Make Money Around Free Content

Most web apps will be monetized with some kind of media model. Don't think banner ads when I say that. Think of all the various ways that an audience that is paying attention to your service can be paid for by companies and people who want some of that attention.

This is the core of FREE, at least as it exists online. Both media and most online businesses are based on "software economics", where the cost of creating something of value is relatively high but the marginal cost of distributing it to each consumer is very low. So you can look at the web as the ultimate extension of the media business model to a wide range of other industries.

But when people think of the "media business model", they usually just think of advertising. That's a big part of it, to be sure, but as those of us in the media business know, it goes far beyond that.

Here's my start at a list all the revenue models you can find in the media industry, all based around a core of free or almost-free content:

* CPM ads ("cost per thousand views"; banner ads online and regular ads in print, TV and radio)
* CPC ads ("cost per click"; think Google ads)
* CPT ads ("cost per transaction"; you pay only if the customer brought to you from a media sites becomes a paying customer. Here's an example.)
* Lead generation (you pay for qualified names of potential customers)
* Autoresponder Memberships (people pay for email; watch this free video)
* Subscription revenues
* Affiliate revenues (e.g., Amazon Associates, Products + Clickbank)
* Rental of subscriber lists
* Sale of information (selling data about users--aggregate/statistical or individual--to third parties)
* Licensing of brand (people pay to use a media brand as implied endorsement)
* Licensing of content (syndication)
* Getting the users to create something of value for free and applying any of the above to monetize it. (Like Digg or our own Reddit)
* Upgraded service/content (ed: aka "freemium")
* Alternate output (pdf; print/print-on-demand; customized Shared Book style; etc.)
* Custom services/feeds
* Live events
* "Souvenirs"/"Merchandise"
* Co-branded spinoff
* Cost Per Install (popular with top Facebook apps who can help others get installs)
* E-commerce (selling stuff directly on your website)
* Sponsorships (ads of some sort that are sold based on time, not on the number of impressions)
* Listings (paying a time based amount to list something like a job or real estate on your website)
* Paid Inclusion (a form of CPC advertising where an advertiser pays to be included in a search result)
* Streaming Audio Advertising (like radio advertising delivered in the audio stream after a certain amount of audio content has been delivered)
* Streaming Video Advertising (like streaming audio but in video)
* API Fees (charging third parties to access your API)
* Funding and Licensing, real example, explanations and stakes.

What other revenue models are we missing? Add any other suggestions directly to this wiki page, please, and we'll help keep the list up to date.


CPC ads Vs CPM ads

Although cost-per-click, or CPC, advertising is enjoying great popularity, CPM (cost per thousand impressions) advertising is still an effective way of reaching potential customers on the Web. Instead of paying per click, in a CPM campaign you purchase a set amount of impressions. An impression is a single instance of an ad appearing on a Web site.

CPM-based advertising can be a cost-effective alternative to CPC deals. To illustrate this point, let's compare the overall expense of two similar campaigns.

In CPC-based advertising, you pay for each click your ad receives. Let us say that you are spending $1 for each click; 10 clicks costs you $10.

In a CPM-based campaign, you may pay $3 for 1,000 impressions. If your ad receives a click-through ratio of just 1 percent, you're paying $3 for the same 10 clicks.

Current results have shown that text-based CPM ads often receive more attention that traditional banner ads. In fact, the average view time for a text based ad averaged 7 seconds, while a graphical ad only averaged 1.6 seconds. Text CPM ads are starting to become more popular and may be a viable alternative to CPC-based advertising.

CPM-based advertising may be more suited for your company if your desired keywords are very popular and expensive. Instead of paying $5 for a single click, you could but 1,000 ad impressions. This can add up over time.

Although click-through ratios for CPM-based advertising are low, click-throughs aren't everything. Even an unclicked (but viewed) ad can play an important role in promoting your company. A well-designed ad will catch a viewer’s eye and may promote brand recognition, even if the viewer doesn't click.

Targeted CPM-based advertising is also beginning to catch on, which may even the playing field for advertisers looking for a CPC alternative. If you can display your ad to a targeted audience, your click-through ratios will improve.

Many sites offer targeted CPM-based advertising options, and you should be able to find a service that will mesh well with your company’s offerings. Targeted advertising greatly increases overall effectiveness of your ads, and the addition of CPM-based targeted advertising may be a great benefit to many small companies.

The downside to CPM-based advertising is that the minimum purchase of impressions could be more than your company requires. While $5 per thousand impressions is very appealing, a minimum purchase of one million impressions can quickly scare off many businesses.

However, there are companies that offer low minimums, and it pays to do your homework before selecting a company that requires the advance purchase of a large amount of impressions.

If your budget allows for it, test several different methods of advertising at the same time and track the results. This way you can see which method is best suited for your particular company and gives you the best value for your advertising dollar.