Categories
Business Models

Tumblr Business Model – How Does It Makes Money?

Tumblr is a microblogging platform founded by David Karp in 2007. The idea of Tumblr is to provide a platform to its users where they can discover new avenues and bond over things that they love with people around the world. The founder of Tumblr, David Karp, waited for an entire year before deciding to make his own social networking website.

He waited for the established blogging platforms to introduce tumblelogging. However, that never happened and, hence, Karp came up with Tumblr. The Tumblr business model has an interesting bit of detail to it. It follows a rather obscure discourse when it comes to generating revenue. We will talk more about its revenue model in the later paragraphs.

The microblogging social networking website has a very specific kind of following. The ability to post high resolution images, gifs, videos and text has attracted a lot of content creators to Tumblr. Tumblr had over 475 million blogs in August 2019. During January 2016, the website recorded over 500 million monthly visitors on their social networking website. However, this number has dropped to 400 million monthly visitors by August 2019.

Tumblr and Acquisitions

Tumblr has seen a bunch of acquisitions in its existence of 13 years. Yahoo had acquired Tumblr for $1.1 billion on May 20, 2013. Many of the users were not pleased with this decision. However, the deal followed through. This deal allowed David Karp to stay on board as the CEO of the company.

tumblr business model

Yahoo made the acquisition in hopes of making a fortune through targeted advertisements. Sadly, things did not go as planned for Yahoo. The sale goals were not met and Yahoo saw great losses. This led to Yahoo writing off $712 million of Tumblr’ value in 2016.

Verizon bought Yahoo in June 2017. The new owners placed Tumblr and Yahoo under its Oath subsidiary. Karp announced in November of the same year that he will be leaving the company at the end of the year. Jeff D’Onofrio took charge of the company with Karp’s exit.

Pornhub’s attempt to acquire the Tumblr business model

Tumblr continued to struggle under the new management of Verizon. The social networking site had seen a 30% decline in use traffic since December 2019 due to the stricter content policies enforced on the users. The content policies put heavier restrictions on adult content.

A study from TechCrunch reported that in 2013 that 22% of all the send and received traffic of Tumblr is classified as pornography. Moreover, about 17% of the blogs on Tumblr had pornographic content. Hence, the heavier restrictions on adult content saw a dip in the page visits.

tumblr business model

Verizon considered selling Tumblr after a bad run since the purchase of the company. Following this news, Pornhub’s vice president offered to buy the micro-blogging platform and remove the strict content policies.

However, a deal never materialized and Tumblr was then sold to Automattic, an operator of WordPress. It was reported that Tumblr was acquired for less than $3 million. This was a huge decrease in the company’s net worth.

What is the Tumblr Business Model?

Tumblr allows its users to create and share blogs. Moreover, they can like and comment on different blogs. They can also follow blogs that interest them. Tumblr is also used by the likes of Taylor Swift, Lady Gaga, Zayn, John Mayer and Zooey Deschanel.

Each user has a ‘dashboard’ that works as a main page. The dashboard contains all the latest updates from the blogs that the user follows. Tumblr allows is users to be creative with their dashboards. They can customize it to their own liking. Unlike any other social networking platforms, Tumblr allows its users to use HTML and CSS to change the appearance of the blog. This level of control is not leveraged by any other website.

tumblr business model

The dashboard is very similar to the timeline in Facebook, and news feed in Twitter and Instagram. Users can schedule posts and make their blogs private. In November 2015, Tumblr added an instant messaging feature to their website.

How Do They Make Money?

Tumblr has a very simple revenue model. They have stuck to it ever since the inception of the site. Most of the revenue is generated through targeted advertisements that are placed around the website. Let’s dive in deeper to learn more about it.

Targeted advertisements

Like most social networking platforms, Tumblr makes money through advertisements as well. Tumblr has targeted ads to provide better user experience to the many people who use this platform. User dashboard. Hence, Tumblr likes to call them sponsored post.

The ads are highly specific to the usage of the blogger. For example, people who follow blogs related to makeup will only see makeup ads. Same goes for other kinds of ads. The idea is to show the ad to the relevant audience. These kinds of ads are better known as in-stream ads.

These ads are more likely to be clicked because they ae disguised as a normal post. This also increases the click rate on the ad as most sidebar ads are often ignored.

How Do Sponsored Apps Help the Tumblr Business Model?

Sponsored apps are advertisements that are about different apps that are available on the App Store or the Google Play Store. These ads are targeted too, but they are shown to a wider range of audience.

tumblr business model

Most of the ads consist of links to various mobile games or apps for your phone. You are redirected to the download page when you click or tap on an ad.

Sponsored Day

tumblr business model

Tumblr allows the companies to own the entire platform for a day to run advertisements. The company is featured on the homepage, the dashboard of users, and on the explore section across the site.

Snapchat uses a similar type of advertising as well. Moreover, you can learn more about Snapchat’s business model here.

Premium Themes and Post Promotion for Users

tumblr business model

Tumblr has a marketplace where users can buy and sell different themes for their dashboards. They make money through the marketplace in return. Lastly, users can pay Tumblr to promote their posts as well. A good feature for aspiring content creators.

Categories
Business Models

Yelp Business Model – How Do They Do It?

There is an online directory with immense number of visitors. This model is called the Yelp Business Model. With a vast following of 83 million of unique desktop visitors, 74 million unique mobile web visitors and an average of 28 million unique mobile application visitors per month, Yelp allows users to view lists of local businesses posted on the platform.

Furthermore, with the inclusion of reservation services and takeout/food delivery services, the company has expanded its business model.

The Business Model of Yelp

But the question is, how does Yelp make money? An insight into the business and its operating model would help answer the question.

What Actually Yelp Is and How It Operates?

Yelp was founded in 2014 by two former PayPal employees, Russel Simmons and Jeremy Stoppelman. Moreover, the $1 million funded project was designed with an aim of creating an ‘email circle’ that could allow exchange of business reviews among friends.

yelp business model

Presently, Yelp is the biggest forum, connecting people with the local businesses, where the users can search, find, book, and review the local businesses.

