Making Money From Social (2)

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I've lost count of the number of people who have told me that the problem with social is that you can't make any money out of it. Yet content owners and producers the world over continue to wrestle with what Scott Karp calls 'the 10% problem' - the problem that if you apply old school media principles to digital content you find that revenue per user is typically a fraction of the revenue per offline viewer, reader, or listener.

Content owners aren't short of challenges: information wants to be free, content is ubiquitous, attention is the new scarcity. The old destination model said build it and they will come. Our content is good so people will come to us to consume it, and whilst they're here we'll throw a load of advertising at them.

In this scenario advertising revenue is often a factor of scale - the more users I have, the more ad impressions I can serve and charge for, and audiences are homogenous - a user is a user, a reader is a reader, a viewer a viewer.

Yet life is not linear. The world is not black and white. And social is neither. So perhaps it's time to ditch what Charles calls the "duality of binary classification", and time instead for "the complexity and infinite shades of grey that exist between the polar states of good and bad, black and white, north and south or up and down."

Take connections between people. Aristotle defined three types of friendship - friendship based on utility (utility being an impermanent thing, changing according to circumstance, disolving when the utility is no more), friendship based on pleasure (of the moment, changing as pleasures change), and 'perfect' friendship which is based on goodness (mutual respect, nourishing, lasting, trusting). Friendship is not black and white, and 'friend' (or 'fan' or 'follower') is a very blunt term.

Think about participation. There are many forms of it, and a significant difference between simply reading, or commenting and actually contributing. Forrester's Social Technographics ladder does a good job of reflecting the broad scope of such participation inequality.

Connection, participation - shades of grey. One user is not like another user. The key for content owners to make money out of social is to understand human subtleties like these. Less media, and more social, if you like. And so I think one of the most useful ways of thinking about your audience is through the level of engagement and interaction they have with what you're doing. The internet is a does medium. It's not for passive consumption, it's about interaction. So thinking of your audience in this way you immediately start to think differently about your content, and about the value you are delivering. Wary as I am about segmenting people into homogenous groups, I think it's useful to put a simple framework around this (I'm no David Armano so I'm afraid you'll have to make do with my rather crude representation).

At the outer edges is the content that people are sharing, passing on. This might be content in its original form or stuff that has been mashed-up and co-created, but the job for producers here is to design for speadable media - what Mike Arauz calls designing for networks not just groups of people. Using the phrase 'outer edges' is potentially misleading - people may be as engaged with what you do here as anywhere else and this is content that reaches out far and wide, brings new people into contact with what you do, spreads the word - what Seth Godin called 'Flipping the Funnel'. The value for the producer here is in the ability to spread your ideas, your brand and your content way beyond your own network or audience.

Then there is the content that is distributed out on the web and other platforms which people may or may not be actively sharing, but which they are actively consuming and interacting with. This has typically been content designed for the platforms (You Tube, Flickr, social networks et al) that can enable huge reach and a ready made network that creates the potential for ideas to spread quickly. Increasingly, I think we'll see more content designed for streams, where (as Glen Hiemstra says) it is the flow of information that matters. It's interesting that twitter and Facebook now refer significant proportions of traffic to some content sites, in some cases comparable to Google. And some of the most interesting content innovations out there like Stephen Fry's The Dongle of Donald Trefusis, and Paul Morley's Showing Off that Russell wrote about, and David and Tom's Purefold, play on the fact that the content is multi-faceted, transmedia, and part of broader streams. There is simple direct value here for the producer (like a revenue share on videos played on You Tube), as well as the indirect value of a tonne of referals.

And then there is what happens on your website. An appreciation of differing levels of interaction (and that one user is not, after all, like another user) is important because there is a lot of difference between a drive-by (someone who comes to your site looking for a specific piece of information, often driven by search, likely not to linger long once they've found what they're looking for), and people who browse (consume but don't necessarily interact), or those who occasionally interact and contribute, or those who are your superusers (those who interact the most, comment the most, contribute the majority of UGC, are most engaged with what your doing).

Websites used to be everything. I think their role now is more akin to a kind of content hub supporting a more distributed presence. Designing for platforms and streams enables an exponentially larger reach for content than could ever be acheived through a destination model, so in this way scale comes through connection. With decent content acheiving scale is relatively easy, but scale without connection is one-dimensional. Because connection builds permission: "the understanding that the real asset most organisations can build isn't an amorphous brand but is in fact the privilege of delivering anticipated, personal and relevant messages to people who want to get them."

