Making money providing a free online service is still the sexiest option for many entrepreneurs and business owners, but generating revenue by charging users is increasingly sexy too.
As such, it's no surprise that in recent years many companies have sought the best of both worlds through the so-called 'freemium' model.
Twitter seems to be moving towards a ‘walled garden’ model, with hosted ads. But is there another way forward?
As recently reported here on Econsultancy, Twitter’s API is ‘evolving’. It’s already removed personal Twitter feeds from LinkedIn, and is threatening to revise the terms of its API so that third parties like Tweetbot and Tweetie can no longer replicate its core experience on their sites.
Some commentators see this as a move towards a ‘walled garden’ model, like Facebook’s, where people must use Twitter’s own sites or apps to access the core experience.
Once there, they’ll be obliged to put up with whatever ads Twitter sees fit to host. The strategy gives Twitter full control over the format of advertising, and also the option to integrate more added-value stuff (games, e-commerce etc).
While the business of virtual goods has probably been popularized most by social games such as Farmville, the mobile market for virtual goods has developed into a lucrative space for mobile games as well.
There's a good reason for this: charging for a mobile game itself has become increasingly difficult for many game developers, and virtual goods offer one of the best ways to implement a freemium model.
According to mobile ad network Flurry, as of June 2011, well over half (65%) of the revenue for top-grossing games in Apple's U.S. App Store was generated by freemium games. Just six months earlier, 61% of revenue was generated by paid games.
The internet has popularized the freemium model like no other channel,
but building a successful business on this model can be quite a
One company that has succeeded: Spotify, the Swedish company that has become Europe's most popular music streaming service.
For many internet startups, a freemium business model is an enticing
solution to the problem of revenue generation: let the world taste what
you provide at no cost, and once your most avid users are hooked, let
them pay for what they've come to love.
It's simple in theory, but for many startups, building a viable business on the freemium model never becomes a reality.
Rupert Murdoch's News Corp is frantically trying to monetize its digital properties. As part of that plan, popular video site Hulu recently added a premium version that costs $9.99 a month. For consumers looking for high quality video content online, it's an interesting model. But there's one catch.
According to new research from One Touch Intelligence, 88% of the content available on Hulu Plus is already available on Hulu for free.
In alll the talk about paid content online, the word freemium comes up a lot. In theory, freemium allows consumers to get a taste of a product for free and then eventually converts them into paid customers once they get hooked and demand more services. But it's not always so easy.
In the case of social networking platform Ning, the freemium model was putting them out of business. Starting in June, Ning went all in on premium. The result? More people are paying to use Ning. But whether that's sustainable is another story.
Online communications tool Skype has been wildly popular in its seven-year existence. And for good reason — it makes free internet and video calls feasible for people who want to communicate around the world. But the business model has one discernable flaw: if everyone in the world used Skype to call each other, the company would make no money.
Skype CEO Josh Silverman says his company's mission is to be “the
fabric of real-time communication on the web." With over 23 million people Skyping in March, it seems the company is getting pretty close to achieving that goal. But getting users to pay for premium services could be a challenge. That's why the company is considering adding advertising to its interface. Will consumers take to ads after getting Skype for free all these years?
The recession and weak ad market have led many well regarded businesses to ask their customers to reach into their pockets and pay a little (or more) money to their cause. But guilting users into opening their wallets is not a long term fix.
This week, Ars Technica CEO Ken Fisher conducted an experiment with ad blocking software, in efforts to get readers to start interacting with the ads on his site. My colleague Patricio Robles has written about the mixed reaction to Ars Technica's plea. But now it turns out that Fisher's efforts have helped the site's bottom line.
The road to online music streaming is littered with the bodies of startups with interesting ways of sharing music. And internet radio darling Pandora was almost one of them — multiple times. This weekend, The New York Times documented the various ways that Pandora almost went out of business over the 10 years of its existence.
Pandora is on track to earn $100 million this year. That turn around is due to a number of issues. Some of them are extenuating circumstances — like recently reduced royalty fees for streaming songs. But Pandora has also been paying attention to changes in consumer behavior and digital payment structures. Their new revenue streams — including online ads, new streaming deals and a paid streaming model — prove that there's not always one way to bring in a dollar.