How is this pandemic treating you? Are you still bound to working from home? In 2020, working from home has become the new normal. Co-ordination between team members is highly important. As no one has expected this situation and all the projects are in progress, the team members need to constantly communicate with each other. Also, a pandemic should not put a full stop to your work, dont you agree? 

One such platform that has increased its users and became known to people of all sectors and industries is Zoom. In this social distancing and quarantine time, many people are confined to their homes. Be it working or studying. So more and more people or businesses are using the services of zoom to communicate with one another. 

Zoom has proved to be one of the most effective business models. In this article lets understand the zoom business model and how does it actually makes money. 

But first things first, let’s understand what is zoom before discussing its business model.

What is Zoom?

Zoom has been in the market since 2011. It offers video conferencing service (remote). This platform allows users to connect with other people virtually. People can work from anywhere in the world at any time, meeting is now made easy. Zoom connects people virtually and helps them staying up to date at work, even if they are not present physically. It is the brainchild of Eric Yan, who previously worked as Cisco WebEx. 

Zoom meetings have become the new normal. People have been using this term lot more now. This platform is quite comfortable to conduct meetings, people can share anything on their screen. Be it notes, presentation, or sharing their screen for other members in the meeting anything is possible. So be it video conference, webinars, or meetings you can host anything on Zoom. The best thing is that it is available in macOS, Windows, Android, iOS. It is also available as integration for other video conferencing apps and browsers. One can say that it is quite hard to find a mobile or laptop without Zoom these days. 

As now that you know the premise of the app. Aren’t you curious about its business model? Yes, then without any further ado lets jump into the topic then.

Zoom- Business Model 

Right from the start Zoom has received the attention. Within the first 5 months, it has gained around 1 million users. The business model of Zoom is freemium meaning it offers both subscription and free plans. The main focus of this app is to get its free users to become loyal customers. Under the free plan, you can use Zoom for unlimited one on one meetings. This is best for individual users. If you’re looking for a temporary service till this goes back then this is perfect for you. Also for a group meeting, you can add upto 100 participants and talk upto 40 minutes for free. One of the main reasons why more people are using this app is because it is offering amazing features even if its for the free version.

As you know that apart from free this platform also has subscription platforms. If you need to communicate with people from different parts of the world regularly then it is better for you to choose among the subscription plans that Zoom is offering. The benefit of this subscription plan is that you will get additional features. Wondering what the features in question are? You can add more people than 100, you will have increased hours for a meeting, integration with other services, and lastly customer support. 

The major benefits of this business model are that they’re getting their users to adjust to them through the free plan. And once they find out how good this app is they would definitely not mind investing their money in subscription plans and also with the word of mouth more and more people will switch to Zoom.

Who are the users that Zoom targets mainly?

So this brings us to the point, who does this platform target mainly i..e, who are their users. It is important to understand its user base to understand how does it make money. 

There are primarily Businesses, investors, and individuals who use this app. But you can say that people use this video conference service mainly to communicate with their team members. One can say that Zoom makes long business meetings more convenient and simple. Also, another reason behind its popularity is that it supports 100 participants in a free plan and more than 100 in the subscription plans. See isn’t it better for you if you want to communicate with your whole team at the same time. It will save you time because it is better to explain once to everyone rather than one-on-one. Dont you agree?

But this doesn’t mean that only Enterprises or businesses are their primary users. Over the years the individuals have become the most important part of them and have contributed to its steady growth. And because of this pandemic, the users have now increased. In 2020 it has added around 2.22 million users, which is more than 2019. Currently, it has more than 12 million users. Yup, you heard it right. The pandemic has increased the popularity of Zoom and more and more people are in need of this app now. 

Since you have understood about the users of Zoom then it is time to know about how does it make money?

How does it make money?

You must be curious about the money-making process of Zoom. In this article, you will get all the information as per the best knowledge of our team. 

First things first, let’s talk about the most obvious method that everyone is aware of. Yup, you guessed it right the subscription plans. 

