Monetize. Monetization. How It Works + Examples (2023) |
The famous Luis von Ahn invented CAPTCHA - the tiny words you have to write to prove that you're human-he came up with one of the most innovative model of monetization ever. The application would pick some random words from the archives of the New York Times, and the user was required to type what they saw. It was not known that they contributed to digitizing old books and newspapers as well as paying the companies for the service.
It was a novel way to add a second monetization stream to digital security.
In this article, we'll introduce you to the words monetize and monetization. We'll explain what each one means before guiding you through the different forms of monetization, and the best way to build a monetization strategy for your business.
What exactly is business monetization?
Monetization refers to the act of creating revenue from things or actions that don't currently generate income. In internet-speak, monetization is usually the way we look at how individuals or companies that produce software or content are financially compensated for their effort. For any service, product or application, there are a number of options to earn money dependent on the way people make use of the product or service.
Sometimes monetization is intrinsic to digital creation-for example, a content gate may require people to pay for a product directly. This is what happens when Netflix or the New York Times or Netflix needs subscriptions.
However, sometimes monetization requires adding extrinsic material. In a traditional newspaper advertising, ads took up additional space, and the paper had to add pages. Companies paid for the ads where they knew that readers were already watching and gave newspapers sufficient income to continue their reporting of information. Television works in the same way. And so do internet advertisements on display or YouTube ads.
Online monetization
When we talk about the monetization of our websites, we're typically talking about the different ways individuals can monetize online things: an online YouTube Channel, a TikTok following, or even a blog or website. This has led to common terms like "Are you making money?" or "I need to monetize." We've also heard the story about the blogger or influencer who makes $50,000/mo.
There are numerous ways of making money from online. For example, a blogger could monetize their website using advertising, affiliate products, and an online course they offer. Companies that use social media monetize user's data rather than offering users a no-cost experience, but requiring companies to put ads in front of viewers.
Because there are many different methods to make money, monetization demands creativity about how you monetize something-which is what Luis von Ahn did with CAPTCHA. And there are creative methods of monetization all around us. For example, the stock market let's stock holders monetize ownership in businesses, while the derivatives market adds even an additional way to monetize the stock market through things like options and calls. (If you've ever seen The Big Short, it refers to these as "side bets." .")
While you consider the monetization strategy and model you are considering for your strategy, you should be imaginative with your approach to the issue, and determining a method of monetization that works for you.
Monetize is literally "to transform something into money." If you own an item you've made: digital products, content, an app, or even software, the goal of monetizing is turning that item into money. However, it's not actually doing it. In most instances, you're figuring out how to generate money from your product. You're turning uses, views, subscriptions, members, etc. into money.
What's a model of monetization?
A monetization model is the process or strategies to earn a profit by selling a service or product or creation, intellectual property, or even your own personal name. There could be different components to your monetization model-all of them need to work in tandem to generate the income you need.
For example, if you created an app it is possible to add in-app purchases as well as charge users for downloads. You could also incorporate advertisements, or all of the above. Or, if you created software, you may choose from different monetization models. You can "white label" the software and then license it to customers for use under their own branding. You could sell access through your company's brand, or offer access to users for free using a the "freemium" or upsell.
A monetization strategy is the way that individual or multiple streams of income come together to make up an entire brand's revenue.
The types of the monetization
They are among the most well-known methods of monetization. However, they're not the only methods to make money. There are even new monetization methods being invented constantly. Be aware that they are not mutually exclusive. A lot of brands utilize more than one of these (and there is a crossover ).
Member Monetization
The growth of members through member-led development is among the most effective ways of monetization. The next generation of companies that are growing fast are likely to be the ones that can convert customers, users and subscribers into members. They'll be able to do this on a massive an incredibly large scale.
The monetization of a member-led community can be simply as easy as establishing a membership fee for a community. This can result in recurring revenue, AND your members create content, and then share with other members to help grow your community in a way that is automatic.
Here are some examples of the ways we've seen members-led the monetization process:
- An entrepreneurship org. The app was branded and launched for 5000 members. The app earned over $30,000 in 2 1/2 months.
- Health-related launch for 100 members with high-tickets increased the ARR by $40,000.
- An author & speaker promoted for 4 weeks within their community of members and earned an increase of $30,000 in sales.
- An author and podcaster sold 5,000 seats to a $997 course in 10 days, to members who are already in.
