TurboTax is a tax-preparing software program that enables consumers to file their taxes electronically. The company uses a variety of business models.

TurboTax primarily makes money from fee-for-service premium tax services. The company also makes money through live assistant tax services, live full service tax support, and a partnership with TaxAudit,

TurboTax was launched in 1984 by developer Michael A. Chipman as a part of a company known as ChipSoft. It was later sold to Intuit as part of a combined ChipSoft acquisition in 1993 for $225 million.^[1]

TurboTax, also known as Intuit TurboTax, is a SaaS or Software as a Service product. It is a market leader in the tax software industry for its ease of use and support. It has been ranked Editor’s Choice for best tax software multiple times and is noted for having a 25-year history of excellence, according to PC Mag Review. ^[2]

What is TurboTax & How Does it Work?

TurboTax is a tax filing software designed for users to file their taxes online. Both business owners and individuals can use its services. TurboTax has a number of different solutions for different income brackets and tax complexity. Using TurboTax’s platform, American and Canadian users can file their taxes at the State, Provincial and Federal level.

Based on data reported by the IRS, “nearly 203.6 million returns and other forms were filed electronically” for the Fiscal Year in 2021. This number makes up nearly 78 percent of all filings.^[3]

Users visit the TurboTax Intuit website or download their free app and quickly get an overview of the services offered. They can choose between filing with a tax expert or filing on their own. TurboTax offers financial management solutions on tax filing in a user-friendly interface with either of these selections.

They also offer tax filing software for those who want to upload a TurboTax program onto their computer and manage their tax return from there.

When a customer uses TurboTax to file their taxes electronically, they are guided through the process of filing both Federal and State or Provincial taxes. With the free edition, users just need their tax documents to fill out the questions.

The software can automatically import data from millions of employers and financial institutions based on users’ input. This feature is incredibly helpful to tax filers who have little to no prior knowledge of doing their own taxes. For users who want to write off deductions or report self-employment income, additional forms are needed.

TurboTax also offers significant value via various package options and tiers. These cover almost every type of business and personal tax-filing need. Their individual tax-filer services range from Deluxe to Premier to Self-Employed. Premium features give users various advantages for their specific tax filing requests.

Next to the Basic package, Deluxe is the least expensive option. TurboTax searches through hundreds of possible tax deductions and credits applicable to the filer. Users can also consult with a live tax expert at any time during the process.

The Premier package is the next tier level. Premier offers a valuable option for investors covering investment income as well as cryptocurrency. Premier users also receive expert advice on their investments, such as rental properties. It will also allow users to import income from things like stocks, employee stock purchase plans (ESPPs), and bonds.

TurboTax also offers a specific service for people who are self-employed. This service option is specifically tailored to help small to midsize business owners. The Self-Employed version searches for more than 500 possible tax deductions.

TurboTax is not the cheapest option in electronic tax filing software. For federal and state returns, for instance, packages can run cost up to $100 more than the free version.^[4] Finally, they sell tax return software in bulk for those with multiple family members to do returns for.

When it comes to business tax filing software, TurboTax offers two different options. First, they offer a Home and Business option for those who are self-employed or investors. They also have a business version for incorporated businesses.

TurboTax also allows users to easily track how much they donate to charity and claim their deductions with a program called ItsDeductible, which is included in many of their packages. That helps users optimize how they take advantage of their charitable donations.

Still, its user-friendly interface is what wins most users over. The user experience, in-depth explanations of tax topics and virtual support options are unmatched compared to similar software programs. The company also consistently refines TurboTax to improve and maintain user experience, and security measures.

In recent years, TurboTax has been the subject of controversy for deceptive business practices. In 2020, it was reported that an estimated 14 million Americans who paid for a tax prep service like TurboTax, qualified for free tax filing. ^[5]

The IRS Free File Program is a private-public partnership with tax preparation software companies like TurboTax-owned Intuit, and H&R Block. Under this program, Free File tax filers with an adjusted gross income (AGI) of less than $39,000, active-duty military with an AGI of less than $72,000, and taxpayers who qualified for the Earned Income Tax Credit are eligible to file their taxes for free.

An audit conducted in 2020 explored why so few taxpayers utilized the Free File program. It revealed that companies like Intuit advertise their services in such a way that it directed users away from the Free File program. Likewise, the platform made it hard to get access to the company’s free services by searching via search engines.

Users were, instead, being directed to the commercial editions of these services. Tax filers may have been charged fees for additional services they incurred while filing their tax return forms that were eligible to file for free.

Business Model of TurboTax

The business model of TurboTax is based on a freemium model. TurboTax offers simple tax filing features at no cost, to encourage a large number of customers to try them out. They then upsell premium products and services for those with more complex tax filing needs.

The company then provides fee-for-service packages with multiple tier options. These packages offer additional resources and benefits that are not offered in the free edition. Each package option charges a fee annually, so users must pay the fee to use the software service each tax-filing season.

With TurboTax, users can also choose from options based on their individual needs during the filing process. At the lowest cost level, individuals can opt to file their taxes completely on their own. From there, they can add services or products using TurboTax’s tiered services business model.

At the highest cost level, users can opt for a full-service package to hire an expert to file their taxes for them. TurboTax Live Full Service provides a professional CPA to file your taxes from start to finish.

TurboTax makes filing taxes for individuals easy with step-by-step guidance throughout the process. The option of hands-on virtual support and assistance is one of the benefits many users like over other programs. The tax preparation service also equips users with helpful resources such as tax calculator, tax reform resources, and tips and videos at no additional cost.

As a subsidiary of Intuit, TurboTax extends the company’s individual and business financial management product line into tax preparation. Intuit owns the popular accounting software QuickBooks, the budgeting app Mint, and the credit score monitoring website Credit Karma.

TurboTax helps Intuit co-market various services to their customers to improve cross-sell and capture more of their customer’s accounting and tax planning dollars.

TurboTax has a number of competitors, such as H&R Block, Tax Act, and IRS Free File. Much like TurboTax these tax software companies allow users to file their taxes electronically.

H&R Block similarly offers tax filing services with category-tailored considerations. While its services do run cheaper than those offered by TurboTax, what H&R Block doesn’t offer is itemized deductions and similar benefits on expenses that freelancers might have.^[6]

TurboTax has significant direct and indirect expenses. Its parent company, Intuit, pays for things like product design, staffing, marketing, and general administrative costs. This added up to $7.1 billion in 2021 and $5.5 billion in 2020.

The company increased their revenue from 2019 to 2021 going from $6.7 billion in revenue in 2019 to $9.6 billion in revenue in 2021.^[7]

How Does TurboTax Make Money

TurboTax makes money in four different ways. These are from providing tiered tax filing support, live assistant service, full-service filing, and through a partnership with TaxAudit.

While Intuit is a public company, it does not break down how much TurboTax makes from its different revenue streams.

Tax Filing Software

Whether via a program installed on a user’s computer or via TurboTax’s website, the company provides software that help businesses and individuals file their taxes.

For individuals who wish to file their taxes themselves without the assistance of a tax professional, TurboTax offers three tier levels: Deluxe, Premier, and Self-Employed. Each tier level offers additional features for writing off deductions, filing for rental properties, or filing self-employment income.

For businesses, they offer a home and business and an incorporated business option. They also offer a deal for people who want to do multiple returns.

Users simply answer a few survey questions regarding their financial situation. TurboTax finds the right forms for your needs. They provide directions and guidance to walk users through on most tax forms.

TurboTax Charges $59 for their Deluxe service, $89 for their Premier service, and $199 for their Self-Employed service. They charge $170 for TurboTax Business software and $120 for TurboTax Home and Business.

TurboTax Live Assistant Services

Another option users can choose from when filing their taxes through TurboTax is the use of their Live Services. TurboTax Live provides professional CPAs their customers can hire to assist during the process when filing their own taxes.

They can ask them questions and get advice. The tax expert can easily be accessed via their website and app. Users can choose to chat with them via chat messages or set up a video call.

TurboTax Live Full Service
For individuals or business-owners that wish to hire a professional CPA, TurboTax Live offers a full-service option. TurboTax matches them with the right expert given their specific needs and that person then handles everything for the user.

Unlike many other services, taxpayers can get tax filing help without having to meet in person. They send over the information electronically and meet over a video call.

TaxAudit Partnerships

TurboTax also makes money through a partnership with TaxAudit. TurboTax Audit Defense is a monitoring service. Users can purchase the Audit Defense feature for each tax return filed. It will provide support to manage tax audits should they occur.

TurboTax Funding, Valuation, and Revenue

TurboTax is currently a subsidiary of Intuit (INTU). Intuit is a public company that trades on the NASDAQ exchange. There isn’t publicly available data on how much TurboTax earns separate from Intuit.

It is also unclear what the TurboTax’s valuation is currently. It was acquired by Intuit in 1993 for $225 million but has likely increased significantly in value since then.^[8] Intuit was valued at $118.49 billion in August 2022. It is also unknown what kind of funding ChipSoft raised in the nine years prior from the acquisition made by Intuit.

