The first two decades of this century were characterized by digital entrepreneurs upending traditional business models in search of new ways to generate revenue and serve customers.
This has been made possible by the emergence of several new technology waves – from the desktop to the Internet, mobile devices and the cloud. Going forward, these waves look set to continue as new advances like artificial intelligence continue to change the way we shop, work, play and live.
Often these business models are used in combination – for example, a software provider may provide a “freemium” version supported by advertising revenue, while also offering a premium ad-free service for those willing to pay. Or, merchants like Amazon can generate revenue from e-commerce while acting as a marketplace where other sellers can offer their goods in exchange for a share of the profits.
Anyone who wants to do business today or understand how money will be made tomorrow needs to understand the basic patterns that underpin the digital economy.
BUSINESS MODEL WITH ADS
The ad business model is among the most successful in the digital age. It underpins the rise of companies like Google and Facebook , which match consumers with products and services using artificial intelligence and analytics. This is made possible by the vast amount of user data that can be taken from online users. The success of these companies is due to the concept that «if you don’t pay, you are the product». In the days of newspaper, radio and television advertising, the data that could be collected was limited to information obtained from audience and market research. Today, every click, follow, like, and share—as well as the information we directly provide to sites and services—can be used to learn something about us. This data is collected from audiences and users and sold to advertisers who use it to predict what products and services we might want to buy.
E-COMMERCE
Simply put, it refers to companies that offer products and services online directly to the customer. This includes giants such as Amazon and Alibaba, which sell products directly to consumers but also operate as marketplaces. It also describes thousands of smaller and niche businesses that exist today and typically operate through platforms and marketplaces such as Amazon, Shopify, Etsy or Alibaba. E-commerce offers an extremely convenient and affordable way for almost anyone to start selling their products globally without worrying about the logistics and costs of setting up brick and mortar stores. Platforms and marketplaces make creating a storefront and announcing products a one-man job, and e-commerce operators often use the power of advertising platforms like Google or Facebook to reach customers in their niche. The value of global e-commerce is estimated at about 10 trillion. dollars in 2020 and is expected to grow to 27 trillion. until 2027
FREEMIUM
The freemium business model typically involves offering a basic, free version of a product or service, but charging users if they want to access premium features. Examples of this are Spotify, which places restrictions on how users can listen to music unless they are subscribers, Dropbox, which offers limited storage and transfer speeds for free users, LinkedIn, which allows anyone to view ads for job and post job openings, but enables subscribers to use advanced analytics features to aid job hunting and hiring, and Zoom, which limits meeting length and number of participants for free users.
Software-as-a-service and workplace providers also often use the freemium model, then offer individual or enterprise licenses to users who want access to the full feature set without restrictions. It is also popular among game publishers who use a free version to attract players before pushing them to subscribe or purchase individual features or benefits on a pay-to-play basis.
MARKETPLACE/PLATFORM
This model covers representatives of e-commerce such as Amazon and Alibaba, which have become marketplaces where anyone can create their own business. It also covers more specialized platforms such as eBay, Uber or AirB’n’B. Users benefit from the notoriety and financial clout of these platforms, which often use analytics and ad campaigns to drive traffic to their customers’ stores or listings. The benefit to the marketplace or platform owner is that they don’t even have to provide the product or service, they can just take a cut of every business they sell through it. In this category we can also include «gig economy» (sharing economy) sites such as Fiverr, Freelancer and Amazon’s Mechanical Turk, as they offer platforms for individuals to offer their individual services to businesses.
SUBSCRIPTION
This applies to any business that charges customers a recurring payment. Initially, this usually applies to service providers – such as Netflix offering movies on demand, or Microsoft and Adobe offering subscription software packages such as Microsoft 365 or Adobe Creative Cloud. Increasingly, however, retailers and product manufacturers are offering goods and supplies through subscriptions as well. This includes fresh home delivery companies such as Hello Fresh and Gousto. Amazon is an example of a business that spans the spectrum—offering digital services like video, music, and cloud computing infrastructure, as well as subscription products that deliver physical goods directly to customers’ doors. This business model allows organizations to generate regular revenue while developing ongoing relationships with customers, meaning they can offer different products and services depending on how their customers’ demands change. Niche and independent companies can also choose to generate revenue through subscriptions, taking advantage of a platform like Substack that allows audiences to connect with individual creators.
Aggregation Sites
This business model involves searching the Internet for companies offering products and services, then bringing them together in a convenient portal where buyers can compare prices, features and benefits. Some well-known examples include PriceRunner, PriceGrabber, and Shopping.com. Other aggregators specialize in specific markets, such as comparethemarket and moneysupermarket (insurance and financial services) and Expedia (holidays and travel). Instead of collecting fees from businesses that advertise their products on their sites, they generate revenue from referrals that are paid to them when we buy products through them.
Crowdfunding
The last business model of the digital age that we cannot ignore is crowdfunding. Large crowdfunding sites – such as Kickstarter, Indiegogo and Gofundme – are also platforms offering other businesses the opportunity to raise funds through small donations from large numbers of individuals. It is the crowdfunding businesses themselves that use the money generated through these platforms as a source of revenue, often to launch niche or prototype products. Other sites, such as Patreon, allow creators to build personal relationships with their audience, often enabling them to create permanent products or services such as music, videos or writing.
