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Entrepreneurs with Denis Oakley

I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN

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Business Model Canvas

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Developing the Business Model Canvas in New Directions

For the last five years I have been designing, developing and improving business models for clients using the business model canvas. For a simple tool it has a vast amount of subtlety and complexity buried in it. In that it is like Go, which I still remain a novice despite my best efforts.

Unlike company financials or other tools the business model canvas offer the possibility to deeply understand how a company makes money, and why it is not. We are looking at the skeleton and how the whole body moves, rather than it’s acne or the locks of rapidly greying hair.

I wanted to use this post to briefly describe where I have taken the business model canvas over the last year and where it can go in the future.

The basic business model canvas shows the underlying business model of the company. Set out on a single page of A4 it allows anyone to quickly understand the company and what is important to it.

Developing the Business Model Canvas in New Directions
An Electricity Utility Business Model Canvas

Using the 9 segments of the business model we are able to make claims such as. Company X makes money by delivery value Y to customer group P and generates revenue by K.

A number of people have then taken the canvas and plugged sales and costs into it to give a sense of how money flows through the business model and is created and or destroyed.

Business Model Canvas and Performance

My focus has been on looking at performance. There are many existing KPIs inside companies and these can often be mapped onto the business model canvas. The result is an instant appreciation of how well the business model, as opposed to the company, is performing.

Because everything in the business model canvas can be seen as a system failure, analysis becomes as lot easier. Improvement plans can deliver more. For example sales performance can be low due to a poor value proposition which is caused by inadequate access to key resources.

Developing the Business Model Canvas in New Directions

Business Model Canvas and SWOT Analysis

This performance based approach looks at the company in static terms. Of course the competitive environment is ever less static so another tool that I’ve developed working with customers is looking at the the threats and challenges that they face. Using the business model canvas we are able to go well beyond traditional SWOT analysis.

This is effective because you see where and how the impact is on the model rather than thinking that ‘company’ has a strength or weakness. It is a lot more granular and as a result can be far more easily addressed by leaders.

Developing the Business Model Canvas in New Directions

Business Model Canvas and Competitive Analsysis

The latest work that I am doing is using the business model canvas for competitive analysis. For many companies data comes back from the sales and marketing teams that a competitor is doing X. This is the what.

What we are able to understand as we probe them with the business model canvas is the why? Done correctly it enables us to simulate how a competitors management team is thinking about their key problems and consequently helps us to understand why they are doing what they are doing. This makes the what easier to disrupt or counter.

These are all linked in my 5 Step business model innovation workshop

Where Next with the Business Model Canvas?

One of the areas that I am fascinated with is business model depreciation. Every business model depreciates. How can we measure the rate of depreciating and the risk of catastrophic depreciation? Is it even quantifiable?

Another area that I’m looking at is how companies transition from one business model to another. IBM has famously done it multiple times. Kodak, infamously almost managed it, and then failed spectacularly (it sold 40% of all digital cameras at one point).

Finally the business model canvas offers lots of opportunity to be the core dashboard for running a company. Here I’m looking for companies willing to experiment a bit and find out what the best ways of doing this are. If this sounds interesting let me know

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Are you copying a business model?

Are you creating a new one?

I can help you get it right

Review YOUR BUSINESS MODEL

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What is the Tenaga Nasional Business Model?

In this article and video, I take a look at what the Tenaga Nasional business model is and use the business model canvas to make it super clear. Tenaga Nasional is an electric utility in Malaysia and has a very similar business model to most integrated power generation, distribution and retail companies.

Tenaga Nasional Business Model Canvas Title

Tenaga Nasional is an integrated electricity company. They create electricity from gas, coal and renewable energy and sell it to consumers, businesses and larger industrial users.

To do this they need larger power stations with easy access to the fuel they need, electricity transmission lines to move it from the power stations to the cities, and a distribution network to deliver it to the millions of users and locations where it is needed.

Tenaga makes money by selling electricity measured by the amount of work that the electricity can do (Watts)

Tenaga Nasional Business model canvas

Some thoughts that occurred to me as I wrote the above.

  • What is the difference between electricity and power? If TNB’s value proposition was about power would that create new opportunities?
  • Why does TNB deliver electricity to the doorstep but not to the device?
  • What would happen if the cost of transmission was a lot lower or higher? How would that change the business model?