Subscription plans 

The primary source of income for Zoom is from the subscription plans. Once more and more people have used their free plan and are interested in the app they will be able to choose between the subscription plans it offers. As you see each of these plans comes with different additional features that will help the users in conducting meetings peacefully. So check all the three plans apart from the basic plan/ free and then choose a plan that works best for you. The subscription plans are Basic, Pro, Business, and Enterprise. As you see anyone can use the Basic version. But if Pro is highly suitable for small teams. Whereas business is perfect for small and medium businesses and lastly the enterprise plan is highly suitable for large enterprises. As the prices change frequently it is better to check them on their website.

Basic- Free

Pro- $149.90/year

Business- $199.90/year

Enterprise- $199.90/year

Add-on‘s 

Another source of income for Zoom is add-ons. Although Zoom offers additional features when you upgrade. But it offers all the features that make video conferencing simple and easy even in the free plan. But it charges its users for add-ons. With add ons, you can get additional features like extra cloud recording storage. But the free users must upgrade their plan to access the add-ons. The users will not get add-ons with the subscription plans. So they must pay for their desired add-on separately apart from monthly subscription fees. Some of the add-ons that Zoom offer with it paid plans are Zoom Rooms, Zoom Phones, Zoom Webinars.

Zoom Rooms: The users can create dedicated rooms to hold their conferences. But they have to pay $49/room/month.

Zoom Phones: With this add-on, the users can make calls right from their phone.

Zoom Webinars: The users cannot by default hold webinars, they need to subscribe for higher plans. So it charges monthly fees to host webinars. The price varies based on the number of participants and they can add upto 10,000 participants. 

Plans for different sectors

This is also another major source of income for the Zoom. It offers a fully customized suite of tools & services for different industries. Yup, you heard it right. The sectors that Zoom is currently serving are Finance, Government, Education, and Healthcare. As all the industries are different from one another, having a customized suite of services and tools can help them in communicating more effectively.

Investments 

As you have all the other methods mentioned how can you miss this one? This can also be considered as the income source. Dont you agree. Investors are highly interested in this platform. From 2011-2017 it has raised around $145.5 Million in different series of funding rounds. It was even termed as unicorn company back in 2017, allowing it to raise around $100 Million. Zoom went public in 2019 and by the end of it, this company was valued at a whopping sum of $16 Billion I,e., $36 per share. 

Wrapping up 

Pandemic has forced people to work from home and with Zoom, most businesses are able to manage their workflow effectively. Also, one of the video conferencing platforms that were in the mouth of everyone for the past 6 months is Zoom. Hope you have understood about the Zoom business model and how it makes money. So in case you want to know more about such interesting business models check out other articles on our website.

Things have changed a lot in the past decade. The world is no longer the way it was before ten years ago. Due to the rapid development in technology many things have become easy for people. You don’t have to move a muscle to get the things you want. A person can just sit inside their home and get all the things they want. All you need is a mobile phone and an internet connection. If you have both then you have all the information and necessary tools at your fingertips. You can buy anything you want from the internet. Not only that you can order food from anywhere. But one of the best things that happened because of this technology is the ability to book taxis, flights, and train tickets. Nobody would have thought that one day they will be able to book a cab using a mobile application.

Do you even remember how you had to get a taxi? You have to go out onto the streets to wave and shout at taxis until one stopped for you. People didn’t even know when or if they could get a taxi sometimes. Another problem with those taxis was that you could not find one if it was late at night. More often than not people, especially women used to get scared if they didn’t find a taxi at night. This used to happen because these taxis were owned by the drivers themselves and did not work under anyone. So they worked for as long as they wanted. But the current generation services are nothing like that. They are available 24/7 and are easy to book. The most popular among these services is definitely Uber. 

Let’s look at its business model of Uber to understand how it became successful.

What is Uber?

Most of the people in the current generation are well aware of Uber. Uber is a ride-sharing application. This application has been the favorite of many people today as it allows them to book a taxi at any time and place. People loved it because they no longer had to wait on the side of the road to get a taxi or get rejected by a taxi driver. This transportation company was founded by Garrett Camp in 2009 after he sold his startup for 17 million dollars. He got the idea when he had to spend a lot of money to hire a driver. Garrett thought about what would be an efficient way to reduce the costs of hiring a driver. After that, he understood that sharing the cost with others made it much more affordable. When it was first launched it was called Ubercab.