“Yelp has become a real word-of-mouth for everything; be it a restaurant, boutique, mechanic or even a dentist. In fact, the leading local guide, founded in July 2004, enjoys an immense presence all over the world.”

With its deep roots in 32 countries, it is available both in website and the mobile application forms.

How Does Yelp Business Model Operate?

How does the Yelp operate? Yelp, unlike other directories, is primarily focused on enhancing engagements with its users. It also helps users engage with others as well as the businesses.

The users on Yelp can create profile, add friends to chat in forums, and also visit offline Yelp events.

yelp business model

Hence, becoming a part of Elite squad is easy at Yelp. It simply requires posting high-quality photos, quality reviews and meeting other prerequisites.

The good news is, after getting listed on the operated model; you can use the platform for free.

What Does It Have For The Businesses?

The businesses at Yelp can create their own profiles, acquire access to business analytics, and also reply to the reviews.

Moreover, the model offers targeted achievements which helps the businesses lure more and more customers.

Reviews of Yelp

The growth of the Yelp Business Model depends on reviews.

“In the world, there are only two types of people: Yelp reviewers, non-Yelp reviewers”

Moreover, not only do the specific local businesses post reviews at Yelp, but, here you would find reviewers sharing their experiences more creatively than they would ever do at any website. In fact, the review feature is useful in creating a network effect.

yelp business model

The visitors, after obtaining the desired results, post reviews. Thus, the feature is useful in turning visitors into reviewers.

Identifying the importance of reviewers in its operation model, the company back in 2006, introduced a new squad of Elite members. These members are the top reviewers on the website.

Yelp Elite

The elite members are active members of the Yelp community, who are identified for maintaining a detailed profile, posting excellent reviews, sharing high-quality tips and meeting other pre-requisites.

The recognized users, in an exchange of the positive reviews and active participation receive:

  • An invite to try out new businesses
  • An invite to exclusive elite events
  • Free gift (Lip Balm, T-shirts, etc)
  • Profile page bearing a sparkly badge

How Yelp Business Model Generates Revenue?

Yelp generated nearly $713 million in 2016. They make money through advertisements.

Profile Enhancement & Targeted Advertisements

Pinterest, Twitter and Facebook and several other social media networks including Yelp use targeted advertisements to make money.

Furthermore, the local businesses via targeted advertisements are able to target local audience. The targeted advertisements are designed as per the industry of the business and the demographics of the users.

yelp business model

Thus, Yelp is a lucrative choice for the business for advertising purposes.

In fact, a study conducted by Neilson shows that 98% of the users had purchased from the business on the platform.

Yelp offers two premium model options for advertisements:

  • Full-Service advertisements
  • Self Service advertisements

Self Service Program

Yelp Self Service program offers various facilities to the businesses including free tools plus, profile enhancements options, and advertising solutions.

The program allows users to:

  • Use various other tools
  • Run targeted advertisements

Use of various premium tools

The businesses have a chance to do well at Yelp. The self-service program offers various premium tools including profile enhancements, deals and gift certificates, online ordering and Yelp reservations. Thus, with these tools, you can enjoy an edge over your competitors.

Yelp Reservations

The restaurants which have signed up for the self-service program get a chance to avail premium services and reservation facilities. The program also covers all the software and hardware requirements.

Gift Certificates and Deals

At Yelp, businesses can lure their customers with deals and certificates. These deals and certificates are part of the program.

Profile Enhancements

The profile enhancements tool allows businesses to take down advertisements of the competitor from their pages, add call to action buttons, and enhance their profiles by embedding the slideshows.

Online Ordering

Online ordering is a premium feature which is available for free even to the non-users of the platform. This is a useful feature which helps Yelp to make money.

For each order placed at a business, Yelp charges credit card processing + 12.5% commission on the subtotal.

Run targeted advertisements

It is the key feature that helps to make money. Targeted advertisement allows businesses to pay for certain keywords and locations to rank better in search results.

These advertisements are also carried on the profiles of the competitors.

Full Service Program

It is a full-fledged program which covers all the services offered in self-service program. And, in addition, offers dedicated support, free tools, video production and hosting services.

Moreover, the dedicated support is useful to the businesses in maintaining the required technical support.

Furthermore, a professional videographer is at your disposal. They can help you to create a video for your Yelp business page.

All these services help the businesses to exhibit themselves and connect with the Yelp community.

Categories
Business Models

Alibaba Business Model – Chinese Tech Giant

Alibaba is one of the largest tech company in the world. It enjoys the prominence for its famous online marketplace which is known for delivering all kinds of products throughout the world. The e-commerce giant from China has a great share of business around the globe. Alibaba business model comprises of different activities of the leading B2B marketplace.

Jack Ma is one of the founders of the Alibaba Group of companies. It is crazy when you get to know that Alibaba was founded out of an apartment with the help of 18 friends. Jack decided to start a website when he got exposed to internet on his visit to USA. During his travel to USA in early 1995, he realized that there were no pages online that had any information about China. This caused a chain of events which led to the inception of the business-to-business e-commerce platform, Alibaba.

alibaba business model

Jack Ma’s success story is all about working hard and never giving up. He bore the fruits of his labor later in his life. As of now, he is the richest man in China. Moreover, Alibaba went onto raise $25 billion in an initial public offering on the NYSE. The $25 billion IPO is the largest ever initial public offering in US fiscal history. Furthermore, this IPO made Alibaba one of the most valuable tech companies in the world. Let’s learn how Jack Ma built the lucrative Alibaba business model.

How Did Alibaba Come About?

The e-commerce website was started in 1999 by Jack Ma and his group of 17 friends. The idea of Alibaba was to create a platform that would allow Chinese manufacturers to sell their goods to international buyers. Moreover, the plan was to give more exposure the Chinese small and medium scale businesses.

