Elliot Swan

Online Business (Revenue) Models That Work 7:41 pm

Advertising’s always a popular choice for generating revenue, but I’m more interested in alternative models. I’ve racked my brain, and here’s a list of ways and places I’ve spent money online.  

Subscription Models

Online subscription models are interesting because there usually do exist competitors that provide similar services for free and/or for purchase/pay-per-use. In order for these services to draw somebody over, either the customer finds the need to use it often enough that a pay-per-use would be more expensive, or the business offers exceptional quality and features.

• Flickr Pro – While I’m not currently a Flickr Pro member, I used to be and loved it. I haven’t been doing as much photography as I used to, so I haven’t found the need to renew my subscription. However, if I do start doing a lot of photography again in the future I won’t hesitate to upgrade to Pro. Like many subscription services online, the company actually provides a free version of their services as well–this seems to compete well with all the other free services and gets their users hooked. Once they need more space/features, users are already brand-loyal and it’s a fairly good bet they’re going to stick with Flickr.
• Rhapsody — To be honest, I can’t actually remember if it was Rhapsody I used or Yahoo!’s Music Unlimited thing. But since Yahoo!’s joined with Rhapsody now, I’ll just say it was Rhapsody. I seem to remember actually paying for this by accident (I was a sucker for the old free-trial-turned-subscription trick) and kept forgetting to cancel my subscription for a few months. I will admit, however, while I had it I sure used it. I have considered using something like this again, as unlimited music for more or less the price of a CD a month sounds pretty good. I guess what stops me is the fact I don’t necessarily want to use their software and the fear of later deciding to cancel the subscription and not having my music anymore.
• Domain Names — I have way more of these than I need. They probably aren’t a product most people would think of when they think of subscription model businesses, but they do run on a yearly (or longer) subscription sort of model.
• Hosting — I’ve got a couple hosting accounts, this site currently on Dreamhost. The interesting thing about buying hosting is that unlike most subscription model businesses, you’re not only just paying for a service, but you’re actually renting space and access to real servers sitting somewhere in California or wherever yours are.

Indirect Models

Other online business generate some revenue in an indirect manner through taking cuts from when you make money. If the service is valuable enough, I think people are often a lot more willing to give it a shot because they’re not seeing their money disappear as much–the services are actually helping them make money.

Retail/E-commerce Models

While not everything in this list is technically a retail or e-commerce business, it’s close enough for the purposes of this post. Basically, I’ve included here business that have sold me products via a one-time fee. These are probably the most common online business and many times the easiest to set up.

• Newegg — A geek’s favorite stop for good deals on gadgetry. This follows the philosophy of a lot of successful online retailers: People like getting really good deals. That’s what the internet’s for, right?
• Amazon — Another “duh” entry. Who hasn’t spent money at this place? It’s basically the ultimate online Walmart. 
• Amazon Mp3 – While technically still Amazon, I felt this deserved its own spot. Unlike most of the areas on Amazon, this one sells digital mp3 files–and totally DRM-free, I might add. Amazon also stayed true to their reputation of generally having good prices (like any supermarket should), and music here is remarkably cheap. With everybody selling mp3s nowadays, Amazon has found itself a niche in those ways. While you do have to install a small bit of software to download the mp3s, the actual shopping and purchasing is done completely online through a browser.
• iTunes — While not the cheapest, and not always DRM-free (but sometimes), iTunes has definitely come out as a big player in the market. The iPod has no doubt had a lot to do with this, which adds an interesting twist to Apple’s business model choices–especially since music bought on iTunes often doesn’t work on many other mp3 players. I’ve also used their new movie rental service a couple times, which provides an interesting alternative to subscription-based movie rental services such as Netflix.
• Threadless — Can’t leave Threadless out of this one. They’ve come out with a truly amazing business model by combining community with e-commerce. People love to support companies they feel actually listen to them, and Threadless pulls it off.
• Brick and Clicks – “Bricks and Clicks” refer to businesses such as Target or Best Buy that have taken their traditional offline businesses to the web. While many simply add convenience to what they’ve already offered, some, such as Best Buy, will offer special deals only online (though you might be able to actually pick up your product in a store). While these may not provide many new things to the web, they still provide reliability and convenience to consumers.

Self-Hosted Application Models

This can be a tough one to sell, because there are so many free (and high quality) alternatives to self-hosted applications like this. I really only use one purchased application of this type, though I do own a few licenses of it.

• Mint — Thanks to Joe for reminding me to add this one to the list (don’t know why I hadn’t thought of it… Especially since I am an addict). Mint took a lot of heat for its business model back during its original launch, because for some reason many people thought it should have been free. This of course is ridiculous, and as one of the few popular purchasable, self-hosted web apps Mint has managed to be extremely successful. 

Services I Haven’t Paid For, But Would Consider

• Netflix
• Blockbuster Online
• I’m sure there are others, but none are currently coming to mind. 

Interested To Hear…

So, what about you guys? Where have you spent money online, and what haven’t you tried but would consider?