Making Money From Social

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I have a bit of a beef about this. I must have read a hundred posts on this subject, many of them attempting to define an elusive 'social media model'. I'm not convinced that this is the right place to start. Social media is not a channel. Nor is it a tactic. There is no 'Media' at the end of the title to this post because rather than obsess about a media model, I think it better to start at what is at the centre of that model - the value you are creating. JP Rangaswami said recently:

“I’ve always maintained that people who “think opensource” work on useful things, solve problems, create value; they don’t focus on the business model at the outset but instead concentrate on the value they create. In Peter Drucker’s words, “people make shoes, not money”. Make something that is worth while and people will pay you for it. Figure out what shoes you’re good at making and then make them well. You will make money as a result.”

Gareth Kay makes a great point about this, which is that all too often we end up focusing on the execution rather than the idea. Thinking 'social ideas', rather than 'social media' makes you think about a very different outcome. Ideas that contribute positively to culture will be those upon which businesses are built. And I believe one of the optimum areas that businesses can invest resources in is in making those ideas as powerful as possible.

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To paraphrase Richard Titus, there are only three ways of making money online:- subscription, transaction and advertising. Every model is a variation on one or more of those three themes. Each of them have at their heart two considerations: what is the level of contribution and participation you expect of your audience, and what is the return? Ultimately, it always comes back to the same question: what value are you creating? Create value and you will make money.

There are plenty of ways to create value. So if you are a content owner or generator of any kind, I think it is useful to build a framework that helps give some structure to the way you think about that value:

Distribution
Conventional wisdom from legacy command and control models position the website as the focus of everything. Investment goes into site analytics, usability, site-based functionality. These things are important, but only part of the story. As Paul Boag says, it's the content that matters, not the website. The website is a tool to showcase your content but it is not the only one.

Distributing your content using platforms that are widely adopted (and often free) not only exposes your content to a far wider audience than your website could ever reach, but allows that audience to find, share and derive value far easier. Through it's associates programme, for example, Amazon creates value for millions of people but in doing so has created millions of shop windows for it's services.

Community
Conventional wisdom positions the website as the destination and focuses investment on search to 'drive' traffic to it. Think about the language we're using here. Do we really think that people who are 'driven' to your website are going to stick around, interact with your stuff, click on your banners? Search is attractive because of it's accountability, control and efficiency but ask yourself this: who would you rather have on your website - a person who is looking for a specific piece of information and is likely to leave as soon as they've got it, or a person who is passionate about what you do and has a desire to connect, interact, share, contribute. Both people count as a unique user. But only one of them will likely stick around, come back again and again, and be truly engaged. So I would argue that their value is very different.

There's nothing wrong with investing in search, and it is an important tool, but it is not everything. Deploying search optimisation without social optimisation is only a partial solution. What do I mean by social optimisation? I mean participation in the conversation. I mean making the community elements in your own content as visible as possible (it has to feel like a community). And I mean creating tools and services to facilitate what that community is trying to do. This has pound notes attached to it - community facilitates repeat visits, engagement and interaction. Repeat visits, engagement and interaction facilitate subscription, transaction and advertising.

Contribution
I'm not a fan of the term 'user generated content'. Apart from conjuring up images of cute kitten videos it is overused and over-simplifies. It's easy to treat all forms of interaction the same. They're not. There is a big difference in expecting someone just to read a piece of content, and asking them to contribute their own data in a registration process. There are many levels of participation (ref Forrester's Social Technographics from a couple of years ago) so developing an architecture around them enables you to better understand what the value trade off is - for you and the user.

Social Objects

For a content owner, developing a strategy around social objects is a no brainer. If you're smart, you'll recognise the attractiveness of stuff that spreads, stuff that keeps people coming back, stuff that people talk about, and deploy your best creative brains behind coming up with a constant stream of great ideas. An idea like fantasy football, for example, delivers for the subscribers, and creates a commercial platform that delivers transaction, subscription and advertising.

So?

Someone asked me the other day how I would make money out of Facebook. If I knew the answer to that I'd probably be sitting in front of Zuckerberg rather than writing this on the 6.18 from Waterloo. But for what it's worth, I think there is one thing that they need to do:- create a marketplace. Arguably they missed a sizeable trick when they opened up their API in allowing the developers take 100% of the monetary benefit of the apps they were propagating through the Facebook platform. When Apple did it, they took a slice of every one of the billion downloads that has gone through the iphone apps store. They created a marketplace.

My hunch is that there is a huge play around data that will be their greatest win. One of the biggest value assets that sits on the Facebook platform is the millions of gigabytes of information uploaded by it's users every second. Recency is Google's biggest current weakness. If it can create value through aggregation and real-time search (in the way that Twitter is starting to do) and useful services that capitalise on that data (increasingly, no doubt, on mobile), it will succeed. But it is not their data. It belongs to their users. So if they are smart they will focus on adding sufficient value to their users so that the trade off is not only acceptable, it is desirable.

The point, and the entire point of this post, is about focusing on the value you are creating for others, not just yourself. That is the way to succeed in digital and, dareisayit, life.

Comments

[simon]

A sterling post, sir. Very wise words indeed. Dare I say, full of common sense too. So, why is so hard for some companies to understand this? For that seems to me to be the greater hurdle.

[Kate Richardson]

http://thebrandbuilder.wordpress.com/2009/05/08/on-the-substance-of-success/

“When people ask me how do you make it in show business or whatever, what I always tell them — And nobody ever takes note of it ‘cuz it’s not the answer they wanted to hear. What they want to hear is here’s how you get an agent, here’s how you write a script, here’s how you do this — But I always say, “Be so good they can’t ignore you.” If somebody’s thinking, “How can I be really good?”, people are going to come to you. It’s much easier doing it that way than going to cocktail parties.”

[Kate Richardson]

whoops, the beginning of that comment said

We obsess over models when often asking the right questions is a much more useful way of working through problems. Models encourage us to do things the way we've always done them, asking questions opens up new possibilities.

On the subject of success, I came across that great quote from Steve Martin via Olivier Blanchard's blog recently and I love it.

[neilperkin]

Thanks both.

Kate - nice quote, and so true

[Christian Hughes]

Fantastic post Neil - clear, concise and correct - I have had so many conversations with colleagues, clients and friends about the 'monetisation' of their social media activities, and this is now the place I plan on sending all of them.

[internet marketing gurus]

Thanks for the juicy tips and strategies! I'm staying tuned!

[John Drake]

Apparently the 6.18 from Waterloo you mention is an excellent place to think. Great post, Neil. Thank you for sharing.

[scott]

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[Gareth]

Great great post Neil. And thanks for the link.

[make money on internet]

Great work
social net working
social media , i mean networking , is great phenomenon , we should explor it it is wast and great , keep writng about it , i liked your writing , you have great hold of subject

[fredrik sarnblad]

A great, thoughtful post Neil. It's absolutely packed with uncommon sense!!

[neilperkin]

Thanks for the kind words all.

John - the 6.18 from Waterloo is an uncommonly good place to think I find :-)

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[Google Fast Cash]

Check out this site! The Google Fast Cash idea looks quite appealing! (:

[Fast Cash Lydia]

This was written in May and most people still aren't making any money from social networking. I say we either figure it out fast, or it's not gonna happen!