New Media Business Models and the Economics of Community

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Chris Anderson, author of The Long Tail, posts on What does the Media Business Model mean and with some help from friends goes on to list 24+ business models for monetizing media that do not require cash payment by the consumer (what he calls free or almost free). Whether it’s really free or not is in the eye of the beholder, but that’s a different discussion.

Making money podcasting has been tough for some, so I think the list of business models is great, particularly for those who might not have exhausted their imaginations for ideas on how to monetize media. However, I think that the immediate focus on business models is like losing sight of the forest because we are gazing so intently at the trees and the different types of trees that grow there.

If we step back from the business model forest created by the economics of impressions, and ask is there something more. Is there something beyond our forest of impression based models? I think the answer is yes. Forest

Forests don’t exist by themselves, they exist as parts of ecosystems. So, what are the media based ecosystems that are inspired, created and formed around content? Content based communities seem like a logical answer, and beyond that networks of content based communities. Content has always been a powerful driver of community – just look at MySpace and YouTube.

We can and should recast the discussion from economics of impressions to the economics of communities.
And what are the economics of communities? They are micro-economies where trade, commerce and personal interaction are all intermingled with each other. Think of Second Life and their booming economy. second life

When the economic infrastructure is put in place to allow commerce to start and thrive, the business models based upon community economics are truly endless. We can stop worrying about impressions and leads and start monetizing the “utilities” that make community based economies work. And what are the utilities? Think currency, banking, trading, land and all the other stuff we take for granted in the physical world.

How might this work? Let’s take Madonna and the Live Nation deal for an example. They did the deal premised on expanding the revenue stream from selling content to selling entertainment, merchandise and whatever else they can sell. That seems like a good first step towards expanding from monetizing Madonna’s content to monetizing the Madonna community.

Madonna CurrencyBut what else could be done to monetize the Madonna community and how could it be done in remote places like Myspace, YouTube and Facebook? If we free our imaginations from the constraints of impression based thinking, what if Live Nation created a Madonna currency that they would honor for goods, products and shows and a payment system for exchanging currency for goods and services. They could create an economic utility that fans could use to trade and exchange for goods and services.

Bank of Live NationNeed a Madonna based theme for your MySpace page, 10 Madonas(10Ms) please. Incentive for Super Fans who share user generated content at YouTube and assign the rights to Live Nation – 3Ms per video or whatever makes sense. And guess who’s the bank and chief payment processor – Live Nation. Now that’s a business model worth shooting for.

So what do people think? If you ran a community and could turn it into an economy what business would you want to run? If you think this won’t work why not?

Here’s the list of impression based business models from Chris’s post:

  • CPM ads (“cost per thousand views”; banner ads online and regular ads in print, TV and radio)
  • CPC ads (“cost per click”; think Google ads)
  • CPT ads (“cost per transaction”; you pay only if the customer brought to you from a media sites becomes a paying customer. Here’s an example.)
  • Lead generation (you pay for qualified names of potential customers)
  • Subscription revenues
  • Affiliate revenues (think: Amazon Associates)
  • Rental of subscriber lists
  • Sale of information (selling data about users–aggregate/statistical or individual–to third parties)
  • Licensing of brand (people pay to use a media brand as implied endorsement)
  • Licensing of content (syndication)
  • Getting the users to create something of value for free and applying any of the above to monetize it. (Like Digg or our own Reddit)
  • Upgraded service/content (ed: aka “freemium”)
  • Alternate output (pdf; print/print-on-demand; customized Shared Book style; etc.)
  • Custom services/feeds
  • Live events
  • “Souvenirs”/”Merchandise”
  • Co-branded spinoff
  • Cost Per Install (popular with top Facebook apps who can help others get installs)
  • E-commerce (selling stuff directly on your website)
  • Sponsorships (ads of some sort that are sold based on time, not on the number of impressions)
  • Listings (paying a time based amount to list something like a job or real estate on your website)
  • Paid Inclusion (a form of CPC advertising where an advertiser pays to be included in a search result)
  • Streaming Audio Advertising (like radio advertising delivered in the audio stream after a certain amount of audio content has been delivered)
  • Streaming Video Advertising (like streaming audio but in video)
  • API Fees (charging third parties to access your API)

[tags]new media, business models, economics of community[/tags]

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