In 2021, Intuit reported a 25% increase year-over-year with total revenue of $9.6 billion.^[9] The company made $2 billion in net revenue that year. That was a modest increase over previous years where the company made $1.8 billion in 2020 and $1.5 billion in 2019. ^[10]

Despite those small income gains, the company has increased revenue significantly during that same period going from $6.7 billion in revenue in 2019 to $7.6 billion in revenue in 2020 to $9.6 billion in revenue in 2021.^[11] That was an almost $3 billion increase in revenue over 2019 with a small $500 million increase in net income.^[12]

Is TurboTax Profitable?

TurboTax is profitable. However, it is unclear how profitable TurboTax’s business model is due to lack of publicly available data on its financials. Because TurboTax is a subsidiary of Intuit, the company rarely lists specific data about how much TurboTax makes independent of Intuit’s broader financial results.

Intuit had slowly increased their revenue from $6.7 billion in 2019 to $9.6 billion in 2021. That worked out to a $500 million increase in net income over the same period. How much of that income growth comes from TurboTax is unclear.^[13]

Conclusion

Thanks for joining us for this blog about TurboTax, the behemoth tax preparation software that has become a household name. We hope you learned something new and enjoyed our take on the business model behind TurboTax.

The tax preparation industry is expected to grow in the future, driven by both an increase in e-filing and an increase in self-employed individuals who need to file taxes themselves instead of using a tax preparer.

TurboTax has been able to capitalize on these trends by offering a streamlined user experience, which makes it easy for customers to navigate through the process of filing their taxes without having to worry about learning how their software works or paying exorbitant fees for additional features they don’t need (like audit protection).

As more people become self-employed or decide to do their own taxes instead of hiring an accountant every year, TurboTax’s user base will continue growing—and so will its profits!

347 Catchy Accounting Company Name Ideas

307 Catchy Bookkeeping Business Name Ideas

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5. ProPublica ↑
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8. LA Times ↑
9. Intuit ↑
10. Intuit ↑
11. Intuit ↑
12. Intuit ↑
13. Intuit ↑

Expedia is a global online travel company that owns a large number of websites that help people plan their travel.

Expedia primarily makes money from selling travel bookings directly as a merchant. The company also makes money from its business-to-business (B2B) booking services, travel agency portals, advertisements, and booking and referral fees when retail customers use their websites to book travel.

Expedia has a storied corporate past. The company was originally founded in 1996 by Rich Barton as a division of Microsoft. In 1999, Expedia was spun off into a public company. However, in 2003 it was purchased by InterActiveCorp (IAC). IAC then spun off the company into a separate security which was distributed among IAC shareholders. The Expedia Group (EXPE) currently trades on the NASDAQ exchange.

The company is known for its travel fare aggregator websites that customers use to find deals on travel bookings. Expedia owns Expedia.com, VRBO, Hotels.com, Hotwire.com, Orbitz, Travelocity, Trivago, and CarRentals.com.

What is Expedia & How Does It Work?

Expedia owns a number of popular websites focused on helping individuals search aggregated travel listings to find deals and quickly book their travel. Expedia’s suite of sites receive over 750 million monthly visitors, and the company has over 30 million Expedia Reward members.

Expedia operates in 70 different countries providing services in a number of different languages. Customers can book travel reservations at over 2.9 million hotels and properties and over 500 airlines.^[1] There are over 210,000 travel activities that users can book across Expedia platforms.^[2]

Travel aggregator sites like Expedia and the companies in its portfolio allow travelers to quickly see what travel options they have so that they can book the best option for them based on their travel schedule, price, convenience, and the travel experience they’re looking to have.

Using an aggregator site can mean accessing cheaper fares and rates or just not having to spend hours researching different options.

Individual customers simply input their travel details into the search engine and include things like the dates of travel, the destination, and how many people are traveling together. The company then returns search results for travel options that fit their criteria.

On many sites, customers can also specify what kinds of travel they are looking to book. For example, some people might only need to book a flight, whereas others might be looking to book a flight, hotel, and a rental car. Often users can access larger discounts by booking more than one kind of travel at a site like Expedia.

Once the traveler decides on what bookings to choose, they can choose that booking and check out directly on the site. Expedia will then keep a record of their booking and can help them make changes if needed.

Ultimately, many of these sites act like self-serve online travel agencies. They allow customers the convenience of being able to search for and book a reservation at travel destinations around the world with just a few clicks.

Expedia also offers a number of travel packages that it creates by booking blocks of room and airline reservations and putting together the packages. They use their size to get discounts from operators and then pass those discounts onto consumers.

Expedia also partners with companies like Visa and financial institutions to provide booking options for their credit card rewards programs.

Since the company runs a number of different websites, the customer experience and value proposition can be slightly different. For example, VRBO is a website similar to Airbnb where individual vacation rental property owners can create listings of their properties and upload them to the site where travelers can book them.

Like many in the travel industry, Expedia experienced considerable difficulties during the COVID-19 pandemic. The company saw their revenue go from $12 billion in 2019 to just $5.1 billion in 2020. Expedia recovered somewhat in 2021 with revenue increasing to $8.5 billion.^[3]

Business Model of Expedia

Expedia’s business model revolves around offering travel platforms where travelers can search for flights and other travel reservations. By aggregating travel options in one place, the company encourages a critical mass of travelers to use their site to quickly and conveniently book travel.

The company also sometimes offers deals and discounts on flights or hotel rooms compared to booking them directly with the provider. The company makes money in three different ways: by operating as a merchant, a travel agency, and as an advertising site.

Their merchant business model is different than many other travel sites, including that of Booking.com, the industry leader. The company directly buys blocks of rooms, flights, and rental cars in order to resell them. Because they are a big organization, they are able to buy large blocks of rooms and offer them to customers either separately or as part of an all-inclusive vacation package at a lower rate than if the traveler bought the travel options directly.

This incentivizes people to buy from Expedia and to also book all aspects of their trip with Expedia because then they are usually able to save more. For example, Expedia might be able to buy a block of $150 a night hotel rooms for $100 a night and then pair that with flights that they can similarly get a discount. They then make money on the markup between what they paid and what travelers pay them.

Expedia has negotiated a right to return many of these reservations 24 hours before the due date in order to reduce the potential loss they might experience should no one book those travel options. The challenge is that this business model can be capital intensive as they need to pay for the inventory before they sell it. For this reason, Expedia likely has higher working capital needs than other travel site companies.

This may or may not ultimately offer the company a competitive advantage over companies with other business models. While some people want to buy travel in packages for the discount and convenience, many people go to travel sites to buy individual travel deals. Expedia doesn’t make as much money off their sales of those travel options.

However, Expedia also makes money in ways that are similar to other travel sites. It earns revenue based on commissions and booking fees associated with a travel reservation similar to a travel agency. They also get paid merchant or referral fees when travelers book reservations with their travel partners.

Expedia has robust B2B travel services, including partnering with companies that issue rewards cards in order to allow their customers to easily book travel online. They also offer a Travel Agent Affiliate Program, which is a ready-built agent platform that travel agencies around the world can use to quickly and efficiently book travel for their clients.

These partnerships are expected to drive significant revenue and growth for the company. They provide enhanced services as part of these partnerships and bulk discounts on the cost of travel in return for consistent business. This segment, however, has not always made money. In 2021, their partnership program lost $4 million. However, revenue is growing significantly in that segment. In 2021, it was up 113% year-over-year.^[4]

The sheer volume of customers that go to travel sites looking to purchase travel means that travel sites also often make money through advertising. Many travel companies want to connect with people while they’re booking their travel and making purchases, and advertising and travel search aggregators is a great way to do that.

Perhaps one of the most interesting things about travel booking site companies is how aggressive they tend to be around acquisitions. Expedia and many of its competitors often own multiple sites that are offering very similar services. There are many reasons for doing this.

Primarily, the goal is to reduce competition. The travel bookings industry requires significant investments in advertising in order to stay top of mind when people are looking for travel options. Other travel companies threaten to eat at a company’s market share. Many travel search companies buy up companies in order to reduce their need to advertise to win over their competition.

They might also do so to expand into slightly different selling markets, expand into new geographic reasons, achieve economies of scale, or grow their revenue via acquisitions.

In recent years, Expedia has been selling off some of its travel assets in order to reduce their operating costs and focus on subsidiaries that are generating more revenue for the company. In 2021, Expedia sold both Classic Vacations and Egencia.

Expedia has a number of competitors including Booking Holdings, which owns Booking.com, and a number of other popular travel companies.

Expedia had $4.2 billion in marketing and selling expenses on $8.5 billion in total revenue in 2021.^[5] That represents 49.1% of the company’s total expenses. Other costs related to Expedia’s business model include personnel costs of $404 million and direct costs of running their site of $1.1 billion.^[6]

How Does Expedia Make Money?

Expedia makes money in four different ways. These revenue streams are selling travel packages they purchased as a merchant, travel agent portals, B2B travel programs, commissions and booking fees, and advertising fees.

