Although there is not a single definition to the term business model and usage varies widely, in standard business usage a “business model” can denote how costs will be covered as well as how a business creates and delivers value for itself and its customers, including the ways in which products are made and distributed.
A business model helps to clarify a company’s main purpose, such as who they’re serving, how they help, and how the company can sustain its operations.
Each business model is unique to a company. There is not an industry-wide business model per se although companies may coalesce around a dominant company’s successful business model and seek to emulate it.
A business model canvas is a tool to map out and plan the different components to a business model. The components vary based on the canvas tool you use, with the most widely used one developed by Osterwalder and Pigneur in the book Business Model Generation, or available online through a series of customizable tools and canvases available for a fee on strategyzer.com.
Revenue streams are a common element of most definitions of business models, particularly ones used to address electronic commerce.
A revenue model focuses on an organization’s revenue streams, e.g., how a company will make money, whereas a business model also concerns itself with other issues such as who the product is serving, how it is distributed and promoted, and key partnerships used in implementing it.
In short, a revenue model is just one component of a business model.
Many online news business models, historically, have been similar to traditional business models, as subscription, advertising, and transactional are the most common categories of online business models.
You should usually develop a business model before a business plan. But before you get to a business model, first and foremost, you need an idea. There are numerous resources for brainstorming activities and entrepreneurial processes to help develop an idea and flesh it out to be “market-ready.”
A type of subscription business model commonly used for content and technology plays is the freemium model. Under a freemium model, access to basic content is free, but users can choose to subscribe to premium content for a fee that provides improved access (such as an ad-free experience) or additional services.
The online music streaming service Spotify is a classic example of a freemium model, with basic access to ad-supported music online available for free, with monthly premium subscriptions for a fee.
Dropbox is another commonly used digital startup that relies on a freemium model. The cloud-based file storage service offers free storage up to a certain amount, and charges a monthly fee beyond that.
Membership is another subscription model. Under a membership model, the content can either be free or paid, but users who purchase a membership receive perks and bonus materials, exclusive access to supplemental materials, and so forth.
Whether you’re a nascent startup or a more established company, selling merchandise with your company’s brand, name, logo, and slogans can serve as an additional revenue stream in addition to serving marketing purposes. T-shirts, mugs, keychains, and hats are commonly sold merchandise.
Apps and websites that take advantage of the sharing economy have proliferated in recent years. Also referred to as the collaboration economy, this business model is predicated on collaboration, whether that is sharing an apartment or home (as is the case in Airbnb), sharing a ride (Lyft or Uber), or sharing office space (coworking spaces).
An entrepreneurial startup truism is that no matter how great your idea may be, if no one will use your product, then you’re dead on arrival. So startup ideas need customers to become a business. Thus, the various entrepreneurial processes, whether that is business model canvas tools, lean startup principles and methodologies, or other approaches, focus a great deal on the customer.
You can start to develop the business model for your startup concept by sketching out the basic idea and its target customer, then identifying how it will make money through one or more revenue streams
Media Innovation and Entrepreneurship by Geoffrey Graybeal is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.