When discussing internet products, it’s impossible to ignore their revenue models, a question often posed to product managers.
If creating a product is like “having a child” and operations are “raising the child,” then we naturally pay attention to the rewards the child can bring as they grow up. Profit, in this analogy, is like the potential future salary of the child — what you might gain in return (though this is, of course, just an analogy; parents are truly selfless!). What? You haven’t raised a child? Well, you’d better hurry; your primary school classmates’ children are already in kindergarten!
With that said, let’s get down to business.
First, I’d like to start with the two main categories of internet products: business products vs. user products. Business products cater to enterprises or individuals in a work context. These products prioritize efficiency and profit. Even if the interface is unattractive, as long as it works, users will get used to it. On the other hand, user products target the general public, where the focus is on user enjoyment. In today’s highly competitive market, even a two-second delay can lead users to abandon a product. The goal is to create emotional resonance with users.
Revenue Models for Business Products
Selling or Renting Products and ServicesProviding services such as consulting, decision-making support, system assistance, or software APIs to generate income.
Examples: Growingio, Alibaba Cloud, Baidu Maps.
Platform CommissionsPlatforms offer space, traffic entry points, and management services, charging a fixed fee or taking a percentage of users’ revenue.
Examples: Taobao Seller Service Platform, Dianping Merchant App, Didi Chuxing Driver App.
Search PromotionGenerating income by selling prominent positions in search results.
Examples: Baidu, Google, Taobao's bid ranking system.
Revenue Models for User Products
Product FeaturesMany products adopt a freemium model, where basic functions are free, but advanced features come at a cost. This aligns with the “80/20 rule” in market profitability, where 80% of profits come from 20% of users.
Examples:
QQ's paid membership exceeds 50 million users, generating billions in revenue annually for Tencent. QQ members enjoy nearly 80 exclusive privileges, spanning QQ, games, lifestyle, and shopping.
The popular U.S. dating app Tinder introduced paid services for older users, leveraging price discrimination to attract those willing to showcase their economic power for advanced features.
Other examples include Baidu Cloud, Youdao Note, and similar applications that use this strategy.
Content ServicesSelling copyrights for videos, literature, and other content to generate revenue.
Examples: iQIYI membership, QQ Reading, 58pic.
Product SalesDirect revenue from selling products on a platform, which can be divided into physical and virtual products.
Physical Product Examples: JD.com, Jumei, Dangdang.
Virtual Product Examples: Game items, app themes, live streaming gifts, online lottery tickets.
PartnershipsThis includes revenue from ads, investments, data trading, and platform traffic referrals.
Many financial products also use this strategy.
Alliance Advertising: Ever noticed that after viewing a product on an e-commerce site or searching for something on Baidu, the same item appears on other websites’ sidebars? This is due to advertising alliances that share user browser cookie data. Such targeted advertising can increase conversion rates by over three times.
(1) Advertising: This is one of the most common revenue models for internet products, with tech giants like Google and Facebook relying heavily on it.
(2) Investment: Shared bicycles are a great example. Take Mobike, with nearly 40 million registered users, each paying a 300 RMB deposit. The total deposits amount to around 12 billion RMB. Depositing this amount in a bank at a 1.5% interest rate generates 1.8 billion RMB in annual interest — not a small sum.
(3) Data Trading: The data left by users on apps can be analyzed for valuable insights. For instance, the free Wi-Fi service provided by Peanut Subway can collect massive amounts of data.
(4) Traffic Referrals: Providing traffic entry points for other apps and sharing revenue. WeChat is a prime example; think about how much traffic the apps in WeChat’s mini-programs receive daily. When Tencent invested in JD.com, traffic was part of the investment negotiation.
Cross-subsidizationSome products are inherently difficult to monetize but are indispensable within a company. These products leverage their strengths to support profitability through complementary products. For instance, Apple uses iPod profits to subsidize iTunes.
