Monetize. Monetization. The Mechanism and Examples (2023) |
The famous Luis von Ahn invented CAPTCHA - those little words you must type to prove you're a human being-he devised one of the greatest monetization models ever. The program would select a few random words from the archives of the New York Times, and users would then type what they saw. Little did they know they were contributing to digitizing old books and newspapers, and those companies paid for that service.
It was a novel way to add a second monetization stream to secure digital data.
In this post this article, we'll take you through the words monetize and monetization. We'll clarify what they mean, then walk through various types of monetization and how to build a monetization strategy for your business.
What exactly is the definition of monetization?
Monetization is the process to generate revenue through things or acts that currently don't bring you profits. In the world of internet, monetization generally the method we use to consider how people as well as companies who create software and content can be compensated for their efforts. In any kind of product, service, or software, there are a number of different ways to monetize dependent on the way people utilize it.
Sometimes, monetization is a part of digital creation-for example, a content gate could make users buy a product direct. This is what happens when Netflix or the New York Times or Netflix requires subscriptions.
However sometimes, monetization may require the addition of extrinsic content. In a traditional newspaper advertising format, advertisements consumed extra space and required adding pages. Companies paid for advertisements where they were sure people were looking for them at, thereby generating sufficient income to continue their reporting of information. TV is the same. And so do internet display ads as well as YouTube ads.
Online monetization
When we talk about monetization, it's usually discussing the various ways users can make money online, such as a YouTube Channel, a TikTok following, or a blog or web site. The result is common terms like "Are you making money?" or "I need to monetize." Of course, we've been told about an influencer or blogger that makes $50,000/mo.
There are many ways to monetize online. A blogger, for instance, might monetize a website with display ads, affiliate products, and courses they market. Social media companies monetize their user's data rather than providing users with a complimentary experience, but requiring companies for putting ads in front of viewers.
Because there are many different methods to earn money, monetization needs creativity about how you monetize something. This is exactly what Luis Ahn did with CAPTCHA. In addition, there are innovative ways to monetize that are all over the place. Like, for instance the stock market lets shareholders monetize their ownership of companies, but the derivatives market adds even more monetization to the stock market with the use of options and calls. (If you've watched the film The Big Short, it refers to these as "side bets." .")
As you think about your model of monetization and method, think of ways to be innovative when tackling the issue in determining the best monetization strategy that works for you.
Monetize: Monetize literally means "to turn something into money." When you have something that you've developed, such as digital products, content apps, or software, to monetize is turning that item into money. But, of course, you're taking this action in a literal sense. In most instances, you're figuring out how to make money out of your product. You're turning uses, views, subscriptions, members, etc. into money.
What exactly is a model of monetization?
A monetization plan is a way or method to earn a profit by selling a service or product, creation intellectual property perhaps your personal branding. There are many elements that make up your monetization strategy-all of them need to work together to create the revenue you need.
In the case of example, if you are creating an application, you could choose to incorporate in-app purchase as well as charge users for downloads. You could also include advertisements, or all of the above. In the event that you developed software, you can pick from various monetization strategies. You can "white label" the software and then license the software to clients to use with their own logo. It is possible to sell access under your own brand or create free access with the "freemium" increase in price.
A monetization strategy is the way that individual and multiple sources of income are combined to form the total income of a brand.
The types of the monetization
These are just a few of the most popular methods of the monetization. But they're not the only methods to monetize. Ultimately, there are ways to monetize that are being created every day. It is important to note that these methods are not mutually exclusive. Many brands employ more than one of these (and there is a crossover ).
Members monetization
Member-led growth is one of the best ways to monetize. The next wave of companies that are growing fast are likely to be those who are able to convert users, customers and subscribers into subscribers. They'll be able to do this at an incredibly large scale.
The monetization of a member-led community can be simply as easy as establishing a membership fee for a community. However, doing so can generate valuable income that is recurring, and the members contribute content, and then share with other members that they are part of your community, allowing it to grow by itself.
Here are a few examples of how member-led marketing work:
- An entrepreneurship org. It launched a brand-new app for 5000 members. The app earned over $30,000 in 2 1/2 weeks.
- Health-related launch for 100 members with high-tickets also added $40,000 to the ARR.
- An author & speaker promoted for 4 weeks within their member community. They saw an increase of $30,000 in sales.
- An author and podcaster offered 5,000 tickets to an $997 class in just 10 days to existing members.