These were the initial plans for Alibaba. However, with time, Alibaba expanded and grew into one of the largest companies in China. They have increased the services that they provide. Furthermore, Alibaba is now a group of companies. The e-commerce website provides a platform for consumer-to-consumer, business-to-consumer and business-to-business sales. It also has an electronic payment method and data-centric cloud computing that contributes to the revenue of the company.

alibaba business model

The name ‘Alibaba’ of the company is inspired of a character in the Persian literature, One Thousand and One Nights. Jack explained why he chose such a name for the company. He talked about the name in an interview:

“People from India, people from Germany, people from Tokyo and China, they all knew about Alibaba. Alibaba – open sesame. Alibaba is a kind, smart business person, and he helped the village. So … easy to spell, and globally known. Alibaba opens sesame for small- to medium-sized companies.”

– Jack Ma

The company has seen great growth since its operation. It has operations in over 200 countries. In addition to that, it took the crown of the largest retailer in the world from Walmart in April 2016.

How Does The Alibaba Business Model Work?

While Alibaba is known for being an online marketplace like Amazon and eBay, it’s mode of operation is slightly different from its competition. Alibaba focuses on businesses to use their platform to sell goods and services. Moreover, they want suppliers to use their e-commerce website to sell their goods in bulk at wholesale rates to other international businesses. Furthermore, this helped the small and medium scale businesses in China to grow extensively.

The founders of Alibaba realized the potential of a trading platform for business to consumer and consumer to consumer. Hence, they created the likes of Taobao and Tmall to increase the value they provide to its users. This in return helped to increase their profits.

Alibaba Business Model: Revenue Generation

Alibaba has transformed into a group of companies. Their continued success in the tech sector allow them to create more solutions for the market. They have a total of 8 subsidiaries that are part of the Alibaba business model. These subsidiaries include Taobao, Tmall, AliExpress, Alimama, Alibaba Cloud, 1688, Ant Financial and Cainiao Network. We will cover all the major sources of revenue of the company.

The most important part of Alibaba business model: Alibaba.com

Alibaba.com has grown into the largest online marketplace for wholesale goods. It has single handedly provided a platform to different businesses in China to get in touch with international resellers who wish to sell Chinese goods in their domestic markets.

alibaba business model

In addition to that, Alibaba offers services such as custom clearance, trade financing, VAT refund and logistics to its customers. They make money through supplier memberships and commissions from the transactions. Moreover, there are two kinds of memberships: Free and Premium Gold. Moreover, suppliers pay the website for more exposure on the platform and unlimited product listings.

Taobao

Taobao was created with the sole idea to provide B2C and C2C trade for small scale businesses and entrepreneurs. Hence, businesses and individuals can list their products on the website for sale. The website was started in 2003 and it quickly picked up traction.

It became so famous that it forced eBay to close its operations in China. In addition to that, it is the largest shopping website in China. It makes money through commission and marketing provided to sellers.

Tmall

Tmall has a similar operating model to Amazon. It was founded in 2010 with the idea to sell branded products in the Chinese market. The entity makes money through commissions, service fees, and marketing services.

Alimama

Alimama is the Adsense of China. It acts as an open marketing platform for companies around China. They provide PPC advertising plans, ad banners, impressions and ad space etc. to advertisers.

Consequently, advertisers pay to put up their ads. Alimama pays a certain percentage of the revenue to the websites that host those ads.

AliExpress

AliExpress is similar to Taobao and Tmall. It serves as a global retail marketplace that allows the consumers to buy goods directly from manufacturers in China.

alibaba business model

Hence, they make money through commissions and charging a fixed fee to start a store on the platform.

AliPay

This is a eWallet system started by Alibaba in China. It is similar to the Paytm service in India. It is an escrow service that is free for its users. The plan was to make online shopping easier.

Categories
Business Models

What is A Business Model and The Different Types of Them

A business model is an integral part of an idea or a venture. A business cannot flourish if it does not have a robust business model and means of revenue generation.  If you are someone with a prototype, your idea is worth nothing if you have not decided a business model yet. Venture capitalists want to invest money in projects that have a good return on investment. Hence, this is why most start up accelerators ask for a business model when you propose an idea to them.

Good business ideas have a working model that include details about the product and how the product creates value for the customers. You will hear a lot of people talk about business models, but not everyone seems to understand the term in its right essence. So, the plan is to break down this term in smaller parts so it is easier to understand. You can only explain things better when you understand them properly.

Business models are all about creating value for the customers and the company itself. In retrospect, business models can be make or break for most aspiring entrepreneurs.  

Business Model: What does it mean?

To put in easier words, a business model includes the mode of operation of a company. Moreover, it includes the viability of the product or service of the business. It also includes the revenue model and the vision of the company. The policies of a company and its brand image ae also the constituent of a business model.

business model

Peter Drucker, a management pioneer, said,

“A business model is supposed to answer who your customer is, what value you can create/add for the customer and how you can do that at reasonable costs.”

The inception of computers brought different business models into the picture. Computers made it easier to test different factors that make up a model. However, it is surprising to note that most successful models were created by accident. The computers helped to devise plans and strategies that could help to maximize the profit and value from the model.

business model

Successful business models have certain attributes which separates them from the rest. There are three such attributes:

  • A complete blueprint about the product or service. This should include all the advantages and disadvantages of your service. It should include the detail about your product that delivers value.
  • A game plan that includes all the steps that need to be taken to market the product and increase sales.
  • Lastly, you should have a clear insight on how your company makes money and how the customer pays for the product they receive.

Business Model and Their Different Types

Every business has a different nature. Businesses with differing natures have different business models. It is possible that a business idea can have several suitable business models. A good entrepreneur should know the business model which is best for their brainchild. For example, Uber uses the aggregator business model. There are chances that Uber might not have made the same growth if they had employed a different business model. If you are interested in how Uber makes money, then you should definitely read this article here.

business model

Moreover, you can study the aggregator business model in more detail in our other article over here.

We have accumulated all the basic business models that are being widely used around the world. You can read the descriptions to pick the business model which works best for your proposition.

Manufacturer                                              

This is one of the most common business model employed around the world. The plan is to use raw materials to make finished goods that are then sold to the public. They either sell their products directly to the customers or through a distributor. For example, automobile giants such as Ford, BMW, and Toyota use this model.