The company had travel gross bookings of $72.4 billion flow through its site in 2021. Expedia’s profit margin was 11.9% with a total revenue of $8.5 billion that year.^[7]

The company breaks down its revenue in a number of different ways but not at the level of different revenue streams. For example, they break down how much money they make from different service types. In 2021, the company made this much from the following service types:

• Lodging: $6.4 billion
• Air: $254 million
• Advertising and other media: $603 million
• Other: $1.2 billion^[8]

They also break down their revenue by business model:

• Merchant: $5.3 billion
• Agency: $2.3 billion
• Advertising, media, and other: $754 million^[9]

While that gives a better idea of how the company makes money, it doesn’t give particular figures for how much is made from individual revenue streams.

Selling Bookings as a Merchant

Expedia has a unique business model where they buy blocks of rooms, flights, and car rentals to create travel packages. They are able to get a large discount by buying in bulk and have been able to negotiate the ability to return unused bookings for a refund. They then pass the savings onto customers directly.

They sometimes do this by putting together travel packages or by selling individual hotel bookings. This is done across many of the company’s platforms like Expedia and Trivago. They primarily make money on sales of hotel rooms in this way. They’re able to mark the rooms up from what they pay and they earn the difference as income.

This is the largest part of Expedia’s revenue mix. It’s also something that many other travel companies don’t do. The downside of this model is that it requires much more working capital on hand for Expedia to pre-purchase all those travel bookings.

Travel Agent Portals

Expedia runs a Travel Agent Affiliate Program (TAAP). The company markets itself to agents by promising that they will earn great commissions, get access to a global travel supply network, get impressive rates for their clients, and access bookings that have last-minute availability.

While the company doesn’t make money from agents directly, they leverage agents via this portal to generate more bookings and earn more money off travel bookings made directly with agents. This is one way the company tries to capture a larger portion of the travel booking market.

B2B Travel Services

Expedia enters into partnerships with companies that are providing travel rewards programs via things like credit card or loyalty rewards. Customers of those clients can then use a customized Expedia portal or the partner’s website with an integrated Expedia API to book travel via Expedia.

This helps simplify travel booking for many of these reward providers while also offering more options and a more seamless booking experience for their customers. The rewards providers benefit since they can negotiate a discount directly with Expedia rather than having to separately negotiate discounts with hundreds of travel partners or book at commercial rates.

The company has decided to invest heavily into this segment as they see it as an area of potential growth. In 2021, they made just $110 million after expenses from this segment, but they hope to grow their revenue from this in the future.^[10] Some of their partners include companies like Chase and Delta.com.

Commissions, Referral, and Booking Fees

Like other travel sites, Expedia makes money when travelers make booking through their platforms. When Expedia isn’t operating as a merchant who has purchased the bookings in advance, the company makes money in the same way that travel agencies make money – by commissions, referrals, and booking fees.

These fees vary depending on the partnership the company has negotiated, the type of travel, and the volume of bookings. The company, for example, earns less on airline bookings than it does on hotel bookings.

Advertisements

Like many other travel search companies, Expedia makes money on advertising. They also offer access to their proprietary travel data to advertising partners. This is a data set created from consumer booking behavior designed to help companies better understand consumer travel behavior and trends so they know how to better market to them.

Companies can then leverage Expedia’s advertising options to create a media plan that reaches the right shoppers. Expedia sells advertising across all their sites in one place. That makes it easier for companies to create a marketing plan that will reach a number of different geographic regions and demographics.

Expedia Funding, Valuation & Revenue

Expedia Group (EXPE) is currently a public company on the NASDAQ exchange. After being founded as part of Microsoft, the company was spun off as a successful IPO in 1999.^[11] before being bought by InterActiveCorp (IAC) in 2003 and trading as a subsidiary of that company.^[12] In 2005, IAC then spun off Expedia again into a separate company.^[13]

Both prior to going public and after, Expedia raised three funding rounds and garnered $3.3 billion in venture capital funding.^[14] Their last funding round was in 2021. Notable investors include Apollo and Silver Lake.^[15]

Expedia’s financial results have been relatively volatile in recent years due to COVID-19. The company went from making $12 billion in revenue in 2019 to just $5.1 billion in 2020 during the height of the pandemic-related travel restrictions.^[16]

The company has also struggled to grow their net revenue or net operating income. They made only $903 million on $12 billion in revenue in 2019, lost $2.7 billion in 2020, and made just $186 million on $8.5 billion in revenue in 2021.^[17]

There is a chance that Expedia’s fortunes will shift as people continue to travel more now that there are fewer travel restrictions. The company might also benefit from shedding some of the subsidiaries they held by selling them off.

Is Expedia Profitable?

Expedia is currently profitable. The company made a profit of $186 million billion in 2021 on $8.5 billion in revenue. However, they lost $2.7 billion in 2020 during the downturn in travel due to the COVID-19 pandemic on just $5.1 billion in revenue. To absorb that financial loss, Expedia raised a post-IPO debt round of funding in 2021.

However, prior to the pandemic, Expedia made $12 billion in revenue and had a net income of $903 million. There is hope that as the travel industry improves, Expedia’s fortunes will also improve.

Conclusion

We hope you enjoyed this blog post on how Expedia makes money. We also hope that you gained some valuable insights into the business model of Expedia and how it is set up to succeed in the future.

Expedia’s success is a testament to their ability to adapt to the needs of customers and provide them with a service that meets those needs. That’s not something many companies can do—and it’s certainly not something every company can do well.

So if you’re looking for inspiration on how to improve your business model or make your customers happier, try taking some cues from Expedia.

655 Amazing Travel Agency Name Ideas Ever

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10. Skift ↑
11. CNN ↑
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17. Expedia ↑

Unsplash is a popular stock photo sharing platform where users can upload and download high-quality images for free.

Unsplash primarily makes money via advertisements. For additional revenue, the company has also adopted some clever freemium payment models into its API integration with popular brands and Unsplash Studio.

Founded in 2013 by Mikael Cho as a Tumblr blog, Unsplash was originally created as a side project to promote Crew, a freelancer marketplace Cho ran. Cho was doing a photo shoot for his new freelancer marketplace since he couldn’t find any satisfactory images on existing stock photo sites. After the photoshoot, Cho decided to take 10 of the leftover images and turn it into a Tumblr blog.

People could visit Tumblr and download the images for free. Mikael uploaded 10 new images every 10 days. Eventually, the Tumblr blog was promoted on HackerNews, after which it exploded in popularity.

In Unsplash’s first year, users downloaded 365 images 10 million times.^[1] Today, Unsplash is home to over 4.2 million photos. In 2021, Unsplash was acquired by Getty Images for an undisclosed amount.^[2]

What Is Unsplash & How Does It Work?

Unsplash is a free-to-use online photo sharing platform where individual creators can upload and download high-quality images from a diverse range of categories. In September of 2022, Unsplash had over 306,000 contributors.^[3]

The platform is loved for its large collection of individually curated royalty-free photos that can be used for both commercial and non-commercial purposes.

The platform allows users to upload and download photos in the resolution of their choice, depending on what they plan to use it for. Some users may download images for a school project or presentation. Others use images from Unsplash for their editorials and blog posts.

Attribution isn’t necessary, but encouraged- and every single photo on the platform is free. There is no hidden subscription or freemium model. Users can expect to find professional-tier photographs from categories such as travel, architecture, business, tech, and others.

Unsplash also allows content creators to shape their own portfolio by making collections and attaching metadata to each photo. Social media features such as likes, sharing, and activity feeds are also integrated into Unsplash. These allow users to see how popular or well-received a certain creator is.

If a user likes a certain photo, they can add it to their collection. Users can organize their photo collections by attaching a category, name, and description. Some photos also feature metadata like the camera and lens model, focal length, aperture, and resolution.

This metadata helps photography aficionados connect on a deeper level with each image, as they understand how it was captured. Opening an image also shows the number of times it was viewed or downloaded. The download figures help users establish the perceived quality or popularity of an image.

Because of its clean-looking user interface and streamlined usage process, Unsplash is one of the most popular photo-sharing platforms in the world.

The platform is integrated into more than 19,000 web apps, including Medium, Squarespace, Wix, Zoom, Buzzfeed, and more. In August of 2022 alone, Unsplash generated over 16.9 billion impressions worldwide.^[4]

Business Model of Unsplash

Unsplash centers its business model around the concept of accessibility and organic advertising for partnered brands. It attracts users by offering a library of over 4.2 million individually curated stock photos. These are completely free to download and use for both commercial and non-commercial purposes under a license similar to the creative commons license (CC-0).^[5]

What makes Unsplash uniquely attractive to business partners is its massive userbase and deep API integration that spans over 19,000 applications. Unsplash users consist of a diverse demographic that includes both amateur photographers and creative professionals. With 75% of site visitors between the ages of 18 to 34, a market segment that is ideal for driving brand profitability and growth.^[6]

Unsplash offers brands the choice to integrate ads in an organic manner that doesn’t feel intrusive to the user. Promotional images can be custom ordered through the Unsplash Studio service. Brands can also use native ads that lead customers directly to their own websites or shopping apps after they download a photo from Unsplash.

