MBA Mondays: The Revenue Model Hackpad

The idea of peer producing a comprehensive web/mobile revenue model list was a success. The hackpad I created and linked to last week got a ton of contributions. I took the time this morning to clean it up a good deal. I will outline the high level changes I made in a bit. But since that hackpad is still wide open, I also made a final version and I have made it invitation only so I can control the edits this one gets. There may be a way in hackpad for the initial author to lock down a hackpad but I couldn't find it, so I did it this way.

So what edits did I make to the wide open hackpad? Well first, I tried to clean up the examples and make them as definitive as I could. The more well known a company/service is, the better example it is. I also took out many of the multiple examples. I think one is generally sufficient. I also took out the revenue models I thought were duplicative or slight variants of other revenue models. And there were a number of sections at the end that I would call "business models" as opposed to revenue models. So I took them out. Finally, there were a few entrepreneurs who were using this hackpad as a way to promote their companies. In effect, they were spamming the hackpad. I took out everything that felt like spam to me.

We are left with nine categories:

Hackpad table of contents

I think six of them are truly definitive revenue model categories (advertising, commerce, subscription, transactions, licensing, and data). The other three (peer to peer, mobile, and gaming) could be folded into the first six since they mostly map to existing models (mobile ads are ads). But these three categoris are unique in many ways and so I felt like leaving them in even though it's not as clean this way.

The "final" hackpad still needs work. There are some entries that are missing examples. I noted them with (??). There also may still be important or emerging business models we are missing. If you would like an invite to help fix the final version, please leave a comment to this post and I will invite you if I think your edit is useful.

My hope is by next week, we will have a truly definitive list of mobile and web revenue models and then I can use the list as a template for the MBA Mondays series on Revenue Models. Thanks for everyone's help on this.

#MBA Mondays

Comments (Archived):

  1. jason wright

    “Finally, there were a few entrepreneurs who were using this hackpad as a way to promote their companies.”shocking and reprehensible.what’s the world coming to?

    1. fredwilson

      No. Just the way they are hard wired. I see it every day.

      1. takingpitches

        Spam and hustle are, perhaps, in the eye of the beholder.

        1. awaldstein

          The trick is not to stop selling. it’s to sell to those who should want to know about it and buy.That’s the difference between spam and value.

          1. takingpitches

            Hustle in the right forums!

          2. falicon

            I like and agree with that distinction πŸ˜‰

      2. jason wright

        there’s a time and a place for a particular thing. scorched earth is not the way.

  2. awaldstein

    Been too busy to participate but this is drawing me in.Thanks for doing this Fred.

  3. takingpitches

    Global brainstorming AVC- style!That was really great. Throw everything up onto the board. Everyone participates without regard to hierarchy. Then ideas get culled down to the beginnings of an amazing, invaluable product that is the basis for weeks of further learning/more discussion.Love it.

    1. fredwilson

      You are describing what we want to become

      1. takingpitches

        Looking forward to the unveiling!

      2. William Mougayar

        Bring it πŸ™‚

      3. Brandon Burns

        I led the team that created a platform built to take the ideas of many and distill them down to something great: the outside, it was simple and fun. under the hood, it was infinitely more complicated than people think β€” crowdsourcing ideas can be a very tricky business.i didn’t respond to the USV design brief before, as it seemed more like a branding project, which isn’t my strong suit. making complicated processes easy to use and experience, is.if you find yourself not getting what you want out of your site redesign process, i’d be more than happy to help.

        1. fredwilson

          we are working with behance on a new identity. we are getting close to engaging several designers to do concepts for usbut is a software project. we have a hacker in residence who is a CS major at NYU who is helping us build it.we hope to roll something out sooni agree with you about crowdsourcing being tricky. this hackpad effort is an example of that

          1. Brandon Burns

            developers building software in isolation without designers makes me queezy, but i’m excited to see what comes of the project. good luck to your hacker!

          2. kidmercury

            yeah that’s def one of the top managerial challenges these days. design and development in parallel, in unison

          3. Brandon Burns

            its not a challenge, its a choice to either do it that way or not. most people simply don’t value design, even the people who pay lip service to it because its the new buzz word du jour.i grew up in a company that valued the way a user experiences a tool as much, if not more than the way the tool is actually put together β€” and achieved great success because of that point of view. i simply can’t see any other way to do it.

          4. kidmercury

            IMO it’s definitely a challenge. outsourcing/crowdsourcing is much cheaper, and to do synchronized development design, you need to find someone who is truly gifted at both (exceedingly rare) or you need to create a team that gels together and designers and developers can work together. this is more expensive, and requires better management. at least that has been my experience, repeatedly across projects. perhaps it is possible to have a synchronized design/development approach when outsourcing/crowdsourcing, although i haven’t found that to be the case. for sure, though, that may just be an indication that i need to improve my product management skills!

          5. Brandon Burns

            i think in the end, we all default to what we know and appreciate. we tell ourselves what is necessary and what is trivial.but you’re right that it can be a challenge, especially with outsourcing, crowdsourcing, or really always when you have a small budget. and when i can’t do things the way i want to, i start with design and worry about dev later.but if i have the resources, they’re used. the volkswagen project i mentioned was done by teams in china, sweden and vietnam… all managed out of beijing. it was hard, but we made sacrifices like having meetings wrapping up 1am and oodles of travel expenses. but we had the resources, budget and drive to do it all.

          6. Yaniv Tal

            we do development inhouse and outsource design, but that’s not to say we don’t take it seriously. i love creative meetings and while our team is design conscious, none of us can produce as well as a first rate designer. luckily the world of design has embraced the agency model exceedingly well and we can get high quality work for much below salary.word of warning though – not at all a fan of the spray and pray model for design. we tried pitting designers up against each other for our logo and the results weren’t stellar. we’re undergoing a rebranding now. it’s much more effective to find a talented designer from the start and develop a deep relationship with them.

