A complete analysis of the six major Internet profit models!

In the Internet age, traffic is money. With traffic and users, you will never worry about not making money. If each of the 1 billion users generates 1 yuan of revenue for Tencent per month, Tencent will be able to earn 1 billion RMB per month (I had this dream when I was a child: if each Chinese person gave me 1 yuan, I could easily reach the peak of my life and wake up with a smile). However, not every company is so lucky to find its own profit model. Many startups burn through investors’ money but still fail to make a profit and eventually die. So what are the profit models of Internet products? What is the best way to monetize traffic?

Today I will summarize the six major mainstream profit models of China's current Internet.

1. Selling Ads

Selling advertisements was the most primitive profit model in the early days of China’s Internet, and it has continued to this day. In the portal era, the four major portals began to sell various advertising spaces, such as focus pictures, full-width ads, pop-up ads, etc. After 20 years of evolution, advertising formats have become more and more diverse. Big data has made the targeting of target users more and more accurate, and the advertising business has also moved from SSP to DSP.

Ad types: online alliance advertising (eg: Baidu online alliance, Alibaba mother, other small and medium-sized online alliances), mobile advertising (eg: Duomeng, Youmi, Adsage, click-through), search bidding advertising (eg: Baidu SEM), information flow advertising (eg: Tencent social advertising, Toutiao, Sina Fans Tong, Sina Fuyi, NetEase Youdao)

Company representative: Baidu (Baidu: We are a technology company, not an advertising company! Me: Please see the financial report)

2. E-commerce sales (including physical products and virtual goods)

The world's earliest e-commerce company was Amazon, founded in 1995 by Jeff Bezos, today the world's richest man. The earliest e-commerce company in China was 8848, founded by Jack Ma in 1999.

E-commerce types: B2B, B2C, C2C, F2C, O2O

Product representatives: HC360 (B2B), NetEase Yanxuan (B2C), Taobao (C2C), Direct-to-consumer (F2C), O2O (Meituan)

Note: Strictly speaking, Taobao and Tmall’s profit model is not selling goods. They just provide merchants with a platform to sell goods. Their real profit comes from the commission on merchant transactions and advertising businesses such as Through Train and Diamond Exhibition.

3. Platform Commission

After the platform facilitates the transaction, it charges a commission from the merchant. The platform does not directly produce or create value, but rather integrates resources. This method is like Lianjia in real estate agency, which connects landlords on one end and home buyers on the other end, and charges a 2% fee as commission when the transaction is completed. The main profit model of live streaming platforms represented by Huya Live, which just rang the bell on the New York Stock Exchange on May 11, is to extract tips or gifts from fans of the anchors on the platform.

Targets of commission: Merchants, drivers, Witkeys, anchors

Product representatives: Tmall (merchants), Meituan (merchants), Didi (drivers), Bajie.com (witnesses), Huya Live (anchors)

IV. Value-added Services

Basic functions are free, and advanced functions are charged. First use free products and services to attract users, seize market share and user scale, and then charge for value-added services or other products. At the end of April this year, Lei Jun said at Xiaomi's press conference that Xiaomi's hardware net profit margin does not exceed 5%. He may not have lied, because in Xiaomi's ecological chain, hardware is free + content/services are charged, which is a complete ecological closed-loop model.

Service type: more advanced features/content/services, membership privileges, virtual items

Representative products: 360 Antivirus (Enterprise Service), QQ Member (Member Privileges), King of Glory (Virtual Props), WPS Office Software (Member Privileges), Baidu Netdisk (Member Privileges)

5. Paid Services

Paid services have existed for a long time, such as housekeeping, tutoring, tour guides, legal consultation, etc., but in the Internet age, the types of services have become more diversified. I remember the descendant of Tao Yuanming who was all over the news some time ago. He was a post-90s anchor on Himalaya and earned a million yuan a month by telling stories. He achieved financial freedom. This was simply impossible 10 years ago, but now with the developed SNS network and convenient online payment technology, such things happen every day.

Service type: product, information, function, technology, API interface, knowledge, content, experience, consulting

Product representatives: Alibaba Cloud Server (function), Umeng (technology/data), Amap (interface), NetEase Cloud Classroom (knowledge), Fan Deng Reading Club (content), Fenda (experience), Zaixing (consulting)

VI. Financial Operations

Take the meat out of the refrigerator and put it back. Question: What's left? Of course it’s oil and water!

This is why Tencent and Alibaba have been trying so hard to seize users' payment portals. In March of this year, Walmart sided with Tencent and began to stop using Alipay and only support WeChat Pay.

