You Should Know These 3 Online Business Models - Advantages, Disadvantages, and Examples

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Hanifmr.com - Various basic business models are also used on the web. These have a very strong influence on the future earning potential, which is why you should know the advantages and disadvantages.

There are 3 basic business models and I would like to introduce them to you today, including practical examples.

Different Business Models on the Web

You Should Know These 3 Online Business Models - Advantages, Disadvantages, and Examples

When I talk about business models here, I mean the basics of addressing customers. How many customers am I trying to reach with my work and do I have to do the work myself or not?

The points “how many customers” and “do I do the work alone” play a decisive role.

The 3 business models 1: 1, 1: n, and n: n can be derived from these two aspects, which I would like to present in more detail below.

1: 1

In English, this business model is also called one-to-one.

This describes a typical customer relationship in which a service provider works for one customer at a time. So, for example, the typical project work or, for example, the activity of a craftsman.

Examples:

Web designers are a good example of this. You look for a new job and then implement a website for a customer. The number of projects that you can implement is limited to your workforce. You just can't manage more than X projects a month.

Another example would be a copywriter. He always writes his texts for exactly one customer. Of course, a copywriter also has several customers at the same time, but the actual work is only ever for one customer. Then you work on the next order for another customer.

Advantages:

The 1: 1 business model enables a close customer relationship and offers potential for long-term cooperation.
Special services are possible because you don't need many customers so they pay well.
If you have earned a name and a reputation with the target group, you can earn very well.

Disadvantage:

This business model scales very poorly. You can only work a certain number of hours and that limits the potential number of customers you can look after at the same time.
In many industries, great competition means that you cannot achieve sufficiently high prices and find too few customers and therefore not earn very well overall.
The dependency on individual customers is relatively high.
With project-related work, you have to go back to new customer acquisitions.

Basically, of course, there is nothing wrong with a 1: 1 business model. However, many self-employed do not manage to establish sufficiently high prices to be able to make a living from it. Many self-employed people who are barely making ends meet have a 1: 1 business model.

1: n

The main difference to the previous business model is that you do a certain job not just for one customer, but for several. In this way, one hour of work can be paid not just once, but multiple times.

So you get rid of the time limit that made the first business model presented so that you couldn't have more than a certain number of customers.

Examples:

There are a lot of examples for 1: n business models (one-to-many). The typical broadcasting business, starting with offline media, naturally also exists on the web. Websites, blogs, and the like are often run by a single self-employed person.

The important thing is that you have the potential to reach a large number of readers/customers. So the maintenance effort of self-employed in the network is more or less the same for me today as it was 5 years ago. But today I have five times as many readers and earn significantly more than I did then.

Further examples are software or app programmers who sell these online. A classic example is book authors who write a book once and then sell it as often as they want. In the online area, these are correspondingly eBook authors.

Online shops also fall into this category, albeit with restrictions. The actual online shop can process 100 orders with as much effort as 1,000. That only makes a difference when it comes to physical shipping.

Developers of paid themes and plugins are also an example here. They develop a certain product and can then sell it 100, 1,000, or 10,000 times with the same effort.

Certain online services, such as online billing tools, also fall into this category. The service itself has to be maintained, supported, and further developed, but whether 100 or 500 use it makes little difference in terms of effort.

Advantages:

1: n business models scale very well. You can earn more with the same amount of labor and thus keep increasing your income.
With many 1: n business models there is growth over time, which of course results in increasing income.
Once you have achieved a certain growth, it is not that easy for new competition to catch up with you.

Disadvantage:

Many 1: n business models are less profitable at the start than 1: 1 customer relationships. Most of the time it takes a certain amount of money to earn money.
Even if, for example, the effort involved in writing articles is the same for me, regardless of whether I have 10,000 or 100,000 readers, there is an increasing overhead. By that, I mean administrative effort, e.g. for support, etc.
The monetization of 1: n customer relationships is sometimes more difficult because sometimes you can't let the customers pay directly and you have to do it through advertising, for example.

1: n business models offer significantly more potential in the long term and theoretically have no upper limit. However, these often take longer to come into profitability.

n: n

The fine art of online business models is the n: n model.

In English, this is also called many-to-many. The difference to the previous business model is that you take yourself out of the equation and your labor is no longer a limiting factor.

To take my blog as an example again. I can only write 2-3 articles a day. If I had various authors here in the blog, a lot more content would be created and the result would certainly be a lot more traffic.

Examples:

Typical examples of n: n business models are, for example, marketplaces. Platforms like eBay, banner marketplaces, or text platforms (Textbroker and Co.) have one thing in common.

The provider himself “only” provides the infrastructure, but does not provide the actual content or does the actual services himself. Instead, it brings market participants together.

The AdWords / AdSense team works similarly. Here, too, Google “only” takes care of the technical platform. The real “work” is done by the advertisers and the website owners.

Forums and social networks also fall under this category.

Advantages:

Most of the fixed costs remain the same. The technical basis must be developed and maintained. The real work is then done by the users (e.g. posting offers on eBay ...).
You are busy with the maintenance of the system and can work on the business instead of always having to work in the business as a blogger, for example.
The growth potential is very great.
Once you've reached a certain size, everything runs almost by itself and many new customers come automatically.

Disadvantage:

It is difficult to start such an: n business model because at the beginning there is only the platform and you have to find the first users who get the whole thing rolling. Anyone who has ever wanted to start a forum knows what I'm talking about.
Even if the providers only provide the technical basis and a large part of the fixed costs remain the same, at least the support effort increases with the increasing number of users. Support, technicians, accounting = overhead.
You have to have a good idea that addresses a user's need.
Often there isn't a lot of space for different competitors, so you have to differentiate yourself.

Which Business Model Makes the Most Sense?

Which of these 3 business models you ultimately decide on depends, among other things, on what know-how you bring with you.

In addition, many founders first have to earn money very quickly and that usually works best with 1: 1 customer relationships. The advantage here is that you need very few customers and hardly have to go in advance, since the actual work is only done in the current project.

1: n platforms usually need more time and grow more slowly.

You have to make a lot of upfront work for n: n business models. The technical basis must at least offer the most important core functions before the first user deals with it. In addition, it often takes a while or you have to invest money in marketing so that the target group knows about it. That is why mostly only “real” startups start with external financing n: n platforms.

In principle, however, it is also possible to switch from one business model to another over time. For example, a web designer can first implement customer projects and then develop their premium themes over time and sell them.

For me, it was the case that at the beginning of my self-employment I made a living from web design and only gradually built up my own 1: n websites and blogs.

Every founder and the self-employed person has to decide for himself which way he wants to go. It is only important to know the different business models and their advantages and disadvantages.

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