How do firms make money selling digital goods online?
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Bonatti_How do firms.pdf
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Author(s)
Lambrecht, Anja
Goldfarb, Avi
Bonatti, Alessandro
Ghose, Anindya
Goldstein, Daniel G.
Lewis, Randall
Rao, Anita
Sahni, Navdeep
Yao, Song
Date Issued
June 2014
Journal
Marketing Letters
Publisher
Springer-Verlag
Citation
Lambrecht, Anja, Avi Goldfarb, Alessandro Bonatti, Anindya Ghose, Daniel G. Goldstein, Randall Lewis, Anita Rao, Navdeep Sahni, and Song Yao. “How Do Firms Make Money Selling Digital Goods Online?” Mark Lett 25, no. 3 (June 24, 2014): 331–341.
Version
Author's final manuscript
Abstract
We review research on revenue models used by online firms who offer digital goods. Such goods are non-rival, have near zero marginal cost of production and distribution, low marginal cost of consumer search, and low transaction costs. Additionally, firms can easily observe and measure consumer behavior. We start by asking what consumers can offer in exchange for digital goods. We suggest that consumers can offer their money, personal information, or time. Firms, in turn, can generate revenue by selling digital content, brokering consumer information, or showing advertising. We discuss the firm’s trade-off in choosing between the different revenue streams, such as offering paid content or free content while relying on advertising revenues. We then turn to specific challenges firms face when choosing a revenue model based on either content, information, or advertising. Additionally, we discuss nascent revenue models that combine different revenue streams such as crowdfunding (content and information) or blogs (information and advertising). We conclude with a discussion of opportunities for future research including implications for firms’ revenue models from the increasing importance of the mobile Internet.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1007/s11002-014-9310-5