Distributor

Distributors were mentioned in the last paragraph. These are known as the middlemen. Furthermore, they take the finished product from the manufacturers and sell it to the public. An example of distributors is auto dealerships.

Retailers

Retailers sell directly to the customers after acquiring them from distributors. Amazon, Tesco, and Walmart are good examples that use this model.

Franchise Business Model

Big corporations start franchising to have a larger network of their services. Companies that start franchising can be retailers, distributors, or even manufacturers.

They allow other people to take their business model and set up business units in return of royalties. KFC, McDonald’s, and Pizza Hut etc. are few of the many companies that use this model.

The Brick-And-Mortar Model

This is a traditional model which includes the business owner that deals with the customers directly in an office or a shop setting. The business owners can render all kinds of services or sell products.

E-commerce

business model

E-commerce is the modern version of brick-and-mortar businesses. Instead of selling goods through a shop, you sell through a website.

Bricks-and-clicks

These companies have physical and digital presence. Most clothing companies have this business model. It allows them to reach more customers.

Nickel-and-Dime

The idea is to provide services at a minimal cost. Basic services are available at low prices. Any extra service needs to be bought by the customer.

Low cost airline services are the prime example. You need to pay for food and baggage in these airlines.

Freemium business model

Most online businesses have a freemium model. The idea is to provide some free services to the user and hide premium features behind a paywall so that the user pays to get access to them. Netflix, YouTube, Google Drive, iCloud, Dropbox and many other companies use this model.

business model

Subscription

Companies like Netflix and Dollar Shave Club have a subscription based model for their customers. Users need to pay a subscription fee to continue using the product.

Aggregator business model

Uber, Airbnb and Oyo Rooms use this model. In this model, the company provides a platform through which service providers of similar niche sell their services.

Network Marketing

Amway is a prime example of this model. It is multi-level marketing where everyone is a seller of the companies’ product(s). People make money through commission.

Categories
Business Models

OLX Business Model – New Craigslist?

Fabrice Grinda and Alec Oxenford created OLX, an online marketplace, in 2006. OLX was started in Argentina and it further expanded to more than 41 countries worldwide. OLX enjoys a strong presence in markets such as Pakistan, India, Portugal, Poland, Philippines, Brazil, Nigeria, and Kenya. It serves as an alternative to Craigslist in countries where Craigslist does not exist.

The Argentinian outfit received funding from various venture capitalists such as Bessemer Venture Partners, General Catalyst Partners, and Nexus Venture Partners. Initial funding help to develop and refine the online classifieds website. This continued until Naspers, A South African media group, bought a significant stake in OLX in 2010. By 2014, Naspers owned 95% of the shares of the company.

olx business model

OLX has achieved great milestones since its inception in 2006. It has evolved over the years and has secured its footing in several markets. It has a strong presence in markets such as India, Portugal, and Brazil where it is the largest online classifieds website. It enjoys the distinction of being the largest online marketplace in India. Moreover, OLX is known for outperforming Google Trader. Google had to shut down this project after being overshadowed by OLX in the online classifieds domain.

The online marketplace has a strong following and sees more than 200 million visits every month. With over 25 million listings and 11 billion page views, it helped to secure more than 8.5 billion transactions per month in 2014 alone.

How does OLX operate?

The statistics show the significance of OLX as an online classifieds option. It offers online classifieds to its users, just like their American counterpart Craigslist. OLX has a very simple model of operation. It is an online marketplace where people can put up classifieds in respective categories.

The user can add details and images of their product or service. Contact information of the user is verified to avoid fake and spam listings. The listing is added in their respective category after the classified is approved.

OLX is an example of a marketplace model. Hence, a question arises. Is the marketplace model similar to the aggregator business model? Find the answer here.

While it may resemble Craigslist in a lot of ways, OLX has a different revenue model than Craigslist. We will talk more about the revenue model of OLX in later paragraphs. You can learn more about the Craigslist business model over here.

olx business model

OLX is like any other marketplace. It is a platform that runs parallel for different customers. People who wish to sell things or offer services put up ads. These ads are incorporated in their respective categories. People who wish to buy things or receive services browse through the classifieds to find the advertisement that suffice their needs.

Sellers on OLX need to add images, title, and description regarding their goods. Moreover, they are also expected to add the price of their commodity. The buyer can browse the listings and get in touch with sellers. They can get negotiate with the seller and make the purchase.

OLX and its role

Unlike other online marketplaces such as Amazon or Recommerce, OLX does not take part in the deal between the buyer and the seller. It offers a platform for the buyer and the seller. It allows the seller to post listings and allows the buyer to browse them.

OLX has no part in the proceedings. The transaction and the other related activities are done between the buyer and seller.

What is the Business Model of OLX?

The OLX business model can be broken into parts. The revenue of OLX largely depends on advertisements. While you are at it, why not lean about the franchise business model as well? Hence, to increase the revenue of the website, OLX needs to take steps that are necessary to maximize the profits. So, here are the parts of the business model that help to bring in the money:

olx business model
  • The business model depends on scale and monthly visits to the classifieds
  • The website serves as a platform for buyers and sellers to buy and sell
  • OLX spends money in advertisements to increase their popularity among the users. This is done so that more traffic can be diverted on to the website and more listings can be added
  • The traffic on the website is used to make money from advertisements, clicks and searches

How Does the OLX Business Model Make Money?

OLX has a very different revenue model than other online marketplaces. Businesses such as Amazon make a commission from every transaction. This is not true for OLX. OLX revenue model depends on advertisements, sponsored listings, sponsored links, and through Google Custom Search Engine.

Google Ads

Most of the revenue generated by OLX comes from Google AdSense. The monetization from Google Ads helps to keep the online classifieds free for their users. OLX works with different partners that are working with Google so that they can act as ad supplier and ad mediator.

These ads work closely with OLX to show on different web pages of the website. These ads are shown on different listings. OLX makes money for the views and clicks on the ads.

