What’s the secret monetization strategy that all the large web startups? That’s the question I was looking to answer when I first started writing about the Facebook platform when it opened up over two years ago and after listening to one web luminary after the other I realized there really is no secret sauce to making money on the social web: you’re either selling ads or selling a product.
Why was it that all the executives were speaking as though there was a secret monetization strategy that was just around the corner? The reality is that there wasn’t and many of them are now looking to sell advertisements as a last ditch effort. Can you easily monetize millions of people that are coming to your application though? While it’s possible to generate revenue through a number of models, there are really only a few core monetization models.
Build A Targeted Audience
There are so many startups looking to develop a web application that attracts thousands or occasionally millions of users but they don’t think about how the money is going to be generated. If you come up with an idea for a service which is going to attract millions of users, yet you don’t know who those users are, you’ve already got a bad start. The value is in creating targeted groups of individuals with shared interests, values, and hopefully shared buying habits.
Dogster and Catster are great examples of targeted communities that have built a targeted group of individuals. Since ownership of mass distribution channels is becoming fragmented, advertisers are looking for targeted audiences that are most likely to purchase their product. Just about anybody can build a large media business overnight thanks to the power of the internet but not everybody can build a perfectly targeted group of users.
Sell A Product
Don’t want to rely on advertising to pay your bills? You don’t have to if you have a product that you can sell. Whether it’s an information product or a physical good, there are massive opportunities to generate revenue from selling things. While you’ll still need to use many of the same strategies used by the targeted audience model, the difference is that you can focus on building the proper strategy to sell more goods or services.
Building a targeted audience is extremely challenging but if you have a unique product or service many of the buyers will eventually turn into brand advocates. Brand advocacy in the world of social media is something that has many marketers drooling but rather than spending all your time monitoring the conversation, try developing a high quality product or service.
The Secret Monetization Model
Did you think I was going to reveal some secret monetization model that would instantly generate millions for you? I’m not. The ironic thing is that many internet entrepreneurs pretend as though there is a secret monetization model that they’ll release in the near future. There isn’t one. Thanks to the social web it is now easy to develop a targeted audience. What you do with that targeted audience is up to you.
Do you think there are alternative monetization models that I’m missing out through this generalized view? What do you think the best way to make money on the internet is?