Revenue Models: The 8 Ways Software Companies Make Money, With Real Numbers
A revenue model is the specific mechanism that turns your product into cash. Here are the eight that cover essentially every software company — each grounded in numbers a real founder put on the record.
On this page
- 1. Subscription — the SaaS default
- 2. Transaction take rate — a percentage of what flows through
- 3. Freemium — free product as the top of the funnel
- 4. Usage-based — pay for what you consume
- 5. Tiered feature packaging — good, better, enterprise
- 6. Reseller and revenue-share — your customers sell for you
- 7. Services attached to software
- 8. Advertising and sponsorship — audience as inventory
- Choosing — and stacking
A revenue model is the mechanism that turns a product into cash: who pays, for what unit, on what trigger.
A revenue model is not your business model, and it is not your pricing. The business model includes how you acquire and serve customers; pricing sets the amounts. Founders who blur the three end up copying a competitor’s price while running a different machine entirely.
Eight models cover essentially every software company we track. Each below comes with numbers an operator actually disclosed, because the interesting part is never the taxonomy — it’s what the model does to the economics.
1. Subscription — the SaaS default
A recurring fee for continued access. Predictable, compounding, and the reason SaaS companies trade at revenue multiples other industries dream about. Workboard runs the enterprise version: contracts averaging $125K in first-year value with ~140% net revenue retention, per CEO Deidre Paknad in 2018 — the account expansion is the model. SafetyWing runs the consumer version: $45/month nomad insurance policies, about 25,000 of them active by April 2023, stacking to a $24M run rate. Subscription’s weakness is the flip side of its strength: revenue you must re-earn every renewal, so ACV and churn rule everything.
2. Transaction take rate — a percentage of what flows through
Marketplaces and payment platforms skim the volume they enable. Magic Eden charged 2% of NFT trading volume — which turned $400M of April 2022 volume into $8M of revenue in a single month.
The metric that matters: take rate × volumeNot contract value — take-rate revenue scales with someone else’s market.
Exhilarating when the market doubles every two months, brutal when it does the reverse — and Magic Eden lived both halves.
3. Freemium — free product as the top of the funnel
Most users pay nothing; a conversion percentage funds everyone. Dropbox is the canonical case — free storage that converted into 18 million paying users at roughly $139 each by 2025, a $2.5B machine built on a low-single-digit conversion of an enormous free base. The newsletter world runs the same math: Lenny’s Newsletter converts roughly 4–5% of free readers into $150/year subscribers, clearing $2M+ a year. Freemium is a distribution strategy wearing a revenue model’s clothes — it works when the free tier markets itself.
4. Usage-based — pay for what you consume
Metered on API calls, compute, storage, seats-hours. The model aligns cost with value and lets revenue expand without a sales conversation — the engine behind infrastructure companies’ famous net retention. The risk mirrors take rates: usage revenue contracts just as automatically as it expands, which is why boards ask what portion of “usage” is really committed minimums.
5. Tiered feature packaging — good, better, enterprise
Technically a pricing structure on top of subscriptions, but it behaves like its own model because the tiers segment customers into different products. Webflow in 2018 ran two revenue streams with opposite personalities inside one product:
Higher churn — 4–5% monthly.
“Essentially zero” churn, in Vlad Magdalin’s words.
6. Reseller and revenue-share — your customers sell for you
The least-discussed model on this list and one of the cleverest in our archive: Webflow charged freelancers $20 for hosting, let them resell it to clients at $200 bundled with services, and took a cut of the difference. The customer becomes the sales channel, with margin as the commission.
7. Services attached to software
One-time implementation, onboarding or coaching fees layered on subscriptions. Pure-services revenue earns low multiples, but as an attachment it can transform the underlying economics: Workboard’s paid onboarding — coaches facilitating the alignment the software then tracks — repaid her $17–18K customer acquisition cost essentially on day one, while staying out of the ACV number. Services as CAC-financing, not as the business.
8. Advertising and sponsorship — audience as inventory
Rare as a primary model in B2B software, dominant in media. The instructive hybrid: Lenny Rachitsky’s subscription newsletter spawned a podcast that CNBC reported earns over $500K a year in sponsorship — the audience built by one revenue model monetized a second time through another.
Choosing — and stacking
The pattern across every company above: the winners run one primary model matched to how value is delivered, then stack a second once the first compounds.
- Subscription plus services — Workboard.
- Subscription plus reseller margin — Webflow.
- Freemium plus advertising — Lenny.
- Take rate plus launch services — Magic Eden’s Launchpad, 20–30% of its revenue.
The failures usually come from mismatch — metering a product whose value doesn’t scale with usage, or subscription-pricing something customers experience as a transaction.
Pick the mechanism that mirrors the value, instrument it honestly, and add the second layer only when the first one is working. The founders quoted here all did it in that order.
See disclosed revenue and models for thousands of software companies at getlatka.com/saas-companies.
SourcesOperator disclosures cited above — Deidre Paknad (Workboard, 2018); Vlad Magdalin (Webflow, 2018); Magic Eden volume, April 2022; SafetyWing figures, April 2023; Dropbox figures, 2025 — and CNBC’s reporting on Lenny Rachitsky’s podcast sponsorship.