Business Canvas Model Examples —TikTok & Netflix
Why the business canvas model?
If you care about simplicity, efficiency and output then you already have the answer. Whether you're a small startup or a big business owner, everybody, and I mean everybody can benefit from the intuitiveness that the business canvas model provides.
In this article, we'll provide two powerful examples of how the business canvas model can provide direction, clarity, and purpose to your business plan just like it did for two of the most influential companies of the century —TikTok and Netflix
How to use the canvas business model?
We've previously discussed in detail the 9 key components to a business model canvas that you need to spell out: start with the key partners, activities, resources, and propositions that define your business and will enable you to offer a product or service.
Then, spell out the nature of your relationship with your customer base, along with customer segments and the channels with which you’ll reach them. Finally, spell out the cost structure and revenue streams of your business. With that said, check out the following in-depth examples to get a hang of how to use the model practically. Promise it'll all make sense!
Canvas Model Example #1: Tiktok
TikTok was launched by ByteDance, a company founded by Zhang Yiming, a former software engineer, in 2016.
That's the short story. The interesting one is that TikTok and its HUGE user base did not appear out of thin air... nope. It was actually a merger with another of ByteDance's apps named Musical.ly that created the TikTok we all know and love today.
Currently available in 150 countries worldwide and 75 languages, reaching the mark of 1 billion users and 2 billion downloads. Big, big numbers that placed the application in fourth place with the highest numbers of users worldwide.
TikTok's Business Model
Here's where TikTok's uniqueness comes into play. Unlike its rivals (or at least before they decided to start copying it), TikTok's primary idea was fast content, with up to 15 seconds of homemade videos, and a different flare to them —think about lip-syncing, a bunch of dancing, and make-up challenges.
Their simple mission statement sums it up with:
"Our mission is to inspire creativity and bring joy"
This new concept of video made TikTok a popular influence that, in a few years, became a 50-billion-worth-startup.
How TikTok makes money?
Like many of the big boys in the social media space, TikTok relies on advertising to make most of its money, with some twists around it. Two more revenue avenues, app purchases (also known as TikTok coins) and e-commerce offerings, provide additional sources of income for the app. Let's have a look at them quickly.
TikTok Ads
Here's when things get a bit more complicated than your average social media ad. TikTok has different types of advertising depending on their “category”. The first one that you may already know, is the personalized ads for each user, like Facebook.
However, there's also TikTok Brands: Takeover, Hashtag, Effects. The “TikTok Branded Takeover” is a type of advertising that takes over the screen when the user opens the app. Similar to it, there’s TikTok View Ads, where the advertising doesn’t cover the screen, but in the feed (videos you can easily scroll through and ignore if you please).
The “TikTok Branded Hashtag” Ads appear on the discovery page on a video exposing or using the product, challenging the users to engage the hashtag making a video. Lastly, The “TikTok Branded Effects” Ads are very common and very popular. It’s a filter to take photos with frames or stickers with the brand for 10 days.
TikTok Coins
Similar to other streaming platforms like Twitch, TikTok coins are a way to reward a particular TikToker or creator for their efforts. Made available once you reach 1000 followers, the feature allows you to receive gifts from your audience with TikTok coins in live videos. The TikTokers have to exchange them for real money through the app – and then TikTok charges a commission
Ecommerce offerings
The newcomer around the block, TikTok is hard at work on ways to integrate e-commerce in its platform. Think about the Facebook or Instagram “shop” feature, but now available for TikTokers to use during live streams and on their feeds. Of course, TikTok gets a cut out of every sale (it's an income stream, after all).
TikTok Business Model Canvas
TikTok customer segments
Users: mostly people at the age of 34 that share their content
Celebrity: public figures that want to share their everyday, upcoming projects, gain new followers.
Brands: companies that want to approximate their employers and products to the users, projects, engage with new followers.
TikTok value proposition
Users: see shorts and funny videos.
Celebrities: share their daily life, create contents that increase the number of followers, make publish posts.
Brands: expose and popularize their products.
TikTok channels
TikTok customer relationships
To users, TikTok provides a customer help center, toon provides the best experience to the user. To the advertisers, TikTok provides the metrics to publish their products.
TikTok's revenue streams
TikTok coin commissions
TikTok Ads
E-commerce commissions
Partners
TikTok key partners
Content developers, like Youtubers, are migrating to TikTok
Digital Influencers and celebrities
E-commerce business, like PRESTAShop.
Companies and brands that want to sell or advertise on social media.
TikTok key activities
The most important activity is the development and updating of TikTok, to prevent bugs and attacks and increase user satisfaction.
TikTok key resources
Without a shadow of a doubt, the platform is the most profitable key resource to TikTok, but millionaires’ partnership contracts are also a source of income.
TikTok cost structure
The TikTok’s data centers, employers and developers paychecks, marketing, investments in infrastructure and administrative offices bills.
Need help in crafting your Business Canvas Model?
Luckily, there are many resources to get you started creating your very own BMC.
A mentor could be your best choice to get an expert with experience in business to guide you throughout the entire process. The MicroMentor platform provides you with the opportunity to find a business mentor to help you design your canvas and optimize the building blocks that you might identify as weak or with the potential to be better.
Sign up and connect with a business mentor for free here.
