Online publisher revenue models for online businesses

For a publisher or other media site owner, I would identify eight types of revenue model which are possible online. Let me know of any I'm missing :) Of course, transactional sites have the option of these also in addition to sales - online, everyone is a media owner.

To model different Internet site revenue models I also have an online revenue model spreadsheet.

This spreadsheet is for media site owners to estimate ad or affiliate marketing revenue from a site or section of site. It allows parameters such as % inventory, number of ad units, CPM and CPC to be set. Total revenue for each ad unit or container and corresponding Earnings per 100 clicks (EPC) or Earnings per thousand page views (eCPM) are calculated automatically.

OK, these are my eight alternative digital revenue models:

1. Revenue from subscription access to content

A range of documents can be accessed for a period of a month or typically a year. For example, I subscribe to FT.com for access to the digital technology section for around €80 per year.

2. Revenue from Pay Per View access to documents

Here payment occurs for single access to a document, video or music clip which can be downloaded. It may or may not be protected with a password or Digital Rights Management.

For example, I pay to access detailed best practice guides on Internet marketing from Marketing Sherpa.

Digital rights management (DRM) The use of different technologies to protect the distribution of digital services or content such as software, music, movies, or other digital data.

3. Revenue from CPM display advertising on site

CPM stands for ‘cost per thousand’ where M denotes ‘Mille’. The site owner such as FT.com charges advertisers a rate card price (for example €50 CPM) according to the number of its ads shown to site visitors. Ads may be served by the site owners own ad server or more commonly through a third-party ad network service such as Google AdSense as is the case with my site.

4. Revenue from CPC advertising on site (pay per click text ads)

CPC stands for ‘Cost Per Click’. Advertisers are charged not simply for the number of times their ads are displayed, but according to the number of times they are clicked. These are typically text ads similar to sponsored links within a search engine but delivered over a network of third-party sitesby on a search engine such as "Google:http://www.google.com or on a network such as Google Adsense, Yahoo Content Match, Microsoft Content Ads or MIVA.

Typical costs per click can be surprisingly high, i.e. they are in the range €0.10 to €4, but sometimes up to €20 for some categories such as ‘life insurance’ which have a high value to the advertiser. The revenue for search engines or publishers from these sources can also be significant. For financial year 2005, Google reported its search revenues as follows: Google Sites Revenues - Google-owned sites generated revenues of $1.098 billion, or 57% of total revenues. Google Network Revenues - Google's partner sites (for example, my site: www.davechaffey.com) generated revenues, through AdSense programs totaling $799 million, or 42% of total revenues.

For me, the search content networks are one of the biggest secrets in online marketing with search engines such as Google generating over a third of their revenue from the network, but some advertisers not realising their ads are being displayed beyond search engines and so not served for this purpose.

Google is the innovator and offers options for different formats of ad units including text ads, display ads, streamed videos and now even cost per action as part of its pay per action scheme.

5. Revenue from Sponsorship of site sections or content types (typically fixed fee for a period)

A company can pay to advertise a site channel or section. For example, bank HSBC sponsors the Money section on the Wanadoo/Orange portal (www.wanadoo.com) or www.orange.co.uk. This type of deal is often struck for a fixed amount per year. It may also be part of a reciprocal arrangement, sometimes known as a ‘contra-deal’ where neither party pays.

A fixed-fee sponsorship approach was famously used by Alex Tew in 2005, a 21-year-old considering going to University in the UK who was concerned about paying off his university debts. This is no longer a concern since he earned $1,000,000 in 4 months when he set up his Million Dollar Homepage.

In fact, he may no longer need to go to University… His page is divided into 100-pixel blocks (each measuring 10x10 pixels) of which there are 10,000 giving 1,000,000 pixels in total. Alex spent £50 on buying the domain name (www.milliondollarhomepage.com) and a basic web-hosting package. He designed the site himself but it began as a blank page.

6. Affiliate revenue (CPA, but could be CPC)

Affiliate revenue is commission based, for example I display Amazon books on my site DaveChaffey.com and receive around 5% of the cover price as a fee from Amazon. Such an arrangement is sometimes known as Cost Per Acquisition (CPA ).

Increasingly this approach is replacing CPM or CPC approaches where the advertiser has more negotiating power. For example, in 2005 manufacturing company Unilever negotiated CPA deals with online publishers where it paid for every e-mail address captured by a campaign rather than a traditional CPM deal.

However, it depends on the power of the publisher who will often receive more revenue overall for CPM deals. After all, the publisher cannot influence the quality of the ad creative or the incentivisation to click which will affect the Clickthrough rate on the ad and so the CPM.

7. Subscriber data access for e-mail marketing.

The data a site owner has about its customers is also potentially valuable since it can said different forms of e-mail to its customers if they have given their permission that they are happy to receive e-mail either from the publisher or third parties. The site owner can charge for adverts placed in its newletter or can deliver a separate message on behalf of the advertiser (sometimes known as list rental). A related approach is to conduct market research with the site customers.

8. Access to customers for online research

An example of a company that uses this approach to attract revenue from surveys is the teen site Dubit.

Considering all of these approaches to revenue generation together, the site owner will seek to use the best combination of these techniques to maximize the revenue. To assess how effective different pages or sites in their portfolio are at generating revenue, they will use two approaches. The first is eCPM, or effective Cost Per Thousand.

This looks at the total they can charge (or cost to advertisers) for each page or site. Through increasing the number of ad units on each page this value will increase. This is why you will see some sites which are cluttered with ads. The other alternative to assess page or site revenue generating effectiveness is Revenue per click (RPC), which is also known as Earnings Per Click (EPC).

This is particularly important for affiliate marketers who make money through commission when their visitors click through to third party retail sites such as Amazon, and then purchase there.