Based on book Business Model Generation by
A. Osterwalder & Y. Pigneur
  “Pattern in architecture is the idea of
capturing architectural design ideas as
archetypal and reusable descriptions.”
  Business Models with similar characteristics,
similar arrangements of business model
Building Blocks, or similar behaviors can be
distilled into the form of Business Model
Pattern.
PV215 2
Christopher Alexander, Architect
By A. Osterwalder & Y. Pigneur
PV215 3
Long Tail Business Models are about selling less
of more
• focus on offering a large number of niche products, each of
which sells relatively infrequently
• aggregate sales of niche items can be as lucrative as the
traditional model whereby a small number of bestsellers
account for most revenues
Long Tail business models require low inventory
costs and strong platform to make niche content
readily available to interested buyers.
coined by Chris Anderson
PV215 4
#ofSales
# of Products
Top 20%
Focus on a small number of products
each selling in high volume.
Long TailFocus on a large number of products,
each selling in low volumes.
By A. Osterwalder & Y. Pigneur
PV215 5
Democratization of tools of production
• falling technology costs gave individuals access to tools that
were prohibitively expensive just few years ago
• amateurs can record movies, produce short films, design
simple software
Democratization of distribution
• Internet dramatically lowered inventory, communications,
and transaction costs, opening up new markets for niche
digital products.
Falling search costs to connect supply with demand
according to Chris Anderson
PV215 6
KP
-
KA
PLATFORM
DEVELOPMENT
LOGISTICS
KR
PLATFORM
PRINT-ON-DEMAND
INFRASTRUCTURE
CR
COMMUNITIES OF
INTEREST
ONLINE PROFILE
CH
LULU.COM
VP
SELF-PUBLISHING
SERVICES
MARKETPLACE FOR
NICHE CONTENT
CS
NICHE AUTHORS
NICHE AUDIENCES
C$
PLATFORM MANAGEMENT & DEVELOPMENT
R$
SALES COMMISSIONS (LOW)
PUBLISHING SERVICE FEES
By A. Osterwalder & Y. Pigneur
Multi-Sided Platforms (MSPs) bring together two or
more distinct but interdependent groups of
customers.
• MSPs are of value to one group of customers only if the other
groups of customers are also present
• MSP creates value by facilitating interactions between the
different groups
• A MSP grows in value to the extent that it attracts more users, a
phenomenon known as the network effect.
Known for long time, but proliferated with the rise of
information technology.
PV215 7
By A. Osterwalder & Y. Pigneur
Segments linkage examples
• Credit cards providers link
• merchants with cardholders
• Computer OS producers link
• HW manufacturers, application developers, and users
• Newspapers link
• readers with advertisers
• Video gaming consoles producers link
• game developers with players
The key is that the platform must attract and serve all
groups simultaneously in order to create value.
MSPs often face a “chicken and egg” dilemma.
PV215 8
By A. Osterwalder & Y. Pigneur
  Subsidizing one of the Customer Segment
◦  by inexpensive or free VP to attract users of the
platform’s other side
  Examples
◦  Metro newspapers
◦  Microsoft
  Question to be answered:
◦  which side to subsidize and how to price correctly?
◦  can we attract sufficient numbers of customers for each
side of the platform?
◦  which side is more price sensitive?
◦  can that side be enticed by a subsidized offer?
◦  will the other side of the platform generate sufficient
revenues to cover the subsidies?
PV215 9
By A. Osterwalder & Y. Pigneur
PV215 10
KP
-
KA
PLATFORM
MANAGEMENT
MANAGING SERVICES
EXPANDING REACH
KR
SEARCH PLATFORM
CR
GOOGLE.COM
CH
GOOGLE.COM
VP
TARGETED ADS
FREE SEARCH
MONETIZING
CONTENT
CS
ADVERTISERS
WEB SURFERS
CONTENT OWNERS
C$
PLATFORM COSTS
R$
KEYWORD AUCTIONS
FREE
By A. Osterwalder & Y. Pigneur
PV215 11
KP KA
KR
CR
CH
VP
HIGH PERFORMANCE
CONSOLE
CONSOLE AUDIENCE
CS
HARDCORE GAMERS
GAME DEVELOPERS
C$
PLATFORM COSTS
R$
HW SALES AT LOSS
ROYALTIES
By A. Osterwalder & Y. Pigneur
PV215 12
KP KA
KR
CR
CH
VP
“FAMILY CONSOLE”
ACCESS TO
CONSOLE USERS &
CHEAP GAME
DEVELOPMENT
COSTS
CS
CASUAL GAMERS
GAME DEVELOPERS
C$
PLATFORM COSTS
R$
PROFITABLE HW SALES
ROYALTIES
By A. Osterwalder & Y. Pigneur
In the Free Business Model at least one substantial CS is able
to continuously benefit from a free-of-charge offer
Non-paying customers are financed by another part of the
business model or by another CS
However, to make profit, an organization offering free
products or services must still generate revenues somehow
The question is
• how can you systematically offer something for free and still earn substantial
revenues?
PV215 13
By A. Osterwalder & Y. Pigneur
Free based on MSP (e.g. Advertising)
• see previous slides
Freemium model
• provides basic services for free and premium
services for a fee
• typical for web based services
Bait & Hook
• free or inexpensive initial offer lures customers into
repeat purchases
PV215 14
By A. Osterwalder & Y. Pigneur
PV215 15
KP
OPEN SOURCE
(LINUX)
DEVELOPMENT
COMMUNITY
KA
SOFTWARE SUPPORT
SERVICES
SOFTWARE
VERSIONING &
TESTING
KR
RED HAT (LINUX)
SOFTWARE
CR
SELF-SERVICE &
DIRECT ACCESS TO
ENGINEERS
CH
REDHAT.COM
RED HAT GLOBAL
BRANCHES
VP
FREE (LINUX) OPEN
SOURCE BASED
SOFTWARE
CONTINUOUSLY
UPGRADED, SERVICES
& GUARANTEED
SOFTWARE
CS
SELF-SERVICE USERS
ENTERPRISE CLIENTS
C$
ELEMENTS OF A SERVICE COMPANY
R$
FREE SOFTWARE
PROFESSIONAL SUBSCRIPTIONS
By A. Osterwalder &
Y. Pigneur
PV215 16
KP
PAYMENT PROVIDERS
DISTRIBUTION
PARTNERS
TELCO PARTNERS
KA
SW DEVELOPMENT
KR
SOFTWARE
DEVELOPERS
SOFTWARE
CR
MASS CUSTOMIZED
CH
SKYPE.COM
HEADSET
PARTNERSHIPS
VP
FREE INTERNET &
VIDEO CALLING
CHEAP CALLS TO
PHONES (SKYPEOUT)
CS
WEB USERS
GLOBALLY
PEOPLE WHO WANT
TO CALL PHONES
C$
SOFTWARE DEVELOPMENT
COMPLAINT MANAGEMENT
R$
FREE
SKYPEOUT PRE-PAID OR SUBSCRIPTION
HW SALES
By A. Osterwalder & Y. Pigneur
PV215 17
KP
DEVICE
MANUFACTURERS
KA
SERVICES
KR
NETWORK
CR
CONTRACTUAL
LOCK-IN
CH
VP
FREE PHONES
SUBSCRIPTION
CS
CUSTOMERS
C$
NETWORK
PHONES
SERVICES
R$
N X MONTHLY SUBSCRIPTION
1 X FREE
By A. Osterwalder &
Y. Pigneur