I've lost count of the number of people who have told me that the problem with social is that you can't make any money out of it. Yet content owners and producers the world over continue to wrestle with what Scott Karp calls 'the 10% problem' - the problem that if you apply old school media principles to digital content you find that revenue per user is typically a fraction of the revenue per offline viewer, reader, or listener.

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Content owners aren't short of challenges: information wants to be free, content is ubiquitous, attention is the new scarcity. The old destination model said build it and they will come. Our content is good so people will come to us to consume it, and whilst they're here we'll throw a load of advertising at them.

In this scenario advertising revenue is often a factor of scale - the more users I have, the more ad impressions I can serve and charge for, and audiences are homogenous - a user is a user, a reader is a reader, a viewer a viewer.

Yet life is not linear. The world is not black and white. And social is neither. So perhaps it's time to ditch what Charles calls the "duality of binary classification", and time instead for "the complexity and infinite shades of grey that exist between the polar states of good and bad, black and white, north and south or up and down."

Take connections between people. Aristotle defined three types of friendship - friendship based on utility (utility being an impermanent thing, changing according to circumstance, disolving when the utility is no more), friendship based on pleasure (of the moment, changing as pleasures change), and 'perfect' friendship which is based on goodness (mutual respect, nourishing, lasting, trusting). Friendship is not black and white, and 'friend' (or 'fan' or 'follower') is a very blunt term.

Think about participation. There are many forms of it, and a significant difference between simply reading, or commenting and actually contributing. Forrester's Social Technographics ladder does a good job of reflecting the broad scope of such participation inequality.

Connection, participation - shades of grey. One user is not like another user. The key for content owners to make money out of social is to understand human subtleties like these. Less media, and more social, if you like. And so I think one of the most useful ways of thinking about your audience is through the level of engagement and interaction they have with what you're doing. The internet is a does medium. It's not for passive consumption, it's about interaction. So thinking of your audience in this way you immediately start to think differently about your content, and about the value you are delivering. Wary as I am about segmenting people into homogenous groups, I think it's useful to put a simple framework around this (I'm no David Armano so I'm afraid you'll have to make do with my rather crude representation).

At the outer edges is the content that people are sharing, passing on. This might be content in its original form or stuff that has been mashed-up and co-created, but the job for producers here is to design for speadable media - what Mike Arauz calls designing for networks not just groups of people. Using the phrase 'outer edges' is potentially misleading - people may be as engaged with what you do here as anywhere else and this is content that reaches out far and wide, brings new people into contact with what you do, spreads the word - what Seth Godin called 'Flipping the Funnel'. The value for the producer here is in the ability to spread your ideas, your brand and your content way beyond your own network or audience.

Then there is the content that is distributed out on the web and other platforms which people may or may not be actively sharing, but which they are actively consuming and interacting with. This has typically been content designed for the platforms (You Tube, Flickr, social networks et al) that can enable huge reach and a ready made network that creates the potential for ideas to spread quickly. Increasingly, I think we'll see more content designed for streams, where (as Glen Hiemstra says) it is the flow of information that matters. It's interesting that twitter and Facebook now refer significant proportions of traffic to some content sites, in some cases comparable to Google. And some of the most interesting content innovations out there like Stephen Fry's The Dongle of Donald Trefusis, and Paul Morley's Showing Off that Russell wrote about, and David and Tom's Purefold, play on the fact that the content is multi-faceted, transmedia, and part of broader streams. There is simple direct value here for the producer (like a revenue share on videos played on You Tube), as well as the indirect value of a tonne of referals.

And then there is what happens on your website. An appreciation of differing levels of interaction (and that one user is not, after all, like another user) is important because there is a lot of difference between a drive-by (someone who comes to your site looking for a specific piece of information, often driven by search, likely not to linger long once they've found what they're looking for), and people who browse (consume but don't necessarily interact), or those who occasionally interact and contribute, or those who are your superusers (those who interact the most, comment the most, contribute the majority of UGC, are most engaged with what your doing).

Websites used to be everything. I think their role now is more akin to a kind of content hub supporting a more distributed presence. Designing for platforms and streams enables an exponentially larger reach for content than could ever be acheived through a destination model, so in this way scale comes through connection. With decent content acheiving scale is relatively easy, but scale without connection is one-dimensional. Because connection builds permission: "the understanding that the real asset most organisations can build isn't an amorphous brand but is in fact the privilege of delivering anticipated, personal and relevant messages to people who want to get them."

That last quote was from Seth Godin. In Tribes, Seth talks about the fact that what people really want is the ability to connect to each other, not to companies, so services that facilitate connection, give people stories to tell and something to talk about, build permission. It flips the focus from looking for customers for your products, to seeking out products (and services) for the tribe (HT to Simon for reminding me of that).

This means that content owners need to reach out and engage their audiences wherever they are. When we think about online communities, it's easy to slip back into old destination thinking about attempting to "build" an online community around your brand. But to paraphrase Mark Zuckerberg, communities already exist, so the job instead should be to think about how you can help that community do what it wants to do. Communities are fluid and ever changing. So a better model is to think about multiple assets (social objects or ideas if you like) each with their own levels of participation.

So what of the thorny subject of paywalls? I'm going to conform to my self-interest here and say that I believe that provided publishers create services that have enough value to the end user, I'm convinced that people will pay for it. The key word here is services - in a world of ubiquitous free content replicating old print subscription models is unlikely to work but, like Tim says, that is generally not how people consume digital media. Our experience of digital consumption is a whole lot more fragmented, dipping in and out of a huge number of different sources. So services which aggregate the kind of highly relevant, interesting in-depth or curated short-form content for me, or which apply producer expertise in new ways to deliver useful services to me may just be the answer.

I said in the previous post on this subject that the way to make money in social is to think about the value you are creating. This is useful since too many people forget that with a two-way medium, the exchange of value is what's really important - the more relevant the content and services, the deeper the level of user participation and interaction, the higher the contribution of value in terms of engagement and data. If there are essentially three ways of monetizing content and services - transaction, subscription and advertising - I would argue that users who are highly engaged with what you're doing are far more likely to transact on your site, subscribe to your services, and interact with the advertising than those who are not. So it's probably a good idea to know who those people are. And we're not short of ways of generating revenue from engaged users: aggregation, outreach, sampling, seeding, PR, behavioural, subscription, affiliate, data, newsletters, display advertising, sponsorship, services, applications, I could go on. All very measurable, all very accountable, at every level.

Let's face it, we're all in business, we're all here to make money. The point is that social gives you the platform. The platform from which to listen, understand, converse, engage. The platform on which the content business of the future will be built.

I've done a lot of thinking aloud here. As always, comments and feedback very welcome.

Original Post: http://neilperkin.typepad.com/only_dead_fish/2009/06/making-money-from-social-2.html

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