High web traffic to their website mean that OLX can make more money from the advertisements. Hence, that is why OLX pays for advertisements on other websites and TV for their own branding purposes.

Lastly, they monetize the inflow of web traffic through cost per click, cost per thousand impressions, and cost per view for video ads. These ads can be placed on the homepage of OLX or other products or listings.

Google Custom Search Engine is part of the OLX Business Model

OLX has a search bar on their website that helps to give results of search queries. This search bar is provided by Google. Every time this search bar is used, Google put out two or more results of their own on the top for each search query. OLX makes money for incorporating this feature in their website.

Feature Listings: A Part of the OLX Business Model

Over the period of time, a listing gets lost in the heap of new listings in the respective category. This means that the buyer will need to browse through lots of other listings to get to this particular listing. This minimizes the effectiveness of the listing.

To solve this issue, OLX has introduced an option to sellers. Sellers can now ‘feature’ their listings to make sure it appears on top of their category. Sellers pay a fee to feature their listings.

Categories
Business Models

YouTube Business Model – Largest Video-Sharing Platform

It may sound absurd but YouTube actually started out as a dating website. Jawed Karim, Steve Chen, and Chad Hurley created YouTube back on 14th February, 2005. All three of the founders were former PayPal employees who worked together to give us YouTube. YouTube was later bought by Google in November 2006 for a staggering amount of US$1.65 billion. This transaction brought the YouTube business model under the umbrella of Google. YouTube now operates as a subsidiary of Google. As of now, YouTube is the largest online video-sharing platform. Moreover, it is also the second largest search engine on the internet as well, just behind Google.

youtube business model

The statistics regarding YouTube are crazy. Daily, more than billion hours’ worth of video is streamed by users around the world. Furthermore, creators upload about 400 hours’ worth of content on YouTube. The numbers are huge and hard to believe, but this is the truth. YouTube has grown into an entertainment staple around the world. The wide variety of videos on the website means that there is something for everyone.

YouTube is available in 76 different languages and is used by various brands throughout the globe. Brands and influencers use it to promote their content. YouTube is also used to make money. Content creators monetize their videos by allowing the video-sharing platform to play ads between their videos, before they start, or after they end.

How Does YouTube Operate?

YouTube has a humongous collection of videos. It allows users to upload new videos and share them with their subscribers. Users can upload their videos for free on YouTube. Every user has their own channel where they can upload new videos and make playlists out of their uploaded videos. A channel is like a homepage that allows the user to personalize it to their liking.

Anyone can watch the videos for free. Apart from the usual videos, YouTube has special platforms for games and music. YouTube Gaming makes it easier to livestream gameplays. Similarly, YouTube has a huge collection of all the latest music from around the world. It is used as a medium of promotion and distribution of music.

Users can like and dislike the videos on the website. Each user has a playlist of their like videos that they can revisit whenever they like. Moreover, they can also make personalized playlist of videos that can be shared with different users around the world.

What is the YouTube Business Model?

Users have free access to all the videos available on YouTube. Similarly, the users can upload the videos for free. Now, you may be wondering how YouTube makes money? Remember that I mentioned that users can monetize their videos by allowing YouTube to play ads within their ads? Yes, they make money from advertisements.

There is no such thing as free service. In today’s time, if you are using a free service, then you are the product. Let me explain that. YouTube has companies that want to put up their advertisements on the website. The video-sharing website shows those ads to you while you surf YouTube. In return, these companies pay YouTube for ad space. So basically, you are the product that Google sells to other companies to keep YouTube free for most of their user base.   

youtube business model

There are more than 1.8 billion users that flog to YouTube every month. Google keeps tabs on the habits of these users and creates a profile of each user. This profile is shared with companies that want to put up their advertisements on Google. Hence, YouTube provides targeted advertisements to its users. Targeted advertisements are known for having greater click through rate.

Furthermore, YouTube has a premium offering for its users which is called YouTube Premium, formerly known as YouTube Red. A similar offering to Netflix. It is a subscription service that removes all advertisements hosted on YouTube. Moreover, it has exclusive content curated by partners of YouTube. They make money through this offering as well.

How Does the YouTube Business Model Make Money?

YouTube employs an advertisement model to make money. The video-sharing platform contributes 11% of the US revenue of Google. While most of the revenue comes from advertisements, subscriptions make up a large chunk of revenue as well.

Sponsored Videos

This is an example of SERP advertising. The advertiser pays YouTube for the number of views and clicks on the ad. The ad is placed strategically around the website to have more clicks per view.

Embedded Advertisements in YouTube Videos

youtube business model

This is another stream through which YouTube rakes in money. Advertisements are embedded in the videos to maximize the clicks per view. These ads can be played before, during or after the video that is played by the user. The ad plays for a certain amount of time before the user can skip it. Ads that are shorter than or equal to 5 seconds cannot be skipped.

YouTube charges the advertiser on the basis of views and clicks on the ad. A certain percentage of the revenue from these ads go to the content creator of the channel.

Landing Page Branding

YouTube allows for advertisement banners on their homepage. Advertiser pay to host an image or video to promote their brand in that space.

New Addition to YouTube Business Model: YouTube Premium

YouTube has added a freemium aspect to their business model by introducing YouTube Premium. It is a subscription based service which offers an ad-free experience across various YouTube offerings. It offers a set of features such as:

  • Ad-free surfing
  • Access to YouTube Music
  • Access to exclusive YouTube Premium Content
  • Ability to download videos for offline viewing
  • Background play so that you can switch apps in mobile phones

Users from USA pay $11.99 monthly for this service. The subscription fee varies across countries.

YouTube TV

YouTube TV is a subscription service that is similar to cable TV. It is exclusive to US as of now and allows the subscribers to watch various cable channels. It is similar to TV cable, but it is portable. The service is available at $49.99 per month and gives access to six different accounts.

You can stream TV channels such as ABC, FOX, Disney, ESPN and many more with this service.  

Categories
Business Models

Amway Business Model – What is Amway?