The application officially started its services in 2011 in San Francisco. It was at this time the name was changed to Uber. During its initial days, people could only hire a luxury black car. But Uber changed its policy when it started its services in Chicago. From that time people could hire an Uber or a regular taxi using its application. It has gained massive popularity once it started its UberX services. UberX gave the opportunity to become drivers for Uber even if they had non-luxury vehicles. People could become uber drivers using their personal vehicles. All they had to do was go through a background check and keep their cars in good condition. After that, it launched UberPool which gained huge popularity and allowed it to go global. It didn’t stop after that and went onto launch UberEats which is a food delivery service that is gaining popularity.

Business model of Uber

Uber has changed since the day it was founded. Now Uber is no longer an on-demand ride-sharing service. This is because it has ventured into several different streams which is a great thing. But since it is widely known for its ride-sharing service this article will mainly focus on that part of its business model. Uber follows an aggregator business model. It has to provide a ride for a customer so that they can reach a certain destination from their current location. All of this involves two types of people which is the passengers and drivers. So you have to look at what it offers to both passengers and drivers to attract them. 

Let’s look at the passengers first as they are ones who create demand for these services.

Passengers

Uber is a platform that can be used by all people irrespective of their age. Be it a college student or an old man it is easy for anyone to use. The great thing about using Uber is that it is cheaper to book a cab through Uber than getting a regular taxi. The other great thing about Uber is that you can use it to book a cab in any country it is operating. If you go for a vacation to some other country you don’t have to hassle with the cab drivers over there. You can simply book an Uber. This will also save you from getting scammed. What this goes to show is the advantage provided passengers have when they know the prices upfront. This was not possible before when Uber didn’t exist.

Not just that you don’t have to keep looking at your watch to see when your ride is going to show up. Uber gives you the accurate time of arrival of the cab. It not only allows you to book a cab but also allows you to cancel it at the last moment if you don’t want it. Uber provides a real-time tracking feature that allows you to look at the exact position of your ride.  When you book a ride your ride will get accepted by the drivers that are near to you. This means that you don’t have to wait for a long time. Another great thing is that you can choose the vehicle in which you want to travel. Apart from that, the cashless rides make it an even greater experience. 

Drivers

Drivers are one of the main reasons why Uber has been so successful. But there is a reason for this that many people don’t know. Uber says that it doesn’t hire the drivers rather it partners with them. If a company hires an employee, the employee has to do everything that the company asks them to do. But Uber is nothing like that. Since it doesn’t own the cars it doesn’t impose any strict rules on its drivers. They only have to comply with a few things like keeping their car in good condition and providing them a copy of the vehicle’s registration documents. By looking at the liberty that these drivers have it is not an exaggeration when Uber says it partners with them. 

When drivers partner up with Uber they get lots of advantages. They don’t have to keep driving around until they spot a person who needs a taxi. Drivers don’t have to compete with other drivers. They can just sit in their taxi and wait for a ride request to show up on their mobile phone. Drivers don’t have a boss but they are working for this company that provides on-demand rise services. So they don’t have to take orders to keep working. They can work according to their own terms. Drivers can earn a lot more money if they partner up with Uber as it constantly gives about the people who request rides. The other great thing Uber does is that it helps its drivers to get vehicle loans. 

Now it’s time for the topic you have been waiting for which is how Uber makes money. Let’s find out.

How Uber Makes Money?

The main reason for its success is the prices it offers. Uber partners with the drivers in a city and comes up with the minimum price that a passenger can pay to get to their destinations. All the drivers get passengers through the Uber app for the price it sets for a ride. But there are several ways in which Uber makes money. 

Commissions 

As mentioned earlier the drivers get passengers through the application provided by Uber. When a request for a ride pops up the driver has complete freedom to accept or reject the ride. The passengers have to pay through the Uber app for the ride. When the payment is done Uber deducts a small percentage of the total amount as its commission. Usually Uber charges anywhere from 20% to 30% as its commission. After that, the payment is deposited into the driver’s account. But the prices for the rides are not always cheap. Uber increases the prices for a ride if the demand is very high. This something that it has adopted from the food delivery services. 

When there are a large number of people who are requesting rides from a certain location the pricing algorithm increases the prices. Apart from that Uber also makes money through premium rides. When someone requests a luxury vehicle the fare is high depending on the type of the vehicle. The higher the price the more money Uber makes.