          7. kidmercury

            i agree about the problems of spray and pay. once you go down that path, you’ve already forked design and development, and so the project will lack the cohesiveness it needs to be truly awesome. this could be okay if you are going totally budget, which as a bootstrapper i do the majority of the time, but then you should know beforehand this is part of your strategy of cutting corners and costs so that you can focus on something else with your limited resources.

          8. fredwilson

            they are not isolated. we will put the team together for the final push.

          9. kidmercury

            IMO crowdsourcing becomes more difficult with the more independent graphs/platforms that are being utilized….and becomes easier the more a single graph is developed and wholly owned

        2. takingpitches

          Took a quick look at the link, Brandon, and the People’s Car Project is a COOL project. Congratulations!I put the info in a link somewhere a couple of months back, but DOD is “crowdsourcing” a couple of next-gen designs as an experiment. Might be worth looking into given your success with the PCP.

          1. Brandon Burns

            thanks! it was a great experience and i’m proud of the work. and the team was amazing, which made all the difference.what’s DOD?

          2. takingpitches

            The Pentagon. Looking for my comment on AVC where it was discussed, but can’t find now. Here is a post from my blog that has some links though:

          3. Brandon Burns

            super cool. i will definitely look into that, thanks!

          4. falicon

            I dug around a bit too, but didn’t see any mention of it in the ~250 comments we’ve indexed of yours (… )If you do find it, please point it out to me so I can dig into if/why it’s missing from the search results…

          5. takingpitches

            Will do that later today.Remember the exchange too vividly for it to just be in my head…at least I hope so πŸ™‚

          6. falicon

            :-DIf you have any other vague details about the exchange (who it was with, other keywords that might have been used, overall general topic besides crowdsource or DOD) let me know and I’ll also dig around for it a bit more…if one comment is actually missing, others could be too…so def. important bug for me to uncover if that’s the case. Thanks!

          7. takingpitches

            Phil, it’s in the comments under this post:…(Disqus issue) It was weirdly tagged as “Awaiting moderation” even though Fred had responded to the must not pick up comments tagged that way.

          8. takingpitches

            I don’t know why I called you Phil. On auto-pilot. If that is not your name, my sincere apologies!!

          9. falicon

            No problems…I answer to almost any name (and have been called almost all of them too!)…btw, the comment is now available in the results ->…Oh and just in case you are *really* curious…my real first name is Kevin…

          10. takingpitches

            Great! Nice to meet you a little more formally, Kevin!

          11. falicon

            OK cool thanks! I will dig into it more now to make sure it’s just because of the ‘moderation’ thing…good catch!

          12. ShanaC

            really, why is the DOD crowdsourcing design?

          13. takingpitches

            Lessons from the Internet on crowdsourcing combined with cost overruns and budget pressure. Check out my post for some links.

        3. ShanaC

          that is so cool πŸ™‚

          1. Brandon Burns


        4. Dave W Baldwin

          Good job Brandon. That concept added to what @JLM:disqus mentioned per his visit to Perfect Daughter would be The Thing.

      4. LE

        The new usv community.

    2. jason wright

      what hierarchy?

  4. takingpitches

    How about “platform tax” as another revenue model, exs. iOS 30% cut and FB credits (zynga).

    1. JimHirshfield

      Aren’t those forms of transaction processing? Those guys are basically taking a piece of the transaction.

      1. Dan Lewis

        Yeah, I was going to put that under “distribution fees” — but that feels like a transaction processing fee.

      2. takingpitches

        Yes, perhaps. This is why I think the distinction between revenue and business model is sometimes tough. Might be the difference between how and why.They have a different “why” for why they should/can capture the value than a pure processor. FB and Apple have created a platform that wouldn’t exist so they should take a cut of transactions that happen within (at least what they think).Hopefully some of the why will come out in posts and discussion because I think it is very important.

        1. Dan Lewis

          That’s true for a lot of things, though. Etsy, Ebay, Amazon all charge sellers for access to others via that platform.

          1. takingpitches

            Similar, but different. My categorization is trying to get at producing revenue on platforms that are not “purchase intent” first to use Chris’s term.

      3. Mark Essel

        agreed on that categorizationps “pimpin’ ain’t easy”

      4. Aaron Klein

        I always find it useful to break these two things up. The 30% Apple charges is probably 3-5% for transaction processing, 25-27% for distribution and bringing you the customer.

        1. awaldstein

          Great point.So the model question is whether 25% is an acceptable customer acquisition fee?From a traditional modeling perspective, that’s high as it never gets cheaper once acquisition happens.

          1. Aaron Klein

            Agreed, in the context of the App Store. No choice there, but it’s high since you’ll pay it on every sale.Outside an App Store, I’m quite happy to pay 30% of initial revenue to acquire a customer I can do repeat business with over time. Maybe more, depending on margins.

          2. awaldstein

            Yup agree completelyAnd the other point oft ignored is that the App store, unlike most other channels, has no network effect, and really doesn’t help find your customers for you. It’s not a channel that sells! it’s a catalogue you can buy from.That is not a moot distinction in my opinion.

          3. Aaron Klein

            True. They are trying to aid discovery (genius, etc.) and in some cases they do, but the vast majority of the time, it’s a very expensive payment processing system.

        2. ShanaC

          but we don’t know those numbers as certain

          1. Aaron Klein

            Well, we know Apple’s costs for transaction processing are probably 2.25% to 2.5%.

    2. fredwilson

      that should go into transactions, right?do you want me to invite you into the hackpad to make that change?

      1. takingpitches

        Yes, please. I will make it.

        1. fredwilson


  5. JimHirshfield

    Would be great if that hackpad, or the ToC was embeddable.

    1. fredwilson

      i made that feature request a few weeks ago. they are working on it already

  6. Jill Stern

    Fascinating that in the end, you can narrow it down to only 6 different models in which all web/mobile companies generate revenue.

    1. fredwilson

      there may be more, but i am a fan of reduction as much as possible

  7. William Mougayar

    You’ve just uncovered a great way to tap into the power of this community- real crowd sourced brainstorming with a meaningful outcome.

