What is a Business Model & Top Examples

Jan 17, 2020

90 Diana Zevan

What is a Business Model & Top Examples

Who would not want to run a successful business and generate huge amounts of money? It is a daydream of many. As a result, over 500,000 new businesses appear on the market every single year. But about half of them fail in its first year. Why? One of the most popular reasons is the wrong business strategy!

We are going to define business model as well as business model canvas and share the most inspiring examples used by top brands. YouTube, Uber, Amazon, Netflix, Airbnb and others – discover what stays behind their success. Grow your business with us!

What is a Business Model?
What is the Business Model Canvas?
Best Business Model Examples

What is a Business Model?

In basic terms, business model is a strategy on how the company earns money [1]. It is a scheme that businesses follow to generate profit from their products or services. You can find your own way or follow the example of the leading brands in your industry. However, even if your company is one-of-a-kind on the market, you are unlikely to invent a business model that was not used by someone before you.

Why does your business need such a model? It is aimed to provide a clear picture of a perfectly working profit generation process and to help you optimize the whole workflow. But don’t think that there can be a one-size-fits-all solution. If you want to succeed, you need to experiment with different approaches to find the business model that works best for you.

The effectiveness of the first model that you try should be monitored and analyzed. If it does not work out, at the initial stage it can still be possible to reestablish it back to the drawing board. We recommend testing multiple tactics to discover their advantages and disadvantages specifically for your business.

What is the Business Model Canvas?

In any activity, if you want to succeed, you need a plan – business is not an exception. At the beginning of the business development process, the best decision is not to reinvent the wheel but form a structure following business model canvas. It is a visual plan of the company’s management and development.

It is especially significant for startups as it helps not only to build a clear company structure but also to find a niche on the market. Using the plan, you will understand the flaws and merits of your company. Business model canvas is also used to help companies that for some reason can not simply follow a ready-made business model. It is a way to single out particular features of different models and combine them in the right way.

One of our main recommendations when it comes to structuring your business is to analyze the competitors and your target market’s key players. This research will show how the competitors have managed to win their place on the market and what approach they followed. It will serve as a relevant example of how a business can operate effectively in your niche.

Want to know what business model canvas consists of? Check out the structure on the infographic provided below. Try not to miss a thing and keep on reading the article!

What is business model canvas

Best Business Model Examples

We have analyzed Google search results to find out the structures of which brands interest people most. Get inspiration from the best ones and let your business grow!

Walmart Business Model

Walmart is one of the largest retail stores with over 10,000 physical stores worldwide – around 5,000 of which are in the U.S. Walmart is a perfect example of how a company successfully combines several strategies. For many years, they have been using a traditional brick and mortar business model which means that Walmart has physical stores where customers can touch and see the product before making a purchase. It is the most popular model among shopping malls and local supermarkets selling goods offline.

But Walmart, like many other companies nowadays, doesn’t want to focus on offline trading only. It also enjoys the opportunities provided by other sales channels and today Walmart follows omnichannel business model. To reach more customers and cover the demand of those who do not have their brick and mortar around, Walmart also sells its products online.

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Amazon Business Model

Amazon is a known worldwide American marketplace. One of the reasons behind the company’s success is that they do not let a single opportunity to earn more pass by. Amazon business model is diverse. The company started as a bookstore but soon enough it turned into a retailer that sells almost anything.

The bulk of Amazon’s revenue is based on retail business model. They order products from the wholesale at lower price as the amount is huge and then resell it to their own customers via the website. As a part of retail business model, they also sell their own products like Amazon Kindle e-books or different Amazon smart home devices.

Then comes marketplace business model. Third-party retailers use the platform to sell their goods via Amazon’s website. The company offers lots of services which are charged additionally, like shipping, packaging and storing for merchants’ products. Sellers can also purchase an Amazon advertising plan to promote their stores in Amazon’s search results. Most of the money that the company makes as a marketplace comes from the commission on every sale made on the platform that Amazon charges. It is highly profitable as over half of Amazon sellers earn more than $100,000 a year.

Then comes Amazon Prime – subscription business model. It is a plan that a customer can purchase to get access to Amazon’s streaming services, including Amazon Music and Video and some other benefits. Prime account provides free shipping option to those who want to order products on the marketplace, no matter if those are offered by a third party or by Amazon itself.

Amazon Web Services (ASW) can be treated as a part of subscription model, however today many people see the point in defining a separate cloud business model. This service offers to store online store’s data on the Amazon cloud.

