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


Comments Comments Feed
  • Posted by Ernest Barbaric
    Mitch Joel

    Great post (and question), as usual. I've been thinking along these lines for a while now. It's painfully obvious that some of the big players have started turning their backs to users (us... the ones who built the network with our stories, connections, posts and photos) and focusing on advertisers... and in turn shareholders.

    It's an interesting paradox. If users start leaving, it diminishes the sales proposition of any network to an advertiser. Not to mention the drop in engagement and having to use advertising to reach the audience you already EARNED.

    I spoke at a recent Social Media Breakfast, in Calgary - and the good folks who ran it posted the video on YouTube already. I'd love to hear your and the other commenters' take on it, and the post-social world. (link here: http://bit.ly/TvVbIO )

    I also feel that we, the marketers, ruined social media. There WAS an opportunity to create something new, something different, something outside of the traditional model of monetization... but alas we're back to CPMs, Reach and Frequency, with a slightly better targeting model.

    Reply
  • Posted by Roger Dooley
    Mitch Joel

    I'll disagree, but just a little. I'm a community guy, and I've seen very few successful communities built when the founder(s) had monetization as a key part of their plan. Most online communities begin as a labor of love, don't take a bunch of VC money, and become profitable only after years of poorly compensated effort.

    Businesses like Twitter and Facebook are challenging, just because of their scale. They couldn't support their own organic growth without gobs of cash. The investors, of course, aren't content with the promise of future profits, creating the need to shoehorn in monetization solutions (as you describe!).

    Reply
  • Posted by Mila Araujo
    Mitch Joel

    Great observations Mitch. Personally what I am creating for in the branding of my company is something that fits seamlessly, painlessly into the user experience. Something that they will relate to and that will give them something visually and emotionally as they live in their own social environments. As you say, the people being targeted in social networks or even online are having the experience in their own time, they aren't looking to think about business, or be bombarded with ads. My own thoughts on this have been to dig deep into what our brand is at the heart, and use these feelings to deliver "ads" that support the values of our clients. Interestingly enough, as I tested some of my "ads" with our own employees, they were so un-ad like to them, they didn't get it. I was happy with this. I want to draw attention, but not as an advertiser but as a community member, hopefully provoking the feeling that the ad is simply an enriching part of the users current experience. If we can really get down to the human side of our products and what they really stand for, I believe good ads will feel interesting, and entertaining, or supportive of values - and not such an annoyance.

    On the flip side, we are bombarded with annoying ads, that are screaming at us to buy, act, do something. Don't we get enough of that in our professional lives, in the office? I believe that users of the networks these ads appear on actually have blinders on, we ignore them, I don't even see them anymore.

    All I see are the things that are different, the things that talk to me. So, this is the challenge and the difference that will make or break the social advertiser/marketer : become a part of your users experience so they want to be involved - don't keep screaming - no one cares. Social Media advertising is a specialty of its own.

    Reply
    • Posted by Ernest Barbaric
      Mitch Joel

      @Mila

      Great point and it's great to see marketers who are reaching back to the heart of a brand :) Have you read Lovemarks by any chance?

      On another note, I'd have to disagree on one point. Social Media was never meant to be advertised on (the new networks that have been "ruined" notwithstanding), so that being a specialty of its own is maybe not the best way to paint it.

      Or maybe it is? If a brand is not going to put the effort into building a community and meaningful connections, maybe advertising is an acceptable vehicle to capture some users and bring them over to a landing page?

      Reply
      • Posted by Mila
        Mitch Joel

        Thanks for the reply Ernest! I will check the book out, I haven't read it :)

        I think what you mention is exactly what I am getting at - it becomes a specialty because of the fact that it's not your straight forward old school thinking advertising - its got to have soul. That's what is really needed to capture the hearts and minds and attention of people - I think those who do it well are gifted like artists :) it's an emerging craft :)

        Reply
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