3 Types of Online Business Models

For a long time we believed that there were no established business models on the Internet. We believed that we were creating in a state of great flux without strict business rules. But today we can say that we were wrong.

online business models

There are three most commonly used business models on the Web: made for the Web, brand extension, and the transmedia model.

You’re probably asking yourself, why would anyone with a blog or other type of website have to know about online business models?

Well, the more you understand the ecosystems you design for, the better the results.

Here are 3 major online business models with real examples from tourism (maybe I just a need a rest somewhere far away):

1. Made for the Web

The service monetization which happens strictly and only online. The service is produced to live and develop within the online ecosystem.

Look at the Airbnb platform. Airbnb was founded in 2008 and soon grew into the biggest community marketplace for online accommodation booking (or via a mobile phone). They have transformed the old fashioned technique of renting apartments and adjusted it to the online communications with an innovative business approach.

For the users they are “a community marketplace for unique spaces”, while for the renters they “let you make money renting out your place”.

The listing of your accommodation is free of charge. The renters are charged a 3% fee when the reservation is processed. All the bookings happen through the platform. In order to provide the best service and rent the accommodation as good as possible, Airbnb even offers a free photoshoot of your accommodation in most countries.

Airbnb is a great example of an innovative approach to the made for Web business model. They are quite ahead of their competitors (Flipkey etc.). They made a strategic shift while giving the service out for free and earning when their partners/renters do.

LESSON: Effective made for web business models are based on building strong communities.

2. Brand Extension Model

This is the most commonly used online business model. Everybody more or less employs it, no matter the size of the company.

The brand communication of a core product or service is extended online through a variety of media channels.

Look at Small Luxury Hotels of the World. SLH offers a selection of over 520 of the world’s finest small independent hotels in more than 70 countries. They communicate through their website, while they extend the communication on other media channels like Facebook, G+, Twitter etc. Users can even book a hotel room directly from their iPhone app. They use extended communication in order to engage with their audience and monetize.

Communication of this type that I fancy is the Disney’s. On their Facebook Fan page one can recognize such a strategic approach. They don’t speak for themselves; no, they rather post what their heroes supposedly say; The Little Girl Squirrel “Oh, that’s alright. He can call me a flower if he wants to. I don’t mind.”

LESSON: Brand extension models have weak ROI if they’re not based on a good social media strategy.

3. Transmedia Model

Transmedia is a design concept, a technique, which happens across multiple media platforms, but in a platform appropriate way. It’s a communication that never sleeps, that constantly travels from one medium to another, from online to offline and vice versa; the goal is to engage the audiences in co-creating stories and benefit from them.

The following example is still in the development phase. It’s a story about WhooArt brand. WhooArt apartment is an apartment for rent rental on the island Vis in Croatia, whereas the WhooArt Gallery is an online gallery that sells works of selected artists. During the summer season, the apartment is used as the exhibition space. So each customer that rents the apartment has the opportunity to rent the vacational space and experience his own private exhibition of selected artists from the gallery.

The story about art travels from the apartment to the online gallery and back. Communication about the service is spread around through many media channels and invites users to share their own story on the art experience. Have you ever dreamt about sleeping in Mel Ramos’s exhibition room?

This online business model is part of the transmedia window model. Individual services can live on their own (within separate browser windows), however, only in cohesion they can form a unique experience.

LESSON: Tap into an unknown with strong design. Don’t be afraid to experiment with a variety of media channels, but bear in mind that without a good story you’ll have nothing to communicate. Design a strong narrative and experiment!

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How would you describe your business model? Do you have one?

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  • alexandria scott

    Great post!. You have stated and identified three types of online business. You have added our knowledge and you have clearly stated its relevant and its help to us.

  • Kristin

    I like your tourism examples. Do you have strong examples from the education sector for the 3 online business models?

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  • Gil C

    This is trivial, but I’d imagine the Disney squirrel you quoted is actually an adorable skunk from the animated movie “Bambi”.

    Apt examples, though.

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  • Sara

    Thx. Joshi

  • Sara

    I guess we are getting more and more mature .o) thx. for your comment.

  • Ter55

    Lovely article & factual as the strategies are getting more creative & adapting on a daily basis :)

  • Apurva Joshi

    Nice article Sara

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  • Sara

    Dear Phillip,

    Thx for your comment.

    I can’t state that the brand extension
    model has weak ROI in all cases. Every company makes their own decision about the integration of web business model that best fits
    their strategy, needs & possibilities.

    For example, a theater play – I can’t remember its name – was sold out for the entire season by engaging with their audience
    via Twitter. Their strategy was based on adapting the play
    to a channel. They twitted the entire play and created a great interest that
    resulted in a sold-out season. I think this is great brand
    extension ROI.

    Sara

  • Phillip

    Brand extension models have week ROI…
    I think that should read
    Brand extension models have weak ROI…