Ask HN: Most clever business models?
Sometimes, very clever business models appear that are key to the success of a product. For some research I'm doing, I'd like to collect as many examples as possible
15 comments
I've always been impressed by Duolingo's strategy - offering language education while distributing text translation.
Traditionally, language learning software like Rosetta Stone has been very expensive. Duolingo offers a free language learning service. As students improve/advance, Duolingo starts to use real sentences for teaching / translation. Because the other side of their business offers language translation services, the app can surface client's text to students and once enough students have attempted to translate it, their software compares and returns the best match to the client. [1]
Equally interesting, its founder previously started Captcha, which cleverly took the "prove you're a human" opportunity to have humans OCR books and street signs. Since the Google acquisition, I think ReCaptcha is now primarily used to improve Google Maps data.
I believe Duolingo has started exploring other revenue opportunities as this hasn't been as profitable as originally expected, but the idea is/was clever.
[1] https://unicornomy.com/how-does-duolingo-make-money-business...
Traditionally, language learning software like Rosetta Stone has been very expensive. Duolingo offers a free language learning service. As students improve/advance, Duolingo starts to use real sentences for teaching / translation. Because the other side of their business offers language translation services, the app can surface client's text to students and once enough students have attempted to translate it, their software compares and returns the best match to the client. [1]
Equally interesting, its founder previously started Captcha, which cleverly took the "prove you're a human" opportunity to have humans OCR books and street signs. Since the Google acquisition, I think ReCaptcha is now primarily used to improve Google Maps data.
I believe Duolingo has started exploring other revenue opportunities as this hasn't been as profitable as originally expected, but the idea is/was clever.
[1] https://unicornomy.com/how-does-duolingo-make-money-business...
The most ingenious business model I ever heard of was for a proxy
service called hide-my-ass that let people get past firewalls when web
surfing at work. They didn't charge a penny for using it, but if a
user visited Amazon, the proxy invisibly changed every link on Amazon
to one of the company's own affiliate links.
An unusual business model I've always liked but never got around to trying would be to have a stock trading game on iOS or Android where people bet on the directions of hypothetical charts (that are secretly derived from historical data) and compete for the best returns. Give the game away for free with no advertising, mine the results for outsized performers, and if you find any, then secretly feed current market data to them and trade off their bets. I'll bet there are lots of other possibilities for getting useful work done for free by gamifying it.
An unusual business model I've always liked but never got around to trying would be to have a stock trading game on iOS or Android where people bet on the directions of hypothetical charts (that are secretly derived from historical data) and compete for the best returns. Give the game away for free with no advertising, mine the results for outsized performers, and if you find any, then secretly feed current market data to them and trade off their bets. I'll bet there are lots of other possibilities for getting useful work done for free by gamifying it.
We have a gym that costs less when you train more. You pay €29,- a month but get €1,- discount per training. So if you train every day you train for free.
I'm still not sure wether this is outright genius (most people overestimate the number of times they will actually go) or really dumb (your heavy users train for free).
I'm still not sure wether this is outright genius (most people overestimate the number of times they will actually go) or really dumb (your heavy users train for free).
Gym memberships are a clever (or diabolical) business model in general. Few people will ever cancel a gym membership once they sign up, because who wants to admit to themselves that they're now making an active decision to be a lazy out-of-shape bastard? I've had gym memberships where I went 5 or 6 times a week, but then there have been other (longer & more frequent) times where I'd pay a gym $40/month and go only once a month, if that. There was one stretch where I paid more than $1,500 over three years and didn't go a single time. Those gyms must have loved having members like me.
The lesson: a good business model is to come up with a subscription product that's aspirational, where people will feel like they're giving up on their dreams or giving up on becoming better if they cancel, because many people will continue to pay you month after month rather than face the sorry truth.
The lesson: a good business model is to come up with a subscription product that's aspirational, where people will feel like they're giving up on their dreams or giving up on becoming better if they cancel, because many people will continue to pay you month after month rather than face the sorry truth.
This might change. Subscriptions are the new thing and customers expect more. Personally, I won't accept a gym membership anymore that I can't cancel in 3 months max.
To be clear, I'm not talking about a subscription where you're locked in for a minimum of 12 months or whatever. I could cancel any of the gym memberships I've ever had with only one month's notice. I just never did. (Because if it occurred to me to think about canceling, I'd say, "No, I really should start going. I'm going to start going. Yep, I definitely am." And then not go.)
I'm a big fan of the Wyze Labs business model: buy cheap white label hardware from China for really cheap, write westernized software for it and massively undercut the rest of the competition that is doing custom hardware development.
A lot of mixing business solutions with models.
I have a meta-model I use to determine the mechanism of how a given company makes money. Simplest is the service model. Most complex is arbitrage. There are 3 in between. Variables are the scaling factors.
Question isn't "how does it make money," but rather, "of possible transaction types how must it make money and how do its factors scale?" There is a short list of ways it must, and then finite factors of how it scales.
Most clever to me is Renaissance Technologies who appear mainly to be an arbitrage factory. Ad-tech markets are closely related. Clever in the sense that their business is about buying clever and applying it to a limited class of increasingly esoteric arbitrage problems. From what I can tell, investment banks are essentially institutional casinos where you take a set of street level hustles and conceptually walk them back until they fit into a regulatory framework. Beating that game would be a lot of fun.
Market makers like uber, airbnb, ebay and AMZN are the next smartest. A company like sharetribe is a good example of smart market making, I hope they do well.
FANG companies are essentially publishers, and their business is about demographic pandering and selling viewers to advertisers/marketers.
The other categories have different structure. Separating the business model from the problem and solution gives insight into just how clever they really are.
I have a meta-model I use to determine the mechanism of how a given company makes money. Simplest is the service model. Most complex is arbitrage. There are 3 in between. Variables are the scaling factors.
Question isn't "how does it make money," but rather, "of possible transaction types how must it make money and how do its factors scale?" There is a short list of ways it must, and then finite factors of how it scales.
Most clever to me is Renaissance Technologies who appear mainly to be an arbitrage factory. Ad-tech markets are closely related. Clever in the sense that their business is about buying clever and applying it to a limited class of increasingly esoteric arbitrage problems. From what I can tell, investment banks are essentially institutional casinos where you take a set of street level hustles and conceptually walk them back until they fit into a regulatory framework. Beating that game would be a lot of fun.
Market makers like uber, airbnb, ebay and AMZN are the next smartest. A company like sharetribe is a good example of smart market making, I hope they do well.
FANG companies are essentially publishers, and their business is about demographic pandering and selling viewers to advertisers/marketers.
The other categories have different structure. Separating the business model from the problem and solution gives insight into just how clever they really are.
There's an extremely clever model that's been losing popularity for a while now: Make something valuable and charge money for it.
I've never heard of that. Are there any historical examples?
Check out park.io: https://www.indiehackers.com/interview/how-automating-tasks-...
The product (individual domains) advertises the service (domain backordering).
Sort of reverse-engineered marketing.
The product (individual domains) advertises the service (domain backordering).
Sort of reverse-engineered marketing.
Robinhood seems to be excellent business model.