Although there is not a single definition to the term business model and usage varies widely, in standard business usage a “business model” can denote how costs will be covered as well as how a business creates and delivers value for itself and its customers, including the ways in which products are made and distributed. Academic strategists tend to use the term business model to describe the configuration of resources in response to a particular strategic orientation.
Most people are familiar with Business to Consumer models (also referred to as BTC or B2C). In a Business-to-Consumer model, the business primarily provides services to consumers. Many of the common media content plays are considered B2C.
Newspapers, television shows, films, and video games are primarily B2C companies. Many apps that individual users download and then consume content from are B2C. Because media companies are typically providing content that is of value to consumers, they look like a B2C, however, they use the attention of those consumers to sell advertising space to businesses, effectively operating as a B2B.
Business to business to consumer (or B2B2C or BtoBtoC) is another prominent e-commerce model, that combines Business to Business and Business to Consumer in a complete product or service transaction.
Revenue streams are a common element of most definitions of business models, particularly ones used to address electronic commerce. Many online news business models, historically, have been similar to traditional business models, as subscription, advertising, and transactional are the most common categories of online business models.
Advertising and subscription still remain the most dominant forms of revenue streams used in most content business models. Content plays involve the creation and dissemination of content, such as news or entertainment, which users will want to receive.
When the newspaper industry moved into online content delivery, many companies initially gave its content away online for free. Within the past decade or so, most newspaper companies have offered digital-only subscriptions and bundled online delivery along with the traditional print product. Within the United States, the leading paywall system was developed by PressPlus. Paywalls offer users a certain number of free page visits, before being blocked with subscription, the primary means to gain additional access.
Many digital media companies that offer content, particularly those that offer content that compete with traditional companies such as newspapers, magazines, and broadcasters, have implemented a Paywall approach. A paywall can be hard where the only way to access the content is to pay for it, usually through a subscription, or soft, where the user is given a certain number of free visits or views per month before being asked to subscribe.
Another common subscription model used for content and technology plays is that of a freemium model. Under a freemium model, access to basic content is free, but users can choose to subscribe to premium content for a fee that provides improved access (such as an ad-free experience) or additional services. The online music streaming service Spotify is a classic example of a freemium model, with basic access to ad-supported music online available for free, with monthly premium subscriptions for a fee. Dropbox is another commonly used digital startup that relies on a freemium model. The cloud-based file storage service offers free storage up to a certain amount, and charges a monthly fee beyond that.
Membership is another subscription model. Under a membership model, the content can either be free or paid, but users who purchase a membership receive perks and bonus materials, exclusive access to supplemental materials, and so forth. In many instances, these content companies have been focused on a certain content form (technology, politics, sports) rather than general interest publications. Musician fan clubs and sporting teams are classic examples of non-digital content entities that excel at offering memberships. That same model is applied to media companies, typically ones that diversify their offerings through some of the other miscellaneous revenue streams discussed later (such as events and conferences; archival data, etc.).
There are various forms of advertising for content and technology companies, with many forms specific to the delivery mechanism and form of the company. Traditional legacy media companies sell local direct advertising (newspapers, broadcasters), classified advertisements, sponsorships (most common in broadcasting) and are part of national advertising networks, among other forms.
Advertising networks are still prevalent for digital media content and technology companies, alongside selling direct advertising on various platforms. Native advertising, the use and sale of microsites dedicated to paid clients, the use of Google AdSense, and the sale of Outbrain-style links to external sites are common on web-based content and technology plays.
Content and technology companies can sell display advertising, search advertising, video ads, text/SMS advertising, mobile and digital forms of advertising, and location-based advertising among other forms, particularly in the mobile space. Content and technology startups can also develop their own proprietary forms of advertising content based on the system. For example, Twitter developed and sold promoted tweets and sponsored ads in its platform. Sponsorships, particularly used in podcasts, are another form of advertising available for content and technology plays.
Mobile advertising (“in-app ads” and “mobile display” ads) and variations of charging for content are the most prominent ways traditional media have sought to monetize content thus far, but there are many other alternative business models under consideration, including free and paid SMS alerts, social media platform distribution, and free applications.
One sometimes controversial revenue stream is brand storytelling, or advertisements that are written in the form of articles in the “voice” of the publication, and displayed alongside regular editorial content. Brand-sponsored content typically falls under the larger umbrella of “native advertising” as the ads appear “native” to the environment in which they’re displayed. Many top traditional journalistic outlets have an entire team or division dedicated to creating sponsored content for brands (e.g. New York Times’ T Brand Studio, HuffPost’s Partner Studio, Washington Post’s WP BrandStudio, Conde Nast’s 23 Stories and Forbes’ BrandVoice).
Content and technology plays often employ various forms of transactional, or e-commerce revenue streams. Some of these allow for an in-between option for users who want access to content, whether that be one-time or more, but don’t want a full subscription option. Let’s explore some of the most common.
Some media organizations, such as The Guardian, allow for direct donations from readers. These outlets may make a direct plea on their homepage, or at the beginning or end of articles. Donations are also much more commonly used in nonprofits as outlined in the next chapter, but soliciting donations from users can also be done by for-profit media ventures.
