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.

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 – 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 Websites Offering Free Services Make Money?

Most free web services plan to make money by the following:

Advertising model - Know as much as possible about the user and bring targeted ads. 

Freemium model - sell a free product and plan to convert some of them to a paid plan.

Limited period promotion - Start with the free product for a promotional initial period and plan to charge it later. For instance, 37 Signals provides free 30 day trial offer for most products and then charge if you use later. This is a tough thing to master these days.

Sponsorship model - If your service indirectly helps the government and/or major organizations you could ask them to sponsor your service.

Wikipedia model -  You could get donations from your users. Many wordpress plugins, open source tools and Wikipedia do this. This could be the future of newspapers.

Gillette model - Printers and razors are sold less than cost, as they plan to make high margin from selling a complementary product (cartridge/blades). The printer or blade you purchased will turn worthless if you don't buy the super-high margin complementary products from the manufacturer. On the web, for instance, you could create a cloud based spreadhseet/wordprocessr that is free to edit/create documents, but charged money for exporting it as a file to the local machine. Or you could charge high for the iPhone app that can access the data natively.

Open Source Model - Sell the product for free and plan to make money on support, customization and installation. Most open source software follow this model.

Usage charge model - This is related to the freemium model. Give the product free for low usage, but charge when the user is exceeding the free limits (many storage applications such as Dropbox fall under this). 

Zynga model - Sell products through in-app purchases or to get forward in the game.

Credit card model - In this model, you make your product free for one side (consumers) and use the network effects to make the other side (merchants) pay. Facebook, Yelp and other online marketplaces are now getting on to the model.

Upsell/Cross-sell - Sell a free product & use that to promote a premium product in the same segment. For instance, If you run a finance website, you could give stock quotes free and sell premium analyst reports and financial planning tools.

Build a brand - Use the free service to get brownie points/good press and use the brand image to sell premium products (directly related or not) later.

Affiliate marketing - Signup for affiliate programs related to your service and convert your users to customers of your affiliates.

Sell it to Google - Build a big user base that might attract a big buyer such as Microsoft or Google, who might use the user base to sell their premium products/services.

Make your next venture a success - If none of the previous stuff works, you could run a free venture to build your personal brand/get popular and hope to get funding for your next venture.

(article written by Balaji Viswanathan, Product Manager at a VC Funded Startup)