Video Commentary on the Tenaga Nasional Business Model

I go into the Tenaga Nasional business model in a lot more detail in the accompanying video. I also talk a bit about how you can use the business model canvas to map out how you can approach business model innovation in a lot more detail.

Using some mockups the TNB business model I assess performance, existential threats, innovative capability and structural obstacles to change.

The data at this point in the video isn’t real but it illustrates how to do a detailed situation assessment on the business model and is great for companies being disrupted or worried about the depreciation of their business model

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What is the Telekom Malaysia Business Model Canvas?

What is the Telekom Malaysia Business Model Canvas?

In this post, I’ll cover the Telekom Malaysia Business Model canvas. Telekom Malaysia is a traditional telecom company that was incumbent in Malaysia from its founding until the early ’90s. The Telekom Malaysia business model is a common telecoms business model for nationalised and integrated telecommunications companies. This model is less common in countries that have privatised their telecoms infrastructure

Since then it’s traditional fixed-line business has come under attack from mobile operators who persuaded people to cut the cord. Malaysia has one of the highest rates of mobile ownership in the world. More recently it has increasingly come under renewed attack as voice has been made obsolete by data.

As a result Telekom Malaysia’s business model now focuses much more on convergence – using its existing products to enable it to sell additional services to it’s large installed user base.

What is the Telekom Malaysia Business Model Canvas?
This is slightly updated from the video, adding in the last mile connection and distinguishing between corporate customers and other telcos. The other telcos are buying access to the fibre network and last-mile connections

Looking at the business model it seems like there is a core pipeline business that provides ‘juice’ to the millions of taps that it ‘owns’. What is a lot less clear is whether the New TM approach offers a way out of the convergence trap as everything becomes commodified. Value-added services don’t and will not replace the lost revenue.

For that TM doesn’t seem to have good ideas and so has major problems with both its business model being disrupted and large amounts of business model depreciation that was not adequately funded in the 1946-1986 period.

I go into a lot more detail about the Telekom Malaysia Business Model in the video so do have a look to understand what it is and how it works. Feel free to ask questions in the comments.

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Measure Business Model Performance with the BMC

Many people have come across the business model canvas and how it can be used for business model innovation or generation. In this article, I want to go beyond the basics and talk about how the business model canvas can be extended to help address a number of business issues by bringing clarity to them. The focus is on business model performance and ways to measure it.

Measuring business model performance

At the core of the business model canvas is the idea that all businesses are made up of 9 segments. These are

Put another way.

“We create this value proposition for these customers and we reach them through these marketing channel, and support them through these customer relationships to generate sales. To deliver this we need these key resources and key partners to undertake these key activities and they come with these costs.


So far so good. Pretty much any business can be sketched out in a few minutes using this template. Once done it allows some fascinating discussions as to how and why the business makes money (or does not) and what to do about it.


The rest of the article is going to move beyond this and look at ways that you can use the basic business model canvas to change your business quickly and effectively.


Performance measurement using the business model canvas


Once you have your business model canvas sketched out have the CEO and/or the management team go through and give each segment (or each item within a segment) a score out of 10. If you feel you are selling 100% of the time to your ideal customer, mark it as a 10. However, if customers have moved on and the value proposition no longer resonates with them then perhaps a score of 4 for the value proposition is appropriate. Finally, if you have revenues with margins much better than the competition, give it a good score. You get the idea.

Then use the Net Promoter Score, scoring mechanism. Everything that is a 9 or 10 is green. Everything, 7 or 8 is yellow. The rest are red. Colour it in.
Voila. You have a powerful visual health check of your business model.

Measure Business Model Performance with the BMC

Going back to the phrasing that we looked at earlier 

“We create this value proposition for these customers and we reach them through these marketing channel, and support them through these customer relationships to generate sales. To deliver this we need these key resources and key partners to undertake these key activities and they come with these costs”

Management thus has a very clear and easy way to consider the problems (or opportunities) that it is facing and a simple way to explain it to stakeholders.

This is based on manager’s subjective analysis, but can be linked to KPI’s and turned into a regular performance dashboard. This is similar to the balanced scorecard but focuses on the health of the business model and it’s ability to deliver profits. 

Measuring Threats to the business model

When working with clients I use a 60-page threat assessment workbook. This takes us through each of the 9 segments looking at key metrics and the issues that are impacting them. When a company is in a market that is being disrupted there are often many threats occurring at multiple different levels. It’s easy to fall prey to information overload. 

