Web Strategy: The Many Forms of Monetization using the Web
You: A Web Strategist
You’re an individual who is responsible for the long term direction of a website, and meets the requirements of business, community, and technology. Part of your role is to keep your website profitable, even if it doesn’t generate direct revenue streams.
Situation
As you plan out the direction of your website, there are multiple ways to bring your web strategy to fruition, I’m listing out these methods below.
The Many Forms of Monetization using the Web:
Marketing
What’s Marketing? Everyone has a hard time describing this activity but I’ll break it down for you with my definition: The activity of bringing products and customers together.
Advertising
The most common form of monetization for websites is Advertising, it works great for media sites, blogs, and other news and media sites. For the corporate web strategist, their goal is to get ads on these sites. ConversionRater has listed out the many forms of advertising including:Contextual Advertising Display Advertising Targeted Advertising Text Link Advertising Sponsorship
I’m calling this out as separate than advertising as often sponsors are infused into website or media as part of the experience. One example that often comes to mind is the infusion of the ScobleShow and Seagate brand. Robert mentions the brand uses the products, and displays the logo on a variety of media he creates. Please note I’m a former employer employee of PodTech, so here’s a few other examples: Chris Pirillo’s live stream show is sponsored by Dell and others, a perfect fit. Recently, Ask a Ninja of Federated Media created some customer shows to promote blades of steel, a cross over and viral marketing campaign.Paid Content and Advertorials
Often in magazines and newspapers we’ll see advertorial sections that –at first glance– appear to be editorial of the publication. These paid content areas likely have useful or valuable knowledge being shared, but at the same time will guide the user towards a marketing direction. Media websites can offer these advertorial sections to their websites, allowing marketers to publish content. Transparency is required, don’t even think of trying to slip one over your users, as when they find out (they always do) a rebellion will occur.
Thanks Andy Beard via commentsSyndication of Content
By repurposing content from other channels, or displaying your content on other websites can result in residual revenue in micropayments or fixed pricing. Displaying content feeds from other sources can result in content providers paying money to the provider.Affiliations
For many websites, providing recommended links to partners can be steady stream of links and revenue from commission. Amazon’s book recommendations program is an example of this. It’s important that the website be fully transparent about the relationship of the linking and recommendations. Companies that aggregate content and distribute to other companies can receieve a micro-payment for such activities, for example: Mozilla’s Firefox generates regular amounts of micro-payments from users that use their search bar in the top right on the browser.Donations
I put this under the Marketing bucket as the same types of activities are required to obtain donations from groups or individuals. This common method requests money be given to a cause, in return goodwill is shared from recognition (or badges to be placed on website) tax benefits, or knowing that one has supported something they believe in.Conversion
Not all websites make direct revenue, although Marketers can bring prospects closer to the sales point. In some companies, those that bring qualified leads get paid, a dollar amount is defined for those leads. Websites can generate interests from marketing activities, contact sheets, qualification activities that eventually result in sales. Although indirect, don’t overlook this powerful form of revenue generation.
Financial
For many web strategists and founders, this is considered the ‘exit strategy’. Although not listed directly, long term monetization and steady revenue growth is often a method to grow.
Acquisition
The most talked about for today’s startup is the opportunity to get purchased by a large web entity. A few come to mind Flickr, Mybloglog, Upcoming > Yahoo, Measuremap, Google Analytics, Blogger > Google, MySpace > Newscorp, and others. Most notably the sale of YouTube to Google for $1.5 billion is a good indicator of an exit. This also includes domain squatting.Initial Public Offerings
More common in the first web wave (I used to be at Exodus) IPOs are a company’s way to sell ownership of it’s company to the open public, these purchasers became shareholders, and eventually the value of the shares (and company) would increase. The founders and employees maintained a significant share of the company in which they eventually (hopefully) would sell and profit. This form of monetization has greatly tapered off in 2007, being very rare.Investment and Partnership
Seen more frequently, and maybe not a direct form of long term revenue streams, many startups are receiving waves of funding from venture capital firms, or large partners. From Seed/Angel, A Round, B Round and partnership money we’re seeing these opportunities. Three year old Facebook recently received over $250 Million from advertising partner Microsoft. Although often not counted as ‘monetization’ methods, it truly keeps those who are running the site working, the lights on, and opportunities for growth.
Services
Key for ongoing revenue generation, websites that offer value added services to it’s users will grow.
