OpenTable is an online restaurant reservation service. Their business model is focused on helping restaurants easily manage their reservations.

OpenTable primarily makes money via subscription fees that it charges to restaurants. The company also makes money on booking fees, referral fees, and its own restaurant.

OpenTable was founded in 1998 by Chuck Templeton, Sid Gorham, and Eric Moe. The company first started operating a real-time reservations system for San Francisco restaurants. Their service has since expanded to over 80 countries.

The company went public in 2009 on the NASDAQ exchange under the symbol OPEN with a successful IPO. In 2014, OpenTable was purchased by the Priceline Group for $2.6 billion. OpenTable’s parent company later changed its name to Booking Holdings in 2018.

Booking Holdings (BKNG) is a public company that trades on the NASDAQ exchange. It primarily owns travel sites, including Booking.com, Priceline.com, Kayak.com, Cheapflights, and Agoda.com. Booking Holdings was founded in 1996 and is based in the US.

What is OpenTable & How Does It Work?

OpenTable is an online site where individuals search for and book reservations at restaurants. The company helps 31 million monthly diners ^[1] make reservations with their 60,000 partner restaurants located across the globe.^[2]

Restaurant reservations can be booked online or via OpenTable’s Android or iOS apps. Users can either search for a restaurant specifically or look for available reservations based on dates, times, cuisine, or price range. This helps users book reservations at the last minute or in cities where they aren’t familiar with the local restaurant scene.

Reservations can be easily booked, modified, and cancelled. Users are able to see things like the restaurant’s menu on the app. They can also invite friends to their reservation in-app. OpenTable gives users personalized recommendations based on their past dining activity, dietary preferences, and dietary requirements. This helps diners discover new restaurants in their cities.

OpenTable users are prompted to review restaurants after completing a reservation. They can rate the restaurant from one to five stars on their overall impression, the food, the service, the ambiance, and the value. They can also submit a rating on the restaurant’s noise level, leave a written review, or recommend that restaurant for certain occasions.

This rating system helps other diners find the right restaurant for their needs and occasion. Since it also verifies that diners have actually eaten at the restaurant before they submit a review, OpenTable’s rating system protects restaurants from false reviews.

Users receive points after dining at restaurants they book through OpenTable that can be used for discounts in the future at OpenTable member restaurants. The company’s most active users eventually earn the title of VIP. This gives users a Booking.com Genius membership which provides them with discounts at hotels and other businesses.

For restaurants, OpenTable helps increase their reservation numbers by giving them access to OpenTable’s network of local and traveling diners. OpenTable claims to have seated 1.6 billion people in restaurants in 2019 and generated 100 million verified reviews.^[3]

OpenTable also claims to have lower non-show rates than other reservation channels like phone reservations and partner reservations. Part of this might be because of OpenTable’s automated systems which email diners to remind them of their reservation.

Restaurants can also send their own automatic email and SMS confirmations to guests so they don’t have to do that work themselves. They also get notified immediately of reservations or cancelations via email or push alerts.

Using OpenTable also increases restaurants’ average per person revenue from diners. The company claims that OpenTable diners spend 24% more than the average diner.^[4]

Business Model of OpenTable

OpenTable’s business model revolves around simplifying restaurant reservation booking systems and processes. By providing a centralized platform where diners can search for restaurants, read reviews, and make reservations, the company cultivates a user base that they can then market to restaurants.

The service is free for diners, who can even earn rewards points or loyalty programs for booking frequently on the site. This incentivizes diners to book through OpenTable rather than directly on the restaurant’s website.

It also standardizes diners’ experience booking reservations at restaurants. Booking reservations on the site is simple, and diners get notifications and reminders. They can also easily change the time of their reservation or cancel if their plans change.

OpenTable has over 600 affiliate partners who use their site to book reservations. These negotiated partnerships are critical for increasing their value to restaurants and drive reservation numbers.

With 50,000 restaurants available on the platform and thousands of reviews, OpenTable is the first place many users go when they’re planning a night out. Their large network of global restaurants makes it hard for other reservation companies to compete.

It also means that their users are global and use OpenTable when traveling. This is important to their value proposition since travelers are more likely to eat out, and they’re more likely to be looking for recommendations about where to eat.

The size of OpenTable’s network is a critical part of the company’s strategy. They originally just provided reservation software to restaurants. It wasn’t until they had a critical mass of restaurants in their network that they launched their consumer-facing website allowing diners to easily book reservations online for restaurants in their network.

While many restaurants previously took phone or online reservations, OpenTable reduces the work involved in taking reservations and allows customers around the world to make 24/7 real-time reservations. That helps restaurants maximize their seatings, simplify their reservation process, and make more money.

For this reason, many companies have abandoned their own online reservation systems and just link to OpenTable on their websites. But the company’s software allows restaurants to do more than just manage their seatings and reservations in their app.

In this way, OpenTable’s business model is similar to a software-as-a-service company (SaaS) that provides a software product or service in return for a monthly or annual fee. Restaurants can integrate their other software with OpenTable’s and keep track of their revenue, reviews, and other data that they previously held across multiple restaurant platforms and software applications.

Their higher tier subscriptions have additional software functionalities. These include things like automating table statuses and access to a relationship management software that helps restaurants cultivate regular diners and increase loyalty.

The company has expanded into a number of different connected businesses, including food delivery. This service is only supported in certain markets, including the US, Canada, Mexico, the UK, Italy, and Australia.

The company does not manage the deliveries themselves but allows restaurants to connect with their delivery partners to arrange the delivery portion. Some of these partners include Uber Eats, Just Eat, ChowNow, Skip the Dishes, Postmates, and Olo.^[5]

This was particularly helpful when the COVID-19 pandemic hit, and many restaurants were forced to close down or switch to delivery for months at a time. During that time, OpenTable created a site to show how the pandemic was affecting the restaurant industry.^[6]

During COVID-19, the company also allowed restaurants to list their cleaning and safety procedures along with their restaurant. They also worked with restaurants to help verify diners to ensure they were vaccinated to help them meet local restrictions around indoor dining.