Measure Business Model Performance with the BMC
The 60 page workbook that we use to assess threats to your business model

In the process above I described how you can measure the corporate business model performance. Here we look at ‘measuring’ how threatened the business model is by market forces and disruption. Again each segment gets given a score and you can identify which parts of the business model are redlining, and which are stable for now.

The twist here is it’s not as simple as highlighting the problem areas. That’s because often many parts of the business model will work in harmony, or have epicentres driving, them as Alexander Osterwalder puts it in Business Model Generation. The marketing channels you chose are ineluctably linked to the audience you are targeting, for example. If the channels are working but the customer base is under threat, you need to be thinking about the marketing channels as well. Once you change customers, you’ll need new channels or at least significant change.


Again the business model canvas does not solve the problems that you are facing. What it does do is layout the threats in an intuitively understandable way. It’s easy to get and explain. That saves time and gets everyone thinking the same way. In turn that opens up the field for more imaginative solutions.

Looking for ways to change your Business Model Performance

A business model can look absolutely wonderful on a piece of paper or sketched out on a whiteboard. The reality is that there are lots of reasons why changing it is going to be as hard as steering an oal tanker with a paddle from a canoe.  Two of these issues are the innovative ability of the people within the company and the company’s architectural resistance to change. These can act as a big drag on your attempts to change the performance of your business model

I’m from an engineering background. Looking back at the railway industry over the last 30 years it seems that a lot of the innovative people are in the key partners and in the marketing parts of the business. The key engineering teams needed to deliver the trains on time are relatively stagnant.

Innovativeness Audits

Small businesses can quickly do innovativeness audits. Who are the most innovative people in the business? Which segments do they live in? Their numbers can be mapped onto the canvas. What this shows you is where the people willing and able to be changemakers and make change live. If there is no appetite for change in the people responsible for key segments, consider the value proposition for example, how can any business model change programme be successful? 

Rigidity Audits


The second issue is the structural rigidity of the business model itself. Most managers are hired for their competence in reducing cost and improving efficiency and effectiveness. Over tim this means that processes and systems become more specialised and less flexible. This lack of flexibility can make it very hard to change a business model. Imagine for example the impact that a power station has on the balance sheet of an electricity company. They need to write it off or sell it in order to change the business model. 


Again we can create a heat map of which parts of the business are easy to change, and which parts are rusted solid. Combining the people and the structural rigidity you then have a clear idea on how you can move forward, or at very least the problems that you are going to have to overcome in order to change your business model and get to where you want to be.

Are you an Entrepreneur?

Are you copying a business model?

Are you creating a new one?

I can help you get it right

Review YOUR BUSINESS MODEL

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What is the Tesla Business Model?

In this edition of the business models of technology companies I’m talking about  the Tesla business model using the business model canvas.

In the video, I use the Tesla business model canvas to show who it’s key customers are and the value proposition it offers them. I describe how Tesla communicates with its customers and its key marketing and distribution channels. Finally, I cover how Tesla monetises its business model.

How does Tesla deliver value to customers? I then look at the infrastructure side of the Tesla Business Model Canvas to show how it uses key resources to deliver the key activities that are required to manufacture its cars and the partnerships that it needs to do this. Finally, I look at how much this all costs.

The Tesla Business Model Canvas

The Tesla Business Model

The Tesla Business Model Canvas

Photo by Roberto Nickson (@g) on Unsplash

The way it works is that Tesla offers an electric high technology car to people who are concerned about the environment and the cost of petrol (or gas if you are from the US). This is the value proposition.

The high technology component of Tesla solves a number of problems. It provides status in a way that is quite different from traditional internal combustion cars.

It also provides a far more interesting mobility experience that is a step away from the petrol driver having to control his car every second of the drive. The Tesla driver can relax and let the autopilot do the heavy lifting.

To deliver this Tesla has several key resources.

A huge factory making the electric batteries and also a heavily automated factory that assembles the cars.

The Tesla Gigafactory is a key resource in its business model
The Tesla Gigafactory is a key resource in its business model

It also has a network of car chargers and it’s own fully owned sales centres.

What is the Tesla Business Model?
Tesla Supercharge via Engadget via Bloomberg via Getty Images

These differ from the traditional car industry model which sells dealership franchises. You don’t buy a car from Ford. Your buy a car from a Ford dealership.

