It is great to have a wonderful idea for an app or a site that others would want to engage with and benefit from in some way by using it. But apart from direct patronage, either personal or via foundations and suchlike, there are only four ways of monetizing an app or a web-based business
- Sponsorship: Payments are made over an agreed period of time based on the past, present and expected performance of the site or app according to an agreed set of criteria. Sponsorship often involves preferential positioning of the sponsor’s brand.
- Sales: The site or app is funded from a portion of the profits generated.
- Subscription: Charging a fee to access the content of a site.
- Advertising: Sites or apps sell a portion of their screen space in order to catch the ‘eyeballs’ of visitors.
Out of these three by far the biggest source of cash for a site or an app is advertising. In the first half of 2011 ad revenues in the United States were almost $15 billion.
Of course, increase spend in one area can mean reduced spend in another. It is possible in 2012 that online ad spend will supersede print.
With the inevitable arrival widespread internet TV use it may no longer be possible to make a valid distinction between the two.
If we were to invert the situation and have no online advertising what would we have on the internet? Very little in my view. All the big social networking sites would have to charge and other services which we view as free would have to be paid for directly. Either through subscriptions or donations. (An interesting question is would Facebook et al have been anything like as successful if usage fees were attached?) All business sites are brochures and while acting as portals to their content they would still have to generate a profit somewhere down the line to make it worthwhile.
It does not take much imagination to see that without advertising the internet would be nothing like as useful, powerful or prevalent as it now is.
Advertising is a necessary function of internet activity and is here to stay but it does not happen by itself. Somebody has to pull the levers behind the curtain.
According to a report released at the end of last year Google controls 44% of global ad spend on the internet.
The amorphous and decentralized qualities of the net are its two most attractive aspects — for me anyway. But if advertising is absolutely key to the economic validity of the web and 44% of that is controlled by one company then we have something that is neither amorphous or decentralized.
There is simply have to much control of an extremely important part of our lives in the hands of one company.