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Business model options

Building or launched a web site/application? Check out the choices below on how to generate money from your hard work. Note that these are not mutually exclusive: consider mixed hybrid models too.

Business models

  Model Variation Notes
I Immediate Revenue Models for generating regular income, cash-flow (‘Self-Sufficient’ models)
I.S Subscription  

Charge the end-user a regular, recurring fee. Consider:

  • Minimum contract lengths
  • Buy X (days/months/weeks) get Y (d/m/w) free
  • First X (d/m/w) free (‘Trial period’)
  • Discount periods
  • Pay to remove adverts
  • Pay for additional (‘premium’) content
  • Pay for API/advanced features
  • Pay for support subscription
I.S.F   Fixed A single, fixed subscription cost (e.g. to access an online magazine or a specific service).
I.S.V   Variable A number of fixed-price subscriptions are available to the end-user; fee dictates feature/usage limitations, etc. This includes the ‘Freemium’ model; a (usually limited) ‘free’ option alongside one or more paid options.
I.T Third-Party Supported   The end-user receives the service for free; a third-party pays the fee for a returned service.
I.T.A   Advertising One or more third-parties place clearly defined adverts within the website/application. Variations of adverts include graphical banners, text, inline, pop-over, interstitial, etc. Normally charged by cost per click, cost per action, or cost per thousand impressions.
I.T.S   Sponsorship One or more third parties become the ‘official’ sponsor(s) of the website. This could include fixed (non-rotating, typically prominent) adverts, integration of third-party branding (colours, slogans) and/or licensing agreements.
I.T.C   Paid Content Advertorials: third-parties pay to include marketing-led content on the website.
I.T.P   Paid Placement Third-parties pay to be included in lists or in the application (e.g. comparisons, reviews, entertainment listings).
I.T.R   Referrer End-users are directed to third-party sites, which pay a fee to the website owner for any referred transactions (e.g. comparison sites).
I.T.L   License Content Third-Parties are given access to re-use the content from the web-site for their own purposes.
I.P Payments   The end-user makes individual, ad-hoc transactional purchases.
I.P.U   Pay-per-use Micropayments: the end-user is charged a fee to use an online service (one-off, or for a limited time). This includes the ‘brokerage’ model, where user(s) are charged a fixed-price or percentage per transaction (e.g. ebay). This also includes the purchase of ‘credits’ e.g. 10 uses of the service for a fixed cost. Discounts can be offered for bulk purchases.
I.P.P   Physical Products The typical e-commerce model; includes books, CDs, holidays, tickets, etc. Typically each ‘physical product’ has a non-arbitrary cost associated with its production.
I.P.V   Virtual Products The end-user purchases a ‘digital’ product that typically has a negligible cost of replication. This includes virtual gifts (e.g. Facebook), in-game items (e.g. World of Warcraft), and other virtual assets (e.g. land in Second Life).
I.P.R   Related Products The end-user has free access to the main product/service. An additional, optional charge is made for related ‘added value’ products/services, e.g. documentation, support, commercial versions, related iPhone or Android application, etc.
I.P.D   Donations The website relies on voluntary end-user donations (e.g. a ‘Tip Jar’).
L Long-Term Revenue Strategic, ‘Invest and Reward’ models where costs are incurred initially for a longer-term ‘pay off’.
L.E Establish and Exploit   Attract a substantial audience before monetizing.
L.E.R   Re-use/Re-sell Re-sell/re-use the data/content, usually from User Generated Content websites e.g. create books, posters or other purchasable products from data/content created on site.
L.E.P   Platform Establish a platform, then charge for third parties to participate once an audience has been established e.g. iPhone. See also Facebook.
L.E.B   Branding Build a ‘personal brand’ for yourself/your company. Once awareness is raised, go on Conference/Workshop/‘Expert’ circuit, or release a book, etc.
L.S Sell/Exit   Create a popular application/website, then make it someone else’s problem to monetize e.g. YouTube

Meta-models

The following business models can be applied in addition to most of the basic revenue models described above.

  Model Variation Notes
M.R Revenue Share   End-users are offered a cash incentive to make the website/application generate revenue, by sharing a percentage of revenue with them (usually based on their personal referrals or popularity of their content).
M.R Re-Seller   The end-user can re-sell the online service.
M.R.A   Affiliate The end-user is paid to direct customers to the website, typically by listing/selling the products/services elsewhere.
M.R.W   White Label The end-user can brand/tailor the online service and re-sell it as their own (typically taking a percentage of the generated revenue, or paying a fixed subscription cost to the original service).

