Revenue Model – BlaBlaCar

BlaBlaCar has emerged as the world’s largest long distance ride sharing community. It connects car owners and travelers from over 700 cities in the world.

REVENUE MODELS

Flat Commission Fee – The startup charges a commission fee once it is able to reach a critical mass in a country. For example, in France, the startup takes a flat commission of 10-15% of the trip cost. In countries like India where the model is still new, it does not charge any fee.

Before the startup deployed an online booking system, it used to earn revenue through advertising and through partnerships with companies to offer ride sharing platforms.

CONCERNS

Market Size – Intra-city car sharing is a big market due to its recurring nature. Inter-city car pooling seems to be a smaller market. Booking commissions are the biggest revenue models in a small market. However, owing to the nature and size of the market, additional revenue models like advertising and partnerships with companies, which the startup was using earlier, should also be looked at.

Revenue Model – Coursera

Coursera is an edtech startup which offers massive open online courses (MOOCs). The startup works with Universities and Institutes to offer some of their courses online.

REVENUE MODELS

Signature Track – Students pay a flat fee of $49 to take up a course which lands them a verified certificate. This is the oldest and most significant revenue model of Coursera. Coursera shares the revenue (typically between 6-15%) with the University which has produced the course.

Specializations – Students pay for specializations, i.e. a sequence of courses with a capstone project which leads to the grant of a certificate upon completion. The fee ranges between USD 300-600.

Purchase Course – Students pay a fee to get access to graded assignments.

Other models such as paid on-demand classes are also being looked at by the startup.

CONCERNS

Competition – Coursera has been experimenting with a number of revenue models since inception. With the startup failing to monetize its strong user base and with a host of strong competitors entering the market now, Coursera will need to find the right model to generate substantial revenue to be able to stay ahead of the pack.

Business Model – Return & Re-Use

This is a business model wherein the startup encourages users to return and sell unused items for an incentive. These items are then refurbished and sold off.

RATIONALE

Users have old and unused stuff which they want to sell off. A company operating with this business model can help these users get value for their items. At the same time, the company can add value to the items and sell them off for a profit, thereby ensuring a win-win for everyone.

STARTUP EXAMPLE

The Amazon Trade-In program buys hundreds of items from customers, across categories such as video games, DVDs, books etc. In exchange, these customers are given an Amazon Gift Card which can be availed on the website. The items must be in acceptable condition and Amazon verifies the product before purchasing any item. Amazon then makes it available for resale.

Revenue Model – Craigslist

Craigslist provides online classifieds and forums for jobs, housing, for sales, communities, gigs etc. It was founded in 1995 and receives more than 50 billion page views a month.  

REVENUE MODELS

Listing Fees – It charges for ads in selected cities: $75 per ad for paid jobs the San Francisco Bay Area; $25 per ad for paid jobs in New York City, Los Angeles, San Diego, Boston, Seattle, Washington DC, Chicago, Philadelphia, Orange County (California) and Portland, Oregon, and $10 per ad for apartment listings in New York City. Similar ads in other areas, and ads in other categories, are free. No charge is made for a successful sale or contact.

Craigslist has not given a profit since inception. The above are able to cover operational costs. Potential sources of revenue through advertising are being mulled in the future. The management however claims that the website’s primary motive is to maintain and enhance user experiences and any revenue model which impacts the same will not be adopted.

Revenue Model – Angry Birds

Angry Birds is a puzzle solving game create by RovioEntertainment Ltd. and has more than 200mn active monthly players.

REVENUE MODELS

Freemium – Angry Birds is one of the best examples of a game monetizing through this model. Players can start playing the game for free and the ones who get committed to it (around 5%) end up buying premium features in the app. Rovio does a great job of keeping users interested and engaged through new versions, upgrades and features for users.

Merchandise Sales – Angry Birds has been able to monetize it’s characters through sales of branded merchandise. Some products include Angry Birds iphone covers, t-shirts, lunch-boxes and so on. The sales strategy is a mix of direct sales and other models like franchising and licensing.

Advertising – The game also makes a lot of money in it’s free version through advertising. By not selling the game, as is the case with a lot of games, Rovio is able to reduce the risk of piracy as well as users can start playing for free.

Revenue Model – Evernote

Evernote is a collaborative tool to organize personal and professional projects. It was launched in 2008 and has over 100 million users today.

REVENUE MODELS

Freemium – Users try out the basic product for free and upgrade to a premium plan when they get addicted to it. This accounts for more than 75% of the revenue.

Business Revenue – Business accounts are paid and offer the benefits of individual accounts along with team and admin features.

Evernote had started a Marketplace model, selling lifestyle products to its users. They shut down this service in February 2016.  

CONCERNS

Scale of Revenue – The startup is facing a challenge generating revenues up to the expectations of the investors and other stakeholders. Additional revenue models will need to be built in to achieve this.

Revenue Model – Quora (Q&A Portal)

Quora is a platform for users to ask and answer questions about anything. All content uploaded by users is vetted for quality, relevance and structure. It is well funded and has raised over $160 million till date.

REVENUE MODELS

Currently the website has no revenue. The aim of the startup currently is to build a strong database of questions and answers, which it monetize later on. Advertising is the potential model it will look at to monetize.

Advertising – Based on the questions asked or on the content displayed. This form of contextual advertising appears to be the best potential model as it flows with the business model of the company and will not hamper the experience of the users.

CONCERNS

When? – When is the question a lot of people in the startup ecosystem are asking. Building a database and creating an asset is one thing. Monetizing the asset created is another. A sustainable business is one which can do both efficiently. Quora has been in existence for over 6 years and created a strong position for itself in the Q&A space. The startup should start focusing on revenue generation to become sustainable and keep investors interested.

