Domain 10 · 24 cases
Business Models
The repeatable structures behind durable companies: subscription, freemium, marketplaces, razor and blades, aggregation, SaaS and more, with the conditions that make each one work or quietly fail.
- Pick the revenue model that fits your product and market
- Spot the condition that makes a model compound or collapse
- See where your margin actually lives
Subscription and Recurring Revenue
In 2011, Adobe was a $3.4 billion company built on selling Creative Suite in a box: pay $1,300 to $2,600 once, get a disc, use it for two years until the…
The Freemium Model
Spotify gives away its core product for free, and that is precisely why it has hundreds of millions of paying subscribers. When it launched in Europe in…
Two-Sided Marketplaces
Airbnb does not own a single hotel room. Uber does not own a single car. Yet both are worth more than most hotel chains and taxi fleets combined. The…
Razor and Blades
Gillette practically gives away the handle, then sells you blades for the rest of your life. King Gillette invented the safety razor in 1901 and the model…
Advertising and Attention
Google's search engine is free, and its ad business has generated hundreds of billions in profit. You are not the customer. You are the product. Broadcast TV…
Franchising
McDonald's is not really a burger company. It is a real estate and licensing company that happens to sell burgers. Ray Kroc did not invent the McDonald's…
Direct-to-Consumer (DTC)
Dollar Shave Club launched in 2012 with a $4,500 video and one product. Four years later, Unilever bought it for about $1 billion, and a big part of what…
Aggregation Theory
Google does not make the content you search for. It just controls whether you find it. Ben Thompson coined Aggregation Theory in 2015 to explain why the…
SaaS: Software as a Service
Salesforce launched in 1999 with a heretical pitch: software should not need a disc, a server, or a six-month implementation. Oracle and SAP ruled the world…
Usage-Based Pricing
AWS charges you nothing when your servers sit idle and a lot when they are humming, and that single alignment helped make it one of the fastest-growing…
Licensing and IP Royalties
ARM Holdings designs the chips inside almost every smartphone on earth and manufactures exactly none of them. Spun out of Acorn in 1990, it made a single…
Membership and Warehouse Clubs
Costco sells most of its goods at or near cost and makes almost all of its profit from the $65 you pay just to walk in the door. Markups are capped around…
Loss Leaders
Costco has sold a hot dog and soda combo for $1.50 since 1985, loses money on every one, and that is the entire point. When Jim Sinegal co-founded the…
Asset-Light and the Sharing Economy
Airbnb became one of the world's largest hospitality companies without owning a hotel room, and Uber became a dominant ride company without owning most of…
Servitization: As a Service
Rolls-Royce used to sell jet engines. Then it started selling thrust. Under "Power by the Hour," airlines pay a fixed fee per flight hour, Rolls-Royce owns…
Bundling and Unbundling
Cable TV charged you $120 a month for 200 channels to watch the five you wanted. Then streaming unbundled it, prices started low, and now a household with…
User-Generated Content
Wikipedia holds more content than any encyclopedia ever published, maintained by millions of unpaid volunteers, at near-zero content cost. No editor at…
Vertical Integration
Tesla designs its own chips, makes its own batteries, sells in its own stores, and services cars in its own shops, while nearly every other automaker…
Platform Ecosystems and Lock-In
Apple's App Store takes roughly 15 to 30 percent of every purchase made through it, and Apple built neither the apps nor the games nor the books. It built…
Microtransactions and Free-to-Play
Fortnite is free to download and free to play, and Epic Games has made billions from it anyway, selling outfits for characters who do not exist. When Epic…
Dynamic Pricing and Yield Management
An airline seat is worth $200 on a Tuesday and $800 the Friday before Thanksgiving. The seat is identical. The pricing is not. Airlines invented modern yield…
Private Label and White Label
Kirkland Signature scotch is made by some of the same distilleries that produce premium brands, costs a third of the price, and Costco keeps the difference.…
Open Core and Open Source
Red Hat gave away Linux for free and built a billion-dollar business on it anyway, and IBM eventually paid about $34 billion for the company. The open source…
The Long Tail
A physical record store could stock maybe 10,000 albums. Spotify carries over 100 million tracks, and the ones after the first 10,000 matter more than anyone…
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