I have been looking into different social applications to see where they succeed and fail at monetizing their product. Just as adding a share feature does not make a product naturally viral, just inventing a feature set add-on does not make it a money maker.
The thoughts below focus on new product initiatives. How to get to market faster by improving you initial ROI on engineering by using monetization as a strategy. While I am focusing on selling features below, the principal is the same for any monetization strategy, as building value and desire is the name of the game.
Here are some of the thoughts that I have had about maximizing ROI by minimizing feature sets and reserving them to find out their monetization potential. The thought here is: Once you give these features out for free, you cannot charge for them later. (Unless of course, you are selling crack.) You are better off waiting for your users to tell you what they really want, and how bad they want it.
Build Walls
I know it seems against the concept of the open web, but building walls between users is actually important on several levels. I am reminded of Randy Paush's speech about Brick Walls. According to Randy Paush, walls exist for several reasons:
- to see how much you want it
- to keep the others out
- let us show our determination
So to improve your ROI on initial engineering effort, leave up as many of the walls as possible. The walls will protect your users, and they will build desire for access. Let the user's desire determine what additional walls to take down. For an example, look at Linked-In.
Build Gates
Set usage limits that protect your infrastructure cost, and protects your community. Limit number of items, pictures, daily messages, data storage, etc. If walls protect and build value in the community, gates help you manage it. There thousands of examples of sites that have done this well. Allowing cheap access drives acquisition. Limiting it drives desire and retention. For an example, look at Backpackit.
Take Bribes
Outside forces are going to find a way in eventually. But, if you build good walls and gates, buying their way in should be easier for them. Sponsor packages are only valuable if they cannot achieve the same goals as a regular user. Also, sponsored accounts build honesty in the community.
These concepts are only part of the picture of how to monetize social applications, but these are important concepts for early-stage projects. Skipping these steps can make it harder to monetize your product later, and if you cannot sell the left out features, you will win over your users when you give them what they want for free and strengthen your retention and referrals.
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