Despite being the leader in reservation platforms, OpenTable has a number of competitors. These include Reserve, Yelp Reservations, Eat App, and Table Agent. This competition has had an impact on the company’s growth by requiring to allocate far more money towards advertising and aggressively expanding their territory to win market share over their competitors.

In 2018, a company employee was found to have booked false reservations at their rival Reserve to make the case that OpenTable had a lower no-show rate.^[7] This was determined to have been done without the company’s knowledge.

Since OpenTable is a subsidiary of a much larger company, it is hard to determine the company’s finances like its expenses. In all likelihood, the company has significant operating costs including things like advertising, development costs, hosting costs, and administrative expenses connected with running the company and expanding its restaurant network and partnerships.

Booking Holdings, its parent company, is a public company and lists its expenses in aggregate. In 2021, the company had operating expenses amounting to $8.4 billion. Of this, $2.3 billion was spent on salaries and $3.8 billion on marketing expenses.^[8]

The online travel and booking business is extremely competitive so it’s not surprising that advertising is such a huge expense for the company. While the majority of Booking Holdings’ income does not come from OpenTable, the company brought in $10.9 billion in total revenue in 2021. That equated to $1.1 billion in net income after operating expenses.^[9]

This was an increase over the company’s 2020 results. They made just $59 million during the height of global lockdowns. However, it’s important to note that pre-COVID in 2019 the company had a net income of $4.8 billion.^[10]

While these numbers hint at the potential profitability of OpenTable’s business model, it isn’t clear how much the company actually makes.

How Does OpenTable Make Money?

OpenTable makes money in six different ways. These revenue streams are subscription fees that it charges to restaurants, cover fees, referral fees, experience fees, advertising fees, and revenue from its own restaurant.

Unfortunately, because OpenTable is a subsidiary of a larger company, the amount of money that the service makes from each of these revenue streams is not publicly known.

Subscription Fees

OpenTable primarily makes money via subscription fees from restaurants. These are a SaaS offering that doesn’t just allow companies access to OpenTable’s network of diners but also gives them access to their booking and restaurant management software.

The company offers three different tiers of subscriptions:

• Basic: This tier gives restaurants access to OpenTable’s networks and allows them to manage their reviews on the OpenTable platform. They can also create a guest database, custom profile and listing for their restaurant, post-dining surveys, takeout orders, direct messaging, and more. This plan costs $39 per month.
• Core: This tier gives restaurants added functionalities that allow them to do things like automate their table statuses, streamline their operations, track revenue with POS integrations, maximize their seatings, and more. This is the most popular subscription and costs restaurants $249 per month.
• Pro: This gives restaurants all the same features as the other plan but also gives them access to relationship management software and user data. This can be used to market to diners who have already ate at a restaurant with the goal of increasing loyalty and driving return visits. This plan costs $449 per month.

With 50,000 global restaurant partners, OpenTable likely makes a significant amount of recurring monthly income. However, that might not be reflected in OpenTable’s recent performance as the company gave its restaurant partners a subscription holiday during the pandemic to address how it affected the restaurant industry.

Booking Fees

On top of requiring restaurants to pay a monthly subscription to be on their website, OpenTable also charges what it calls a cover fee. This is a fee for every guest that is seated at a party. For example, a table of four has four covers.

They charge a different cover fee based on which kind of subscription a restaurant has.

• Basic: Free for the first 30 days, then $2 per cover and $0.30 per cover or $49 per month for reservations on a restaurant’s website.
• Core: $1.25 per cover and free for reservations on a restaurant’s website.
• Pro: $1.25 per cover and free for reservations on a restaurant’s website.

Given that OpenTable drives a significant amount of business to restaurants, they can potentially make a lot of money off these fees.

Referral Fees

OpenTable has partnerships with a number of food delivery services such as Uber Eats, Just Eat, and ChowNow. The company charges restaurants a 2% fee for every order it refers via its website to delivery companies.

Food delivery companies likely also pay OpenTable a commission or referral fee as part of their partnership agreement.

Experiences Fees

OpenTable encourages restaurants to showcase dining experiences like tastings, seasonal menus, or classes to its users. They then help the companies customize and market these experiences. These can be anything from a happy hour special to an expensive ticketed wine dinner.

Experiences are pre-paid and restaurants can upsell customers by suggesting that they add something like a wine paring with the tasting menu. OpenTable charges a 2% fee on all Experiences bookings.

Advertising Fees

OpenTable runs advertisements where restaurants can purchase promoted listings and appear higher in search results. The company advertises this as a great way for restaurants to fill their slow days and shifts.

Companies control when they want to advertise and can launch a last-minute campaign if they are having a slow seating. They can also choose which diners to target their ad campaign to such as those who are booking last minute or first-time diners. OpenTable does not list how much they charge for ads.

Restaurant Earnings

In 2021, OpenTable launched its first restaurant. Layla is located inside Kayak Miami Beach, a hotel owned by Kayak. Kayak is a travel booking site that is also a subsidiary of Booking Holdings.^[11]

This move seems like it could be an attempt for Booking Holdings to move from just booking travel services and reservations to providing them. The restaurant is Bedouin inspired and serves things like baba ghanoush and tailored cocktails.

OpenTable sees this restaurant as an innovation lab. They use it to develop new technology. For example, if a customer tweaks a cocktail to include a preferred spirit, OpenTable will have that data the next time they visit, and the customer won’t have to ask for the tweak.

It’s unclear if the restaurant was designed to make a profit or simply as a research and development lab.

OpenTable Funding, Valuation & Revenue

OpenTable is currently a subsidiary of Booking Holdings (BKNG) which is a public company listed on the NASDAQ exchange. Formerly known as The Priceline Group, Booking Holdings had their IPO in 1999.^[12]

Before it was purchased by Booking Holdings, OpenTable went public itself. In 2006, the company sold their IPO at an offering price of $20 but the stock was trading at $29 by the end of the day. That gave OpenTable a valuation of $626 million on its first day.^[13]In 2014, Booking Holdings bought OpenTable for $2.6 billion.^[14]

Prior to going public, OpenTable went through three funding rounds and garnered $48 million in venture capital funding.^[15] Notable investors include Comdisco Ventures and Orange S. A.^[16]

OpenTable’s parent company’s stock has struggled in recent years due to the pandemic. The company’s revenue fell from $15 billion in 2019 to $6.7 billion in 2020 and then bounced back to $10.9 billion in 2021.^[17]

Is OpenTable Profitable?

