What do digital business models mean?

Digital business models allow businesses to create value and generate revenue online or via the cloud. They leverage software to deliver products, services, and experiences to customers without needing a physical presence.

Here are some examples of digital business models:

• Online shopping
• Cloud-based software (SaaS)
• Services you can subscribe to
• Online shops for sale
• Digital goods
• Making money off of data
• Models built on ads
• P2P (peer-to-peer) networks use
• ₷Partner Marketing

Every other kind of online company

Technically, any company with an online footprint is a digital business. On the other hand, digital business models are made to take advantage of an online platform’s unique possibilities.

Like words

• The digital economy
• How to run an online business
• The Growth of Online Business Plans

In the 2020s, digital business methods are expected to grow, which shows that the world is changing quickly and dynamically. Since 1999, Salesforce has become the first SaaS platform; digital changes have even changed how traditional businesses work. These changes can be seen in the growth of shopping, the subscription economy, and the Fourth Industrial Revolution.

AI that creates

Applications like ChatGPT, Midjourney, and DALL-E, which can make pictures, text, videos, and more, took the world by storm in 2023, bringing this technology much attention. Generative AI is quickly being adopted by businesses in many fields, and it is starting to change jobs from sales to software development.

Some people think that creative AI will take people’s jobs, but the truth is that it’s more of a technology that makes things possible. It can improve our lives, make things easier, and help businesses increase.

Digital Experiences Without Any Problems

It’s getting more and more critical to design and build digital experiences that are engaging, connected, and easy to use to attract and keep customers and workers. PwC research shows that 43% of customers would be willing to pay more for convenience.

In this way, digital business models can not only make more money but can also use ease as a way to stand out from the competition. Technology can help you eliminate problems in the customer trip, make it more personalized, and give the customer a better experience.

A “frictionless digital experience” also refers to how digital and real life are increasingly connected. This trend is caused by the desire for everything to be linked, from personal matters (like smart houses) to more extensive uses (like intelligent cities). A big focus is also on using data through innovative and adjustable APIs, which shows how important it is to make data-based decisions.

Computer safety and AI

As technology gets more accessible for more people to reach and use, cybersecurity and AI are essential to keep organizations safe and create new business opportunities and efficiencies. This trend shows how important it is to have a digital infrastructure that is both safe and smart.

Threat intelligence collects and processes data to find possible cyber threats before they worsen. It is a big topic of interest in cybersecurity and AI. Companies can stay one step ahead of hackers and keep their digital assets, like private customer data, safe in this way.

Hyperautomation and technologies in the cloud

Hyperautomation is getting more attention. This is when companies quickly find and automate as many business processes as possible. AI, machine learning, and robotic process automation (RPA) are the primary tools behind this trend. For example, the typical business today automates 130 tasks with SaaS apps.

At the same time, more and more companies are using cloud tools to make their digital business models work. Traditional on-premise systems can’t compare to cloud-based platforms regarding scalability, freedom, and cost savings. This is very important because digital business models need to be very flexible a lot of the time.

Digital Accessibility and Design for Everyone

Since there have been many lawsuits about digital accessibility, more attention is paid to making digital goods and services accessible and open to everyone. Disability, race, social background, gender identity, age, and sexual orientation are some newer factors considered during the design process.

To include accessibility in their digital strategy, business leaders must keep up with new rules and trends and add technology that makes their digital tools easy for everyone to use. This is the law and allows businesses to reach a large group of customers they might not have thought of before.

Optimizing for mobile

Over half (57.8% of all website traffic each year) comes from phones and computers, so the focus on mobile-first design is still rising. This trend comes from the need to make sure that all devices have the same experience and that mobile-optimized material is essential for search engine rankings.

Also, mobile technology is becoming increasingly integrated with different digital business models, like e-commerce and mobile payments. As the number of people using smartphones grows worldwide, companies that want to stay competitive must ensure their websites load quickly, are easy to use, and offer safe payment methods.

Changes in rules and regulations

Laws and rules for digital businesses are changing quickly, just like those for any other kind of new business. Governments are increasingly stepping up to police data privacy, hacking, and other areas where digital business models have an effect.

For instance, the General Data Protection Regulation (GDPR) of the European Union changes how companies handle personal data in significant ways. Google’s move away from cookies in ads makes it harder for businesses that make a lot of money from internet ads or data sales.

The people who make policy are also thinking about how to help and promote the growth of online companies. Things like giving tech companies tax breaks or investing in digital infrastructure are examples of these. Digital companies need to stay up-to-date on these changes to ensure they follow the rules and take advantage of possible opportunities for non-dilutive, non-secured funding.

