What do Google, Airbnb, Uber, Booking.com, and Facebook have in common, and what can you do with this information?

Hello Fellow!

In this article, we will focus on analyzing two, particularly interesting, “Business Model Patterns.” (Business models with similar characteristics, similar arrangements of business model building blocks, or similar behaviors).

So, why should you know about it? I mean, who cares? I have my own idea in mind of a business I wanna do.

Well, probably the only reason why you should know about these two particular “patterns” is because they are used by the MOST successful companies in the world, and when you start to develop an idea for your new business, you may just keep them in mind. Being aware of these two “patterns” can drastically change your idea and, consequently, your chance to succeed. These models are used by the majority of the most successful and famous companies you can think of including Google, Facebook, Airbnb, Booking.com, Uber, What’s App, Skype and many many others.

So, what are these key elements that allow start-ups to grow up into “unicorns” (privately held startup companies valued at over $1 billion) and succeed on the market?

The first pattern is called Multi-Sided Platforms. These platforms bring together two or more distinct but interdependent groups of customers. They create value as intermediaries by connecting these groups. (“Business Model Generation”, A. Osterwalder & Y. Pigneur). Basically, these platforms usually have two distinct customer segments or “two sides”: Airbnb (travelers and apartment owners), Booking.com (travelers and hotels), Uber (clients and drivers), Google (users and advertisers), Facebook (users and advertisers). The key is that the platform must attract and serve all the customer groups simultaneously in order to create value. One difficulty multi-sided platform operators face is understanding which side to subsidize (luring one segment to the platform with an inexpensive or free value proposition in order to subsequently attract users of the platforms “other side”) and how to price correctly to attract customers.

Okay, now as you already know about the Multi-Sided Platforms business model, let’s move to another, probably the most exciting business model – Freemium. By the way, Freemium can be also integrated into a Multi-Sided Platform. So, in the Freemium business model, at least one substantial customer segment is able to continuously benefit from a free-of-charge offer. Non-paying customers are financed by another part of the business model or by another customer segment. (“Business Model Generation”, A. Osterwalder & Y. Pigneur). The best example of it to illustrate would be a multi-billion telecommunications application Skype. They claim that they have over 400 million registered users who have made more than 100 billion free calls since the company was founded in 2004.

But how do they make money?

Well, here is the answer: 10% of the free Skype callers also use the extra paid option called SkypeOut to call on the mobile phones over the world for very cheap rates. These paid users cover all the costs of Skype’s infrastructure, supporting the free-subscription users as well, and made them worth $8.5 billion. (Skype was acquired by Microsoft in May 2011 for $8.5 billion. “14 And 116: These Two Numbers Explain Why Microsoft Dropped $8.5 Billion On Skype”, www.businessinsider.com).

So, the question is (how) can you set it free? If you manage to answer it, we may be able to see another “unicorn” start-up company conquering the market in the nearest future.

Practical Advice:

If you got inspired by this article and would like to know more about different business models and practical tools, don’t rush to the shop to buy a new Business Model Generation book for 40 bucks. First, check the free materials they have on their official website: www.strategyzer.com. All that you need to do is to fill a simple registration form (platform.strategyzer.com/login) and you will be given absolutely free access to a lot of useful materials and tools including: Business Model Canvas, Value Proposition Canvas, Business Modelling Supporting Tools and even some training videos about the implementation of different tools. So, check it out because it’s really great and free as well!

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