OpenTable is likely profitable. Booking Holdings, OpenTable’s parent company, made a profit of $1.1 billion in 2021 on $10.9 billion in revenue. However, Booking Holdings does not break down their revenue by subsidiary, so it is unclear how profitable OpenTable could be.

There is also a chance that OpenTable lost money in 2020 and 2021 due to the struggles the restaurant sector faced and OpenTable’s decision to temporarily suspend subscription fees for restaurants as they experienced less business.

There is also a chance that OpenTable’s revenue might still be down as some remain wary of indoor dining.

Conclusion

We hope you enjoyed this blog post and learned more about OpenTable’s business model and how it makes money. 

The company has been around since 1998, when it launched its first website: easyeats.com. It was originally intended as an online reservation system for restaurants, but it quickly grew into something much bigger—and today, there are more than 50,000 restaurants worldwide that use OpenTable to manage their bookings and reservations.

OpenTable is more than just a company that helps you make reservations. It’s become a household name in the restaurant industry, and it’s helping to change the way we think about the dining experience.

OpenTable has shown itself to be a leader in the online reservation space, but it can’t rest on its laurels. There are plenty of competitors out there, and OpenTable needs to stay on top of the latest trends and technologies if it wants to stay relevant.

We’re excited to see what’s next for OpenTable—and you should be too!

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10. Booking Holdings ↑
11. Food and Wine ↑
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15. Crunchbase ↑
16. Crunchbase ↑
17. Booking Holdings ↑

Patreon is a popular membership platform that creators use to get support from their fans via membership subscriptions. The company has a few key revenue streams.

Patreon primarily makes money via fees paid by creators who use the subscription membership service. The company also makes money from payment processing fees and platform fees.

Founded in 2013 by Jack Conte and Sam Yam, Patreon is known for helping artists and creators earn money via their service where their fans can contribute towards their work on a monthly recurring basis. In exchange, creators provide exclusive content, rewards, or other perks to subscribers.

Patreon was founded because Jack Conte was a musician looking for a way to make money off his YouTube videos. Initially, Patreon was designed to provide an artist with compensation when they created a work of art. It later moved primarily to monthly subscriptions.

Headquartered in San Francisco, California, Patreon is now one of the top platforms for crowdfunding.

What is Patreon & How Does It Work?

Patreon is a platform that allows artists or creators to make money off their art or content. Their fans sign up for monthly membership-based subscriptions to support the creation of their work. In return, patrons get access to exclusive content, sneak peaks, exclusive access to events, and the ability to engage directly with the creator.

Patreon is used by podcasters, video creators, musicians, visual artists, communities, writers, journalists, gaming creators, nonprofits, educators, and creators of all kinds. The platform boasts a large number of video creators but also has a large contingent of podcast and music creators.^[1] These are also the categories that generate the most in monthly earnings.

Fans can either search through the database of creators or follow a link to the site from a creator that they like. They can then pick a membership tier and start providing support.

Patreon boasted in 2020 that it had six million active monthly patrons. Those numbers suggest that the site is growing quickly. It increased its number of patrons by 50% from 2019 to 2020.^[2] These patrons collectively support over 200,000 creators. However, while some creators have tens of thousands of supporters, many only have a few patrons.

Only about 700 creators have over 2,000 patrons. The top creator is True Crime Obsessed, a podcast about true crime but it is unclear how much the podcasts makes monthly.^[3] In 2021, creators on Patreon earned $2 billion from patrons.^[4]

The point of Patreon is to give creatives the resources they need to continue to create the work their fans love. For some creators on the site, they would not otherwise be able to continue to do their work. For others, the money they make from Patreon supplements other income sources or allows them to monetize their work.

This has proven lucrative for many. For example, The Tom Dillon Show, a podcast, is estimated to have over 40,000 subscribers and make over $200,000 per month.^[5]

Creators are able to customize membership levels for their fans. That means that they can offer a number of different price points so people can choose the level at which they want to provide support. People at higher support levels often get additional access to the creator or more benefits attached to their membership.

For example, a comics creator might provide early access to new work and projects or exclusive access to certain installments in their comics series. Other creators might offer free merchandise or consulting with the creator at higher tiers.

Every creator has a landing page that explains their membership offerings and perks and lists the number of patrons they have. It also says how much the creator is earning per month off their work. Users can follow creators even if they don’t become patrons of that creator.

Many creators also post non-membership content that everyone can see. This can help them sell subscription memberships as people will get a taste of the kind of content they offer before supporting them. While Patreon gives supporters an option to pay for a year of support, the majority of people pay on a monthly basis. These monthly subscriptions can be cancelled anytime.

Patreon liberates many creators by giving them more creative freedom and control. By freeing them from the dictates of advertisers or the whims of companies that they work for, they’re able to spend less time focusing on making ends meet or other people happy. Instead, they can create more of the work that their fans love.

The recurring nature of the revenue creators get from Patreon allows many to achieve greater financial stability and pursue an independent creative career. It also gives many artists a community to test out new ideas and understand how their fans will react to them before investing a significant amount of time pursuing them. This creates a more interactive creative process.

This also helps early generate interest and support for projects that can help them make their next release successful. Ultimately, Patreon allows creators to build an interactive community to support them and their future work.

Business Model of Patreon

Patreon is a membership platform designed to help creators monetize their fanbase through recurring monthly membership subscriptions. The company has revolutionized the way work is done by creatives and changed how they raise funds to do the work that their fans love.

Patreon, ultimately, runs a payment processing company that enables individuals to raise money to deliver creative work. In the past, people creating work that others loved but which wasn’t well-compensated had to work other jobs or ask for support on an intermittent basis with a payment link.

Patreon changed that by providing a platform that allowed them to easily set up a profile page, determine monthly membership levels, and start accepting monthly payments. This simplifies the work artists used to do to fund their creative endeavors. It also gives them far more financial stability.

By attaching payments to a subscription level and giving fans perks for subscribing, Patreon also makes those who donate feel like they are receiving something in return for their support and money. That makes it easier for creators to ask for help.