The Tesla business model breaks that. This difference allows Tesla to be far closer to its customers and control the whole value chain. Tesla is vertically integrated in a way that traditional car companies have not been for generations. 

Tesla, the most valuable carmaker in the world, worth an excess of $800 billion, has disrupted the automotive industry in a number of ways.

First off, the company focused on producing low-price, high-volume electric vehicles in order to facilitate the mass purchase of its cars. This made the company produce several cheap luxury cars that are affordable, unlike other electric cars which are expensive.

This, in turn, has led to an increase in the rate of adoption of Tesla’s vehicles.

Unlike most other auto-makers, Tesla updates the hardware and software of its vehicles instead of having to release an entirely new model year.

The fact is that electric vehicles have a long-standing history but internal combustion engine cars were easier and cheaper to manufacture.

Tesla is now disruptive because it is ripping the heart out of the supply chain of internal combustion engines. No internal combustion engines means a huge chunk of the gears, transmission drive chains etcetera are no longer needed.

This massively simplifies everything and has the potential to slash costs ― while giving greater performance

The anomaly that Tesla solves ― is everyone knew that electric cars were possible for a long time ―  but it was too risky to try, and trying to switch would cannibalize the internal combustion engine market… which is exactly what Tesla is doing now!

Customer segments

Tesla’s target customers include environmentalists who are advocates of a carbon-free environment.

The company strongly resonates with this group who want a pollution-free and green environment.

If you had the chance to make a contribution towards the reduction of global warming then maybe your first line of action would be to purchase a Tesla car that is fully electric. And that’s exactly what the company capitalizes on to reel in its huge customer base.

Just like its charismatic CEO, Elon Musk, Tesla’s customer base also consists of hardcore technology fans and enthusiasts.

This can be partly attributed to the fact that the company develops its cars as if it was software. 

Another contributing factor is the fact that Tesla’s cars are run on software. Hence, it would be of benefit to this particular customer base as they can easily upgrade their cars to the latest model for free instead of having to buy a new car altogether just like traditional car owners do.

Value proposition

Tesla provides a good value for its customers by providing them with self-driving autonomous cars.

One of Tesla’s other main value propositions is its provision of sustainable transport, otherwise known as Green transport whereby its cars don’t utilize any dwindling environmental resources

Customer relationships

One of the most fascinating things about Tesla is that it put its customers in control by selling its cars directly to them.

The country owns a wide range of service and sales centers through which it sells and services its cars. These centers are fully operated by Tesla’s staff, thereby leading to more interactions with their customers.

This also helps them provide a better buying customer experience.

Tesla employs technicians called Tesla Rangers who make house calls. These technicians provide various services for Tesla car owners, which in most cases, the service being provided is done remotely.

This is mostly due to the fact that the Model S can upload data wirelessly, hence, the technicians can perform fixes and repairs on the car without ever touching the car physically.

Channels

One of the unique activities of Tesla involves its direct sales of cars to customers instead of through car dealerships. 

The company sells its cars directly to its customers through its wide range of showrooms and galleries all around the world.

Alternatively, customers can go to the company’s website to purchase its cars online, specify customizations for the car and have it delivered to them.

This puts Tesla in total control of its sales process.

Revenue streams

Tesla makes money from a variety of offerings which includes sales of its cars and servicing, the company also provides financial services such as car leasing and car insurance.

Below is a breakdown of Tesla’s revenue streams in 2020;

  • Automotive revenue – $27.24 billion
  • Automotive leasing – $1.05 billion
  • Energy generation and storage – $1.99 billion
  • Services and other – $2.31 billion

Key resources

One of Tesla’s key resources includes its SuperCharger Network which is its own network of charging stations spread across the country. Here, Tesla car owners can charge their cars for free for 30 minutes.

Tesla introduced this SuperCharger Network into its business model in order to increase the rate of adoption of Tesla vehicles.

Due to the fact that Tesla vehicles also run on software, the company tends to collect data from its cars which is also a key resource in order for them to be able to improve the driving experience of their cars.

Funny as it may sound, Elon Musk is also a key resource of Tesla. 

The outspoken CEO has been the brains behind the innovation and product development at Tesla.

In order to ensure his continued focus and attention towards Tesla, Tesla’s board entered a certain deal with him whereby he would be compensated handsomely should he help the company achieve certain milestones and targets which have been spread over 12 tranches.

Other key resources owned by Tesla includes its;

  • Lease vehicles
  • Solar energy systems
  • Property, plant, and equipments.

