122 PART | III ITS business models
Subscription
A subscription model is an example of recurring revenue strategy. This is a
common strategy among entertainment services, and online hosting companies
like Netflix, Youtube, Ahrefs, etc., where they provide the specified service for
a predetermined periodic cost.
Donation
Many companies provide their products and services free of cost and rely totally
on donations paid to them by their customers. Wikipedia is one such company
which relies on donations.
Arbitrage
An arbitrage revenue model makes use of the price difference in two different
markets of the same good. It involves buying a security, currency, and/or com-
modity in one market and simultaneously selling the same in another market at
a higher price and making profits from the temporary price difference.
Fee-for-service
This model charges the customers for the type of and times the service is provid-
ed. This is a pay-as-you-go or pay-per-usage revenue model where the customer
pays only for the services he actually used. This revenue model is common in
telecom and cloud-based service industries.
The author agrees with Slávik & Bednár (2014) that the business model
is a system of resources and activities, which create value that is useful to the
customer and the sale of this value makes money for the company. This corre-
sponds to the definitions of Zott and Amit (2006); Zott and Amit, (2010); Zott
et al. (2011) that a business model is an interdependent system of activities that
explains how an individual or collective actor creates and captures value. The
author also concurs with Reinhold et al. (2017) that there are three key features
that characterize this definition: first, the focus on an interdependent system of
activities, second, the inclusion of individual and collective actors, and finally,
the emphasis on creating and capturing value.
10.8 Why we need a business model?
Having a business model offers many benefits to a company. First, according
to Casadesus-Masanell & Ricart (2011), business model is a vital concept that
helps us to understand how and why a broad set of individual or collective ac-
tors succeed in sustainably creating, capturing, and disseminating value. Sec-
ond, Massa et al. (2017) argue that business model focuses on managerial and
research attention on several essential interdependencies—interactions among
activities and associated choices, links between material and cognitive aspects