While its free to get started on Patreon, the company has different levels of subscriptions for creators. Rather than pay a monthly subscription, however, Patreon charges a different percentage for memberships. Each tier gives creators different levels of support or functionalities on the platform.

Creators can leverage the platform to create business models of their own on the platform. They might focus their memberships on giving subscribers access to a community. Or they might ask their subscribers to pay for their educational work.

Many use a gated content model where fans can access some content for free but need to pay for exclusive content. Others use their fans’ interest in them to offer them more access or even personal contact like phone calls for higher tiered supporters.

Patreon does a lot of work to help creators develop their Patreon strategy so that they can maximize their conversions from fans to subscribers and increase their revenue. They provide suggestions for everything from rewards to offer to how to treat your Patreon services as a business.

In that way, Patreon is supporting creators in creating their own small businesses. Patreon’s model for doing this is different from some other models that emerged around the same time.

Crowdfunding sites like IndieGoGo and Kickstarter, for example, focused on helping creators and entrepreneurs get one-time funding for big creative endeavors. These services also allowed creators to give out perks and rewards for supporting creators. However, they were transactional in that supporters often expected to get a physical product or service from it.

Other services like Substack are focused narrowly around supporting content creators with subscriptions to newsletters and other content. Then there are sites like Kofi, which allows people to make both one-time donations or sign-up for monthly memberships to support creators.

Another way creators monetize their content is through direct requests for cash donations via PayPal link or other peer-to-peer payment processing services. Patreon distinguishes itself by providing monthly revenue for a wide variety of creators while also providing a platform to create community.

The business models of these companies are not necessarily in competition. For example, a creator who has a Patreon might still use Kickstarter to crowdfund a large project. Or they might ask people to make one-time donations to them via Ko-Fi.

In 2021, Patreon is estimated to have generated around $160 million in revenue after paying its creators.^[6] The amount that they made in profit has increased significantly in recent years, doubling from 2020 to 2021.

However, Patreon likely has significant expenses from running their growing platform. Things like staffing, advertising, hosting, and development costs are also likely to increase as they grow. As a private company, it is unclear how profitable they were after covering their expenses.

How Does Patreon Make Money?

Patreon makes money in more than three different ways. These include a percentage of the subscription fees they collect, payment processing fees, and merchandise fees.

As the company is private, a breakdown of how much the company makes from these individual revenue streams is not publicly available.

Subscription Fees

Subscription fees make up the core of Patreon’s revenue. Patreon earn anywhere from 5% to 12% from subscriptions. However, the amount varies depending on the plan creators choose.

Here are Patreon’s pricing tiers:

• Lite: This plan charges just 5% on all income earned on Patreon. It gives creators access to a hosted creator page, communication tools, and Patreon workshops.
• Pro: This plan charges 8% on all income earned on Patreon. It gives creators access to membership tiers, analytics, special offer tools, creator-led workshops, the ability to send merchandise, and app integrations. It’s designed to help create meaningful experiences for fans and generate more income.
• Premium: This plan charges 12% on all income generated on Patreon. It also includes a dedicated Patreon partner manager to help maximize a creator’s income, the ability to send merchandise to membership, and team accounts. It’s designed for established creators to save them time and make building their membership easier.

It is unclear which of these tiers is most popular among creators.

Payment Processing Fees

Patreon charges payment processing fees to cover the expenses of processing payments and fighting fraud. These fees are also meant to cover things like setting up recurring billing, chasing down declined payments, and reminding people that their credit cards are expiring.

There are two fee rates:

• Standard rate: For payments over $3, they charge 2.9% and $0.30 per transaction.
• Micropayment rate: For payments under $3, they charge 5% and $0.10 per transaction.

Merchandise

Patreon sells branded merchandise that creators can customize and send out as perks to their membership base. The company deals with creating the merch, shipping, tracking, and providing support to buyers.

Examples of merchandise include prints, stickers, mugs, tote bags, posters, t-shirts, scarfs, and hoodies.

Merch is only available for Patreon Pro and Premium members. Creators can then apply artwork, words, or a design to these items based on what their supporters would like. Merchandise is a great way for creators to encourage supporters to give at higher tiers and reward those who do.

Global shipping is included in the price of the merchandise.

Patreon Funding, Valuation & Revenue

Patreon is currently a private company. Their financials are not often shared, and much of what’s available online about their financial results are estimates based on amounts the company has said it has raised for creators.

So far, Patreon has raised $413.3 million in venture capital funding during ten funding rounds.^[7] Notable investors include Raison and Maximize Capital.^[8] In 2021, Patreon was valued at $4 billion after raising $155 million in a funding round.^[9]

Patreon has increased its revenue significantly in recent years. They brought in an estimate of $160 million after paying creators in 2021, up from $80 million in revenue after paying creators in 2020. That represents significant revenue growth.^[10] Given that consistent and strong growth, there is a good chance the company can continue to increase its revenue in years to come.

Is Patreon Profitable?

Patreon is likely not currently profitable. While the private company rarely releases details about their financial performance, estimates suggest that they brought in just $160 million after paying creators in 2021. Given that the company is likely to have significant expenses, it is likely that they are still pre-revenue.

The fact that the company continues to raise venture capital also suggests that they aren’t yet profitable. However, given the company’s recent growth, there is a chance that Patreon could become profitable in the future.

Conclusion

In conclusion, Patreon is a unique platform that has the potential to change the way content creators are able to make money. With the help of their loyal patrons, Patreon allows artists and creators to receive support for their work and continue creating. This is why we believe Patreon will be successful in the long term.

Patreon’s business model is based on the idea that people want to support artists and creators. This is a great thing for artists and creators because it gives them more control over their income and allows them to make a living doing what they love. It’s also great for fans because they get access to exclusive content, experiences, and rewards that they wouldn’t otherwise have access to.

The company has been able to expand its user base at an impressive rate, and it looks like they will continue doing so in the future. We’re excited to see where it goes from here.

If you enjoyed this blog post, please share it with your friends and check out our blog for more content like this.

Thanks for reading!

