eLearning Startup Business Model: Top 8 Revenue Streams

EdTech is not new; however, that’s what the majority of articles posted online would like readers to believe. To help you understand, an ecosystem in which technology is used to aid in the teaching process is known as EdTech.

A typical computer lab in a ’90s school could be classified as an EdTech.

However, only some people were aware in the 1990s that Industrial Revolution 4.0 would likely involve more gigabytes in smartphones than computers. Thus, if smartphones are modern, small, lightweight, and convenient garments today, shouldn’t the same principles be applied to the education system and the delivery methods?

It turns out that it is among the advantages of education app development for both organizations and children and is the reason entrepreneurs are rushing the doors of venture capitalists to finance the future or, if we prefer to say the present, of 21st-century teaching.

The EdTech model of business for apps, which includes eLearning platforms for children and organizational learning, has grown into among the top profitable (for entrepreneurs) and appealing (for investors) models for businesses in the past. It’s among the few sectors that can withstand this COVID-19 outbreak and maintain its promise of growth. What’s the reason we say that?

• According to Grand View Research, the global market for education technology was estimated at US$89.49 billion by 2020. It is projected to experience an annual compound annual growth (CAGR) of 19.9% between 2021 and 2028.
• According to HolonIQ, total digital spending in the field of education will be 341 billion dollars by the year 2025, which is a contributing factor in the rise of startups in education and children’s apps for education.
• However, the total costs that the industry will generate are 4.4% over the projected time frame.

What is the Revenue Model?

The revenue model is a theoretical framework that defines and explains a business’s revenue strategy. It is a method for generating financial earnings. It’s the process of managing the company’s revenue streams and the resources required to support every revenue stream. It encompasses the service or product of significance, the revenue generation methods, the sources of revenue, and the consumer who will benefit from the service or product.

Types of Revenue Models

There are many types of revenue models. Therefore, this list never attempts to include all of them, mainly since most of them are known under different names within the world of startups. Below are the most favoured and efficient revenue models’ businesses utilizing, big and small.

This section outlines some of the more popular revenue models many recently launched startups employ to create the first revenue. Below are the revenue models that he outlines below:

Ad-Based Revenue Model

Ad-based revenue models involve creating ads for a specific product, service or any other product to place them on high-traffic channels. You could earn by selling advertising spaces if you’re a business with an online platform that receives significant traffic. We all know about digital advertising as it’s the preferred marketing method for giants like Google or Facebook.

There are four primary advertising strategies: video, display, mobile, native, and display. Data plays a critical role in measuring ad performance, and you should be able to provide advertisers with precise metrics like CTR (clickthrough rate), CPC (cost-per-click), CPM (cost-per-impression), and many others.

Advantages: Earning revenue from ads is among the most simple and effective ways to create revenue models. That’s why many businesses use advertisements as a source of income.

Disadvantages: You’ll have to draw millions of customers to earn enough money to sustain the business from being profitable. Additionally, most people find advertisements annoying, which could result in low clickthrough rates and, consequently, less revenue.

Affiliate Revenue Model

Another well-known web-based strategy is the affiliate model, which works by marketing the right products through links and then collecting a fee on the sales of those items. It can work with advertisements or on its own. This is an agreement between a product or service seller and a promoter, where the promoter directs customers to sellers, who in turn conclude the deal. Some of the most popular companies offering affiliate marketing plans for their partners include Amazon and Shopify.

Advantages: One of the main advantages of utilizing an affiliate revenue model is that it usually earns more money than traditional revenue models.

Disadvantages: If you are using an affiliate model of revenue for your business, keep in mind that the amount you earn depends on the scale of your business, the type of product you sell, and the size of your target market.

Transactional Revenue Model (direct and web)

Numerous companies, tech-focused rather than, try to use the model of transactional revenue with good reason. This is among the most honest methods to generate income since it simply means a company offering a product or service to its customers.

Advantages: Customers are more attracted to this kind of experience due to its clarity and broader choices.

Disadvantages: Due to the simplicity of the transactional revenue model, numerous companies utilize it themselves, which leads to increased competition and price degradation, which means less profit for those who employ this method.

The revenue model for transactions is broadly divided into two types: direct sales and web sales.