One example of native ads is when a user gets photos of the Apple iPad at the top of their feed after searching for tablets. Unsplash also allows brands to geo-target desired userbases by prioritizing certain countries and blocking others. What distinguishes Unsplash from other image sharing sites is its high clickthrough rate.

According to Unsplash, 51% of their users have an annual household income of $100,000 or more. And 71% of Unsplash users have a university degree. As a result, brands advertising on Unsplash can expect clickthrough rates in excess of 2%.^[7]

That is 10 times higher than Pinterest and 3x higher than Dribbble. Apart from advertisements, brands can also integrate the Unsplash API with their own website or mobile app. Integration is seamless and free of charge.

But certain brands can also choose a paid API model if they have high usage volume and desire access to exclusive content. Unsplash also provides individual contributors with the opportunity to promote themselves on the platform. Users can hire photographers by clicking on the hire button next to their profile image provided the photographer has this option enabled.

Unsplash doesn’t make any money from this hiring process since it’s strictly a C2C (consumer to consumer) relationship. Professionals can also feature their PayPal donation links on profiles. In this respect, Unsplash is completely unique since no other photo sharing platform has integrated creator support features similar to it.

Unsplash’s biggest rival is Shutterstock as they offer similar services. However, Shutterstock follows a freemium model where users can choose to pay for a subscription if they wish to download premium copyrighted artwork and vector images. It is more suited to small businesses that download images in bulk.

In contrast, Unsplash is aimed at prosumers and individual content creators. It doesn’t have any subscription model or freemium plan which makes it a lot more accessible to everyone. This allows Unsplash to attract a much larger and highly diverse userbase compared to Shutterstock.

Unsplash also offers 3D artists a platform to upload their models designed in software like Maya and Blender. These are then converted to JPEG images. Because of the 3D artwork, Unsplash contains a more unique collection of photos compared to Shutterstock.

Pexels is another Unsplash competitor that offers free high-definition stock photos. However, its userbase is smaller than Unsplash’s user base. Similar to Unsplash, Pexels also has an API integration with other apps.

But it isn’t adopted by nearly as many platforms. This results in a more limited selection of photo categories since Pexels has fewer contributors and brand partners. One advantage Pexels has is video sharing, while Unsplash is strictly restricted to images only.

Unsplash has over 870 billion all-time views and 4.7 billion all-time downloads.^[8] This makes it the most popular free stock photo platform. It is also estimated to generate annual revenues of around $9.7 million.^[9]

However, the company also has considerable expenses. These include staffing costs, R&D costs, hosting costs, and development expenses. Due to the lack of data on Unsplash’s financials, it is unclear how profitable Unsplash’s business model is.

How Does Unsplash Make Money?

When you think of Unsplash, you probably think of the most beautiful photos on the internet.

And it’s true—Unsplash does have some of the most gorgeous photos you’ll find online. But behind all those stunning shots is a story that’s just as compelling as the pictures themselves: how Unsplash makes money.

Unsplash makes money in four different ways. These include direct advertisements, native advertisements, Unsplash Studio, and a freemium API.

Getty doesn’t provide any information on Unsplash’s financials. It’s not publicly known how much the company makes from each revenue stream.

Direct Advertisements

Direct advertisements are one of Unsplash’s core revenue streams. Unsplash doesn’t break down how much money they make from advertising. But Getty, Unsplash’s parent company, mentions their goal of reaching 288 million content creators each year within the August 2022 investor relations report.^[10]

With direct advertisements, brands get four unique placement opportunities:

• Photo Downloads: By associating their products or services with a particular photo, brands can shape a unique visual image of themselves within the minds of users.
• Feeds: This is targeted at content creators and users who download high-quality stock photos for professional work. By tracking a user’s search data, Unsplash can help brands display curated ads. These ads are based around key performance indicators (KPIs).
• Homepage Ads: Ads that are displayed on the homepage, these are usually what a user sees first when they open the app or website. These ads are visible to the entirely of Unsplash’s userbase and help the brand reach out to a wider group.
• Promotional Videos: Carefully integrated into the feed, promotional videos can help Unsplash users gain a deeper insight into the product or service offered by a brand.

Native Advertisements

Compared to direct advertisements, these are much more subtle and organic. Say for example, a user is searching for photos of shoes on the website. Initial results that display at the top of their feed will include shoes from a specific brand like Nike or Adidas.

These search results are arranged on the basis of partnership agreements made between the brand and Unsplash. Brands get to share their uniquely curated marketing content with individuals who then download these photos and share them across organic channels.

Through native advertising, a brand can reach places where traditional ads can’t generate impressions.

Unsplash Studio

If a company doesn’t have any suitable photos for advertising itself on Unsplash, it can hire photographers from Unsplash Studio. They will create custom content based on the company’s needs at competitive market prices. A share of this revenue is passed on to the professional photographers that Unsplash is partnered with.

Freemium API

The Unsplash API can be freely integrated into a website or app for no charge whatsoever. Through the API, users of sites such as Medium, Trello, Square, Dropbox, and many others gain access to over 4 million high-quality stock photos. But in quarter four of 2021, Unsplash rolled out a freemium API monetization model.

By using this, companies that receive high amounts of traffic can improve their content access through a subscription model. Companies are charged based on the amount of traffic they receive and how often their users access Unsplash’s content library. How much money Unsplash makes through this model is currently unknown.

Unsplash Funding, Valuation & Revenue

Unsplash is currently a subsidiary of Getty Images, which doesn’t release any details regarding Unsplash’s profits or revenue streams. For this reason, the company’s valuation is hard to determine. Getty also didn’t release any details regarding the financial terms of their deal with Unsplash.

With new API partners and contributors joining each month, Unsplash has a larger user base than ever before. Hence, the company is likely to have gone up in value since its 2021 acquisition by Getty. Estimates suggest the current annual revenue for Unsplash to be around $9.7 million, but there is no official way to verify this.^[11]

Prior to its acquisition by Getty, Unsplash raised $31.3 million in venture capital funding over 4 rounds between 2013 and 2019.^[12] Notable investors include Bossanova Investimentos, LDV Capital, Inovia Capital, and Bedrock Capital.

Getty Images was privately owned until July 25 of 2022. Which is the day it went public through a special purpose acquisition company (SPAC) merger with CC Neuberger Principal Holdings, who valued the stock image company at $4.8 billion.^[13]

This is when a private company merges with an existing public company that was set up to facilitate the process of companies going public Currently, Getty Images (GETY) trades on the New York Stock Exchange and had a valuation as of September 2022 of $4.64 billion.

Since Getty was privately owned until July of this year, they haven’t filed any annual reports with the SEC. However, they did release an investors relations presentation in March of 2022 which details their annual revenues from 2017 to 2021. According to the presentation, Getty generated $919 million in total revenue for the fiscal year of 2021.^[14]

That also happens to be the first time it turned a net profit since 2017. For 2021, Getty reported a total profit of $117 million. That’s significant improvement over Getty’s 2020 fiscal year in which it reported a net loss of $37 million with a total revenue of $815 million.

Is Unsplash Profitable?

It’s hard to say whether Unsplash is profitable. Getty Images doesn’t release financial data on any of its subsidiaries, and Unsplash is in a highly competitive market. The company is constantly looking for new ways to monetize its platform and reward content contributors.

Unsplash has also been experimenting with blockchain tokens as a means to leverage their massive distribution network and add value for users.

In February of 2018, Unsplash raised over $7 million through a Series A funding round led by OST, who contributed both cash and brand tokens. Currently, Unsplash is focused on expanding their platform and making it more accessible to both individual users as well as brands.

This means that Unsplash might not be making money yet for its parent company, Getty Images. Getty itself went public in the second quarter of 2022, and its August 2022 investor relations report shows that 2021 was its first profitable year since 2017. In 2021, Getty made a net income of $117 million from total revenues of $919 million.^[15]

Conclusion

We hope you’ve enjoyed this blog post on Unsplash’s business model and how it makes money.

Unsplash has created a unique business model that is taking the photography industry by storm. It has proven to be a successful way of monetizing free photos and content, while also giving back to the community at large.

We think it will be interesting to see what the future holds for Unsplash and other companies like them, as they continue to grow and evolve.

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Sources

1. Mikael Cho Medium ↑
2. Betakit ↑
3. Unsplash ↑
4. Unsplash ↑
5. Unsplash ↑
6. Unsplash ↑
7. Unsplash ↑
8. Unsplash ↑
9. Growjo ↑
10. Getty ↑
11. Growjo ↑
12. Crunchbase ↑
13. Bloomberg ↑
14. Getty ↑
15. Getty ↑

BlockFi is a popular crypto-based fintech platform. The company has a wide variety of revenue streams that utilize crypto to provide customers with everyday financial solutions.

BlockFi primarily makes money via interest on crypto loans. The company also makes money from spreads, withdrawal fees, and crypto mining.

Founded in 2017 by Zac Prince and Flori Marquez, BlockFi was created to provide users with familiar financial services by using crypto as an asset. Prince got the idea for this company when a bank rejected one of his loan applications because he offered to provide crypto as collateral.

Unlike traditional crypto sites, BlockFi isn’t a platform where users can exchange crypto. Instead, its goal is to provide everyday financial services like credit cards and personal loans by leveraging crypto as an asset.