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2. Backlinko ↑
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4. Backlinko ↑
5. Graphtreon ↑
6. Backlinko ↑
7. Crunchbase ↑
8. Crunchbase ↑
9. TechCrunch ↑
10. Backlinko ↑

Bumble is a popular dating website and app. In recent years, the platform has also launched services for friendships and professional networking.

Bumble primarily makes money off subscriptions for Bumble Premium. It also makes money off of its Bumble Boost subscription, Bumble Spotlight purchases, SuperSwipe purchases, and by selling merchandise.

The company was founded by entrepreneur Whitney Wolfe Herd in 2014 after she left Tinder, a rival online dating platform. Like other dating platforms, users on Bumble view each other’s profiles and swipe if they’re interested in being matched. However, Bumble requires that women make the first move.

The popularity of dating apps has been steadily increasing worldwide since 2016. In that time, dating apps have seen significant growth in both user base and revenue share. In 2021, there were 323 million users of dating platforms worldwide. ^[1] Bumble is the third most popular dating app globally after Tinder and Badoo.

The app boasts 45 million active monthly users but only 1.5 million are paying users. Despite significant growth, Bumble has struggled after its 2021 IPO. In August 2022, Bumble was valued at just $5.4 billion. That’s a 50% decrease from its peak valuation of $13 billon in 2021.^[2]

While the company has often met their predicted revenue growth, many on Wall Street seem to have lost faith in the stock.

What is Bumble & How Does It Work?

Bumble is like other dating apps like Tinder, Hinge, Match, and Ok Cupid. Users join for the purposes of finding other people for friendship, dating, and possible long-term commitment.

However, unlike other dating platforms, Bumble was designed to allow women to control the conversation by making the first move in heterosexual matches. Either can message first in a same-gender match.

Founder Whitney Wolfe Herd has referred to this structure as flipping the outdated gender dynamics of dating and romance, “on [their] head.” The platform has also been referred to as ‘Feminist Tinder’ and ‘Tinder for women; due to this focus on women’s experience of the platform. ^[3]

With Bumble, users create profiles that communicate who they are and what they’re looking for from a potential love or friendship match. The app is essentially a search tool that uses algorithms to match users based on the personal data they provide, like location and age.

Users can sign up on the website or download the app to their phones. They can use their phone number, Apple ID, or Facebook account to create a Bumble account. At minimum, they must provide their name and two pictures to complete the profile.

After signing up, users can browse the profiles of other users, swiping right on profiles they like and swiping left on profiles they don’t. If both parties swipe right, a match has been made. At this point with other dating apps, either party can send a message.

Bumble is different in that the woman must message first within 24 hours in a potential heterosexual match. The man then has 24 hours to respond to her. If neither party responds with the 24-hour window, the connection will be lost. If both parties respond, the time restriction is lifted, and the conversation can continue at its own pace.

The time limit is novel among similar dating apps and is likely designed to increase user’s engagement with the site. It also likely means users generate connections faster which could make the app feel more effective to users.

Bumble is meant to provide a safer space for women by reducing the opportunity for men to send unsolicited lewd messages and pictures. In LGBTQ matches, either party can message first, and the other has 24 hours to reply. Users can also SuperSwipe to alert users of their interest.

Despite Bumble’s branding as a female-friendly platform, it has faced criticism in the past. Main investor and majority owner Andrey Andreev has been accused of misogyny and creating a toxic workplace.^[4] However, Andreev sold his stake in the company in 2019.

Users who want to more easily search for potential matches can sign-up for Bumble Premium. It gives users access features like incognito mode, travel mode, advanced filters, and unlimited swipes. Bumble also offers something called Boost, which allows users to SuperSwipe, extend time on current matches, and spotlight their profile to the top of the profile stack.

In recent years, Bumble has branched out to matching people for other purposes. For example, it has added a BFF mode which is meant for users looking for friendship. It has also added a Bumble Bizz mode which attempts to rival LinkedIn as a business networking platform.

With these services, users input details about what they’re looking for from friendships or business connections. They can then search through profiles of people looking for those types of connections. These services are helpful for people moving to a new city or starting a new career.

Business Model of Bumble

As a dating platform, Bumble is based on a freemium business model. The company makes using the app free in order to incentivize a critical mass of people to use the app. That ensures that people who sign up will be able to access a large number of potential partners, making their dating app experience better.

Users can then upgrade to paid plans that offer significantly more functionalities and features. The limited features of Bumble’s free plan means that users are incentivized to purchase premium services that enhance their experience of the app.

With 42% of dating app users aiming for marriage as an end goal, ^[5] the ability to pay to extend time with current matches or have an unlimited number of swipes on potential matches makes many users pay. Bumble has 1.5 million paying customers.

Bumble earns most of its revenue through its subscription offerings and in-app purchases like Bumble Premium and Bumble Boost. Users can also pay for individual services, like Spotlights. These are available individually or in packs of 30 and boost users’ profiles to more users for a period of 30 minutes.

Although Bumble’s model of allowing women in potential heterosexual matches to make the first move is unique, it’s freemium model of allowing free account creation while urging in-app upgrades is similar to other dating apps on the market. Bumble’s Spotlight feature, for example, functions like Tinder’s Boost feature.

Bumble also owns the popular Russian-based Badoo dating app, which allows it greater access to global markets. Badoo is focused on the European and Latin American markets, boasting over 28 million monthly active users. ^[6] Bumble operates in North America, the UK, the Czech Republic, and other countries around the world. The US market makes up more than 10% of the company’s revenue.

Bumble holds 22% of the U.S. market share. That means it comes in after Tinder which hold 32% of the market. Both beat out Hinge and Plenty of Fish, at 15% and 14%, respectively. ^[7] The company faces intense competition from these sites and other local or interest-specific rivals life FarmersOnly.com.

The company also faces competition over its friend and business matchmaking services. Companies like Friender and Friendmatch offer rival services and companies like Pawdates offer specialized friend matching services for dog owners. When it comes to making business connections, LinkedIn is a rival.

These additional matching services makes Bumble different from its other dating app competitors who don’t offer matching for these groups.

Bumble’s business model has been successful at generating increasing revenue. The company reported revenue of $765 million in 2021, up from $542.1 million in 2020.^[8] But the company also has significant expenses. It takes significant human resources like developers, writers, editors, designers, and marketers to keep a global app like Bumble functioning smoothly.

