In the digital age, having an online business with a website has become a common and often lucrative venture for many entrepreneurs. However, the key to success often lies in choosing the right business model. This post explores some of the most popular business models used for online businesses today, along with examples of companies that are thriving using these strategies. What are the best online business model in 2025? The best online business models in 2025 include affiliate marketing, subscription-based services, AI-first content businesses, and freelancing. Each model has unique pros and cons, but all can be launched with low overhead and scaled online.
1. What is an E-commerce Store?
Overview: An e-commerce store is an online platform where products or services are sold directly to consumers. This model requires a website where customers can browse, select, and purchase items. A merchant model is a sub-category of e-commerce where the business buys goods (or services) to sell to sell to customers at a profit. Here is a more in-depth description of e-commence model.
Examples:
- Amazon is the world’s largest e-commerce store, offering everything from books to electronics and groceries.
- Etsy specializes in handmade, vintage, and unique goods, creating a marketplace for artisans and small businesses.
- Shopify enables businesses to create their own branded e-commerce sites. Many small to medium-sized businesses use Shopify to power their online stores.
Benefits: The primary advantage of an e-commerce store is the ability to reach a global market. Unlike brick-and-mortar shops, e-commerce businesses are not limited by location and can operate 24/7.
2. How Do Subscription-Based Model Work?
Overview: The subscription-based model charges customers a recurring fee to access a product or service. This model is particularly popular for digital products, such as software, digital content, or membership sites. Here is a more in-depth description of subscription-based model.
Examples:
- Netflix offers streaming services for movies and TV shows on a monthly subscription basis.
- Spotify provides music streaming services through a freemium model, where basic access is free, but premium access comes at a monthly cost.
- Adobe Creative Cloud offers software like Photoshop and Illustrator through a monthly or yearly subscription.
Benefits: Subscription models provide predictable and recurring revenue, which can help stabilize cash flow and foster customer loyalty over time. Additionally, they often have lower customer acquisition costs since customers pay over a longer period.
3. What is Affiliate Marketing
Overview: Affiliate marketing involves promoting another company’s products or services on your website in exchange for a commission. This model is popular among bloggers, influencers, and niche content creators who want to monetize their audience without creating their own products. Here is a more detailed explanation of the affiliate marketing business model.
Examples:
- The Wirecutter, owned by The New York Times, earns revenue through affiliate marketing by reviewing and recommending products and linking to them on affiliate sites like Amazon.
- Smart Passive Income, founded by Pat Flynn, provides extensive resources on how to build a business through affiliate marketing, often recommending tools and services for which it earns commissions.
- Dog Food Advisor is a website that has a lot of information about dog food and is intended to help dog owners make better decision about the dog food.
Benefits: The primary benefit of affiliate marketing is low overhead costs since there’s no need to create, store, or ship products. It also offers flexibility and the potential for passive income if the content continues to attract traffic.
4. Freemium Model Explained
Overview: A freemium model provides basic services for free while charging for premium features. This model is particularly popular for software, apps, and online services. Freemium Explained goes into much more detailed about this model.
Examples:
- Dropbox provides free cloud storage up to a certain limit, after which users must pay for additional space.
- Zoom allows free video conferencing for meetings up to 40 minutes but charges for longer meetings and additional features.
- LinkedIn offers a free version for basic networking and job searches but has premium plans for advanced networking, recruiting, and learning services.
Benefits: The freemium model allows businesses to attract a large user base quickly. By providing value upfront, companies can demonstrate their value proposition and then convert free users into paying customers.
5. How Do Content-Based Model Work?
Overview: Content-based businesses create valuable content that attracts a specific audience and then monetizes that traffic through advertising, sponsorships, merchandise, affiliate or subscriptions. Sometimes this is called the advertising model. Here is a more detailed description of content-based model.
Examples:
- BuzzFeed generates revenue primarily through advertising, branded content, and merchandise sales.
- Medium operates on a model where writers publish content and readers pay a subscription fee to access premium content. Writers are paid based on how much engagement their articles receive.
- YouTube creators can earn money through ad revenue, sponsorships, and merchandise sales once they reach a certain level of followers and engagement.
Benefits: Content-based models allow for flexibility and creativity. They can attract significant traffic and foster community engagement. However, they often require time and effort to build an audience large enough to monetize effectively.
