The marketing strategist Tom Goodwin once pointed out, in a famous (and much imitated) slide: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”
These businesses are all platforms of one kind or another that enable other businesses to reach a vast audience in exchange for a cut of their revenue or a chunk of advertising spend.
As Goodwin added, “Something interesting is happening.”
Business models are fascinating. Meeting entrepreneurs and taking a peek behind the curtain to understand what makes a company tick is one of the most interesting things about working at an agency.
This is especially true when the model is new and innovative.
An example at the moment is the rapid growth of buy now, pay later, as popularised in the UK by Klarna and Clearpay.
This has proven so popular it threatens the dominance of credit cards.
It has also led to some of the same problems associated with credit cards, with some people taking on more debt than they can afford.
Another is Peloton.
“I’ve always been slightly in awe of Peloton’s business model,” the writer Jonn Elledge recently wrote in his newsletter (which you can subscribe to using Substack – which, as an aside, is another innovative business model – that of paid email newsletters).
“The internet-connected exercise bikes cost nearly £2,000 in themselves, but then there’s a £13 a month subscription, too. And once you’ve got one, you’re sort of locked in: £13 a month isn’t that much, really, but £2,000 is, and if you stop spending the £13 a month you have to admit to yourself that spending £2,000 on an exercise bike was a bloody stupid thing to do. So, I’m guessing, once you’re in, you keep paying. Possibly forever. They’ve found a way of weaponising the sunk cost fallacy. You have to keep paying the small fee to avoid admitting to yourself that you’re a twat.”