Dating app companies also have to invest a significant amount of money in advertising to compete in the crowded online dating marketplace. After expenses, Bumble generated just $286.9 million in net income in 2021.^[9]

How Does Bumble Make Money?

Bumble makes money in different ways. These are through its Bumble Premium subscription, its Bumble Boost subscription, Bumble Spotlights, SuperSwipes, and merchandise.

Bumble does not break down the sources of its revenue so it’s unclear how much of it comes from the company’s separate income streams.

Bumble Premium

Bumble makes the majority of its funds from subscriptions. While the platform is free to use, getting a subscription makes using the platform easier and gives you more information.

Bumble Premium allows users to:

• See everyone who swiped right on them so that they can quickly review potential matches
• Rematch with connections that have expired
• Extend matches another 24 hours
• Backtrack if the user accidentally swipes left
• Access unlimited swipes
• Use five SuperSwipes a week
• Search more effectively with advanced filters like education, verified status, and even star sign
• Turn on a private mode that doesn’t show people when they’re online
• Put themselves in a Spotlight to generate more matches once a week
• Use Bumble in other locations while travelling.

Bumble Premium costs $19.99 for one week, $39.99 for one month, $76.99 for three months, and $229.99 for a lifetime subscription.^[10] Many features extended by the Premium plan help with selling a monthly or weekly subscription if a user makes a mistake on the app or wants to reconnect with a match.

For example, a user might purchase a subscription if a match expires or if they accidentally swipe the wrong way on a promising match.

Bumble Boost

The Bumble Boost plan Is a lower tier subscription plan that costs less but doesn’t come with as many features.

Bumble Boost allows users to:

• Backtrack, or unswipe on profiles they may not have meant to swipe on
• Extend time on current matches
• Access unlimited swipes
• Spotlight themselves to prospective matches once weekly
• Use five SuperSwipes per week. ^[11]

Bumble Boost costs $8.99 for one week, $16.99 for one month, $33.99 for three months, and $54.99 for six months.^[12]

Bumble Spotlight

Bumble also sells their individual features separately. Bumble Spotlight allows users to spotlight themselves for 30 minutes if they use on Spotlight or for 150 minutes if they use two.

It can be purchased independently for $5.99 each or $50.10 for 30 which costs just $1.67 each. This can greatly increase the number of matches a person gets in a particular period of time since their profile is given priority to people swiping.

Bumble SuperSwipes

SuperSwipes are features that allows users to indicate to matches that they’re very interested in them. When users activate it, the other user will be notified that you SuperSwiped them.

SuperSwipes are purchased with digital currency known as Bumble Coins. One SuperSwipe is equivalent to one coin. The cost depends on currency and region, but an American user can buy 5 coins for $7.99 or 30 coins for $34.99.^[13]

Bumble Shop

Bumble also has a Bumble Shop. People who have developed successful love matches on the app can create a branded gift registry on the site. They can request items like a $75 charcuterie board and knife set engraved with the phrase ‘The best is yet to bee,’ a set of wooden honey dippers, and a variety of bee and honeycomb-themed wedding party favors.

No information was available on how much revenue the shop brings in for the company.

Bumble Funding, Valuation & Revenue

Bumble Inc. (BMBL) is currently a public company trading on the NASDAQ exchange. The company raised $2.15 billion in their February 2021 IPO with an initial opening price of $76 per share. This was well above its projected IPO price of $43 and gave the company a valuation of $8.6 billion.^[14] As of August 2022, the company’s stock traded at $26.69 USD for a valuation of $5.4 billion.

Prior to going public, Bumble raised $2.2 billion in four funding rounds. They are funded by five investors: Greycroft, Headline, Able Partners, Accel, and actress Priyanka Chopra. ^[15]

Over the last four years, Bumble has greatly increased its revenue, growing from $488.9 million in 2019 to $765 million in 2021. However, the company experienced a loss in 2020 of over $110.1 million.^[16]

Is Bumble Profitable?

Bumble is currently profitable. Although the company reported a net loss of $110.9 million in 2020, Bumble managed to post a profit of $286.9 million in 2021. Bumble has enjoyed periods of profitability since its founding but recently saw a $110.1 million loss in 2020.

The company’s focus on empowering the female dating app consumer may prove to be a risk. The company wants to grow by expanding the services it offers to that community but has not yet proven the profitability of its alternative Bumble BFF or Bumble Bizz models.

Because there is a low cost to consumers to switch to alternative dating apps, Bumble will remain at risk from its competitors. If Bumble were to seek alternate monetization strategies, it may be able to report more consistent profits and growth. ^[17]

Conclusion

So there you have it! Bumble’s business model is a clear example of how a company can use their product to their advantage. It’s not just about making money; it’s about delivering on the needs of their customers and finding new ways to do so.

As a result, Bumble has grown into a massive community with over 45 million monthly users, who are all looking for connections, friends, and of course, love. 

It’s clear that Bumble is a force to be reckoned with in the dating app industry. The company has built a strong brand and a loyal user base, and it’s poised to continue growing as it expands its services.

We’re excited to see how the company continues to grow and evolve in the future. We’re sure there are plenty of exciting things on the horizon for Bumble!

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Sources 

1. Business of Apps ↑
2. Business of Apps ↑
3. New York Times ↑
4. Forbes ↑
5. Cloudwards.net ↑
6. Forbes ↑
7. Business of Apps ↑
8. Bumble ↑
9. Bumble ↑
10. Mashable ↑
11. Bumble ↑
12. Mashable ↑
13. Manly and Modern ↑
14. Forbes ↑
15. Crunchbase ↑
16. Bumble ↑
17. Bumble ↑

Poshmark is a popular online marketplace where users buy and sell clothes and accessories. It has a slightly different business model than other online marketplaces.

Poshmark primarily makes money via peer-to-peer sales commissions. However, Poshmark also makes money from shipping fees, boutique clothing sales, and wholesale products sold on the site.

Founded in 2011 in Redwood City, California by Manish Chandra, Tracy Sun, Chetan Pungaliya, and Gautam Golwala, the online specialty marketplace was initially focused on selling fashion for women, men, and children. However, the company later added the ability to sell home good, pet goods, and electronics.

