B2B

B2B is the abbreviation for the English term “Business-to-Business,” meaning “from company to company.” It refers to a deal in which the customer itself is a company, not a private individual. If a bakery buys flour from a mill, that’s B2B. If that same bakery sells you a bread roll, that’s B2C, meaning “Business-to-Consumer” — sales to end customers. The product being sold can be similar in both cases. The difference lies in who pays and why.

Why tech companies prefer selling to companies

Companies buy for a sober reason: they want to make money or cut costs with what they purchase. That’s why they’re willing to spend considerably more than private individuals. A chat program for 20 euros a month is something you might consider. For a company with 5,000 employees, that’s 100,000 euros a month — and often still a good deal if it saves work time.

Then there’s reliability. Corporate customers sign contracts for one or more years and rarely cancel on a whim. Private users, on the other hand, jump ship quickly if a competing product looks better. For investors, predictable revenue is worth a lot, because it allows them to estimate how a company will be doing in three years.

A misconception is therefore widespread: the best-known tech brands are not automatically the most profitable. Many companies whose names you never hear make very good money with software for accounting, logistics, or human resources management. They don’t need TV advertising because their customer base consists of just a few thousand buyers.

How a B2B sale unfolds

In B2C business, one person decides in seconds. In B2B business, a group decides over months. Usually involved are the department that wants to use the product, the IT department that has to implement it, procurement that pushes down the price, and the legal department that reviews the contract. Any of these groups can block the purchase.

That’s why sales look completely different. Instead of advertisements, there are trial periods, presentations, and individual proposals. The price is often not even listed publicly on the website but is negotiated instead. A single deal can take half a year of work, but it can bring in hundreds of thousands of euros.

Also common is the subscription model, usually called SaaS: “Software as a Service,” meaning software rented over the internet. The company doesn’t buy the program once but pays annually for its use. Experts measure the success of such providers by ARR, the annual recurring revenue. This metric shows how much money comes in even without a single new customer.

B2B in AI news and stock market reports

The term constantly comes up in current AI coverage. Providers of large language models earn the larger share of their money not from private subscriptions but from corporate customers. These companies integrate the models into their own programs via an interface and pay based on usage volume. Nvidia is also a purely B2B company: the computing chips go to data centers, not to private individuals.

If you read in a report that a startup “is focusing on enterprise customers,” that means B2B with particularly large companies. Such news is a signal for investors, because it promises stable revenue. Conversely, a purely private audience is considered riskier because the competition is just one click away.

Besides B2B and B2C, there are other abbreviations. B2G stands for sales to the government, such as software for public authorities. Some companies serve both worlds at once, for example cloud providers with free offerings for individuals and expensive contracts for corporations. The technical term for this is “freemium”: the basic version is free and serves as advertising for the paid corporate package.