Business model change: deciding how the money actually gets made

One dollar more than Diners Club

In 1958 American Express launched a charge card into a market Diners Club already had. Everyone else in payments was racing to be cheap and everywhere. Amex set its annual fee at $6, exactly $1 higher than Diners Club's $5.

The extra dollar was a signal: this card is for people who can afford it. Amex was choosing who its customer was, what that customer would pay for, and, above all, who would decide the price. Amex would.

In 2024 American Express collected $8.4 billion in net card fees, up 16% in a year, the fees cardmembers pay just to hold the card. They had grown at double-digit rates for 26 consecutive quarters.

Now set that beside Booking Holdings, which wins many of its customers by paying Google for them. In 2024 it decided to convert those paid customers into direct ones. It was working, and its marketing bill still rose, from $7.278 billion in 2024 to $8.186 billion in 2025. Both are decisions about how the money gets made. The difference is who sets the number.

What business model is

The answer is often not the obvious one. A broker can give trading away and earn on the cash its customers leave idle. A coffee chain can hold more than two billion dollars of its customers' money on prepaid cards. A streaming service can add advertising mainly so that it can offer a cheaper way in. The decision is about seeing where the money really comes from, and choosing it on purpose.

Why it is so hard

Changing how a company makes money sounds like a pricing exercise. Three things make it much harder than that.

The ways companies did it

The decisions on record take four shapes. Each changes a different part of the answer to who pays, and for what.

What 54 companies did

Here is every decision on record, placed by the year it was made and marked by how it turned out. Hover a mark, or open the table, for the company and the outcome.

Of the 54 decisions that can be judged, 49 were never undone, 3 were walked back and 2 were kept only in part. Once a money machine starts running, it is rarely switched off.

That cuts both ways. MoviePass's $9.95 unlimited plan was never undone either. It ran until the service shut down in September 2019 and its parent filed for Chapter 7. "Never undone" means a model stuck, not that it worked.

The walk-backs

Put the decisions that were walked back side by side and they share one thing. Each depended on a number the company did not control: a partner's volume at a fixed rate, advertisers' budgets in a crowded market, the speed at which people bought electric cars.

The decisions that held tended to set their own number. Amex sets its own fee. Bloomberg raised the price of a terminal seat to $31,980 a year in 2025, a 6.5% increase it tied to inflation. Nobody outside the company negotiates either price.

That is not a promise in the other direction. Booking's shift toward customers it owns has held, and it is working. Its marketing bill still rose, because until the switch is done it is paying a rate set by somebody else.

A price you set is a business model. A price someone sets for you is a tenancy.

What the share price did

For many of the decisions there is a clean market record: the company's total return over the three years after the decision, against the S&P 500.

The spread is wide, and it does not line up with whether a decision held. Broadcom's VMware deal was followed by a return 342.8 points ahead of the index. Etsy's higher take rate was never undone either, and its shares trailed the index by 88.2 points over the same kind of window. Kroger's alternative-profit businesses, built around the data unit it formed in 2015, earned $1.35B of operating profit in 2024, and its shares still trailed by 69 points.

A business model change shows up in the income statement long before the share price agrees with it, if it ever does. Judge the decision by whether the money now comes from where you meant it to.

How to run this decision

If you are weighing a version of this choice, here is what the record suggests doing, in order.

1. Write down where the money really comes from, line by line

   Not the product on the box: the actual sources, with this year's numbers. Schwab's commissions were about 4% of its revenue when it dropped them. If you do not know which line carries the company, you cannot know which change is safe.

   Seen in: Charles Schwab, 2019
2. Name who sets each number

   For each revenue line, who decides what you charge? For each customer, who decides what they cost you to win? If the answer is a platform, a channel or a single large buyer, that is the business you are actually in, whatever the plan says.

   Seen in: American Express, 1958 · Booking Holdings, 2024
3. Separate the customers you pay for from the customers you own

   A customer won once and kept is an asset. A customer bought again on every purchase is a cost with a supplier attached. Report the two separately, and track how many move from the first group to the second.

   Seen in: Booking Holdings, 2024
4. Price a marquee deal by its unit economics, not its logo

   A famous customer signed on terms below your cost per transaction loses more money the more it grows. Work out what each unit earns at the contract rate before anyone announces the name.

   Seen in: Block (Square), 2012
5. Ask what the model earns if the volume never arrives

   Ford built for two million electric vehicles a year. Work out what your model earns at half the volume you are planning for, and whether it still works at all. If it does not, build in steps you can stop between.

   Seen in: Ford, 2022
6. Before you raise your rate, count who pays it and what they can do

   A higher take can work on a network that is hard to leave, as Etsy's did. It also draws a response: Etsy's sellers went on strike over the 2022 fee rise. Decide in advance how much pushback you will accept, and from whom.

   Seen in: Etsy, 2022 · Reddit, 2023

Warning signs

What it has looked like when this decision was going wrong.

• Your growth depends on traffic a platform can turn down.BuzzFeed, 2021 · Booking Holdings, 2024
• A famous customer is signed on terms below your cost.Block (Square), 2012
• Capacity is being built for an adoption curve rather than for orders.Ford, 2022

All 54 cases

Each case is one company at one decision: what was on the table, what it chose, why, and what followed, with every fact sourced.

Questions

What is a business model?

The way a company actually makes money: who pays it, for what, how often, and who sets the price. It is often different from the product on the box. Schwab gives trading away and earns on its clients' cash.

What are examples of business model changes?

Meta charging businesses per WhatsApp message instead of charging users a yearly fee, Schwab cutting commissions to zero, Netflix adding a cheaper plan with ads, Etsy raising its share of each sale, and BlackRock buying iShares to move into index funds.

Why do business model changes fail?

On record, the ones that were walked back depended on a number the company did not control: a partner's volume at a fixed rate, a habit customers never formed, or the speed at which a market adopted something new.

How do you know if a business model change worked?

Check whether the money now comes from where you meant it to, and whether you, rather than a platform or a partner, set the price. The share price is a poor guide in the first few years.