How it works: financial lending, account period, deposited funds, capital pool, Ponzi scheme

Product representatives: Huabei (lending), Jianshu and other platforms’ rules for withdrawing rewards (you can only withdraw when you have more than 100 yuan; I don’t want the 15 yuan in my account, I’ll give it to you~), Mobike (precipitation funds), Paipaidai (fund pool), Shanlin Finance (Ponzi scheme, sanctioned)

Attached case list

Case 1: Meituan Takeaway Profit Model

1. Commission

A certain share of the transaction revenue will be taken from the merchants who have settled in.

1. Platform value-added services

Advertising spaces within Meituan such as banners, recommended spaces, special topics, etc. - merchants.

User portraits, competitive intelligence, etc. - merchants.

Paid membership privileges-user.

1. Self-operated catering

The platform has access to the order data of all merchants and knows what to sell in what location and at what time to make the most money. This is big data.

1. Funding Pool

Settle accounts with merchants every week or two weeks. Make use of the account period to invest the deposited funds.

1. Sale of merchant data and user data information

It was revealed online that Meituan user information was being sold at a low price of 1 cent per piece (Meituan: We are innocent, we are helpless too! Me: Am I not worth even one dollar~).

Case 2: Mobike’s profit model

As of March 8, 2018, Mobike has entered more than 200 cities around the world, with over 200 million registered users and over 9 million bicycles in operation.

A well-known investor once said, "Mobike is the most powerful business innovation model in China in the past three years."

1. Deposit pool/funding pool

The deposit for a user is 299 yuan, but there is no data disclosed on how many Mobike users have paid the deposit. At the beginning of 2017, some media reported that Mobike's user deposit pool had reached billions, and there was no regulatory agency to oversee the money. Now, a year has passed, and no one knows how much money is in the deposit pool. Even if this much money is placed in a bank, with an annual return of 4%, it would amount to tens of millions a year. Besides, would Mobike put the money in a bank and get 4%?

1. Paid service, time-sharing rental

The fee is 1 yuan per ride. If a bike is used 4 times a day, it is calculated as 250 days a year. A bicycle can contribute 1,000 yuan in revenue a year, and the cost of a bicycle is 500 to 2,000 yuan (the official price is 3,000 yuan). Now that Mobike is cooperating with Foxconn to manufacture bicycles, the cost of each new generation of Mobike should be less than 1,000 yuan. If a bicycle can be used for 4 years, the investment can be recovered in one year, and net profit can be made in the remaining 3 years.

1. Advertising revenue

A high-frequency super app with 200 million users can earn considerable income just by taking an advertisement. Clients we have worked with include: Vanke Real Estate, Uniqlo, No.1 Store, JD.com, Justice League Movie, etc.

1. E-commerce sales

Mobike has been trying more ways to make money, selling peripherals is one of them. It sells raincoats, gloves, insulation boards, key chains and other products in the Mobike Achievement Hall, but the results are not satisfactory.

Note: Mobike’s high depreciation rate, high operation and maintenance costs, and the cost of rapidly expanding cities and manufacturing large quantities of bikes require the company to have strong cash flow support, which may be the reason why it was finally sold.

Case 3: Fan Deng Reading Club’s Profit Model

Fan Deng Reading Club was founded in 2013. Its founder Fan Deng was a CCTV host in his early days. Later, he started a knowledge payment business like Luo Zhenyu. Now it has nearly 2 million paying members, 600 offline communities, 300 city branches, and annual income of over 100 million yuan.

1. Fee-based services

The annual membership fee is 365 yuan, which includes teaching you about 50 books; paid course service.

1. Selling books

I wasn't satisfied after listening to the interpretation and wanted to buy a physical book to read. Okay, they also sell books.

1. Open a bookstore offline and do traditional business

The IP Fan Deng now has great appeal, so he started an offline bookstore business, adopting a franchise system and charging franchisees a franchise fee of 50,000 to 100,000 yuan, as well as some additional management fees, training fees, etc.

1. Offline community fee-based activities

Each city agent has the management rights of the local community and can organize some local activities every week and charge a certain amount of organization fees from community members.

Summarize

In any mature product ecosystem, there will not be only one profit model, it must be diverse. As part of the business model, the profit model is the basis for the sustainable development of an enterprise, but it also requires constant change and innovation.

The Google I/O conference not long ago dominated the WeChat Moments, making people sigh that the past is not gone, but the future is here. The future will be the AI ​​era of artificial intelligence and the IoT era of the Internet of Everything. How to seize the initiative in the AI ​​revolution in the post-Internet era is not only something the giants have to think about, but also something you and I have to think about, because when the times abandon you, they won’t even say goodbye. Let’s encourage each other!

Finally, if the above summary is inappropriate or wrong, please feel free to discuss in the comment section.

Author: Kang Yibing

Source: Kang Yibing