What is BlockFi & How Does It Work?

BlockFi is a crypto-based fintech platform that provides trading and loan services to a global userbase. It offers a comprehensive suite of crypto-centric financial services in addition to seamless integration with existing crypto wallets. In recent years, the platform has exploded in popularity — going from 10,000 retail clients in 2019 to over 225,000 in 2021.^[1]

Before using the platform to make trades, users must sign up with their current ID documents and address. BlockFi used to provide their BIA (BlockFi Interest Account) to both US and foreign users. But following a US Security and Exchange Commission (SEC) enforcement action in February of 2022, new BlockFi Interest Accounts can no longer be created by US customers.^[2]

Foreign users can still make a BIA account and accrue interest on their crypto deposits. Existing US BIA customers will also be paid interest on their deposits. As a BIA account holder, customers can modify their interest payout preferences via the mobile app or desktop web app.

BlockFi is the only crypto fintech company that lets users choose which cryptocurrency or stablecoin they wish their interest to be paid in. For example, someone with a Bitcoin deposit can choose to receive their interest via PAX Gold, Ethereum, USDT, USDC, and many other options. Money can be deposited to accounts via wire transfer in fiat currency or crypto transfers.

BlockFi has a security feature called ‘allowlisting’, which is similar to whitelisting. In the unlikely event that a user’s BlockFi account is hacked, the hackers can only send crypto to their whitelisted addresses. Once a user has set up their BlockFi account, they can buy and trade a wide range of cryptocurrencies.

With BlockFi’s repeat trade feature, users can automate their crypto portfolio. It allows them to repeat a certain crypto purchase at a frequency of their choosing. The frequency can be set to daily, weekly, or monthly.

The company also offers a loan service that pays out US dollars to a user’s bank account using their crypto deposit as collateral. Annual Percentage Rates (APRs) can vary depending on the loan-to-value (LTV) ratio. Higher LTV results in a higher APR. With a 50% LTV, users will need to deposit twice the amount they’re borrowing as crypto.

The company has long been the subject of regulatory action. In 2020, the SEC charged BlockFi with violation of the registration provisions within the Investment Company Act of 1933. According to the SEC, BlockFi failed to register itself as a security or investment company. The fintech company was forced to pay a $100 million settlement fee in addition to halting its interest-based loan services in several states.^[3]

Business Model of BlockFi

BlockFi’s business model is centered around providing loans backed by crypto to individuals and financial institutions. The company attracts users by providing a one-stop solution for all their crypto trading needs, in addition to unique loan opportunities with low APRs.

BlockFi differentiates itself from a traditional fintech company by investing almost exclusively in crypto and being available to a global audience.

The company makes its revenue from a wide variety of sources. These include interest on loans, spreads, and transaction fees.

BlockFi provides close to double-digit interest rates on stablecoins. Because of these interest rates, crypto investors are likely to purchase a significant amount of stablecoins and store it in their BlockFi Interest Account.

These stablecoins are assets that BlockFi can then use to provide loans to financial institutions. Through this process, the company generates revenue while simultaneously returning value to customers.

BlockFi attracts customers with its transparency, low minimum trade amounts, and intuitive user experience. The company’s interest account, which is available only to customers outside the US due to SEC regulations, allows users to accrue interest on their crypto savings. This encourages new users to create a BlockFi account just so they can passively grow their crypto investments over time.

The rapid withdrawal process and low spread also encourage users to transact more frequently on BlockFi. This generates a wide pool of loyal customers who use the platform for the majority of their daily crypto trading needs. Users can seamlessly link their crypto wallets from other platforms with BlockFi.

This results in higher conversion rates since users don’t feel tied down to any single platform. The extensive security measures implemented by BlockFi help reassure users that their investments are safe and protected from fraudulent actors.

Given the highly comprehensive security systems employed by BlockFi to prevent fraud, withdrawals on this platform can take slightly longer compared to rivals such as Celsius. The increased security also means that BlockFi can only provide a limited number of free withdrawals each month. They currently offer only one free monthly withdrawal.

BlockFi’s biggest competitor is Celsius, as they offer similar services. Celsius pays out interest on a weekly basis, while BlockFi pays interest once at the start of every month. BlockFi provides one free withdrawal per month, and charges for subsequent withdrawals.

In contrast, Celsius provides unlimited free withdrawals. The drawback is that its withdrawal security isn’t as robust compared to BlockFi. BlockFi withdrawals are supported by a complex social security framework that combines two-factor identification with multiple selfies and what’s known in cybersecurity as Know Your Customer (KYC) documents. These are identification like driver licenses or passports.

For customers who want faster, more frequent withdrawals, Celsius might be a better choice. But for users who value security above all else, BlockFi can’t be beat. BlockFi is also reported to have a better customer service system with lower callback times and more personalized solutions.

BlockFi is a private company and does not release its financials. While the company is estimated to have annual revenue of around $147.8 million per year, it also has considerable expenses.^[4] These include things like staffing costs, hosting costs, platform costs, and development costs.

Due to the lack of data on BlockFi’s financials, it is unclear how profitable the company’s business model is.

How Does BlockFi Make Money?

BlockFi makes money in five different ways. These include loans to financial institutions, crypto-backed loans, spreads, withdrawal fees, and mining.

As BlockFi is a private company, details about how much revenue they generate from these different revenue streams aren’t public.

Loans To Financial Institutions

BlockFi aggregates the crypto assets deposited by its users and lends them out to various financial institutions. This process is similar to securities lending, with fiat currencies replaced by crypto. It’s called rehypothecation and allows BlockFi to use collateral posted by clients for the purpose of generating yield.

They do so by providing loans to organizations like crypto exchanges, over-the-counter (OTC) market makers, crypto ATMs, and investment funds. These organizations then pay interest on their loans, which BlockFi uses to fund its operations and make a profit. Given the large demand for these types of loans, institutions are willing to pay higher interest rates.

The profits made by BlockFi are used to pay retail lenders interest on their crypto deposits. It’s similar in concept to how banks generate interest on savings accounts. But the interest rates are much higher with BlockFi Interest Accounts (BIAs) compared to banks.

Crypto-Backed Loans

A user can take out loans against their crypto assets, with an LTV ratio of 20 to 50%. The APR can be as low as 4.5% for an LTV ratio of 20%. Users can expect payments in US dollars to their bank accounts on the same day as BlockFi receives their collateral.

BlockFi makes money on the interest paid out over the loan period. Higher LTV ratios usually mean higher interest rates. Cryptos accepted for US dollar loans include Bitcoin, Ethereum, LITECOIN, and PAXG.

Spreads

BlockFi’s platform also includes an exchange and trading service in addition to their BIA and crypto-backed loans. Spread is the difference between the current market price of a crypto asset and the price that users buy or sell it for.

Even though BlockFi claims to charge zero commission fees, spreads integrated into the prices can account for up to a 1% increase in charges. At a large scale, the company can make a significant amount of money off these spreads.

Withdrawal Fees

BlockFi allows users to withdraw funds from their interest account or wallet at any time during the month. However, free withdrawals for stablecoins and crypto coins are allowed only once per month.

A convenience fee is charged on each subsequent withdrawal, and rates can vary depending on the crypto currency.

Mining

In 2021, BlockFi announced that they are partnering with Bitcoin mining company Blockstream which has a 300MW mining facility in the state of Georgia.^[5]

By using Blockstream’s end-to-end mining colocation services, BlockFi bypasses significant infrastructure and research overheads. This partnership is also integrated with BlockFi’s supply chain and diversifies their revenue streams.

BlockFi Funding, Valuation & Revenue

BlockFi is currently a private company, and its financials aren’t available to the public. Right now, it is unclear what the company is valued at.

However, BlockFi raised $1.4 billion in funding over 12 rounds between 2018 and 2022.^[6] Notable investors include FTX US, Investlink Holdings, Alumni Ventures, Empede Capital, and Rose Park Advisors. The company’s latest funding round was a debt financing round in June 2022, led by FTX US who signed an agreement for a $400 million revolving credit facility.^[7]

BlockFi’s last disclosed valuation was $3 billion when it raised money through a series D funding round in 2021.^[8] Since then, the company has raised more money. But it has provided no details regarding its valuation.

Annual revenue for BlockFi is estimated to be around $147.8 million.^[9] But there is no official report to verify this. Given the recent crypto market downturn, it is possible that BlockFi could be making less than this figure.

Is BlockFi Profitable?

BlockFi is likely not yet profitable. The company is private and doesn’t disclose any details regarding its finances. Its annual revenue is currently estimated to be around $147.8 million.^[10] This is significantly less than the estimated $500 million BlockFi was making when it was ranked America’s fastest-growing private company by Inc. 5000.^[11]

The revenue alone is not a sign of profitability since BlockFi could easily be expending more than that in operating and expansion costs. The company has secured $1.4 billion in funding.^[12] Which is likely being used to expand into new markets and introduce new services to bolster revenue streams.

Conclusion

BlockFi was founded on the premise that there is an increasing demand for crypto-backed loans and that the market is ripe for disruption by an innovative company.  