That last quote was from Seth Godin. In Tribes, Seth talks about the fact that what people really want is the ability to connect to each other, not to companies, so services that facilitate connection, give people stories to tell and something to talk about, build permission. It flips the focus from looking for customers for your products, to seeking out products (and services) for the tribe (HT to Simon for reminding me of that).

This means that content owners need to reach out and engage their audiences wherever they are. When we think about online communities, it's easy to slip back into old destination thinking about attempting to "build" an online community around your brand. But to paraphrase Mark Zuckerberg, communities already exist, so the job instead should be to think about how you can help that community do what it wants to do. Communities are fluid and ever changing. So a better model is to think about multiple assets (social objects or ideas if you like) each with their own levels of participation.

 

So what of the thorny subject of paywalls? I'm going to conform to my self-interest here and say that I believe that provided publishers create services that have enough value to the end user, I'm convinced that people will pay for it. The key word here is services - in a world of ubiquitous free content replicating old print subscription models is unlikely to work but, like Tim says, that is generally not how people consume digital media. Our experience of digital consumption is a whole lot more fragmented, dipping in and out of a huge number of different sources. So services which aggregate the kind of highly relevant, interesting in-depth or curated short-form content for me, or which apply producer expertise in new ways to deliver useful services to me may just be the answer.

I said in the previous post on this subject that the way to make money in social is to think about the value you are creating. This is useful since too many people forget that with a two-way medium, the exchange of value is what's really important - the more relevant the content and services, the deeper the level of user participation and interaction, the higher the contribution of value in terms of engagement and data. If there are essentially three ways of monetizing content and services - transaction, subscription and advertising - I would argue that users who are highly engaged with what you're doing are far more likely to transact on your site, subscribe to your services, and interact with the advertising than those who are not. So it's probably a good idea to know who those people are. And we're not short of ways of generating revenue from engaged users: aggregation, outreach, sampling, seeding, PR, behavioural, subscription, affiliate, data, newsletters, display advertising, sponsorship, services, applications, I could go on. All very measurable, all very accountable, at every level.

Let's face it, we're all in business, we're all here to make money. The point is that social gives you the platform. The platform from which to listen, understand, converse, engage. The platform on which the content business of the future will be built.

I've done a lot of thinking aloud here. As always, comments and feedback very welcome.

Comments

[eaon]

Good work Neil. i've also been thinking a bit lately about exchange models and intrinsic value v/and/or relational value, which you allude to here.
Excellent stuff.

[Graphic Designher]

Excellent article, made my eyes go funny trying to read it on screen, had to go all traditional and print the bugger out.
Thanks to you! Matt

[Steve]

best round up i've seen to date! great work neil

[John Dodds]

Nice round-up. Does this guy Aristotle have a blog?

[neilperkin]

Thanks all.

John - yes, it's here:
http://bit.ly/povo8
...could be I've got the wrong Aristotle mind ;-)

[Charles]

Awesome post and thanks for digging through my Nixon post to hit on the subject of complexity although I sometimes don't recognise what I've written and more scarily who has written it (Who is that GUY?) ;)

I would gladly pay for content. Not because I want to but because deep down I know that I need great content more than great content needs me.

Random idea: Wouldn't it be good if leaving a comment was a micro payment. It would be a wheat from chaff kudos system (with trackbacks) overnight and you'd be up 20 pence already.

Just a thought but let's face it, the problem isn't that we don't have an idea for payment.

The challenge to me seems that we've got too many and we need a few years to try them all out. The 20th century biz model says we have to get it right, and without error, because expensive people are hired for the process.That mistakes can't be made and yet everything we've ever achieved as a species is built on learnings from mistakes. Why doesn't Rupert Murdoch admit he doesn't know and *join* forces with his competitors. We all want content, we all paid for it when it was physical and we are scared we will lose it if old media asphyxiates on an old business model. (Move out the way I say to the executives who don't have blogs)

My other dangerous idea is that services such as Twitter should be paid for by opt out (in a "Nudge" like way) micro taxes. That's right.

Taxes.

I love em. Pays for the cops, army, street lighting and all the other essential stuff nobody wants to talk about but which means the British army are in Afghanistan so the US can influence Iraqi oil policy.

The internet is no longer a flim flam luxury. I feed my head on it, you do and when the massive passive begin to dwindle then the monologue TV model is looking shaky too.

I want utilities such as twitter which I think everyone should have and everyone except non indutrialised countries (and a few others) should chip in for.

