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Tag: revenue model for startups

  • Top 7 Best Revenue Models for Your Startup

    Every startup builds a business model that is viable and promises huge returns after a specific time frame. But for a business to sustain itself in this highly competitive ecosystem, earning revenue along with some investments is important. So, here are some of the revenue models for startups i.e. a channel through which a specific business earns to sustain and grow itself. The offerings could either be a B2B (Business to Business) or B2C (Business to Consumer).

    What is Revenue Model?
    Markup Revenue Model
    Commission Revenue Model
    Subscription Revenue Model
    Arbitrage Revenue Model
    Advertising Revenue Model
    Pay Per Use Revenue Model
    Licensing Revenue Model

    What is Revenue Model?

    A revenue model is a conceptual framework that determines and explains the revenue earning strategy of the business. A revenue model is a framework for generating financial income. It is the strategy of managing a company’s revenue streams and the resources required for each revenue stream. It includes the product or service of value, the revenue generation techniques, the revenue sources, and the target consumer of the product offered.

    Revenue Models For Startups

    Markup Revenue Model

    Normally followed by middlemen. In simple words, earning profits by selling goods at a price that is higher than its actual price, this margin includes all the profits, commission-based revenue model, and additional costs. They buy the product from the manufacturer, before selling it to the consumer. E-Tailers, retailers follow this type of revenue model.

    Commission Revenue Model

    Charging a fee or a commission for providing a platform, to connect a provider with a consumer. They charge a commission based on service or item being sold. The commission may be fixed or maybe a percentage of the selling price. This commission-based revenue model is highly popular in generating a revenue stream, especially for various internet companies. Aggregators like Ola, Payments wallets like Paytm work on this business model.

    Subscription Revenue Model

    Charging a periodic fee for a specific service. Most common for OTT (Over the top) platforms and SaaS (Software as a service) providers to generate revenue. The periodicity can be weekly, monthly, or yearly, based on the service and its provider. A subscription for basic access in addition to some extra charge contingent upon use. An essential telephone utility pays a pre-decided expense for a month to month use yet may have additional charges for extra administrations, for example, significant distance calls, registry administrations, and pay-per-call administrations.

    At the point when the essential help is offered for nothing out of pocket, this plan of action is frequently alluded to as freemium. This revenue model has a high recurring ratio i.e. a customer might come back to the platform if he likes the service and finds Return on Investment good enough. Netflix, Prime Video, Byju’s follow this revenue model.

    Subscription Revenue Model
    Subscription Revenue Model

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    Arbitrage Revenue Model

    This revenue model works on the price difference of the same product in different markets. Currencies, bonds, commodities are traded in different markets and the profit generated through the trading results in cash flow. This revenue model of a startup is usually a low risk one but might result in heavy losses if a currency gets delisted due to heavy inflation. The arbitrage online system is a publicizing procedure that includes purchasing traffic from a site that coordinates to your webpage and selling promoting space on your site. Utilizing this basic method the potential for cash making is boundless.

    Advertising Revenue Model

    Money is generated by providing a platform for companies or individuals to display their advertisements. Social media platforms earn through this business model. This revenue model is highly profitable if successfully implemented. A provider might charge an advertiser based on duration and area, if present in an offline channel or based on clicks and views in the case on online channels. Facebook, Instagram, and various magazines and newspapers follow this model for generating cash flow. This revenue model is easy to adopt if you have a greater regular audience and you can easily earn more money.

    Pay Per Use Revenue Model

    Platforms charges a user commission, every time he uses their service. Rates might differ as per the service being provided and the amount. Credit card companies follow this revenue model of a startup.

    Licensing Revenue Model

    Most inventors and owners of any intellectual property earn by providing a license for their invention. People who have patented their inventions follow this revenue model. The license amount is dependent on time, region, and volume. Software providers like Microsoft follow these types of business models for startups to generate a revenue stream. A licensing revenue model allows technology producers to monetize their new technology products by licensing them to other companies so that they may be integrated into an end-product.

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    FAQs

    What is a revenue model?

    A revenue model is a strategy for managing a company’s revenue streams and the resources required for each revenue stream. A business model is the structure comprised of all aspects of a company, including revenue streams for startups, and describes how they all work together.

    What are the types of Revenue Models?

    Types of Revenue Models are as below:

    • Markup Revenue Model
    • Comission Revenue Model
    • Subscription Revenue Model
    • Arbitrage Revenue Model
    • Advertising Revenue Model
    • Pay per Use Revenue Model
    • Licensing Revenue Model

    What is Commission Revenue Model?