• Web sales have exploded over the past few years and are suited to many different offerings, including hardware, software and even subscription services. But relationship sales are not compatible with the model of web sales, which is why if your business is in the field of consulting or large-ticket products (high-value things like appliances, houses, and automobiles), You should consider applying a model that fits well with your offerings.
• Direct sales could be considered inside sales when the customer calls to make orders (or sales representatives call potential customers), as well as outside sales, which is a face-to-face sales transaction.

Direct sales are effective when combined with relationship, corporate, or more complex sales cycles involving several influencers and buyers. But, these types of sales usually require an entire sales team, which means they aren’t the best option for low tickets. If your product is priced lower than the $1,000-$2,000 area, you’ll have trouble making a scalable business through direct sales.

Subscription Revenue Model

In the subscription revenue model, you sell your customers an item or service they pay for over a long period, usually months to months or years. Subscription as a Service (SaaS) Providers typically allow users to try their service for free before they begin charging each month or year.

Recent research suggests that companies such as Netflix, Spotify, and millions of others that are adopting the subscription-based revenue model are part of an industry that has grown fivefold in the past seven years.

Advantages: If your organization is sufficiently advanced in its growth, the model could generate recurring revenue and even gain from customers unwilling to end their subscription with you (which could be the secret behind subscription-based models).

Disadvantages: Since this model relies on the support of a large number of customers, it is essential to maintain a higher subscription rate than the rate of unsubscription.

Channel Sales (or Indirect Sales)

Channel sales involve agents who sell your product on behalf of either the reseller or you, the product provider. Affiliate revenue is an excellent option for this model, particularly if the product you offer is a virtual item.

The most well-known example of a channel’s sales model revenue is wholesale retailers that supply regional distributors.

Advantages: Channel sales models are ideal for companies that offer a product that is an incremental sale to their channel and can generate an annualized profit.

Disadvantages: Do not use this strategy If your product demands you to spread the word about your market or if your product competes with your competitor since they’ll promote their product, not yours.

Commission Marketplace

Commission marketplaces are typically online marketplaces that allow intermediaries to offer products or services and pay commissions. They are the perfect rental revenue match for physical items and single-time services.

The most successful startups relying on this cash flow method include Uber and Airbnb.

Advantages: The commission-based income model can be attractive due to its scalability, flexibility, and monetizing potential for everyone involved.

Disadvantages: This kind of mediation service will require a lot of administration and custom e-learning app development staff to handle orders, shipping, payments, and other necessary processes.

Licensing

This revenue model is widely used by technology and data providers. The name implies that the strategy of licensing income involves managing permissions to utilize an offer. When a legal contract is signed, the copyright owner gets payments from individuals or businesses who wish to utilize its products and/or services.

The license agreement could be permanent or for a short period. It can provide access to several customers or be exclusive.

Advantages: This revenue model encourages the protection of intellectual property. When properly executed, the licensing model can provide a steady income while advertising a new idea or trademark.

Disadvantages: The drawbacks of this kind of monetization may be hidden in the fine-printed contract between the licensor and the licensee. If too many additional provisions regarding the use of the product are clearly stated, it’s easy to break the terms of the contract.

Retail

The model of retail revenue requires opening a traditional shop where you sell tangible goods at a reasonable price to customers. Be aware that brick-and-mortar retail sales require space on the shelves (that you’ll be required to purchase) in existing stores and are designed to work with companies with storage and logistics capabilities.

Advantages: Retail sales can be the perfect way to provide discounts and other products to your existing customer base and increase your brand’s visibility.

Disadvantages: The sales method could be more suitable for companies in the early stages or offering digital products such as apps or software.

Revenue Stream Examples

There are many ways companies can earn revenue with e-learning app development solutions. In general, there are pros and cons for every type of revenue stream. Depending on your company’s value proposition and your customers’ needs, a particular revenue stream could be better suited to your needs than the other. Below are revenue stream examples illustrating broad categories of ways your company can earn money.

Asset Sale

Selling assets is among the most popular ways businesses earn revenue across multiple sectors. The company you work for sells something, and your clients take ownership of the item. Asset sales also happen when the owner of a business sells their business. It’s usually a one-time transaction sale. After the sale is completed, the purchaser usually may use the item and resell it or even dispose of it since they are the asset owner. The sale of a physical item earns the company money.