Leasing Vehicles

Many people don’t know this but Uber has a program that leases vehicles to drivers in certain countries. The drivers have to pay a fixed amount before they could lease a vehicle. Once they get the vehicle they can pay the lease using their earnings. The money is automatically deducted by Uber from their earnings.

Cancellation fee

Not many people don’t this but Uber charges a cancellation fee from the passengers. There is a certain time limit in which you can cancel your ride without getting charged. But once the threshold exceeds you have to pay a cancellation fee if you want to cancel the ride. 

Conclusion

This is the business model of Uber. It follows an aggregator business model just like the business model of Airbnb. But the services these two companies offer are completely different. Uber also makes money from UberEats which is its food delivery service. Its business model is similar to the business models of Swiggy and Deliveroo. Check out the business models of those companies to understand how it works.

These days you are just a click away from getting inspired. Whether you are looking for travel inspiration, or food or decoration inspiration, you could get all that with a simple search. Especially the popular image sharing and social networking service, Pinterest is contributing a lot in this.

In fact, the era of inspiring people with visuals started with this unique platform called Pinterest. It has been inspiring people with amazing visuals AKA pins since nearly 10 years, all for free.

Pinterest is a popular site for discovering new ideas started in January, 2010 by Ben Silbermann, Paul Sciarra and Evan Sharp. It is a huge space for finding images, videos and GIFs related to any niche, of course, the platform doesn’t need an introduction if you have been on it for a while. Simply, it is an easy-to-use and little search engine to find something you exactly want. Because, you will not need to read long articles till the end to find the little information you need or watch lengthy videos to find that simple trick.

However, what most people wonder is how this brilliant platform makes money if it serves the huge discovery for free. Well, if you are one of those, you will find the answer in this article. This article covers what exactly is Pinterest, how does it work and makes money. So, shall we get started?

What is Pinterest?

Pinterest is a media sharing and networking service designed to help people discover and save the information on the internet as Pins which are similar to bookmarks. These pins saved by users drive them to the websites where those visuals are created. Users can save the pins and organize them on their private or public boards and access them whenever they would like to.

This platform, however, is commonly known as a social networking site, it is not a platform to post personal life pictures or media like Facebook, Instagram etc. As of the second quarter of 2020, this giant discovery platform has over 367 million monthly active users across the world. It had just 10,000 users nine months after its start. This is to simply say, how fast the website is growing its users. However, the number is no where nearer to other social networking sites such as Facebook, Instagram, Twitter, etc.

So, now coming to how Pinterest makes money, you should first see how it works.

How does Pinterest Work?

Millions of users pin billions of images and other media related to a vast range of categories such as travel, food, parenting, fashion, architecture, other products every day. It, in fact, has become a go-to search engine for many discovering stuff as the results are eye appealing (as they are images, videos and GIFs). This is why users have become one of the two key players in Pinterest business model. Wondering who is the other key player? Advertisers. Yes, there is business in the absence of these two.

Advertisers don’t come to the platform if there are no users. There is no revenue if there are no advertisements. Therefore, Pinterest works purely on user base and advertisers base.

How it Works for Users?

Users just need to create their account and start discovering the stuff they are looking for. Users can search for pins and get results according to their interests. They can even save the pins and organize them in their boards either accessible to public or else private. 

Users can even share their media to the platform, comment on others pins etc. In short, it is the same as other social media sites, it’s a little unique though. 

How it Works for Advertisers?

The working model for advertisers is the same as it is for other ad platforms such as Google Ads, Facebook, YouTube. Advertisers have to bid maximum to ensure their ad is placed on the top. The bid amount will be based on the industry, product category and target user demographics.

Read: Google Business Model – How does Google Make Money

The ad will either appear on side bars of users boards or appear on search results. The advertisers are provided with the option of setting an “Install App” or “Buy” button in the ad or they can simply users to their website.

So, wondering why do even advertisers look at this platform when they can meet the same audience base on other platforms such as Facebook or Google. Well, let’s look at that in the next section: how does Pinterest make money. Let’s see its business model and find out why and how it became such a popular go-to platform for not only moms, dads but also everybody who loves to discover interesting things on the web.

How does Pinterest Make Money?

