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January 11, 2008

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Tony Leach

I think a lot of free business models will depend on selling additional services beyond the basic offering (some call it "freemium"). I'm thinking of places like Last.fm, which enhances the experience for paid subscribers with better internet radio. Skype makes internet calls free but charges for landline connections.

Zecco (my company) is another example of revenue models based on providing core services for free. Providing free ($0 commission) stock trading can be made up not only by advertising revenue generated by our investment community, but also through selling additional services like tax-preparation or advanced quote streaming software.

Simon Owens

One thing I think you're overlooking is “associated revenue” or “single-sponsor” revenue. It’s similar to Affiliate revenue but different in the sense that 100% of the profit goes to the content provider.

Let me give you an example of what I’m talking about based on an article I’m currently researching.

An online (free) magazine called Clarkesworld Magazine publishes fiction, nonfiction, interviews, etc.. The owners of Clarkesworld Magazine also own Clarkes World Books and Wyrm Publishing. Part of their revenue model is based off the idea that SF fiction readers will come to their site for the free content and then will click through to buy the for-sale books.

This would be similar to clicking through to Amazon affiliate books, except that they keep all of the revenue from the sale. The free content then leads to paid-for content.

Also, you could probably include "reader donations" as a revenue source, since many blogs an online sites (wikipedia for instance) are able to bring in a significant amount this way.

Sampad Swain

How about creating pages for users and monetizing it. For example, Facebook pages wherein users can add ads like blog sites in which they can choose the ads and then earn money depending on the clicks from their friends.It may work not only for SNS but also in various Web 2.0 enabled sites where active participation is high...

Anyway is there any business model on this? It can be called as CPUC i.e. cost per user click..

Crosbie Fitch

Still strange how few people acknowledge the possibility of commission instead of charging.

Commission: "I'll pay you x if you produce more."
Charging: "I'll charge you x for your 'consumption' of what I have produced."

In both cases it's a bargain: art for money, money for art.

There are very few people exploring the commission approach.

Four obvious ways of putting the reader/writer bargain (ignoring advertising):

1. Writer offers their work in exchange for the reader's money.
2. Writer donates their work to their readers.
3. Reader donates their money to the writer.
4. Reader offers their money in exchange for the writer's work.

Everyone is focussing on 1 and 2, with only a half-hearted nod to 3.

You can count the number of people looking at 4 on the fingers of one hand. And one of those is me.

Michael Cader

How about:

-- Upgraded service/content
-- Alternate output (pdf; print/print-on-demand; customized Shared Book style; etc.)
-- Custom services/feeds
-- Live events
-- "Souvenirs"/"Merchandise"
-- Co-branded spinoff

Ben long

Google doesn't like it but you can make money selling links from your homepage and writing articles for SEO purposes. eg, http://daily.stanford.edu/

Rex Hammock

The other day http://www.hammock.com/craft/2008/01/the_hammock_2008_custom_media.php
>I wrote a piece on Hammock.com's Custom Media Craft blog
about "mediacasting" direct towards corporate and association marketers who have developed media channels (magazines, an array of digital media) but who are confused into thinking those formats and channels of media mean they need to apply a media-business business model to them. Most times, for corporate and association marketers, the business model -- the reason the marketing-oriented media exists -- is related to engendering loyalty (extending the relationship) or to deeping the relationship (what marketers call "share of wallet"). You may want to look at research related to what some call "relationship marketing" or research into the value of a current customer vs. the value of acquiring a customer to also understand the "Return on Free" in the context of providing media designed to engender loyalty or cause an action of value.

Another thing to look at is Doc Searls discussion of making money "with" a blog (or any medium) or making money "because" of a blog.

Also, and perhaps with great coincidence, irony or just very much obviousness, one of the most seminal essays every written on this topic can be found with a search of Wired.com -- An essay Esther Dyson wrote in Wired 3.07 (July 1995) and that still reads like it was written yesterday.

Rex Hammock

Oops. Sorry for that bad code on the link in the previous comment. It should have been:

http://www.hammock.com/craft/2008/01/the_hammock_2008_custom_media.php

Thomas Schinabeck

Already an important business model for the tv & movie industry: product placement.
Actually in the future it don`t have to be a "secret" one... sponsoring works in the sports industry for decades now very well.

Max

Just a quick note: the main player in the "Getting the users to create something of value for free and applying any of the above to monetize it" model is Google with search!