Since then, we’ve seen a number of other lenders enter the space—which is good news for all of us! It means that there are more opportunities for people to get access to loans in crypto, which means more options for borrowers and more competition for lenders.

As more people get involved in the cryptocurrency market, we can expect more companies like BlockFi to enter this space and provide innovative solutions for all kinds of problems that come with using cryptocurrencies as a form of payment or investment.

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Sources

1. TechCrunch ↑
2. SEC ↑
3. BlockFi Interest Rates ↑
4. Growjo ↑
5. Blockstream ↑
6. Crunchbase ↑
7. Coin Telegraph ↑
8. TechCrunch ↑
9. Growjo ↑
10. Growjo ↑
11. Inc Magazine ↑
12. Crunchbase ↑ 

Wikipedia is the world’s most popular online encyclopedia. It is run by the Wikimedia Foundation which is a non-profit organization.

Wikipedia primarily makes money via donations and grants. However, the nonprofit also makes money through things like investments, Wikimedia Enterprise, and merchandise sales.

Founded in 2001 by Jimmy Wales and Larry Sanger, Wikipedia is a non-profit online encyclopedia that’s edited by users and volunteers. Initially available solely in English, the website now has articles in 329 languages. The website, which is based around a wiki editing system, is the largest and most-read online reference site.

Much of this growth is believed to be because the site empowers volunteers and site users to edit and contribute to the creation of articles and listings. Wikipedia has been said to have helped democratize knowledge by making information easily available to people around the world.

What is Wikipedia & How Does It Work?

Wikipedia is a free online crowdsourced encyclopedia that functions as the internet’s largest repository of knowledge. There are 6.5 million articles in English on the site and 56.4 million articles across the 329 languages Wikipedia publishes in.^[1] If all the content of English Wikipedia alone were printed out, it would make up 3,065 volumes.^[2]

The site has over 280,000 active editors and over 103.6 million registered users who create and make edits to articles in Wikipedia’s database. All of these editors and contributors volunteer their time as Wikipedia is owned by the Wikimedia Foundation and is a registered charity.

Every month, an average of 17,000 new articles are added to the site. However, articles are constantly being updated, and much of the site’s growth also comes from growth in the average article length.

While English Wikipedia has the largest amount of articles, making up 11% of the site, the Cebuano version of Wikipedia comes in second at 10.3%, followed by the German version at 4.6%, and the Swedish version at 4.3%. Cebuano is a language that is spoken in the Philippines. Most Cebuano Wikipedia entries were created by an automated program.

The site is incredibly popular. Every month, Wikipedia receives over 5.1 billion unique global visitors.^[3] In August 2022, the site had 23 billion total page views and processed 50 million edits.^[4]

People searching for information often click on a Wikipedia page because it shows up at the top of their search engine query. Due to Wikipedia’s size and its authority, most search engines will link to a Wikipedia entry in the top few results for a general topic. Google also embeds Wikipedia content on its search pages to help people get a quick snapshot of a topic.

That sends a great deal of people to the site, but many also go to Wikipedia directly to learn about a topic. For example, Wikipedia often gets surges of searchers looking up a topic after a newsworthy event has occurred. This is partly because Wikipedia is known for quickly updating articles related to topics in the news.

Readers accessing an article page can get a general overview of a topic like a historic event, a biography of a prominent person, or a definition of a philosophical concept. The pages are broken down into sections with a hyperlinked table of contents that can be used to quickly navigate to the part of the article that is most interesting to the reader.

Many articles also have a call out box on the right side that highlights some important statistics. For example, an article about a public figure might mention what they do, when they were born, when they died if they are deceased, and the name of their spouse.

Wikipedia articles have hyperlinks on words to other Wikipedia articles that give an explanation of the concept mentioned. A reader can read an article and click through to other articles to understand the concepts surrounding it. This creates a great networked resource where users can find out all the background information they need on a topic.

On most Wikipedia pages, there are also edit buttons that anyone can click in order to edit an entry. To do so, they need to sign in or sign up for an account. Once they have made an edit, it goes live. However, articles have editors who are in charge of them who later look over the change and accept or delete it.

To make an edit to Wikipedia, the site requires that you cite verifiable sources for your edit. Many edits are thrown out if they don’t meet Wikipedia’s standards. Every Wikipedia page has what’s known as a Discussion Page. On this page, editors and contributors can talk through the changes being made to the page or come up with lists of things that might need to be added.

Readers can look at these discussions to understand if there were any controversies in the creation of the article. Some articles on Wikipedia are so controversial or are the targets of frequent bad faith edits that they are only open for edits to a select number of Wikipedia editors and users. Others are carefully monitored and prioritized for review whenever an edit is made.

Wikipedia also created a way to rate the quality of various articles and notify readers who are about to read articles that the site feels are outdated or missing key information. These notices appear at the top of an article and explain what needs to be added or addressed.

This doesn’t just help the reader understand the limitations of the information they’re about to read, it also helps guide contributors who might want to edit the page. Wikipedia also keeps lists of articles in need of updates for volunteers to work on.

The site also is known for deleting topic additions if the editors don’t feel like they’re relevant enough. In the past, many people tried to add articles about themselves to the site. Unless the person was a public figure, these were deleted.

However, Wikipedia has often received criticism for not having enough articles on its site about prominent women or have been accused of having a gender bias. This is often thought to be because the site’s editors are mostly male. In 2018, 90% of Wikipedia editors reported being male in a survey. Only 8.8% were female, and 1% identified as non-binary or other. Those numbers were slightly better on English Wikipedia, where 84.7% of editors were male, 13.6% were female, and 1.7% weren’t female or male. ^[5]

Many have claimed that articles about women were less likely to be detailed, expanded, or written in a neutral way. In 2021, a study found that 41% of biographies nominated for deletion were about women, while only 17% of biography articles published were about women.^[6]

To try to adjust for this, edit-a-thons were created to encourage the coverage of women.^[7]

Business Model of Wikipedia

Wikipedia is run by a non-profit foundation called Wikimedia Foundation. The organization, therefore, functions like many non-profits. It raises most of its money via donations.

While the website could very easily make enough money to cover its expenses via advertising, Wikipedia does not allow advertising on its site. That is a policy it adopted to ensure the site would be neutral and fair. Many people who visit Wikipedia during their annual fundraising drives will therefore see an advertisement asking people to contribute.

Generally, Wikipedia asks for a very small amount from each individual donor. The pop-up appears at the beginning of the page. It sometimes tells the visitor how many times they’ve personally visited the Wikipedia website in the last month. It then tells them how quickly they would reach their fundraising goal if everyone gave a small amount.

This money is then used to run the site. However, Wikipedia has a significant amount in reserves. In 2021, the Institute for New Economic Thinking claimed that according to their 2020 financial report, the company would be able to run its services for 75 years without additional revenue.^[8]

Once those funds were exhausted, they would be able to run the servers for an additional 63 years if they used all the funds in their endowment.^[9] In addition to raising funds from individuals via small donations, Wikipedia also makes money via large donations. For example, Google donated $7.5 million to Wikipedia in 2019.^[10]

It is somewhat unclear what Wikipedia intends to do with all the additional money that they are raising over and above the organization’s direct financial needs. But it seems like the foundation has plans to continue to expand their knowledge base by adding more resources and partners to their website.

In recent years, the foundation has been using it to grow an endowment. In 2016, the foundation declared that it had a goal to raise $100 million for an endowment over 10 years. However, the foundation reached that goal five years earlier than expected, in 2021.^[11] The organization continues to raise money for their endowment.

The data from Wikipedia’s website is included in a number of for-profit websites and apps. Previously, many of these companies donated money to Wikipedia in recognition of these contributions. However, many companies have pushed for Wikipedia to adopt an enterprise fee-for-service offering. As a result, Wikipedia Enterprise was created to provide companies like Google and Facebook with better access to its content.^[12]

For example, Google populates its knowledge boxes from Wikipedia. Amazon’s Alexa and Apple’s Siri voice assistants also use Wikipedia for many of their answers. While Wikipedia doesn’t force tech companies to pay for Wikipedia, it does offer companies who partner with them via Wikipedia Enterprise additional features.

These include things like allowing the companies to share only community-vetted content rather than the newest edits. As there are often edits made on the site aimed at creating insulting or false articles, this protects those companies from sending out misinformation.

Wikipedia’s business model, ultimately, relies on the free labor of its contributors and editors. Some volunteer a significant amount of time to help create this free educational resource. Arguably, no for-profit company would have been able to amass that much content in such a relatively short period of time.

There are no websites that rival Wikipedia for the breadth of knowledge or the number of languages that it has content in. However, there are other online encyclopedias, including Encyclopedia Britannica, World Book Online, and Encyclopedia.com. Companies like Quora, where users answer questions, might also be seen as competitors to Wikipedia as they are also sources that people go to in order to discover answers to their questions.