Twitter shouldn't make VAST Google like profits their mission. They should make surviving for as long as possible their mission. It's not African debt we should make the only moral obligation. It's as much digital platforms we can give Africa for free. And a kick ass broadband connection because what goes around comes around. Google isn't the future of business. It's the best of a profit model that is rooted in the past. It's the zenith. Well done boys.

Now let the Twitter gang in.

Here's an example why. I'm pretty sure Twitter unsettled a few people I met in the last months whose intent was malicious. I'm not sure I'd have the liberty to write this if I wasn't telling people what I had for breakfast, where I was walking to, where I was walking from. People with ill intent, with much more power than me and who didn't like transparency. Twitter was very comforting. A bit verbose for those that follow me but here I am.

Oh dear, I've gone on again haven't I? Great post Neil.

[neilperkin]

Thanks Charles. I think you're right about the payment thing - people will pay for something if it is important enough to them, and connection is important. Like you say, there are so many ways in which payment could work - I just hope we see more of the kind of learning cycle your talking about, because that's what it will take. Perhaps mobile (which I didn't talk about specifically above) will help because there you have a ready-made micropayment system infrastructure and more importantly a situation where people are more used to pay for stuff. I wonder.

[david cushman]

Nice one Neil. am pointing at it from this:
http://fasterfuture.blogspot.com/2009/06/were-trying-to-change-world-not-report.html

Makes me wonder if we aren't in social media... alarmingly we may be in social services (ah hem...)

[andy]

Wow. Thorough. Took a few reads :)

One thing caught my eye which ties into some things I'm thinking about.

You battle briefly with active vs passive, saying one moment that the internet is not for passive consumption and then acknowledging that the 'outer-edges' is misleading in its dismissal of its inhabitants' significance. (crikey, hard trying to write this in brief)

Things are perhaps most interesting when active and passive collide. They're terms that are historically opposite, but now there is a new kind of behaviour that one might call 'passive doing' - participating with almost zero investment. Which hyper-connectivity and intuitive tools have made easy.

I just wrote something that started to scrape the surface of this and your post has got me thinking. I'm going to stop there or I'll drown your comments list.

[Gary Hayes]

Nice item - echoes most of my social media 101 charts & thoughts. The charts are on flickr http://www.flickr.com/photos/garyhayes/sets/72157613331811096/ and relevant posts linked from those. The most popular image seems to be the social media campaign diagram covered in this post http://www.personalizemedia.com/the-future-of-social-media-entertainment-slides/

Also Laurel Papworth has covered monetization a great deal on her blog eg: http://laurelpapworth.com/social-media-monetization-and-revenue/

[Scott Karambis]

Great thoughtful, balaned post. It's certainly true that social media offers many benefits beyond more transactions (insight, engagement, etc), though at the same time I'm sympathetic to the CMO who still needs to show old-fashioned sales results lined up against his marketing dollars. On the other hand--and this is a simple, obvious point that I'm not sure got made above--social media is really cheap compared to traditional marketing vehicles so it doesn't have to make as much money.

[Rob @ Cynic]

Of course you can make money from social networking - it's how the Chinese culture has operated for thousands of years - which leads me to my point ... can we all stop implying social networking is a new phenomenon, it's not - it's just easier to do with technology. [as I wrote - excuse the plug @ http://tinyurl.com/myaqt2]

Thank you, I'll shut up now.

[James Cherkoff]

When people say you can't make money out of social media I always think - compared with what? TV? Hardly a booming business to be in at the moment? Classifieds? Display?

I think they are saying you can't make money out of selling social media. So the 'problem' is only for professional media folk who are looking through the narrow lens of traditional media.

In the meantime, social media empires such as Craigs List, SixApart, Etsy, Zynga, Threadless, Flickr, Huffington, Facebook et al continue to rake it in.

[Charles]

I've no idea why I can't use an Oyster Card or an Octopus card to drag and drop micro payments into content I like.

Or do big banks get scared with the idea of money being digitised outside of the 7 days to send money system that I'm currently experiencing?

Of course they do. Banks don't like micropayments one bit.

[neilperkin]

Thanks for the comments.

Rob, James, Charles - great points

[Laurel Papworth]

Thankyou Gary for mentioning my work - I have put together 22 different revenue streams from peer to peer finance to merchandising and so on on my blog post http://laurelpapworth.com/social-media-monetization-and-revenue/

It includes examples from the $2.16 per year per member Myspace makes from advertising to Michael Arrington making 2.5 million per year blogging from his spare room, to virtual goods industries and spotlight sponsorship forums ($1 million per forum for KFC) and LinkedIn $80 million - 1/4 only from advertising, rest from freemium services.

Hope it helps :)

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