Monetizing online Communities

Sometimes its coincidence that takes you outside the box. That’s what happened to me recently. Somewhere between Ross Mayfield’s link to LightSpeed Venture Partners to Maggie K. Fox’s comments and excellent social media blog I found my views of monetizing online communities change 180 degrees.

First a bit of background – I’ve been reading, thinking and practicing about how to monetize communities for 3 years – first with a grand scheme targeted to local radio stations then to amusement parks, portals for drivers and recently as a consultant to a group developing a destination travel application. Throughout the goal has been driving eyeballs to ads.

Then along comes Jeremy Lewis’s post “Three ways to build an online business to 50M” which focuses on the traffic needed to hit 50M in annual revenue with 3 distinct business approaches (general audience, demographic targeting, endemic or product niche focuses). The conclusion is of course ad revenue per impression increases with targeting but that even very targeted sites need to generate a lot of traffic – in the order of 200K page views/month to generate 50M in revenue. Of course I knew this but overlooked it because hope overlooks logic when development costs are low and the objective is as much fun as profit- and that was the core of Maggie’s post “further proof that small is the new big

But then it occurred to me that Lewis only focuses on advertising and there is more in user community that just eyeballs. Mine those comments and there is the some of the same type of information that Thompson , Gartner or Forrester charge a lot for. Of course you have to analyze text and tags but that’s increasingly easy with products like Autonomy  or Copernic  or even my old friend Henry’s company ContextDiscovery (link up in a couple of days when the product comes out of wraps).
There’s also opportunities to monetize participation either through direct fees or indirect approaches like merchandise, events or connecting members. 

Finally even if one want to remain ad driven there’s also opportunities, assuming the community users permit it, for social network analysis for very direct word of mouth promotion or to aggregate audience aggregation across multiple sites – very much like mainstream media did when TV and Radio stations banded together to make it easier for advertisers to reach desired audiences while still keeping elements of their local flavor.

Online communities can be monetized by a lot more that advertising – making small truly beautiful.

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2 thoughts on “Monetizing online Communities

  1. Hey Pete – you have raised some excellent points; metrics are not all about eyeballs. In fact, eyeballs are probably the least powerful/desirable method of measurement. Being in this space, we know that for each project we do, we need to determine engagement metrics. Not traffic, but depth and breadth of consumer engagement with the program, and that is very different indeed. Great blog!

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