Every startup should be focused on building a customer base and then driving revenue within that base. Product development aside, customer and revenue acquisition are often the missing pieces of the business model puzzle.
I’ve created a list that stratifies some of the more common revenue generation models that internet startups have employed. I’ll start by identifying a list of ‘general’ revenue generating methods. In a later post I’ll discuss pricing models in competitive and/or cornered markets. Finally, I’ll tie it all together by using several going concerns as examples.
The model is a bit muddy right now but I think it provides a framework for product planning, pricing strategy and customer acquisition.
The revenue geeration models are:
- Subscriptions - freemium and premium per function pricing. Premium features may have multiple tiers each tier driven by functionality, additional user/per seat license.
- Content Consumption Subscriptions - fremium through monthly/yearly access to content. Fremium content can be metered e.g., access to a maximum number of assets/content per period.
- Ad Impression / Ad Network - usually piggybacked with free services, content or community functionality. This can be integrated within the fremium subscription model, premium subscribers receive no ads. Placement of the ad can be withiin web page, as commercials in videos, within a social stream or deliverd to a mobile device.
- Transaction Clearinghouses - companies facilitate transactions and take a percentage (the rake) from the transaction. A number of user interface, messaging and analytic features are often provided which increase customer acquisition. The clearinghouse model can also be tiered; where certain transaction types are free or at a low cost.
- Ecosystem Mining - Content warehouses (pictures, video clips, essays & blogs) offer methods to repurpose the content eg., print photos, place photos on mugs or photobooks. The ecosystem requires partners to accept the content and seemlessly deliver the physical good.
- Virtual to Physical - the ability to move digital assets from online view to offline delivery. Essentially an eStore for existing content; think the NY Times photo archive.
- Donations - The consumer decides if they want to pay and if so, how much. Think of the PayPal contribution model of donating. Probably best for non-profits; I really can’t imagine this as a viable revenue generation practice, but quite a few organizations attempt it.
- Access Convenience - fremium or pay sites can offere mobile access to content, alerts etc., for a preimum price. Think of the the cbs.com mobile application for viewing network content from within a mobile platform.
- The Per Unit Price Model - it’s really a web store, virtual catalog and shopping cart. Physical or digital products are sold and delivered via drop ship, direct mail or digital download. Think iTunes Store, Amazon.com or Dell Direct.
- Social Revenue - methods of paying with social broadcast are emerging. Companies agree to exchange a digital good like a white paper, eBook or audio/video file in exchange for a Tweet, Facebook like or other social endorsement.
- Per Use - access to content, data or system functionality on a pay as you go basis; think of the movie rental principle applied to ebooks, contact lists or data mining applications. This is perhaps a subtype of subscription services; the transaction provides access with a predetermined time to live.
- Affiliate Networks - create a network of affiliates to help sell and/or distribute physical or virtual goods. Revenue is shared across the network on a per unit basis.
- Pay for Influence - this method is tricky because it is more like social arbitrage. It is as much a business model as a revenue generation scheme. A communty of individuals is aggregated. The influence of the community is sold to a customer as a product: the community will provide some service to the customer. The customer pays the arbitrager. The community is compensated at some discount for participation.
- Free to Subscribers - services like Twitter or Facebook have attracted customers en mass because they offer a product with high utility at zero cost. You can’t beat infinite ROI, and that’s the strategy for attracting customers. Monetizing the community is done through many of the other methods above, most notably giving advertisers (messengers) the ability to deliver a message at a price to a targeted audience. There is also an element of the ecosystem play there…I guess I could write an entire post on methods of revenue generation within social - perhaps I will.
I’ll probably add to this list over time but wanted to get it out there, attract some feedback and refine what I have. Drop me a line if you feel this list is incomplete, confusing or let me know if you have other thoughts on packaging and pricing an internet product or service.