One of Poshmark’s founders, Manish Chandra, had previous experience founding a social shopping site. He created Kaboodle, a bookmarking site where visitors could save home décor that they liked with the intent of purchasing it later. In 2007, Hearst Media bought Kaboodle for $30 million.^[1]

Poshmark (POSH) launched its IPO in early 2021. Despite pricing its shares at $42, they began trading at $97.50 per share.^[2] The company’s stock has steadily fallen since then. In August 2022, the security traded for just over $10.50 per share for a valuation of $831.1 million.

What is Poshmark & How Does It Work?

Poshmark is a social marketplace focused on peer-to-peer buying and selling. They have a website and also iOS and Android apps. The company claims they have over 80 million active users, with 8 million of them actively selling on the platform.^[3] They operate in a number of different markets, including the US, Canada, Australia, and India.

When users sign-up for the platform, they create a user profile, which they call a Closet. They are then asked to share three brands that they like with Poshmark. This helps the company match users with sellers that offer products from those brands. Profiles include personal details, a photo, and a short bio. Users can follow each other so buyers can easily see new items by sellers they like in their feeds.

Sellers can then upload photos of items they want to sell, write a description, and set a price. Listing can have up to 16 photos. Once an item is uploaded, it is then shared with a user’s followers. Buyers can also find it by browsing or searching for items.

Buyers are able to send messages to the seller and ask questions in the comments about the item. Sellers can then answer their questions to ensure they have the information they need to make their buying decision. Buyers can also make offers below the listed price which the seller may or may not be willing to accept.

Poshmark is a social selling app that focuses on shipping products to buyers like Ebay rather than meeting up to exchange items with buyers like with a local classified marketplace like Craigslist or Facebook Marketplace. Thus, when a buyer purchases an item, sellers then need to ship it out.

Poshmark handles the shipping logistics. They send the sellers an email with a pre-paid pre-addressed shipping label. Sellers just need to print it out, package the item, and schedule the delivery. All Poshmark items are sent via priority shipping.

Sellers get the funds from their sale when the item is received by the buyer. Sellers can have their payments sent to them via a check or bank transfer. Or they can keep the money in their Poshmark account to make purchases in the marketplace.

Poshmark manages return requests on behalf of their sellers. They require buyers to let them know they’re requesting a return within three days of receiving the item. They also require that buyers take pictures to show why they are requesting a return. If approved, Poshmark then provides the appropriate return labels to buyers.

Buyers can rate their purchases by giving sellers anywhere from one to five stars. They can also suggest ways the seller can improve such as by improving on seller responsiveness, shipping time, packaging, the item’s cleanliness, or the item’s description. The score is not displayed publicly but shared with sellers to help them improve.

However, that score is used when it comes to deciding who can be in the Poshmark Ambassador program. The program gives sellers more visibility but requires an average rating of 4.5 or above. Poshmark Ambassadors can do things like host Post Parties, host Posh N Coffee events, and speak at Poshmark events. Their closets are also recommended to new Poshmark users when they sign up.

Poshmark is unique among social selling apps in that it also coordinates online Posh Parties. These are real-time shopping events where users can meet up to sell and shop. They host at least 4 parties per day. Each parties is typically organized around a particular theme like a brand or a type of item.

Users can find Posh Party listings in the app. After the party, they can then buy things featured in the Posh Party. This is an effective way to build community and showcase items in sellers’ stores.

Poshmark also hosts some in-person events. For example, they host events called Posh N coffees where sellers meet up locally in order to learn how to be more effective at selling on the platform. Poshmark Ambassadors lead these meetups and provide tips to other sellers on how to increase their sales and improve their business.

Poshmark also offers a styling service. Sellers can sign up to be a stylist and answer buyer requests for different types of items or outfit suggestions for various occasions. Sellers then send recommendations from their own closet or that of other sellers.

Popular items on Poshmark include t-shirts, leggings, tank tops, blouses, sandals, dresses, athletic wear, sneakers, designer items, and accessories.

The site is frequently used by influencers and celebrities to resell clothing they got for free or for a steep discount from partners and companies. For example, actors like Ashton Kutcher, chefs like Rachael Ray, Youtubers like Casey Holmes, athletes like Alex Morgan, and reality stars like Patti Stranger from Millionaire Matchmaker all use the Poshmark to get rid of clothes they no longer want. ^[4]

There are also stores that specialize in resale that sell on the platform. Some people have even started small businesses where they source clothing at local thrift stores and resell it on the app.

Business Model of Poshmark

Poshmark’s business model is that of an online peer-to-peer marketplace. They created a marketplace where individual users and buyers can easily sell items to each other. The company then facilitates that transaction and exchange by managing the shipping and return process.

In this way, they’re more hands-on than selling sites like eBay and Etsy where sellers and buyers need to manage their shipping and returns themselves. However, as part of their commissions-based business model, the site also charges more in commission than those competitors.

The unique thing about Poshmark is how they charge sellers. Unlike many other marketplaces or selling platforms, they don’t charge for listing an item. Instead, they charge a 20% commission on sales. That added expense means that items might be more expensive on Poshmark than in other marketplaces as sellers include the commission in their pricing.

However, the higher fees for used clothing and other items sellers can get on the app is also related to Poshmark’s work in creating a community of fashion buyers and focusing on selling branded merchandise. They have been able to create a resale marketplace where sellers are able to get more money for secondhand clothing than on many other sites.

This is likely because their algorithm explicitly connects buyers with people selling the brands that they love. Their daily Posh Parties and stylist recommendations also help people discover products more easily — selling them faster.

Poshmark also attracts people who sell expensive designer items on the site. As a result, Poshmark has an aggressive counterfeit detection polity. They allow a buyer to dispute an item’s authenticity and review whether the item is a counterfeit. They then refund the full cost of the item to the buyer.

They even have technology that scans their site to try to detect counterfeit items. This technology, which they acquired by purchasing the company Suede One in 2021, currently is best at virtually authenticating sneakers but they plan to expand to more items.^[5]

Another unique thing about Poshmark’s business model is that they encourage the creation of community on their selling platform. By being able to follow sellers, meetup in real life, and participate in real-time Posh Parties, they encourage people to forge relationships with sellers.

