The Advertising Revenue Model

• The adverting based revenue model is a business revenue model whereby a business makes money by selling advertising. Newspapers and other print media are the oldest examples of the advertising based revenue model. Although newspapers and magazines often include subscription fees as a revenue stream, their primary source of revenue is through selling advertising space in their publications. Simply put, businesses using the advertising based revenue model provide content to consumers and other businesses pay for space in front of those consumers.
  
  

Who Uses It?

• CEO Mark Zuckerberg and his team sell ad space on Facebook..Justin Sullivan/Getty Images News/Getty Images
  
  While newspapers, television, and radio are the oldest examples of businesses using the advertising based revenue model, Internet based businesses have quickly adopted this business model in order to bring in revenue. Popular websites such as Facebook and Google had to look for revenue streams beyond user subscription, in order to continue to provide their services for free. These sites are tremendously profitable through the selling of advertising space, with revenues well into the billions in 2010.
  
  

Direct Advertising

• Direct advertising, under the advertising based revenue model, is the more common way to sell advertising space and it produces a higher income. Direct advertising is where a business sells advertising space directly to the advertiser. In a web context, this is typically done through a CPM (cost per 1000 web impressions) or CPC (cost per click) agreement between the business and the advertiser. The business handles all of the transactions and interactions with the advertiser and can therefore have the utmost control over how the advertising is displayed and sold.
  
  

Contextual Advertising

• Contextual advertising is where a business uses a third party to sell advertising space to advertisers to be displayed on websites whose content reflects what advertisers believe their customers will be interested in. An example of contextual advertising is Google AdSense. A business agrees to display contextual Google ads on their website, Google sells the ad space to contextually relevant businesses, and those businesses deal directly with Google. Businesses benefit from not having to handle relationships with advertisers or the transaction part of the ad sale, however they must also pay the third party intermediary, which lowers the overall income of this model.