    1. fredwilson

      that’s what we want to do at usv.comyou will start seeing more of that this week

      1. Abdallah Al-Hakim

        This example has finally made it clear to me what USV is trying to do. I know you have written about it before but I was never completely clear!

  8. 2joshis

    @fredwilson:disqus mobile pay as you go model is being adopted in emerging markets for electricity/clean water etc http://www.millenniumvillag… doesn’t entirely fit in transaction services

    1. fredwilson

      like prepaid calling cards?

      1. Carl Rahn Griffith

        Or mobile payments via direct carrier billing for the many who are unbanked – which is no longer just an emerging markets issue.

      2. 2joshis

        yep, similar user sms’s a code to operator, Operators loads the electric meter (via an SMS to the meter) with fixed number of electricity units. Similar scheme’s are also used for users buying can’s of drinking water in rural area’s.Another interesting application is authenticating genuine medicine via SMS, each pack of medicine contains a code which is SMS”s do a well known number, user gets a return SMS indicating genuine or counterfeit .

  9. Ryan Frew

    Really interested to see the AVC community’s thoughts on the “freemium, pay to play” model, especially with USV’s investment in Zynga. This discussion was brought up in a Wired article (These Guys’ $5K Spending Sprees Keep Your Games Free to Play) a few weeks ago and I found it surprising how controversial this model is to some people.

    1. Aaron Klein

      Oh, let’s not start that again.If you really must see that, search this blog for zynga and you’ll find it. πŸ˜‰

  10. falicon

    That ‘final version’ requires access even to read…

    1. fredwilson

      ooh, that’s a problem. i need to fix that. i will figure out how. thanks for pointing that out.

    2. ShanaC

      it isn’t just me who noticed that earlier then πŸ™‚

  11. jonathan hegranes

    How many revenue models would you recommend for a company? Does the answer vary based on stage / maturity of the company?IOW, strength in diversity of revenues or strength in focus?

    1. fredwilson

      one to start. focus everything on getting it right and to scale. then add others. i like the way twitter is doing it. clearly they have other models available to them. but they are 100% focused on promoted content right now.

      1. Abdallah Al-Hakim

        that is a great example because they obviously have the resources to try other revenue models but focus is critical. Great question @hegranes:disqus

      2. JLM

        .When you are sitting there with that first blank piece of butcher paper and trying to diagram your business model, you have to initially recognize “who are my customers”.The you have to decide how do you reach them — channels.Some customers you will reach with multiple channels and some will have unique channels.Income through each channel may be dramatically different because the expense part of the income statement may simply have different expenses.This then leads to CTA (cost to acquire) v LTV (long term value) valuation of each individual customer.The casino industry has done a very good job of wrestling with this modeling issue because the value of a long term customer can be so great regardless of the individual cost to acquire..

  12. Brandon Burns

    I still cringe when I see “mobile” pointed out as a revenue model, or made the focus on anything, really. It’s a channel; one of extreme importance, but one of many.Unless you literally own the channel, a distribution channel is not a product.NBC’s product is entertaining content, paid for by advertising. They first distributed this on the new radio technology of the 1920s. Then the new TV technology of the 1950s. Then the new internet technology of the 1990s. Now its distributed in the new mobile technology of this millennium.Your channel is not your business; your product is.I acknowledge that distributing on a different channel can change your business plan. Attempting to make money from advertising on mobile, on a small scale, could put you in the poor house. And selling subscriptions via TV may not be so smart these days. But that just means you have to pick the channel that best suits your business and product, not be a slave to an arbitrary channel.

    1. Carl Rahn Griffith

      Very true. Well said.

      1. JamesHRH


    2. William Mougayar

      True, but there are certain revenue methods that would thrive in Mobile specifically, and not desktop, right?

      1. Carl Rahn Griffith

        Very true, William. A concern I note is that many seem to think if they simply move to mobile, regardless of what their product/service is, then they will open up a whole new market/revenue stream.

        1. Brandon Burns

          humans are animals. if the pack starts running in one direction, almost everyone else will, too β€” regardless of whether or not its good to do.only few set out to chart a different course, and then go back to find and redirect the pack.but then again, a lot of those few get lost or eaten by predators, too!

          1. Carl Rahn Griffith

            Absolutely.Lol, I will pass over to my wife there, Brandon (she lectures on animal behaviour, etc) πŸ˜‰

        2. Elia Freedman

          I heard someone recently say that when the method of distribution changes the business model needs to change also. This statement seems to mirror yours, Carl.

          1. Carl Rahn Griffith

            Nicely put, Elia.

      2. awaldstein

        When I look at my mobile usage, the model that is tied to my behavior with that device is always transactional.I buy stuff on the phone. And almost always I have an account as more thank 1 or 2 clicks on the phone is a non starter for me.So is it a revenue model or a product type that we are talking about?

        1. Brandon Burns

          you probably buy things on your phone, because the business you frequent on your phone are stores that have a well-designed “location” in the mobile matter the store β€” ebay, amazon, J Crew, whatever β€” their business is retail, and the phone is a channel where they open up shop. they design their store appropriately for the location, in the same way you design a flagship store on 5th avenue differently than your express outlet in a mall, but they don’t change the nature of their business because of the location. if you’re in retail, you’re in retail no matter what you are.

          1. awaldstein

            Very articulate. You’ve obviously been through the thought ringer on this.I agree partially… But it’s not that simple to meApps. Mobile stores are catalogues, You buy from them due to clarity of purpose, brand resolve or whatever.Retail stores are not that. For the most part you are Sold product at retail unless its a commodity or just boring stuff.That difference is not trivial. It’s behavioral and the DNA of smart retail. The best location based retail sells at retail and is bought from on their mobile app. The is the DNA of true hybrid sales at their core.Amazon for example, doesn’t sell anything. They are just a catalog to be bought from

          2. JLM

            .Amazon is becoming the “fulfillment center” of first resort.You go see something somewhere — Best Buy as an example — and then you review it online and buy it from Amazon.Amazon is also wrapping the entire experience in a better guarantee, better customer service, better return policy and delivering it to your door.Where and when did you decide to buy the product? That is the buying decision.From whom did you decide to buy it? That is the fulfillment experience..

