Uber to Netflix: The Basics of Billion Dollar Business Models
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Do you know what distinguishes Billion-dollar companies like Uber, Amazon, Netflix, Airbnb, etc. from other companies? Their effectively created & implemented business models. Business models that are flexible. Revenue generation models that react to the varying needs of customers.
Of course, brand image is imperative to attract new customers, but without a defined business model, you might fall short in converting that attention. If you are looking for some motivation, check out these Unicorn companies and know how they run their business.
Business Models of Billion Dollar Companies: Uber, Netflix, Amazon, and Airbnb
1. Uber’s Business Model
Uber can be considered as the early adopter of the gig economy. The company had seen a tremendous opportunity in the taxi market and built a platform that aggregates riders with nearby drivers.
Today, Uber provides 15 million rides per day without owning a single cab. How amazing it is!
But you may wonder how did uber come to this point, right?
To know that, let’s see how Uber works.
A person who wants to commute to any place can book Uber from the mobile app. He or she has to set a pick-up location on the map and enter the destination and book the cab. As soon as the person books the cab, Uber drivers who are near to that person’s location get the notification about it. A driver interested in having that ride can accept the request and complete the job.
An interesting thing about Uber’s business model is that it doesn’t own any car. The drivers who are registered in the app have their own car.
The Revenue Model
The main source of Uber’s revenue generation is its completion of every trip. On every trip completed Uber takes 20-25% of the commission from the total payment. It then transfers the remaining amount to the driver’s account.
Users can cancel the trip at any time. But they have to pay some fees as per the Uber’s guidelines. Users who cancel the ride after two minutes or meet the driver after five minutes of arrival, then they have to pay the extra charges.
The ride-sharing company charges users according to the car types they select. Some examples of Uber’s car categories are Economy, Premium, Extra seats, and more. Riders can choose any of the car types as per their need. For an economical ride, Uber has a carpooling option that allows a rider to share the car with another rider going in the same direction. Its premium car offers luxurious rides. They have also options for forward-facing car seats for children and Wheelchair accessible vehicles for old people and handicaps. However, these two options are available in certain regions.
Uber sometimes implements surge prices when the demand is high, especially in times like bad weather, holidays, and rush hours. The company generates great revenue from this tactic.
Apart from the on-demand taxi services, Uber’s revenue comes from UberEats, UberFreight, Uber Elevate, and their self-driving cars.
2. Amazon’s Business Model
From an online book store to a leading company in the world, the success of Amazon is the result of its innovative and customer-first approach. Amazon does not make its money through only one source, rather it generates money through different markets namely, retail, cloud service, Streaming service, and marketplace. Let’s delve into that.
The majority of the income of Amazon comes through its retail segment. It comes from selling goods online directly to the customers. Amazon buys goods from wholesalers at a less price and sells it by setting competitive prices.
The company leverages the advantages of its own warehouses where it stores the goods and provides faster delivery. Apart from buying in a bulk from Wholesalers, Amazon also has its own range of products like Amazon Alexa, and Echo.
Other than selling its own products online, the retail giant has been labeled as the biggest marketplace on the earth. Amazon has built its marketplace that aggregates sellers with the buyers. In simple terms, the marketplace is a thousand small stores with different items inside the giant store.
Amazon provides its high-quality services to the sellers through its Fulfillment by Amazon (FBA) program. Here Amazon packs & delivers the parcel to the customers’ doors. The behemoth earns a handsome commission from its third-party sellers.
Amazon also provides cloud infrastructure services to the businesses who are digitizing their businesses. The company charges them on a yearly subscription basis. The reason for Amazon’s stepping into cloud infrastructure services is an increasing trend of digitization. Businesses have understood the importance of digitization which led them to create their business on the internet.
Apart from the above-mentioned revenue streams, Amazon also provides its customers with streaming services and free deliveries. An Amazon Prime subscription allows viewers to watch unlimited amazon original TV shows and movies, not to mention unlimited music. With this subscription, users can also purchase their items on the Amazon store with unlimited free deliveries. Also, those who love to read through Kindle, they can read countless books online.