- A community has launched the course for 13 weeks and added $100k to revenues in only two months.
If you're running members-only products it is likely that you typically earn revenue from both the members' memberships as well as the other things your members buy-a business model McKinsey refers to as an Flywheel for communities .
Digital Subscriptions
The way you can earn money with subscriptions is a lot like a member model. But your customers aren't adding worth. They instead consume content or software that you've developed or licenced. This is a common model used by firms that offer software, as organizations like Microsoft and Dropbox have created subscriptions as their mainstay.
And it works for the content, too. Netflix as well as Disney+ have built empires with subscription services. The subscriptions have even helped save The New York Times; in 2020, there were 8 million subscribers to print and digital.
Freemium
Freemium monetization is one of the models which is very popular among software firms, as it lets users try a product for free before committing. The system of monetization takes responsibility for the trial period, thus reducing the need for features such as "money refund guarantees" since the payment doesn't have to be made in advance. But also, it lets members, users, etc effortlessly upgrade over the paywall within a set period of time OR to gain access to greater features.
Content monetization
There are many ways to earn money from content including digital subscriptions and memberships. However, for creators of content, the options keep going. Here are some of the typical options:
- Affiliate marketing: If you promote the products you sell on your website or feed on social media and a user clicks on a company-approved tracker link, you could earn commissions. Many blogs and websites monetize through affiliates.
- Ads: Monetizing using ads is a proven and tested monetization strategy for content-heavy brands, from TV channels to websites to applications (more about this in the next minute). Advertisements can be paid for per ad or per visit (usually described as RPM=revenue Per Mille ).
- Sponsorships: A sponsored content is typically usually refers to an article that was sponsored by a blog. The majority of sponsorships are created by influencers.
Social media monetization
Most of us see social media monetization as a method by which people can earn money from their social media platforms. The majority of social media owners make money using different methods already on this list: advertisements, affiliate marketing and sponsored posts.
But there's also the question of how social media platforms make money- and they're creative. Below are two instances of how social media giants make profits:
- Meta: With its top brands of Facebook and Instagram, Meta makes money through selling attention. And with two billion people using it every day, the company has plenty to offer. Meta gathers data from users and sells companies the chance to get the right advertisements before their audience, with highly targeted demographic information. This led to a staggering an estimated $32 Billion in the final third quarter in 2022. Meta's collection of data is so effective that it's often been the target of scandals (think Cambridge Analytica's attempts to influence elections).
- LinkedIn: LinkedIn is much smaller than Meta and has an average of 141 million users per day. However, it has a unique monetization model that matches its strengths as an application. As a career and networking website, it can sell Premium plans to job seekers (giving an edge on job applications) as well as offer unique plans to recruiters and employers for a higher price. The platform lets all types of user get what they require through the platform. And they still offer ads. LinkedIn made over $13 billion in sales by 2022.
If you take a look at any of the social media sites there's one thing to be able of. They don't charge users to join the platform in the first place. The goal of these sites is to garner massive engagement and attention, or to convert users to premium plans or-more usual-simply to offer their customers the attention of advertisers.
App monetization
The world of app monetization is by itself. We've created a tutorial on it. However, let's simply say that there are many ways to monetize apps, including subscriptions, memberships, and ads. But what's unique for apps is the category of in-app purchases.
These are the 13 ways that mobile applications can be monetized in the future, so be sure to go through our blog post on Mobile app monetization for an in-depth look at each one.
- Freemium
- Ads and Premium
- Ads Only
- Ads + In-App Purchases
- Subscriptions
- Memberships
- Courses
- Events
- Products (physical or digital)
- A one-time payment
- Services
- Selling user data
- Crowdfunding
A monetization model that is based on the product
The most effective monetization model is an item. This could be digital or a product like a flagship online course. As an example, we've mentioned above that a podcaster and author on Mighty has sold 5,000 tickets to an online course of $997 in just 10 days. That's a fantastic online product monetization strategy.
However, selling a physical product is a tested and true way to earn money, and there are some truly amazing brands who have grasped the art of turning digital hype into real-world success for their products.
Look at Peloton in the form of a physically-based bike that connects in to workouts and other fitness buffs at any time. Additionally, Peleton was born during the pandemic, when the population was looking for a way to exercise. There have also been celebrities who launch physical products and use their names to market them. This is similar to Ryan Reynolds' Aviation Gin brand that he recently sold at $600 million.