          3. awaldstein

            Perfectly said.Never has marketing done right been more critical to business success.And never has it been more closely aligned to selling.Maybe at their best they’ve always been attached. I think so. But now with such a bifurcation, it’s become more self evident.

          4. ShanaC

            You know, this echos many experiences of my friends. Effectively, for my generation – amazon is walmart. And they are going to run into walmart problems sometime soon.

          5. laurie kalmanson

            they already are, with warehouses…

          6. PhilipSugar

            Its like UPS or Fedex,they just moved the last mile.

          7. JLM

            .There is an interesting “reverse engineering” twist on all of this.Witness a brand like Piperlime which started on the web and has just opened its first brick and mortar store in SoHo on Wooster.When you go there, you see and touch and feel their goods — almost purely traditional retail experience.But if they don’t have your size or color or you want a slightly different product, they have their entire website up on a flat panel screen (touchscreen? I am not sure) and you simply order it there.This is like a backwards extension or closed loop between web to bricks & mortar and back to web.This is kind of stuff you learn when you have to accompany your wife and Perfect Daughter shopping in SoHo as I did last week..

          8. awaldstein

            The hybridization of retail fascinates. It’s a new obsession.Next time in Soho ping me if you’d like. Relaxing on a cold NY afternoon over a bottle of wine getting to know folks better is a grand way to spend an hour or two.

          9. Carl Rahn Griffith

            Sharing a bottle of wine is the pinnacle of social media πŸ˜‰

          10. awaldstein

            You are due back for a visit Carl.I’m late to the party but have become a devotee of Buvette lately in the Village. The food is as good as the wine list and as informal as they get.You would love it I’m sure.

          11. Carl Rahn Griffith

            I’m well overdue, Arnold. I will hold you to a visit there, if/when I ever get back to NYC. At present, London seems a long way away, lol ;-)This exact time 10 years ago, I was in NYC sorting out an apartment, etc, for my move there in January of 2003. It’s hard to not look back, sometimes.Time flies…

          12. awaldstein

            Time is an issue to get in front of.You can’t grab it. Can’t stop it.Been trying to ride it lately and it feels like the right poise for me!

          13. laurie kalmanson

            time flies like an arrow. fruit flies like a banana. (running away to hide now)

          14. ShanaC

            Why there – I’m looking for new places!

          15. awaldstein

            I collect places I love that work for me.New-2-me is the same as new ;)Croque Forrestier with a bottle of Trousseau at Buvette (new-2-me), takes it place now next to Farm Egg Pizza at ABC Kitchen (not new), braised Cauliflower at Balaboosta (not new) and free range steak with blue cheese at Odeon (near ancient)!I’m just a simpleton when it comes to perfect places to sit at the bar and eat and drink with friends.

          16. Dave Pinsen

            What is a Croque Forestier? I’ve heard of Croque Monsieur and Croque Madame, but this is a new one to me.

          17. awaldstein

            Croque Monsieur (cheese, ham, grilled goodness) without the meat.

          18. Dave Pinsen

            OK, thanks.

          19. awaldstein

            Better answer is jut Yum!Come have brunch with me before the year is out!

          20. Dave Pinsen

            Will do. Email me a date that works for you.

          21. ShanaC

            Hey, if you ever want a one time eating buddy (I’m a jewish girl who likes food)

          22. takingpitches

            That’s so excellent (and no privacy concerns)!

          23. JLM

            .Will do but we were on Operation Sandy. Perfect Daughter lives on 18th St and had to make 4-5 shopping trips just to get her nerve back after the storm.I might have been getting hustled. Who knows?Next time for sure. Thanks for the invite.JLM.

          24. ShanaC


          25. LE

            “I might have been getting hustled. Who knows?”When I was younger my dad never had a problem if I hustled him. In fact from my memory it was actually a good thing and was expected and encouraged that I exploit any opportunities (which is not to say “lie and cheat” btw.)I think I told the story here of my ex wife, at our final divorce signing agreement saying “oh one more thing I also want a trip to disney for me and the kids or I’m not signing that thing”. God bless her. She learned that from me. I was so proud that she had listened all those years.

          26. Dave W Baldwin

            If it makes you feel any better, found out this morning my “author” buddy went to help his sis in Jersey, doing 3 days hard labor, got extremely drunk the final night (thought it was a party) and was told not to come back…man, she was always a cold one.

          27. ShanaC

            You can do that at JCrew, at Madewell, and at Aldo. I don’t think touch/feel is going away so soon. I also feel that customization is going to be back very quickly – no reason you can’t get size narrow shoes that you’ve held in your hands even though they aren’t in stock.

          28. laurie kalmanson

            back in the day, many brick and mortar stores with catalogs had “hotline” phones you could use to call customer service for the same item in a different color. also, stores with helpful salespeople would always offer to check with another branch with a phone call, before you could do it yourself with a tap on the screen; it was part of customer service.

          29. Dave W Baldwin

            Thanks for mentioning. As of late, some places are taking customer service to the point of annoying. This fits with what @Brandon_Burns:disqus mentions today.

          30. Brandon Burns

            If I sell hard goods to people in exchange for money, I’m in retail. From Walmart to eBay, no matter what channel their stores are distributed to β€” the street, the laptop, the phone β€” they still sell hard goods to people. That is their business.In lieu of a different illustrative analogy, here’s a cautionary tale.When the NBCs and FOXs of the world said their product was television, instead of video entertainment, other creators of the same kind of product crept up and filled the void in the channel of the Internet when the “TV companies” refused to do so. And they still lag behind, because they still don’t get it. Meanwhile, YouTube has lapped them all in size and profitability.Yes, I’ve been through the thought ringer on this, mostly via 8 years in advertising and design shops, shepherding clients and their brands from one channel to the next. You learn that your equity is in your brand and your product β€” you grow by taking it to new channels and modifying your approach for said channel, not by rethinking your whole business every time technology gives you something new.

