Beyond AdSense: A Business Model Checklist

This great post by Peter Rip has me off the dime to make a list I’ve wanted to make for a while: a checklist of the various business models available to developer of live Web apps & services. During a podcast with Lane Becker, we started brainstorming options open for entrepreneurs.

Programmable Web has the definitive list for APIs availalbe for mashing up, so why not create a revenue toolbox as well? Now, I’ve simplified things a bit, and as Peter’s chart makes clear, there are tons of facets for value creation that can generate different types of revenue. There’s so much more potential than “let’s get some traffic and take the AdSense revenue” or, even, the straightforward 37signals approach: make a service that someone will pay you to use.

Here’s my initial crack at this, and many examples are combinations of these approaches (as Peter points out). Feel free to add your suggestions.

1. Advertising

Naturally, this old-school option pops up the most often, and why not? It’s how our media businesses have been built for the past hundred years or so, and Google’s success has shown that new twist can keep the model valid for Web businesses. How long will the AdSense party last though?

Banner Ads

Oh my. You still see these around, some even more annoying than others with action that tries to flag your attention. I’m sure someone can point me to numbers that say these things delivery some sort of value, but, wow, you’re not thinking too hard here.

Example: BusinessWeek seems plastered with these. You know what banner ads look like. Unless you’ve used GreaseMonkey so long you forgot.

Contextual Advertising

The house that Overture blueprinted & Google built. You see Technorati, Feedburner and all sorts of companies rolling these in. Better than crude ads, sure, but not exactly a creative move at this point. Plus, it seems to me this should be lagniappe and not your main plan.

Examples: heavens, isn’t almost every blog plastered with AdSense ads?

Syndicated Ads from Boutique Media Services

If you play in a defined niche that is addressed by one of the boutique ad networks popping up (Federated Media, BlogAds, The Deck, Gawker), then this might be right for you.

Examples: GigaOm, Kottke.org, 43folders all use these types of ad networks.

Affiliate Networks

Refer traffic to Amazon and other retailers and take a cut.

Example: 43Folders, etc.

Watch An Ad, Get Access to Premium Content

Targeting ads around desirable content.

Example: Salon’s DayPass system.

Sponsorships

Limit the types of marketing possible on your site and offer more exclusive types of support in the form of sponsorships. This can go far beyond just slapping a logo up on the site, and can evolve into some creative content/service offerings.

Examples: Techcrunch, Flickr (the Nikon program), Cork’d, Rocketboom, Flock & other browsers

2. Make Them Pay

As the 37Signals guys point out, there is a simple way to make money with your app, charge people to use it. Naturally, there are various flavors to this. Here are a few:

Freemium

Fred Wilson’s favorite business model, one that I like a bunch too. Try it before you buy it. Offer up some variant of your service for free, build the user base, and then allow folks to buy a more premium level of service.

Examples: Flickr, PbWiki, Backpack, Box.net, FeedBurner, and many, many others

Subscription Model

Ah, recurring revenues. This, combined with a freemium entry point, is tops for me. Sell various levels of service with sliding fees, making it simple to updgrade (or downgrade) a user account as desired.

Examples: Basecamp, Flickr, Web hosting companies, Valleyschwag

One-time License/Fee

Think old-school shareware. Trial the app, and if you like it, cough up a minimal licensing fee. Pretty simple, though, upgrades, etc. make it less attractive. Plus, I like the constant customer contact a subscription model allows for.

Examples: NetNewswire, Mint, MetaFilter

Premium A La Carte Services

Cross sell premium services to your subscriber base.

Examples: Apple iPhoto books, Edgeio, Dogster

Revenue Share

If you’re offering a market-making service, the model seems pretty straightforward to me: take a piece of the action. Even better if your app helps create a market that was heretofore difficult to bring together.

Examples: Ebay, Federated Media or other ad networks, CafePress

3. Because of, Not With

Sometimes the revenue streams are a bit indirect. We’re talking about Doc‘s assertion that more people will make money ‘because of’ open source software or whatever, than ‘with’ open source software. Here are some of the indirect revenue streams that jump out at me:

Publications

While many of us are giving away a sample of our thinking every day via blogs and other self-publishing platforms, you can charge for content. It helps to have a huge support base, natch, but I think more people will follow the self-publishing path.

Examples: Get Real, Adaptive Path publications

Professional Services

One straightforward way to make money on ‘free’ software is to sell support services around it.

Examples: Automattic, Spanning Partners

White Label Versions

We used Biggu.com as a demo version of our corporate blogging tools, and tried to sell white label versions for companies who would want tweaks to the branding and workflow we’d already built.

Example: Big in Japan, Newsgator

Sell Intelligence

Analyst groups have been playing this game for years. Sell your know how in a variety of forms: events, subscription newsletters or reports, access to data.

Examples: Technorati, Analyst Groups, FeedBurner stats

Cross Selling the Next Product

Ask A Ninja was originally started as an attention gathering project for the ‘real’ content project those guys wanted to sell. Ok, you’ve got our attention. I doubt I would have seen ‘Hope is Emo’ so quickly, and now they could easily launch a number of things via that audience already gathered around Ask a Ninja. Likewise, setting up a free TaDa list gets lots of 37Signals products in front of you. These loss leaders can help you build the right kind of tribe.

Examples: Campfire, Feedburner, Yahoo!

Update: Tara’s thinking about the same sorts of things.

Jeremiah has some additional modes: