Types of Businesses: Uber and ClassPass

The first strategy will be to correctly identify what kind of business the company is currently in and how the business model can evolve over time.

This will address the kind of business this company has created and will cover its revenue model. Fred Wilson helped crowdsource a detailed list of revenue models with examples for each. He breaks them out into the following categories: Advertising, Commerce, Subscription, Peer to Peer, Transaction processing, Licensing, Data, and Mobile Gaming. You can find the full list here.

Uber

Uber is an “unbundle and reaggregate”, as well as a “monetizing previously non monetizable inventory,” business. The “unbundle and reaggregate” part belongs to the fact that before black cars were owned by car service companies. In order to access a certain black car, you would need to contact a specific car service company. And if you landed in an unfamiliar city, you would need to find the number of a local car service company if you wanted a ride. So what Uber did was unbundle the cars from their operating companies and aggregated them onto one platform, Uber. This way, a customer does not have to know the number of a car service company in order to get a car. They don’t even know which company that black car belongs to.

“Monetizing previously non monetizable inventory” is what Uber is doing with UberX where regular people can be drivers and charge a fare. In cities like New York, the only way to charge a fare, is if you had a taxi medallion. Taxi medallions were the barrier that cabbies had to purchase in order to collect a fare from a rider. At it’s peak, a medallion was worth over a $1 million. After ride-sharing companies came in and helped shake up regulation to the point where normal people could collect a fare, the value of the medallion dropped.

ClassPass

Just like Uber, ClassPass is unbundling and reaggregating. ClassPass is a membership program for fitness classes across multiple gyms and studios, making working out more accessible. In the traditional model, in order to sign up for a gym, you would need to sign a year long contract and pay a ridiculous enrollment fee. These were the tactics gyms used to lock in members so they think twice about cancelling.

Gyms are successful because they are betting that they can get a reoccurring monthly positive cash flow from their memberships. In addition, as the podcast “Planet Money” pointed out, “Gyms have built their business model around us not showing up. Gyms have way more members than they can actually accommodate […] After all, if everyone who had a gym membership showed up at the gym, it would be Thunderdome. If you are not going to the gym, you are actually the gym’s best customer.”

With ClassPass, you don’t need to have a membership to a specific gym to take classes in it. This freedom allows you to jump around different boutique gyms throughout the month.



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