In the business world a startup is a company just getting off the ground, however, it goes beyond that. A startup is not the same as small business. Startups have something to sell to the large market that can grow fast. It is usually associated with a business that is technology oriented with a high growth potential.
Unlike a small business that is funded by loans or grants, a startup is typical funded by venture capitalists who tend to have an active role in the company they are backing, especially if they are leading a financing round or hold a large stake in the company.
This is the reason why a startup should monetize their idea fast. Monetize may sound dirty but monetization is converting an asset or object into money or legal tender. In the internet, monetization is meant the ability to generate revenue from blogs or websites.
Whether it is a small business or a startup, monetizing is the heart of every business.
Monetization Models for Startup
Subscription/ Software-as-a-Service Model
The subscription-based revenue model is an attractive option for a startup as long as the services are appropriate to the subscription approach. It allows your company to sign users for long-term payment agreement and increases the duration value of the customer.
The repeating revenues that come with offering subscription-based plans is a secure income stream that is reliable. This is good for the startup’s sustainability.
There are two approaches to the SaaS model. First is the Pay as you go, where you charge the users according to the individual user rates. This method has do not have high revenue value and not very reliable.
Another approach is the Tiered pricing where the services are divided into different tiers based on features and usage amount. This means the customer pays more as her needs evolve or expand. We spoke with Paul from Task Pigeon on why startups are so attracted to the SaaS model and he responded: “the great thing about software as a service, or SaaS, is that it creates a recurring revenue stream. If the startup can minimize customer churn and continue to attract new users, then each month the revenue generated by that startup should grow. This has a flow on effect as well, as it then makes the company more attractive to investors.”
Online advertising is the most common and it is a huge revenue channel. It is also growing steadily. Implementing this approach can be done through third party ads within the app, or build your own ad network.
The downside of this model is that while advertising generates a huge amount of revenue globally it is largely spend on dominant players web properties such as Google and Facebook. Therefore to generate significant revenue on your own property you need to be able to generate a huge amount of traffic that can then be converted into views and conversions for the ads you serve. Without a large audience, monetizing via ads can be a long slog.
If your startup is collecting data, getting customer’s preferences and habits then get ready to be courted by other companies. This data can be very valuable to other companies.
Foursquare is a classic example. Their check-in data is very valuable to business in the hospitality industry. If you want to open a coffee shop in a University town, you will know the possible number of customers and their time preferences by buying them from Foursquare.
You can then feed this data into your own marketing campaigns to make them more targeted and effective. Data collection doesn’t only happen on the consumer side either. Many businesses build and collate data on corporates and large businesses. This information is readily sort after by competitors and other companies looking to sell into that space.
Many startups look to establish an ecommerce store as it is a lower cost way of reaching and serving your customers. We are now also seeing a mix of the e-commerce model with subscription commerce, where people buy shavers, boxer shorts and other regular items via a monthly or quarterly subscription. Much like software as a Service, ecommerce via a subscription model provides the potential for a steady stream of revenue to develop for the company.