Usage Fees

Usage fees refer to the amount companies charge to use their services. The client pays you according to the amount they use the service. For instance, a phone company will charge customers for a specific amount of minutes and data. Most often, clients pay a monthly fee for access to telephone service. Another example is car rental; a customer pays a rental firm to lease cars for the miles they drive. A postal service charges you for delivering a parcel from one place to another. In essence, with usage charges, the more people utilize a service, the greater the amount they have to pay.

Leasing and Renting

The revenue stream revolves around the fact that customers can use the item for a specific period. This is because you’re offering customers the exclusive use of an asset for a specified period. Some examples of companies that use this revenue stream include Airbnb or car rental firms.

Another instance of this income stream can be seen in Rent the Runway, which lets customers hire designer clothes for a specified amount of time. The rental company for designers offers the option of a monthly subscription as well as one-time rentals for customers. The memberships start at $135 per month and allow users access to up to 8 items a month. They’re tapping into multiple revenue streams to generate transaction and recurring income from one-time rental purchases.

Advertising Fees

Advertising fees generate revenue, which you can earn by charging to display the product or service or create a brand image on your company’s website or offline assets. It is any place you can charge to advertise or promote another company. A revenue stream based on advertising is typically used by companies that have websites that receive lots of visitors. Revenue is generated through the sale of advertising space.

The advantage of this is that it can be monetised relatively quickly if you have an area with a lot of traffic, either on or off the internet. The drawback is that ads are everywhere nowadays, and whether you would like to entice your visitors with an advertisement is worth considering. Examples of generating revenue through advertising include the use of Google Adsense on your website or advertisements on your YouTube or podcast channel.

Subscription Fees

Many businesses use subscription-based revenue streams, which are earned by clients paying for access to a particular service. Some examples of companies that use subscription fees include Netflix, Shopify, Adobe, and fitness studios.

These kinds of revenue streams are likely to have lower monthly payments, which is why customers pay because it’s something that you could quickly forget about. With a subscription, users pay a recurring fee to use services. Other businesses that utilize this source of revenue are subscription boxes and a few eCommerce business firms.

Licensing

The licensing process typically involves one-time payments that grant an individual user or groups of people access to software. While the creator retains the copyright, a third party can access the content at no cost. In the past few months, big players have shifted away from the licensing model and instead adopted a subscription-based one.

Businesses like Adobe or Microsoft have changed the licensing model of several of their products into subscription-based services. However, licensing is still a popular option in music, photography, and video games, where customers pay for use and access to content, but the owner retains ownership rights.

Brokerage Fees

Companies match people to exemplary service; they can earn the brokerage fee. Traditionally, real estate agents and brokers connect individuals with properties and pay a brokerage fee. Some other companies that pay brokerage fees include Uber, Booking.com, and Airbnb. All of them charge a fee that matches customers with the service.

The advantage of this income stream is that you do not need to provide products or services. Instead, you match the customer to the appropriate business or service. However, this type of revenue stream is only available to specific companies and takes significant time and energy to establish. Businesses that act as intermediaries will pay a percentage to provide their service.

Consulting or Services

The team members are also assets. A valuable asset doesn’t have to be physical. Your team can be leveraged by providing consulting or other services. Examples include marketing agencies and financial advisors or consultants. These kinds of companies can consist of retainer and project work.

Retainers work similarly to a subscription system that allows customers to be charged a set monthly amount for a particular service. Consulting or providing services is an excellent method of earning a profit without designing new assets or even creating an entirely new product.

Conclusion

The world’s EdTech sector is expected to grow rapidly. Venture capital investment in the fastest-growing Edtech businesses and Startups, particularly in the US, China, and India, suggests the emergence of parallel growth industries between the West and Asia.

We make this assertion based on our conclusions based on the study of all of the Global Edtech unicorns. The world of online learning has not only emerged from its cocoon but has established itself as a vast, constantly evolving internet of technology. Numerous tech companies have failed but are now thriving. One reason startups fail, not only in the E-learning industry but worldwide, is that they over-promise by making hype without solid data. BYJU’s, Udemy, Coursera, and Udacity, among the world’s most reputable Edtech businesses, have made it to the top of the ladder by quickly identifying technology-driven applications that will lower the price of education. In this regard, an E-learning app development company must enter the marketplace with options that offer remote access, compatibility with multiple devices, support for numerous, and 24/7 uptime.