How Megaupload.com Makes Money!

So now that the United States Government has shut down one of the most popular online sharing sites, Megaupload.com I’ll bet you’re probably wondering how they made so much money.

In fact, it is estimated that Megaupload.com has made more than $175 million dollars since 2005, when the website was first put online. Kim Dotcom (a.k.a. Kim Schmitz and Kim Tim Jim Vestor) who is the founder, former CEO and current chief innovation officer has banked more than $42 million dollars himself in 2010 alone.

So how does a file sharing site like Megaupload actually make money?

Having desirable content such as popular movies, music, books, TV shows, video games and software available for anyone to download makes this website instantly viral. People who visit this site soon tell their friends about it.

Megaupload benefited from the viral effect of their popular content and boasted as having over 1 Billion visits to the website since 2005. They have more than 150 million registered users and 50 million daily visitors. It is reported that Megaupload accounts for more than 4 percent of Internet traffic.

To ensure ongoing premium content was always available Megaupload paid millions of dollars in incentives to subscribers who uploaded content that others could then download. The more popular the content amongst its users the more the uploader was paid.

Now that the content was taken care of and a constant stream of new content added daily via its own users, Megaupload turned to a subscription based model where they offered subscribers a lifetime subscription to the website for around $260.

Included in this lifetime membership were benefits such as faster download speeds and access to premium content such as newly released games, movies and music.

More than $150 Million dollars came from these premium subscriptions and an additional $25 Million from online advertisers who advertised their products and services on the site in front of millions of viewers daily.

The music and movie industry has reported to loosing more than $500 Million dollars since 2005 because of the Megaupload website. This only solidifies just how much the music and movie industry were making before Megaupload and other file sharing websites were available online.

This also causes me to ask the question why on earth movie tickets were increasing at a steady rate way before Megaupload and other file sharing sites ever came into existence. If the music and movie industry has lost a reported $500 Million dollars because of file sharing sites then why are they still profitable?

Movies cost millions of dollars to produce and actors don’t come cheap so this only adds “fuel to the fire” and a solid foundation for the argument that the music and movie industry are nothing but greedy no good SOB’s.

I’ll leave that for you to decide!

But, in a nutshell this is how Megaupload.com made its money:

1. Popular stream of never-ending content
2. Incentive based participation
3. Membership benefits to premium content
4. Advertising profits

Taking a look at this business model what do you think you could offer that would fit this? Do you have specialized knowledge in a particular field or know someone who does? How about offering other products or services to fans of the music and movie industry?

Think about it and post your comments below, I’d love to hear your own thoughts on this story.