Key activities

The key activities of Tesla include engine manufacturing. 

Its cars’ engines, unlike most other companies’, lie at the bottom of the vehicle, in order to maximize the trunk and boot space.

Car manufacturing and design are also among the company’s scope of activities. Its various cars designed and manufactured so far includes model x, model 3, model y, and model s, of which over a million have been sold to date.

Worth mentioning is its upcoming Cybertruck which it unveiled in 2019. Production of the vehicle will begin in late 2021. The vehicle already has 600,000 pre-orders thus far.

The company also produces a wide range of solar panels and batteries. 

Its range of products also includes solar roofs which are installed in homes as alternatives to traditional roofs.

Key partners

Tesla’s key partners include battery manufacturers which it either acquires or forms partnerships with in order to produce batteries.

Tesla, for instance, has a partnership with Panasonic, to produce 2170 batteries at Giga Nevada. Currently, Panasonic produces 39GWh per year of the 2170 battery cells at Giga Nevada. 

Moreso, CATL, and Panasonic are responsible for supplying Tesla’s battery cells in China

Tesla also has partnerships with component suppliers. This is evidenced in the fact that the company outsources a major part of its components to manufacturers and focuses on engine manufacturing and final assembly.

Cost structure

Tesla’s expenses includes R&D, as well as manufacturing and assembly of its cars

R&D cost Tesla $1.4 billion in 2020, while it’s selling, general and administrative costs amounted to $3.5 billion according to their 2020 annual report

Conclusion

Tesla is really disrupting the entire automotive industry. This disruptive approach has led to the meteoric rise of Tesla’s stock.

In fact, Tesla’s growth rate has even led analysts to classify Tesla as a tech company due to the fact that it’s exhibiting similar growth as tech giants do.

Currently, Tesla is worth more than the 10 biggest car manufacturers combined!

Other automotive companies would have to adapt to this change, and pivot their strategy and business models, lest they get swept under the rug

The Tesla Business Model Canvas
The Tesla Business Model Canvas

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What is Airbnb’s Business Model?

In this edition of the business models of technology companies, I’m talking about Airbnb’s business model using the business model canvas.

In the video, I use the Airbnb business model canvas to show who it’s key customers are and the value proposition it offers them. I describe how Airbnb communicates with its customers and its key marketing and distribution channels. Finally, I cover how Airbnb monetises its business model.

How does Airbnb deliver value to customers? I then look at the infrastructure side of the Airbnb Business Model Canvas to show how it uses key resources to deliver the key activities that are required to create a marketplace between hosts and guest and the partnerships that it needs to do this. Finally, I look at how much this all costs.

Airbnb Business Model Canvas

Airbnb, as we all know it is a marketplace that connects guests and travelers with property owners who want to rent out their property or spaces usually on a short-term basis. 

The company utilizes the sharing economy ― an economic model ― otherwise known as the peer-to-peer economy. This model allows buyers and sellers to conduct business together ― such as the selling and buying of goods and services ―  while the platform may, or may not facilitate transactions between both parties.

The company, even in the midst of fierce competition from its competitors, has managed to disrupt the hospitality industry and now remains the most valuable hospitality company in the world with a market cap of $118 billion.

Key partners

Airbnb’s key partners include lobbyists, this is due to the fact that there are laws and regulations affecting short-term rentals and home-sharing in some countries.

These laws prevent some hosts in certain countries from listing their spaces on Airbnb’s platform, not to mention, hosts which list their spaces or properties on Airbnb may also get penalized by these laws and regulations.

This, in turn, has continued to have material adverse effects on Airbnb’s business, results of operation, and financial condition.

Hence, the reason why Airbnb has lobbyists as key partners so they can help convince politicians to ease up the laws and the regulations so it’ll be more favorable for hosts, which in turn, will bring positive impacts upon Airbnb’s business and operations.

Corporate travel companies also constitute Airbnb’s key partners, as well as corporate travel managers.

Channels

Airbnb runs display ads as a means of reaching its customers. Here, it runs ads on platforms such as Google ads network and Facebook which targets both hosts and guests in order to increase the number of properties and spaces listed on its platform and also to increase the number of bookings that take place on its platform.

The company also engages in search engine marketing as a channel of reaching its customers. 

It runs ads on Google as a means of traffic and customer acquisition. The company also utilizes unpaid marketing tactics such as search engine optimization (SEO), where their content appears on Google search results pages, as a means of attracting traffic to their site.