Over 88% users purchased a product they pinned on Pinterest. More than 49% purchased more than 4 products they pinned or re-pinned. What’s more interesting is nearly 79% of Pinterest users are female who are likely decision makers in families. So, as you see the platform is converting the users well. Exactly, this is how Pinterest makes money and why advertisers turn towards the platform.

Advertisements/Promoted Pins

Though the user base is incomparable with the internet and mostly with Facebook, the conversion rate is high. It is always a wise option to start a campaign where conversions are huge rather than the huge user base which don’t convert much. So, the paid pins or promoted pins or ads bring money to Pinterest.

Pinterest introduced its revenue model in 2013, meaning it didn’t have a plan or didn’t earn a penny until then. Like other social networking sites, it started its service for free and gained a huge user base. The strategy turned out so that now it has a higher conversion rate. Hence, more and more advertisers are considering the platform to create brand awareness and grow more customers.

Here are four types of conversion campaigns which let advertisers reach to grow their business. The campaigns are self-explanatory as their names say it all.

1. Check out

2. Sign Up

3. Lead

4. Add to Cart

As per Q12020 Financial Highlights, Pinterest’s revenue as of 2020 is $271,940 whereas it was $201,911 with a 35% growth.

But it is not as Pinterest only sees profits. It had seen a lot of losses in its earlier days, and even in recent years in stocks. It experienced a $141,196 net loss as of 2020, whereas the net loss was $41,420 in 2019.

Okay, further talking more about revenue in Q12020,

• Global – $272 million
• U.S – $237 million
• International – $35 millions

Thus, it is transparent that Pinterest makes money only through promoted pins. There is no way they make money unless there are no advertisers. However, that won’t happen because Pinterest takes the best care to serve its users with awesome pins and as said there are 367 billion monthly users for the platform. Moreover, people use the platform for saving their future purchase ideas, be it travel plans, furniture, fashion products etc. Hence, what’s the best platform other than this where users are exploring what to buy. In fact, this is why Pinterest has become a sweet spot for advertisers to run campaigns.

So, Is the Pinterest Business Model Sustainable?

So far, Pinterest is attracting advertisers well to bid for campaigns to buy user’s attention. Therefore, the service platform is making enough to sustain however, as mentioned, it’s revenue is no where relatable to other social networking sites. Moreover, this platform which started as a small scale business has grown to a level where it’s competitors are giant companies like Facebook, Google, YouTube etc. Pinterest only makes money through advertising, therefore its competitors are such top tier companies.

Therefore, it goes without saying that Pinterest sees a tough competition in future as well. 

Where do you stay when you go for a vacation to someplace? The most common answer would be a hotel. Because people think that they do not have any other options. So what do they do? They book hotel rooms in the places they want to visit. These hotel rooms are not cheap. In fact, staying at some hotels is way costlier than others. You are going to find good hotel deals all the time. Especially if it is a holiday season then you won’t be able to get accommodations for cheaper rates. This is because the hotels have to cash in on those days. So they will definitely not give you a room for an affordable price. This makes it hard for people to travel. Because not everyone has hundreds and thousands of dollars to spend on everything. There are many people that travel with a budget. 

These types of people are more interested in travelling and seeing places than enjoying the luxuries of a hotel. A large chunk of these people is the youth who love to travel but do not have enough money. If they keep saving money then they will never be able to go to all the places they want to visit. So these people definitely have to stay at places that provide them accommodations for cheaper prices. But this is not always a great idea. Because if you want to stay in cheap hotels then you will get what you paid for. You will not only be risking your health but also safety. There are many incidents that can tell you what a horrible decision it was to stay at a cheap hotel. But luckily there is a website which allows you to stay in the homes of people. It is Airbnb. 

What is Airbnb?

Airbnb is like an online marketplace for vacation rentals. Simply put, it is a place where people can rent rooms in other people’s homes in the city or place where you want to go for your vacation. You can choose rooms that you want to rent based on your preferences and budget. It is a very great way of traveling as it might save you a lot of money. The idea for the company came into the minds of the founders in an interesting way. So you all of you might know how costly it is to find a place in San Francisco. This something that the founders of Airbnb Joe and Brian were aware of. They were former high school friends who became roommates in San Francisco. Looking at the cost of living they decided to make money by putting an air mattress in their living room.