Ecommerce
Brought to our attention during the first web phase, the “brick to click” mantra became talked about at many traditional retailer stores and has now solidified on many corporate websites, and etailers. Selling online goods, and providing recommendations to them provides and opportunity for the seller to either profit from selling their own goods, or a wholesaler or middleman to take a cut from the transactions.Premium, Memberships, and Licensing
Common for websites that offer free service, feature-ladden exclusive memberships will provide users with additional benefits. A few examples include mail services offering additional storage, flickr offering more photo upload capacity, or access to other websites. This could also include software licensing options and white labels. (saw this from Brian’s list)Virtual goods
Not to be overlooked, this form of monetization is growing steadily on Social Networks and Virtual websites. Objects (real and virtual) connotate value and meaning from the giver to the receiver, and can have a monetary value assigned. I’ve outlined the value of virtual goods, do not disregard.
Corollary Benefits
These are revenues that are generated as an outcome from the website itself. Based upon the feedback I’ve received from Twitter and in the comments, there’s some additional revenue opportunities.
Selling Data
Many websites collect information that can be resold to third parties. Data types could be: web traffic, search terms, registration information, email information. Please be open and transparent to your users when collecting information if this is your intention.Secondary Opportunities
Opportunities to extend a brand into other mediums can generate revenue. In particular new jobs, speaking opportunities, writing opportunities, and syndication of content.
Additional Resources
Brian Oberkirch has a similar list to this one, I didn’t see it until now. If you want to get specific on blog monetization, problogger has a great list. Also read The Many Forms of Web Marketing.
Was this post helpful? Read the other posts tagged Web Strategy. Have any additions? Don’t agree with my taxonomy? I wanna know. Leave a comment and talk back!
38 Comments so far
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very good summary. some bloggers have chances to publish their thoughts and stories, that could be another form of monetization. speaking engagement or further job advancement are also probability gained through webblogs.
The “tracking” stuff Microsoft is doing sounds interesting — obviously, branding has been entirely overlooked in the ppc context.
Few people understand that links are old-fashioned (and link-based rating systems only give stale results). Most link-based search engines are only useful for “known-item” searches — such as adidas, bmw, ebay, etc.
Your summary of revenue models, however, is quite a good overview of the landscape — thanks!
You might also be interested in the WSJ article I just dugg — see http://diggerss.com
Where would you put “domaining” or the buying, development and sale of domain names in your summary? It’s becoming quite a big business, but don’t know if it quite fits within your definition of acquisition.
Likewise affiliate marketing, kind of falls in both with e-commerce, when you discuss a middleman or the recommendation of products as well as affiliation.
Simon
Great thoughts, that and other data collected can be sold and re purposed. We get into the gray territory here as is that direct monetization from a website or the content being split from it? Let me simmer on all these ideas
Dave, I mentioned affiliate above. Also Domain squatting is part of Acquisition, I added a quick note to indicate domain squatting as part of that.
Running total of other methods to consider (I may add to the list):
1-Website data collected and sold to third parties (ADDED)
2 -Outcomes: Job advancements, speaking, consulting and publishing (Simon in comments and VRUZ from Twitter, and many others on Twitter) (ADDED)
The Many Forms of Monetization using the Web…
As you plan out the direction of your website, there are multiple ways to bring your web strategy to fruition, I’m listing out these methods below….
Simon, thanks for the overview. I am interested in finding alternative business models as I feel that the major web 2.0 model (providing free but ad based services) puts us into a trap that doesn’t allow developers to focus on user value. Instead they need to focus on network value (to monetize the ads). In order to get out of the advertisement trap we need new business models. This business model creates less value for the user and enforces unwanted things like walled gardens. There are alternatives, but will we get the user, the developer, and the investor to take the chance to try something differen?
[…] trouvé aujourd’hui plusieurs articles en anglais décrivant toutes les possibilités qui s’offrent au Web Entrepreneur pour monétiser son site Web. Je m’apprête à les décrire, les simplifier, et les […]
With affiliate marketing the only time you could argue a need for a form of disclosure is when there is some form of word of mouth marketing.
Otherwise it is just totally unnecessary, case in point price comparison search engines or CPA based advertising.
You are missing out on paid content, not just things like paid reviews in blogging, but also hosted advertorials and sponsored areas on major web portals - this isn’t really the same as sponsorship, because often there is a degree of editorial control with hosted advertorial sections.
I generally like to separate sites that provide a service such as hosting, and membership sites that provide specialist information. There is often some cross-over with the service being used to lock people into the information resource, or information products being used as a bonus to the service.