          31. LE

            “Amazon for example, doesn’t sell anything. They are just a catalog to be bought from”If you believe (like I do) that the vast majority of offerings on the Internet are done by propeller heads it makes total sense that things aren’t sold and are weak on marketing and experience. That’s not their forte. Their forte is believing people will flock to the better mouse trap if they build it. No need to explain. Ever try to buy ads on adsense?All this flows from the top of an organization. If the guy at the top is or does understand selling (Walton, Jobs, Disney, Kroc) then the entire organization by design is setup this way. Bezos is a numbers guy. So was ebay (Meg “if you can measure it you can manage it” Whitman) a totally confusing experience.Your wine store example yesterday (Bottle Rocket in NYC) gets it. The liquor stores generally run by the immigrants don’t. They are looking to earn a (cash business) buck and don’t have any style or ability to be creative.

          32. PhilipSugar

            Gary Vaynderchuk an immigrant did a historically great job. Amazon is like UPS. They don’t have to be showy.

          33. LE

            Remember when UPS was the only game in town (Fedex didn’t do anything but express [1]) and they concentrated on what was important, service (even washing the trucks every night)? UPS delivers packages they don’t create or fill a need. The “trick” is to get people to buy things they don’t know they need or get them to buy more of something or get them to spend with you vs. a competitor.There is very little that UPS can do to move the needle other than taking away share from Fedex or the Postal Service. Fedex really created (or filled depending the way you look at it) the need for overnight package service.Now contrast that with Amazon. There is plenty that they can do to get more business. They (unlike UPS/Fedex) have many competitors and the pie can be stolen from the local office max or target. And they can make it easy for me to buy the $150 Sentry Safe instead of the $80 safe. By doing more than “free shipping if you join amazon prime!”.Vaynerchuk is an immigrant but he took over his father’s wine store. There’s a big difference in that he was raised observing what his father was doing (and learning) and then was able to make and improve on that. That’s actually a fairly common theme that happens. My cousin (also an immigrant) took over his father’s business (which at the time was also my father’s) and he had been trained by my father in all the ways of the business and was able to improve and enlarge that quite a bit (after staging a coup and forcing my father out).[1] Actually I remember when Fedex didn’t even exist. It was only UPS and the postal service.

        2. ShanaC

          product type

        3. Yaniv Tal

          i still think the “give us your credit card number” model is broken. i recently moved and all of my services came tumbling down one by one because the address change caused transactions to fail. the same thing happens when a credit card is lost or stolen. talk about loss of opportunity. i updated the services i really care about but evernote and a few others lost my business. that’s why i’m a fan of mobile wallets. paypal sucks but others could do better.

          1. awaldstein

            Sincere PayPal hater here. And proud of it.You logic is right for me as well that’s why basically online I use Amazon and a handful of specialty accounts. Few to manage. Few to trust.For theLocalSip I’m going to eventually have to build a software wallet to interface with online POS systems and my own pay for event engine. Hopefully by the time I do this there will be a wallet that works but today there is simply none that will do the trick.Transactional infrastructures are a game changing business platform that someone needs to crack. Just a nightmare for the small biz.

          2. Yaniv Tal

            someone (rooting for stripe) needs to come up with a web widget that accepts credit card data from 3rd parties over standard api’s. that standard could then get integrated into mobile web platforms and be accessible through phonegap so that mobile wallets can feed the transaction. this could fulfill the traditional paypal function of acting as a widespread standard for online merchant acceptance but expand to cover mobile and interface with 3rd party wallets so that consumers aren’t tied to one service.the user experience would be great: browse on your mobile phone and find something you want to buy. click pay and a native dialog comes up asking you to choose from your installed mobile wallets. select your wallet of choice and complete the transaction (with a single click). then return to the merchant. the same wallet could also be used for nfc payments. this way you have one wallet with one copy of the truth for all of your purchasing needs – and the choice of wallet belongs to the consumer.

          3. awaldstein

            I’m sharing this dream.Three pieces jump out at me as still TBD:-How does shipping get entered?-Dispute resolution-From the vendor side accounts are the connection to future sales. How does that work?This discussion is a whole series in itself.There are no good answers only good questions though i think now. This may get covered when we deal with the transactional platforms.Challenge to world that may be listening to this thread….If anyone has even a shadow of this solution, many will pay attention!

          4. Yaniv Tal

            whoever tries to tackle this will have to work with the W3C which is no easy body to work with. i think google would have the best chance of getting something through but i wouldn’t rule a startup out.when it comes to data, i think the mobile wallet should act as the source but that merchants have a right to access the data. the shipping address should be contained in the mobile wallet. when you proceed to check out you would have the ability to select the credit card you want to use as well as the shipping address. by selecting sensible defaults you achieve 1-click ordering. the merchant should be able to receive the user’s name, contact info, and some uID though It might not make sense to give them the credit card number. that should probably pass securely from the wallet to the transaction service (that supplies the widget).dispute resolution I think gets pushed to the credit card companies. we pay them for something right?just my 2 cents

          5. awaldstein

            Thanks….CC company handling disputes will be as useless as Paypal handling them; ) Which is basically not at all.Important topic. The more you dig into it the more you realize the genius of someone like Amazon for doing what they do do so well.

          6. Yaniv Tal

            yeah it’s not an easy problem but if we tackle it the right way and come up with a solution that promotes consumer choice, it’ll open up all kinds of commerce opportunities and boost quality of life.btw i think we’re due for a phone call. we’ve been screaming ahead. i owe jeff a shout out too.. we’ve been busy busy! couldn’t be happier with our move to austin. this city’s delivered and then some.

          7. awaldstein

            Sure…send me a mail.

      3. Brandon Burns

        sure, but it depends on your product.Instagram vs. Pinterest. Both now have a key discovery / community element but, remember in the beginning, Instagram was sold as a better way to *take* your own photos, and Pinterest as a better way to *organize* photos that are not yours.I take photos on my phone, so Instagram was best on mobile. Most of the photos that are not mine that I save for later are on the web, so Pinterest thrived there first.”First principles, Clarice. Simplicity. Read Marcus Aurelius. Of each particular thing ask: what is in itself? What is its nature? What does he do, this man you seek?” β€” Hannibal Lecter

      4. Elia Freedman

        I’m not certain that makes them unique to mobile, though, just better geared for it.