Amway, short for ‘American Way’, is a multi-level marketing company that deals in beauty, health and home care products. Multi-level marketing is the new name of the age-old pyramid scheme that has been made illegal or strictly regulated in different parts of the world. Jay Van Andel and Richard DeVos started out Amway in 1959 from Ada, Michigan. Amway business model is a variation of network marketing. All the business proceedings are done through various affiliate companies that sell Amway products across the globe. Amway has been greatly successful in their endeavors. Amway and its sister companies under Alticor recorded sales worth $8.8 billion in 2018.

However, the traditional pyramid schemes are known for being fraudulent as they do not benefit anyone at the lower levels of the pyramids. Hence, Amway has been investigated by several companies in the past for their practices. Moreover, institutes such as Federal Trade Commission (FTC) have been keeping tabs on Amway for alleged pyramid scheme practices.

Forbes has ranked it as one of the top companies in the world in the past. However, this did not stay like that for long because of their business practices. Amway business model is based on direct selling and multi-level marketing. Their business model has sparked a lot of controversy in the past and it is still under the microscope for their practices.

What is Multi-Level Marketing?

Multi-level marketing is one of the oldest marketing techniques known to man. They are also known as network or referral marketing. The contentious technique of marketing has been under a lot of scrutiny. Partners and promoters sell the goods and services of a company in this method of marketing. The seller is not the only person who makes money out of the sale in this case. There is a multi-level system of commissions established which is used to pay the associates involved in the selling process.

amway business model

The sales personnel take care of the fulfillment of transactions. They work lower down in the hierarchy. The personnel sell the products directly to the retail distributors using promotional marketing. Moreover, they are expected to recruit new sales personnel so that they can expand the hierarchy under them. The idea is to expand the network of salesperson so that more sales can be recorded. The new additions to the network can either sell the products themselves or sponsor others to sell those products.

So How Does it Relate to Amway Business Model?

Basically, Amway business model is an amalgamation of the multi-level marketing that we just mentioned in the last two paragraphs. You can learn about a different business model, the franchise business model, over here. The business model can be referred to as a ladder which has a trader or seller at each step of the ladder. Each seller engages with the network of sellers under them. Every trader on the ladder is responsible for selling the products of the company.

The Cogs of Amway Business Model

Business model of Amway is very easy to understand. It is a simple model that works on the understanding of networks. To work with Amway, you will need to do the following:

  • Become a distributor of Amway
  • Act as a distributor or independent business operator (IBO) of Amway products
  • Sell the products of Amway and bring in new recruits to the network of sales personnel to make profits

You make money when you sell a product or and IBO appointed under you makes any sale. You get a commission for every sale that you make and sale made by an IBO under you. They get a bonus commission when the IBO recruited by you successfully sells their product.

How is the Amway Business Model Any Different?

Companies have a certain chain of command that is followed by the employees. This chain of command can be in terms of income, power, and responsibility of the personnel. People at the top of the ladder consists of people who were recruited during the earlier phase of the company. These people tend to make more money than the people who were recruited later into the network of the company. Most companies that employ the multi-level marketing model adopt this as the standard.

amway business model

However, things are different with the Amway business model. People who were recruited later into the network can earn more than the former recruits in the Amway business model. The business model has a simple approach to revenue of the sales personnel. The revenue of a distributor is directly proportional to their number of sales.

Amway tend to sell actual commodities to its consumers. Hence, if you study the model closely, you will realize that distributors are not paid for expanding the network. They have to make sales to earn profits. Amway enters the market discreetly and depends on word of mouth to increase the sales of their products. They want people to join their network so that their products can reach out to a larger audience.

Who are the Consumers of Amway?

The Amway business model requires the new recruits to pay an entry fee to join the established network. So, basically, every person in the Amway ladder is a customer of Amway itself. To sell for Amway, they need to pay a fee that makes them eligible to join their network.

Amway and other similar companies do not disclose the participants responsible for the company’s revenue. It is speculated that most of the revenue generated by Amway comes from participating customers that are the people who pay an entry fee to join the network.

amway business model

To explain this better, think of the business model this way: you are an employee of Amway that needs to buy a shampoo. Instead of buying it from some other store, you buy the shampoo provided to you by Amway. This completes a transaction. You paid for the product but you also made money through the commission of the sale.

Similarly, you continue selling the products to other customers and get more people to join the network so that you can make commission when they make a sale. The idea is to keep selling and bringing in new recruits to maximize your profits.

Categories
Business Models

Twitter Business Model – Learn How They Make Money

Jack Dorsey, the founder of Twitter, posted the first ever tweet on 22nd of March, 2006. The tweet was pretty simple and only contained 24 characters (if we include spaces). Back then, it was the start of a new social media platform which now caters to 321 million active users as of 2018. Over the 13 year period, the social media platform has evolved. Twitter business model saw new additions too. After getting launched in July of 2006, the microblogging website has become popular among celebrities and masses.

twitter business model

The year 2013 saw Twitter become one of ten most visited websites on the internet. Moreover, it got called the ‘SMS of Internet’ as well. Originally, Twitter users were limited to 140 characters for their tweets. However, the character length was increased to 280 characters for non-Asian languages in November 2017.

Twitter has become the voice of many users worldwide. Notably, many celebrities or political figures use the social media platform to stay in touch with their followers and supporters. For example, political figures such as Donald Trump, the President of United States of America, Imran Khan, the Prime Minister of Pakistan, are some of the many politicians that are active on Twitter.

The American microblogging platform has started numerous trends online and have also helped to commence different movements. #MeToo movement was brought to life again when Alyssa Milano took to Twitter to accuse Harvey Weinstein of predatory behavior.

What is the Twitter Business Model?

Twitter enjoys prominence and is known for the value it provides to its users. However, Twitter has been known for having a revenue model that has not been changed in many years. This is alarming because Twitter’s valuation has taken a slump and is going downhill with time. The performance of its shares has been sub-par as well. So, you might be wondering how Twitter sustains itself.

twitter business model

People at Twitter are still at work, trying to make Twitter profitable. However, the likes of people at Forbes believe that Twitter’s business model is ‘broken’. This will probably raise lots of questions in your head. You should not worry because we have got you covered.

