Revenue Models

Web Services can help your company generate income as well as save on the cost of doing business. Several different revenue models exist:

• Charge a flat fee for access to the service

• Charge based on volume of use of the service

• Creatively use the advertising model

• Use a middleman model

We will take a look at each of these models in the following sections.

Flat-Fee Access

For some Web Services, it may make sense to charge users a flat fee for use of the service, regardless of how much they actually use it. This benefits the consumers because they know exactly how much they will be charged. The downside of this for the owner of the service is that a few clients can account for the majority of the use of the service.

Flat-fee access makes the most sense when looking at renting applications for a fixed period of time. Consumers know how long they want the software, but they may have no idea how heavily they will use it. The user may rent some data analysis functionality or a full-blown application. You might provide a custom user interface that interacts with the back-end Web Service.

Volume-Based Access Fee

Use this model when you discover that users only want to pay for how they use the Web Service. You can charge users based on how much data they store at the service or on how many calls they make into it. For example, you might offer a service that provides up-to-the minute stock quotes. After analyzing the market, you discover that most individuals check their stocks ten times per day. A few users (stock brokers and day traders) may make over a thousand calls per day. To balance costs, you can set up a fee schedule that looks like the following:

• 1–50 calls/day = $0.07/call

• 51–100 calls/day = $0.06/call

• 101–500 calls/day = $0.05/call

• 501–1000 calls/day = $0.04/call

• More than 1001 calls/day = $0.03/call

To do this type of billing, you will need to audit all calls coming into the Web Service so that you can figure the costs on a day-by-day basis. This fee schedule may work for any Web Service where the revenue is based on call volume. Just make sure that your revenue is greater than your cost to provide the Web Service.

Under this model, you may also want to add a no-charge use level. Think of this as a sample that users can pay for if their needs go up. This way, you don't have to worry about charging for low use where the billing may cost more than the cost of providing the service.

So, how would you track all of this information? To correctly bill individuals, you will want to audit the Web Service access—track the identity of the caller, the date and time of the call, and the Web method that he or she called. When generating the bills, just add up the number of calls the user executed and bill appropriately. To authenticate the users, follow the recommendations in the authentication section of Chapter 6, “Security Issues with Web Services.”

Creative Use of the Advertising Model

Advertising can work with Web Services. The trick is figuring out how to expose advertisements to your users. The only way to do this is to take some control of the user interface used to access the Web Service. You can do this by either creating your own user interface or by requiring licensees of the Web Service to also display ads that you provide. For applications where the primary user is a person, this model may work. Obviously, this model fails when the primary user is another machine.

A Middleman Model

Believe it or not, you can actually make money being a concentrator of information. A database of books could charge publishers for the cost of adding the books to the collection. They might charge an extra fee for particular titles to show up when specific words are searched. For example, Sams Publishing might pay such a service to prominently list the title of this book whenever a user searched for SOAP books. The Web Service could add value for the end user by showing who is selling the book for the lowest price. Why would Sams pay for this? Assuming that all booksellers pay the same price per book, Sams makes more money if all booksellers combined sell more copies.

The middleman model can work in other ways as well. You can serve as an aggregator of disparate Web Services. For example, several Web Services may exist that allow individuals to get the prices of stocks from stock markets around the globe. You could add value by aggregating these different request types and always using the provider that is currently the fastest.

In general, this model will work whenever you can add value by placing yourself in the transaction stream between the creator of the product and the end user.