Andy
Good stuff, I put paid content under Sponsorship in my mind, but I see why it makes sense to separate this out. I’ll add it and credit you
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I would recommend dropping the term ‘virtual’ to describe good and simply refer to them as goods, or digital goods if you want to compare them to physical goods. Virtual implies they are not real, which is incorrect. They may not be easy to hold in your hand but the emotional experience for the giver and the recipient are identical to a physical gift of the same value and the gift appears on a page the same way say a photo does, and we don’t call them virtual photos.
The sooner the industry stops caling the ‘virtual’ gifts, the sooner their true and lasting value will be treated seriously.
Ted
I know this arguement well, it’s actually the same as assigning value to Gucci watches, which perform the same as Guess watches, just 10% of the cost.
“Emotional Gifts” has a nice ring to it.
For the purpose of this list, I need to keep virtual as part of it.
Jeremiah — You may have listed this above and I’m just not seeing it given the fact that I’m only about 50% caffeinated but contests are another way to get people to your site. In particular, we’ve played around with scavenger hunts recently and when the challenge/prize is right, it does a good job at driving engagement/traffic.
Aaron
Contests are a great idea, love it! In your example, how can we make contests be a form of monetization? or is it really more of marketing?
lovin’ the good ideas…keep ‘em coming.
Jeremiah — I would view at more a form of marketing but you could also look at it for content generation i.e. do X and get entered for Y. X could be music, book content (like Gather.com is doing now), blog posts, etc. That content can subsequently be monetized…
Jeremiah,
Have been hearing about you from Daniel Riveong, and Karen O’Brien of Crimson Consulting, finally commenting here. May I suggest Mobile marketing/advertising - I know it is early here in the US, but there is plenty of advertising done in Asia and Europe through mobile campaigns.
William
That’s a good one. I’m doing a 2008 update, it will appear then!
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The distinction between “Ecommerce” and “Conversion” is something I’m struggling with.
I can understand why you’ve ended up splitting the two, but I think that the distinction (at least in the realm of non-digital/non-virtual products, and for that matter services) a bit more blurred than your categorisation might suggest:
In the past, businesses used to get worried about whether a sale transaction had entered their ledger through a web click by a customer, or an entry by one of their staff (in-store / mail-order.)
Nowadays, I’m seeing (UK) retailers take the view that the transaction path is far more complex, involves multiple touch-points between customer and vendor, including:
- verbally with vendor staff (in-person or on phone)
- verbally with another product users / evangelist
- visually (of real product, equally split as above)
- visually of picture of product (on-paper on on-screen)
- for want of a better word “kinaesthetically” (ie actually holding / smelling the thing), again either at the vendor’s premises, or on trial [risk-reversal is growing massively, particularly in Europe as a result of the Distance Selling Directive], or at another customer/evangelist’s.
The “ten touches” rule still seems to hold, as a result of which, the question of whether the final “buy” happens on the website, or in-store, or on the phone, or by mailing in an order form is, well, irrelevant.
Mark
Some marketers consider “Conversion” to be registration to a white paper. Or subscribing to a newsletter or a podcast. It’s that simple.
eCommerce, or point of “Buy” is often farther down the road.
I really think they need to be distinctly different. I hope others chime in.
Where’s DJ Howatt?
Mark also suggested that we include Promotion, and maybe Campaign. I think it’s a collection of advertisements/sponsorships/etc. Should it be called out separate?
Jeremiah,
You and your other commenters have a great list. Let me suggest that you consider a different structure that might help to identify additional forms of money-making. It may also help to identify where common methods can be used in new ways.
Rather than begin with a list of money-making ideas, let’s talk about where the money would come from.
I’d start with Direct and Indirect. This acknowledges that sometimes a site makes money by itself, and sometimes it is part of an influence chain that helps you make money somewhere else in your marketing mix.
Next, let’s identify who might have money to give us. Here’s my list: visitors, partners, sponsors, investors. You and your readers will probably identify more sources.
Taking your list of money-making systems I populate my list like this:
A. DIRECT
A1. Visitors
-Donations
-Fees
-Memberships
-Ecommerce
A2. Partners
-Advertising
-Ecommerce
-”In kind” or trades
-Fees
A3. Sponsors
-Ads
-Paid content
-”In kind” or trades
A4. Investors
-Stock
B. INDIRECT
B1. Visitors
-Brand enhancement
-Trial
B2. Partners
-Allegiance
B3. Sponsors
-Value-added service
B4. Investors
-Confidence
Now it gets fun. I think the opportunity in your analysis is only partly to find new tools for money-making. The rest of the opportunity is to use existing tools in new ways. With this structure we can identify some patterns and see gaps. For example, we’re used to selling ads to sponsors. What if we consider selling ads to some of our other money sources? Could we sell ads to Investors? Can we do in-kind trades with Visitors? Can we sell memberships to Partners?