Greg Fisher

This is a discussion that is central to long concept from a business perspective. I am doing my PhD research on "how web entrepreneurs decide on a business model" - what are the factors that they consider and what drives their decision making and process defining a business model. Any web entrepreneurs willing to participate please contact me at gcfisher@u.washington.edu

Micheal Rappa does a good job of laying a foundation for helping us understand what a business model and how we can think about it in terms of the web - much of this is old but still very relevant - see http://digitalenterprise.org/models/models.html#Brokerage

David Cushman

The co-creation of value. Community dominated edge in models lead to value webs where we every member is a convergved indivdual - ie not just a consumer, but also a creator, designer, marketeer etc.
That which we create, we embrace. Beats all the wastage of mass production, too.
Lots on this on my blog.

Chase Granberry

Am I missing something? Has no one mentioned paid directory services? These have been monetized since the birth of the Internet, and can bring in some serious cheddar.

Terry Heaton

The problem with the list is that advertisers are now their own media companies, creating and serving content just like everybody else. What's left, then, is aggregating these forms of advertising content.

I think the ad-supported content model is adrift at sea.

Baher

I've create a wiki for Media Business Models
http://www.mediabusinessmodels.com

I've already added your list and Fred's additions as well, and I hope more people will contribute to it along the future.
Here's my blog post about it http://technozzle.com/?p=38

Lloyd Fassett

You could watch the metrics of giving things away and generate statistic reports on why people are selecting what they are selecting. This understanding could be sold to the people creating the content and wanting to attract more traffic by changing the content.

Essentially, it's like political consulting. The candidates say what the data tells them to say to win, so I guess you'd call the business model 'consulting'.

It would also be like like Netflix engineering their system that predicts what movies you'll like and selling that knowledge to the producers of movies by saying, 'the market is here, go make a movie that fits this'....which I suppose is an existing large industry as well.

The common point is analyzing the data flow though in a market place and providing that information to the producers of the content...I don't think that's covered in the list.

Vada Dean

Added the following to the USV wiki:

Credit Points (think: Microsoft Points and Zune Marketplace)

Rewards Points and Conversion (e.g. frequent flier miles, contests, support rewards, etc.)

Production Points (e.g. advertiser, subscriber, and consumer subsidies to fund production)

John Ebbert

My addition is a Market Maker in ad exchanges (like ADSDAQ by ContextWeb, RightMedia and DoubleClick's AdX) which earn the difference between an advertiser's bid price and a publisher's ask price for online ad inventory.

I added it to the USV wiki, and a more detailed explanation is on ContextWeb's blog.

Benoît Marcoux

I am not sure on how to name it, but some cell phone virtual operators have tried free phone calls in exchange for listening to an advertisement first...

Chris Cartter

Here's one for your list: health outcomes.

QuitNet is the world's largest smoking cessation program. Started as a project of Boston University School of Public Health in 1995, it was spun out as a private company in 2000 (I was President & CEO) and was eventually bought by a public company, Healthways, in 2006.

QuitNet has always been free to end users. While there is a Premium service upgrade option (which few individuals buy out of pocket), the business model is sponsor paid. Employers, health plans and public health departments pay for "their" people to use the program. The health related costs of smoking are so high that QuitNet provides a great ROI. There is a advertising, viewed only by users who have no sponsor, but it accounts for a small revenue stream. If we were solely reliant on ad revenue, we'd be out of business.

With a thriving online support community and quirky culture, QuitNet is a service that users LOVE. Who would have thought quitting could be free and fun?

goundoulf

You also forgot donations, just have a look at Mozilla Foundation ;)

shai

What about Pay Per Post / Pay for Comments? I know this got very controversial, but with the proper disclosure, it seems to me this model could work very nicely. For example, ProBlogger has been charging bloggers for "Community Consulting", where each consulting gig is essentially a short blog post that serves as an open thread for problogger commenters to give the blogger feedback on his or her blog. I think it's fairly successful.

Cece Salomon-Lee

My company works with a majority of B2B publishers to leverage webcasting and rich media for revenue opportunities. Some additional ones to consider are:
- Extension of live events: can be sponsored or pay-per-view
- Pre-rolls: add a 15 or 30 second pre-roll before the live webcast
- Microsites: work with sponsors to created special niche microsites that have white papers, articles, webcasts, podcasts, etc.
- Upgraded ead generation: more than providing the names, also provide lead scoring to better identify, quality and score leads

From a personal perspective, other possibilities include:
- RSS feed advertisements: text or graphical
- Subject Matter Newsletters: sponsored or ad insertions

claudio vaccarella

At Show Farm we get money by selling extra contents through the mobile channel (m-site)

Nikhil Kulkarni

As soon as one starts building a business model around the concept of "Long Tail" - The biggest question one must answer is how many niches make up sufficient revenue (measured by the area covered under "the 98% niches" in the long tail graph).

Any analysis on the numbers there? Say how many hits per month are needed to start making money in the long tail.