    Charging a fee or a commission for providing a platform, to connect a provider with a consumer. They charge a commission based on service or item being sold. The commission may be fixed or maybe a percentage of the selling price. This commission-based revenue model is highly popular in generating a revenue stream, especially for various internet companies.

  • Revenue Generation Model of Television Channels

    The Indian Television Industry produces thousands of programs in many Indian languages with the Hindi, Tamil and Telugu factions of the industry being the largest.  In 2021, the Indian Television Industry was worth INR 720 billion and is estimated to reach INR 826 billion by 2024.

    Emergence & Expansion of the Television Industry

    Television emerged on the Indian market in 1959 as an experiment which offered two-hour programs for a week.  It soon garnered popularity and by the 1970s television centres were opened in other parts of the country.  The year 1976 saw Doordarshan emerging as a separate government department and in 1982 it telecasted the 9th Asian Games. The 1990s saw the television industry expand with the emergence of private television channels.  It began after CNN broadcasted the Gulf War.  STAR (Satellite Television Asian Region), which was based in Hongkong entered into an agreement with an Indian company giving birth of  Zee TV. Several other channels came into existence during this time including regional channels and international channels like CNN, BBC and Discovery offering different categories of entertainment to a wide variety of audience.  This expansion also gave rise to DTH (Direct To Home) cable operators. By the year 2016, Indian Television boasted of 857 channels of which 184 were paid channels.

    Television has become an integral part of people’s daily lives.  The popularity of the medium is due to its capability to cater to the needs of its audiences through various shows of different genres telecasted through various channels.

    Revenue Generation Model

    As with any commercial enterprise, television industry operates with the basic idea of generating revenue and posting profits.  The various channels generate revenue from three basic streams – Advertisements, Subscription Services, Sponsorships & Product Placements, Licensing owned Content and Re-transmission Fees.

    1. Advertisements

    Television channels sell airtime and slots to advertisers who wish to showcase their products or services during commercial breaks.  The slot and airtime rates depend on the time and on the popularity of the show as well as the time-length of the advertisement itself. Advertisements broadcasted during prime time cost more than those which are broadcasted at low viewership slots, like mornings or early evenings.  Even the TRP (Television Rating Points) ratings of the show affect the airtime rates.

    2. Subscription Services

    This is a two-pronged process.  Some television channels are made available to subscribers, by DTH operators, on payment, which could be monthly or annually.  A part of this subscription fees goes to the channel itself.  This model of revenue generation is largely volume based.

    3. Sponsorships & Product Placements

    Television channels are a high interest sponsorship venue due to their wide and deep audience penetration.  They receive funding from sponsors for programming.  A high revenue is also generated from specific advertiser product placement within their shows.

    4. Licensing Owned Content

    Television Channels also produce and distribute content like programs or movies and generate revenue by licensing or outright selling the rights to other networks or streaming devices.

    5. Re-transmission Fees

    Television channels charge fees from cable distributors and satellite operators to allow them the right to retransmit their local signals.  This can happen for a program that sees high demand.

    Specific coverage of live events like sports, concerts or award shows are also a high revenue generating stream for television channels.  Such events attract large audiences which, in turn, translate into higher advertisement rates.  Another minor, however, effective revenue generation source is the internet. Television channels stream their program episodes via YouTube and generate income on the number of times the program is viewed.  This also works as an advertisement for the program and the channel and can increase their audience reach.

    Trends in the Television Industry

    The delivery of television programs to the audience has undergone a huge change, especially in the recent years. What was delivered through relied antennas has switched to dishes, distribution through cable networks and direct broadcast satellites.  Through the use of Internet Protocol Television, programs are available to watch on mobile phones.

    Conclusion

    The television industry is fiercely competitive and its revenue generation is heavily dependent on capturing the viewers attention and sustaining it.  Effectively, it is that attention that the channels sell to the advertisers.  While the TV channel landscape continues to evolve with the rise of digital media and streaming services, the fundamental principles of generating revenue through high-quality content and effective advertising remain constant.

    💡
    The revenue of TV channels in India primarily comes from advertising, which contributes around 70-80% of their total revenue.

