You've Got Users, But Do You Have A Revenue Model?

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There’s a lot of talk about the Internet Bubble 2.0. In the last 12 months, large Internet properties, such as LinkedIn, Zynga, Zillow and Facebook, have gone public. These companies largely boast large and growing user bases, but often are not profitable businesses -- at least not yet.

Tumblr had long been against advertising. Its CEO said: “We’re pretty opposed to advertising. It really turns our stomachs.” He has since been quoted as saying he was an “idiot” for making that statement. The pressure of value creation has caused LinkedIn to increase its sales and marketing staff by 270% year over year. 

These companies all need a way to balance driving profits that attract investor interest, while growing a strong user base. Does this mean that Facebook will start to show banner ads and start to look like Yahoo.com? I don’t think so. Over the last few weeks, we have started to see the future monetization strategy that will shape digital advertising.

A clue to the future was revealed recently when Foursquare and Tumblr both launched new monetization strategies. The key to their strategy is turning existing content into ads, a strategy that is similar to those of Twitter and Facebook. Twitter took Tweets and allowed brands to make them “promoted.”

The same is true with Facebook and their “sponsored stories.” The idea of taking existing, or native content, and making it an “ad” allows these Web properties to monetize their content, but not become intrusive to the user experience. In Tumblr’s example, they will take a space that currently hosts a ‘featured’ post and allow that space to become a ‘sponsored featured’ post -- no new placements, or disruptive ads, just monetizing the experience.

Brands must consider how they create and promote content on these sites to engage with users. Engagement is important because the payment models for these ads are based in a cost-per-engagement model. For example, how often something is ‘liked’ or ‘retweeted’ directly determines the cost of the placement.

This fundamentally changes the dynamic for brands. It forces them to reach outside of their digital measurement comfort zones of last-click direct-response metrics and into an attribution and engagement model that measures total bottom line impact.

The future is starting to take shape, and it is integrated and content-driven marketing.  The challenge will be planning for proper media mix across these placements, and how companies choose to engage and measure success. It will start with a fundamental belief in the channel and the consumer base -- and end with a productive bottom line impact.

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1 comment on "You've Got Users, But Do You Have A Revenue Model?".

1. Jaffer Ali from PulseTV
   

   commented on: June 12, 2012 at 10:19 a.m.
   Taking an ad and calling it content is not a winning strategy. Using content as bait to attract and direct an audience is a great strategy. Promoted Tweets are ads and as such, will eventually fail. Calling promoted tweets content is akin to mislabeling rape as making love.

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