Example #2: Netflix
Oh boy, how I love binge-watching a good series... and I'm guessing you do too! If you've been watching some lately, I bet it was in the Netflix ecosystem. Funded all the way back in 1997 (surprising, I know), Netflix looked a lot different back then...
Netflix was launched as one of the world’s first online DVD rental companies, with a small and under 1000 titles. Their initial business was to send physical copies of films, shows, video games, and other media through the American standard mailing system (USPS), in a pay-for-use model. The following year, they changed to a subscription model.
However, over the next decade, Netflix watched the DVD rental market begin to decline and soon adapted its business model. Let's say that they wanted to avoid the all-famous “Blockbusters debacle”. They stopped sending physical copies and made a catalog of titles available online, to be consumed by the public, at any time, anywhere.
By 2016, Netflix has already expanded to other 190 countries, offering programming in 21 languages. And the following years, the company would win Academy Awards for some of its original productions.
Netflix would go on to become a pioneer in a space that today has many competitors, and still, we can confidently say that it was this tech giant the one who curved the way for what would become the “standard” in the industry. Even though HBO, Disney, and others have joined the fray in recent years, Netflix remains the absolute leader in the segment, with over 180 million subscribers worldwide.
Netflix's Business Model
Netflix Business Model brought the “all you can eat business model types” from the table to your screen. Simple as that. Pay for a subscription, and you'll be able to enjoy all the content they provide.
There's a catch, however. Netflix does have different subscription prices, but they don't relate to the content itself. Instead, Netflix will charge more, or less, depending on the quality you expect to stream and on the number of devices you'll be using at the same time.
Netflix states its mission with:
“At Netflix, we want to entertain the world. Whatever your taste, and no matter where you live, we give you access to best-in-class TV shows, movies, and documentaries.”
A “newer” addition to this structure is the Netflix family plan, allowing you to stream from even more devices, all while sharing one family account. Pretty amazing, but unless you got 10 kids staring at the screen at the same time, I wouldn't say it's worth it. Its initial hook is a free month offer, for a trial period. Now, take a look at Netflix business model canvas:
Netflix Business Model Canvas
Netflix customer segments
Netflix platform is designed to please a wide range of subscribers. For this reason, its catalog covers the most varied titles, able to entertain fans of films, series, documentaries, and shows of all genres, for all ages and preferences.
For this reason, customer segmentation is both usage and geographical, but only to verify what type of content works best for each audience.
Netflix value proposition
Netflix’s entire value proposition is linked to the fact that it provides quality entertainment to its user, 24/7. This proposition includes:
Access to a huge catalog of products, with content for all tastes.
On-demand streaming, with 24/7 access – without ads!
Possibility of binge-watching.
Offering personalized lists and recommendations, based on the content watched.
Original and high-definition content.
User accounts, allow each person in the family to have a personalized profile.
All of this on any device connected to the internet.
Netflix channels
The main channels of Netflix are, no doubt, its own website, and app. But they also invest in online and offline advertising, take advantage of social media and benefit a lot from word of mouth among its users.
Netflix customer relationships
Netflix’s customer relationship is built primarily on the platform itself. It is user-friendly and therefore allows the user to configure it in the way that best suits them. Second, it uses an algorithm that suggests content based on what users usually consume.
Netflix user support also allows access via website, email, chat, and telephone. And finally, the company’s work with social media is very strong. Netflix uses networks like Instagram, Facebook, and LinkedIn to update the audience about releases and promotions. And the company really “talks” to their users, answering a great part of the comments in their posts.
Netflix's revenue streams
Since Netflix’s business model is grounded on subscriptions, it is simple to say that its revenue streams are based on the monthly fees paid by its millions of subscribers. However, as you'll see below, Netflix’s cost structure is also huge! Which brings up big questions about the company's profitability.
Netflix key partners
Netflix has a wide range of key partners. Among them, media producers and TV networks stand out, which license their content to Netflix; consumer electronic producers such as Wii, X-Box, PlayStation, which bundle Netflix with their systems; and Amazon AWS, since the Netflix platform is totally hosted on AWS. Besides those, there are investors and regulators.
Netflix key activities
Netflix’s key activities are all about offering the best streaming content experience to its users.
This means that, in addition to investing in technology, and hiring and retaining talent to keep its platform running at high performance, the company also needs to focus on its content offering.
That is, besides maintaining and expanding its platform on the website and apps, Netflix needs to produce, select, license, and acquire relevant content; build partnerships and negotiate with studios, content producers, and movie production houses; while analyzing and understanding customer behavior to improve their experience.
Last but not least, Netflix must keep developing its subscription model and pricing strategy, to keep and grow its customer base.
Netflix key resources
In addition to its own platform, website, and app, Netflix’s key resources are mainly human and digital resources. Among them, there are software developers, the content library, the recommendation algorithm, filmmakers and producers, the brand, and the studios that Netflix is developing to support its own creations.
Netflix cost structure
The cost structure of Netflix is... complicated and huge to say the least. And also the reason for which the company had a bad cash flow during their first years (maybe even to this day). Because the new business model demanded a BIG investment to reach the position where the company has gotten today. This huge cost structure involves:
Producing movies, series, and other new content,
Purchasing content and rights,
Providing recommendations through artificial intelligence,
Platform maintenance,
Data centers for streaming content,
Research, patents and software development,
Amazon AWS and technology,
Marketing, human resources, and infrastructure.