    • As per industry estimates, the Indian TV advertising market was valued at approximately 35,000 crore INR (~$4.7 billion) in 2021.
    • The television revenue is expected to grow at a CAGR of 4-5% and reach Rs 826 billion by 2024, according to EY FICCI M&E 2022 report.
    • The report says, the ad revenue of TV is expected to become Rs 394 billion in 2024.
    • Revenue from subscriptions for TV channels is expected to reach Rs 415 billion in 2023.

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    FAQs

    How do free TV channels make money?

    Free Tv channels earn revenue by displaying ads between the shows.

    How much does it cost to start a TV channel?

    To start a non news channel the net worth of the company should be around 5 crores.

    What is the benefit of high TRP?

    If a channel has high TRP they can charge a higher amount from advertisers.

    What is the revenue model for TV Channels?

    The two key methods of revenue for TV Channels are:

    • Subscriber fee
    • Advertising

    How many TV channels are there in India?

    There are 850 TV channels in India.

    What is full form of TRP?

    TRP stands for Television Rating Point.

    Who calculates the TRP for Television Channels?

    TRP is calculated by Broadcast Audience Research Council using “BAR-O-meters”.

  • Paytm Business Model – How Does Paytm Makes Money

    Paytm is India’s largest platform for mobile payments and commerce. The word is an abbreviation for “pay through mobile “. This digital payment system and fintech company have its base in Noida. It was founded in 2010 by Vijay Shekhar Sharma in Noida with an initial investment of $2 million.

    Beginning as a prepaid mobile recharge platform it later expanded to be a single destination for all kinds of bill payments and much more by 2013. Today the platform operates in more than 11 Indian languages and is accepted across almost every grocery store, restaurant, pharmacy and whatnot. In 2020 the revenue of the company was increased by 10% to reach Rs.3629 crore.

    This article will explore the business model of Paytm to understand how Paytm earns money.

    Business Model of Paytm
    Main Products and Services of Paytm
    Revenue Segments of Paytm

    Business Model of Paytm

    The business model of Paytm is worth looking at due to its multipronged approach to ensure a seamless experience for both the company as well as the customers. Let’s look at the various components of the business model canvas of Paytm to further understand its details for generating revenue and constantly being at the forefront of innovation and providing the best possible online services to its clients.

    Key partners of Paytm

    With the kind of services that Paytm offers, it had partnered with a huge number of insurance companies, hotels, shopping centres, pharmacies, hospitals and every other institution where transactions through Paytm is accepted now.

    This collaboration with a plethora of organisations to gather bills and payments for various services enabled Paytm to expand its partnership over time. It has also partnered with banks to provide escrow services.

    Key Activities of Paytm

    The major activity carried out by Paytm is to facilitate the transfer of funds from one place to another. They also ensured that the best possible security is provided for the millions of transactions that are taking place through their platform.

    Another important activity of Paytm includes preventing scams and other cyber frauds in its platform. Apart from that they also strive to make Paytm a single stop for all kinds of payments that an Indian household should take care of.

    Value Propositions of Paytm

    The prepositions that augment value for Paytm begins with recharging business. Initially providing prepaid recharging services it later expanded to postpaid services as well. It further expanded to creating a Paytm wallet which served as a parallel bank account for the clients.

    From there Paytm has devolved into curating the idea of digital gold where customers can store gold digitally and later use them to complete transactions or even exchange it for actual gold of the same value.

    Paytm has also set up various e-commerce verticals wherein it serves as an important component in the completion of transactions.

    Key Resources of Paytm

    There is absolutely no doubt that a company cannot survive without having an inexhaustible resource domain. As far as Paytm is concerned its biggest resource is its partners. As the company started to grow it received support and funds from many resourceful entities like the Alibaba group and Soft Bank vision fund.

    One cannot overlook the amount of support that these resources give to their company. Another key resource that drives Paytm is its RBI license that lets Paytm legally operate the system of Paytm wallets.

    It has revolutionised the idea of digital currency, especially during the time of demonetisation. Its first-mover advantage in the technology platform is yet another key resource of the organisation.

    Cost Structure of Paytm

    Being a service-driven technological platform, most of the expenses that Paytm has to bear is related to its own platform and customer acquisition. Apart from that a large part of its budget also goes into improving the security of the platform and preventive measures to avoid any kind of fraudulent activities. It also invests in systems to avoid the risk of money laundering.

    Customer Relationship of Paytm

    Handling over 65 million customers is not an easy job. To cater to the concerns and complaints of its clients Paytm has a customer support service that is functional 24×7. The customer can make use of phone calls or chat services to voice their concerns and get them rectified.

