The 22 Best Types of Digital Business Models Today
In our Digital Business Model Foundations series, we learned why business models are best categorised by value creation.
We have used the underlying ideas of the Global Industry Classification Standard (GICS) devised by MSCI and the S&P Dow Jones Index to categorise digital business models into 11 digital verticals.
Today, we will look at the next level equivalent to the sub-vertical layer.
Just as in the GICS, we could go categorise further than this:
Looking at our Fintech overview, you could categorise each end node as a business model type. That would make it some hundred business model types.
No two companies run the exact same business model. In essence, every major offering within a company has its own business model. That would make it tens of thousands business models.
Making some smart choices today, we will focus on the most important business model types within each vertical, typically at the level of a sub-vertical. This brings it to 22 business models.
We will mention the key revenue models for each business model type. Many forms of monetisation exist for each business model type but it’s typically one or two that generate most of the revenue.
eCommerce
One of the largest verticals is eCommerce. Here we can find two major approaches.
(1) Linear eCommerce Business Model
A linear eCommerce business model includes the physical footprint associated with consumer commerce, such as sourcing and management of inventory, warehousing, delivery and more. Amazon is the key player in this space. Key monetisation models include markup/commissions, delivery fees and subscriptions (Prime).
(2) eCommerce Platform Business Model
Then we have the many platform business models which are basically intermediaries. There can be many different approaches to this. Players like eBay, Etsy and Temu don’t have a delivery infrastructure though they “keep an eye” on the supply slide’s performance. The key monetisation model for these is a commission structure.
Amazon Marketplace is also a platform business model that offers merchants the services of their fulfilment infrastructures.
Online Travel, Dining and Experiences
In a similar way that eCommerce moved the purchase of goods to the online space, this vertical has done the same with travel (flights and accommodations), dining and experiences.
(3) Online Travel Platform Business Model
Basically all players use platform business models. Note that we don't consider online booking pages of airlines or hotel chains a digital business model as their business is still centred around transportation and lodging respectively. We are only looking at players whose major value creating activities are digital.
(4) Online Experiences and Events Platform Business Model
Dining, experiences and events aggregators like Yelp and OpenTable have not played quite the role that once was anticipated. Dining has seen an influx of delivery services like Uber Eats and DoorDash. General search and maps emerged as major alternatives / substitutes that may have curtailed the growth of dining platforms.
Asset & Service Sharing
(5) Asset & Service Sharing Business Model
These business models are characterised by providing access to major assets, like cars, vacation homes, office spaces, eBikes and more. Some platforms aim to provide the shared asset only (e.g. eBikes) but most also have a service component. The biggest success came with asset sharing supported by services as seen in Uber (ride-hailing) and Airbnb’s vacation rentals.
(6) Service Provision Business Model
Service intermediaries are always based on the platform business model. Often there is an asset involved in value delivery but the customer doesn’t interact with it. Examples are the eBikes of meal delivery drivers or specialised software involved in online services (e.g. Fiverr, Upwork).
Most business models in this vertical monetise on a commission plus a service fee.
Search & Vertical Search
This vertical always uses the platform business model due to the nature of their value propositions. The main two business models are general search and vertical-specific search.
(7) General Search Platform Business Model
General search engines can be organised by the search method. General search engines often monetise on an advertising platform model (not to be confused with an advertising or “ad-supported” model).
Newer search platforms ChatGPT, Gemini and Perplexity use conversational generative AI. Their value propositions are like search engines in that they provide access to information but mostly without showing links to the websites from which the training data was collected. Monetisation shapes up to be via subscriptions but this can still evolve.
(8) Vertical Search Platform Business Model
Vertical search platforms are specialised in one knowledge domain. Zillow focuses on real estate and meta-travel search engines traverse across many travel platforms.
Those who monetise by providing insights and market intelligence do this on a subscription or advisory basis (Zillow, AirDNA).
Other vertical search engines use an advertising display model or affiliate models. Ad display models are very different from ad platform models and much less lucrative.
Social & Communication
Digital social & communication business models can be split into the following two types.
(9) Digital Communication Business Model
Communication networks: these are digital network models where peers communicate with each other. The communication is typically peer-based, ephemeral and short-lived content. A key difference is often the media type.
These business models can be characterised as linear network business models or platform business models leveraging direct (or same-side) network effects.
The biggest players monetise on an advertising platform (WhatsApp, Snapchat) or subscriptions (Zoom).