Revenue Model – WeChat (Voice & Messaging App)

WeChat is a voice and text communication mobile first app. WeChat has been able to monetize much better than it’s competitors and despite having lower number of users than it’s main rival, it has generated substantially more revenue than it.

REVENUE MODELS

Advertising – Users can opt in to display small ads from other users. These ads are displayed below posts of the users opting in.

Why do users want to display ads – The revenue generated from advertising is shared between WeChat and these users. This is great for the users and gives them an incentive to grow their network and create better content. Also to maintain the personal space of users, ads are shown around a friend’s personal updates.

Which users can advertise – Verified users or users having more than 100,000 followers are eligible to advertise.

Others – WeChat is constantly innovating and looking to build other revenue models. Some areas being looked at include Innovative Advertising, Ecommerce, Gaming, Mobile Payments etc. 

Revenue Model – TripAdvisor (Online Travel Community)

TripAdvisor offers a variety of travel options and travel planning features. Users can discover different hotels and flights, read reviews about them, compare prices and make bookings. Also they have a section for restaurants discovery and a travel forum for users.

REVENUE MODELS

Click Based Advertising – Advertisers (hotels) pay the website each time a user clicks on their ads.

Display Advertising – Advertisers can put banner and text ads on various sections of the website.

Subscription Advertising – Advertisers pay a regular fee to the website to increase their exposure on it.

Affiliate Model – Affiliate revenue from third parties such as airlines, hotels etc. on bookings made through the website.

All revenue models are based on the core focus of the website (travel discovery and community) and on activities which build on the customer experience.

Revenue Model – Alibaba (E-Commerce)

Alibaba acts as a middleman, connecting buyers and sellers. It has three divisions under it’s brand, Taobao, Tmall and Alipay. Taobao is a website which connects sellers to buyers and caters primarily  to small businesses while Tmall is designed for bigger merchants. Alipay is a savings and payments wallet for customers.

REVENUE MODELS

Taobao’s Revenue Model – Merchants pay Alibaba for advertising and other services to promote themselves.

Tmall’s Revenue Model – Merchants pay a deposit, an annual fee and a commission fee on sales.

Alipay’s Revenue Model – Vendors pay a fee for every transaction through the service.

Revenue Model – Yelp (Hyperlocal Classifieds)

Yelp is an online classifieds business, helping users find local businesses.

REVENUE MODELS

Local Advertising Sales – Banner ads & sponsored listings are sold to businesses which are reviewed on the website.

Brand Advertising – Brands can give banner and text ads on Yelp.

Other Services – Yelp has other services which generate revenue for it. Some of them are

Eat24 – Online ordering system for restaurants

Seatme – Online restaurant reservation system.

CONCERNS

Extensive Sales Force – To pitch to local businesses, a large sales force is required. Over 65% of the total employee strength of Yelp were sales people.

Revenue Model – Olx (Online Classifieds)

Olx is an online classifieds startup based in India.

REVENUE MODELS

Google Ads – Banner ads as well as sponsored listings are Google ad products which Olx uses to make money. Banner ads are the big banners which run on top of the classifieds and also on the left side of them. Sponsored listings are the links you see above the organic search results of keywords.

Featured Listings – Classified owners can highlight and upgrade their listings to featured listings to get them to be placed above the free listings. Ad placements are based on algorithms running within the site.

CONCERNS

Limited Revenue – Featured listings tend to be a limited source of revenue as only a few classifieds out of the total get upgraded. Also in a classifieds portal, sellers do not pay listing fees (as compared to ecommerce websites).

Revenue Model - Bookmyshow

Bookmyshow is an online ticketing startup based in India.

REVENUE MODELS

Convenience Fee Charged (85% of Revenue) – The startup charges it’s users a convenience fee over and above the ticket price.

Turnkey Solutions for Events & Sports (10% of Revenue) – Bookmyshow offers turnkey solutions to various events, from generating user interest to selling their tickets online.

Software Solutions (5% of Revenue) – This is the revenue charged from cinemas for the software solutions provided and their maintenance. This software includes online integration and the facility through which users can get printouts of the bookings they have made online.

The startup is also looking at developing an advertising revenue model aimed at production houses.

CONCERNS

Regulation – Regulation can be a cause of concern for the startup, something which has happened in the past as well. Maharashtra Government, in 2013, decided to scrap the convenience fee in the state.

New Competition – Currently the startup is a dominant player in the market, with very little competition. A new big entrant can play with this convenience fee to compete and establish itself. 

How do I Create a Revenue Model for my Startup?

A model through which your startup will earn money is called a Revenue Model. The Revenue model forms an important part of your Business Model. Bad revenue models can result in startup failure.

While creating a Revenue Model, the following should be kept in mind.

Who to Generate Revenue from: An entrepreneur needs to assess who the main beneficiary of the business is and the revenue should ideally be generated from it.

When Revenue is Collected: Analyse when you want to collect revenue. For example a hiring agent can charge a company upfront on signing up or each time someone is employed in that company. Bad collection timing can affect the efficacy of the model. For example, in Bitequest, we used to collect revenue for every customer we sent to a restaurant. Revenue was collected post sending customers and was collected at the end of the month. Because of this, a lot restaurants tended to delay/default on the payments. Our cash flow took a beating.

How Much to Charge: This can be based on current market data or based on some logic or reasoning. Charging low will mean a loss of revenue and charging high may not be able to attract paying customers.

Getting this mix right will make your Revenue Model robust and the chances of your startup generating revenues higher.