Wikipedia has considerable program and administration costs. In its 2021 fiscal year, the Wikipedia Foundation spent $67.8 million on salaries and other compensation and $2.3 million in hosting expenses. Their total expenses added up to $111.8 million. However, the non-profit brought in $162.8 million. That left them with a surplus of $50.8 million in 2021.^[13]

The company’s 2021-2022 financial plan saw increases in total expenses by 34%, from $112 million the previous year to $150 million.

How Does Wikipedia Make Money?

Wikipedia makes money in five different ways. These are donations and grants, investments, Wikimedia Enterprise, and merchandise sales.

Donations and Grants

Wikipedia currently brings in the majority of its funds via donations and in-kind services. Many of these come from small global donors who are users of the site. Others come from large donations given by corporations. For example, tech companies like Google and Facebook have donated to Wikipedia in the past.

In 2021, the Wikimedia Foundation received $153 million in donations and $473,709 in in-kind services. They also received $2.4 million released from their net assets.^[14]

Investments

Wikipedia makes money from its investment assets. These include investment assets the Wikimedia Foundation hold directly and the funds that their foundation partner, the Tides Foundation, holds on their behalf.

Wikipedia made $4.2 million in 2021 on investment interest on the assets that the Wikimedia Foundation held directly. That’s less than the previous year when the foundation made $5.5 million on investments.

It is unclear how much investment income the foundation made from assets held by the Tides Foundation.

Wikipedia Enterprise

In 2021, Wikipedia announced that they would be offering a program for companies called Wikipedia Enterprise. While the organization will not be forcing companies to pay for access to its database, it will be offering additional services to companies that do.

Wikipedia Enterprise is a commercial product designed for companies that use Wikipedia data in high volume. The company announced in June 2022 that its first customers would be Google and the Internet Archive. Companies interested in the product can sign-up for a free trial. ^[15]

Ultimately, Wikipedia Enterprise makes it easier to package and share Wikipedia content at scale. The product provides a real-time feed of content updates, guaranteed uptime, and other features that aren’t available through the company’s publicly available APIs.

Merchandise Store

Wikipedia has a large number of loyal fans and contributors. So, it’s not surprising that the company also has a merchandise store. They sell t-shirts, socks, kids’ clothes, backpacks, and other novelty items with Wikipedia logos or fun designs on them.

The foundation originally used the merchandise store to thank its contributors. They have a merchandise giveaway program where users can nominate another contributor to get a free merchandise gift. However, other people started asking if they could buy the merchandise directly. That’s when Wikipedia launched its public-facing merchandise store.

It is unclear how much money the foundation makes directly from its merchandise sales.

Wikipedia Funding, Valuation & Revenue

Because Wikipedia is not a for-profit company, it doesn’t have a valuation. The company’s revenue comes primarily from donors. However, the company’s recently launched Wikipedia Enterprise program will likely create a robust additional income stream.

The Wikimedia Foundation runs Wikipedia and other Wikimedia projects with the revenue they raise. The foundation generated $162 million in revenue in 2021 and $129 million in revenue in 2020. After expenses, the foundation had $51 million left over in 2021 and $16.7 million left over in 2020. These funds are added to the foundation’s net assets.^[16]

In 2021, Wikimedia Foundation had $231.1 million in net assets, an increase from 2020 when they had $180.3 million. The foundation also holds money in the Tides Foundation. In 2021, the non-profit reached their goal of creating an endowment of $100 million at the Tides Foundation.^[17]

Is Wikipedia Profitable?

Wikipedia is run by a non-profit foundation called Wikimedia Foundation and generates a positive net income every year. However, as a non-profit, the organization isn’t focused on being profitable but on making enough money to grow and sustain Wikipedia and the Foundation’s other projects.

The foundation raises considerably more money every year than they have in operating expenses. They are poised to increase their year-over-year revenue considerably after the launch of Wikipedia Enterprise, a program that will see tech companies pay Wikipedia for supported access to its data.

Conclusion

In conclusion, Wikipedia is a powerful website that has revolutionized the way we access information. The free-to-use model has been copied and mimicked by many other websites and services, but none have come close to matching Wikipedia’s ability to provide accurate, comprehensive, and unbiased content.

At the end of the day, Wikipedia is a non-profit. As such, it’s not looking to make money. But that doesn’t mean it isn’t profitable.

It may be counterintuitive, but Wikipedia makes its money by not making money. By allowing anyone to contribute and participate in building out the site, it creates a pool of contributors who are invested in its future and help it grow. The more people who care about what you do, the more likely they are to support you—whether financially or otherwise.

And this is exactly how Wikipedia has grown into what it is today: a free online encyclopedia with over 55 million articles in hundreds of languages worldwide.

The internet has become an integral part of our daily lives. It is a place where we can learn about anything, connect with others from all over the world, and share our ideas—and it’s only getting better.

The way we communicate and share information will continue to evolve as technology advances. But Wikipedia will always be there for us, providing a platform for anyone to learn about anything they want.

We hope you’ve enjoyed learning about the business model of Wikipedia, and we’re excited to see what the future holds for it. It’s been a pleasure writing this blog, and we hope you’ll come back to us next time!

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17. Wikipedia ↑

YouTube is a popular video sharing platform where anyone can watch or upload content for free. The company has a wide variety of revenue sources.

YouTube primarily makes money via advertisements. The company also makes money from YouTube Premium subscriptions, channel memberships, Superchat donations, YouTube TV, and merchandise commissions.

Founded in 2005 by Steve Chen, Chad Hurley, and Jawed Karim, YouTube was created as a platform where anyone could share videos for free. The founding trio came up with the idea for YouTube after they realized how difficult it was to find and share videos online. In April 2005, Jawed Karim uploaded the first video to YouTube titled ‘Me at the zoo,’ which now has over 243 million views.

The platform was purchased by Google in 2006 for $1.65 billion.^[1] At that time, YouTube only had a total of 65 employees. Within one year of its YouTube acquisition, Google started rolling out ads on YouTube.

What is YouTube & How Does It Work?

YouTube is the world’s most popular video sharing platform. It provides both individual content creators as well as companies with a means to publish their content and have it viewed by a global userbase. YouTube allows creators to monetize their content by displaying ads.

Content viewers visit YouTube to access the world’s largest on-demand video sharing platform. They host millions of videos spanning a wide variety of categories from health and fitness to entertainment and education.

Based on 2022 data, YouTube has over 2.5 billion active users.^[2] India has the largest YouTube audience, with 467 million users.^[3] Each minute, over 500 hours of content is uploaded to the platform with a daily viewing average in excess of 1 billion hours.^[4]

To access the hundreds of millions of videos on YouTube, all a user needs is an internet connection and device. That can be a desktop, laptop, mobile device, or smart TV. The YouTube application is available across a wide range of platforms and doesn’t require users to register in order to view content.

However, registering will help YouTube better curate and personalize content based on analytics and tracking data. The process is extremely simple and only requires a Google account with an email address. Over time, YouTube collects usage data and optimizes its automated recommendations to maximize watch time and satisfaction.

At the very top of each YouTube window is a search bar that allows users to type in whatever they are looking for, with support for voice commands. On the homepage, right underneath this search bar, is a scrolling bar. It contains video categories featuring the types of content users might find interesting.

Items on this bar are dynamically selected by the algorithm based on recent activity and perceived interests. The presence of every single user on YouTube is contained within their unique ‘channel’, which can be thought of as similar to a social media account. Each time someone uploads a video, it is done via their channel.

Users can subscribe to channels for content they find interesting. Which then allows YouTube to provide them with notifications every time the channel uploads a new video. Subscriptions are free of charge and only require users to click a single button.

And they help creators promote their content since the algorithm prioritizes videos from channels with higher subscriber counts. Subscriptions are a way for viewers to support their favorite content creators, completely free of charge. Users can also like the videos they watch, and the number of likes are displayed by a counter under the button.

A high number of likes indicates that the video was positively received by the community. It provides the creator with positive feedback and helps new viewers make a guess on whether they should devote their time to watching the video. Often, new viewers will also subscribe after watching a video if they find it entertaining or informational.

One of the major strengths of YouTube is that it acts as both a video sharing platform and social media site. Every channel functions as its own self-contained community, whether it has a few thousand subscribers or several million subscribers. The comments section of YouTube is truly unique.

It brings together people from all over the world to share their thoughts and interact with each other. Due to the sheer size and reach of the platform, anyone can immediately interact with people from a multitude of nationalities and cultures. They can compare their viewpoints, provide feedback to the video creator, and engage with each other in other ways.

Value is further added to each interaction by a viewer when someone else likes their comment on a video. It’s similar to the Karma system on Reddit or the Like function on Twitter. People engage with the creator and each other in fun and creative ways.

YouTube is all about empowering its creators and providing them with every tool they need to develop a successful channel. Analytics, channel customization, monetization, playlists, and various other helpful tools are built into the creator dashboard. No other video sharing platform provides this level of utility to its creators, which is why YouTube is loved by so many people.

Using the tools provided to them, creative content creators can generate professional-tier content that attracts millions. They can also make a decent bit of money from it. YouTube announced in 2021 that they had paid out over $30 billion to content creators over a period of 3 years.

In 2021, YouTube celebrity MrBeast was estimated to have generated $54 million in revenue.^[5] At the time of writing this article, he has 103 million subscribers. He regularly gets over 50 million views on his top videos.

