This document discusses 10 common monetization models for digital businesses: direct sales, freemium, ad-based, subscription, affiliate, transactional, channel sales, web sales, retail sales, and free product except services. For each model, it provides 1-2 sentences on the pros and cons as well as examples of companies that utilize each model. The models are defined and their revenue generation approaches are briefly explained. In conclusion, it reviews some key monetization model concepts.

1. PROS AND CONS OF
MONETIZATION MODELS

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

3. “ Content builds
relationships.
Relationships are built
on trust. Trust drives
revenue
Andrew Davis
3

4. CHOOSING THE BEST REVENUE
MODEL FOR YOUR COMPANY
4

5. 1. Direct Sales
2. Freemium Model
3. Ad-Based Revenue Model
4. Subscription Revenue Model
5. Affiliate Revenue Model
6. Transactional Revenue Model
7. Channel Sales (or Indirect Sales)
8. Web Sales
9. Retail Sales
10. Free Product, EXCEPT Services
START-UP REVENUE MODELS
55

6. 6
PROS AND CONS
Source: www.pixabay.com
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7. DIRECT SALES
7
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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8. DIRECT SALES:
Companies examples:
▪ Avon
▪ Tupperware
▪ Kirby
▪ Mary Kay
▪ Amway
8
Source: www.pexels.com
8

9. FREEMIUM MODEL
9
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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10. FREEMIUM MODEL
Companies examples:
▪ Angry Birds
▪ Evernote
▪ MailChimp
▪ Dropbox
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Source: www. pixabay.com
10

11. AD-BASED REVENUE MODEL
11
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
11

12. AD-BASED REVENUE MODEL
Companies examples:
▪ Buzzfeed
▪ Conde Nast
▪ Disney
▪ Facebook
▪ Forbes
▪ Google
▪ The New York Times 12
Source: www.pixabay.com
12

13. SUBSCRIPTION REVENUE MODEL
13
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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14. SUBSCRIPTION REVENUE
MODEL
Companies examples:
 Amazon Prime
 Netflix
 Netjets
 Spotify
 Zipcar
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Source: www.pixabay.com
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15. AFFILIATE REVENUE MODEL
15
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
16
 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?
16

17. AFFILIATE REVENUE MODEL
Companies examples:
 LifeWire
 ShoutMeLoud
 Dating Advice
17
Source: www.pexels.com
17

18. TRANSACTION REVENUE MODEL
18
PROS:
 Direct and simple way of generating revenue
 Wide set of options can be offered for customer
CONS:
 High competition and price deterioration
18

19. TRANSACTION REVENUE
MODEL
Companies examples:
 Doctor On Demand
 Blendle
 Virgin Megastore
19
Source: www.pixabay.com
19

20. CHANNEL SALES
20
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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21. CHANNEL SALES
Companies examples:
 Ultra Mobile
 Quick Bridge Funding
 StartApp
 Scopely
21
Source: www.pixabay.com
21

22. WEB SALES
22
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
22

23. WEB SALES
Companies examples:
▪ Amazon
▪ Jingdong
▪ Alibaba Group Holding
▪ eBay
▪ Zalando
23
Source: www.pixabay.com
23

24. RETAIL SALES
24
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
24

25. RETAIL SALES
Companies examples:
 Wal-Mart
 Tesco
 Walgreens Boots Allianc
 Carrefour
25
Source: www.pixabay.com
25

26. FREE PRODUCT, EXCEPT SERVICES
26
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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