With so many companies that provide popular services to users of Internet and media for free, consumers sometimes wonder, “What makes this business or website to make money? ” The answer, in many cases, is a revenue model based on advertising. A revenue model describes how a business makes money and models based on advertising relate to businesses make money by selling advertising space.
The advertising revenue model
The revenue model is based on advertising business revenue model by which a company makes money by selling advertising space. Newspapers and other print media are the oldest examples of this model. Although newspapers and magazines often considered the subscription fees as a source of revenue, its main source of income is by selling advertising space on their impressions. In short, companies that use the revenue model based on advertising content to give consumers and other businesses pay for that space.
Who uses it?
Although newspapers, television and radio are the oldest examples of companies using the revenue model based on advertising, Internet companies have quickly adopted this business model in order to generate income. Popular websites such as Facebook and Google had to find additional sources of income to user subscriptions in order to continue to provide their services for free. These sites are tremendously profitable through advertising sales, with revenues of billions of dollars.
Direct mail, on the revenue model based on advertising, is the most common way to sell advertising space and produce higher incomes form. Direct mail is when a company sells advertising space to the advertiser. In a web context, this is normally done through an agreement CPM (cost per 1,000 web impressions) or CPC (cost per click) between the company and the advertiser. The company handles all transactions and interactions with the advertiser and thus can have maximum control over how advertising is displayed and sold.
Contextual advertising is when a company uses a third party to sell advertising space displayed on websites whose content reflects what advertisers think that their customers could be considered interesting. An example of contextual advertising is Google AdSense. A company promises to show contextual ads from Google on your site, Google sells advertising space to contextually relevant companies, and these companies deal directly with Google.Businesses benefit of not having to manage relationships with advertisers or part of the transaction from the sale of advertising, however, must also pay the broker, which lowers the total income of this model.