Monetize. Monetization. The Mechanism and Examples (2023) |
In the year Luis von Ahn famously invented CAPTCHA - those tiny letters you need to enter to prove that you're human being-he devised one of the greatest monetization models ever. The software would choose a few random words that were found in the archives of New York Times, and the user would type in the words they were shown. Little did they know they contributed to digitizing newspaper and books that were once in the archives as well as paying the companies for this service.
It was a novel way to add a second stream of monetization to the secure digital data.
In this post we'll explain the concepts of monetization and monetization, define what each means and then guide through various types of monetization and how to build a monetization strategy for your business.
What is monetization?
Monetization is the process of creating revenue from things or activities that do not currently generate income. In internet-speak, monetization is usually the way we consider how people or companies that produce software or content are compensated for their efforts. With any product, service or program There are lots of ways to make money dependent on the way people utilize it.
In some cases, monetization is integral to digital creation-for example, a content gate might make people pay for a product directly. This happens if you are using the New York Times or Netflix needs subscriptions.
In contrast it is possible that monetization involves adding extrinsic material. In traditional newspapers advertising format, advertisements consumed additional space, and the paper had to add pages. Companies paid for advertisements where they were sure viewers were already looking and gave newspapers sufficient income to continue their reporting of information. Television works in the same way. The same is true for internet advertisements on display as well as YouTube advertisements.
Online monetization
When we speak of the monetization of our websites, we're typically talking about the different ways users can make money online, such as an online YouTube Channel, a TikTok following, or a blog or web site. The result is common phrases like "Are you monetized?" or "I need to make money." We've also heard the story about the influencer or blogger who makes $50,000/mo.
There are a variety of ways to monetize online. A blogger, for instance, might monetize a website with advertising, affiliate products, and a course that they sell. Social media companies monetize their user's data rather than giving the users a free experience, but requiring companies to display ads on the front pages of their viewers.
There are many ways to earn money, monetization needs imagination in the way you market something-which is what Luis von Ahn came up with in CAPTCHA. And there are creative ways to monetize that are all over the place. Like, for instance that the market for stocks lets shareholders monetize their ownership of companies, but the derivatives market adds even additional monetization options to the market by using the use of options and calls. (If you've ever seen The Big Short, it refers to these as "side bets" .")
When you are thinking about the monetization strategy and model you are considering for your strategy, you should be imaginative in approaching the problem and determining a method of monetization which is effective for you.
Monetize means "to convert something to money." When you have an item you've made: digital goods, content apps, or software, to monetize is to turn that thing into cash. Of course, you're not actually doing it. Most of the time it's about figuring out ways to generate money from the usage of your item. You're turning uses, views, subscriptions, members, etc. into money.
What is a monetization strategy?
A monetization model is the method or methods by which you earn money from a product, service or creation intellectual property or perhaps your personal branding. There could be different components in your model of monetization. All of them need to work in tandem to generate the income that you require.
For example, if you were creating an app it is possible to include in-app purchases, charge for downloads, add advertisements or any of the above. In the event that you developed software, you could select from a variety of monetization options. It is possible to "white label" it, and sell it to users for use under their own brand. It is possible to sell access through your company's brand, or offer access to users for free using a the "freemium" upsell.
A monetization strategy is the process by which a single and multiple sources of revenue are combined to form an entire brand's revenue.
The types of monetization
They are among the most well-known methods of the monetization. They're certainly not the only methods to earn money. Ultimately, there are new monetization methods being invented constantly. Note that these are also not mutually exclusive-many brands use multiple of them (and there's a cross-over ).
Member Mmonetization
Member-led growth is one of the best ways to monetize. The next generation of companies that are growing fast are likely to be those who are able to convert users, customers and subscribers into subscribers. It will be done in a large the scale of.
Member-led monetization can be as simple as creating a membership fee for a community. However, doing so can generate valuable income that is recurring, and your members create contents and share it with others to help grow your community on autopilot.
Here are some examples of the ways we've seen members-led the monetization process:
- An entrepreneurship org. It launched a brand-new app for 5000 members. The app earned over $30k in just 2 1/2 weeks.
- A health-focused launch to 100 premium members, which increased the ARR by $40,000.
- A speaker and author promoted for 4 weeks within their membership community and saw the addition of $30,000 in revenues.
- A podcaster and author has sold 5,000 seats for the $997 course within 10 days, to members who are already in.
- One community started a 13-week add-on course and brought in an additional $100k of income in just two months.