Joe and Brian wanted to turn the air mattress into a bed and breakfast. Soon they were joined by Nathan Blecharzyck who liked the idea. He became the third co-founder and chief technology officer of the company. So they created a website to offer their services. The current name of Airbnb is a shorter version of its original name. When the company was first founded it was called AirBed & Breakfast. The idea of this company was to provide short term living quarters for people who cannot find rooms for affordable prices or for those who can’t find rooms at all. The site was launched in 2008 and they got their first customers in the summer of that year. After a small investment and training by Y-combinator for a small interest Airbnb had a good business model. It shortened its name to Airbnb in 2009. Currently, Airbnb’s valuation is $31 billion.

Business model of Airbnb

If you are owning global hotel chains like Marriott then you will need to invest millions and millions of dollars to grow your business. This is because you have to find the place, buy the land, construct the property the way you want, employ people that fit your requirement so that you can provide the quality of service that your company is known for. If you just look at the process you will easily understand that this is a time taking one. Not only that, but it is also a business model that needs lots of money. You cannot provide your services to all the people. The only people who are going to stay at those places are the ones who are well off. So your business model has a limited amount of people as its target audience. This is where Airbnb has the advantage to cash in.

As mentioned earlier, all of these globally reputed hotel chains have to spend millions of dollars to build their property and brand value. But Airbnb doesn’t have to do any of that as it does not construct any buildings to rent out a room to people for short periods of time. Instead, it uses the properties of other people where travellers can stay. It acts as a mediator between the people who want to rent out rooms and the people who are looking for rentals in an area. Because of this Airbnb doesn’t have to spend millions of dollars to increase its reach. This also helps them in growing at a fast pace. The reason it became successful is that it allows people not only to book rooms but also connect with local people through their hosts. Travellers can look at the profiles and reviews before choosing a place.

How does Airbnb make money?

If you think that the process of making money for Airbnb is simple then you are absolutely wrong. See, it is not a traditional hotel where you can just go and book your room. It is an online platform where people can search for rooms for the prices they want. So it has its own challenges. Because it is an online platform and does not rent out their own property it cannot expect to make a lot of money from a single booking. It is also important for them that they have a wide range of options in their platform for the customers to choose from. Because not everyone is exactly looking for the cheapest place to stay in. Some people want to rent out a room that is actually a bit lavish. Most importantly they have to make sure that the room that is listed is not a scam.

Once all of this is taken care of they can make money through room bookings. So this is how Airbnb makes money. 

Commission from hosts

So by now, you might have understood that it makes money from the hosts who list out there rooms. But it is not like you can just list out a room if you have an extra one. There are a few things a host has to follow. One of the most important things is hygiene. The hosts cannot expect to rent out a room if it is in a poor condition. They have to be in a good condition for people to stay in them. The hosts have to provide things like soaps and good sanitation to the guests he is going to host. Most importantly they should be good and welcoming. Their rooms should have all the things that are specified on the listing. If the guests experience any type of inconvenience then the hosts may lose their payment. The host must ensure the safety of the guests.

The major advantage for hosts on Airbnb is that they can choose the price for which they want to rent out their rooms. This means that they can make the amount of money they want by renting out rooms. Listing a room for Airbnb is very simple. All you have to do is go there platform and sign up as a host. Once you do that you can list out the room you want to rent out with a description. You have to provide photos of the place and mention the address along with the price. Once your room is booked you have to wait for the guest to arrive to receive your payment. You will get paid after the guests spend a day at your place. Airbnb takes 10% of the total fee and it also charges a 3% processing fee. They also provide insurance to hosts.

Transaction fee from guests

If you think that Airbnb only charges a commission from hosts then you are totally wrong. Airbnb also makes money by charging a transaction fee to its customers. It charges anywhere from 6 to 12% of the total amount as a service fee. Not only that but it also adds tax to the bill depending on the tax laws of the places you want to visit. If you are thinking about cancelling your reservation then you have to think twice. Because once you confirm your booking your money will not be refunded. 

Airbnbmag and Business travel

The website is not the only way it makes money. Airbnb also makes money through a guidebook called Airbnbmag. They made this product to improve the experience of travellers. The other thing is Business travel which provides rooms with amenities that will allow people who travel for business purposes. Airbnb managers use this to travel to other places not only for business reasons but also to check out the quality of the services they are offering. 

