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Are Digital Products Profitable – Find Out Just How Much

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Digital products are extremely profitable, and by controlling business expenses, you can make close to 100% profit margins. In this article, we explore how profitable these types of products can be, how to increase the profit margin, and why digital products are profitable.


Key Takeaways

  • Digital products are highly profitable as the expenses for creating such products can be very low.
  • The profit margin gets closer to 100% the longer and more you sell the product.
  • Profit margin can mainly be increased by lowering expenses, increasing prices, and offering a product that has high demand but low competition.
  • The most profitable digital products are ebooks, digital downloads, and online courses.

How Profitable Digital Products Can Be

Digital products can be almost 100% profit after the initial expenses have been covered. If your product is sold year after year (with no updates), the profit margin will come close to 100%. If there was no expenses for creating the digital product, then the profit margin is automatically 100%.

Such an example would be to write an ebook on a public library computer and sell it on a free marketplace like Gumroad. Another example would be to create AI art with DALL-E 2 (on a public library computer) and sell it as a graphic design asset on sites like Envato Elements or Creative Fabrica.

Let’s imagine the baseline expenses are the same for each digital product you create. Let’s say that it costs roughly $50 to create a digital product. In this case, it would be an ebook, and the cost would come from the internet bill.

You can promote and sell your digital product for free, so there are no expenses from selling the actual product. The more you sell the digital product, the closer you get to a 100% profit margin. The more expenses you have per month in your business, the less profit you make per product sold.

What type of expenses lower the profit margin of digital products:

  • Graphic design tools and services
  • Hardware and materials for production
  • Marketplace, platform, and website fees
  • Living and business expenses
  • Payment gateway fees
  • Taxes

What Digital Products Are The Most Profitable

The most profitable digital products are those that have the least production expenses, maintenance expenses, or delivery expenses.

When talking about profit margins, it doesn’t matter whether you sell a four-figure online course or an ebook that costs a few dollars to the customer. Profit margin is always dependent on the expenses that your digital product has.

List of the most profitable digital products:

  • All kinds of digital downloads (PDF, PNG, SVG, fonts, etc.)
  • Online courses (high-end courses with 4-figure pricing)
  • Ebooks (PDF)

How To Increase The Profits For Digital Products

By cutting down expenses, production costs (tools and services), delivery expenses (marketplace (Etsy, Creative Market, etc.), Google Drive, product platform (Podia, Payhip, Sellfy, etc.)), and maintenance expenses (product update expenses, platform fees), you can increase the profit margin.

You can also increase the profit margin by not updating the product. When you update a product, you are essentially spending time and possibly some tools and services to update the product.

Best ways to increase the profit margin for digital products:

  • Use marketplaces to deliver the product (no maintenance fees for you, though marketplace fees might affect the profit margin)
  • Host the content on your own site or platform (some maintenance fees, but the profit margin is controllable)
  • Create digital products that have little to no production expenses (ebook, digital downloads)
  • Bring organic traffic to your digital product with video, audio, and/or written content
  • Promote your digital product through social media
  • Sell the same product on multiple marketplaces (not essentially increases your profit percentages but increases sales/product, and thus narrows the gap to 100% profit margin)
  • Increase price when there’s a high demand for the product, conversion rate is good, and there’s low competition for a similar product
  • Create an add-on that can be sold as an upsell offer but not as an individual product

Why Digital Products Are Profitable

The reason why digital products are highly profitable is that you can create them once and sell them as long as you want. You only need to do the work once and then sell the product in as many places as possible.

Another reason why digital products are highly profitable is that you don’t have to have any kind of physical inventory or physical location for production (home, internet and a computer are all that is needed), and you also don’t even need a website to sell digital products.

With digital products, you can scale your business extremely fast and easily. All you need is to drive traffic to your product, and when the traffic conversion is optimized, and the ads have a good ROAS (return on ad spend), increase the ad spend to scale the business.

List of the most common reasons why digital products are profitable:

  • No inventory
  • No need for a warehouse or dedicated workspace
  • No need for physical materials except a computer (but even that can be accessed on most public libraries)
  • Minimal expenses to create a digital product. In some cases, only an internet connection is needed (ebook creation)
  • Easy to update. You don’t need a lot of resources to update your product, so the expenses stay minimal
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Okuha

Digital Artist

I’m a digital artist who is passionate about anime and manga art. My true artist journey pretty much started with CTRL+Z. When I experienced that and the limitless color choices and the number of tools I could use with art software, I was sold. Drawing digital anime art is the thing that makes me happy among eating cheeseburgers in between veggie meals.

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