A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
In this guide, we’ll see also 53 business model types identified by the FourWeekMBA research. Ever since, this list started to be published, back in 2018, many copycats around the web have started to duplicate it without understanding the meaning of each model referenced here.
Thus, if you need our feedback, feel free to reach out.
You can jump directly to any of them below or read the guide in order:
A mix of chain and franchise business model
When 1983, Howard Schultz was walking through the streets of Milan and Verona he became “enamored” by the coffee experience people had in the Italian bars. He decided to bring that experience back home. That’s how Starbucks was born.
While McDonald’s makes money by primarily and heavily franchising its restaurants, Starbucks is a mix of operated vs. licensed stores. If we look at the revenue generation, company-operated stores make up 79% of the company’s revenues in 2017.
Ad-supported (subsidized) business model
Keeping a free product offering, especially when it comes to a consumer brand, like Spotify, can be quite expensive. It is true, that Spotify uses a sort of self-serving model where its free accounts are channeled to activate premium plans (the Family Plan has been the most popular in the last years).
On the other end, Spotify makes sure to support its free side of the business by running ads. Those ads, subsidize in part the free service for over 163 million accounts as of March 2020.
Therefore, instead of letting premium members support the free plans. The ad-supported side (representing 10% of its revenues as of 2019) becomes self-standing and viable.
In short, while the free/ad-supported side of the business is relevant to Spotify to convert those accounts in premium. At the same time, it works pretty well as a self-sustaining product tied into a digital business model.
However, as the ad-supported model scales, it also proses some threats to the scalability of the business model, as the licensing costs for the streamed content might grow quickly (Spotify will pay more royalties as more free users stream content on the platform).
That is also part of the transition of what I like to call from
platform to brand.
Affiliate business model
Let’s say you have a website with a large amount of traffic each month. Yet you don’t sell any product or service, which is yours. How do you make money? Well, thanks to affiliate marketing you don’t need either a product or a service, you have many from other companies.
Thus, you’ll make money by merely featuring other products or services and getting a commission for that. Affiliate marketing done right can be a powerful source of income. Take, Pat Flynn from Smart Passive Income, which has been generating millions of dollars with affiliate marketing:
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