- One community started an add-on 13-week course that generated an additional $100k in revenues in only two months.
If you're running members-only products and you're a member, you'll typically earn revenue from both the memberships and the additional items your customers purchase-a business model McKinsey calls a Flywheel for communities .
Digital Subscriptions
Subscriptions and monetization work a lot like a member model. But your customers aren't adding benefit. They instead consume content or software which you've created or licenced. This is a common model used by firms that offer software, as organizations like Microsoft as well as Dropbox have been able to make subscriptions their bread and butter.
And it works for media too. Netflix and Disney+ have built empires with subscription services. Subscriptions also saved The New York Times; in 2020 there were 8 million digital and print subscribers.
Freemium
Freemium monetization is a model that's really popular with software businesses, because it allows users to try out the product without cost before committing. In this case, the monetization structure takes care of the free trial which means that there is no need to provide things such as "money back guarantees" as the money doesn't have to be made in advance. But also, it lets members, users, and so on, easily upgrade to get beyond the paywall after a certain amount of time or to receive greater features.
Content monetization
There are many methods to make money from content like digital subscriptions or memberships. But for content creators there are endless options. Here are a few most popular ones:
- Affiliate marketing: If you talk about products on a website or feed for social media, when someone clicks on a brand-approved tracking link, you may make commissions. Numerous websites and blogs earn money by utilizing affiliates.
- Ads: Monetizing with ads is a well-tested and reliable monetization method for companies that are content heavy, ranging including TV channels, websites and apps (more on this later in an instant). Advertising can be paid per ad, or paid per view (usually known as RPM=revenue per Mille ).
- Sponsorships: The term "sponsored content" is usually refers to the blog posts that were sponsored. Today, more and more sponsorships involve influencer-created posts.
Social media monetization
Most of us see social media monetization as a ways people make money through their social media platforms. Most social media publishers monetize with different options already on this list: affiliate marketing, ads, and sponsored content.
But there's also the question of how social media platforms themselves monetize-and they're also creative. Below are two instances of how the social media giants generate profit:
- Meta: With its flagship brands like Facebook as well as Instagram, Meta makes money by selling attention-and with 2 billion people using it every day, it's got a lot to sell. Meta collects user data and gives companies the possibility to place the appropriate advertisements to their customers, with highly targeted data on demographics. The company generated an estimated $32 Billion in the final third quarter in 2022. Meta's data collection is so effective that it has been the target of scandals (think Cambridge Analytica's attempts to influence elections).
- LinkedIn: LinkedIn is much smaller than Meta, with 141 million daily users. But it's created its own unique revenue model for monetization which matches its strengths as an application. Since it's a career and networking platform, it can sell premium plans to job-seekers (giving them a competitive edge on job applications), and then sell unique plans to recruiters and employers at a more expensive price. It lets each type of user get what they need on the platform. However, it also sells advertising. LinkedIn generated more than $13 billion in revenues in 2022.
When you examine all the social media platforms and you'll notice they all have some things to be able of. They don't charge users to get on the platform to begin with. The goal of these sites is to garner massive engagement and attention, and then either convert some users to premium plans or-more typical- to sell their users' attention to advertisers.
App monetization
App monetization can be a whole world in itself, and we've devoted a guide to it. But let's just say that there are a variety of methods to increase the value of apps through subscriptions, memberships as well as ads. But what's unique for apps is the category of In-app purchases.
There are 13 ways that mobile apps could be made monetizable make sure you go through our article on Mobile app monetization for an in-depth look at each one.
- Freemium
- Ads + Premium
- ads only
- Ads + In-App Purchases
- Subscriptions
- Memberships
- Courses
- Events
- products (physical or digital)
- One-time purchase
- Services
- Selling user data
- Crowdfunding
Product-led monetization
Sometimes, the most profitable monetization model is an item. It could be a digital product; like a flagship online course. For example, we mentioned above that a podcaster as well as an author on Mighty sold 5,000 seats to a $997 course in 10 days. This is a great digital product monetization model.
The selling of a physical product is a tried and proven way to earn money, and there are some really cool brands that have discovered the art of turning digital hype into actual product sales.
Look at Peloton, who created a physical bike that could plug users into workout routines as well as other fitness buffs in real time. It also helped that Peleton was born during the pandemic, when many were seeking a way to exercise. There have also been celebrities who launch physical goods and utilize their names to market them. This is similar to Ryan Reynolds' Aviation Gin brand that he recently sold for 610 million dollars.
