Digital Business Models and Capabilities Essay Sample

In this sample essay, we will discuss the Digital business model. While this concept has been around for decades now, it is still a relatively experimental thing.

In today’s time technology is booming. New technologies have added a new edge to everything. All fields are getting more and more advanced.

We will be looking at what a digital marketing model is, what are different types of digital marketing models and what there are benefits them over others. We will also briefly discuss how this digital business model works.

To understand the concept of digital business models we must understand what a digital business model is. So we will start by looking at the definition of the same.

What is a Digital Business Model?

A digital business model is a way of using digital technology to create a value-based service for customers. These models can be an extension of existing conventional business models but not always.

Digital business can be commission based or subscription-based services and several other types we will discuss later in the essay.

The way of profit differs for each type. As with everything else each model has its own advantages and drawbacks.

Different Types of Digital Business Model

There are various types of digital business models. A model may vary depending upon the types of service and type of revenue. We shall discuss the five most common types of digital business models being used today.

We will discuss each one of them briefly and will see what each one is capable of.

These five types of digital business models are:

1. The open-source digital business model
2. The freemium digital business model
3. Subscription digital business model
4. E-commerce digital business model
5. The peer-to-peer digital business model

Now we shall discuss each one in brief and look at their use and capacity.

Use and Capacity of Digital Business Models

1. Open-Source  Model

An open-source digital business model is essentially free it usually owned by a non-profitable organization. Another key trade of open source is that it provides value to a certain community.

Companies often open-source their projects at the initial stage as doing so allow them to receive support and advice from people around the world without any actual cost,

Advantages of an open-source digital business model:

• quick and effective development
• the software’s free licensing
• Popularity spreads quickly as it is free
• Due to the value provided to the community, there is a higher chance of success.

2. Freemium  Model

The Freemium model provides basic services free of cost and there is a premium version that can be used after paying a sum of money.

Moreover, this offers high virility growth as it attracts a high level of traffic on its free side.  But the free version contains ads and certain limitations so there is higher chance people will buy the paid version to get ads-free service and full access.

Spotify is probably the most famous example of this type of model.

Nevertheless, we shall look at the benefits of this type of digital business model.

• There is always revenue through ads or premium buyers
• Larger customer base due to free side
• The more the service is used more value it derives

3. Subscription Model

This is one of the most famous digital marketing models among the bunch. In this type of model, there is no type of free service of any sort; it is completely based on subscription.

This means that to use the service customers must buy one of the various plans offered by the company. Some of the most famous examples are Netflix and Amazon Prime.

There are some strong advantages of this model like:

• Loyal customers
• Stream of revenue is continuous and stable
• Sales are predictable and stable
• Higher revenue

4. E-commerce  Model

E-commerce is one of the most famous types of online business today if the most famous. This trend was started by Amazon.

These types of business models are one of the most used ones in today’s date. It works as an online marketplace. It may sell a certain group of products such as pepper store which sells only furniture or Amazon which sells everything. These are huge in profit and have various advantages like:

• Allows physical store to expand customer base
• It allows a smaller physical store to be a larger virtual marketplace
• Saves capitals as compared to conventional large stores
• Allows smaller players to reach further.

5. Peer-to-Peer  Model

Also known as Customer to the customer or two-sided marketplace, this type of digital business model takes a person providing service and a person needing that service face to face.

Some examples of it are Uber and eBay. The company itself does nothing else than providing a place where both can meet.

Company profits by taking a commission in each transition of services.

Some of its major advantages are:

• Cheaper to maintain
• Easier to run
• Higher profit margin
• More value to users

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