    In many cases, it also has clear-cut directions to navigate the customer to whatever service they need on their own. These are accessible directly from the website or the app in itself.

    Customer Segments of Paytm

    The wide variety of services offered by Paytm is reflected in its multilayered customer segments as well. The most important customer segment of Paytm is the users of its e-wallet. This is mainly because of the fact that the wallet is like a flagship service of the organisation.

    Another segment is that of the users of the app which constitutes the middle class of the country. Paytm is also seeing a growing segment of customers in the older age group as well.

    Channels of Paytm

    Considering the big name that Paytm is in India, there is no doubt that the primary channel of distribution of the company is its website and app in itself. Apart from that Paytm also ties up with the sites of their clients, e-commerce platforms, vendors sites et cetera to promote the platform. Paytm also ensures that they attract customers through advertisements and constant follow-ups.

    Main Products and Services of Paytm

    Paytm makes money through various businesses like Paytm mall, recharge services, ticket booking, bill payment etc. By facilitating a gateway solution to every transaction, Paytm ensures a steady flow of money.

    The launch of Paytm wallet in 2014 was revolutionary as far as the company was concerned. Since then it has evolved as a parallel bank account as far as the users are concerned. They have also released a digital gold service wherein it allows users to buy gold digitally.

    In future, they are also planning to collaborate with various developers so that the customers can convert their digitally purchased gold into finished commodities.

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    Revenue Segments of Paytm

    The major revenue segment of Paytm is through commissions that it derives from customer transactions that take place on its platforms. As mentioned earlier they have collaborated with banks to create escrow accounts facilitated by Paytm wallets. The company generates revenue from these escrow accounts as well. With every transaction, both Paytm and the partner bank receives a predetermined interest that was mutually agreed upon between them.

    Revenue of Paytm
    Revenue of Paytm

    The following are the various businesses through which Paytm earns money

    • MarketPlace (Paytm Mall)
    • Paytm Wallet
    • Recharge Services
    • Bill Payments & Ticket Bookings
    • Digital Gold
    • Coupon Codes/Voucher cards
    • Payment Gateway Solutions
    • Paytm Payments Bank

    FAQs

    How does paytm makes money?

    The major source of revenue for Paytm is commissions, it charges merchants a small fee which is mutually agreed upon. It also takes commissions from the users.

    Who is the founder of Paytm?

    Paytm was founded by Vijay Shekar Sharma in 2010.

    What is the revenue of Paytm?

    The revenue of Paytm is around 3,187.6 crores INR as of 2021.

    What is the valuation of Paytm?

    The valuation of Paytm is $16 billion as of 2021.

  • How to Create an Effective Revenue Model for Startups

    Revenue model is how a business makes money. It is important for the company’s long term projections. It provides Current and future potentials to earn profit. Building a great revenue model convinces investors that you are worth investing in. Designing an effective and profitable revenue model for startup is difficult but is significant.

    What is a Revenue Model ?
    How to Create an Effective Revenue Model for Startups?
    Top 10 Most Effective Revenue Model For Startups
    FAQ

    What is a Revenue Model ?

    The Revenue model is a strategy for managing company revenue. It will determine the types and sources of revenue that your business will generate. It projects how a product and service will generate revenue.

    How to Create an Effective Revenue Model for Startups?

    Choose a Revenue Model that is suitable for your startup and your Market

    Research the market you are entering extensively. Study your customers, address subscription options to them. Analyze how your product will fulfill the customers. On the other hand, if you are looking to sell your product to larger companies licensing is the fittest option for high returns.

    Revenue is a key component of the business model. Also While identifying your market, analyze your competitors as well.

    Create a Revenue model that expresses the value of your startup

    Your revenue model should communicate your value. How different your products and services are from the competition. A prominent selling point is to stand out your product that people will sign up for.

    Build a Revenue that helps you find the top investors for your startup

    Build a great revenue model that convinces investors that you are worth investing in. Focus on investors that will be in for the long haul. The investors should get a complete idea of your business values by just looking at your revenue model. Investors also focus on how profitable your revenue model is.

    Determine your revenue model

    An important point to figure out is how you’re going to charge your customers. There are two comprehensive types to charge your customers.