With more than 328 million active users on Twitter, it sits as the ninth largest social media network in the world. Time has shown that Twitter is one of the largest source of breaking news around the world. The app and website make it easy to post new, rapid updates.

However, it is concerning how Twitter is still behind Facebook, WhatsApp, Snapchat, and Instagram when it comes to number of total users on the platform. Largely, the valuation of Twitter depends on the numbers of users and engagement between the users. Hence, the valuation of the company took a dip when the growth of number of users stunted.

Twitter vs Facebook

During the early years of Twitter, it was seen as a direct competitor of Facebook. While the two social media networking platforms were different in nature, their similarities meant that they were often compared. Twitter failed to keep up with Facebook as time passed.

Facebook captured the majority of the market over the next few years. Currently, Facebook is the most popular social media network in the world. With over 2 billion users worldwide, Facebook is valued at a whopping US$ 485 billion.

To make things worse, the valuation of Twitter dropped to US$ 15 billion recently. That is US$ 3 billion lesser than the valuation of the company at the commencement of its IPO.

More Details on the Business Model

Twitter shares a business model that is similar to other social media networks. The users create a profile on Twitter that allows them to post tweets and follow other users on Twitter. The tweets cannot be longer than 280 characters.

You need to have a Twitter profile if you want to read and post tweets. Unregistered users can only view tweets. The Twitter profile allows the user to post images, videos, and various links through their account. It also has a direct message feature baked in for users.

twitter business model

Twitter has changed their strategy recently. They are promoting content creators who post more videos on Twitter. Statistics have proven that videos drive up the engagement of a tweet. In fact, videos witness greater engagement than text or image-based tweets. To get more content creators to make videos, Twitter offers the content creators to share the revenue generated by the videos. User receives 70% of the generated revenue, while the remaining goes to Twitter.

Twitter offers a better rate than YouTube, which gives just about 55% revenue of a video posted on YouTube. This incentive is enticing.

Twitter acquired Periscope to throw live-streaming into the business. Furthermore, they bought digital rights to NFL in 2016 for US$10 million. Twitter tries to get exclusive digital rights to other similar events such as the NFL for its business model.

How Does the Twitter Business Model Make Money?

Twitter makes money through two ways: advertising and data licensing. According to Twitter, about 85% of the revenue comes from different advertisements. Advertising options at Twitter includes promotion of tweets, user accounts, and particular trends or hashtags.       

Twitter charges its clients. This rate is dependent of on the amount of engagement that a tweet generates. You can either set a budget at the beginning of the ad campaign or charge the advertisers depending on the number of clicks or retweets.

Twitter sells its public data to different companies around the world through ‘Firehose’. Twitter forwards 500 million tweets to different companies around the world daily. Companies use public data to analyse the consumer trends and generate the response of users’ regarding different brands and events.

The volume of data helps to reach good conclusions. The companies can get detailed information about their users through these services. However, sophisticated analytical tools and algorithms will be needed to be used to get hold of the crucial information.

Categories
Business Models

Uber Business Model – Ride-hailing made easy

Garret Camp came with the visionary idea of a ride-hailing company that would allow the users to call a cab to their location and go about their destination. The idea might have sounded absurd back in 2009, but Uber has come a long way since then. It would not be wrong to say that Uber has revolutionized the idea of hailing a cab. As of now, Uber is the largest multinational ride hailing company. Uber business model has evolved over the years. The business model is a particular area of interest of many individuals. It has also been criticized as well. We will dive deeper into details regarding the business model in the next paragraphs.

Uber disrupted the taxi industry when it finally took off in different parts of the world. The company made it a breeze to get a cab. The app would use your location to connect you with a driver and the driver would pick you from your location. You no longer had to frantically wave at a cab for it to stop so you could get a ride.

How did Uber start and how does it work?

Uber was a joint venture of Garret Camp and Travis Kalanick. The pair brought their friends on board to build an application that would allow the users to book rides to and fro around the city. The application used the location of the user and their internet connection to book rides.

Moreover, the app uses robust algorithms to pick the closest possible available drivers to the user. After the driver accepts the ride, they can use GPS to get to the location of the customer. The app allows the user to select from a range of different ride options. You can either order a standard ride or the more luxurious ones. Different ride options have different fares. Some ride options are exclusive to specific countries. For example, Uber Moto is only available in Pakistan, India and Dominic Republic.

The app has an algorithm working in the background that calculates the fare that user needs to pay at the end of the trip. The algorithm considers things such as the distance between the source and destination, the time taken to travel, fuel consumed etc. Fare is calculated at the end of the ride and the customer can pay using several different options. Cash and credit cards are the more popular payment options among users.

The drivers and customers then rate each other on the basis of their experience. It is a five-star rating system where 1 star is poor and 5 stars is excellent.

The Uber Business Model

Uber’s business model is an amalgamation of the aggregator and partnership business model. In an aggregator business model, the company provides a platform for two parties so that they can get in touch with each other. Similarly, that’s what Uber does. There are drivers that want to render their services and there are customers who want to go from one place to another.

Both parties use the platform to fulfill their needs. You could say that Uber assists the two parties to achieve their goals. In return, Uber makes money off the driver and customer. The fare calculated at the end of the ride has a percentage that goes to Uber.

Moreover, Uber drivers are partners of the company, not employees. This means that the drivers get to choose their work schedule and the company has minimal control over them. While this model gives more autonomy to the drivers, it is often criticized too. As the drivers are partners of the business and not employees, Uber is not legally bound to pay for their insurance and other similar amenities. Various drivers have filed complaints regarding this policy and there are cases being fought in different courts.

Why was Uber able to disrupt the Taxi Industry?

Over the years, the number of people using ride-hailing apps has increased. Conventional taxis are still there but the amount of customers are gradually decreasing with every passing year. Uber was able to disrupt the taxi industry because it was able to provide services that the conventional taxi industry could not.

