Social Machinery

The consulting and Digital Marketing Company Multiplica just released a new study comparing source of revenues and business models from Top 100 web 2.0 sites today. Multiplica analyzed companies like Youtube, Myspace, Facebook, and Wikipedia Among others.

The study gives a pretty good picture about today’s web 2.0 business models and some ideas on way forward that I would like to share.

Unsurprisingly, advertising is by far the main source of revenues for most of web 2.0 sites today. 86% of these companies use advertising as the most important revenue stream.  The second most important source of revenues, with only 22% of all sites using it, is yearly/monthly subscriptions model. The third place was occupied by affiliate marketing with only 15% of all sites using it as a revenue stream. Interestingly, donations where only used by 8% of all these sites and pay-per-use was the least business model used with only 5% offering it.

When it comes to advertising based business model, it looks too crowded considering the number of companies relying only on this stream as their source of revenues. The study concludes that the only way to be successful on grasping a relevant share of the ad spending pie is by offering real time campaigns measurement, a critical customer/prospect base and enough customer insights for giving more relevance to the marketing messages.

Even do relevance, reach and revenues is not a new topic in the online advertising world, now is a key success factor if you think that 9 out 10 websites relies mainly on advertising streams.

Current Web 2.0 business models

1. Advertising (Used by 86% of Top 100 web 2.0 sites)

Current advertising model is based on ad insertion for targeted and interactive campaigns. Sites charge advertisers based on location, size,  page where the ad is located and frequency.

-Integrated displays (e.g. Banners)
-Rich media & Video: Banners containing videos, audio or rich media.
-Sponsored links: Text advertising usually related to search results or topic.

2. Subscription model (Used by 22% of Top 100 web 2.0 sites)

Pay for the use of all or certain functionalities on yearly or monthly basis.

3. Pay per use (Used by 15% of Top 100 web 2.0 sites)

Pay as you go model. Users only pay when using the service. Most of companies offer users to buy credits (e.g. Skype) or to pay via premium SMS.

4. Transaction fee (Used by 5% of Top 100 web 2.0 sites)

Service fee for making an specific transaction in the site. It could be because selling or buying a product or service. (E.g Ebay)

5. Product sales (Used by 5% of Top 100 web 2.0 sites)

Online store where users can buy tangible products from the site.

6. Referral model (Used by 10% of Top 100 web 2.0 sites)

Some of these sites offer incentives to their customers based on their activity in the site, content download, and site promotion to their friends or even sharing part of advertising revenues with them.

7. Donations (Used by 8% of Top 100 web 2.0 sites)

Free donations given by users as way to allow the site to keep their service free or to pay their operational costs. (e.g. Wikipedia).

More information: Multiplica