Essential Parts of Digital Business Models

Digital business methods tend to put a lot of emphasis on being flexible, creative, and quick. They use technology in ways that completely change how a business works, making it more efficient and better able to find new customers, make more money, and stay ahead of the competition.

These are the ten most important parts of digital business models:

1. Value proposition: how your one-of-a-kind product or service solves a problem or meets a need for a customer.

2. Customer segments: Customer segments are separate groups of related users that different parts of your service are meant to serve or appeal to.

3. Product strategy: This includes user experience (UX), features, development processes, and new product releases. It’s all of these things that affect product-market fit.

4. Your unique mix of sales, marketing, and distribution methods that help you reach customers and give them value. Examples include online stores, social networks, channel sales partners, and email marketing.

5. There are several ways for your business to make money, such as through subscriptions, partner marketing, and one-time services.

6. Customer relationship management (CRM) is how you helpfully connect with your target audience, keep customers, and turn them into long-term brand advocates.

7. Cost structure: planning for and getting the most out of your goods and services costs.

8. Key activities: daily things you do that offer customers a value proposition.

9. Data strategy: how you collect, study, and use data to make better decisions, improve the user experience, spur innovation, and make money from your product (while ensuring you follow the rules).

10. Tech stack: the software, hardware, and networking tools you use daily to get things done.

Types of digital business models that are often used

There are a lot of different ways to run a digital business. Here are some of the most common:

Online shopping

An e-commerce shop is an online store that sells goods or services. There are a lot of different types of business plans in the industry itself, such as:

Walmart and Amazon are examples of traditional stores.

• Online stores like Etsy and eBay
• Building websites with tools like Shopify and BigCommerce
• Digital goods like files, online classes, and boxes you can subscribe to every month
• Brands that sell directly to customers, or DTC, like Warby Parker and Allbirds
• Online stores that sell in bulk, like Amazon Business and Alibaba,
• Businesses that sell to other businesses and do so online

Putting something up for sale online is now easier than ever. You can quickly start selling things from your bedroom with platforms like Shopify and Amazon. You can use 3PL (third-party logistics) to handle order processing and use algorithms to grow your business.

Sign-ups for

When we think of digital goods, the subscription business model is the first thing that comes to mind. This is the business of giving people access to data or services in exchange for a fee paid over time.

Some examples are

• software-as-a-service (SaaS) like Slack, Salesforce, and most of the apps you use today.
• Platform-as-a-Service (PaaS) like AWS and Google Cloud Platform
• IaaS (Infrastructure as a Service) providers like Rackspace and Microsoft Azure
• Pay-per-view sites like Netflix and Amazon Prime
• Mail-order boxes like Stitch Fix and BarkBox

The great thing about this plan is that it gives businesses steady income while giving customers ease, flexibility, and long-term benefits. This is one of the most scalable business models because everything is hosted online.

Shopping malls

Marketplaces bring buyers and sellers together. Building a public area where people can buy and sell goods or services is what this plan is all about. The following companies have used this digital business model:

• Airbnb (letting space out)
• Turo (letting people rent your car)
• Uber (public service)

Freelancing work on Upwork

Four (gig work)

Marketplaces can often increase because they don’t have to worry about stock or having real locations. Plus, network effects work in their favor for both buyers and traders.

For free

The freemium business model is like subscription-based SaaS models, but there is one difference: customers can use the basic features for free, but they have to pay to use more advanced features or get rid of ads.

Some common examples are:

• Spotify (streaming music)
• LinkedIn is a business social networking site.
• Dropbox is a cloud-based file service.
• Evernote is software for staying organized.

With the freemium approach, the goal is to get free users to become paying customers. This can be an excellent way to reach more people and make money. But the features must be carefully balanced so enough people will upgrade for the business to make money.

Using digital ads

Advertisements bring in most of the money for a business in an ad-based revenue plan. To keep the service free for users, they rent out ad space on their website or app to other companies. Some well-known companies that use this plan are:

Look it up on Google

• My Facebook page
• o YouTube
• ¶ Insta

Many people don’t like the digital advertising approach because they think it invades users’ privacy and helps spread false information. But companies still use it a lot to make money from their online platforms. It’s also how many subscription and e-commerce businesses reach their ideal customers and learn how they act.

Marketing for Affiliates

Affiliate marketing makes money by getting people to refer others. Companies pay affiliates (people or businesses) a commission for promoting their goods or services. It’s a success-based strategy. The main goal is to get people to visit and buy, but companies also use it to find new customers and raise brand awareness.

Some examples are

• Amazon Associates (get paid a fee on items bought through affiliate links)
• CJ Affiliate (an affiliate network that links publishers and companies)

Affiliates of TikTok (a group of artists and brands)

Affiliate marketing is a safe way to get your message by using someone else’s site. But you have to closely monitor affiliates to ensure they’re promoting your business honestly and fairly. And it would be best to enthat the people who sing your product are reaching the right people.

