There is a lot of confusion about revenue models. They often get mixed with the term business model. A business model is something greater. A business model takes into account all your finances, how you get customers, and the revenue streams that the business has. And the revenue model is just a part of the business model.
In this article, we will go over some of the most common revenue models and explain when and how they should be applied.
Here is a video explaining the difference between revenue model and a business model.
Ad-based revenue model
Many people want to make money with ads. It is the simplest revenue model. All you do is create an ad, place it on your site or billboard, and you are set to go. But the truth is that people hate ads and ignore them. That makes ads so ineffective that they can really only make money if the site or billboard on which they are placed get a very high volume of views.
On the web, the most common place to get ads is Google’s AdSense. For most sites, AdSense will earn somewhere from $5-10 per 1,000 page views. A thousand page views is the unit of measurement and pricing for ads.
So if a typical CPM (cost per thousand views) is $5, then you need 10,000 views to make $50. And to make $500 you need 100,000 page views. And to make $5,000 which is getting close to the vicinity of a monthly salary, you need to generate one million page views. So your site needs to be huge if you want to monetize it with advertisements. Or you can consider how you can add extra revenue models.
Affiliate revenue model
The affiliate revenue model is a very popular one on the web. It works by placing links to relevant products and collecting commission on the sales of those products. This can work together in conjunction with ads, or separately. If you get it right, it typically makes more money that the ad-based revenue model. But that depends largely on your business niche, the kinds of products you are selling, and your audience. Here is a tutorial for how to begin earning affiliate commissions online.
Transactional revenue model
The transactional revenue model is the darling of all business owners because it is one of the most direct ways you can get paid. You give goods or provide a service, and people pay you for that. The challenge with this approach is that everyone wants to be a part of it and usually the spaces where that is a possible revenue model are extremely competitive. And once there is competition, there begins to be price deterioration. And that causes everyone to make less money. The consumers love this though because they get more options and cheaper prices.
Subscription revenue model
This is another darling of business owners. Not only does this means recurring and somewhat predictable revenue, but it also means that revenue can accumulate every month because many people don’t unsubscribe. So if you can maintain a higher signup rate than your unsubscribe rate, you will have a beautiful revenue growth graph that is always up and to the right. Plus, the dirty little secret of subscription based revenue models is that many people simply don’t unsubscribe because they are lazy or uncertain. Think about how many people maintain their gym memberships, but have not been to the gym in months. Here is a tutorial for how to increase your revenue by adding a subscription-based service.
Further Business Resources
For more business-starting resources, please take a look at our business planning mobile apps. Here is the iOS business plan app and here is the Android business plan app. Additionally, here is the iOS fundraising app. And here is the Android fundraising app. And here are our business apps on the Kindle. And here is an article where I give the argument that our Android apps are the best business apps on Android.
And please check out and subscribe to my YouTube channel where we cover many marketing topics.
Author: Alex Genadinik