"Monetize The Audience, Not The Content" - Fred Wilson, Union Square Ventures
Fred Wilson is a venture capitalist who is recognised as a world leader in understanding how to monetize content and audiences on the web. He puts his money where his mouth is and has invested in many of the Internet's most innovative companies including Twitter, FeedBurner and Zynga.
In this recent article, "Monetize the audience, not the content" he writes:
"For those content owners with a cost model that can't be covered with advertising alone, subscriptions seem like the obvious choice. And yet, for most, subscriptions have not worked very well.
The worst examples of subscription services are those that break the content up into free and paid. It's as if some content is worth more than other content. I think that is the wrong idea most of the time, and especially in news and news related content.
I like the subscription model the FT has been using for some time now. I may get the exact details wrong but its the idea that's important anyway. You can visit the ft.com domain something like nine times per month for free. They cookie you and when you stop by the tenth time in a month, they ask you to pay. And many do.
This model recognizes a few fundamental facts about the Internet. First, you need to make your content available for search engines and social media linking. That drives as much as half or more of the visits these days. And if you have an ad model at all, and most newspapers do, then you need those visits and that audience.
Its also true that the 'drive by' visits will bring new audiences, some of whom will become loyal and ultimately paid audience members.
The other thing I like about the FT's model is that its an elegant implementation of freemium. The best freemium models allow anyone to use the service for free and then convert the most serious/frequent/power users to paying customers. "
Fred makes some very good points:
- Freemium content drives traffic and loyalty
- The quality of the free content should be as good as the quality of the paid content
- Only a small percent of visitors to any website will be engaged enough to become paying members so the publisher has to have other ways of making money from the majority
- Publishers must understand where their audience perceive the value to be and then charge for that value
Audience Is More Important Than Content, But Content Is Critical
I would take Fred's thinking one step further. his argument above is focused on the most common debate which is free versus paid and how to balance the two to maximise revenues. However the most successful companies are those that build a loyal audience and then look at multiple ways of monetizing it.
A non-web business that thinks like this is Ryanair. For those who haven't heard of this company it is a low cost airline which flies between the UK and Europe. Ryanair make a loss on most of the seats it sells on its flights, yet the company is very profitable and continues to thrive even in recession.
How does it do this?
Simply by monetizing its audience.
Ryanair know that if people are booking flights they will also need accommodation, car hire and insurance. The flights are their way of building an audience of people with common needs who are ready to pay for a range of services. Ryanair is not really an airline, it is a travel company. It offers and sells dozens of travel related services to every person who books a flight.
Online publishers should think in the same way.
Their specialist content should be focused on building an audience of people with a common interest who can be sold related services.
Let me give you an example.
Say I ran a website focused on whiskey. I could giveaway for free the summary of my tasting notes and my rating of every whiskey. This would be valuable content that would probably satisfy the information needs of 80% of my website visitors. However I would know that most of these people have a genuine interest in whiskey so I could link from each tasting note to a a site where they could buy that whiskey. I could sell accessories such as glasses, books, DVD courses, etc. I could promote and sell wine tasting dinners, distillery tours and tasting courses.
For my more passionate and professional visitors I could have a membership area where they could get access to my full tasting notes, interviews with industry experts, access to special deals, etc.
Can you see how this business model works?
Use freemium content to get listed in the search engines and to build an audience of people with a common interest. Ensure that the content is valuable and unique so it builds your credibility, authority and ultimately, trust..
Once you have an audience who trusts you, offer them as many paid services as you can related to your niche subject including premium content, downloadable products, books, courses, events, travel, insurance, special deals, unique deals, etc.
Your content builds your audience, then you monetize that audience.
Therefore the major shift in thinking that most publishers must make is the real value of an online content business is the audience, not the content.