When you have an item that is based on membership it is likely that you usually earn money from the members' memberships as well as the other items your customers purchase-a business model McKinsey describes as a Community flywheel .
Digital Subscriptions
Monetizations with subscriptions works a lot like a member model. However, your members aren't adding value. Instead, they consume the content or programs that you've developed or licenced. It's a popular model for firms that offer software, as organizations like Microsoft as well as Dropbox have made subscriptions their bread and butter.
It also works with content too, Netflix and Disney+ have built empires around subscription services. Subscriptions even saved the New York Times; in 2020, there were eight million subscribers to print and digital.
Freemium
Freemium monetization is a model that is extremely popular among software firms, as it allows customers to test a product for free before committing. This is because the system of monetization takes charge of a free trial, thus reducing the need for things like "money back guarantees" since the payment isn't made upfront. But also, it lets users, members, etc quickly upgrade their accounts to go beyond the paywall after a certain amount of time or to gain access to more features.
Content monetization
There are many ways to earn money from content including digital subscriptions and memberships. For content creators it is not a matter of deciding which options to choose. Here are a few typical choices:
- Affiliate marketing: If you discuss items on a site or feed on social media and a user clicks on a company-approved tracking link, you can receive commissions. Numerous websites and blogs earn money through affiliates.
- Ads: Monetizing with advertisements is another tried and true monetization model for brands that rely on content, ranging from websites to TV channels to applications (more on this later in an instant). Ads can be paid per ad or per visit (usually described as RPM=revenue Per Mille ).
- Sponsorships: The term "sponsored content" is was formerly a term used to describe an article that was sponsored by a blog. Today, more and more sponsorships involve created by influencers.
Social media monetization
We usually see social media monetization as the way that people monetize their social media platforms. And most social media creators make money using different methods already in this list, including advertisements, affiliate marketing and sponsored content.
There's the issue about how social media platforms themselves monetize-and they're creative. Below are two instances of how the social media giants generate money:
- Meta: With its flagship brands like Facebook and Instagram, Meta makes money through selling attention. And with two billion active users each day, there's plenty to offer. Meta gathers data from users and sells companies the chance to get the right advertisements to their customers, with highly targeted demographic information. It led to the amount of $32 Billion in the fourth quarter of 2022. Meta's data gathering is so potent that it's often been the focus of numerous investigations (think the efforts of Cambridge Analytica to influence the outcome of elections).
- LinkedIn: LinkedIn is much smaller than Meta which has the number of users who are daily 141 million. It has developed an unique model of monetization that matches its strengths as a platform. Since it's a career and networking website, it can sell premium plans to job applicants (giving them a competitive edge when applying for jobs), and then offer unique plans to recruiters and employers for a higher price. This lets every type of user get what they want through the platform. And they still offer ads. LinkedIn has generated over $13 billion in revenues by 2022.
If you take a look at any of the social media platforms there's one thing that they share. Nearly none of them cost users to join the platform to begin with. Their aim is to gain huge engagement and attention or to convert users to premium plans or-more usual-simply to offer their customers' attention to advertisers.
App monetization
App monetization can be a whole world in itself, and we've devoted a guide to it. Let's say there are a variety of methods to monetize apps, including subscriptions, memberships and ads. But what's unique for apps is the option of purchase in-app.
These are the 13 ways mobile apps could be made monetizable in the future, so be sure to read our guide to mobile app monetization for an in-depth look at each one.
- Freemium
- Ads and Premium
- Advertisement Only
- Ads + In-App Purchases
- Subscriptions
- Memberships
- Courses
- Events
- products (physical as well as digital)
- One-time purchase
- Services
- Selling user data
- Crowdfunding
Monetization based on product
Sometimes, the most profitable monetization model is an item. This could be digital or a product such as a major online course. For example, we previously mentioned that a journalist and writer on Mighty has sold 5,000 tickets to an online course of $997 in just 10 days. It's an amazing way to monetize digital products.
The selling of a physical product is a tried and proven method of monetization, too. And there are some truly amazing companies that have figured out how to transform digital buzz into real-world success for their products.
Just look at Peloton which was the first physically-based bike that connects you into exercise routines and other fitness buffs in real time. Also, Peleton became a teenager at the time of the outbreak, when people were looking for ways to get fit. We've also seen celebrities launch physical items and then use their brand names to promote them, like Ryan Reynolds' Aviation Gin brand that he recently sold for 610 million dollars.
The incorporation of services with online attention is just getting started, and we'll see more in the coming years.
