Harking back to economics 101, picture the fundamental economic graph, where the vertical axis is price, the horizontal axis is quantity, and the downward-sloping demand curve illustrates how, at a high price, the quantity demanded is small, but as the price approaches zero, demand grows to near infinity. Therefore, at any given price point there's a corresponding quantity and you can easily calculate total revenue by multiplying price and demand. Subtract costs and you have total profit.
But what if there was a way to monetize the nearly infinite quantity of demand for free content? That would be a gold mine and it represents the potential of the web. First, you multiply price by an almost infinite number, yielding almost unlimited revenue potential. Second, there are virtually no costs involved in distributing additional content on the web, so the incremental revenue is pure profit. This is a true media business model, where revenue comes from attracting an audience and monetizing it through advertising. It's been around for decades in broadcast and has been represented in print with controlled circulation. Now the global reach and low production and distribution costs of the internet have opened up tremendous opportunities for applying the media concept to many new types of content. In fact, the only situations online where paid content still makes sense are if (1) demand for the content is limited, but it's still quite valuable to the people who want it; or (2) demand for the content outstrips advertisers' willingness to support its audience.
As a rule of thumb online, explore the option of free content monetized through advertising first. That's almost always the lowest-cost--and very often the highest profit--alternative. Invest in audience, not an e-commerce platform and support system. Do the analysis and embrace the scale opportunities of the web. It's a new medium with a new economic landscape compared to its predecessors.
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