These may not be possible in many business models, but they might be just the thing for other business models.
If this structure makes any sense we can try to fill it in with more money sources and more methods, and then mix and match to see what possibilities we can consider.
Jeremiah,
If we’re using the term “conversion” to include “conversion to free stuff”, then it’s hard to see how it fits in a list of monetization methods.
As far as I can make out, the old-fashioned funnel approach is still holding very true, but that for the vast majority of companies using social media, the role of social media is in the top half of the funnel… and the monetization sits nearer the bottom.
[Obviously, I’m talking about “end-user” companies operating IN the long tail, not “infrastructure” companies operating ON the long tail.]
I’m sure that my thinking on this is not (yet) well-developed - that’s why I subscribe to your blog, after all
When are you going to be in the UK - it would be great to have a session about all this kind of stuff in London! (And for me to buy you a drink / smoothie / beverage of your choice).
Mark
Oh - and I’d not
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DJ
That’s brilliant. This is the second time you’ve responded to my posts tilting the angle at which to apply the lens. The first one “Social Computing for the Product Life Cycle” you switched it towards the customer life cycle. Makes a lot more sense.
Mark
No plans to be in UK, although I hope to head out there soon.
Hey Jeremiah,
Great stuff…another resource that I’ve found very useful & wanted to share with you & the readers can be found at
http://digitalenterprise.org/models/models.html
Rgdz
Avinash
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Great info here. Some of which I still need to build out in the SMM strategies I am planning. I will say that in our campaigns we never actually say BUY BUY BUY. My goal in SMM is to create a positive user experience that personifies the brand and in my case also the band. These days it is so easy for a band (most major bands don’t) to connect to their audience. We make sure the strategy encompasses the look, feel and personality of the artist and make sure the artist is as connected as possible with the fans. I have found that that more personalized communications with not CTA at all have garnered the most action from our audience. One band took the time to hand write guitar tabs on paper and scan them to his blog. People loved and appreciated that they would take the time to do that for their fans. A contest we did using the www.gydget.com widget got way more results by us putting people in the top friends portion of the widget than the original CTA which was that the placement that gets the most grabs and impressions wins a spot in a video blog. That was ok but when we switched up the CTA to simply “add our widget to your page, get in out top friends” our metrics doubled overnight. Also, a simple thank you goes a long way, and it doesn’t stop on the web. When a person meets the band face to face, and the band recognizes them by their social profile icon, and even recalls a conversation had; that person will never forget that this band who meets thousands of people in a day actually remembered their name, recalled a conversation, and shook their hand. That goes much further than the sale of the CD we are aiming for. They will tell everyone they know what a great bunch of people not only the band is but the people working the band (me and my team). We even went so far as having one of the band hand write guitar tabs
I am also realizing that social networks especially myspace no longer provide their most valuable utility for free anymore which is the ability to target down your pool of friends. They realize this is a commodity and it seems the only way to take advantage of a social network’s demographics now is through PPC.
Widgets metrics, good tracking, and information capture through opt in subscriptions helps keep a strong base of opinion leaders, and influencers in my sights. Keep that pool of people happy and it will grow. Word of mouth is way more valuable to me than PPC impression. PPC for me is a branding tool.
It is good to see that the people who make sense of all this are coming to conclusions that fall in line with the strategies that I try to incorporate into my plans on a day to day basis.
I am just about to launch a mobile campaign and it is the first time we are actually connecting monetization (ring tones) directly in the campaign. Am hoping it goes well. Going to make the CTA very organic and personal from the band themselves, in a nice portable widget.
If anyone has the time check out www.sproutbuilder.com a very cool mash up tool for creating widgets. I was up all night toying with it. Talk about using existing tools in new ways! Read this article about the mashup results of using sproutbuilder, dapper.net, and yahoo pipes to create great widgets:
http://www.floozyspeak.com/blog/archives/2008/02/dappernet_sprou.html
Thanks Jeremiah for putting things into perspective (and letting me ramble). I have identified areas that I can do more work in thanks to reading this.
Adam
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