    Transactional: You can Charge customers on a per transaction basis. Once the customer purchases the product from you they don’t need to pay again. Examples: Tesla, Apple (hardware), Starbucks

    Recurring: You can charge your customers a monthly or annual subscription fee for the ongoing service. Examples: Netflix, Blue Apron

    Determine your customer acquisition model

    There are many customer Acquisition models but we will shortlist three important customer acquisition model

    • Direct: Does Your company has direct contact with the customers of your product. This typically means contracting salespeople who engage directly with and sell the product to customers. This tends to work best for products that demand a high price. Examples: Tesla, Palantir, Boeing.
    • Indirect: If your company does not has direct contact with the customers of your end product. Indirect customer acquisition includes retail sales, channel partnerships, independent dealerships, consultants, etc. Examples: Mattel, Ford, Oracle, Coca-Cola.
    • Inbound: Customers have no or little contact with your company. This typically entails driving traffic to a website or app with  sign-up and payment interfaces. This works best for low price products or services that customers understand easily. Examples: Netflix, Amazon Prime, Spotify.

    Top 10 Most Effective Revenue Model For Startups

    1. Ad-Based Revenue Model

    Ad based revenue models require creating ads for product, service, or app and placing them on high traffic channels. Google’s Adsense is one of the most practical and common tool to get ads for your website. For most websites, AdSense will make about $5-10 per 1,000 page views.

    Revenue model
    Google Adsense 

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    2. Affiliate Revenue Model

    Affiliate revenue is an affiliate web-based revenue model in which you signup with a company to promote their products via links. You receive a small commission for the sales of the product or if someone executes the desired action.

    Affiliate revenue model
    Affiliate Revenue Model

    3. Subscription Revenue Model

    The subscription revenue model is a model where the company earns revenue by charging customers a recurring fee at regular intervals. A quite common and popular example of the subscription Revenue Model is a popular streaming platform Netflix.

    Subscription Revenue Model
    Subscription Revenue Model

    4. Arbitrage Revenue Model

    An arbitrage revenue model is a model that is followed by traders since ancient times. This is a quite simple revenue model. In the arbitrage revenue model, a product is purchased from a market or a region to be sold at high profit in a different market.

    5. Direct Sales Revenue Model

    In the Direct Sales Revenue Model, The business or brand directly interacts with the customers for selling their products. There are two types of Direct Sales

    Inside sales – When the customer calls to place the order for the product.

    Outside sales – When the brands sell their product using face to face sales transaction.

    6. Licensed Revenue Model

    The licensed revenue model is quite a profitable revenue model that is commonly used by music industries for licensing their songs. The brands or companies earn revenue by licensing their products. It is quite common in media industry and for patents, copyrights, trademarks.

    Examples of Best Brand Licenses

    • Angry Birds & Star Wars.
    • Microsoft & Fuji Xerox.
    • Microsoft & Canon.
    • Victoria Secret & NFL.
    • Lego & Star Wars.
    • Lego & Warner Bros.
    • Monopoly & McDonald

    7. Data Sales

    Data sales can be explained by a simple phrase “If you can’t see how the money’s made, you’re the product”. The data sale revenue model is a complicated revenue model and is hard to maintain. In this revenue model, the data is sold to the business or consumers.

    Specific companies use data sales as their primary revenue model while some use it to augment another revenue model. Data should be handled with care an proper public concern if you decide to go with it as your revenue model.

    8. Retail Sales Revenue Model

    In the Retail sales revenue model, you have to set up a traditional department store or retail store in which you offer physical goods to your customers. A retail business generates revenue from sales of the product with the help of its retail stores.

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    9. Channel Sales(or Indirect Sales)

    Channel sales are the most complex pursuance in the world of sales and marketing. In simple words, brands or companies rely on a third party to sell their goods.

    Revenue model
    Indirect Sales Revenue Model

    10. Freemium Model

    Fremmium Revenue model is a model in which the consumers are offered service for free of cost but additional cost is charged for premium features. Many companies use this type of revenue model for example Skype, Zoom, Spotify and many more.

    Freemium model
    Spotify Freemium Model

    FAQ

    What does a revenue model include?

    A revenue model includes the offerings of value, the revenue generation techniques, the revenue sources, and the target consumer of the product offered.

    What are examples of revenue streams?

    Subscription fees, Renting, leasing, Licensing content to third parties, Brokerage fees, and Advertising fees.

    What is the best revenue model?

    Subscription-Based Business Revenue Model is one of the best types of revenue models for startups.

    Conclusion

    Build a revenue model for startup that is equipped for the future. Research the market you enter effectively. Creating a revenue model might seem challenging but not having one is not an option. The revenue model for startup is crucial to driving the success of your company.