Mighty Encyclopedia

Monetization Model

When Luis von Ahn created CAPTCHA–you know, those little words you must type to prove you’re a human–he came up with one of the most brilliant monetization models ever. The software would choose a few random words from the archives of the New York Times, and the user would type in what they saw. Little did they know they were contributing to digitizing old books and newspapers, and those companies paid for that service.

What is a monetization model?

A monetization model is a method by which you earn money from a product, service, creation, intellectual property, or even your personal brand.

For example, if you were creating an app, you could choose to add in-app purchases, charge for downloads, include advertisements, or all of the above. Or, if you built software, you could choose from different monetization models. You could “white label” it and license it to customers to use with their own branding. You could sell access under your brand, or create free access with a “freemium” upsell.

What monetization model is best?

Each monetization model has advantages and disadvantages. Freemium models let users try a product or service before paying and could make selling easier. Charging upfront will take more sales effort, but could bring in more cash flow early on. A subscription monetization model brings in revenue month after month, but requires ongoing customer service. Plus you need customers to stay long enough that you can get the real value of recurring revenue.

With online communities, our research has found that paid membership is a really good model. People value what they pay for--and paid membership communities often have more engagement.

There are dozens of ways to monetize any creation, product, or service, especially in the digital space, so choosing a monetization model that lets you balance access, user growth, and your own objectives is really important. We should also say that monetization doesn't have to be with cash! With a Mighty Network, you can also use token gating and monetize that way.