One thing I have trained myself to do over the years is to think in depth about how business models work. I am not specifically talking about apps, either. It can be a business model for a real estate investment, a youtube channel, or a blog. The hope is with practice I will get better. And as I get better I should be able to improve the business models for my current and future products and investments. Toward the end of the blog post, I do bring it back around to apps, though.
DISCLAIMER: I am not an expert in any of these businesses. Some of the inner workings involve a lot of assumptions on my part. Corrections are very much welcome. That’s how I learn.
YouTube channels have used several methods to monetize their videos. It is quite important to do so as relying on one revenue stream (YouTube ads) is risky. Does this sound familiar? I’m looking at you, app developers.
Here are some options, I’ve seen some YouTubers use:
- YouTube ads – Built in way to generate revenue from a video.
- In video sponsorship – A sponsorship spot can be sold and edited directly into the video. I imagine the rates are fairly good, as they are read by the video creator, a trusted voice.
- Crowdfunding – A site like Patreon allows individual subscribers to voluntarily pledge support. A perfect way for passionate enthusiasts of the channel to give more.
- Merchandising – T-shirts, mugs, coasters, underwear, etc…
When people think about making money online, they think of advertising. Seems to be a trend, right? Blogs, by their nature, are generally free of the constraints of proprietary platforms (like YouTube). However, a professional blog must also be weary of relying on one form of revenue.
Here are some options for blogs. Some are similar to what have already been discussed:
- Ads – The simplest method is using an ad network to sell ad space.
- Sponsorship – Blogs can also be sponsored. Much like with YouTube videos, I imagine that a trusted voice helps command higher rates.
- Sponsored posts – Getting paid by a company to write on a particular subject. The money should reflect in the subject matter, but not the opinion.
- Affiliate links – Blogs can use affiliate links when reviewing or talking about products they like to get a percentage of the sales.
- Merchandising – Stickers, books (for instance, a cooking blog could create and sell a cookbook), t-shirts, flamethrower, etc…
- Subscription – Create premium content for subscribers only.
I like real estate investing. I tend to give it a lot of thought and most of my business spreadsheets revolve around real estate. But as this is probably the least interesting part for most people, I will get through it quickly.
- Rent – Duh.
- Furniture rental – Additionally offer tenants furniture and appliances to rent.
- On-site laundry – Apartment complexes can have coin operated laundry facilities for tenants.
- Vending machines – Similar to laundry
- Physical advertising – Common outdoor space and walls can be used to sell advertising.
Using these ideas, I will then do a quick back of the envelope calculation to find out what is possible. This is often done similarly to solving a Fermi problem. One or very few known stats and a bunch of educated guesses.
For instance, if I run across an article that mentions the average rent at an apartment complex or the size of the user base for an app, this could trigger one of these calculations. The stats from the article would be my knowns in the problem. I would then work through all unknowns as best as I could.
If I were really interested by the business, I would then take my back of the envelope calculations and make a spreadsheet! I love spreadsheets.
What is the point?
The goal of these exercises is to eventually be able to develop creative business models. It is really easy to spot creative businesses – hindsight being 20/20 and all. However, creating one is really, really hard.
My hope is by practicing my analysis, I will eventually get comfortable enough with how different business models work to be able to design my own. A good business model can be the difference between success and failure.
One last thought
Recently, I have been thinking a lot about how sponsorships on podcasts (and YouTube videos) work. I have wondered if there is a way to integrate them into an app’s business model.
In a way, we have already done that with our two Armenian versions of Gus on the Go. AGBU sponsored us not with money, but with resources to help create the apps. In turn, we added their logo to the splash screen and the main screen.
The idea would be to take sponsorship a step further and have it more integrated into an app. Not necessarily rebranding an app, but more than just an ad banner. It would need to be done tastefully and in a way that keeps a trusted voice feel. Additionally, it would require being able to swap out sponsors on a weekly or monthly basis. Or as slots expire.
If we compare a podcasts unique downloaders to an app’s weekly or monthly active users, I image that an app would have to reach a larger audience than a podcast to command the same fee. This is a guess. I would assume that an app’s users would be seen as less trusting of said app than a listener is of a podcast. But again, just a guess.
If you have experience in any of the fields I mentioned and want to correct or add anything to what I have said, I would love to hear from you.
Or if you have any thoughts or comments, find me on Twitter. I’m @yonomitt. I’m always open for discussions.
Have a nice day,
No. Not this blog. This blog is by no means popular enough to have a business model… but other blogs are. ↩