Sustainable Business Models for Websites, Apps– Are Ads It?

Earlier this week Instagram subtly announced that it will soon be integrating paid ads into their popular photo/video sharing app. The Facebook-owned company, to this point, has had nadda in the revenue department, which obviously isn’t the ideal way to run a business.

Of course, just like with Facebook, Twitter, and countless other sites/apps before it, Instagram’s entry into advertising has not been received all too kindly by the app’s loyal users. Thus far, there hasn’t been massive outrage, or a mass-exodus of followers; but, ads within Instagram have just been announced– no ads have shown up, at least what I can tell, as of yet. The company has promised to introduce these slowly over time to get users familiar with the ads without too much of a “shock”.

Thing is, there will undoubtedly be some outrage. Likely, some people will abandon Instagram for Vine & Snapchat, or whatever other service pops up. On the whole, though, Instagram will survive any fallout. People complain about ads on Facebook, too– but they haven’t left in droves. People complain about ads on websites, and the internet is doing just fine.

But, for companies looking to make their mark on the web, and within mobile apps, what other alternatives exist in order to monetize their efforts to become, well, a real company??

Some newspapers have gone the “pay-wall” route, forcing visitors to pay for most full-length stories they publish on the site. While a pay-wall may (or, may not) be a sustainable solution for news outlets, it certainly wouldn’t be the answer for Instagram or Twitter. What about “Freemium” services, then? Evernote, for instance, allows its user-base the option of upgrading, for a cost, to unlock special features that aren’t available for free. Might work, right?

No, not for Facebook or any of the other social networks, either. Part of the draw of these services is the fact that they are free to use; that everyone, no matter how much you earn, can be on equal footing when it comes to the options available to them. LinkedIn and Evernote can get away with this since they’re focused on business professionals, not everyone. Which is exactly why that would fail for many major websites/apps.

Now, Twitter, Facebook, Vine, etc offer free downloads of their mobile apps. Could they charge something like $.99 to download? Well, of course they could; but, that isn’t a sustainable biz model, either. Once your core user-base has downloaded the app, they don’t have to pay again. So you may get an influx of one-time revenue (as well as a massive decline of users), but without any sort of reoccurring charges, funding will dry up sooner than later.

Sites like Facebook have been able to earn some revenue by teaming up with search engines, which is great, but doesn’t bring in nearly enough to keep FB running. Unlike Facebook, which keeps its data tightly under wraps, Twitter has been selling analytics data on its users for years– to the tune of $42m annually. This is a big business for the network, and one many others may follow.

The answer, for most, has been advertising. It’s always been advertising; just look at television. Sure, networks like HBO can charge $10.95 per month to view their programming; but, they don’t get nearly the eyeballs that networks do. And, they have content not available anywhere else– if a social network tried that, people would just jump to another, one that is free.
Integrating advertising in a non-obtrusive way is currently the only solution that these web-based companies have at the moment. Potentially, somewhere down the line, someone will develop a model that does not include placing text and banner ads within an app or on a site; until then, users either need to get used to it, or find somewhere else to go (until that site needs to monetize…)

(Photo Courtesy of Mashable)

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