The 8 Internet revenue model options
For a publisher or other media site owner, I would identify eight types of revenue model which are possible online. Let me know of any I’m missing 🙂
Of course, transactional sites have the option of these also in addition to sales – online, everyone is a media owner.
1. Revenue from subscription access to content
A range of documents can be accessed for a period of a month or typically a year.
For example, I subscribed to FT.com for access to the digital technology section for around ‚ 80 GBP per year a few years ago. Smart Insights Expert members have an annual subscription in this form.
2. Revenue from Pay Per View access to document
Here payment occurs for single access to a document, video or music clip which can be downloaded. It may or may not be protected with a password or Digital Rights Management.
For example, I’ve paid to access detailed best practice guides on Internet marketing from Marketing Sherpa.
Digital rights management (DRM) The use of different technologies to protect the distribution of digital services or content such as software, music, movies, or other digital data.
3. Revenue from CPM display advertising on site
(e.g. banners ads and skyscrapers).
CPM stands for “cost per thousand” where M denotes “Mille”. The site owner such as FT.com charges advertisers a rate card price (for example 50 GBP CPM) according to the number of its ads shown to site visitors. Ads may be served by the site owners own ad server or more commonly through a third-party ad network service such as Google AdSense as is the case with my site.
4. Revenue from CPC advertising on site (pay per click text ads)
CPC stands for “Cost Per Click“. Advertisers are charged not simply for the number of times their ads are displayed, but according to the number of times they are clicked. These are typically text ads similar to sponsored links within a search engine but delivered over a network of third-party sitesby on a search engine such as the Google Adsense Network.
Typical costs per click can be surprisingly high, i.e. they are in the range GBP 0.10 to “‚ GBP 4, but sometimes up to GBP 40 for some categories such as “life insurance” that have a high value to the advertiser.
The revenue for search engines or publishers from these sources can also be a fair proportion of this.
Google Network Revenues through Ads generate around one third of Google’s revenue. For me, the Google’s content networks are one of the biggest secrets in online marketing with search engines such as Google generating over a third of their revenue from the network, but some advertisers not realising their ads are being displayed beyond search engines and so not served for this purpose.
Google is the innovator and offers options for different formats of ad units including text ads, display ads, streamed videos and now even cost per action as part of its pay per action scheme.
5. Revenue from Sponsorship of site sections or content types (typically fixed fee for a period)
A company can pay to advertise a site channel or section. For example, bank HSBC could sponsors the Money section on a media site. This type of deal is often struck for a fixed amount per year. It may also be part of a reciprocal arrangement, sometimes known as a “contra-deal” where neither party pays.
A fixed-fee sponsorship approach was famously used by Alex Tew in 2005, a 21-year-old considering going to University in the UK who was concerned about paying off his university debts. This is no longer a concern since he earned $1,000,000 in 4 months when he set up his Million Dollar Homepage.
His page is divided into 100-pixel blocks (each measuring 10×10 pixels) of which there are 10,000 giving 1,000,000 pixels in total. Alex spent £50 on buying the domain name (www.milliondollarhomepage.com) and a basic web-hosting package. He designed the site himself but it began as a blank page.
6. Affiliate revenue (CPA, but could be CPC)
Affiliate revenue is commission based, for example I display Amazon books on my personal blog site DaveChaffey.com and receive around 5% of the cover price as a fee from Amazon. Such an arrangement is sometimes known as Cost Per Acquisition (CPA ).
Increasingly this approach is replacing CPM or CPC approaches where the advertiser has more negotiating power. For example, in 2005 manufacturing company Unilever negotiated CPA deals with online publishers where it paid for every e-mail address captured by a campaign rather than a traditional CPM deal.
However, it depends on the power of the publisher who will often receive more revenue overall for CPM deals. After all, the publisher cannot influence the quality of the ad creative or the incentivisation to click which will affect the Clickthrough rate on the ad and so the CPM.
7. Subscriber data access for e-mail marketing
The data a site owner has about its customers is also potentially valuable since it can said different forms of e-mail to its customers if they have given their permission that they are happy to receive e-mail either from the publisher or third parties. The site owner can charge for adverts placed in its newletter or can deliver a separate message on behalf of the advertiser (sometimes known as list rental). A related approach is to conduct market research with the site customers.
8. Access to customers for online research
An example of a company that uses this approach to attract revenue from surveys is the teen site Dubit.
Considering all of these approaches to revenue generation together, the site owner will seek to use the best combination of these techniques to maximize the revenue. To assess how effective different pages or sites in their portfolio are at generating revenue, they will use two approaches. The first is eCPM, or effective Cost Per Thousand.
This looks at the total they can charge (or cost to advertisers) for each page or site. Through increasing the number of ad units on each page this value will increase. This is why you will see some sites which are cluttered with ads. The other alternative to assess page or site revenue generating effectiveness is Revenue per click (RPC), which is also known as Earnings Per Click (EPC).
This is particularly important for affiliate marketers who make money through commission when their visitors click through to third party retail sites such as Amazon, and then purchase there.