Business

Types of Business Models

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Model
Revenue Source
Examples
Industry
Known For
SaaS (Software as a Service)
Monthly/annual subscriptionsSalesforce, Slack, ZoomTechnologyPredictable recurring revenue; high margins once scaled
Marketplace
Transaction fees/commissionsAmazon, Airbnb, UberE-commerce/ServicesNetwork effects make it stronger as it grows; winner-take-most dynamics
Subscription
Recurring subscription feesNetflix, Spotify, NYTMedia/ConsumerPredictable revenue stream; customer lifetime value is key metric
Freemium
Premium upgradesDropbox, LinkedIn, CanvaTechnologyLow barrier to entry drives massive user adoption; converts 2-5% to paid
Advertising
Ad impressions and clicksGoogle, Facebook, TikTokMedia/TechnologyScales to billions of users; data-driven targeting maximizes ad value
E-commerce (Direct-to-Consumer)
Product sales marginsWarby Parker, Glossier, CasperRetailCuts out middlemen; builds direct brand relationship with customers
Franchise
Franchise fees and royaltiesMcDonald's, Subway, 7-ElevenFood/RetailRapid expansion with minimal capital; franchisor earns from every location
Razor and Blades
Recurring consumable salesGillette, Nespresso, printersConsumer GoodsLock-in effect creates recurring revenue; base product is a loss leader
Licensing
Licensing fees and royaltiesDisney, ARM, QualcommEntertainment/TechnologyHigh-margin revenue from existing IP; minimal incremental cost per license
Aggregator
Commission or markupGoogle, Netflix, Booking.comTechnologyControls the customer relationship; suppliers compete for visibility on the platform
Hardware + Services
Hardware sales + service subscriptionsApple, Peloton, TeslaTechnology/ConsumerHardware creates lock-in; services provide recurring high-margin revenue
Enterprise/B2B
Large contracts and licensesOracle, SAP, PalantirTechnologyHigh contract values; long customer relationships but slow sales process
Crowdsourcing
Varies (ads, premium, data)Wikipedia, Waze, Stack OverflowTechnologyUsers create the product; community-driven content and data
Affiliate/Referral
Referral commissionsWirecutter, NerdWallet, BankrateMedia/FinanceLow overhead; revenue scales with content reach and trust
Platform as a Service
Usage fees and revenue shareShopify, AWS, StripeTechnologyEnables entire ecosystems; grows as customers grow

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