ADVERTISING-BASED REVENUE MODEL IN DIGITAL MEDIA MARKET

Abstract

In the case of advertising-based revenue model, a company creates a digital media product, attracts interaction and engagement of users and then sells access to this audience to advertisers. This revenue model allows users to receive useful content for free or at a low price, while publishers accelerate the growth and adoption of their digital product. Although overreliance on advertising may result in failure to develop the core product, the advertising-based revenue model has become one of the most popular sources of revenue for many web products. Existing empirical studies on digital media revenue models are conducted from singular viewpoints, focusing on new types of revenue models and lacking the comprehensive research of possibilities of advertising-based revenue model in the modern digital media market. In this study, the focus is on the real case of creating the content website and making it profitable in six months using the pure advertising-based revenue model. It is empirically proven that, in order to stay competitive, a new digital media product should aim at decreasing website costs, increasing revenue and scaling up the product to reach a wider audience. Minimum marketing costs can be achieved through working on the relevance and quality of advertising, reasonable targeting and landing page experience. As for increasing advertising revenue, the main point is constantly experimenting with advertising format optimization, adding new advertising networks and enhancing landing page quality. It is empirically proven that the pure advertising-based revenue model can be profitable for a new digital media product entering a highly competitive market. However, high gross margins can be achieved only by attracting quality target audience, achieving economies of scale and diversifying the revenue model.