Conclusion 

This is the business model of Airbnb. It makes money through the Aggregator business model. Airbnb has made it very easy for people to find accommodation at tourists for affordable prices. You can check out the business models of other companies on our site. For instance, you can look at the business model of Netflix that is completely different from this one. 

No matter what, people are always up for entertainment, right? Exactly, this is why the premium video streaming services such as Netflix, Hulu and Amazon Prime Video are just seeing nothing but success.

Thanks to technology, these entertainment platforms are bringing entertainment to your fingertips replacing the cable TVs though. You can watch live TV, your favorite web series, movies etc on your phone, tablet or laptop anywhere, either at home, office or on-the-go.

Thus the main reason for their success is they are just entertaining their customers no matter where they are. Moreover, the members can access a wide range video content on these platforms for lesser pricing.

Wondering how these video streaming services make money while they are offering a wide range of content for a lesser price than that of your cable costs? Well, let’s talk about Hulu here in this article and the others later.

Read: Netflix Business Model here

This article covers what Hulu is, how does it work and explains its business model. So, keep reading…

What is Hulu?

Hulu is an American subscription video streaming service owned by Walt Disney Company. It was, in 2006, it initially started as a joint venture between NBC Universal, News Corporation, The Walt Disney Company and Providence Equity Partners.

Also, Hulu is partnered with top USA’ cable TV channels such as NBC, Fox, ABC, CNBC, Disney Channel, National Geographic, etc to grow as a leading online TV library.

Hulu is the nearer competitor to Netflix boasting over 35.5 million of subscribers as of August 2020. Though it started as a replacement for cable TV by making the TV content available for users 1 day after it is aired. In 2011, Hulu started producing original content. The Morning After, a light hearted pop-culture news show was its first release.

You will be surprised to know that Hulu was first announced with no content in it. It asked users to leave their email address for beta testing. It was in March, 2008 Hulu started streaming shows and advertisements.

Now, Hulu is a giant streaming library of 80,000+ TV episodes and movies, also offering Live TV with 65+ top channels starting from $5.99 to $54.99/month.

Okay, now that you have seen what Hulu is. Let’s see how it makes money.

How does Hulu Make Money?

Hulu makes money in two simple ways. In fact, its business model is pretty easy to understand. Let’s see how it does.

1. Paid subscriptions
2. Advertisements

However, back then, Hulu allowed users to stream TV shows with ads interrupting in between. It was almost similar to the business model of YouTube and it is clear that it hadn’t made any profits. Hulu growed its ad revenue by 45% making $1.5 billion from  2017 to 2018.

In 2010, it started Hulu Plus, a paid subscription service similar to Netflix. Initially, Hulu Plus was available for $9.99/month. Very soon it devalued its pricing to $7.99/month. Though the paid subscription service contains a huge library of shows, movies etc, it also contains ads.

It launched a no-ad subscription plan for around $12 to $14/month. This plan is now available for $11.99/month. Again, it was not fully ad-free service. Hulu airs pre-roll and post-roll ads during a few shows.

Later in 2017, Hulu focussed on strengthening itself as an online TV. It launched Live TV service by live streaming more than 50 broadcast and cable tv channels. It introduced HBO, Showtime, Cinemax, cloud DVR to online live streaming add ons.

Hulu’s Major Highlights

• Hulu is one of the largest library for on-demand TV shows, movies and original content
• Hulu streams Live TV for more than 200 channels
• It provides cloud DVR
• It produced popular originals like The Looming Tower, The Handmaid’s Tale, The Simpsons etc
• Hulu provides access to on-demand channels like HBO, Cinemax, SHOWTIME, STARZ and exclusives like Games of Thrones.

How to Get Hulu Subscription?

It is quite easy for users to enjoy streaming on Hulu. All you need to do is sign up for the app, choose a plan among three (Hulu, Hulu No Ads, Hulu + Live TV) and enjoy the free trial. You can enjoy 30 days of free trial for Hulu and Hulu (No Ads) whereas you can use Hulu + Live TV for only 7 days. You can pay for the actual plan after the trial period ends or cancel the plan any time.

