List of Web Business Models(gist.github.com) |
List of Web Business Models(gist.github.com) |
My two personal-favorite business models are (in no particular order): Tesla and Miley Cyrus.
Tesla: evident if you're familiar with it (http://www.teslamotors.com/blog/secret-tesla-motors-master-p...)
My interest in the Miley Cyrus model might need a little more explanation. Back a few months ago, when she was releasing over-the-top videos (wrecking ball?), everyone was saying some variant of "wow why is Miley famous she obviously has no talent and this is just lewd." But this is the crux of her brilliance.[0] She has tricked a very large number of people into advertising for her, regardless of whether she does anything requiring talent. But then there's the obvious tradeoff: she has to deliver all of these ridiculous things, likely to the detriment of her ability to contribute anything actually meaningful to the industry. Maybe other people have made that deal but none seem to have been as successful, at least based on the data from my facebook feed. And this is a rare case in which facebook feed data is a useful measure of the success of the business, because it fuels the clicks and the conversations and the weird interest.
Anyway. Every time I see something about her, even overwhelmingly negative, I shake my head and think "another person tricked into feeding her success". Her willingness to decouple her success from anything "worthwhile"[1] about her (talent/skill/beauty/benefit to fans), at the cost of irrecoverably changing her career in what most would view as a very negative way, is sort of fascinating.
[0] I say "her brilliance" but in reality I am sure she is just the face for a manager type orchestrating the money-and-fame-for-girl's-reputation-and-soul deal.
[1] "Worthwhile" in quotes because is anything in the pop music industry really worthwhile?
If so, I don't think it's a correct assessment. Her music is ultimately popular because people like it. I don't think people think Wrecking Ball is a better song because the video was over-the-top, nor would a wild video make me like a song I would otherwise hate. Miley was also popular before she got more extreme. On the flip-side, Britney Spears was far more popular before she got extreme. I'm sure there are other cases where an artist receives more press attention that does not correlate to increased music sales.
Chris Brown has had nothing but bad press since he hit Rhianna a few years ago and he's still placing songs on the charts and radio. People seem to mostly dislike him, but will still listen to his music. I don't think they're listening to him because he hit a woman and is in and out of jail. I think they just like the songs he makes.
In the end, people still need to have some connection to the music. In pop music, that connection may not be entirely rational, and it certainly isn't lasting, but it's still there for some period of time.
I don't think that this is actually true - most of these songs are purchased from agencies, produced to within an inch of their lives, and marketed aggressively in every possible medium. People may like the songs (and they should, because every part of the process has been managed by the most talented and successful people in the music industry), but that's not specifically the reason for Miley Cyrus's success.
Biley Papyrus could have the same songs in the same order on the same records with a sound produced to be indistinguishable to the versions you're familiar with, and if Biley didn't have the brand that has been created around Miley (or Rhianna, or any major corporate pop artist), Biley's success with that same set likely wouldn't be what Miley's success has been.
edit: Also - Smiley Papyrus (Biley's sister) could have the exact brand as Miley, and an entirely different set of songs, and the expectation would be that she would be successful. Hell, when Miley puts out her next album, she pretty much is Smiley.
Put it another way: it doesn't matter if your song is good for many people, if you can't reach them, nobody will know about you.
It is so simple, yet I'm always amazed about how uncomfortable this can be for some people.
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
[0]http://www.youtube.com/watch?v=My2FRPA3Gf8 - note that this song has 20x more views
The first they apologized (and were penalized) for, the second they fired the founder. They aren't embracing negative attention, as far as I can tell.
What does it say about you, though, that you are reading that person's commentary? Whoever it was was probably just using her notoriety to make a point they wanted to make anyway. Media feeding frenzies go both ways. The media uses Miley as much as she uses them. The system isn't as simple as one person tricking another person into free publicity.
I am really so sick of hearing people repeat this mantra. Bad publicity can have silver linings and sometimes what might seems like bad publicity is not bad at all. But there are plenty of examples of bad publicity that is just bad publicity. See Tiger Woods for a straightforward example.
The game is truly free to play, and giving them all the money in the world will not give the player any in-game advantage. On the surface, the game sells various hero skins and other cosmetic items that are little more than vanity items. Looking closer, it seems that Valve is making (or at least trying to make) money by developing a scene of professional gamers around this game. Just last weekend they held an international competition (conveniently named [The International](http://www.dota2.com/international/overview/) ) where the prize pool exceeded 10 million USD. This pool was partly funded by the community of viewers paying to watch the pros play their games. I paid my ticket 7.5€ (10$) a third of which went directly to the prize pool.