6. Why Use the Dropshipping Model
Overview: Dropshipping is a type of e-commerce where the seller does not keep the products it sells in stock. Instead, when a product is sold, the seller purchases it from a third party and has it shipped directly to the customer. Here is a more in-depth article about the dropshipping business model.
Examples:
- Oberlo is a dropshipping app that integrates with Shopify, allowing businesses to find products to sell without holding inventory.
- AliExpress Dropshipping is a popular platform for entrepreneurs who want to source products from suppliers in China and sell them to a global audience.
Benefits: Dropshipping requires low upfront investment since there is no need to purchase inventory in advance. It also allows businesses to offer a wide variety of products without needing to manage physical stock.
7. What is Software as a Service (SaaS)?
Overview: SaaS businesses provide software solutions to customers via the internet. Customers typically pay a recurring fee to use the software, which is hosted on the provider’s servers. Here is a more in-depth article about the SaaS business model.
Examples:
- Salesforce offers cloud-based CRM software on a subscription basis.
- HighLevel an all-in-one sales marketing platform for marketing agencies and small businesses. (Full disclosure: I am an affiliate of HighLevlevel and receive commissions from them).
- Slack provides messaging and collaboration tools for teams, with both free and premium options.
- Zoom (also a freemium model) is primarily a SaaS business offering video conferencing services.
Benefits: SaaS models provide predictable revenue through subscriptions and often have high profit margins. They also allow for continuous updates and improvements to the software, keeping customers engaged.
8. Marketplace Model Explained
Overview: Marketplaces connect buyers and sellers on a single platform, taking a commission or fee for facilitating transactions. This model is commonly used in e-commerce but is also applicable to other sectors. Here is a more in-depth article about the marketplace business model.
Examples:
- eBay connects individual sellers with buyers around the world.
- Airbnb allows property owners to list their homes for short-term rentals.
- Upwork connects freelancers with clients looking for various services, from writing to graphic design.
Benefits: The marketplace model benefits from network effects; as more buyers and sellers join the platform, its value increases. Additionally, the marketplace does not need to manage inventory or provide the services directly.
9. What is Lead Generation Model?
Overview: Lead generation businesses collect potential customer information (leads) and sell it to other businesses. This model is common in industries such as real estate, insurance, and professional services. Here is a more detailed article about the lead generation business model.
Examples:
- NerdWallet provides financial advice and recommendations, earning money by generating leads for credit card companies and banks.
- Zillow offers real estate information to users and generates revenue by selling leads to real estate agents.
Benefits: Lead generation offers a potentially lucrative revenue stream with minimal upfront costs. It relies heavily on SEO, content marketing, and online advertising to attract traffic.
**New AI Bonus Section**
AI-First Business Models: The Next Frontier in Online Entrepreneurship
If you’re asking: “How do I make passive income with AI?” Then AI-First Business Models are where you should start. As artificial intelligence rapidly transforms how we work, market, and deliver value, a new breed of business models is emerging—AI-First Business Models. These aren’t just businesses that use AI; they are fundamentally built around it. Rather than adding AI as a tool later, these ventures start with the assumption that AI will be at the core of creation, delivery, and monetization. According to McKinsey, generative AI could contribute up to $4.4 trillion annually to the global economy — with business functions like marketing, sales, and content creation seeing the biggest impact. That’s why many entrepreneurs are launching AI-first businesses now.
Here are three examples of how entrepreneurs are building AI-first businesses right now:
1. What Are AI Content Engines
Creators are now launching content businesses where AI handles 80–90% of the workload—from generating blog posts and videos to repurposing them for different platforms. Entrepreneurs focus on:
- Curating prompts
- Editing for brand voice
- Distributing content
- Monetizing via ads, affiliate links, or courses
Example: A faceless YouTube channel built entirely with AI voiceovers, AI-generated scripts, and stock visuals.
2. Prompt-Based Product Creation Explained
With tools like ChatGPT, Midjourney, and ElevenLabs, it’s now possible to launch digital products—like eBooks, children’s stories, design packs, and even full-blown SaaS ideas—just by writing effective prompts.
