Thursday, December 13, 2007

How to monetize a website?

These are the basic models of revenue I can think of analyzed from the perspective of a regular web site offering horizontal or mostly vertical content:

1. Subscription based services.
This is basically the membership approach. Members pay for a monthly or yearly membership. There are some options as far as the membership. There are sites that will provide free membership. Other option is the unique fixed membership fee. Another approach is escalated memberships with different benefits and fees (gold, platinum, make it simple ;). The fourth option, which I'm a big fan of, is a mix called freemium, which would offer a free membership providing basic services and a premium membership with a fee and exclusive services that only premium members can get. The freemium option usually gets nicely complemented by advertisement on the free areas of the service.

2. Pay per service. This is the model of the pay per view in the cable industry. Users pay as they consume a product or service. For instance, the member might have a free membership and pay to play one round of golf or one tournament, etc. As part of this model there's a new approach "it's up to you" started some time ago in the music industry by Radiohead. Also, an interesting approach to this model was eBays with commissions applied to services/product sold by others.

3. Advertisement based models. Users have great acceptance of non-intrusive publicity that finances their free services. It’s been a winner for multiple companies to make money where many others failed before (including Google).

4. Merchandise store. As you get traffic to a site, one revenue model usually used in addition to others is to have a merchandise store related to the site users' interests.

Then of course there are combinations of all of them, which I really think is the way to go.

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