Online Revenue Business Models

Socially, the experiment was a mixed bag. A bunch of people whitelisted Ars, and even a few subscribed. And while others showed up to support our actions, there was a healthy mob of people criticizing us for daring to take any kind of action against those who would deny us revenue even though they knew they were doing so. Others rightly criticized the lack of a warning or notification as to what was going on.

Ars Technica

The post finished with a request that people not use ad blockers & decrease revenue for the site.  This reminded me after the crash in November 2008 when the Irish government decided to continue with their plan of increasing VAT on goods & services that were already some of the highest priced in Europe.  Across the border in Northern Ireland, the UK government dropped VAT on goods & services that were already much lower priced than in the Republic.  Droves of people were crossing the border, a couple of hours drive, every day to purchase their groceries & Xmas goods in Northern Ireland.  Never ones to arise early except for financial reasons, they were queueing for hours before shops opened across the border.  The Irish government pleaded saying that they should be loyal to Ireland & buy in the country, but provided no incentives for that to happen.  Of course no-one listened & they continued taking the trip across the border even to this day TO SAVE MONEY!  Many businesses have gone to the wall & the Irish Republic was talking about going to the IMF at the end of last year so their pleas to the  public was having NO real affect in the economy.  But to this day they still have not implemented a plan to ensure that their own people would shop in their own country?  Go figure?

Bret Piatt had an interesting article ‘Advertising isn’t the only business model for Websites’ where he listed the main models on the net, as per below:

  • 100% advertising
  • hybrid model of pay for content (either through one time purchase or a subscription) plus advertising revenue
  • 100% pay for content with no advertising
Bret Piatt

Another post by John Leach called ‘Advertising and ad blocking’ who talks about advertising’s moral & psychological affect:

Advertising is mind pollution. Advertising is designed to affect the behaviour of people for the benefit of the advertiser.  Why would anyone willingly expose themselves to something designed to steal their attention?

John Leach

Brian Carper on his blog posted ‘Advertising is devastating to my well-being’ and talked about ethical concerns as per:

  • Stop making the world a garish and hideous place to live by flooding it with ads.
  • Stop trying to grab my attention, evoke emotional responses in me, manipulate my mind, and trick me into spending money on crap I don’t need. This is what advertisement is. Stop disrespecting me and insulting my intelligence. Stop viewing me as an anonymous, money-spending piece of cattle.
  • Stop trying to track my every move online. How many people understand tracking cookies? How many companies make it clear that every click is being recorded and data-mined? How is this ethical?
Brian Carper

My take on this is that online business needs to think creatively about their business models and not just fall back on advertising.  We are doing business in a different world and need to get with the program.    Techcrunch published an interview with Mark Andreessen, a venture capitalist, founder of Netscape & owner of Ning social network,  ‘Andreessen’s Advice To Old Media: “Burn The Boats”’ which said:

In particular, he was talking about print media such as newspapers and magazines, and his longstanding recommendation that they should shut down their print editions and embrace the Web wholeheartedly. “You gotta burn the boats,” he told me, “you gotta commit.” His point is that if traditional media companies don’t burn their own boats, somebody else will.

I pitched for a dating site on in January and the winner out of the 12 startups who pitched, actually had no business revenue model.  We realised afterwards that the service & technology was brilliant & seduced us all but he did not present a viable revenue model and won???  This shows how much focus we all need to put on revenue business model if we plan on remaining online businesses.  Often we go from the extreme of free to the other extreme of advertising based model.  Somewhere in the middle we can make money & provide brilliant service to our customers.

Fred Wilson posted ‘When Talking About Business Models, Remember That Profits Equal Revenues Minus Costs’ where he brings up the salient point:

There is no shortage of discussion about Internet business models these days. And they almost always focus on revenues. But revenues are only half of the value creation equation. The other half is costs.

Fred Wilson

And I think that “operating leverage” is going to create a lot of value.

So let’s not lose the plot with Web 2.0 businesses, let’s create new business models, make money & provide great services for our users.

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