In this post we will take a look at several popular business models to monetize a classified ads or directory site.
We’ll take a look at how the business model works, but also look at the benefits and cons of choosing the business model.
he objective of this post is to give you a clear overview of the possibilities and inspire you to get creative in combining two or more business models.
1. Subscription based / Membership
How: charge advertisers to become member of the site before they can publish ads. This fee can be one-off, but also be a recurring fee per month or per year.
Benefits: working with memberships still gives you a lot of flexibility when it comes to offer various packs. You could charge your members per month or per year, and you can combine that with options like the number of ads they can publish.
Besides the various packs it’s also an ideal way to generate a recurring revenue, which is what any online entrepreneur is looking for.
Suitable for B2B or B2C websites.
Cons: you really need to be able to show that the membership subscription is worth the deal. A lot of sites fail at doing that. They set up a directory, get hold of an e-mail list or start bothering people on LinkedIn and get in touch with them to get a listing on their site at a ridiculous high rate without any certainty of providing traffic to the advertisers website.
Serchen is one of them. It’s a software directory and charge large amounts of money for a yearly subscription. When they contact you they offer serious discounts if you decide before tomorrow. They do get some deals, but because they don’t provide value the advertisers stop after their first round at Serchen.
2. Free classifieds with premium options
How: offer your visitors to post their listings for free, and offer premium features such as “Featured Ad” or the ability to add more pictures if they pay a small fee.
Benefits: the barrier to publish an ad becomes very low, because everybody can publish for free. This way you don’t exclude anyone of signing up for your website.
People will notice that there is a way to make their ad stand out of the other ones listed. Follow-up e-mails can stimulate publishers to upgrade their to be featured, or add more pictures to the ad.
Suitable for C2C and B2C websites
Cons: because of the nature of the payments (small amounts, but maybe large in volume) the site should offer the easiest payment method available but also the one with the lowest fees. With so many possibilities it’s hard to choose the right one. Should you collect your micropayments using Paypal and pay a 0,35$ + 3% fee on every dollar you get for an ad, or choose for SMS payments for example?
3. Bounce Ads
How: just like people only take a look at the first several pages of search results on Google they only look at the first pages when browsing classified ads. As more ads are getting listed you can offer advertisers the possibility to bump their ad back to the top for a small fee.
Benefits: this way of monetizing gives advertisers a quick way to get their ad back at the top without having to publish it again. It’s some kind of gamification element that you add on your website. Some advertisers just like to see their ad at the top and are willing to pay for that. In The Netherlands, Marktplaats offers this kind of functionality to their advertisers.
Suitable for C2C and B2C sites
Cons: just like the additional features you can charge for, it will probably be micropayments so you have to look for a gateway that won’t cost you a lot for every transaction.
4. Free Classifieds, charge for banner ads
How: show banner ads on relevant categories and pages.
Benefits: this is the easiest way to implement and you still have a lot of options to offer. The easiest way is to add the Google Adsense code to your site and show banners through Google’s famous ad network.
Or you can use a plugin which allows you to offer banners and charge per impression or click. When there are no advertisers you can still show the Google ads.
Suitable for C2C, B2C & B2B websites
Cons: If you’re using the Google ad network it will require a lot of visitors in order to make money of the banner ads you’re showing. The CTR (click through rate) is low, and the revenue per click won’t be much (depending of the niche. Insurance & financial products can have higher rates).
When you go for selling banner space directly towards advertisers you’ll get into a time consuming sales cycle, which isn’t ideal either.
5. Pay per ad
How: charge advertisers a fee for publishing one or more ads.
Benefits: this is an ideal solution for websites that have been around for a while and never charged for their service. They already have the reach, and people that publish know that the response will be there as well.
This can of course be combined with Premium Ad features such as “Featured” or more pics.
Suitable for C2C & B2C websites
Cons: it’s a hard decision to make to actually start asking money to publish an ad when people are used to publish for free. Some niches are suitable to start charging from day one, but not many.
6. Pay per view
How: charge advertisers a fee for the views there ad detail page gets
Benefits: you are very open in your offering towards potential advertisers. They only pay if you make sure the ad gets eyeballs so the risk is low.
Suitable for B2C & B2B sites
Cons: as companies are familiar with CPM (cost per mil) pricing, you really need to convince them that you provide quality traffic and that it’s worth to pay a little bit more than ad networks such as Google.
7. Pay per lead
How: advertisers pay a fee per lead they receive through the contact form on the ad listing page. Some directories offer a form to get a quote or request a demo.
Benefits: as advertisers only pay per lead, the risk is again very low for them to start advertising, and instead of charging CPM pricing you can raise the price because you actually get them leads. This also gives you power to improve your site to get more contact forms filled in.
Suitable for B2C, but most for B2B websites. Softwareadvice.com is doing a good job in providing qualified leads to software vendors for example.
Cons: it’s hard to control the quality of leads that fill in the contact form (as a site owner), so it’s important to follow up with the advertisers to see if they are getting good deals out of it.
8. Affiliate model
How: instead of sending people to another website using an affiliate link, you can offer your advertisers to sell their products directly on your site and you’ll get a fee on the sales made.
Benefits: instead of just contacting the advertiser or click through to their website, visitors can buy the item right away.
Suitable for B2C sites
Cons: the affiliate model is a hard solution to implement and it will take some skills to manage payments coming and divide it over several. With so many affiliate platforms out there you will probably need several accounts to manage the campaigns you are running (or will be running) on your website.
Combination of various models
Like you see there are a lot of ways to make money with your classified ad site or directory site. The examples listed above are the most popular ones, but this list is just a start.
To maximize your profits you should be creative come up with a unique mix of monetization options, but always make sure that if fits the needs of your visitors and advertisers.
We’ve built plenty of sites that are doing a great job at monetizing their classified ad site. From simple C2C community sites to directory sites that combine B2C listings, a webshop and banner ads to sell ad space.