The integration of items with online attention is just beginning, but we'll see more of this in the near future.
Licensing
This is a model of monetization that's under-appreciated and for those who own any kind of intellectual property, licensing could be an incredible way to monetize. In essence, licensing is when you are the owner of a particular method or design and license others to make use of it. When you see anyone selling "Trademarked X method to X" you're probably thinking about a licensing plan.
As an example Many thinkers will create their brand around topics like the TED Talks or op-eds However, they may license the application of their concepts to businesses.
Services and consulting
It's similar to licensing but those who build expertise around their online content can often sell the application of the content. For example, a lot of creators are on LinkedIn and YouTube who share their knowledge could be hired by other people or companies to make use of the content in a direct way. If you had your own YouTube channel focused on helping entrepreneurs build their business, it stands to reason people might be interested in hiring to coach them. This is why services and consulting are usually a good way to earn money.
Data
One final monetization model is to profit from data. For this instance an online platform, it collects data regarding its users and sells it to third parties-often advertisers. It's a staple of social media firms (above) However, social media companies aren't the only ones that collect and selling user data.
All across the spectrum of industries including health care, to finance, businesses are collecting and monetizing user data. Although selling user data is an monetization strategy used by a lot of tech companies but it's not one small-scale creators and brands employ based on a reasons that are legitimate. It's difficult and complicated. must be carried out on an extensive scale as well as having a lot of legal implications.
Which monetization strategy is best?
Each monetization model has benefits and drawbacks. Freemium models let users try products or services before charging and help in selling more easily. The upfront charging process requires longer sales efforts, however it could bring the cash in earlier in the process. A subscription monetization model brings in revenue month after month, however it requires continuous support for customers. Plus you need customers to remain for a long time so that you can get the true value from the recurring revenues.
There are many ways to monetize any creation of product, service, or other, especially in the digital space and therefore, selecting a model of monetization which allows you to balance accessibility, user growth, and your personal goals is essential.
Monetization model examples
- Vikrim begins the first internet-based community and decides to charge one fee up front that will give annual access, and include everything that falls under.
- Ali creates a paid, subscription newsletter with advice and special offers. She sends it out each month.
- Charles has been a major influencer and offers social tokens for people to have more access.
- James creates an app and offers it for free through the purchase of in-app items.
- Jen is an influential writer and thought leader who earns money from her writing by speaking engagements and book sales.
What is the best way to create an effective monetization strategy
If you are planning to market your business, here are some tips to develop your strategy:
- Understand your strengths: Many of efforts to monetize fail due to they don't know the advantages of their brand. Let's take an example: there is a tiny number of members who are committed. Advertising isn't the best method of monetizing, as they need to be in large quantities. The product you are targeting could be ideal. However the case could be different if you have an undefined website subject matter and a large number of visitors, ads might be more appropriate. The product won't achieve success without having a distinct area of focus. Find your strength and pick the one that best fits your needs.
- Ask your members When you're thinking about creating a product or service that you intend to sell, request your members determine what they want from you. If you're a part of an online community it could be as simple as asking a question.
- Make sure it fits: Some monetization attempts fail because people misunderstand their target audience. As an example, there's a story of a blogger giving career advice to unemployed millennials who planned to launch a product that was expensive. The product failed badly. People were enthusiastic but they had no money (remember they weren't employed! )
- Align your tech: Monetization-especially done online-usually takes some sort of tech solution. If you're monetizing an online community, it could be as easy as turning to a membership program or a bundle. But each monetization method needs some preparation. Want to self-publish an ebook? It is necessary to know the how to format, design and layout of your cover, as well as KDP. KDP platform (or hire someone who does). Want to put ads on your site? It's best to join an ad network like Mediavine as well as Ezoic and set it up.
- Know the business aspect even if you do it online, earning money is something that IRS has some strong opinions on. You must be aware of how you can claim your income. A visit to your local small business center might be in order-they can often show you what you need.
- Adapt, test to learn Try different monetizations: The first one that you test may not be the right one. Do not be scared to test various options (and take things slow) until you figure out the best solution for your needs and your customers.
Conclusion
While you search for the best monetization strategy take note of the things that work for your brand and your members. Don't force it. It is important to manage monetization with care, and without risking loyal customers or ruining your users' experience with your product.
If you're looking for an effective opportunity to develop a members-led growing business, join on Mighty! You can monetize with community and content such as courses, classes, as well as live activities. And you can test it for free for 14 days!