Anyone who wants to do business today or understand how money will be produced tomorrow must comprehend the underlying models that support the digital economy.

Ad-supported Business Model

One of the most profitable business models in this digital age is the Advertising-supported Business Model. The massive amount of user data that can be collected from online users make this possible. Companies use AI and analytics to match people to products and services.

What is it?

The advertising business model is a revenue generation strategy supported by the sale of advertising. In general, a business must first establish an audience by generating content or facilitating interaction and then earn revenue by selling access to that audience. The advertising business model has become popular in the web era, where companies like Google and Facebook have been able to build the largest digital advertising machines on earth. Four Week MBA

These companies' success is based on the idea that "if you're not paying, you're the product." Data collection in the days of newspaper, radio, and television advertising was restricted to information derived from audience and market research surveys. Today, every click, follow, like, and share, as well as the information we voluntarily provide to websites and services, can be utilized to learn more about us. This information is gathered from audiences and users and sold to advertisers, who use it to forecast what items and services we might be interested in purchasing.

The advertising business model, like any other, is vulnerable. It includes both advantages and disadvantages.

Advantages

The business model is easy to start. Build an audience that attracts a huge amount of traffic to your website and to start producing revenue. Unlike other firms, you do not need to look for or develop products, wait for orders, or incur exorbitant shipping costs. Provide great content, and this how revenue is produced.

Your earnings in this model are determined by your efforts. It is quite simple to expand your business by increasing your traffic level. Your revenue increases as more people visit your website or platform. You can increase your revenue as much as you desire.

You are free to cooperate with any brand. You do not limit the brands with which you will collaborate in advertising. You can opt to work with as little or as many advertisers. You also have no restrictions on the ads you can and cannot display.

Disadvantages

Low returns are one of this model's flaws. As you are aware, your income is determined on the number of clicks received by an advertising. Some visitors or readers may see the presented advertisements but leave the website without clicking on them. This implies you will not be compensated for the view.

Your revenues and charges are determined by traffic. The larger and more loyal your following, the greater your prospects of earning significant returns and charging extra fees. As a result, you will need time to create a strong audience in order to profit from your enterprise.

These business models are frequently employed in tandem, with one supported by advertising revenue and the other offering a premium, ad-free service to those willing to pay.

Amazon is one such example. Amazon generates revenue through e-commerce. It is a also platform for other vendors to advertise their business in exchange for a percentage of the earnings.

Freemium

What Is Freemium?
A combination of the words "free" and "premium," freemium is a type of business model that offers basic features of a product or service to users at no cost and charges a premium for supplemental or advanced features. A company using a freemium model provides basic services on a complimentary basis, often in a "free trial" or limited version for the user, while also offering more advanced services or additional features at a premium. Investopedia

The freemium business strategy is providing a basic, no-frills version of a product or service for free while charging users to access premium features.

Spotify, for example, limits how users can listen to music unless they are subscribers; Dropbox, which offers limited storage and transfer speeds to free users; LinkedIn, which allows anyone to browse job ads and list vacancies but enables advanced analytics functions to subscribers to help with job searches and hiring; and Zoom, which limits the length of meetings and the number of participants for free users.

Productivity and workplace software-as-a-service companies commonly use the freemium model before offering individual or corporate licenses to those who want unlimited access to the complete feature set. This is likewise popular with game publishers. Game publishers provide a free version to attract players to sign up for a subscription or buy certain features or perks on a "pay-to-play" basis.

Advantages

Freemium business models are popular because they allow for the acquisition of a large number of initial users during a pressure-free trial period, especially when there is no fee connected with testing out an app or service. Most consumers are willing to try out a new software or service. This providing the company with an easy opportunity to gain new customers and research their usage habits.

In many circumstances, businesses can still benefit from their free users: even if these users aren't explicitly purchasing upgrades or things, the company can collect their user information and data, display them adverts to generate cash, and boost their own business statistics to continue to improve the service.

Disadvantages

One of the drawbacks of the freemium model is that free users never become paid users. Finally, even if some companies are completely satisfied with their free users (and have budgeted for these free users to account for the majority of their forecasted earnings through ad consumption or time spent on the app), they may provide too many features on the free version, discouraging users from ever upgrading to the premium version.

Also, customers may grow tired of a free edition because it lacks bells and whistles but encounter other roadblocks or an unwillingness to upgrade to the premium version.

Many computer software companies have used the freemium model. They provide basic products that are free to trial but have restricted features; to receive the whole package, you must upgrade and pay a fee. It is also a popular business strategy for gaming firms.

References:
https://www.bstrategyinsights.com/advertising-business-model/
https://www.forbes.com/sites/bernardmarr/2023/03/14/the-7-most-successful-business-models-of-the-digital-era/?sh=28a177f75617
https://www.investopedia.com/terms/f/freemium.asp#:

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