(10) Social Network Business Model
Then we have social network business models, like Meta’s Facebook, Instagram, TikTok, X and many others. These business models have a propensity to grow fast, via word-of-mouth effects. The key concepts making them successful are the combination of direct and indirect network effects.
Most are monetised via an advertising platform.
Content & Media
Content and media business models monetise on access, licensing and sale to/of content.
(11) Content & Media Platform Business Model
The provided content can come in many different media formats. Spotify is a platform business model for music and YouTube one for videos. The supply side can differ from non-professional all the way up to pros and everything in between.
In written word and photo, we see players like Medium, Reddit, Adobe Stock (photos) and thousands of others.
(12) Linear Content & Media Business Model
Netflix is the largest linear business model in the movie / TV entertainment content sub-vertical. Many others also run a linear model, such as most online newspapers and many non-corporate websites.
Typically monetisation is based on subscription, advertising and licensing of content.
Education Technology
EdTech is interesting in that a majority of the business models are platforms.
(13) Linear Edtech Business Model
However, the biggest publicly-listed Edtech company, Duolingo, is based on the linear business model. Many other language and education apps have developed the content themselves and all fall under the linear model.
Monetisation generally occurs via subscriptions. There can be an ad-supported free plan but it will not make profits and is considered a customer acquisition channel rather than a monetisation model.
(14) Edtech Platform Business Model
Edtech platform business models include two major types of Edtechs: learning management systems monetising on subscription fees and course aggregators using a commission model on the sales price.
Financial Technology
Fintech is still an emerging vertical. Many traditional banks moved their offerings online early but are not digital business models. This and the GFC have held back the emergence of “mostly-Fintech” companies.
(15) Payment Fintech Business Model
Early Fintechs centred on the most frequent financial value propositions being money transfers and payments. This did not require them to be a bank which comes with huge regulatory burdens and poses ample barriers to entry.
(16) Banking & Investment Fintech Business Model
Over the last 10 years, we have seen emerging “mostly-Fintech” players entering all traditional financial value propositions.
The most promising ones fall under banking and investment. Key monetisation models are commission and service fees depending on the transaction type.
Digital Health Tech
Digital business models in the health sector are still emerging.
(17) Telemedicine Business Model
Telemedicine is the biggest sub-vertical. Exciting examples are Conversa and Doximity. They have offerings based on the platform and linear business model and monetise mainly on subscriptions.
(18) Digital Health Management Business Model
Many different ideas are emerging in digital health. Promising ones are in health tracking and health education (e.g. general fitness tracking and an ecosystem of offerings around it or specialised health condition trackers). Another area is health insurance benefits management and entirely new types of health insurance that are based on rewarding healthy lifestyles evidenced via trackers (activity levels, etc).
Hardware / Software Technology Platforms
This space is so complex and fast-paced that it is almost impossible to get a firm grip on it.
While platform business models (PBMs) existed before digital was invented, this vertical has spurred astronomic growth in the number and sophistication of PBMs.
(19) Hardware + Ecosystem Business Model
Many hardware systems these days have several forms of monetisation including the sales of the hardware unit and various other forms of monetising on the ecosystem they create. We consider hardware systems with a significant digital ecosystem a digital business model because a significant portion of the value is created by the ecosystem.
(20) Software Platform Business Model
In addition, we have software platforms. Some of these are distributed for free as part of a hardware unit (e.g. operating systems) while others are monetised via commissions on the transactions they facilitate (e.g. App Stores). But there are thousands of other software platforms from specialised ones (Wordpress, Chrome, etc) to virtual assistants and more.
Software-as-a-Service (SaaS)
Basically, all SaaS fall under the linear business model and mostly monetise on subscriptions.
(21) Enterprise SaaS Business Model
In the enterprise SaaS sub-vertical, we still have many traditional Enterprise Resource Planning (ERP) solutions that were moved to the cloud. They are competing with cloud-first/native solutions which are taking an increasing market share.
(22) Small/Medium Business & Productivity SaaS business model
Then we have many solutions that are centred around individual and team productivity. SaaS makes these solutions increasingly collaborative. In addition, there are thousands of SaaS solutions focussing on small and medium-sized businesses from marketing tools to website builders and beyond.
Key Insight
We have seen how a methodical approach to classifying business models can help us to very quickly gain a comprehensive overview of the most significant types of business models in digital technology.
The aim or this article was to give you breadth. While all of these types of business models have brought out billion-dollar companies, the biggest digital business models by market cap are covered in here.