Terrific survey of free business models online

From Box UK, a survey of business models used by the top Web apps, most of them variations of ad-supported Free and Freemium. In the chart below, the largest segment (ITA) is ad-supported, the second largest (ISV) is Freemium. After that is referral (ITR) and then the sale of virtual goods (IPV), such as the gifts in Facebook.

 

“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.

 

 

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).

 

Comments

[Rakesh]

Amazing post. Well researched and simplified.

[Anders]

It would be very interesting to follow this over time and also look at the financial results from the "Top Web apps". Also, comparing similar sites with similar content using different business models such as I.T.A vs I.S.V would be very interesting. Anyone knows any research?

Anders
The Business Model Database

[John Koetsier]

Nice survey - thanks for this valuable info!

Very topical right now, obviously, with newspapers falling like flies and flailing around in search of a business model that works and doesn't involve dead trees.

[Paul Marion]

What a valuable post and great way to see the popular business models today. Thanks for sharing.

[Fred H Schlegel]

It's not surprising that advertising has such a high percentage of models, given the ease the model can be set up and the low barrier that sets on getting 'customers.' I was surprised at how few IPP (physical product) models their actually were. I'm with Anders in wondering if the revenue numbers would significantly change the look of this chart.

[watzabatza]

Simplified?

I think, it's more complicated...

[Florian Komm]

Thank you for sharing this. This is the first time that I see that kind of study on startups.

[Subbaraman Iyer]

Well, all this models are fine, but at the end of the day, are these business models sustainable and provide shareholder value.

Facebook is an interesting case study as it is the poster boy of social networking. I have described the business challenges that they face at: http://subbaiyer.wordpress.com/2009/03/31/facebooks-positive-and-unique-problem/

[Rocky]

Thanks for the details.
Rocky
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[M Walls]

I've recently started exploring the world of e-books, and it is striking that even a switched on retailer like Amazon is pursuing a totally outdated business model. Charging $15 or more for an e-book? Ridiculous. The distribution and printing costs just dropped to zero - and the first publishing house to realise that can cut retailers (including Amazon) out of the loop entirely. For the first time direct sales from the publishers are a possibility - which they are ignoring.
The result of overpriced digital books? Irritation and piracy.
The intro on the Baen free books library makes a good point - people only turn to piracy when the legitimate option is overpriced. Now is the time to stop that market from being created in the first place - by dropping the prices to a reasonable level.

[Tom Troughton]

This is a cool study. One interesting additional would be to show the increase or decrease in each different model. For example is I.S Subscription model actually gaining or losing ground compared to previous data?
Thanks,
Tom Troughton
http://www.StartaBlogWebSite.com?ck

[cristiano]

Hello friends. There is good news for all of land buyers. Real estate can now be searched in the internet. It is very helpful for the people that are in economy crisis right now.
______________________________________________________
cristiano
real estate

[Fielt]

I find these business models very interesting, in particular their creativity and variety. However, I have a problem with labeling them as "free."

See my small piece on this via the following link

[Kevin Ohashi]

Thanks for the great compilation, it's very interesting to see where the new companies are going in terms of business models and the range of opportunities afforded to them.

[Ward Roberts]

Great way to see today's popular business models. Very interesting post.

[Alan Noake]

Great article - our business model for adbasement.com was inspired by The Long Tail.

[E commerce Web development]

Nice post.In those days business model is so important.People run their online campaigns according business model.

[saeed]

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please translate this pictures to your language and give it to your
people in your country

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translate khayyam's poem i understand that khayyam

khayyam:
tonight i drink 2 bottle of wine
in the first i finish my mind and my religios
and then fuck the girls

Хайям призывает вас в Ислам

Он разделяет свои рубаи на две группы:

*первая группа для "искателей" и очень привлекает людей (тех,которые любят вино,женщин и для людей,которые не верят в бога).

*вторая группа для Лидерство, руководствующие людей(прямой путь-маленькое писание и непрямой путь - большое писание).

Маленькое писание (не очень важное):

*если у тебя есть только кусок хлеба и кувшин воды, это достаточно для тебя и ты не нуждаешся ни в чём другом.

*ты должен жить в этом мире как следует,так как этот мир короткий и он принадлежит Богу.

* если ты живешь в этом мире хорошо,я вознагражу тебя вином в раю,т.к. в раю бог дает мне вино и я раздаю его людям.

Хаям говорит: "Когда я умру, мой прах обмойте вином, а если захотите искать меня в раю, то найдёте у стен кабака"

Большое послание (очень важное):

Не дайте писанию, девушке и вино "умиреть" и книга.
Коран - это великая книга,но вино ещё лучше.

[cerita dewasa]

I find these business models very interesting, in particular their creativity and variety. However, I have a problem with labeling them as "free."

[دليل مواقع]

Thank you my dear brother
On this post
It's a very useful and wonderful
Best wishes you success

[منتديات]

Recognizes your hand dear brother

It's wonderful blog

[cerita seks]

The intro on the Baen free books library makes a good point - people only turn to piracy when the legitimate option is overpriced. Now is the time to stop that market from being created in the first place - by dropping the prices to a reasonable level.

[sma bugil]

That’s an interesting article. I just wondered if you could tell me where to find more info on this topic?

[foto cewek bugil]

This is a cool study. One interesting additional would be to show the increase or decrease in each different model. For example is I.S Subscription model actually gaining or losing ground compared to previous data?
Thanks,

[vitamine]

This is very informative man.I was wondering this Business Models.The graph which is given here is fantastic.Just wana say thanks for sharing such a great post here...