Popular business models

We spent a few hours going through the Webware 100 Top Web Apps for 2008, analysing the business model(s) used by each. The chart below shows the results of this survey: 34% use Advertising, 12% a Variable Subscription model, and 8% each for Virtual Products (typically digital downloads), Related Products (typically a large software company offering a free product to attract you to their platform) and Pay-Per-Use.

Further reading


About the author

Box UK

Box UK

Box UK's team of simply brilliant thinkers, consultants and application developers mastermind simply brilliant solutions to the world's toughest, performance-critical web and software assignments.

Comments

David Bearman

Feb 24th, 2009

Nice list. I'd 'add' or elaborate, one. For a number of years we developed fairly complex models around licensing, which might deserve more examination here than in your one (ITL) reference. For examle, the Art Museum Image Consortium licensed content to third-party distributors, who were in turn authorized to develop competing applications and re-license content to higher education institutions who allowed third-parties (students and teachers) tomake end-uses of it. (see:"The Economics of Publishing Cultural Heritage Content Online: The AMICO Experience", in Proceedings of ICHIM03, Paris, 2003. See http://www.archimuse.com/publishing/ichim_03.html) The general model of licensing content so others can develop applications that return income is under-utilized I think.

Juan Chaparro

Mar 3rd, 2009

Love this Article…It's perfect as I do web 2.0 consulting to businesses. Thanks for sharing

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Mick James

Aug 16th, 2016

We help you outsource work to virtual employees for only £2.99/hr. For more info please visit our website www.staff-india.com

Andy Wright

Mar 12th, 2009

Thanks for a great article! This is just what I was looking for.

digvijay singh

Mar 19th, 2009

Awesome..Awesome…Awesome. You just helped me define my market in a better manner. Thanks a Ton

warikoo

Mar 26th, 2009

Great article… Quick question though – Where would lead gen fall? My experience is that advertising, while considered most basic, is rarely the bread earner for a site, unless it gets a huge volume up and running. Lead gen works very well then…especially if one goes down the simple route of keeping acquisition costs low (organic traffic or better ad optimization) and pricing the leads appropriately..!

Arjun

Mar 26th, 2009

@warikoo I think lead gen would fall under the M.R./Revenue Share model which is basically saying you pay the referrer based on quality of lead.

Herbert

Mar 27th, 2009

This list is also an excellent starting point for small e-business entrepreneurs to develop a monetization strategy. These business models help you to develop your own monetization mix. Well done!

Owen Brunette

Mar 27th, 2009

The other dimension is to know which of these sites are generating profit either by having some published indication or maybe just from knowing the failure rate for the different models. For example if these sites had also been in the Webware 100 or even 500 six or twelve months ealier it might indicate a sustainable business model and allow better assessment of which models are generating money instead of burning their investor's money. Using the webware list which is prioritised by 'coolness' rather than profitability or traffic is also an issue and it would be interesting to contrast with the models of the Alexa top 100 or other sources.

Subbaraman Iyer

Mar 31st, 2009

Well, nice to hear about the free business models! how does it make a business model, if ultimately this can't be sustained. A case in point is Facebook with 200 million users and still has no business model. I wrote about the challenges it faced in my blog at : http://subbaiyer.wordpress.com/2009/03/31/facebooks-positive-and-unique-problem/

Robin Good

Apr 10th, 2009

Wonderful work Dan, really useful. I was wondering whether it would be appropriate to include also Fund Raising as a specific model. I have seen in the past some sites resort systematically to it with excellent results.

Joe Stepniewski

Apr 14th, 2009

awesome. I just created a wordle based on your lovely collation of the webware top 100 business models http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/popularity-of-monetization-methods-f

Paddy

Jun 27th, 2009

Great analysis, really thorough, but theres a burning question left unanswered for me… While its great to know who uses what business model, what I REALLY want (need) to know is which ones are more successful? If the 34% majority using ITA are only turning over $1,000 a month, then Im kinda interested in their model. But if the 8% using IPU are doing $10,000 a month, then Im really interested in their model. Any ideas on which of the models seems to give the best returns?

Natalie

Jul 2nd, 2009

This is the most detailed article I've read on the subject – and believe, I've been looking for that kind of info as I'm working on a new web app! Thanks for doing all the research and presenting it in such an easy to read form.

