2. 2
Module M7 Monetizing your digital business
Competence
unit
U7.2 Spotting monetization
models
Learning
outcome
Define pros and cons of
monetization models
Type of
resource
PowerPoint Presentation
(PPT)
Type of
learning
Face-to-face
Resource title
Pros and cons of monetization
models
Learning
hours
1,5h
Contents
- Pros and cons of different revenue models
- Companies examples of each revenue model
7. DIRECT SALES
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PROS:
Low financial risk: low to investment and overhead
Mostly: home-based businesses and are often geared to women
Relatively low number of customers needed. BUT – more business
builders
CONS:
Uncomfortable: attempting to sell for your friends, relatives, and
colleagues
Isn’t optimal for small price items
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9. FREEMIUM MODEL
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PROS:
Perfect opportunity for free beta testing of new products or features
People are more likely to become engaged and loyal users later on
Opportunity to upsell and monetize user base
Increases audience size with no barriers to entry and no risks
CONS:
Requires a considerable investment of time and money to reach and
convert free users into paying customers
Customers must see a great value to invest in upgrade conversion at
some point
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11. AD-BASED REVENUE MODEL
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PROS:
Relatively simple: create a site that has a large and sustainable
traffic
CONS:
It can be risky: you will need to attract millions of users with any
guarantee that anyone is actually going to click the advertisement
Your wesite should fit the needs of desired online advertising goals
Most people find advertisement annoying, which can lead to lower
traffic and decreased revenue
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12. AD-BASED REVENUE MODEL
Companies examples:
▪ Buzzfeed
▪ Conde Nast
▪ Disney
▪ Facebook
▪ Forbes
▪ Google
▪ The New York Times 12
Source: www.pixabay.com
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13. SUBSCRIPTION REVENUE MODEL
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PROS:
Stable and predictable Income
Subscribers are more likely to be loyal and engaged app users
Increasing audience motivates to ensure high-quality product
CONS:
Difficulty keeping the interest and proving the value
Risk of cancellation: constant pressure to maintain a higher
subscribe rate than an unsubscribe rate
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15. AFFILIATE REVENUE MODEL
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PROS:
More money than ad-based revenue models
Low-cost, low investment
Loss of control: branding and brand image
Low responsibility: customer service is not in your interest
Increasing audience motivates to ensure high-quality product
CONS:
Revenue is limited to the size of your industry
Sometimes can be associated with spammy marketing campaigns 15
16. AFFILIATE REVENUE MODEL: payment methods
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Pay Per Click (PPC) - Affiliate gets paid whenever the affiliate link is
clicked.
Pay Per Impression (PPI) - Affiliate is paid when someone lands on
the merchant’s site.
Pay Per Lead (PPL) - Affiliate is paid when someone clicks on
affiliate link and takes an action, e.g. completing a form to generate
a new lead.
Pay Per Sale (PPS) - Affiliate is paid when a sale is made. Affiliate
receives a percentage of the cost of that item.
Source: zuora.com - Affiliate revenue model example: How to increase monetization through the affiliate revenue model?
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18. TRANSACTION REVENUE MODEL
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PROS:
Direct and simple way of generating revenue
Wide set of options can be offered for customer
CONS:
High competition and price deterioration
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20. CHANNEL SALES
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PROS:
Indirect sales channels have more visitors
Relatively low maintenance after establishment
Ideal for companies who have a product that’s an incremental sale
for their channel and can produce incremental profit
CONS:
This model is not effective if your product requires you to evangelize
your marketplace, or if your product competes with that of your
partner’s, as they will push theirs and not yours
Bigger competition
Source: The Founder Institute.10 Most Popular Startup Revenue Models
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22. WEB SALES
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PROS:
Include a wide variety of offerings, including software, hardware, and
even subscription services
CONS:
Impersonal Customer Service
Customer resistance to payment
Technical issues
Relationship sales are incompatible with the web sales model, so if
your company is related to consulting or big ticket items (high-value
items such as houses, appliances, and cars), you should consider
employing a model that’s more suited to your offering.
Source: The Founder Institute.10 Most Popular Startup Revenue Models
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24. RETAIL SALES
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PROS:
Full control of your vision becoming a reality: products, management
style
Full responsibility: being the boss
CONS:
Financial risk
Long working hours
Challenges with difficult customers and emploees
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26. FREE PRODUCT, EXCEPT SERVICES
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PROS:
Great trust and brand awareness customer
CONS:
Running a services business with the product as a marketing cost
Not efficient for scaling a company in the long term.
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Source: The Founder Institute.10 Most Popular Startup Revenue Models
27. LET’S REVIEW SOME CONCEPTS
Monetization model Revenue model
Direct Sales Transactional Revenue Model
Freemium Model Free Product, EXCEPT Services
Subscription Revenue Model Channel Sales (or Indirect Sales)
Affiliate Revenue Model Ad-Based Revenue Model
Web Sales Retail Sales 27
28. This project has been funded with support from the European Commission.
This publication reflec ts the vi ews onl y of the aut hor , and the Commission cannot
be held responsible for any use which may be made of the information contained therein.
Project Number: 2018-1-UK01-KA202-047909
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