List of Web Business Models

https://gist.github.com/ndarville/4295324

by pessimism • 12 years ago

346 70 12 years ago

gist.github.com

pessimism2• 12 years ago

It’s an old list by now, but I keep updating it; you can also contribute to the original list (http://news.ycombinator.com/item?id=4924647) on which this was based.

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. :)

phillc732• 12 years ago

You could add some other exchanges to the P2P Gambling section. e.g. Betdaq http://www.betdaq.com

pessimism2• 12 years ago

Can you describe the service? It’s blocked in my country, apparently.

marcuskaz• 12 years ago

Thanks for this list. I put together a related list for open source foundations how various open source projects fund themselves

Open Source Funding Models http://mkaz.com/2014/04/07/open-souce-funding-models/

applecore• 12 years ago

Here's another list of software business models, comprised mostly of smaller companies, e.g., SaaS.

https://github.com/cjbarber/ToolsOfTheTrade#hn-tools-of-the-...

duncanawoods• 12 years ago

No need to repost that from a few days ago. Its a list of tools, not business models.

qeorge• 12 years ago

Disagree! This is a great list, and I hadn't seen it. Thanks for posting it, applecore.

kristofferdk• 12 years ago

Great link! Thanks for sharing :)

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.

1337biz• 12 years ago

I feel a bit like being on hn for too long - but are these actual business models or just forms of revenue streams? I would argue for the second because business seem quite often to have not just one of those revenue streams in place.

nileshtrivedi• 12 years ago

Startups usually begin with a single revenue stream so there's no effective difference among the two.

digitalengineer2• 12 years ago

I came here thinking I would see detailed Busines models. I might be biased as I'm working with the Business Model Canvas right now. If you're looking for a way to build your own here's a link: http://www.businessmodelgeneration.com/canvas

Edit: UX optimized BMC: http://grasshopperherder.com/business-model-canvas-for-user-...

dhimes• 12 years ago

+1 for BMC. I found it to be a very effective way to organize my ideas and come up with the right questions.

EDIT: As others have alluded to, the posted link only refers to one aspect of a business model, which is immediately obvious with BMC.

abuteau2• 12 years ago

Do you know some online open source version of BMC like https://strategyzer.com/. Wish to have one, but can't find. Might build it myself if there is none.

digitalengineer2• 12 years ago

Thanks for the link! There is this from Udemy (a Founder Instute startup I think) https://www.udemy.com/entrepreneurship-from-idea-to-launch/

davidjgraph• 12 years ago

I created my own editable version of the canvas [0] then used a Google Spreadsheet for recording the testing part.

[0] https://www.draw.io/?url=https://googledrive.com/host/0B8WNm...

abuteau2• 12 years ago

Thanks guys, appreciate !

icebraining• 12 years ago

No crowdfunding? I suppose it could fit in Commission, but it doesn't sound quite right.

ebspelman• 12 years ago

Agreed - Kickstarter, Indiegogo, GoFundMe deserve their own category.

mrfusion• 12 years ago

This has me hoping HN will do another ideas post soon. I got a lot of value from the last one, and I've got five new ideas to share.

fidotron• 12 years ago

I'm very happy to see this at the top this morning.

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.

beat• 12 years ago

Well, it depends on your ambition. As Jason Cohen put it, "Do you want to be rich, or do you want to be king?" They require (or at least benefit from) different approaches. If you want to be rich, maximize growth. This means accepting funding whenever it can increase your growth rate. If you want to be king, avoid investment if you possibly can, and focus on profitability.

"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.

mychaelangelo• 12 years ago

Agreed. Would be good to see some more biz dev stuff but i guess there's lots of other sites that specialise in that. Good to see all these tech business models though!

lifebeyondfife• 12 years ago

IaaS - Amazon Web Services, Microsoft Azure

I thought that would be a fairly obvious one.

hyperliner• 12 years ago

Yes, or we could call it "by the hour."

swombat• 12 years ago

Missing: all the service-based models?

