is
simply a web storefront for a traditional brick-and-mortar retail establishment.
The advantages of a merchant model is that you get to keep the biggest portion of profits.
Since you own the products, you get to decide what to do with the money you earn.
July 4, 1994
US$ 88.988 billion (2014 )
244 million (2015)
Prime monthly subscription
E-books and content
Commission on reseller sales
US$ 11.8 million(2014)
Over 2 million (2014)
Sales & advertisements
.Amazon.com, Inc is an
American electronic com-
merce and cloud compu-
ting company with head-
in Seattle, Washington.
Lands' End is an American
clothing retailer based
in Dodgeville, Wisconsin, that
specializes in casual clothing,
luggage, and home furnishings.
Some firms function as infomediaries (information intermediaries) assisting buyers and/or
sellers understand a given market.
Nowadays, this model is also being used in another way: premium blog posts. By adding
private blog posts, readers can pay a small fee to view the private information. Of course,
for this to work, the blog needs to be well established and trusted by its reader base. Blogs
doing this can also make use of the subscriber model which charges a fixed periodical fee,
regardless of the amount of premium blog posts viewed.
Data about consumers and their consumption habits are valuable, especially when that in-
formation is carefully analyzed and used to target marketing campaigns.
This model really took off when e-books gained popularity. Authors can write or buy the
rights to an e-book and set up a site that sells this information.
Some marketers have made a lot of money with this simple information model as the ex-
penses involved are virtually non-existent.
Nielsen Online, a service of the Nielsen Company, provides measurement and analysis of online audi-
ences, advertising, video, consumer-generated media, word of mouth, commerce and consumer behav-
It was founded in 2007.
Its revenue was US$ 1633 million in 2014.
Nielsen gets data from retailers and then sells aggregated data.
Coolsavings was always more of a lead generation site--the grocery coupons were what they ad-
vertised, but when you visited the site you were led through page after page of opt-in or opt-out
Eventually Coolsavings changed its company name to Q Interactive and sold its couponing tech-
nology to News America's Smartsource, which runs the grocery coupons on the Coolsavings site
Lease -- in exchange for a rental fee, the buyer receives the right to use the product under a “terms of
use” agreement. The product is returned to the seller upon expiration or default of the lease agreement.
License -- the sale of a product that involves only the transfer of usage rights to the buyer, in accordance
Brand Integrated Content -- in contrast to the sponsored-content approach (i.e., the advertising model),
brand-integrated content is created by the manufacturer itself for the sole basis of product placement.
The manufacturer or "direct model", it is predicated on the power of the web to allow a manufac-
turer (i.e., a company that creates a product or service) to reach buyers directly and thereby com-
press the distribution channel.
The manufacturer model can be based on efficiency, improved customer service, and a better un-
derstanding of customer preferences.
Purchase -- the sale of a product in which the right of ownership is transferred to the buyer.
As an example, say a company sells a product for $100 and they set an affiliate rate at
50%. This means that if you were to promote this product on your own website, each time a
user clicks through your promotion and ends up buying the product, you would earn $50.
This model can be a huge revenue earner if your site has a healthy amount of traffic.
Affiliate marketing is one of the best ways to earn money simply because you own no part
of the service or product.
Examples-Barnes & Nobles
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one
site, the affiliate model, provides purchase opportunities wherever people may be surfing. It
does this by offering financial incentives affiliated partner sites.
While the advertising model rewards the website owner for simply advertising, this model
rewards the owner each time a user clicks on the promotion and ends up buying the prod-
uct or service or filling in a form.
In many ways, this model can be very similar to the subscription model but varies slightly as
users would have invested a high level of time and emotion into the site and will therefore
find it easier to invest money in the site.
Open source communities also earn money by providing their software for free but then
charging for support, tutorials, user documentation and more. These type of companies are
also becoming more common as more and more free products are released to the public
and open source gains popularity.
The viability of the community model is based on user loyalty. Users have a high invest-
ment in both time and emotion. Revenue can be based on the sale of ancillary products
and services or voluntary contributions; or revenue may be tied to contextual advertising
and subscriptions for premium services
This model is used for sites which build a community of users interacting with each other.
While the basic features of the site would be free, companies using this model could charge
a small subscription fee for certain premium features used.
Reid Hoffman, Allen Blue, Konstantin Guericke
Eric Ly, Jean-Luc Vaillant
$2.21 billion (2014)
Over 400 million (2015)
Subscription by the users for premium model
Selling Data - Companies and recruiters are able to pay
and gain access to LinkedIn databases advertisements
Jack Dorsey, Noah Glass, Biz Stone, Evan Williams
March 21, 2006
US$1.4 billion (2014
302 million active (May 2015
Added paying for "promoted" tweets
LinkedIn is a business-
oriented social network-
ing service serving the
Twitter is an online social net-
working service that enables
users to send and read short
Internet service providers (ISPs) in some parts of the world operate as utilities, charging
customers for connection minutes, as opposed to the subscriber model common in the U.S.
Metered Usage -- measures and bills users based on actual usage of a service.
Metered Subscriptions -- allows subscribers to purchase access to content in metered
portions (e.g., numbers of pages viewed).
The utility or "on-demand" model is based on metering usage, or a "pay as you go" ap-
proach. Unlike subscriber services, metered services are based on actual usage rates.
Traditionally, metering has been used for essential services (e.g., electricity water, long-
distance telephone services).
Many of these offerings have similar cost structures where the marginal cost of serving an
additional customer tends towards zero. The core free offering then acts as a gateway to
the paid service.
It is typically used in service-based businesses where the lifetime value of the average cus-
tomer is high and is increasingly popular with Internet services such as Spotify, Skype, or
It describes a business model in which you give a core product away for free to a large
group of users and sell premium products to a smaller fraction of this user base
This is where the business gives away something for free in return for your personal details
so they can then market to you and hope to build up a relationship so that you buy from
them in the future.
Priit Kasesalu and Jaan Tallinn
US$ 860 million (2011)
Over 660 million (2015)
Software is free but subscribers can then purchase addi-
tional features that are unavailable for the free software.
Matt Mullenweg and Mike Little
May 23, 2007
US$ 40 million(2014)
274.6 million sites (2015)
Skype is an application that
specializes in providing video
chat and voice calls. Users
can also ex-
change text andvideo mes-
sages, files & images.
WordPress is a free and open-
source content management
system (CMS) based
on PHP and MySQL .WordPres
s is the most popular blogging
system in use on the Web.
Rather than charging a one time fee, users can simply sign up and pay a fee continually for
as long as they keep their subscription.
This gives them the ability to cancel their subscription at any time. From the company’s
end, it also gives them an on-going income which they can then use to improve their ser-
vice which would in turn attract more customers.
This works similarly to the subscription model but instead charges according to how much it
was used, rather than charging a fixed weekly/monthly fee.
Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. It is
not uncommon for sites to combine free content with "premium" (i.e., subscriber- or mem-
ber-only) content. Subscription fees are incurred irrespective of actual usage rates. Sub-
scription and advertising models are frequently combined.
With this type of model , online companies charge a daily, weekly or monthly rate for being
able to log into site and using private applications or viewing private information.
Marc Randolp and Reed Hastings
US$ 5.50 billion (2014)
26 million (2015)
Subscription by the users
US$17.60 billion (2014 )
Subscription by users
Netflix Inc. is an interna-
tional provider of on de-
mand Internet streaming
media available to view-
Pandora Internet Radio is
a music streaming and auto-
mated music recommenda-
tion service powered by
the Music Genome Project.