The integration of items that are online-focused is only starting to take off, and we'll see more of it in the coming years.
Licensing
It's a largely under-valued monetization strategy and for those who own some sort of intellectual property rights, licensing may be a fantastic option to earn money. In essence, licensing is when you are the owner of a particular process or model and you sell the rights to others to use the model. When you see someone selling the "Trademarked X method to X" You're likely looking at a licensing model.
As an example Many thinkers will create their brand around topics like Op-eds, TED Talks and other TED Talks however, they will also grant permission to use their theories to corporations.
Consulting and other services
It's similar to licensing but those who build expertise around their online content can typically sell the idea of their content. For example, a lot of content creators are on LinkedIn as well as YouTube who share their knowledge could be hired by other people and companies to use it directly. If you owned a YouTube channel dedicated to helping entrepreneurs grow their business It stands to reason that people might be interested in hiring to coach them. This is why services and consulting are often a great way to earn money.
Data
A third monetization option is to monetize data. For this instance the platform gathers information on its users and sells it to third parties-often advertisers. This is a common practice of social media companies (above) However, social media companies aren't the only ones collecting and selling data from users.
All across the spectrum of industries that includes health care and finance, companies are capturing and making money from users' data. However, while selling data is a model of monetization that is used by many tech companies however, it's not a model that small-scale creators and brands use-for good reason. It's difficult and complicated. must be carried out on a large scale, and there are lots of legal considerations.
Which monetization strategy is best?
Every model of monetization has its benefits and drawbacks. The freemium model lets users test products or services before making a purchase and can make selling easier. Charging upfront will take more sales effort, but can result an increase in cash flow earlier on. Subscription monetization models bring in revenue month after month, however it requires continuous customer service. In addition, customers must be loyal enough to ensure that you can get the real value of recurring revenue.
There are numerous methods to make money from any, product, or service particularly in the realm of digital and therefore, choosing a monetization model that allows you to manage access growing user base, access to the internet, and your personal goals is important.
Monetization model examples
- Vikrim begins an online group and then decides to set a single fee up front that will give an annual subscription and includes everything that falls under.
- Ali creates a paid sub-scription newsletter, with tips and deals that she sends out each month.
- Charles is an influencer who is a seller of digital tokens to allow people to access more information.
- James is an app that has been developed and offers it for free through in-app purchases.
- Jen is a thought leader and writer who makes money by speaking engagements and book sales.
How do you develop an monetization plan
If you are planning to monetize here are some suggestions to develop your strategy:
- Understand your strengths. A large portion of monetizing efforts fail because they don't know the advantages of their brand. Let's take an example: there is a tiny number of dedicated members. Advertising isn't the best way to monetize, since they need to be in large quantities. The product you are targeting could work. However it's possible to have a website with no clear area of focus and lots of users, ads might seem more sensible. A product isn't likely to succeed without a clear area of focus. Find your strength and pick the model that fits best.
- Contact your existing members In the event that you are thinking of making a product or a service that you intend to sell, solicit your current members to find out what they most require from your company. For a community on the internet the process is as easy to conduct a poll.
- Make sure it fits: Some monetization attempts fail because people misunderstand their target audience. For example, there's a case of a blogger giving career advice to unemployed millennials and decided to create an expensive product. The product failed badly. People were enthusiastic however, they didn't have a dime (remember that they had no job! )
- Align your tech: Monetization-especially done online-usually takes some sort of tech solution. If you're monetizing the community of your choice, it might be as simple as turning to a membership program or a bundle. But each monetization method requires some planning. Do you 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). Are you looking to add ads to your site? You'll need to get into an ad network like Mediavine or Ezoic and set it up.
- Learn about the business aspects If you are doing business online, earning money is something the IRS has some strong opinions on. Be sure to know what you need to do to report the earnings. If you are in the area, a visit to your local small business center may be in order. They will often show you what you'll need.
- Learn, experiment and improve: The first monetization that you test may not be the right one. Don't be afraid to try different things (and allow things to go) until you discover which one works for you and your audience.
Conclusion
As you try to find the most effective monetization method take note of what works for your brand as well as your customers. Don't force the process. Monetization needs to be done with care, and without risking loyal customers or ruining your users' experience with your product.
If you're looking for an effective method to create a community-driven growing business, join upon Mighty! It is possible to make money through community, courses, content, as well as live occasions. It is also possible to try it free in 14 days!