Other channels Airbnb utilizes include host advertising and referrals where users refer other people to the platform and earn some form of reward.

Value propositions

Airbnb has value propositions for both of its customer segments which include guests and hosts.

For the guests, it gives them the opportunity to book unique accommodations all across the world.

These unique accommodations which it offers include cabin stays, treehouse stays, tent stays, cottages, full apartments, luxury houses, or even spaces within a house such as single rooms.

These choices provide variety and satisfaction for its hosts, as these are options which are not typically available with hotels.’

On the other hand, value propositions that it provides for its hosts include the opportunity for them to let a unit or space in their property on a short-term basis.

This makes it possible for property owners to earn extra income from their property, not to mention, it is also ideal for property owners who would not be able to rent or lease out their places on a long-term basis.

As we can see on its landing page below, its value proposition is well highlighted.

Customer segments

Guests and hosts are Airbnb’s two major customer segments.

The company, utilizing the third-party marketplace business model, provides a platform where hosts can list their property and guests can look for one of these properties to book and stay whenever they wish to travel or go on vacation.

This is akin to Alibaba’s marketplace business model, where it brings both sellers and buyers together through its platform ― in order for them to exchange value, services, and goods on the platform ― while facilitating the transactions between both parties.

Cost structure

Airbnb’s cost structure includes the expenses involved in building, designing, and maintaining its platform.

The cost of Airbnb’s product development, which also encompasses its platform build, design, and maintenance, stood at around $2.7 billion as stated in its 2020 annual report.

The company also noted that they currently rely on Amazon Web Services for cloud computing services, which also adds up to its cost structure.

Their marketing costs stood at a whopping $1.7 billion

With all the aforementioned facts, it is safe to say that their platform builds, design and maintenance costs them a huge chunk of money.

Key activities

Airbnb’s major activities include the optimizations which it makes to its platform. 

According to their 2020 official annual report, it was stated that the company has 1,480 engineers currently working on building and developing their platform. It was also stated that their platform has the following broad and complex requirements:

  • Global payment capabilities, anti-fraud measures, city-specific product requirements, and multilingual real-time community support
  • Delivery of business intelligence insights to manage their marketplace, as well as pricing insights and optimization of occupancy for hosts.
  • Incorporation of machine learning to power key areas such as fraud detection.

According to the same report, they also noted that they’re pivoting their platform to a service-oriented architecture to make their core business capabilities available as granular services that will help them accelerate the creation of new products and services. The new service-based architecture being built by Airbnb was noted to provide the following capabilities:

  • Data management systems that will continue to support user privacy, machine learning, business insights, and analytics.
  • Service reliability that will lead to best-in-class centered on availability, disaster recovery, latency and business continuity, security, testability, observability, operability, and agility.
  • Cloud support that will focus on robust capabilities for granular attribution and usage patterns to realize efficiency gains.

With the aforementioned facts, it is evident that optimizing and developing its platform is a key activity of Airbnb.

Key resources

Some of the major resources which reinforce the business model of Airbnb include its platform, as well as its huge library of over 4 million listings from which its guests can book from.

Customer relationships

Airbnb bolsters its customer relationships by interacting with its customers through its self-service platforms.

The company has tightened its relationship with its customers by offering refunds to its customers, wherein they evaluate whether the cumulative amount of payments made to customers that are not in exchange for a distinct good or services received from customers exceeds the cumulative revenue earned.

Furthermore, as stated in the company’s 2020 annual report, they offer a host protection program dubbed; Host Protection Insurance and Experience Protection Insurance. Here they offer payments of up to $1 million to hosts in the event of a third-party claim or a bodily injury related to a stay or experience.

They also have a program called the Host Guarantee Program, where they provide a reimbursement of up to $1 million to hosts should a visitor damage or destroy their property during a stay.

They do all this to tighten and increase their customer relationships as well as to ensure customer satisfaction.

Revenue streams

Airbnb makes money from commissions charged to both its hosts and guests when a reservation is made.

The company charges hosts commissions usually under 14.2%.

Guests, on the other hand, are charged service fee commissions of 3%.

The company made a revenue of $3.37 billion in 2020, a huge decline from its 2019 revenue of $4.81 billion, due to the covid-19 pandemic which disrupted the global travel industry.

What is Airbnb's Business Model?
What is Airbnb's Business Model?