Business Model of YouTube

The business model of YouTube centers around getting people to use their free video sharing platform, which hosts the largest and most diverse range of user-created content of any such platform on the internet. Then, they monetize this userbase through ads and various freemium services that are obtained within the app.

YouTube’s value proposition to advertisers is that it provides a targeted audience of their choice with a never-ending stream of on-demand video content. There is a wealth of content on YouTube that caters to an extremely large and diverse group of consumers from all age groups. All of it is supplied to viewers via a dynamic algorithm that constantly monitors usage data and curates content recommendations to optimize view time.

No other video sharing platform has access to the kind of technology, scale, and userbase that YouTube has, which makes it uniquely suited to advertisers who wish to reach the largest audience possible within their particular niche. YouTube has highly active channels with millions of videos for everyone from gamers to investors.

YouTube has several competitors, but none of them can match it in size or scope. One of these competitors is BitChute, which is an alt-tech alternative that champions freedom of expression and minimal data collection as some of its core values.

However, its lack of any proper curation or analytical algorithms means that users find it much harder to view content that is relevant to their interests. The platform has also garnered a reputation for hosting fringe communities. It is mostly populated by videos catering to the political commentary community.

As a result, advertisers and brands will find that their options are far more limited on a platform like BitChute. Some advertisers might not wish to associate their image with the type of content being produced on BitChute since it has no restrictions on profanity or misinformation.

Vimeo is another competing platform, but it restricts free members to just 500MB of storage. In contrast, YouTube places no restrictions on the size, number, or length of videos that creators can upload. Vimeo charges users on a monthly or annual basis if they wish to access better content creation features.

It features a paid subscription model to provide additional hosting capacity and customization options. As a result, the platform caters to a very specific group of professionals who are willing to pay for these benefits. The benefit core is that Vimeo doesn’t have any ads.

YouTube has significant operating costs. These include hosting, research and development, staffing, and general administrative costs. YouTube’s parent company Alphabet doesn’t release any specific details on its subsidiary’s operating expenses.

But their 2019 financial statement shows that Alphabet spent $26 billion on R&D alone.^[6] Sales and marketing comprised over $18 billion in expenses, while general and administrative expenses took up another $9.5 billion.^[7]

Since YouTube is such a large contributor to Alphabet’s revenue, it likely takes up a significant portion of those operating expenses.

How Does YouTube Make Money?

YouTube makes money from six different revenue streams. These are advertisements, YouTube Premium, channel memberships, Superchat donations, YouTube TV, and merchandise commissions.

Alphabet Inc., YouTube’s parent company, separates their ad revenue from all other revenue streams in its annual report. In 2021, Alphabet generated $28.8 billion in advertising revenue.^[8] That’s an increase of $9.1 billion from 2020 or nearly 46% year-over-year (YoY).

YouTube’s non-advertisement-related revenues are consolidated in Alphabet’s financial data alongside Google Play store purchases and hardware sales. In 2021, this segment brought in $28 billion in revenue.^[9] That was an increase of $6.3 billion over its 2020 results.

Advertisements

Advertising is YouTube’s primary revenue stream and generated $28.8 billion for the company in 2021.^[10] YouTube’s ad revenue has been steadily growing over the years. This growth is driven primarily by improvements to their ad delivery formats and an increase in the number of users.

Currently, YouTube offers five kinds of ads:

• Skippable In-Stream Ads: These ads play before a video starts or during the video. The user is provided with an option to skip the ad after 5 seconds. Such ads can be used to generate leads or increase website traffic.
• Non-Skippable In-Stream Ads: Users can’t skip one of these, and they typically last 15 seconds or less. Non-skippable ads are ideal for generating brand recognition and reaching a wide base of viewers.
• In-Feed Video Ads: In-feed ads don’t appear within videos. Instead, they show up on the homepage of YouTube’s mobile app or next to search results for relevant videos within a browser. They can also appear on the user’s feed, next to video recommendations.
• Bumper Ads: A shorter version of the non-skippable in-stream ads, bumper ads are used to deliver a quick, catchy message. They can appear at the start of a video, during the video, or after another video.
• Masthead Ads: Masthead ads appear at the top of the homepage and support widescreen formats. These are video ads that come in under 30 seconds and are muted by default. Users can click on them to be redirected and watch a full version of the ad.

YouTube splits the revenue made from ads with its content creators. Generally, the split gives 45% of the Revenue to YouTube and 55% to creators.^[11] Payments are calculated on a click-per-mille (CPM) basis. That means the advertiser pays out a certain amount based on every 1000 views.

How much an advertiser pays to YouTube can vary depending on the geographical location of a channel, content type, demographic, and various other factors.

Content creators must meet a minimum set of criteria in terms of subscribers and watch time before their channel is monetized. If a video doesn’t meet the advertiser’s preferences, YouTube can demonetize it. Some content creators can make a significant amount of money from ad revenue.

YouTube Premium

It’s a subscription service that gives users access to ad-free viewing on YouTube and the ability to download videos for offline viewing. YouTube Premium users also get ad-free access to YouTube Music. Premium members can also view YouTube Originals series free of charge as soon as they are released.

YouTube Premium subscription prices are localized. That gives greater accessibility to users from all over the world based on the relative value of their regional currency. Mobile users with a Premium membership can switch to another app and still have the video play in the background.

Channel Memberships

This is a feature similar to the subscription system on Twitch, where fans can pay a monthly fee to support their favorite content creators. In exchange, they receive unique member-only perks such as badges, emojis, and more. Other users can see when someone is a member — which motivates more users to join the party.

Channel memberships come in tiers, with up to five levels in total. Higher tiers provide additional rewards in exchange for a more expensive subscription fee. Things like member-only streams, community posts, shoutouts, and exclusive videos can be adopted by creators to reward the purchase of higher tier memberships.

Superchat Donations

Another feature that’s inspired by Twitch and its live-stream donation system. With Superchats, viewers of a livestream can gain access to exclusive messages that are highlighted and stand out from the rest. Streamers often prioritize engagement with Superchat donators over regular viewers.

It’s a great way for viewers to directly interact with their favorite content creators and get a shoutout at the same time. Superchats also reward the donator with a special sticker that shows up next to their name. And their donation amount or message remains highlighted at the top of the chat window for a while.

YouTube TV

For now, this is a US-exclusive subscription-based premium television service. It gives members access to over 85 channels covering entertainment, news, sports, and more. Users don’t need a set top box or digital video recorder (DVR) functionality. Unlimited storage across six unique accounts is included within the plan.

Merchandise Commissions

YouTube content creators often partner with third party sites such as Teespring or Shopify to sell their exclusive merch. They can also set up a direct store shelf on their channel that links to the off-site merch store. Viewers can scroll through available products right underneath the channel description.

The proceeds from merch sales are passed in their entirety to the content creator. But YouTube has partnerships with third party stores that pay the site for integrating their API. As a result, YouTube gets a commission every time a product is sold via these partnered stores.

YouTube Funding, Valuation & Revenue

YouTube is a subsidiary of Google, which itself is owned by Alphabet. It is one of the ‘big five’ Silicon Valley tech firms alongside Apple, Microsoft, Amazon, and Meta. Alphabet (GOOGL) trades on the NASDAQ exchange and had a valuation as of September 2022 of $1.41 trillion.

A 2018 estimate puts YouTube’s valuation at $160 billion.^[12] YouTube generated $28.8 billion in ad revenue alone in 2021, which is an increase of 46% YoY from 2020.^[13] But it’s hard to judge its total revenue since Alphabet doesn’t provide specific details on non-advertisement revenue streams.

Alphabet has been steadily increasing its earnings. The company generated $257.6 billion in revenue in 2021. That was up from $182.5 billion in 2020 and $161.8 billion in 2019.^[14] The company generated $76 billion in net income in 2021.

Is YouTube Profitable?

YouTube is likely profitable for Alphabet since the company has been reporting consistent revenue growth in a market with minimal competition.

Granted, it also has significant operating expenses that involve technology costs, R&D, staffing costs, and server costs. YouTube ad revenues have increased by $9.1 billion from 2020 to 2021.^[15]

Their non-advertisement revenues are reported to form a significant portion of what Alphabet terms ‘Google Other’ revenues within their 2021 annual report. This revenue bucket increased by $6.3 billion from 2020 to 2021 and has shown consistent growth in the past.^[16]

Conclusion

YouTube has come a long way since it was first founded in 2005. The platform has grown from being a simple video sharing site to an entire industry with its own set of rules that are constantly changing.

Its business model is very similar to those of other social media platforms like Facebook, Instagram, and Twitter; however, YouTube has its own unique features that make it stand out from the crowd.

As you can see, the business model of YouTube is constantly evolving. But one thing is for sure: the video-sharing site has become a major player in the world of online video, and it will continue to be an integral part of our daily lives for years to come.

We hope you’ve found this article helpful, and if you have any questions or comments, please feel free to let us know. We’ll keep you posted on any updates on how YouTube makes money as they come along, so be sure to check back here for news on changes to their business model!

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