      5. Carl Rahn Griffith

        Voice and SMS used to be good revenue streams for mobile and the associated telco cartels. As did data.Therein lies the dilemma. It’s now a free-for-all. It’s just a lump of plastic in our pocket. No one owns (dominates) the monetisation of it any more. Problem = Opportunity, of course.

    3. fredwilson

      i agree and that’s why i pointed that out in the post.but there are some things, like in app upgrades, that really don’t exist outside of mobile right now

      1. Brandon Burns

        Unless I’m missing something, I can’t see how there would be an in-product upgrade that is specific to the mobile channel.I can buy points for Zenga games, no matter the channel. I can buy gifts on Facebook, no matter the channel. I can upgrade my LinkedIn account, no matter the channel.These upgrades are central to the product, not the channel. And I think its healthier to think in that way. Unless, again, I’m missing something.

        1. fredwilson

          you are right

        2. Andy Vaughn

          So, what if I charge you for responsive design? Not saying I would…but in a heavily-used sticky community, you could try and do this.

      2. Elia Freedman

        I disagree on this point. I’ve been buying desktop-based shareware products for years that include in app purchase to upgrade. They give me a little form I fill out right in the app and the key is registered without me having to leave the app or do anything special.

        1. kidmercury


        2. Brandon Burns

          you’re describing the method a feature is delivered, not the feature itself.that shareware could send you an email advertising that same feature, and send you to a link to pay for it. or through an an-app add on your phone. or via a banner ad. or its home page. hell, it could even send you a postcard in the mail advertising the same feature and ask you to pay for it by sending in a check!yes, the distribution method you mentioned may be the best for delivering this specific product feature. but when you think about it as a *product* feature, and you don’t tie it to a channel, you then see all the other channels you have through which to sell it β€” and all the opportunities you’re missing out on when you don’t look at it that way.

          1. Elia Freedman

            One problem I am detecting is we don’t have a common framework to discuss such things as revenue model. Personally, I view revenue model as the way in which I collect income. In app purchase is one method. Check is a completely different method. I might argue that PayPal is a method distinct from taking a credit card. I’m not talking about a feature at all. I’m talking about a means in which I take money.In app purchase is a means in which I take money. I view that as a way of giving me money from within the app itself. I utilize in app purchase on a desktop app just like on a mobile app. Yes, the company collecting money is different — and maybe that makes this different — but the concept is exactly the same.You must be seeing revenue model different than me, Brandon. (Not saying you’re wrong — I very well could be off.) I’m curious how you view it.Fred, this might be a good post on the topic, by the way. Seems like there is confusion between “channel,” “business model,” and “revenue model.”

          2. Brandon Burns

            i see what you’re saying.i’m defining everything from the point of view of the product; the thing that is being sold, rather than the way the money is collected.i think an exercise in the way you’re looking at it would be a good idea, as it helps to stretch your mind to see al the channels and methods of distributing your product.i’m not sure how fred’s structuring his series, but if its “how do i monetize my product?” i would advocate directing people to think about their product β€” its offering, its nature β€” first, and then after you’re confident that you know what that is, then figuring out what channels to put it in and how to collect money in those, i guess both pieces are variables of the same equation.

          3. Elia Freedman

            Agreed. It’s not so straight forward. :-)For what it is worth, I looked up each at Wikipedia just to see what it says:Revenue Model…”*Revenue model* is the system design by which a business monetizes<http:”” wiki=”” monetizes=””> itsservices.”Channel…Redirected to Distribution. “Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries <http:”” wiki=”” intermediaries=””>.”Business Model…”A *business model* describes the rationale<http:”” wiki=”” explanation=””> ofhow an organization <http:”” wiki=”” organization=””> creates, delivers, and captures value[1]<http:”” wiki=”” business_model#cite_note-osterwalder2010-1=””> (economic,social, cultural, or other forms of value).”Business model is very hand-wavy, it seems, which makes it easy to confuse. I had the same problem with mission and vision in school, although I think I understand those now.Elia

          4. Brandon Burns

            i hate talking about business models, too. very hand-wavy.i’m coming from the perspective of the infancy stages of creating a product. every time i stop to do build a feature or do an experiment to test the validity of a potential business plan, its usually a good learning experience, but it ultimately slows me down.unfortunately, that’s all investors ask about. and when you’re thinking, “i need funding,” you start making an effort to answer those questions.i’m trying to find product market fit. i’m figuring out *what* i’m selling to *whom* and *why*. that’s enough to focus on. I’ll get to the *where* and *how* questions when i’m ready. though i’d prefer if they just weren’t asked at this point β€” they’re very distracting.anywho… enough rant. :o)

          5. Elia Freedman

            I hear you. I’m at the same stage also but found that thinking about the business model was instrumental in the way we were thinking about the product itself. Good luck!

          6. Yaniv Tal

            part of validating product/market fit is making sure that customers are willing to pay what you think they are

          7. Brandon Burns

            yep, right.but when your product isn’t there yet, but you’re testing to see if people want it even though its only half of what they want, you can spin in circles and never close the loop if you don’t approach the process in a way that works for your product, team and consumers.a lot of people start shoehorning their product into template models, when they need to look at the nuance of their specific situation.

          8. Yaniv Tal

            indeed, you do know startups πŸ˜‰ half the battle is clawing your way out of said loop.i’m learning just like everybody else but what we’ve found is that go-to-market is everything. making sure that our v0 is complete enough that customers will adopt but lean enough that we get there reasonably fast. we validate that v0 plan regularly and that includes price (we’re b2b).