Licensing
This is a model of monetization that's under-appreciated however, for people who have any kind of intellectual property rights, licensing may be an incredible option to earn money. In simple terms, it means that you are the owner of a particular procedure or model, and then you offer the right to other people to utilize it. When you see someone selling the "Trademarked X method to X" you're probably considering a licensing model.
For example, a lot of thinkers will create their reputations around TED Talks and op eds however, they will also license the application of their theories to corporations.
Consulting and other services
It's similar to licensing, however those who develop expertise in their online content may frequently sell the use of the content. As an example, many of the creators have their own channels on LinkedIn as well as YouTube that share their expertise are able to be hired by individuals and companies to use their content directly. If you owned a YouTube channel that was dedicated to helping entrepreneurs expand their businesses It stands to reason that people might be interested in hiring your services as a coach. This is why services and consulting can be a fantastic way to earn money.
Data
One final monetization model is to monetize data. In this example the platform gathers information regarding its users and sells that data to third party advertisers. It's a staple of social media firms (above) However, they're not the only ones that collect and selling data from users.
In pretty much every industry including health care, to finance, firms collect and sell the data of their customers. Although selling user data is a model of monetization employed by lots of tech companies, it's not one that small-scale creators and brands use-for good reason. It's complex, complicated, needs to be done on a large scale and has a myriad of legal implications.
What model of monetization is best?
Each monetization model has advantages and disadvantages. Freemium models let users try the product or service prior to paying and could help in selling more easily. The upfront charging process requires greater effort to sell, but could bring in more cash flow early upon. The subscription model can bring an increase in revenues month after month, however it requires continuous support for customers. Plus you need customers to be loyal enough to ensure that you can get the true value from recurring revenue.
There are numerous ways to make money off of any of product, service, or other, especially in the digital space and therefore, selecting a model of monetization that lets you balance access to users, growth in user numbers, as well as your own objectives is really important.
Monetization model examples
- Vikrim starts an online forum in the year 2000. He decides to charge a one-time fee at in the beginning that grants an annual subscription and includes all the items under.
- Ali produces a pay monthly newsletter that includes advice and deals that she sends out every month.
- Charles is an influencer who offers social tokens for people who want to gain access.
- James creates an app and offers it for free through the purchase of in-app items.
- Jen is an author and thought leader who earns money from her writing through speaking and book sales.
What is the best way to create a monetization strategy
When you decide to market your business HTML0, here are some guidelines to help you develop your plan:
- Know your strengths: Many marketing efforts don't succeed because they don't know what strengths their brand has. For example, let's say there is a tiny number of loyal members. Advertising isn't the best option to make money, because they need to be in large quantities. A targeted product might be ideal. On the other hand the case could be different if you have a website with no clear area of focus and lots of users, ads might be more appropriate. A product isn't likely to succeed without a clear market. Choose your strengths and choose the best model for your business.
- Ask your members: If you're looking at developing a service or product to monetize, you can solicit your current members to find out what they most require from you. In an online community it could be as simple as asking a question.
- Make sure it fits Certain monetization strategies do not work because they misunderstand the customers. For example, there's a story that a blogger gave career advice to unemployed millennials and decided to create a product that was expensive. It was a disaster. The crowd was enthusiastic, but didn't have any money (remember they weren't employed! )
- Align your tech: Monetization-especially done online-usually takes some sort of tech solution. If you're looking to monetize an online community, it could be as simple as turning into a membership or bundle. Each monetization option requires some planning. Are you planning to self-publish your ebook? You'll need to understand formatting, cover design, as well as the KDP platform (or hire someone who does). Do you want to place ads on your website? The first step is to sign up with an ad network like Mediavine as well as Ezoic and then set it up.
- Understand the business side: Even if done online, earning money is something that IRS holds a strong opinion regarding. Be sure to know how to claim the income. A visit to the local business center for small businesses may be in order. They will usually provide the help you need.
- Adapt, test to learn: The first monetization you try might not be the best one. Don't be afraid to try various options (and take things slow) until you figure out what works best for you and your customers.
Conclusion
When you are trying to determine the most effective monetization method take note of the best practices for your company and the members you have. Avoid imposing the process. It is important to manage monetization cautiously, so that you don't risk your customers' loyalty, or damaging your users' experience with your product.
If you want a great method to create a community-driven growth business, come build upon Mighty! It is possible to make money through community or courses, as well as content as well as live events. And you can test it for free for 14 days!