Success fee based, Time & Materials, Fixed Cost, etc...

larrys• 12 years ago

Also missing:

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".

babarock• 12 years ago

One thing worth mentioning for games is what Valve is doing with Dota 2.

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.

gregpilling• 12 years ago

This competition model has been common at racetracks (motorsports) around the country for a hundred years. The promoter takes some of the "gate" to pay prize money. Sometimes the pros even get money just to show up, so that there are big names at the event.

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.

runevault• 12 years ago

With The International the final prize pool was set fairly close to the actual event, based primarily on 25% of sales related to this last Compendium. That was where the vast majority of the 10.8 million came from (I want to say Valve seeded the first million but I'm not positive).

xerophtye• 12 years ago

Totally viable. Riot Games is pulling it off with League of Legends. Exact same case: money is just for skins etc. All the money in the world won't give you any unfair advantage. Oh and yes, HUGE competitive scene.

jabelk4• 12 years ago

I was hoping for more fleshed-out examples of why the business models were good, but the list was interesting nonetheless.

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?

instakill• 12 years ago

I'm assuming the Rap Genius guys are following the Miley Cyrus model then.

jabelk4• 12 years ago

I don't think so - unless I'm missing information about them (they're now rebranded as just "Genius" FYI). Their two main controversies that I'm aware of were the SEO violation thing and the founder's inappropriate comments about the serial killer's sister.

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.

jw989• 12 years ago

I disagree. Even though Rap Genius has showcased plenty of what I like to call "douchey" behavior, in the end of the day they still make an awesome app that I and many others essentially need.

gclaramunt2• 12 years ago

I'm pretty sure with a father and godmother long timers in the music business, I'm pretty sure she knows what she's doing. For another take that confirms it: http://www.youtube.com/watch?v=wOwblaKmyVw

jabelk4• 12 years ago

She definitely knows what she's doing. You can't go from that "Jolene" video you linked to sitting naked on a wrecking ball[0] in one year, by accident. The interesting thing is that she would choose deliberately to do that.

[0]http://www.youtube.com/watch?v=My2FRPA3Gf8 - note that this song has 20x more views

ssharp• 12 years ago

Are you purporting that Miley is currently popular because she's doing over the top things, despite her music not being good?

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.

syntern• 12 years ago

I think that an over-the-top video helps to get more reach, helps to introduce more people to a song. There are many songs with similar qualities, but if yours reach a wider audience, you will dominate the sales (and award) charts.

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.

sosborn• 12 years ago

Her music is ultimately popular because people like it.

It is so simple, yet I'm always amazed about how uncomfortable this can be for some people.

jabelk4• 12 years ago

It seems like some baseline talent is necessary to make the strategy work. I don't claim to have any ability to judge musical ability, plus it seems many artists aren't writing their own songs anyway, so I'm not trying to comment on her merits. Just noting that she's chosen to shift attention from her actual music to these antics, which is a strange choice from my perspective.

pessimizer• 12 years ago

Her music is ultimately popular because people like it.

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.

fsckin• 12 years ago

Tesla Master Plan:

  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

Thanks for the link, good reading.

TheBiv• 12 years ago

Soulja Boy also used the 'Miley Cyrus' model, except he would release a short, easy to do, dance video for everyone to dance when his song came on!

nostrademons• 12 years ago

Paris Hilton did it as well - leak a sex tape, do all sorts of outrageous shit, and make sure that the media covers it all and people talk about it. Ironically, she's the first Hilton in a while to be a self-made millionaire; her actions got her cut off from the bulk of her trust fund, but she's making about $10M/year in endorsements and public appearances.

mtdewcmu• 12 years ago

Why is Miley Cyrus famous, despite an apparent lack of talent? She was probably famous before she was born.

theycallmemorty• 12 years ago

It's worth pointing out that Miley Cyrus didn't exactly invent this model. The old saying is "there's no such thing as bad publicity". The first example that came to my mind is Madonna who always seems to do something "stupid" and "crazy" every couple years that reminds people she exists and keeps her in the public eye.

