One of the first things to consider when running a business is how to generate revenue through its services. Therefore, to sustain and grow a business, you should start with a clearly defined revenue model that establishes how your services will generate revenue.
This material briefly introduces the basic types of revenue models used in online environments. Most offline models, such as revenue from admission fees and sales, are straightforward and direct, so they will not be explained separately here.
Advertising-Based Revenue Model
Advertising revenue that increases with the number of views
Generating revenue through advertising, the advertising-based revenue model has become a popular model attracting many people as the number of creators earning enormous incomes through 1-person broadcasts on YouTube and other personal broadcasting platforms increases and their earnings become known.
In particular, the more subscribers creators have and the more views their content receives, the more advertisements are shown, and they receive compensation by sharing the revenue with the platform operator.
Representative examples of online advertising include full-screen ads shown before videos start and banner ads appearing during videos on YouTube, while websites feature banner ads displayed in certain areas of the site and search ads displayed in search results on Naver, Google, and similar services.
Donation-Based Revenue Model
AfreecaTV's Star Balloons are a representative example
The donation-based revenue model is a revenue model that previously received no attention at all but came into its own thanks to newly growing platforms such as YouTube, AfreecaTV, and Twitch. Content producers (creators) regularly provide free services, while users voluntarily give creators revenue.
From the content producer's perspective, the key is how well they can build a dedicated fan base that uses and likes their channel.
Subscription-Based Revenue Model
Content and services accessible only to paying users
The subscription-based revenue model may seem similar to the advertising-based revenue model mentioned earlier, but it is a distinctly different concept. While subscriptions in an advertising-based revenue model are intended to increase view counts through a large number of viewers (users), a subscription-based revenue model regularly provides content or services to users (subscribers), who can receive the service only if they pay for it.
Magazines offering mainly specialized content had been using this revenue model, and it was becoming an outdated model. However, OTT services such as Netflix achieved great success with subscription services, after which this revenue model rapidly rose to prominence among corporate content providers.
Commission-Based Revenue Model
Commissions charged whenever a transaction takes place are the main source of revenue
The commission-based revenue model is a revenue model in which a business operator provides a platform as a 3rd party and receives a certain percentage of the transaction amount between other sellers and buyers as a commission.
Auction and Gmarket could be cited as the most representative platforms. Among newly emerging platforms, Baedal Minjok can also be classified as using a commission-based revenue model.
This model generally generates more revenue as the platform being operated becomes larger, but growing to that scale and building public recognition is extremely difficult, so businesses using it are likely to struggle. In particular, catching up with early entrants is extremely difficult, so targeting niche markets can be seen as somewhat more promising than competing head-on.
Sales-Based Revenue Model
Earning income from the margin on goods sold
The sales-based revenue model is the most basic and common revenue model. It involves purchasing or producing products as cheaply as possible, then selling them to consumers at or above a certain price and keeping the resulting margin.
Its forms vary depending on the scale and environment of the business, including small sellers that set up stores on the large platforms mentioned earlier, businesses that build their own online stores to sell directly, and sellers such as Coupang that sell goods acquired through large-scale direct purchasing.
Partnership-Based Revenue Model
Generating revenue through B2B (business-to-business transactions)
The partnership-based revenue model is a revenue model in which a platform operator receives revenue through B2B transactions with other businesses and benefits those businesses by allowing them to set up on the platform, linking to them, or promoting them.
Many bloggers and YouTubers who focus on reviews also earn revenue in this way, and among platforms, Kakao, which is rapidly expanding its business scope, could be cited as a representative example.
In particular, its partnerships with game companies, which drove Kakao's rapid growth, are the standout example. Although the gaming business has now lost momentum, Kakao is making major efforts to enter other business areas such as beauty, driving services, and taxis.
With that, online businesses' revenue models have been examined in terms of their main types. Of course, businesses do not pursue just one revenue model. Since establishing multiple revenue models at the same time can generate correspondingly more revenue, larger companies strive to have more revenue models.
However, for a business operator (founder) who is just starting out, firmly establishing even one revenue model can be the path to a successful business. I hope you can use this material as a reference to find ways to generate substantial revenue.
