The first two decades of this century are characterized by digital entrepreneurs disrupting traditional business models in search of new ways to generate profits and serve customers.
This development is made possible by the emergence of many new technology waves, from desktop computers to the Internet, mobile devices and the cloud. In the future, it seems certain that these waves will continue, as new developments, such as artificial intelligence (AI), continue to redefine the ways we consume, work, entertain and live.
These business models are often used in combination, for example, a software vendor may provide a “freemium” version, supported by advertising revenue, while offering an ad-free premium service to those willing to pay. Or, online retailers like Amazon can generate revenue from e-commerce while serving as a marketplace where other sellers can offer their wares in return for a share of the profits.
Anyone who wants to do business today, or understand how to make money tomorrow, needs to understand the basic models that underpin the digital economy. So here’s a look at some of the most successful and important business models, and an explanation of how technology has made each of them possible.
The advertising-based business model is one of the most successful in the digital age. It’s behind the rise of companies like Google and Facebook, which connect users to products and services through artificial intelligence and analytics. This is made possible by the huge amount of data that one can collect from users over the internet. The success of these companies is due to the concept of “if you don’t pay, you are the product”. In the days of newspaper, radio, and television advertisements, the data that could be collected was limited to information gleaned from opinion polls and market research. Today, every click, every follow, every like and share, as well as information provided directly to sites and services, can be used to learn more about users/consumers. This data is collected from audiences and users and sold to advertisers who use it to predict what products and services one might want to buy.
In its simplest form, this term simply refers to companies that provide online products and services directly to the customer. These may include giants such as Amazon and Alibaba, which in turn sell products directly to consumers, but also act as marketplaces. It also describes the thousands of small, niche businesses that exist today that typically operate through platforms and marketplaces such as Amazon, Shopify, Etsy, or Alibaba. E-commerce offers a very convenient and affordable way for almost anyone to start selling their products all over the world without having to worry about the logistics and costs of setting up a brick-and-mortar store. Thanks to platforms and marketplaces, a storefront and products listing can be created by one person, and e-commerce operators often leverage the power of advertising platforms like Google or Facebook to reach customers in their niche. The value of global e-commerce has been estimated at approx $10 trillion In 2020 it is expected to arrive $27 trillion By 2027.
A freemium business model typically involves offering a basic, no-frills version of a product or service for free, and then charging users if they want access to premium features. Examples include Spotify, which limits music listening to unsubscribed users, Dropbox, which offers limited storage and transfer speeds to free users, LinkedIn, which allows anyone to view job postings and list job postings, but provides subscribers with advanced analytics functionality to make job searching and hiring easier. Zoom, which limits the duration of meetings and the number of participants for free users.
Productivity and work-as-a-service vendors often use the freemium model, before offering individual or enterprise licenses to users who want access to the full feature set without restrictions. This model is also popular with game publishers, who use a free version to attract players before getting them to sign up for a subscription or purchase individual features or benefits on a pay-to-play basis.
This model covers e-commerce providers such as Amazon and Alibaba, which have become marketplaces where anyone can start their own business. It also covers more specialized platforms like eBay, Uber or Airbnb. Users benefit from the notoriety and financial power of these platform providers, who often use analytics and advertising campaigns to drive traffic to their customers’ stores or advertisements. For a marketplace or platform owner, the advantage is that they don’t even have to offer a product or service themselves, and can simply take a slice out of each company that sells through them. Also included in this category are “gig economy” sites like Fiverr, Freelancer and Amazon’s Mechanical Turk, which provide platforms for individuals to offer their one-on-one services to companies.
This is any business that charges its customers for a regular payment. Originally, these were usually service providers, such as Netflix which offers movies on demand, or Microsoft and Adobe which offer software-as-a-service subscription plans, such as Microsoft 365 or Adobe Creative Cloud. However, retailers and product manufacturers are increasingly offering goods and consumables through subscriptions. These include home delivery companies such as Hello Fresh and Gousto. Amazon is an example of the enterprise that covers all the spectres: the number of service numbers available for this video, music and informative information in nuage, as well as for subscribers to products that provide physiologic data directly to the port. clients. This business model allows organizations to generate regular income while developing ongoing customer relationships, which means they are able to offer different products and services based on the changing needs of their customers. Niche and independent companies can also choose to generate revenue through subscriptions by leveraging a platform like Substack that connects audiences with individual creators.
This business model involves searching the Internet for companies that offer products and services, then compiling them into a convenient portal where shoppers can compare prices, features, and benefits. Well-known examples include PriceRunner, PriceGrabber, and Shopping.com. Other aggregators specialize in specific markets, such as the comparison market, Money Supermarket (insurance and financial services), and Expedia (holidays and travel). Instead of charging companies that advertise their products on their sites, these companies generate revenue through the referrals they receive when we buy products through them.
Another business model in the digital age that cannot be ignored is crowdfunding. Large crowdfunding sites, such as Kickstarter, Indiegogo, and Gofundme, are also platforms that provide opportunities for other businesses to raise money through small donations from large numbers of individuals. Crowdfunding companies are those that use the money generated by these platforms as a source of revenue, often to launch specialized products or prototypes. Other sites, such as Patreon, allow creators to build personal relationships with their audience, which often allows them to create lasting products or services such as music, videos, or writing.
Translated article from the American magazine Forbes – Author: Bernard Marr
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