Gerd Leonhard

I just published on video on"paying with attention' - thanks for the inspiration, Chris, and everyone else, too
http://www.youtube.com/watch?v=Z4gPVW25nV0

John

Media has growing in a rapid pace. The nice point is everyone getting their peace of cake. Definitely it is not only one getting benefit, whoever participate get their meal here...
UK Breakdown Cover

Santosh

> Getting the users to create something of value for free and applying any of the above to monetize it.

Why not Google.com as the best example (and every other search engine)?

Grant Alden

It is disturbing to me that many of these models violate (or seem to violate) long-standing, albeit print-centric ethical rules. The relationship of advertising to content seems to be shifting radically; I cannot see how this is good for the reader, nor, in a broader sense, for our democracy.

Tom Nield

Please, all you music business pros, just make sure we users have an option to pay to avoid the ads (especially in-line audio).

Marilla P. Alligator

Did someone already say this one? (I didn't read every comment.) If you have a site of user-generated content, you could sell spots in a 'featured' content area on the site. This is similar to Google's "sponsored links" on search result pages but applied to content within a web community.

Rico

I head up business development for a streaming company and the answer we have come up with is, 'Drive alot of traffic.' Banners make money, pre-rolls make money in-player 'bugs' (read; ScanScout)make me money and one day in-stream ads will make money too. The point is, give the content away, make it compelling and the ad revenue will come. We have seen a drastic increase in advertising revenue in the past six months. With the maturation of the pre-roll market and improving CPM's on banners, you dont need a slew of new ideas, you need traffic. And Tom Nield, I respect you opinion as a listener, what amount would a person like you deem as an appropriate amount to pay to listen to music. I myself pay for subscription services, but would not pay for internet radio. You hear ads on radio, I view it as a different delivery method for the same product.
Thanks for listening.

rj

I would add 'Cost Per Influence' on the list. The first mention that I saw of this online was with the DECK (http://www.coudal.com/deck/) which is a small ad network that runs a small 120x90 ad across line up of creative sites (37signals, coudal, alistapart etc.) This model might overlap with the sponsorship model since you are paying a fixed fee for certain length of time.

Chris, is your power point from your Nokia world talk available online??

Thanks!

John Banfill

Thanks for the very informative list of media models from you and the other contributors.

Many web sites start out as a labor of love and later become monetized when they are successful. This list of media models for monetizing online media illustrates the wide range of possibilities driving digital abundance from a commercial standpoint. It would be instructive to develop a similar list of why people create media works where they are not concerned about the commercial potential. This will illuminate the strong commercial, institutional and personal driving forces that are working to create digital abundance on the web. There probably is a seperate set of models underlying the commercial and personal drives to create free software and extend digital abundance.

Can any of these models translate to the physical world and the creation of free physical goods?

A couple of other possible models are: Reduce personnel costs and increase customer satisfaction by developing online manuals and information about products and services. Create religious converts and political supporters who will work and donate to support the causes explained by the media.

preetam mukherjee

Chris,
I'm sorry but IMADOOFUS and I can't figure out how to track back to you from blogger aside from HREF-ing your article.

So: http://weareindia.blogspot.com/2008/01/show-me-money.html

-p

Alex Nesbitt

If we step back from the business model forest created by the economics of impressions, and ask is there something more. Is there something beyond our forest of impression based models? I think the answer is yes.

We can and should recast the discussion from economics of impressions to the economics of communities. And what are the economics of communities? They are micro-economies where trade, commerce and personal interaction are all intermingled with each other. Think of Second Life and their booming economy.

Read more on this idea at http://ta.gg/10o

Alper Çuğun

Another way to make money from free content is to rely on voluntary contributions or 'tipping'.

Sites such as ours: Tipit.to (http://tipit.to) aim to facilitate that style of economical transactions.

Julie

Many nonprofits have brought their fundraising online. Some like Donorschoose.org have gone further by raising money for others and getting others to raise money for them too (see their Blogger challenge).

Julie

Many nonprofits have brought their fundraising online. Some like Donorschoose.org have gone further by raising money for others and getting others to raise money for them too (see their Blogger challenge).

Arun

This falls under the paid inclusion model I guess... but things like Yellow Pages online (and their variants) - often called 'local search' options - still make pretty big $ today. I can only see this falling though as 'natural search' becomes more and more pervasive. The issue there is that while the consumer side to Yellow Pages is free, the advertiser side is not - unlike say, Google Maps.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

FREE was available in all digital forms--ebook, web book, and audiobook--for free shortly after the hardcover was published on July 7th. The ebook and web book were free for a limited time and limited to certain geographic regions as determined by each national publisher; the unabridged MP3 audiobook (get zip file here) will remain free forever, available in all regions.

Order the hardcover now!