Here is a simple illustration I put together for a client that displays the six primary monetization methods on the Web. Is is a simplification and expansion on a post from Dion Hinchcliffe from awhile back. The only real “Web 2.0” advances in monetization lurk in the “back door” that was opened up using APIs. Recently, Larry Dignan reiterated a common refrain that APIs are the future of Web monetization based on very rough numbers of how much Amazon makes from its numerous Web Services (additional interesting point here). While the numbers are not yet firm they are the only new monetization method that has arisen with Web 2.0. The illustration shows the monetization methods from the traditional “front door” of a Website as well the new opportunities opened up by APIs (all presented simply enough for even the busiest executive):
And here is a very brief summary of the six methods:
Advertising: The Web site owner sells spots on the website (“inventory”) to advertisers. There are numerous models for this type of monetization. Some are fixed price, some are per displays (“impressions”), other are based on the visitor clicking or taking some other action from the add link. Example: AOL sells premium ad banner locations for up to $500K per day.
Subscriptions: The Web site owner only makes some or all of the content or functionality available to customers who create an account and use a credit card (or other means) to subscribe to use the content or services. Rhapsody.com charges users $10/month to be able to listen to millions of songs from thousand of artists anytime, anywhere (online – additional charge to download a song).
Retail: The Web site sells products or services directly to the site visitor. This is a single transaction as opposed to an ongoing subscription. Example: iTunes makes it money be selling individual songs for download.
Donations: The Web site allows people who find the site’s content or services useful to donate money to keep the service functional. Example: RadioParadise.com is a user-supported online radio station that generates all its revenue from listener donations.
Fees: This is a B2B charge where the Web site makes some or all of its content or services available to other businesses for a fixed fee. Example: Amazon.com opened many of its online merchant functionality to other companies and generated an additional $250M in revenue in 2005.
Commissions: This is a B2B charge where the Web site makes some or all of its content or services available to other businesses and collects a percentage of the other business’ resulting revenue. Example: Google AdSense allows everyone to put Google text ads on their website and get a percentage of the money Google makes from the advertising.
And that is a wrap of the original document. But…
Coming Soon: Web 2.0 Show Me The Money (Part 2) – wherein I revisit the illustration and update it based on recent developments and the great monetization summary article from Professor Michael Rappa. (I will try to get part two up in the next 30 days!). In the meantime, please leave comments especially if you can point out everything I missed!