Goladus4• 12 years ago

The old saying is "there's no such thing as bad 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.

Goladus4• 12 years ago

Every time I see something about her, even overwhelmingly negative, I shake my head and think "another person tricked into feeding her success".

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.

zt• 12 years ago

This isn't meant to be a comprehensive list, but it does have some holes I'd point to primarily in (1) Consulting / services, (2) Enterprise, (3) Hardware / manufacturing. On the first you have time and materials, fixed fee, etc. On the second you have on-premise solutions, enterprise licenses, etc (Think Oracle, tons of security companies), and the third is, well, I'm not sure anyone needs examples: you make physical stuff that does something and you sell it.

jonnathanson2• 12 years ago

This is a fantastic list, and it is extremely helpful to have everything in one place. The next step, IMO, is for folks like us in the HN community to put a little more meat on the bone. Annotate or link to this list with specifics for each model.

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.)

walterbell2• 12 years ago

F2P games took market segmentation and price elasticity testing to somewhat questionable places, with large financial returns, http://www.gamasutra.com/blogs/RaminShokrizade/20130626/1949...

Ben Thompson wrote an analysis of "Digital Whales", http://stratechery.com/2014/dependent-digital-whales/

---

"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."

---

jonnathanson2• 12 years ago

All of which is to be expected, to a certain extent. Certain categories of goods -- especially games and entertainment -- have always had broad userbases or fanbases with very small, but fanatical "hardcore" segments. Only in recent years have companies have been able to address the segments so effectively. In the old days, you had low-tech segmentation strategies, like Collector's Edition DVDs, or value-added merchandise, or mailing lists, or fan clubs. These days, you can offer in-app purchases, expansions, or slightly different price points based on different release windows and platforms. On the surface, these tactics seem exploitative. In practice, not all of it has to be. Certain value-added stuff is not for everybody. Clearly. It's for the tiny percentage (anywhere from a fractional percentage to roughly 8%, in most cases) who is willing to pay for a lot more. The thing is, there's an ethical way and a less-ethical way to a) figure out who those people are, and b) offer them more. The ethical way involves giving people the choice to be hardcore or not to be. It involves offering a hardcore value-add that in no way detracts from the experience the casual fans enjoy. That's what Radiohead did. It's what some mobile gaming companies do, and what other mobile gaming companies do not.

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.

source99• 12 years ago

Where is Amazon?

Goladus4• 12 years ago

How is "site take-over" a business model? (Pandora)

eli2• 12 years ago

In this context "site take-over" is a type of web advertising where the customer essentially gets to reskin the entire site. Usually means buying all the ads on the site, plus a background image and sometimes also a matching popup or expanding banner or some other in-your-face ad unit.

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.

flibble• 12 years ago

I think they missed rake based games - eg. online poker.

GBond• 12 years ago

Maybe too unique to include but one of my favorites is FreeConferenceCall.com's "provide a free service and get paid by exploiting a loophole" model:

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.

http://www.freeconference.com/blockingfaq_press.aspx

Smudge• 12 years ago

No this is not unique. Tons of services exploit this loophole (free conference calls, adult chat lines, phone-to-ip services, to name a few).

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.

eli2• 12 years ago

I think the parent comment's question was whether the idea of "exploting a loophole" is too narrow to be considered a business model, not whether others exploited this particular flaw.

snorkel• 12 years ago

I especially like the recursive "Service As A Service"

johnbenwoo• 12 years ago

Worth adding Swagbucks (www.swagbucks.com) to the list - they give out rewards points to members for consuming ad-supported content

Kiro• 12 years ago

It's well-known that adding yourself to link directories are bad for SEO. How is this different?

List of Web Business Models

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