These models excel in niches where creativity and speed matter more than code:
- Sell AI-generated coloring books on Etsy
- Launch AI-powered newsletters that summarize niche news
- Build GPT-powered apps on platforms like Thunkable or Bubble
3. What Are AI-Powered Services at Scale
Freelancers and consultants are reinventing their offerings with AI:
- A solopreneur might offer AI-augmented SEO services, delivering in days what used to take weeks.
- Copywriters are scaling to agency-level output with structured prompt workflows and review systems.
These businesses often use a “Done-With-AI” model, where the founder provides human oversight while AI does most of the heavy lifting.
Why This Matters Now
If you’re thinking of starting an online business, you don’t need to compete with legacy companies using old playbooks. You can start lean, move fast, and scale smart—all by putting AI at the center of your model from day one.
And with generative tools constantly improving, these AI-first businesses are only becoming more powerful and accessible. The barrier to entry is no longer capital or code—it’s curiosity, creativity, and courage.
| # | Business Model | Key Features | Best For | Example Products/Services |
|---|---|---|---|---|
| 1 | Affiliate Marketing | Promote others’ products, earn commission | Beginners, bloggers, influencers | Amazon links, course referrals, tool reviews |
| 2 | E-commerce Store | Sell physical products online | Product creators, resellers | Shopify store, Etsy shop, Amazon FBA |
| 3 | Digital Products | Create once, sell repeatedly | Creators, experts, designers | E-books, templates, digital art |
| 4 | Coaching & Consulting | Offer 1:1 or group services | Professionals, service providers | Life coaching, marketing consulting |
| 5 | Online Courses | Teach something valuable at scale | Teachers, content creators | Teachable, Udemy, fitness course |
| 6 | Membership Sites | Recurring revenue from exclusive content | Niche experts, community builders | VIP forums, paid newsletters, private groups |
| 7 | Subscription-Based Model | Recurring fees for ongoing access | SaaS, subscription boxes | Monthly tools, curated boxes |
| 8 | Advertising & Sponsored Content | Monetize traffic with ads or brand deals | Bloggers, influencers, creators | AdSense, brand sponsorships |
| 9 | Freelancing & Services | Sell time and skills directly | Designers, writers, devs | Freelance gigs, consulting work |
| 10 | AI-First Business Models | Built around generative AI for creation and scale | Solopreneurs, AI-savvy creators | AI blogs/videos, GPT-powered apps, AI SEO services |
Conclusion
There is no one-size-fits-all solution for building an online business. The best model depends on various factors, including your niche, target audience, product or service, and long-term goals. By understanding the different business models and seeing examples of companies that have successfully used them, you can make a more informed decision about which approach aligns best with your vision for your online business.
Frequently Asked Questions
What is the best online business model for beginners?
Affiliate marketing and freelancing are excellent for beginners because they require little to no upfront investment. These models let you start earning while you build skills and audience.
Which business model offers the most passive income?
Digital products, online courses, and AI-first business models often provide the highest passive income potential once the initial setup is complete.
How do AI-first business models work?
AI-first business models are built around AI tools from the ground up. They use generative AI to create content, automate services, and build digital products. Entrepreneurs focus on strategy, curation, and distribution while AI handles most of the execution.
Can I start an online business with no money?
Yes. You can launch an affiliate site, offer freelance services, or use free AI tools to start building products or content without any upfront capital.
What is the most scalable business model?
Digital products and subscription-based models are highly scalable because they don’t require inventory or manual delivery. AI-first models also scale well due to automation.
How are AI tools changing online businesses?
AI tools reduce time spent on content creation, marketing, design, and customer service. They’re enabling solopreneurs to operate at the level of small agencies or startups with minimal resources.
What’s the difference between a membership site and a subscription model?
Membership sites usually focus on access to a community or content hub, while subscription models provide a recurring delivery of products or services (like a software tool or subscription box).
Can I combine multiple business models?
Absolutely. Many successful entrepreneurs combine models—like selling digital products through a subscription, or offering a course with affiliate marketing built in.
What’s the easiest business model to automate?
Digital products, AI-generated content, and subscription-based services are among the easiest to automate with tools like ChatGPT, Zapier, and email marketing platforms.
How do I choose the right business model for me?
Consider your skills, audience, and available time. If you love creating, try digital products or AI-first content. If you’re a strong communicator, coaching or consulting might be a fit. Test quickly and iterate as you grow.
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