I don't know if this model is viable or profitable. Maybe someone has more info. But it's worth looking at. I've always been interested by products that are free to use by the public and make money from the pros using it.
The model is viable, but a little risky sometimes if you don't know how many spectators will pay. Usually the prize money is set before the cash flow is known.
Edit: UX optimized BMC: http://grasshopperherder.com/business-model-canvas-for-user-...
[0] https://www.draw.io/?url=https://googledrive.com/host/0B8WNm...
EDIT: As others have alluded to, the posted link only refers to one aspect of a business model, which is immediately obvious with BMC.
HN has tended to prioritise product development at the expense of business development, when the reality is you need both. Many of us seem to come from that product dev background and like to stick to the "if you build it they will come" mentality, which isn't so hot in practice. A lot of modern business models (especially those like ARM's licensing or Google's sublimely evil auctions) deserve respect from the hacker community for being almost as innovative as the products being sold in them.
Finally, I kind of wonder if the promotion by 37 signals has introduced a sort of conservatism that doesn't really work. Their true success came from the then radical idea of software as a service, and while I admire the way they cut through a lot of start up bullshit their approach seems to destroy ambition in a way that, for example, YC doesn't seem to.
"Rich" isn't just about making money, or maximizing money. You can get rich as king, too. Rich is about creating the largest, most powerful, most influential business you can, taking the idea to its max. But if you go this route, with lots of investment, you must pay off for your investors. You must have an exit strategy.
"King" is about control. It's about building the company you've always wanted to work at, and just working there forever. That's what 37signals did. They created an ideal company with a unique culture, and incidentally got rich in the process, but it's not nearly as big as it could be if they pushed. But that's okay... they love their product.
I might quibble, on a very minor level, with calling these "business models." More accurately, they are revenue sources. One could argue that this is a small distinction, but there is a real difference. A revenue source is necessary, but not sufficient, for the operation of a healthy business. Plenty of other things go into the mix, even leaving aside the obvious (product): COGS, logistics, competitive differentiators, etc. There is so much more to the success of Uber, for example, than just the "excess-capacity market" revenue model. All of what Uber does with its drivers on the back end, for instance, is quite sophisticated -- and equally responsible for the company's success as its top-line, nominal model.
Further annotation -- and I'm happy to get my hands dirty and contribute -- will also help us flesh out the pros and cons of some of these models. "Pay-what-you-want," for instance, lists Radiohead as the example. That's fine. But what a lot of folks don't realize is that Radiohead made approximately 80% of its money from the "In Rainbows" album release by selling collector's edition box sets for $81 a pop. In that case, pay-what-you-want served as a loss leader and demand driver, and the collector's sets earned the real money. Either of these tactics, without the other, would not have worked as well. The combination of the two was a stroke of genius -- allowing the band's customers to segment themselves, and in effect, adding an ultra-premium tier to the top of the "pay what you want" curve. The operative lesson of Radiohead's experiment was that pay-what-you-want can be effective, but you need to structure the pay scale to account for your customer segments' different willingness to pay for different versions of the same product. Give them suggestions, at both the low end and the high end of the product/price spectrum. If you don't, you're anchoring everyone towards the low end. And that leaves a lot of money on the table. This lesson has carried over to sites like Kickstarter, to great effect. (I have no idea if Kickstarter took any inspiration from Radiohead's experiment; this is just a thematic observation.)
https://github.com/cjbarber/ToolsOfTheTrade#hn-tools-of-the-...
Related, I really enjoy St. Gallen's 55 business model patterns http://www.im.ethz.ch/education/HS13/MIS13/Business_Model_Na... (starting from page 8). Might be inspiration for further development.
Through this service, we generate long distance fees for interexchange carriers who pay a portion of their fees to local networks to compensate for use of their networks. We receive a relatively modest fee from local networks for generating traffic.
It is enabled by "common carrier" laws, meaning a phone carrier is legally obligated to connect these calls (to typically rural locations) even if it is at a loss. The connecting local service can charge absurd rates at a high profit margin. To further increase profits, the local services typically offer kickbacks as incentive for internet/VOIP services to connect through their phone numbers. So a rural county with only a small population can have an absurdly high volume of expensive calls flowing through them, all on the carrier's dime.
This is why Google Voice refuses to connect calls through to certain rural areas, something that US carriers complain about, since they feel Google should be subject to these same laws. (Google disagrees, claiming they act as a web service instead of as a traditional phone carrier).
Edit: As to the question of whether the "exploit a loophole and profit" business model itself is too narrow, I'd argue that, no, it isn't. I can't think of any other concrete loopholes off the top of my head, but I'm sure this can't be the only loophole (legally-enforced or otherwise) that businesses profit from, and looking at the sheer number of businesses doing so it seems like it would deserve a place in the list.
