The great thing about building a website that drives high traffic is that it offers opportunities to earn revenue in a variety of ways. And though it's exciting to jump on the monetization train right away (who hasn't been lured by the promise of advertising revenue?), it's important to first evaluate both the opportunities and the risks inherent in each approach to ensure the greatest success.
In this article, I'd like to walk you through a few typical monetization approaches, how they can earn you money, and what you should watch out for as precautions. Let's get started.
In this article, I'd like to walk you through a few typical monetization approaches, how they can earn you money, and what you should watch out for as precautions. Let's get started.
#1. Pay-per-click (PPC) advertising
THE OPPORTUNITY: Pay-per-click advertising provides you with extra revenue as you earn every time a site-user clicks on an advertisement on your site. It's a great way to leverage real estate you already own. Also, if optimized correctly, advertisements could create extra value for users as your serve up relevant offers.
THE RISK: You only earn revenue when an ad is clicked, so you run the risk of not earning anything if the advertisements aren't relevant and tailored to your site's audience. You also run the risk of overwhelming your site-user with advertising when they are already bombarded with messaging from all channels. You can mitigate both these risks by ensuring that advertisers suit the content on your site and are providing products/services that are relevant to your user.
THE RISK: You only earn revenue when an ad is clicked, so you run the risk of not earning anything if the advertisements aren't relevant and tailored to your site's audience. You also run the risk of overwhelming your site-user with advertising when they are already bombarded with messaging from all channels. You can mitigate both these risks by ensuring that advertisers suit the content on your site and are providing products/services that are relevant to your user.
#2. Cost-per-impression (CPM) advertising
THE OPPORTUNITY: Cost-per-impression advertising ensures that you earn revenue as long as site-users view the advertisement, regardless of whether they click-through. Like PPC, this also leverages your site's real estate, though this approach mitigates the risk associated with a lack of click-throughs.
THE RISK: CPM revenue relies on high traffic to the site. Advertisers will want to be on pages where they can earn a lot of impressions, and you'll want to be able to serve more impressions in order to earn more revenue. Another risk is that not requiring click-throughs may lead to less-relevant advertising, which could frustrate site users and lead to a loss in traffic.
THE RISK: CPM revenue relies on high traffic to the site. Advertisers will want to be on pages where they can earn a lot of impressions, and you'll want to be able to serve more impressions in order to earn more revenue. Another risk is that not requiring click-throughs may lead to less-relevant advertising, which could frustrate site users and lead to a loss in traffic.
#3. Subscription
THE OPPORTUNITY: A subscription based model provides a more continuous revenue stream. In addition, site-users are opting-in to pay, ensuring that they value the content you're providing.
THE RISK: As subscription revenue relies on consumers being willing to pay for your content, which means that you need to invest in quality content, or risk losing out on any revenue. Another risk is if you already have advertising on your site, potential subscribers may not being willing to pay for content that they are already "paying for" by putting up with advertising.
THE RISK: As subscription revenue relies on consumers being willing to pay for your content, which means that you need to invest in quality content, or risk losing out on any revenue. Another risk is if you already have advertising on your site, potential subscribers may not being willing to pay for content that they are already "paying for" by putting up with advertising.
#4. Data Monetization
THE OPPORTUNITY: Leverage the data you gather about your users to earn revenue from companies willing to pay for consumer insights. Companies like Facebook are using this model
THE RISK: Privacy concerns can kill this monetization approach. Take Facebook as an example again, who lost 9 Million active US users in the last year, 48% of whom stated that privacy concerns were the cause for their departure. Tread lightly when it comes to using your visitor's data and mitigate as many of the risk as possible through a strong privacy policy.
THE RISK: Privacy concerns can kill this monetization approach. Take Facebook as an example again, who lost 9 Million active US users in the last year, 48% of whom stated that privacy concerns were the cause for their departure. Tread lightly when it comes to using your visitor's data and mitigate as many of the risk as possible through a strong privacy policy.
#5. Freemium
HootSuite plays the Freemium card well, offering well-constructed value tiers including Free, Premium, and Enterprise that address very different usability requirements.
In order to learn more about the Freemium Model, I spoke with Kemp Edmonds from HootSuite to learn more about how HootSuite found value in the Freemium model.
In order to learn more about the Freemium Model, I spoke with Kemp Edmonds from HootSuite to learn more about how HootSuite found value in the Freemium model.
THE OPPORTUNITY: Freemium is another interesting opportunity to monetize site traffic, by capitalizing on the 80/20 rule. By providing a quality free product, the brand is able to develop high brand awareness and product trial. From there, they can monetize by charging for premium or super-premium services. This monetization approach adds value because only consumers who require and are willing to pay for extra value will have to pay. This allows you to earn 80% of your revenues from 20% of your consumer base, capitalizing on the 80/20 rule.
THE RISK: As many success stories as there are with the Freemium model (Skype, LinkedIn, HootSuite), there are many companies that have failed because their costs ran rampant since they couldn't support the first-stage high-quality free product. For Freemium to succeed, the site needs to be able to afford to support the product well before revenue comes through the door. Once the free product is established, they then need to develop value tiers that accommodate all users, while ensuring enough extra value is provided in premium tiers to earn revenue.
THE RISK: As many success stories as there are with the Freemium model (Skype, LinkedIn, HootSuite), there are many companies that have failed because their costs ran rampant since they couldn't support the first-stage high-quality free product. For Freemium to succeed, the site needs to be able to afford to support the product well before revenue comes through the door. Once the free product is established, they then need to develop value tiers that accommodate all users, while ensuring enough extra value is provided in premium tiers to earn revenue.
Choose what makes sense for your site
In the end, remember to evaluate all the potential opportunities and risks associated with a monetization method. This will allow you to choose the best fit for your site as well as allow you to mitigate any risks that you identify.
Have any other great monetization ideas? Feel free to leave them in the comments!
Have any other great monetization ideas? Feel free to leave them in the comments!