          9. Brandon Burns

            oh man… i know nothing about startups!i’ve been building products for other people for years. but building your own business from scratch is a whole ‘nother story. i’m a noob.however, through this journey, i’ve built up my short list of advice tidbits i listen to (like your go-to-market nugget), and a wasteland of opinions that i’m vehemently against.i’m just voicing opinions, discussing with the AVC community, and figuring it all out along the way.

    4. takingpitches

      Great points Brandon.That said it is a proper focus. For folks — like many on this blog — trying to sell a product or service that somehow involves the internet as a distribution channel, the shift to mobile to access the Network for users — both over time and generationally — is a real issue.We need to understand it, master it, and in some case perhaps surrender, in order to deliver that value we would like to deliver.

    5. Richard

      I dont see Mobile another chanel. Heretofore, entertainment has been broadcasted, today it is narrow-casted and co-created.

      1. JamesHRH

        I don’t know that I buy this Rich.My wife is consuming large amounts of ‘made for network TV’ content via her iPad (some thru iTunes, some post live viewing of broadcast TV). Ipad is her preferred device.She also will VoD via our cable provider. We both read olnlne news. We have one subscription, etc.Channels rule (they always have in most businesses). Distribution is key in movies, TV, radio, and almost all hard goods.

    6. ShanaC

      thank you thank you thank you. Maybe we should a separate one for channels

    7. laurie kalmanson

      a new model for networks is that they are a platform: content pays to be there.kickstarter, for example. or ebay, etsy, etc.those platforms could distribute entertainment.long, long time ago, aol paid content providers to be on its platform. then the tables turned and people paid to be there — like buying shelf space in the supermarket. then they went away, but that’s another story.related: i saw a quote the other day, “it’s only technology if it happened after you were born.” fish don’t think much about water; it’s always been there. before mobile is already like that for some users; desktops/browsers are for more.i am fascinated lately by the feature phone discussion in less developed countries — people whose online experience is on a different device than we usually talk about here. i read that facebook sees its future there: mobile, but very very very limited.

    8. Luke Chamberlin

      Seeing mobile listed as a revenue model really bothered me. Good comment.

  13. Christian Arca

    Could gaming be covered with entertainment as a revenue model? I was looking for where film, comedy, and comics would live. They all could be covered in commerce but as suggested film, comedy, comics, etc… feel different.

    1. fredwilson

      yes, that’s where we could improve this hackpad. it will take work to reduce it to an elegant framework.

  14. Carl Rahn Griffith

    One thing that should be borne in mind, I’d suggest, is how to address the ever-diminishing disposable-income pool out there…

    1. fredwilson

      that is an underlying theme for all of thisweb and mobile do tend to wring excess profits out of systems and make things less expensive creating consumer surplus

    2. takingpitches

      Such an important point, Carl.Innovation creates customer welfare by lowering prices, wringing inefficiencies out of the system, but also undercutting jobs in some cases (at least in the short-term). But technology hopefully also addresses (or at least keeps in mind) employment issues, as well, because you have to worry about aggregate demand.I have loved reading the entire USV+ umbrella over the last couple of weeks and the underlying, maybe unintended, interplay between Gotham Gal’s posts (Mom and Pop stores), Albert (on jobs moving forward, and the positive and negiatve impact of tech), along with AVC.

      1. Carl Rahn Griffith

        I sense an inevitable and even more extreme polarisation of producers and consumers; wealth (or not, as case may be), and market activities – more than ever before – eg, in the same days Tata (if not already aware, the vast Indian global conglomerate that owns stuff from steel plants to Jaguar Land Rover) announced record sales for JLR and investment in China for the new middle-classes there, they closed steel plants in already depressed parts of Wales in the UK.’Follow the Money’ (as an old boss always used to say to me) is happening more and more…In some ways ’twas ever thus, but what we are witnessing now is a whole new socio-economic ball game – as you suggest, the umbrella/holistic debate is where we need to focus. Tech has for far too long lived in splendid isolation – well, the wake-up call is well and truly here now. We need to see this as a chance to reinvent what we do, and why.

        1. takingpitches

          yes. high corporate profits, record cash in the coffers, little investment.economist had a piece about this a couple of weeks ago: calling it dead money.

          1. Carl Rahn Griffith

            Nice catch.β€œIt’s not burning a hole in our pocket.” – and not even in regard to investments, where there may be a risk, but in the relatively safe context of acquisitions.Basically, they can’t be arsed. They’ve had it so easy, for so long.That GE quote says it all, really. Yet, humble consumers are lambasted if they save too much and don’t fuel consumerism in perpetual mouse wheel mode – then damned when debt forces them into extreme austerity mode and they fall off said mouse wheel.Ironic.

          2. pointsnfigures

            conversely, they need incentives to invest. the tax and regulatory incentives are not aligned right now. corporations aren’t any different from scared people sometimes and sit on cash.

          3. takingpitches

            Yes. A lot is out of synch right now, including incentives

        2. RichardF

          I was in Wales this weekend, I have no idea how they are going to replace the jobs lost in Port Talbot and I doubt the Welsh government do either.

          1. Carl Rahn Griffith

            Heartbreaking stuff; yet another example.Still, maybe a supermarket chain will open up a megastore in the area, with generous government subsidies, so ‘creating’ several hundred new part-time jobs: stacking-shelves. People can then spend their benefits (whilst they get them) at said supermarket. After all, life for many is now reduced to eating/drinking/sleeping/watching TV/surviving/hoping/waiting. You don’t know whether to scream or cry.I hope China et al enjoy the consumerism phase, whilst it lasts. I wonder if we should tell them it is all nothing more than a vacuous corporate/government game?

        3. ShanaC

          but the money is ever more liquid in terms of where it goes.It gives me great hope for 3d printing as a result. Pop up factories to follow liquid money.

          1. Carl Rahn Griffith

            Money Laundering in 3D – now, that’s a futures market!

    3. Richard

      Yep, with non market interest rates in effect, expect a shock when interest rates revert to the mean.

  15. Richard

    “blank” awareness/engagement might be a new buisness model. For example in mobile health it might be “heath score” awareness, in energy it might be entergy savings activities/awareness. These activities have been, untill recently, difficult to discretise and monetise. I see that changing. See Opower for an example of a company that fits this model.