Success fee based, Time & Materials, Fixed Cost, etc...
Anything related to domain names ie - registration - aftermarket sales etc.
And also: - Web hosting - Blogging
I guess it also comes down to what you call a "business model".
I’m sure you have more great suggestions for what can go on the list; new models keep popping up with companies like Patreon.
Feel free to—also—post your suggestions on the Gist. GitHub currently does not support notifications for gists, so don’t get mad if I don’t get back to you. :)
Open Source Funding Models http://mkaz.com/2014/04/07/open-souce-funding-models/
I thought that would be a fairly obvious one.
So it's just an advertising model, but one that focuses on high-dollar (probably direct) ad sales. If you find the right client, you can charge a lot more for a site takeover than for a couple of regular banners.
Ben Thompson wrote an analysis of "Digital Whales", http://stratechery.com/2014/dependent-digital-whales/
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"So to recount, Facebook is going gangbusters because of ads for free-to-play games, developers are excited about the chance to cash in via Facebook ads, Google and Twitter are trying to mimic Facebook’s success, and Google and especially Apple are hanging their app store hats on the amount of revenue generated by in-app purchases.
In other words, billions of dollars in cold hard cash, and 20x that in valuations are ultimately dependent on a relatively small number of people who just can’t stop playing Candy Crush Saga.
... Answered my own question: Re/code reports that a new study from app-testing firm Swrve claims that half of all in-app purchases are made by just 0.15% of mobile gamers, which is pretty stunning considering how lucrative in-app purchases have become for mobile game developers."
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IAP in gaming has been a fraught subject, and rightfully so. That's largely because certain gaming companies have realized the potential for IAP vis-a-vis the natural segments of hardcore gamers, and have attempted to IAP-gate the basic gameplay. Rather than offer a standard product to everyone, and a hardcore product to the hardcore, they try to hook everyone into playing at a "hardcore" level -- and sell IAP accordingly. This stinks, frankly. A lot of companies have picked a lot of low-hanging fruit with this model, but the model is already creating backlash. Unfortunately, it's not going away anytime soon. It's so damned lucrative.
I would almost call that strategy a pay-ladder, rather than a true segmentation. You get everyone onto the ladder, and you make people pay to climb it. It's exploitative. It's also very effective. (For now.)
We should distinguish this strategy from a less exploitative segmentation, like what Radiohead did with "In Rainbows," and what a lot of artists and performers are attempting to do with their own albums, books, or shows. Radiohead didn't force anyone onto a pay-ladder. Radiohead gave people legitimate choice, and the $81 box set was a choice that people who really wanted it could opt into. Both strategies arrive at a segmentation of the userbase; Radiohead's strategy arrives at that segmentation through a more positive and consumer-friendly method.
Segmentation, in and of itself, is not evil. It's just smart business strategy. How you set up the segmentation, and how you enforce it, delineate the boundaries between ethical and unethical.
And look! here we are, talking in "social media" about her... damn!
There is so much to explore in this topic. A recent article on Pinterest said that Buzzfeed made a change on their social sharing buttons to increase the size of Pin button, only for traffic which originated on Pinterest. It resulted in a large increase in re-pins of the article.
Star Citizen seems to have done a reasonable job of providing people with a choice of in-game enhancements. Apparently, some have willingly spent thousands.
Could pay-what-you-like museums and/or libraries make use of these techniques?
Another topic is non-DRM online content which have "Donate" buttons. Are there techniques like the Buzzfeed/Pinterest one, where the Donation Pitch is customized based on data about the traffic origin of previous donations?
* Have at least some baseline modicum of talent * Have access to talented songwriters * Have access to talented producers * Be attractive, or at least interesting to look at * Have a stage presence
Bonus points for: * Ability to dance * A salacious or intriguing "private" life
Many pop stars have singing talent in spades (Beyonce, Adele, Whitney Houston), but many others have proven that extraordinary singing talent is not a pre-requisite for enormous success (Britney Spears, Jennifer Lopez, Miley Cyrus, perhaps Madonna).
I would say talent is less important now than ever. But this could be an illusion, as history is likely to forget pop stars who leave behind nothing memorable.
Britney Spears and Lindsay Lohan are not exactly long-term success stories, even though they continue to be in the news and their popularity is still worth money.
These documentary clips about the "pop star formula" (boobs + hair + autotune + writing talent from elsewhere) are rather instructive:
https://www.youtube.com/watch?v=soNLWoSMy1k
https://www.youtube.com/watch?v=Z9tpOvYDqyo
(the 2nd clip about 1:30 applies the formula, humorously)