Uber Business Model

Uber is a company that has transformed the modern vision of a taxi. The company offers ride-hailing services in over 60 countries and estimates to have around 110 million users. How does it work? Uber business model is primarily based on on-demand business model. Basically, the companies that follow this model, provide immediate access to the products or services that the consumers need right in the moment.

Whenever they need a taxi, Uber users can book a ride, pick a driver and get information on a driver’s car. The Uber app allows tracking the driver’s location as well as check the price in advance. Moreover, Uber offers various types of driving services according to the type of a car and a fare, which are Premium, Extra Seats, Economy and More.

What about payments? Uber sets prices on drives according to the distance, the estimated time and current demand for rides in a needed location. Demand is one of the main ways the company makes money. During holidays, bad weather conditions, rush hours and Friday evenings they double the fare.

Users can either pay cash for a service in some countries or connect a credit card via the app. Uber keeps up to 25% of the fare and pay the rest to a driver. The requirements to become an Uber driver are not very strict, this way of making money is already widely popular among car owners and it keeps attracting new users.

With the service Uber Food, the company also manages food delivery to the customers. Allowing restaurants and cafes to purchase advertising plans in their app, Uber also takes advantage of advertising business model. Uber also works in partnership with different hotels and stores.

Netflix Business Model

Netflix is an American streaming service that also creates its own content. It operates worldwide except for China, Syria, North Korea and Crimea.

Netflix successfully combines subscription and streaming business models offering online movies, series, documentaries and TV shows, including those produced by the company. Their subscribers pay for the service monthly and get access to a video library. Netflix personalizes the customer experience providing unique recommendations.

There are three Netflix subscription plans: Basic, Standard and Premium.

  • Basic plan costs $7.99 a month and allows to use it on one device.
  • Standard plan is $10.99 per month with an opportunity to connect two devices.
  • Premium can be purchased for $13.99 and it allows watching Netflix from four different devices.

The company also offers a free month trial for new subscribers for any plan. When the trial month is over, users can keep enjoying the service by paying a fee for the selected plan. Netflix makes most of its profit on domestic and international streaming but they also keep providing the American customers with DVDs following rental business model.

Back in a day, the company used to be a movie rental service which is surprisingly still in demand. Besides the popularity of streaming services, there are still a lot of people who use DVD. Three membership types for Netflix DVD by-mail service: Starter, Standard and Premium allow customers to borrow different number of DVDs at a time and a month.

Airbnb Business Model

Airbnb is an online marketplace and a broker that connects travelers looking for accommodation with homeowners. The company operates in over 100,000 cities in more than 220 countries and regions and every day up over 2 million people stay at an Airbnb apartment [2].

It follows a marketplace business model and allows people to offer available accommodation and earn some extra money on rent while providing travelers with an opportunity to book unique local homes.

How does it work? A host provides information about a property, including amenities, pictures, pricing and location. When people search for accommodation, they use a filter and check reviews to pick a desired apartment. Hosts can either approve the guest or reject as they also can look at the reviews from the previous hosts where the guest stayed. Airbnb business model is unique because it charges both a guest and a host.

The company offers free registration to the guests and hosts but when the apartment is booked, both of them have to pay extra to the platform itself. Hosts pay a commission fee while guests cover the transaction fee. Hosts give Airbnb about 3% from the profit made on the platform while guests pay up to 15% service fee for booking an Airbnb apartment.

The company also takes advantage of subscription business model offering a travel magazine subscription. The Airbnb magazine is popular among travelers who search for the best hosts and want to get information about well-rated travel experiences in different countries.

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Apple Business Model

Apple has over 500 retail stores and ships its products globally. It is considered to be the fourth largest company after Facebook, Google and Amazon by the annual revenue.

One of the main components of Apple strategy is manufacturer business model combined with retail business model. They create and sell computer software and top-notch devices. The main products are iPhone, Mac, and iPad. Among the main products, the iPhone is an iconic Apple device that generates over 60% of the company’s revenue while Mac and iPad combined – up to 20%. Then come smart watches, headphones and other accessories for Apple devices.

The company also uses a subscription business model offering a wide range of services like Apple Music and iTunes. It also has its own payment service – Apple Pay, iBookStore where the users can purchase books to download, Apple TV and others. The company generates about 10% of its profit on these services.

Google Business Model

Google is a technology company that specializes in offering internet-related services and products. Their official website is one of the most visited platforms globally while their several services like YouTube are among the top 10 most visited sites. Google strives to organize all the information and make it globally accessible and useful. The company’s revenue amounted to $130 billion.