Buys inside the app

Users can buy things inside mobile apps (and sometimes SaaS Google). They can buy extra features, virtual goods, or premium material inside the app. For example, Candy Crush has a lot of different power-ups and extra lives that you can buy inside the game. You can also find these payments in productivity apps and other media.

In-app purchases work the same way as ads: they give businesses a steady stream of income that’s not tied to a single transaction. This way, they can increase their revenue and profits while giving users a free or cheap experience.

Services and advice for digital

The digital services business plan is all about offering clients various consulting, advisory, or specialized technical services. Among these are:

• Web design and building
• Web advertising
• SEO stands for “search engine optimization.”
• Take care of social media
• Making content

You can tailor this model to your client’s wants and goals, which is one of its best features. This makes it a more profitable choice than traditional consulting or services.

It is, however, a very competitive area because you can start it from almost anywhere and with little to no money. To succeed, you must provide high-quality, niche-specific services and keep your skills up-to-date.

The Way Forward for Online Business Models

Digital business models have been successful thanks to cloud-based technology and changes in the customer experience. However, there are still many challenges and chances to come. To stay ahead of the curve, businesses must adapt and develop new ideas as technology and customer habits change.

Besides cloud-based technology, the following other trends will shape the future of digital business models:

Business ecosystems that are not centralized

Future digital business models could work in decentralized environments using blockchain technology. This could include companies that are decentralized in how they work and who owns them. Stakeholders and customers could have a say in how decisions are made and how much money they make through tokenization.

Take VAKT, a blockchain tool that was made with Thoughtworks’ help. Big companies like BP, ING Group, Saudi Aramco, Shell, and Société Générale are among the commodities trade organizations that are part of VAKT. It wants to speed up dealing with energy after it has been traded by using smart contracts and blockchain to store digital records.

Business Operations on Their Own

AI and machine learning could improve over time to the point where they can handle large parts of business operations independently. Companies may have AI-powered departments that can make choices, carry out plans, and adjust to market changes without human help. This makes them much more efficient and speeds up the decision-making process.

Siemens’ use of AI-powered creative design tools in engineering software is an excellent example. This software lets engineers set design and cost parameters, then explores the design space on its own to come up with several choices. This automation has cut production costs and made products work better for Siemens users.

Augmented reality (AR) and virtual reality (VR) for business

As VR and AR become more popular, digital companies of the future may be able to offer more immersive shopping and service experiences. Customers could virtually try out goods and services or move around in digital areas that look like actual stores or environments.

AR is already being used on the websites and mobile apps of IKEA, Amazon, and many other big online stores. When a user points their camera at an empty room, AR apps will show them how a piece of furniture or home decor would look there.

Digital business models made possible by technology

Online shopping

E-commerce is more about technology than how to run a business. No longer is it about “selling stuff online.” It’s about the tools and processes that make it possible for people to buy things online.

Online store SaaS companies like Shopify, Oberlo, and BigCommerce have made digital business models possible in a big way. Their software makes it easy for businesses to set up online shops, keep track of inventory, make sales, and handle orders.

Using the cloud

SaaS and e-commerce systems depend on cloud infrastructure. These digital business models would not be possible or scalable without the cloud.

Unless they run their cloud, businesses can host their websites and apps on reliable servers with easy-to-use management tools through AWS, Google Cloud, and Azure. This cuts down the costs of hosting services in-house by a significant amount while still giving you all the benefits of highly available technology.

Set up, price, and quote (CPQ)

CPQ software is an essential tool for companies that charge by contract, usage, or some other complicated method. Businesses can use CPQ solutions to tailor quotes and packages to each customer’s needs and tastes. They can also automate the approval process and change prices without problems as service offerings change.

This makes the sales process more accessible and lets companies be more flexible and quick to adapt to changes in the market. This technology has been critical to the growth of digital business models and will continue to be so.

Taking care of subscriptions

With membership management software, software companies can handle all their users’ billing and subscription needs without doing it by hand. It lets companies offer different subscription plans, charge users based on how much they use, and automate billing while making sure they follow tax rules.

Platforms for billing

Billing software is built into CPQ and subscription management or can be bought as an add-on to handle specific payment tasks. These tools help companies handle payment plans, keep track of recurring income, and ensure customers pay on time.

AI and Learning Machines

ML and AI tools come in a lot of different forms. It could be predictive analytics tools that help companies figure out how customers act so they can make their products better, or it could be self-making decision-making tools that help companies always be more efficient.

As AI and machine learning keep improving, they will significantly impact how digital businesses work in the future. These new technologies will help businesses succeed in the digital world by making things easier for users and handling complicated tasks.