In a recent webinar, Monetizing Content in a World of Digital Disruption, we covered a number of examples from across industries of innovative ways to leverage eCommerce best practices to get paid for digital products and content.
While we encourage you to check out the replay for all the juicy details, this post recaps the various business models represented by the examples.
"Just free" is a legitimate business model, though not a sustainable one (unless you're lucky enough to get bought out by one of the big players in the market). Many startups charge nothing in order to get a critical mass of users and word of mouth before figuring out how to profit (think Twitter in its early years). While it's not a viable long-term strategy for most companies, it can make sense in the short-term to gain momentum. (Remember, most businesses are not married to just one business model over the life of a product or service.)
Offering your digital content for free may also be a way to drive sales in another channel. For example, the software is free, but the company makes money on services and/or sister products.
The subscription model is common for all types of digital content - software, gaming, news, magazine, telco services, and streaming video and music content (Netflix, Hulu, Spotify). Subscriptions has also gained popularity in recent years beyond digital content, spanning many different industries embracing eCommerce using a digital native approach, including rent the runway, theblacktux, and stichfix, just to name a few.
Many of these types of content use paywalls. Paywalls may be presented immediately, after a free trial, or be "metered," meaning that the paywall appears after a certain number of page views or content views/listens. 78% of online news organizations use a metered paywall, which allows them to generate more ad revenue than shutting visitors out.
Publishers can experiment with "soft paywall" alternatives like Google Surveys that provide inexpensive market research for brands and greater recall than banner ads.
Selling content by subscription is getting harder for online news outlets, and publishers must figure out how to mitigate disruption from news aggregator apps, sites like Google News, and distribution via social media platforms. Curated news is gaining popularity, but it threatens the appeal of subscribing to individual publications while at the same time potentially drawing in new customers. For example, the New York Times allows its subscribers full access to stories through an Apple News subscription, but otherwise they require a direct subscription in order to consume content.
We may see habits shift to a Twitter-like summary of the news, rather than full articles. Offerings such as the Skimm have gained in popularity in recent years, because they make consumption of news content easy for generations that don’t want to read a full newspaper or scroll through endless articles.
However, other subscription verticals like gaming, software, and media are thriving, themselves disrupting the old model of ownership of physical products for several years now.
Microtransactions are what they sound, piece-meal access to digital content and applications, being either pay-to-play (streaming content, time-limited or volume-limited access to content or applications), or pay-to-own (download a track, movie, article, image, etc.) This model pre-dates the common use of the Internet - think pay-per-view movies and sports and arcade games.
In its heyday before music streaming services like Spotify, iTunes was a prime example of a microtransaction model, and O'Reilly publishing has been offering books by the chapter for years.
The question remains whether this model will work for news and magazine articles, which are typically one-time reads, where music and video track downloads are more sticky.
The hallmark of freemium is offering a free and paid (premium) version. There are a few variations of this model:
- Free and paid version (e.g. lite use and power use, personal vs. business use, ad-supported vs. ad-free, basic vs. enhanced features, etc.)
- Free with in-product transactions (e.g. virtual goods and currency in-game, which accounts for 72% of Apple App Store revenue)
- Free and premium with microtransactions (buy ad-free access to games, or buy access to new levels and goods within the game)
Ad-supported free products are common across digital verticals, from newspapers and magazines to games and software, on-demand video, music services, and social networks. But it goes beyond banner ads. Viggle is an example of innovative ad opportunities.
Its second-screen app (companion to television) is not only free for users, but rewards users for engagement with TV shows and ads through its own loyalty program. Points accrued from check-ins to favorite TV shows, ad viewing, trivia, and other actions are redeemable for real gift cards like Starbucks, Amazon, and even bitcoin.
Another differentiator is its own proprietary audio recognition technology (similar to Shazam) that verifies a user is watching a program.
The company's also created new ways to watch TV, like MyGuy, a fantasy sports app that allows you to pick your star player for a game, and win extra points when your player is doing well.
Ad revenue comes from TV networks looking to promote their shows and brands that advertise within the app. A TV show pays for point value, which increases the attractiveness of checking into the show. They may also pay for placements in other contests and promotions.
The long-term opportunity here is for second-screen providers to become an AdWords-like platform where network shows use real-time bidding to drive tune-ins and engagement for their shows. The viability of this depends on the consumer experience, and if consumers will be willing to adopt this approach, which will be required to make its app the way people watch TV.
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Kindles that include ads and sponsored screensavers are available at a discount price. This may catch on with other device manufacturers.
Shazam is an audio recognition app that helps you discover or remember who sings that song you're hearing right now. "Tagging" a song searches its database and presents the answer along with affiliate links to download tracks or buy tickets to local gigs.
Shazam began as all-free, and moved to a freemium model. Its free version was limited to 5 song tags per month, and unlimited access for a one-time payment of $5.
Down the road, Shazam dumped its freemium scheme for free-for-all access, a move that can potentially increase its revenue greatly. Providing everyone unlimited tagging widens its opportunity for affiliate revenue. More tags = wider funnel.
Services like Spotify, Pandora, and Apple Music license content from record labels and independent artists, Hulu and Netflix from Hollywood. Software products white-label. Publishers syndicate content. There are many examples of licensing digital goods.
Beyond content, innovators can license their proprietary technology to others. Shazam could license audio recognition technology to other companies to add an additional functionality and revenue streams.
Many content producers are sitting on piles of existing and legacy content that can be remixed into new experiences and licensed to third parties. As the API economy continues to grow across all industries, this approach has gotten more and more popular for digital content distribution. I covered Pearson's API on Get Elastic, along with 7 other wicked applications of commerce APIs.
The Last.fm music service sits on a mound of listener data, and can offer advertisers highly targeted campaign opportunities. An example is for Puma's Deadmau5 running shoe. The brand was able to target the band's fans within a social network using Last.fm's technology features.
Selling data is an opportunity for additional revenue for digital products and services that collect it.
Similarly, pieces of content can be remixed into new products, or derivative products, used internally or licensed to developers. Two examples mentioned in the webinar are Hark and Eyewitness.
Hark is a YouTube for audio clips from popular movies, TV shows and even political quotes (how timely). It streams sound files and enables social sharing and embedding, with links to rent or buy full content from Amazon.
Guardian's Eyewitness mobile app features its famous photographs, repurposed for iPad. The app is freemium, sponsored by Canon (a fitting partnership). Free users get a daily photo, paid users get an extra 3 photos per day and sports photos for £1.49 per month.
More examples can be found in our webinar, available on demand: Monetizing Content in a World of Digital Disruption.