Branch and Monetization
Over the weekend, I got to participate in a Branch after I asked for an invitation from @FAKEGRIMLOCK. The premise of the branch was whether the future of social media was advertising (current model for most everything) or paid (App.net). Once the conversation got started (and I got out of the way) some bright people got talking about some interesting things.
Most effective call to action ads are unpaid. Groupon understood this; they paid to build up audience, then released deals down that pipe that people would share. The levering mechanism (30 people need to buy this for it to happen) I think was ancillary. The real mechanism is that the deals were a really great value - so great that people were willing to share it in order to make it work. And before anyone jumps on me, their model was unsustainable, maybe because they scaled too fast, or saturated the market, or their offerings were just not good enough for the businesses, or whatever - but their sales model worked.
This suggests that the right way (or a right way) to attack a social media campaign is to build up audience (fan acquisition, maybe post promotion + good content to build up EdgeRank) and then release an offer that spreads itself. This doesn't necessarily need to be a ridiculous deal ($5 for $10 Starbucks card) - it could be social good (buy groceries from Fresh Direct this week and we'll donate half to whoever, Starbuck's Foursquare promotion), cross-promotion (start Hulu subscription, get a voucher for 1 month Netflix free), or new/novel product launch (FreedomPop, any number of Kickstarters, the Smoke Shack at Shake Shack).
Another thing that the branch has me thinking about it adding value to the end user with advertising. Generally speaking, this is the opposite of what gets implemented - a company builds a really great product, then monetizes by tacking on after-the-fact advertising. This money from advertising is balanced against user impact - you want to make the most money while inconveniencing users an amount that won't tarnish your brand too much or make appreciable amounts of users stop using your service. Everyone (including users) acknowledges this as a necessary evil and moves on.
But models where advertising is genuinely beneficial to users are a.) rare and b.) I think super successful. I like to point to the Penny Arcade Kickstarter, which raised half a million dollars for them to remove ads from their site. Their goal was to work for their users, and not be a slave to page views. However, one of the very common components of their feedback was "but we like the ads"!
One of the huge values of Penny Arcade's blog (aside from Tycho being hilarious) is game curation. They play lots of games, and talk about the ones that are interesting; some sufficiently large subset of people agree with their selections, and gain value from their recommendations. Their game ads are also curated similarly - basically, their goal is that the games that they advertise have to be reasonably good, therefore an ad for an interesting-looking game is more valuable to the end user. Presumably, this positively impacts their click-through rates, as well as the value to the advertiser on a per user basis (people are more likely to make a transaction because they "trust" the ad).
That second model sounds much harder to create than the first. What would be a value add model for Twitter? For Facebook? For NYT? For Spotify? For Hulu? For TV and radio? For the subway station? For Gmail? For Railscasts?