Uber does not refuse any ride requests unless the driver cannot reach the location in time or there are no cars available at that moment. Customers can file complaints regarding their rides to Uber, something that you cannot do after a taxi ride. Furthermore, the rating system makes for better service. The app also notifies how long it will take the cab to reach them.

You can also call the driver after you book a ride. The app shares all the details of the driver including car details and location of the driver. Lastly, the app has a wide range of car options to choose from. If you have more than 4 passengers, you can opt for a larger car size option.

How Does the Uber Business Model Make Money?

Uber does not own any fleet of cars. It has an aggregator business model. This means that Uber has collected cars to provide ride hailing as a service to customers through their brand.  The ride-hailing company partners with drivers who use their personal vehicles to provide services to the customers. Uber provides them customers and standard rates are applied to each ride using the algorithm. Uber charges about 20% to 25% commission depending on the fare paid by the customer.

uber business model

Also, Uber is known for hiking their prices when the need for cars increase. In cases of bad weather, traffic congestion or holidays, Uber charges a higher rate to their customers. This dynamic pricing model helps to sustain the company.

Furthermore, Uber collaborates with different companies for different promotional purposes. Uber has a huge customer-base. Different companies see this potential and collaborate with Uber in hopes of driving up their sales or achieving brand recognition. These companies pay exorbitant sums to Uber for different marketing campaigns. PepsiCo, Spotify, Hilton, and BMW etc. are just some of the few companies that have collaborated with Uber in the past.

Categories
Business Models

Airbnb Business Model: Traveling Made Easy

It is crazy how a simple idea such as providing living space and breakfast to visitors at your home can go a long way. This simple idea has changed how people travel around the world. The Airbnb business model has shown that even simple ideas can solve great problems. The business model proposed by the hospitality brand has made it easier for travelers to find quality shelter at modest rates. The ease that it brings to the table has made Airbnb an instant hit among travelers around the world. Now, you can learn about the marvels of Airbnb business model that is unique and sustainable.

Airbnb: What is it?

Airbnb was brought to life when two former classmates, Joe Gebbia and Brian Chesky, put up an air mattress in their apartment in San Francisco and put up an ad that they were providing bed and breakfast service. They felt the need for such a service because the cost of living in San Francisco is absurdly high.

After several instances of seeding and incubators, the idea finally took off. Seed money from the likes of Sequoia Capital helped the founders to put up a quality app. The app served as the interface that allowed the travelers to connect with local hosts.

airbnb business model

The idea of Airbnb is to provide lodging services to travelers. These services can be provided by a local in their own home or a rental. Airbnb acts as a broker between the two parties. The host puts up an ad that consists of the services and amenities provided by the host. The ad also contains the listing price. On the other hand, prospective customers browse through the listings to find a suitable rental. After finding a suitable listing, they get in touch with the host through the app. Airbnb makes money through commissions from each booking.

Airbnb is a lodging and hospitality company that is based out of San Francisco, California. As of now, it serves various cities around the world. Their revenue was a whopping $2.6 billion in 2017.

The Global Presence of Airbnb Business Model

As of now, Airbnb has established its presence in over thirty four thousand cities across more than one ninety countries. There are over 4.5 million listings on Airbnb and the San Francisco-based hospitality company has served upwards of 35 million travelers up till now.

According to statistics, more than 140,000 guests stay in different listings on Airbnb every day. It surpassed Hilton Hotels in 2012 for more nights booked over the period.

In numbers, Airbnb has a strong hold on the lodgings and hospitality industry. Over the years, the numbers of users have grown exponentially. As of now, it feels that the rate of growth will not slow down any sooner. 

The Airbnb Business Model

Airbnb uses a similar business model as Uber, the famous ride-hailing app. You can learn more about Uber and its business model over here. The Aggregator business model has been used by many successful startups lately. Oyo Rooms, a company similar to Airbnb, is also based on the aggregator business model.

airbnb business model

Most of the hotel industry around the world has a linear business model where traditional hotel chains such as Marriot, Hilton etc. put in millions of dollars to build and maintain their enterprises. Airbnb has seen massive growth because of little to no marginal cost. It is the people who put up listings and maintain them. Airbnb, on the other hand, only serves as the broker between the two parties. No money is invested by the company to maintain the lodgings.

Anyone who has available space in their home can put up a listing on Airbnb. In a listing, you can add pictures and details about the service. Airbnb allows the hosts to make money on the side if they have available space. The users pay rent for the property and the services they use.

The benefit of a booking an Airbnb over a hotel is that you can home-stay with any local in the area. Home-stays are cheaper than hotels and are of great value when it comes to experiencing the local culture and their way of living.

What Else Does The Model Include?

Travelers and hosts have their personal profiles. Each profile contains reviews and ratings that are given by a traveler to a host and vice versa. The ratings system helps the users to make an informed decision before getting a place or giving a place for rent.

Hosts can also review the ratings of the traveler to decide whether they want to rent their space or not to a respective traveler.

Lastly, the business model also supports a huge community of freelance photographers. Airbnb pays the photographers to take high quality images of the properties that are made available in the listings. These high quality images increase the click-rate and eventually increase the number of bookings too. The photographers are paid by the Airbnb for the images.

How Does the Airbnb Model Make Money?

All the transactions between the host and the traveler are processed by Airbnb. Airbnb makes money by charging commission on every booking made through the platform. Airbnb charges a 10% commission from hosts and 3% from the travelers on every booking.

Furthermore, the travelers pay about 6% to 12% of the booking amount as a service fee to Airbnb. This fee is charged when a booking is confirmed. The fee is non-refundable. Also, travelers need to pay value added tax for bookings. The VAT is calculated on the basis of the region of the rental.

airbnb business model

Travelers who pay in any currency other than the one accepted by the host have to pay for an exchange rate that is set by Airbnb itself.

Hearst and Airbnb have collaborated to put out the Airbnbmag, a travel magazine for its users. This is a $15 magazine that serves as a guidebook to travelers so that they can enjoy their stay in a foreign land. The idea of the magazine is to include details that allows the traveler to see the new place from the eyes of the local.