Sustaining the project

Building a funding model that works

One of the great attractions of the online world is that it seems to be free. Many of the tools can be downloaded without charge, there are vast resources to be searched, read, and transformed again without charge, and the ethos of much of the Net is collaborative. People will share and help each other. Some of the free tools are there because their developers believe software should be free; some because the developers want to build a big user base to whom they can sell something else; some because costs are covered by advertising revenues or deals with linked partners.

Other online services have to be paid for though, in a variety of ways. And even if the tools are free, you will have invest a lot of time not just in getting started, but also managing technology development and in facilitating or contributing content. These costs have to be paid for in some way – either by revenue, funding, or the contribution they are judged to have made overall to the organisation. Even where volunteers or service users contribute a lot of content and support, some paid-for management may well be needed.

If you can find simple ways to make your project sustain itself, you will make things much easier for yourself and reduce the risk of having to close down a successful service just as people are beginning to derive real value from it. If you are offering something valuable to people in the real world, there should always be some way to pay for it.

Online business models

Professor Michael Rappa has analysed commercial business models, and writes:

“In the most basic sense, a business model is the method of doing business by which a company can sustain itself – that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

“Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realises a profit. Other models can be more intricately woven. Broadcasting is a good example. Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.”

Professor Rappa goes on to analyse some classic online business models, some of which may be relevant to those developing start-ups or other projects for social change or public services:

• Brokerage: bringing buyers and sellers together, and usually charging a fee. (Ebay is one of the best known; School of Everything a more recent UK example).
• Advertising: extending the traditional broadcast model and charging for exposure to people ... or rather their eyeballs. (such as Yahoo, Google…).
• Infomediary: collecting data about online users that can be used for marketing, for example. (Doubleclick)
• Merchant: sales of products or services on list prices or through auctions. (Amazon, ITunes)
• Manufacturer (Direct): reaching buyers directly. (Dell computers).
• Affiliate: providing purchase opportunities not through portal but where people are. (Amazon stores).
• Community: attracting loyal users, to whom other services can be sold. (Craigslist).
• Subscription: charging users periodically for a service. (Listen.com)
• Utility: pay-as-you-go. (Slashdot).

Be creative in modelling how your project might generate money to sustain itself. Work out what your service really does, and for whom, and then align the revenue model to fit. Take the time to design a robust revenue model early on, or else the inevitable search for money later could take you away from serving your community.