The fact that the company has also attracted celebrities to sell their items on their app also elevates the status of the service and attract more buyers. The service is likely to benefit from the fact that it’s a reseller in the future as more people consider adopting more sustainable fashion buying habits.

While Poshmark’s business model might be compared to other online marketplaces like Ebay or classified sites like Craigslist, Poshmark is perhaps more similar to a secondhand store that takes consignments. Similar to such stores, Poshmark focuses on curated branded items, some of which are high-priced. Poshmark represents the online evolution of such stores.

While the company generated revenue of $326 million in 2021, Poshmark also has considerable expenses.^[6] These include things like operations, research and development, marketing, staffing, and hosting costs. After expenses, the company experienced a loss of $98.3 million in 2021. However, the company previously saw a profit in 2020 of $6 million.^[7]

It is unclear if Poshmark’s business model will prove to be profitable in the future.

How Does Poshmark Make Money?

Poshmark makes money in four different ways. They are via commissions on peer-to-peer sales, shipping fees, their boutique, and wholesale products sold on the site.

Poshmark does not share a breakdown of their income by revenue stream in their annual report so it is unclear how much they make from each of these monetization strategies.

Peer-to-Peer Sales Commissions

Poshmark doesn’t charge sellers to post an item. Instead, they charge a commission on all sales they make on the platform.

For every sale below $15, Poshmark charges a flat fee of $2.95. For every sale above $15, the company charges a commission of 20%. The flat fee amount varies in their international markets but the percentage is the same.

In return for these commissions, Poshmark handles the financial transaction and provides the seller with a pre-paid shipping label.

This makes it easy for sellers to run their business without having to worry about shipping logistics. However, this fee is much higher than other platforms like Etsy which only charges 6.5% as a transaction fee and $0.20 as a listing fee.

Shipping Fees

Poshmark might handle shipping for sellers, but the company charges buyers for those shipping fees. While fees vary by country, in the US, the company charges buyers a flat fee of $7.67 per item.

Orders are shipped via the US Postal Service’s 1 to 3 day Priority Mail service. Buyers purchasing multiple items from one closet can pay a single shipping fee so long as the total order does not exceed 5 lbs.^[8]

Boutique Listings

Poshmark allows companies to sell new items as Boutique items if they were purchased wholesale or directly from a distributor. These items are being sold for the first time to the public.

Sellers can add a Boutique tag to their listings but must complete Poshmark’s Boutique Certification process to qualify. These items are then marked and marketed differently in the Poshmark app. However, it doesn’t cost anything to set up a Boutique listing and commissions are the same on Boutique items as on other items.

However, Boutique items is a way the company lets retailers and small businesses sell on Poshmark. They are therefore able to steadily increase their listings on the site without having to exponentially attract more sellers. This also gives users with closets that have a lot of followers an extra opportunity to monetize their following.

Wholesalers who reach 10 sales and an average rating of 4.5 or above can get access to Poshmark’s Wholesale Market, where they can buy items. The market features items from hundreds of brands that sellers can purchase and add to their store.

Wholesale Sales

Poshmark makes money off items sold by brands or distributors in their Wholesale Market to Poshmark Boutique sellers. Poshmark facilitates these sales similarly to how it does other sales. It takes a commission from the seller and charges the buyer shipping.

This is yet another way for the company to monetize their app. It helps sellers get additional merchandise to monetize their store and followers more effective. It also creates an added revenue stream for the company from wholesalers.

As many sellers procure merchandise off-app to sell on Poshmark, this process allows Poshmark to get a percentage of those wholesale transactions.

Poshmark Funding, Valuation & Revenue

Poshmark (POSH) is currently a public company trading on the NASDAQ exchange. As of August 2022, the company’s stock traded around $10.50 with a valuation of $831 million. This is a significant decrease since the company launched it’s IPO when it opened at $97.50 per share.^[9]

While the global apparel industry is a $1.9 trillion market, the industry saw a 20% decline from 2019 to 2020.^[10] Much of this was due to the COVID-19 pandemic but that has left some investors cautious about fashion stocks.

Poshmark also is still operating at a loss. They’ve had to spend additional money on marketing in order to offset moves by technology companies to protect user privacy.^[11] Since its IPO, the company has consistently missed analyst expectations which lead to a sell off of the stock.^[12]

Prior to going public, Poshmark raised $153 million in venture capital funding during seven funding rounds. Notable investors include JKH Capital and Menlo Ventures.^[13]

Poshmark generated $326 million in revenue in 2021 but posted a loss of $98.3 million.^[14] That was a larger loss than in past years despite impressive revenue growth. In 2019, the company brought in $204.9 million in revenue and posted a loss of $47.7 million. In 2020, the company increased their revenue to $261.6 million but had a net income of $18.8 million.

Is Poshmark Profitable?

Poshmark is not yet profitable. While the company is increasing their revenue steadily, they saw a loss of $98.3 million against revenue of $326 million in 2021. This was after posting a net income of $18.8 million in 2020.

As Poshmark is still in the midst of expanding into new markets in order to, ultimately, increase their revenue, the company seems to be prioritizing growth over profit. ^[15]

It remains to be seen, however, if the company’s business model will prove profitable or if they will struggle to grow.

Conclusion

We hope that this article has helped you to understand how Poshmark makes money, and hopefully, you’ve learned something new about Poshmark. You might have even had some questions answered that you didn’t know you had!

We know that it’s not always easy to find the time to keep up with all the latest trends in fashion, so we’re here to help! We’ll be bringing you more articles about all the latest and greatest things happening in fashion, including how your favorite brands make their money.

If you have any questions about anything we’ve covered in this article, or if you want to share some of your own feedback with us, please let us know!

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Sources 

1. TechCrunch ↑
2. CNBC ↑
3. Morning Brew ↑
4. Closet Assistant ↑
5. Ecommerce Bytes ↑
6. Poshmark ↑
7. Poshmark ↑
8. Poshmark ↑
9. CNBC ↑
10. Financhill ↑
11. Financhill ↑
12. Financhill ↑
13. Crunchbase ↑
14. Poshmark ↑
15. Poshmark ↑