Whether you’re a nascent startup or a more established company, selling merchandise with your company’s brand, name, logo, and slogans can serve as an additional revenue stream in addition to serving marketing purposes. T-shirts, mugs, keychains, and hats are commonly sold merchandise. Google, for example, has a physical store on its main campus that sells all sorts of Google-branded merchandise. Companies can also sell merchandise online.
Crowdfunding, defined as “an open call, essentially through the Internet, for the provision of financial resources either in form of donation or in exchange for some form of reward and/or voting rights in order to support initiatives for specific purposes.” offers a novel way of funding projects.
Crowdfunding involves creators of a project soliciting donations from funders, or backers, of the project, through an online platform that features the project request.
Five basic kinds of crowdfunding models have attained widespread reach: donation-based, pre-purchase-based, reward-based, lending-based, and equity-based. In donation-based crowdfunding, the backers support a particular cause with no expectation of any kind of returns. However, in reward-based crowdfunding, the backers are provided with non-monetary benefits in exchange for their support. Kickstarter and Indiegogo are the most well-known and commonly used rewards-based crowdfunding platforms.
A pre-purchase model is similar to rewards. A backer receives the product the entrepreneur is making, such as a music album. Lending-based crowdfunding platforms offer a loan to small-scale lenders with an expectation for a return on capital investment. For instance, Kiva is the most premier lending crowdfunding platform that operates in 66 countries. Equity-based crowdfunding is that in which the backers receive an equity or stake in the profits of the project they have invested in. The Jumpstart Our Business Startups (JOBS) Act of 2012 allowed equity funding in the U.S. for the first time. Title III of this act allows small-sized business owners and entrepreneurs to retail investment that was previously restricted to select accredited investors and potential investors on various Internet-based crowdfunding platforms.
Crowdfunding gained popularity somewhere in the late 2000s. Since then it has shown unprecedented growth and is particularly common among startup entrepreneurs and investors. Circleup, Equity Net, AngelList, and Wefunder are examples of some popular equity-based crowdfunding sites.
One revenue stream for media startups could come from a “digital retail mall” or “transactional experiences” like shopping purchases through a digital credit card or online payment system.
Popularized and most well-known by the startup Groupon, this method provides discounted deals en masse to groups of consumers who scoop up the coupon-like savings that can be purchased and used at a later date.
Many of the models previously mentioned for content plays (subscription, advertising, and transactional) are also applicable for technology plays, and we’ll discuss some miscellaneous categories beyond the Big Three for both.
One of the considerations for technology plays is the distribution mechanism, whether the product is available online, or mobile, some combination of the two, or neither. If the technology play is an Internet-dependent one, such as an app, then the choices are whether it is accessible through the mobile web (HTML5 is a common tool), or proprietary app stores. If it’s an app, then you must decide whether it will be formatted and available in Apple’s iOS format or Google and Android capability. Many universities and cities hold appathons or hackathons that bring together interdisciplinary teams to work on the creation of an app and/or the business plan and pitch for an app concept over a weekend. These are useful and can help flesh out some of the necessary steps and considerations for startup tech plays. Look for such efforts at your university or city. MediaShift also sponsors a popular hackathon several times a year that brings together students, faculty, and professionals from universities across the country.
If you are creating an app, decisions include whether the download is free or if you charge a one-time download fee. Then, you can consider some of the above-mentioned revenue streams, such as subscription, and mobile advertising.
eBay is probably the most well-known auction site, where users can post items for sale and get bids from other users.
Apps and websites that take advantage of the sharing economy have proliferated in recent years. Also referred to as the collaboration economy, this business model is predicated on collaboration, whether that is sharing an apartment or home (as is the case in Airbnb), sharing a ride (Lyft or Uber), or sharing office space (coworking spaces).
Mainstream media outlets like The New York Times excel at organizing live events and conferences as an alternative revenue stream, but startups can also do the same. Media organizations sponsor live events, such as conferences and banquets, and charge a fee to attend.
See resources elsewhere in this textbook for lists of foundation funding sources. Many nascent entrepreneurs and media startups have benefited from foundation funding in the past. The Knight Foundation historically has been a large funder of media entrepreneurial efforts. The Lenfest Institute for Journalism is a new funding source for entrepreneurial journalism efforts. And organizations like the Kauffman Foundation and VentureWell fund entrepreneurial efforts writ large. Grants and competition prizes from foundations focusing on entrepreneurship are worth exploring as a funding source.
Sell Archival Access
Content companies who have created archives of past content can sell access to the archives to users for a fee.
Sell Data and/or Analytic Services
Analytics are usually more of a B2B play, where the business sells access to user data and analytics to other companies. In some instances, companies can sell analytic tools and services to users as well.
Commonly used in technology plays, licensing as a revenue stream involves licensing out some form of proprietary technology, such as software or analytics tools, for use by other companies for a fee.
A business model is a general outline of the transactions needed for your idea to make a profit. The most basic business model involves simply producing a product or service and selling it directly to customers. The company makes a profit if revenues are greater than production and business costs.
Business models are goal-driven When developing your business model, clearly define the type of business you are pursuing and your goals for your business venture. Once you have a well-defined business idea and specific goals, you can establish the method by which you are going to make your profit.