Classify any business model in a minute + free Figma designs
Business Model Mnemonics for Amazon, Uber, and more.
There are many business models: transactional, all-you-can-eat subscriptions, pay to play. One business model might be relatively straightforward, while another—a seemingly comparable business—has a completely different model. They’re often contorted in differentiated ways. A company might combine business models for multiple revenue streams.
Understanding how a business makes money is important to design a best-in-class product. It’s easier to contribute to company goals and makes for better decision-making. If you’re building a business, analyzing the greats can help identify the best model for your company.
We’re going to rebrand business models. Rebrand the B2B, B2C, B2C2F2G. The X2Y abbreviation doesn’t capture the nuances when comparing business models and makes it harder to dive into the key differences of a business (for example: how often a transaction occurs). Here we’re going to propose a new shorthand for labeling business models; plus, add a sort of mnemonic for representing them visually.
After this post, you’ll be able to articulate how the business is making money by defining: who’s paying, how they pay, and who gets paid. If you want to check out the examples, scroll toward the bottom. If you want to see the visual representation, here’s the freebie in Figma.
The framework
This framework for labeling business models is pretty simple, it breaks out into the following format: who pays - how do they pay - who gets paid . Each is marked by an abbreviation described below.
Who pays? (B, C)
Who is paying for the good or service? It may be an individual (consumer), or a business. The first letter is denoted as either B for business or C for consumer (this is standard so far).
Business
Consumer
How do they pay? (T, S, PPU)
This is our primary addition to the more common “B2C” notation. How the entity pays can help us optimize the core product value. Understanding this handshake helps us understand what problem the customer is solving with this product. How do they pay?
Every time they get something new → Transaction
Once per period (month, year, etc.)
For a set amount (sometimes unlimited) → Subscription
For amount they used → Pay per use (PPU)
Example: for Netflix’s streaming service, customers pay via subscription: S. For Amazon’s AWS, you would pay for the number of servers, etc. you used: PPU.
We could get more granular with this format. For T, we could also break down the fee structure of the transaction. For example, DoorDash includes a delivery fee, service fee, tax, and tip, on top of the subtotal of the order. How the fees are grouped, and the amount of each is unique to DoorDash.
Who gets paid? (B, P)
In almost all scenarios, the business gets paid as part of the transaction, marked as a B. But sometimes they’re not the only ones. The provider of the good or service can get paid as well. Like when someone sells on Etsy, or Amazon; or rents a house on Airbnb. We’ll mark this entity as P for the provider.
Business
Provider
Let’s walk through an example
We’ll use Amazon as an example, we’ll go through three of the many products they offer and identify the business models for each.
Amazon Retail → going to Amazon.com and buying a product
Someone (C for consumer) goes to Amazon, buys a product, and pays for the product (T for transaction), then the business (B, Amazon) and the provider (P)—if there is one, the entity selling the product—gets paid. C-T-BP
Amazon Web Services → A startup goes to AWS to buy backend infrastructure for their product
A startup (B for business) goes to AWS, and signs up for S3 (cloud storage), they agree to pay for every gigabyte they use, so they’re going to pay per use of the service (PPU) and the business (B), AWS will get paid. B-PPU-B
Amazon Prime → customers purchasing a subscription for additional benefits
Amazon charges for shipping, but you can subscribe to a bundle (Amazon Prime) which removes the shipping cost + additional added benefits (often called bundling).
The value the customer is getting (consumer surplus) exceeds the cost the consumer is paying. This creates a lock-in for Amazon: you don’t want to waste your money paying for a subscription if you’re going to lose the free shipping benefits. This product + business model combo makes Amazon Prime the gold-standard of customer retention.
The business model here is the consumer (C) paying a subscription (S) once a year, which goes to the business (B). C-S-B
With just these three of Amazon’s businesses, we have Retail C-T-BP + AWS B-PPU-B + Prime C-S-B. It’s nice to see how you can combine these revenue streams to build a massive business.
It’s also interesting to see Amazon’s retail business isn’t that different from something like Etsy. A consumer transacts for a good, Etsy gets paid, and the provider of the good gets paid (C-T-BP). This framework helps us get a bit more specific about this similarity, more than using something like B2C and C2C.
Some more examples
Etsy, Uber, Airbnb → C-T-BP (customer transacts on platform, business and provider get paid)
TikTok → B-PPU-BP (business sells targeted user attention, per minute/view/tap, business and provider get paid)
Shopify → B-S-B (businesses using their website framework) + C-T-BP (customers interacting with websites, buying products)
For me, it helps to look at this visually, so I created a (totally free) Figma to lay it all out. This document includes examples, and also a “Build your own” section, in case you have a startup or early business you feel may benefit from a bit of design.
Our exploration of business model mnemonics has created a fresh way to categorize and understand the inner workings of various business models. Breaking these down into concise, bite-sized mnemonics can help better understand the best products in the world. And help us create new ones.
No one’s playing Business Model Trivia (to be fair I’m not 100% certain on this one), so excuse the alphabet soup. But, I hope these mnemonics might be helpful in your current role, or your next venture.
Cheers.