  16. Igor Kofman

    Hey Fred, you can make a hackpad moderated by clicking the little lock icon at the bottom of the pad (it should be more obvious!). We’ve gone and ahead and marked the original moderated.

    1. fredwilson

      thanks!!!!i would love the ability to embed all or part of the hackpad in this blog

    2. fredwilson

      when a hackpad is moderated, how do i allow people to edit it?

      1. Igor Kofman

        Just saw this. If anyone proposes an edit, you should get an email about it and be able to approve the edit. Ping us if you have any trouble w/it!

  17. Corey Crossfield

    I would like to be invited to contribute to the hackpad.

  18. Dad

    did you mean to make your edited version both un-editable and un-viewable? I don’t expect to be able to edit but given that you linked to it I thought I’d be able to view it. thanks.

    1. fredwilson

      no, i fucked up. i am fixing it with today’s post


    Fred, I saw your clip on Bloomberg. They cut it to about 3 seconds. I told ya’ you’re boring! lol.Oh my, now I’m feeling bad that I posted you’re boring yesterday. Well look at it this way even though you’re almost as boring as shopping online. You can always change the new USV theme to something other than mobile this and mobile that. Then you’ll be cutting edge again..Remember ABS!

    1. fredwilson

      i would have preferred to be left out completely.

  20. Greg Mand

    Hi Fred…great idea and I appreciate your initiating. As a BD guy very helpful in thinking about various revenue models. Would love to be a part of finalizing the list. Two thoughts: 1) Secondary markets for expiring inventory like Tickets ex. StubHub. 2) Pay-per-view: Access to live (or recorded) video. ex. Ustream has tested PPV with certain events. Do you see PPV under Paywalls? Thanks!

  21. leigh

    hope to see the final soon πŸ™‚

  22. Anuj Agarwal

    Fred, would it be appropriate to include Image Ads in ‘Advertising’ category.Example image ads are not the most popular ones, but i have seen such ads before on celebrity gossip blogs like yahoo omg, perezhilton is one such advertising platform for in-image advertising———Secondly, can we include revenue generated by conferences like TC Disrupt, LEWeb by selling tickets. Pandodaily makes money by selling pandomonthly ticketshttp://pandomonthly.myshopi…I think both are indirectly related to the web ecosystem.

  23. serkanunsal

    Peer to peer and online education can be combined and make it called “marketplace commisioning”. (People sell their stuff/know how, others buy it).Patents can not be thought as Revenue Model but it’s a monetization tool for some companies.

  24. EmilSt

    Sponsorships. Donations. When entities sponsor things they care about. Kickstarter might be example.

  25. Mat Evans

    There’s definitely more granular models that come under some of the advert categories. Video advertising for one. There’s a lot more than just pre rolls and to be honest more efficient ways. This goes for a fair few of the ideas – the less things are grouped in to high level groups the better, I believe this is a big part of how new ideas are started. By drilling down into what we know, we start to find out what we don’tI’m also wondering how many of these can be joined up to form new revenue models from 2 different sections – this might be bordering on business models though.I work for so have a slight bias to new video advertising solutions ;)cheers

  26. Luke Skurman

    On ‘Content’ – you might want to add something about licensing. I think before Zagat got acquired that got paid a lot to license their content. I believe this is how Seeking Alpha works. Thanks for putting this together would love an invite.

    1. fredwilson


  27. Tom Labus

    It would be good to see a new revenue model that hasn’t been anticipated and take everyone to anew place.

  28. Guillermo Ramos

    Maybe we could add another category called “Enablers”: OS (Android, Ios), Browsers (Chrome, Safari). or maybe a subcategory into existing ones

  29. falicon

    Hey is it my fault that *everyone* should want to know about and use conversation search?As the famous saying goes, don’t hate the player…hate the game! πŸ˜‰

  30. falicon

    I guess you could fit that under transactional process or subscriptions depending on the situation (ie. spot instance of EC2 is a transaction, reserved instance is a subscription)?

  31. LE

    “need utility pricing. Amazon S3 etc, Rackspace.”Key difference is that a true utility is regulated and that is actually good. Because they need to justify any price increases and spend time improving their network to make it more reliable (Bell Tel in the old days, electric companies, natural gas etc.) The price of my electric is cheap and it was cheap in the 80’s as well. While I couldn’t quote the % increase it’s no big deal (compare to what you are paying for television). Maybe it even went down in price. Note all the issues that exist with cell phones during the last storm? Ooops. Wasn’t something that was considered. That reliability was built into the pots system because of regulation. Without regulation private industry didn’t want to spend the money on that (more robust generators) (and it sucks to be the person w/o phone service, right?) because they were more interested in cornering the market for end users.Amazon and Rackspace (probably more amazon though) is more like cable tv in that the prices you pay now will be increased predictably in years to come, with no regulation or cap because “there is competition and you can switch”. But you really can’t. Once you are setup on Amazon it’s not trivial to switch something built that way. Ever try to even switch colocation places and multiple servers? It’s a big job with pitfalls (I’m still putting out fires from a recent move we did and that with untold hours of planning. The only reason for the switch is the colo place was getting out of business. I was already overpaying but felt it was better than switching and the troubles). And that’s several steps away from AWS. Some people can benefit greatly from amazon (those who need to scale) but I would suspect that most that use it don’t fall into that category. (Nothing to back this up, just a hunch).Also those “pay for what you use” services inevitably make up the money somewhere. By charging you for things you need that were previously paid for by everybody (so it might be good for someone or bad, depending).How do you say this? I think it’s something like “the more levels of abstraction you add to something the less control you end up having”. And both RS or AWS add to that abstraction and you are beholden to them and their price increases (that will come, trust me.).I actually had some email conversations with the product managers (and the CEO) of Rackspace (sent a blind email with suggestions after reviewing what they had and comparing to Amazon) asking them to allow people (similar to AWS) to setup spare instances and keep IP addresses for disaster recovery. Sound like they might make that offering going forward.