Google provides products and services to diversified users like companies, developers, common internet users and offline audience. The company developed a complex and versatile business model that allows Google to achieve such high results.

Mainly, Google follows advertising business model. So, the company makes over 80% of its revenue on advertisement. With AdWords, an online ad platform, and AdSense, an ad placement service, Google helps companies to promote themselves and makes a profit.

The company also owns the rights on the Android operating system and sells Android-based phones. Moreover, the company has Google Play where developers can promote their apps both free or paid.

There are several other services created and owned by Google, including Google Maps, Google Earth and Google Chrome browser. Google also develops products and services for offline users like autonomous cars, humanoid robots, smart glasses and other top-notch tools following manufacturer business model.

Vlad Yunusov

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YouTube Business Model

YouTube is a video sharing platform owned by Google. YouTube users upload over 400 hours of content every minute and spend billions of hours watching videos daily. The platform helps individuals, celebrities, brands promote themselves as well as their products and earn money through YouTube.

How do users make money on YouTube? The platform allows uploading videos on the platform which are usually free for watching as well as monetize videos. YouTube also offers paid videos according to the needs of users but they are not widely used. But how does YouTube make a profit on free content?

How does YouTube makes money? It is based on advertising business model. It is the main source of revenue that represents over 10% of Google’s profit. YouTube also offers sponsored videos. The price of an ad is regulated as Pay-Per-View. Another source of YouTube ad revenue is an embedded advertisement. Such ad is played before the video will be shown or in between videos if an ad is short.

YouTube also uses subscription and freemium business models. The company offers YouTube Premium membership for up to $12 in the U.S. It has the following benefits:

  • Ad-free videos
  • Premium access to YouTube Music
  • Background play when a screen is off or while using other apps
  • Offline content

The company offers channel membership that allows adding the Join button on channels and video pages. Creators of such channels can offer special things for subscribers like discounts of products, goods and more. If people want to subscribe, they pay $4,99 per month in the U.S. While YouTube keeps up to 30% of the membership fee paid by subscribers. Besides that, YouTube has its TV streaming service – YouTube TV.

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Tesla Business Model

Tesla is not an ordinary automobile manufacturer. The company specializes in electric vehicles and solar panels manufacturing. The company’s main aim, according to Elon Musk, is to offer electric cars affordable to an average customer. Producing over 300,000 vehicles per year, Tesla makes up to $20 billion. The biggest part of it comes from using a direct sales business model.

Tesla business model is based on developing electric cars for affiliate customer and then providing their vehicles on other markets at a lower price. Unlike the majority of the automobile companies following manufacturer business model, Tesla sells its cars directly to customers in impressive galleries and showrooms. Tesla also offers to customize a car according to customers’ needs and order it online.

What does any car need sooner or later? Service. Tesla has its service centers where customers can charge or repair their vehicles. Promoting such services, Tesla makes money not only on its own customers but also at owners of other luxury car owners. Moreover, the company offers Tesla Rangers service – mobile technicians who service Tesla cars at home or fix software bugs online.

Trying to encourage people to buy Tesla cars, the company introduced supercharger stations that let charge cars for free for 30 minutes. Tesla has a group of such stations that truly accelerates electric vehicle acceptance. The company also offers a home-based installation of charges for cars, solar panels, roofing and others.

Costco Business Model

Costco is a multinational company that operates a number of warehouse clubs. Only members of the Costco club can shop there. The company’s main goal is similar to Walmart: it strives to provide its members with quality products at low prices. Costco’s revenue increases every year and for now the company makes over $150 billion.

Costco is based on a combination of membership or subscription business model with the brick and mortar business model. Customers pay a fee every year to have an opportunity to shop at Costco. The strategy helps it to show customer loyalty and attract them to come for more. If you are not a member, you are unable to shop in the store but you can visit it with a Costco member. Non-members are also able to use Cash Cards to shop at Costco stores.

Conclusion

Striving to launch a profitable company, you can’t survive without a functional business model – a strategy to make money. And now you see it. Working with a specially designed strategy, you increase your chances to reach more customers and boost sales. We hope that we have managed to encourage you with the examples of top brands to never give up on your way to success.

Developing your business model canvas? Ask us for more details and share your experience in the comment below.

Vlad Yunusov

Partner With Us

Looking for a partner to grow your business? We are the right company to bring your webstore to success. Talk to Vlad

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