A business model is a representation of how a company creates and delivers value to its potential customers. Therefore, digital business models are forms of business but applied in the digital world. Today we are going to talk about some of the best known ones.
what business models are there?
- Enterprise model: The enterprise model is mainly characterised by the fact that the company sells services or software for other businesses, generally by means of a single-use licence (not by subscription). The contracts established between these companies and the clients usually have fixed and temporary terms and must be renewed every certain period of time at the expiry of the service. Some examples of companies that apply this business model are: Oracle, large consultancy firms such as McKinsey or KPMG or FireEye.
- Subscription: This is the model that has developed the most since the explosion of the Internet in the new millennium and we are certainly living in a subscription economy. A subscription model consists of selling a product or service to customers for which they have to pay on a recurring basis (generally monthly or annually) in order to access it. If they stop paying, they no longer have access to the product. They are usually services focused on customers rather than companies, as these usually require customised products, as is the case with SaaS. The most entertaining and customer-centred services we know today, from Netflix, Showtime and Amazon Prime, follow a subscription model.
- SaaS (Software as a Service): The SaaS model is one of the most common business models when we think of digital companies or startups today. It is a variation of a subscription model in which the customer has to pay a monthly/annual fee to access the service offered by the company. Some of the most famous examples of SaaS companies are Asana, Slack, Zoom or Talkdesk.
- Transactional Businesses: This is a relatively new business model that has developed a lot over the last 10 years with the emergence of Fintech or financial technology companies. A company with a transactional business model is one that generates income through the billing of commissions for allowing transactions through its platform. They are usually companies associated with finance or banking and the model is to retain a commission for each transaction that is carried out. Some examples of this type of company are Stripe, PayPal and Skrill.
- Marketplace: In the market, Marketplace or Peer To Peer (p2p) business models are differentiated by putting two parties in contact who are involved in a transaction, either products or services. In this business model we have Uber, Airbnb, eBay or Blablacar.
- eCommerce or Electronic Commerce: ecommerce models are based on online sales of products and services, i.e. they are like a virtual shop. A method of buying and selling that uses the Internet as a means of making transactions and contacting consumers, not only through a website, but also through social networks. These are a source of information with great impact, and allow you to get to know your target audience better.
- Model based on advertisements or monetisation of customer data: These companies are based on offering products or services free of charge to customers and obtaining their profits through the publication of advertisements on their products or the sale of user data to third parties. Within these business models we find social networks and other content platforms. Facebook, Twitter, Telefónica (they sell user data such as location, habitual movements, websites they frequent...) and YouTube are well-known companies that receive income in this way.
- Hardware sales: A hardware sales company is characterised by the fact that it sells physical products to consumers or businesses. A variation of this business model is the "Bait and Hook" model, which is based on the initial sale of hardware at an artificially reduced price, but the consumables must subsequently be purchased from the company in order for the product to function. This is the case of the company Nespresso.
- Open Source: The open source model is characterised by the use of freely available software, which empowers a community of programmers to contribute. Companies such as Red Hat, for example, make money by charging premium subscriptions and services associated with their open source software.
- Freemium: This term, coined by US entrepreneur Fred Wilson, is a combination of the words "Free" and "Premium". The idea behind this model is to offer a product or content for free while reserving the good content to be paid for. Paid content for users is known as Premium. Freemium content sometimes includes advertising or integrated marketing, although the hope of digital businesses is that advertising revenue and revenue from Premium users will be sufficient. The most representative case is Spotify.
