For the past 20 years the internet has transformed the way we live our lives. Previously, the only hope of getting your message out in the open for free was to shout from the rooftops; or jump in front of a passing TV camera. Now it’s possible to do this to a worldwide audience with a few simple keystrokes. The internet has changed the way entrepreneurs can innovate and earn money. You don’t even need to sell a product to become a billionaire online, take Facebook as an extreme but relevant example.
Millions of young entrepreneurial minded webmasters are bringing thousands of visitors to their website every month, but in order to be successful you need to understand online revenue models by looking past the obvious placed in front of you. You need to discover what best suits your website and users.
Below I’ve talked about the top 3 website revenue models in layman’s terms, allowing anyone getting started in the online world to make the right choice.
CPC and CPM Networks
CPC (cost per click) and CPM (cost per Impression) networks provide the most common form of advertising for websites today, with providers such as Google Adsense leading the way. Google Adsense allows webmasters to paste a segment of code into their website source, which then displays advertisements on their behalf. The webmaster will then earn revenue for every click that one of their visitors makes on the advertisement (CPC), or revenue for every thousand times the advertisement appears (CPM).
The ad networks manage the advertisements displayed on your behalf, ensuring that you can focus directly on building your site and increasing its traffic.
What websites is it right for?
If you’re running a high traffic website used as an end point rather than a portal, you’ll most likely have a low advertisement click through ratio. Common examples could be a game or news website, where CPM might be the better choice for you.
If you provide reviews on a product or niche then CPC may be the right path for you. Your content will act as a lead point and the ads will re-target themselves to entice users to click through.
A lot of CPC & CPM ad networks detect what option is financially better for your site automatically or may even provide a hybrid.
Affiliate advertising is a sales performance based incentive for advertisers to promote the merchants products. This is operated through a number of financial models, the two most popular are revenue share and CPA (cost per acquisition).
Revenue share allows the affiliate to earn a percentage of the revenue that a business will take through the customers you send. Using the online gambling industry as an example, if a player clicks on my advertisement to a casino and spends $1000, I’ll receive 35% of that and anything else they spend through that account in there lifetime. Likewise, if I refer someone to Amazon and they buy a book I may receive 10% of the profit. I’ll also earn 10% when they purchase another product next month.
CPA differs from revenue share as it allows you to earn a pre-agreed sum of money for each customer you send or product they buy, usually as a one-off. For example, in the casino industry if I send a player to a casino that I have a CPA agreement with, they’ll pay me a pre-agreed amount, usually around $250-400. Likewise I could have a CPA agreement with Amazon which means that they pay me $25 for referring a customer who purchases a product.
Choosing between revenue share and CPA is always a difficult choice, and it really does vary between circumstances. Revenue share allows you to play the long game and potentially earn $1000’s when the customer returns again and again over the years, but on the flip side a lot of customers may never come back. Assess this individually site by site and ask yourself the following questions every time:
1. Does the customer have sufficient incentives to come back to the merchant and purchase again?
2. Do I need the money in advance to sustain the site running costs or can I play the long term game?
If the answer to both of the questions is no then go with CPA, otherwise I’ll always wait it out and stick with revenue share.
What websites is it right for?
If you’re selling something or recommending a website/product then you should be earning a chunk of the business you are sending them. This is the perfect advertising method for portals, a middle site to a product for the consumer.
The vast majority of advertising partaken in offline has always used a flat-fee model, where a price is agreed for a certain spot for an allocated period of time. This model can also be transferred successfully online if you’re willing to put in the work.
This type of advertisement involves you negotiating a fee for an advertiser to hold a specific position on your website for a certain period of time. One of the reasons this is so unpopular is that it requires the webmaster to sell their site to potential advertisers, rather than it being for the most part automated when working with a CPC, CPM or affiliate partnership.
You’ll always run the risk of either undervaluing or overvaluing your site advertisement positions, tying you into an agreement that could prove reputation damaging or unprofitable. On the other spectrum, you might often find companies in bidding wars just to have their brands listed on popular sites.
What websites is it right for?
Providing you can assess a fair value for the advertisement space on your website, this method can be an excellent choice. There is no need to go out and directly seek advertisers, simply make an advertising page on your website and allow them to come to you. In the meantime, there are plenty of other online revenue streams available for webmasters.
While the three advertising revenue streams I mention cater to the majority of revenue earned through the web, it is important to remember that they’re not guaranteed methods for success. The results come through implementation of the best advertising type, and being innovative enough to place, promote, and recommend the products correctly.
Continue to focus on your website and the traffic levels, slowly test different options every month, and discover what is right for you.
David is also a guru when it comes to online marketing, affiliate marketing, and SEO. He has even set up an affiliate program for their online casino to reward people who promote their site.