On Demand Business Model #5- Revenue Model

This blog is the part of Juggernaut Special Series on ‘Understanding On Demand Business Models’, where we reviewed different facets of On Demand Business Models

“Five years ago, Andrew Parker of Spark Capital published a now well-known post highlighting the different startups attacking different parts or services of Craigslist entitled the Spawn of Craigslist. Then in December 2012, former Spark analyst David Haber updated the chart further expanding the list of companies to more than 80.”

CB Insights recently published this analysis, concluding that they have raised $8.87bn in funding till date. The list included only 2 mobile first On Demand Marketplaces – Uber and Lyft at that time. In another recent analysis (Oct’14) of Vertical On Demand, mobile first based Marketplaces, the number was $1.46 billion in last 4 quarters excluding Uber’s $1.2 billion funding.

The basis of investors cozying up to the idea lies in the monetization potential of the concept. The business model of Uber, and in turn, Uber for X startups will have you as a platform owner owning every transaction. This puts you in a vantage position to charge what would have earlier gone to the middleman while providing the said services more conveniently, with a small or no markup in costs to the end customers.

How every transaction is being monetized may vary from one implementation/vertical to another. Instacart adds a small markup to every grocery item you buy, while Eaze charges dispensaries for every lead that it brings their way.

Having figured out an appropriate business model, one needs to take the product/service, to a product market fit, wherein consumer feedback is taken into account, along with emerging market forces and the product/service is tweaked to create a better customer experience. This invariably requires an MVP.

Stakes have never been larger. This is a good time that you stop sitting on your ideas and bring them to life.