There are no hidden fees, equipment rentals, or installation appointments and the pricing is pretty straightforward. It subscription model is as follows:

Hulu: $5.99/month

Features

1. Streaming library of 80,000+ TV episodes and movies

2. Most new episodes the day after they air

3. Access to award-winning Hulu Originals

4. Watch from anywhere and any device

5. Watch on 2 different screens at the same time

6. Up to 6 user profiles

7. 30 day-free trial

Hulu (No Ads): $11.99/month

Features

1. Offers all features of Hulu

2. No ads in streaming library

3. Download and watch

Hulu  Live TV: $54.99/month

Features

1. Offers all features of Hulu

2. Live TV with 65+ top channels. No cable is required

3. Live TV guide to navigate channels

4. Record Live TV with 50 hours of Cloud DVR storage

5. It offers 7 day free trial

Add-ons are available at extra cost. You can always add them any time.

How does it Make Money from Subscriptions?

Hulu has more than 35.5 millions by August, 2020. It has revenue of $1 as per 2013. The paid subscribers are still growing due to its various plans such as live TV, no-interruption and both combined. Moreover, users can add more add-ons by paying extra.

Prices for Add-ons

• Hulu Live TV – add Enhanced DVR (200 hours) – $9.99
• Hulu Live TV – add unlimited streams – $9.99
• Hulu Live TV – add unlimited streams and enhanced DVR – $14.99
• Showtime on Hulu – $10.99
• HBO on Hulu – $14.99
• Cinemax on Hulu – $9.99
• STARZ on Hulu – $8.99
• Entertainment add-on – $7.99

How does it Make Money from Advertisements?

Hulu provides three types of advertising options.

Action with Broad Appeal

This is to reach a wider audience with customized content. Here advertisers can target audiences on Hulu based on interests & behaviors, demographics, location, and custom audiences.

Brands can sponsor hottest content or integrate with custom content or choose innovative ad formats.

Premium Programmatic

Advertisers can power the campaigns by activating the data with this ad option.

They can select the target audience, determine price bid and control and optimize the campaign in real time.

This is how Ad Premium Programmatic plan works.

It matches the audience, finds lookalike audience and analyzes behavioral segments.

Also, Hulu offers three types of ad options.

1. Programmatic Guaranteed: Automated, guaranteed buy with the help of advanced targeting

2. Private Marketplace: Buying not guaranteed with targeted control

3. Invite-Only Auction: Lets you find your audience, set your price and optimize.

Thus advertisers can choose the plan according to their goal.

Self-Service Solution

This ad plan is for small businesses to upload, target and track performance of their ad campaigns. Hulu provides tools for ad managers to boost their ad performance and their brand awareness.

Hulu ad manager is still in beta version. Its creative partners, Genero, QuickFrame, Vidmob and Shuttlerock help the advertisers to create innovative ads that attract audience attention.

Hulu provides 7-second ad options and 30-second ad options. For, basic subscription model, Hulu plays ads over and over. Whereas for premium plans, non-blockable ads are streamed before and after the videos.

Is the Business Model of Hulu Sustainable?

Though people compare Hulu and Netflix, it actually is a supplement for cable TV and a replaceable for YouTube TV. However, it doesn’t mean Hulu is not a competition for Netflix. In fact, Hulu streams shows such as Futurama, The Simpsons etc which are not available in any other premium streaming services like Netflix.

Hulu is a large streaming library with a vast number of TV shows, original content, live TV channels and web series, the only concern is viewers cannot skip ads. This is definitely a disruption for its members while watching their favorite content.

In fact, Hulu is strict in terms of revenue. Hence, it is clear that it makes profits with its business model. Hulu makes most of its revenue from advertisements. Moreover, it constantly upgrades its tools, provides better insights for brands to grow their business. Not just that Hulu provides impactful market insights for advertisers and helps viewers connect socially with viral challenges, and help marketers with case studies. Thus Hulu’s business model is sustainable in the long run.

Bottom Line

So, this is how one of the leading on-demand streaming services, Hulu makes money. As you see its business model is quite simple. It makes money through advertisements, subscriptions and add-ons. Moreover, it is affordable than other premium subscription services. A lot of changes were made to its business model and hence the changes occurred to its revenue. Though it doesn’t make as much as Netflix makes, it is still making a good profit through its business model. Moreover, Hulu’s ad revenue was expected to grow by 22.7% by 2020.