Six Business Models You Should Know

A business model isn’t just about selling a product or service; it’s a fundamental framework that outlines how a company creates, delivers, and captures value. Understanding various business models is crucial for aspiring entrepreneurs, investors, and anyone seeking to grasp the mechanisms behind successful enterprises. These models dictate revenue streams, cost structures, target customers, and competitive advantages.

In this article, we’ll be listing the six popular business models you should know about.

1. Subscription Model

The subscription model has become ubiquitous across numerous industries, shifting consumer behaviour from one-off purchases to recurring payments for continued access to a product or service, with similarities to platforms like gambling360 real money casino. This model prioritises long-term customer relationships and predictable revenue streams.

Customers pay a recurring fee (monthly, annually, etc.) for access to content (e.g., Netflix, Spotify), software (e.g., Adobe Creative Cloud, Microsoft 365), physical goods (e.g., Birchbox, HelloFresh), or services (e.g., gym memberships, online learning platforms). Why it’s popular: It provides businesses with stable, recurring revenue, making financial forecasting more accurate and easier. For customers, it offers convenience, continuous access to updates or content, and often a lower initial cost. This model fosters customer loyalty and can leverage network effects to drive growth.

2. Freemium Model

The freemium model combines “free” and “premium” offerings, providing a basic version of a product or service at no cost while charging for advanced features, additional capacity, or an enhanced experience. It’s a powerful customer acquisition strategy, particularly prevalent in the software and digital services industries.

A core product is given away for free to attract a large user base (e.g., Spotify Free, Zoom Basic, Dropbox Basic). A smaller percentage of these free users are then converted into paying customers (subscribers) by offering compelling premium functionalities, such as ad-free experiences, increased storage, advanced tools, or priority support. Why it’s popular: It lowers the barrier to entry, allowing users to experience the value proposition before committing financially. This viral growth potential can quickly build a large user base, which can then be monetised through upsells.

3. Marketplace Model

The marketplace model acts as an intermediary, connecting buyers and sellers on a single platform without owning the inventory itself. It thrives on network effects, where the value of the platform increases with the number of participants on both sides.

The platform facilitates transactions and typically earns revenue through commissions on sales, listing fees, advertising, or premium services for sellers. Examples include e-commerce (e.g., Amazon, Etsy), services (e.g., Upwork, Fiverr), transportation (e.g., Uber, Bolt), and accommodation (e.g., Airbnb). Why it’s popular: It offers a vast selection and competitive pricing for buyers, as well as access to a broad customer base for sellers. The platform benefits from scalability, low inventory risk, and strong network effects that create defensibility.

4. Direct-to-Consumer (D2C) Model

The Direct-to-Consumer (D2C) model involves brands selling their products directly to customers, bypassing traditional retailers, wholesalers, and other intermediaries. This model has surged with the rise of e-commerce and digital marketing.

Brands manage their entire customer journey, from manufacturing and marketing to sales and distribution, typically through their own websites and social media channels. Revenue comes directly from product sales. Examples include Warby Parker (eyewear), Glossier (beauty), and Casper (mattresses). Why it’s popular: It allows for greater control over brand messaging, customer experience, and pricing. By cutting out middlemen, D2C brands can offer lower prices, higher margins, or a combination of both. It also enables direct customer feedback, fostering product innovation and loyalty.

5. Advertising Model

The advertising model revolves around generating revenue by delivering targeted advertisements to an audience. This model is foundational for many online platforms that offer free content or services.

Platforms (e.g., Google Search, Facebook, YouTube, TikTok, and traditional media such as TV and radio) attract a large user base by providing valuable content or services at no cost. Advertisers then pay the platform to display their ads to this audience, often leveraging user data for precise targeting. Revenue is generated through impressions, clicks, or conversions on these advertisements. Why it’s popular: It provides free access to content for users, fostering massive scale. For businesses, it offers a powerful way to reach specific demographics and build brand awareness, making it a highly scalable and often very profitable model for platforms with large, engaged user bases.

6. Franchise Model

The franchise model enables an established business, known as the franchisor, to license its brand, business system, and intellectual property to independent operators or franchisees in exchange for fees and royalties.

The franchisor provides a proven business concept, operational training, marketing support, and access to a supply chain. The franchisee pays an initial fee, known as the franchise fee, and ongoing royalties, which are a percentage of the franchisee’s revenue, for the right to operate the business under the franchisor’s brand and system. Examples include McDonald’s, Subway, and Hilton Hotels. Why it’s popular: It enables rapid expansion for the franchisor with reduced capital investment and decentralised management. For franchisees, it offers a lower-risk entry into business ownership with a proven concept, established brand recognition, and ongoing support.