Serge

Jul 4th, 2009

Very valuable info. Thank you very much

Avery

Jul 10th, 2009

Very useful article, thanks for sharing! Bookmarked :)

Jonas

Jul 22nd, 2009

Oh, I was just sketching up a similar list. Great work anyway.

Michael Pillsbury

Aug 7th, 2009

All my websites are currently I.T.B – Third-parties pay to be included in lists or in the application (e.g. comparisons, reviews, entertainment listings). This way I add content to the website while earning money from commision

Dave

Aug 10th, 2009

There are so many startups looking to develop a web application that attracts thousands or occasionally millions of users but they don’t think about how the money is going to be generated. If you come up with an idea for a service which is going to attract millions of users, yet you don’t know who those users are, you’ve already got a bad start.

Melen

Aug 10th, 2009

I see that Advertising model is most used but I wonder what the breakdown is with actual $ revenue is calculated.

Laura Nina

Aug 12th, 2009

The business model is really understandable. Good for learning material in the Entrepreneurship course. I had one in the Business Feasibility Study, but doesn't look like this one. Thank you.

John

Aug 27th, 2009

I think you could have included the link selling in the table. Most of the blog owners are earning now a days through selling their link spots to other webmasters. This facilitates in consistent earning.

Lukisan

Aug 29th, 2009

Very comprehensive article, thank you for sharing it with us.

Obama

Sep 2nd, 2009

Excellent road map of the various methods available to the webmaster. Thank you, it is nice to have all the possibilities summarized in one place.

zhuzhiyan

Sep 11th, 2009

Subscription based apps would be the best way to monetize, because it also leads to passive income that you will collect each month.

Johnny Blaze

Sep 25th, 2009

Wow, Ive been looking for something like this for quite sometime. I developed a shopping cart web app and have been trying to figure out the best way to market it. This will do just fine. Thanks for offering this for free. Johnny B CEO,Halo Cmpany

band

Sep 28th, 2009

Quick question though – Where would lead gen fall? My experience is that advertising, while considered most basic, is rarely the bread earner for a site, unless it gets a huge volume up and running. Lead gen works very well then…especially if one goes down the simple route of keeping acquisition costs low (organic traffic or better ad optimization) and pricing the leads appropriately..! Thanks and Regards

jeims

Nov 15th, 2009

Microsoft would be working on solutions that really amazes people, as Apple does, or OS's that really works, as Linux and BSC do. The history shows that all empires come to an end…. clomid

Trabajo

Dec 4th, 2009

What is the best business model for a web 2.0 app like facebook app?

Moni

Mar 25th, 2010

This is a perfect business model, I will love to implement this, Thanks for sharing such a useful post.

philip

May 14th, 2010

The chart that you have shown under "Popular Business Models" is something similar to the analyzed data on the web whenever we do any kind of research. Thanks for sharing this. Philip http://www.viteb.com/website-development/

joel

Jul 16th, 2010

Earning money has online never been this easy and transparent. You would find great tips on how to make that dream amount every month. So go ahead and click here for more details and open floodgates to your online income. All the best.

Ivan Villanueva

Aug 17th, 2010

The problem with Webs is that you don't know when the owners of the multiple software patents you are infringing will ask you for license fees (or worst: shut your web down with a court decision). See examples of such patents on the right column of: http://petition.stopsoftwarepatents.eu

Fishing Gears

Sep 4th, 2010

nice article

fakhrakanwal

Feb 9th, 2011

I am so glad I discovered this weblog. Thank you for the information. You make a whole lot of beneficial points in your post. Rated 5 stars

Keith Hall

Feb 9th, 2011

Great article! I bookmarked this last year and keep coming back to it to spur on new thoughts. I’m in the UK and recently launched Cloudware City – http://cloudwarecity.com which can make it easy to offer free or paid subscriptions to web apps, services or content of almost any website! As well as an easy to integrate API, subscriber management, Cloudware City supports recurring billing, and even helps with sales and marketing through its online app store. Since a lot of the pain in development and administration of subscriptions and billing systems is taken away, it leaves the developer to concentrate on the web app, service or content. It can help get an idea off the ground with little risk. Hope this helps someone!

Huss

Mar 25th, 2012

Nice list of ideas for web business models. Many clients get overwhelmed with the number of options available. http://businessmodelinstitute.com

Ihsan

Dec 2nd, 2014

Nice article ! I recently launched a site, http://www.pixelparis.com and you’re article did shed a bit of light on monetization methods online.

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