Making money online: 6 business models

If you want to make money from your app, computer game, software, or digital service, you can. It is up to you to decide how: do you want to sell ad space, so that your product can remain free of charge? Or do you sell online subscriptions? These 6 digital business models may help you decide.

1. The free model

When you use the free model, you provide software or a service free of charge. Well-known examples are Google, social media platforms, and smartphone games. There are many more examples, such as weather apps, and news and entertainment websites. Free products or services are attractive for users: they can try them out without having to pay.

Making money with the free model

There are several ways of making money using the free model. For instance, by selling your users’ data. Users of social media platforms often have to agree to general terms and conditions that state that users agree to the sale of their personal data to commercial parties. These commercial parties then use the data for highly personalised advertising.

The GDPR privacy regulation does require from you as an entrepreneur that you respect the users’ rights. You have to inform your customers about how their data is being processed, and by which parties. Several social media platforms, for example, show an overview of the parties that process personal data they provide.

You can also sell ad space. Probably the best-known example of this is showing an ad after every completed level of a game. Or you can link advertisers to digital playlists in your music streaming service, so users will hear ads between the tracks.

2. Freemium model

The freemium model is a variant of the free model. Only part of the product is free. Does the user want a full, or a better version? Then they have to pay. This model encourages users to make the switch to the paid version.

WeTransfer uses the freemium model. You can transfer files of up to 2 gigabytes (GB). If you want to send larger files, you have to pay. Self-employed professionals and SMEs also use the freemium model. Event photographers for example: do you want to download 1 photo or a set? The 1 photo is free, but you have to pay for a set. Or a financial advisor who shares expertise through e-books, webinars, and digital newsletters. These are all free, but if you need custom advice, you pay.

3. User designed model

The user designed model saves you money and time. The model uses your customers’ creativity. They design their own product; you only process the order. Your software enables customers to design a self-made product. For instance, t-shirts, mugs, tiles, puzzles, stickers, photo albums, or wallpaper.

Personal

An added bonus of this model is that users value you for the personal product you offer. But remember: you can only use this model if you sell products that are suitable for printing and personalisation.

4. Online platform

This business models brings different types of users together. Your app or website caters for demand and supply. You make money by selling ads, or by charging a fee or percentage per transaction.

There are many examples of online platforms. You can buy and sell products via Marktplaats, bring together drivers and passengers who are going in the same direction on BlaBlaCar, and buy and sell houses through Funda. This business model also works on a smaller scale: hondjeuitlaten.nl connects dog owners to people who want to walk dogs for instance.

Many users

An online platform works best when you have a monopoly. This will secure you a large number of users, who will review the platform or its individual suppliers/sellers. New users can see whether the service is reliable. And if the reviews of your platform are negative, you can work on improving it. Try to gain as many user reviews as possible. A small number of reviews does not provide a realistic picture of how users experience your platform. Make your platform user-friendly for a majority of people, and make sure it is easy to leave a review.

5. Subscription model

The subscription model is used by physical magazines, and is also used online. Your customers buy access to your product or service for a set period of time. Usually, they take out a subscription for a month or a year. Customers do not have to pay a large fee, as they only use the product for a limited period.

This model is often used by antivirus software providers. But there are many other examples: Adobe exclusively offers their image editing software Photoshop as a subscription. And streaming services, like Netflix and HBO, are also based on the subscription model. The model requires constant renewal of what you have on offer, so that customers remain loyal.

Online underwear

You can also offer digital subscriptions for physical products, such as flowers, tea, wine, or underwear. The user takes out an online subscription, and the product is delivered on a monthly basis.

6. Online store

The best-known model is the online store, or as it is called in the Netherlands, the webshop. Webshops sell products to customers who shop online. One advantage of the online store is that it is always open, as opposed to a physical store that is bound by closing hours. Also, you do not need to rent store premises: a storage space is enough. Do not forget to take into account the costs you make for inventory management, distribution, packaging, and the payment system.

A bit of everything or 1 product?

Online stores come in different shapes and sizes. Some, like Bol.com, sell a bit of everything. Others focus on niche products, specialising in 1 product. For example, some online stores only sell door fittings, phone cables, or soccer shirts. By specialising in 1 product, you can offer your customers more choice. And because your store is online, there is no limit to your range of potential customers.

Delivery without storage

If you have no storage space, you can make use of dropshipping. When you use dropshipping, you place your customer’s order directly with the supplier. They will send the product to your customer.

More models

You will find more strategies for making money in the article Get ready for the future with these 6 revenue models. Have you made your choice, and do you want to include the business model in your business plan? Get to work with the Business Model Canvas.

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