How to monetize your business?

There are dozens of monetization models used by everyday brand and products we love. If you consider starting your own business or own one, here are my top 3 favourite models that can be applicable to online businesses:

1. Free With Ads

We all are using Facebook- which is the best example of this business model. A service provider offers their service for free to users and in exchange, the customer is shown ads that are either sponsored or operating in adsense model.

Users generally like this method because service is for free for them to use. And therefore, it is a great monetization strategy for an owner. However, optimal monetization requires a large, active user base in this scenario. Facebook has millions of daily users and even only 3-5% of those users will interacts with an ad, it will be enough for the company to make billions of dollars a year. The key is to provide an incredible customer experience, while still being able to monetize advertisements.

2. Freemium: Free With Upgrade to Premium

We hear FREMIUM a lot recently. It is when people can use the service for free, but are offered to pay for an even better experience, access to premium features or content.

Think brands like Typeform, SurveyMonkey, Skype or Slack.

It is important to give users a great experience in the free mode so they will adopt the platform quickly and easily. Once comfortable with the service, enhanced features are an easy and natural upsell.

Deciding how much functionality to offer free and what extras to hold back for paying members should be determined through experimentation and user testing.

Slack for example, offers 10,000 searchable messages, 1-1 voice or video calls and file sharing for free. If you want unlimited searchable messages, group calls or screen sharing, you need to upgrade to a paid version. Or Dropbox- the basic version of Dropbox comes with 2 GB storage. If you want to increase that limit, you can move to the Pro plan and pay a premium of $9.99 a month for it.

3.Subscriptions

This monetization model works great for products or services that we need to buy over and over again like Netflix, Justmop or Dollar Shave Club (which mails new razors to subscribers each month).

Pricing should be looked at carefully for this type of subscription model.

Often, users will subscribe and then forget about it. If the price is low enough, users will continue to subscribe even if the value for them becomes marginal. Since the value of continuing revenue greatly increases the LTV of the customer, it's worth looking carefully at setting the price low enough to encourage users to subscribe.

This model works great for services that have almost infinite content or products that people use on a recurring basis. The risk with this model is that, if the brand has to constantly spend to create new content or recurring products, it can be costly. As those costs rise, the user base must also be large enough to justify the expense.

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The explosion of the digital marketplace has created a tremendous demand for products that have been turned into services. It is now possible to subscribe to a service that will plan your meals and deliver groceries. Even people who don't want to shop for clothes can sign up for a service that sends new outfits to them on a monthly basis.

If you have a traditional product and want to take advantage of new ways to monetize engagement, you may want to explore the feasibility of turning it into a service. Just think of which monetization model would be a better fit for your business resulting in a better LTV and long term sustainability.