How are you going to make money?
It’s the fundamental question that every business has to answer before it even becomes a business. There are a variety of ways of bringing in revenue.
Here are some of the best business models for startups, particularly those in the digital sphere.
Ad-based revenue
Primarily used by content publishers, ad revenue can come in 1 of 2 ways. The first is the old-fashioned way of contacting enough prospects until you secure a customer base of people ready to advertise on your website, publication or whatever venue that you’re marketing in.
The second method, exclusive to the digital world, is using a program like Google AdSense, wherein a search engine will display ads in the spots on the website you designate.
The advantage of the latter is that a program like Google’s is tailoring the ad to the person browsing your site, based on their previous Internet history.
The downside is that because Google is doing the heavy lifting, so to speak, of figuring out what ads people will be interested in, they keep a good chunk of the money. You need a lot of traffic before this type of ad revenue will do anything more than pay for some recreational activity.
Affiliate revenue
This is where you contract with another company to display their ad and drive traffic to their website.
Why is this different from the old-fashioned method of selling advertising? Because you are working on commission. Depending on the structure of the affiliate agreement, you’ll be paid based on how much traffic you drive to your partner’s website.
Or, more commonly, you’ll only be paid if people who come from your site purchase a product within a certain period of time. The responsibility for tracking this will lie with the affiliate.
Subscription revenue – premium services
For content producers, subscription revenue would be the crown jewel—when people like your stuff so much that you can put it behind a paywall and they’ll still want to access it.
For other businesses, premium services can be offered. A common strategy is to have a basic service that’s available for free. This gets people in the door and then they can upgrade to a paid service. This is common among streaming services and for different gaming apps.
Transactional revenue
Finally, we come to the classic bottom line of selling products or services in exchange for cash (or a credit card, as the case may be). A person who offers an abstract service—e.g. consulting, legal or financial help—can execute these transactions online. The business that’s selling hard products has to figure out how to handle storage and shipping.
The best model for you will depend on the nature of your business and how large your company is.
