Six Pixels of Separation - The Blog
August 30, 2012 3:17 PM

The Misery Of Monetization

Do you know which brands struggle with monetization?

It's not a trick question and the answer is pretty obvious: any brand that was created without thinking about how or why people would either pay for it or truly engage with an advertising supported model. Kickstarter was built to make money. So was Square. Twitter wasn't. Neither was Facebook. You could argue that while Google wasn't created that way, they are one of the few brands that was able to turn it around in a spectacular fashion (thank you, Google AdWords). Look at what YouTube is doing to try and figure out if people like ads before watching an online video clip (TrueView is some interesting stuff).

There is no struggle with monetization.

Trying to figure out where the money is going to come from after you have launched something and people connect to it is near-impossible. I say this not to state the obvious, but because the default position - when all else fails - is to bring in the advertisers. The brands figure out what a pageview is worth (and this can be on a website or mobile device) and let the media companies go and do their bidding. Alternately, brands that have something to sell can learn - in short order - what people are willing to pay for (and how much). It's somewhat astonishing how self-regulating the Internet can be when it comes to testing price variables and more (btw, don't kid yourself into thinking that everyone pays the same price, either. Start snooping around Amazon to see how creative they can be with their pricing).

Value and the user experience.

It's all going to come to a head... and it's going to happen fairly soon. This isn't about inflating advertising dollars by bulking up user numbers (or the creation of fake accounts and users). As advertising shifts from a scarcity model to one of abundance, the brands that are struggling with a true monetization strategy are going to have to figure out how much disruption their consumers are going to accept in terms of advertising before they start heading for the unfollow button.

A personal story...

Not too long ago, I started noticing more and more pieces of "branded content" showing up in my feeds (across a few online social networks). Some were interesting, while the majority were bland. I started to unfollow and unfriend some brands to see if that would change my user experience (the ignore buttons don't always do the trick). It didn't stop. It seemed like I could not control it. "I'm fine with that," I thought to myself, "I'm not paying for these services... looking at ads is the price of admission." There's a bigger question here: do you think that consumers are as forgiving as a professional marketer?

Making money.

There are too many articles and blog posts that have come out in the past few days that are debating the future of platforms that are struggling with monetization (look no further than this one: Twitter to Target Ads Based on Interests). Do we really think that it's about how targeted the ads are (or about how big they are)? I'm willing to bet that marketing efficacy would be based less on those areas of concerns and much more on what the user experience is, and whether or not the marketing adds value (a compliment to it) instead of acting as an interference.

It's funny how that works, isn't it?

Stuffing advertising on top of something that people like, used to be the right strategy. But that's increasingly becoming a challenging business model to capitalize on. That's a hard nut to swallow when you're in the advertising game, but it's true. We're still running impressions based on CPM models against a media channel that is becoming highly personalized and very finicky. On top of that, adding in content (which is, ultimately, thinly veiled advertising) is only going to ruffle more feathers. The solution: build the financial business model before you launch... don't scramble to figure it out after people have a set level of user experience expectation.

Is it too late for social media? It could be if the focus remains on advertising as a last resort.

By Mitch Joel