So, these were the revenue segments from which amazon earns its revenue. According to the reports
, Amazon earned revenue of 87.4 billion in Q4 of 2019 with these revenue streams.
3. Netflix Business Model
With its unique & sustainable software as a service(SaaS) based business model, Netflix has established itself as a leading streaming service in the globe. It’s a SaaS platform that brings new shows, movies, documentaries, etc. to the viewers.
It has become a synonym for entertainment. According to the latest numbers, Revenue earned by Netflix in Q1 of 2020 is $5.77 billion which is more than Netflix had expected.
With the help of big data and data analysis, Netflix serves its customers with personalized content. It helps the company to buy and create content that their viewers like. Customers can purchase a plan as per their needs on a monthly or yearly basis. They can watch their favorite shows and movies on their phone, tablet, TV, and laptop.
To attract new customers, Netflix allows them to register on the platform and gives them a free month trial. Once it completes, customers can choose any of the following plans as per their needs.
Note that Netflix does not have the same pricing structure around the world.
Basic, $8.99 per month This plan doesn't provide HD viewing and its programs can only be watched on a single screen at a time.
Standard, $12.99 per month The standard Netflix plan provides HD videos and allows for two simultaneous viewings.
Premium, $15.99 per month The Deluxe subscription offers customers the ability to watch four screens at the same time. It's also the only item on Netflix that offers a 4K viewing option.
Now as I said, Netflix does not have the same plan for each county. When last time Netflix hiked its pricing in the USA and UK, it started a new plan in India which was more affordable. It allows mobile users to buy a plan that can only be watched in a single mobile device. So, Netflix understands and goes through the data and its users’ behavior and keeps changing its plan accordingly.
Apart from streaming service, Netflix also has a provision for DVD and blu-ray video streaming platforms. Below is the list of DVD Plans.
Starter plan ($4.99/ month)
A basic plan allows you to watch one disc at a time with a two-disc limit per month
Standard plan ($7.99/ month)
Users can watch one disc at a time with an unlimited amount of discs throughout the month.
Premier plan ($11.99/ month)
A premier plan lets users watch two discs at a time with an unlimited amount of discs per month
4. Airbnb Business Model
Airbnb is considered an Uber for accommodation. Today, Airbnb has 150 million users and 6,50,000 of hosts worldwide.
As uber connects taxi owners with nearby customers, Airbnb connects hosts with travelers. Travelers roaming in different cities can easily find their accommodation needs through the Airbnb platform. These accommodations are basically listed properties of people who have an extra property. They are called Host and they can earn by listing a property on Airbnb.
Like Uber, Airbnb also does not own any property, it aggregates travelers with hosts. If you will go through Airbnb’s detailed business model, you will understand how Airbnb Makes money
Airbnb has a simple listing procedure for hosts. Hosts can simply update their pricing, amenities, and city, Airbnb sends their freelance photographer to take perfect photos of their property for listing.
Also for travelers, the booking process is easy. They can filter their property by price, city, & amenities, and then book their property. Hosts can go through travelers’ profiles and their past stays and accept the request. They both can rate and review each other.
Airbnb’s revenue generation process is a little bit different than Uber. Airbnb charges both its hosts and guests for using the platform. The company charges 3% from their hosts and 5-15% from their Guests.
What’s new In Airbnb
Airbnb has found its place in Unicorn company due to its flexible business model and its policies. Take, for example, Airbnb has recently launched its new programs
, which include extended stays, Covid-19 responders stays, and online experience. These steps have made it possible for the company to become a billion-dollar company.
Understanding your customers’ needs and their behavior helps you find a perfect and sustainable business model. You must take some time to consider your options. Each of these unicorn companies has a different business model but still, they earn a fortune through it.
You could also develop a new business model that takes you to the billion-dollar club by exploring the untapped opportunities and new markets.
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