Monetizing Customer Information

As I have addressed previously in my posting about menéame, the biggest challenge of managing Web 2.0 applications, is for companies to know how to best monetize them, whether so as to just cover the costs of maintenance or to make it a profitable endeavour. Currently, there are a few business models out there, subscriptions, premium subscriptions, CPC advertising, CPM advertising, etc. With the growth of Google, came with it the huge growth in reliance on advertising as being the main revenue stream of many Web 2.0 business models.

Is the advertising model effective?

Well, it depends since it has been very effective for Google, however it has been far from that for the some such as menéame or facebook. It does a lot to do with understanding the kind of users that are frequenting such websites and networks. Therefore, although such websites have created a wide user base, which is the first essential step for triggering the network effects and the potential for profitable monetization, they have still not come close to fulfilling their profit potential.

However, have they all been unsuccessful in terms of monetization through their user base (rather than the developers of 3rd party applications in the case of facebook)?

No! An example of success when it comes to monetizing the user base is tuenti. Tuenti is the leading online social network in Spain, only open to users joining through invitations. Tuenti managed to do this through see their user base as much more than just a user base but rather a wealth of information on specific individuals with specific preferences and interests. They used that to bring online social networking advertising to a different level with what they had called "events". These "events" are basically a form of highly targeted advertising. They usually show in the form of an icon on a user's profile and when clicked, it directs the user to information about a certain product, usually with some kind of offer or so. I have not been able to experience the "events" myself first hand, however being taken through the way it works and the kind of results the "events" have generated is impressive. How are they successful? Basically, through highly specific targeting that brings advertising in a well scheduled way to any specific user, where any user would not receive more than two or three events in any given week. This leads to reducing clutter and a high click-through rate.

The wealth of information that can be capitalized on is expanding in size as well...The fastest growing part of the user base, can be called "the transparent generation" with the advent of microblogging and location based services, the information and the monetizing opportunities are numerous.

So what does this mean to everyone else who is not making enough money through their user base?

1. Ensure that you are collecting as much information as possible about the user base
2. Look at creative ways of using this information to achieve highly specific targeting bringing relevant messages to the relevant user in a clutter-less environment
3. Re-invent your pricing so as that it reflects the higher value you are providing advertisers and partners
4. Ensure that you are fair in the way you are using customer data so as to build trust in them sharing more information which in turn will lead to better services and messages tailored to them.

Word of Caution:

The collection of user data means that there needs to be legal covering to support such activities through giving users the choice to opt-out after they are educated in a transparent way about the benefits they would receive out of opting-in. As mentioned before, there needs to be trust so that the user base can be truly monetized in this way.

Going through a recession, there is a need for creativity and a bigger need for better understanding the value that comes with a wide user base...and once that is in place, it would be time to make smarter and more sustainable money!

The Internet and Communism

A few weeks ago, I had set up a survey to gauge whether the readers of my blog would prefer to go for Wikipedia or Britannica as a source of information. The survey was launched and closed in the early days of this blog and therefore did not attract as many responses as would be needed to make any conclusions. However, it can bee seen that the majority of the surveyed readers have opted for Wikipedia.

Many of the traditionalists and the less informed would probably be shocked to see that kind of result.

So, why?

• Wikipedia has built a brand that is synonomous to convenient access to information
• Wikipedia is totally free
• Wikipedia does not represent a corporation and therefore sparing it the negative sentiments that many of the younger tech savvy users of the Internet have for corporations
• Wikipedia has proven to be a democratic space employing continuous improvements to ensure that its quality, through it accuracy rate, is comparable to that of the longer established paper encyclopedias

So those are some of the key reasons that I have been faced with through my conversations with some of the people in my class. However, I would also say that some part of Wikipedia's success that it is perceived to be created by the people for the people - which ironically for the Internet and its users sounds a bit like communism...

So is the future of the Internet a communist one?

Yahoo! up for a fight

Yesterday, The New York Times revealed Yahoo's new plans to introduce images and videos to search ads, presenting a richer offering to advertisers.

Search advertising has been typically in the form of only text advertisements and links, contrasting to that of banner and box advertising which typically show images or video. The step taken by Yahoo also comes at a time where it has been proven that the recession has pushed advertisers towards investing more in search advertising rather than banner and box advertising. This is attributed to that search advertising gives more direct and measurable results.



Recently, Yahoo's strength has been that of banner and box advertising, so this move on their side makes them enter the fight to gain back market share from Google for search advertising. Yahoo's market share for search advertising has fallen from 13.8 percent in 2004 to 10.5 percent in 2009, while Google has doubled its market share to reach 67.7 percent in 2009.

The new offering had already been made available to larger advertisers, one of them being Pedigree, which has seen the benefit of the new form of search advertising.

“Video is always more powerful than just words on the page.It’s definitely compelling to us to have options like this, where, when you type in ‘Pedigree,’ you get more than just the words, you get the video itself.” - John Anton, the marketing director at Pedigree

The new offering would present the most value to those who are big enough to invest in their advertising and brand.

Yahoo is currently offering the new service for a monthly service fee which contrasts with Google's current model for generating revenues out of search advertising.

Yahoo's offering is currently unmatched by Google or Microsoft. However, will long will it be before Google follows the lead and capitalizes on its larger advertiser base to ensure it protects its market share of search advertising.

Is Yahoo really up for a fight or just creating a better place to offer itself again to Microsoft?

menéame - Finale!

To read the first two parts of the series of blog postings related to the Spanish website menéame, then please follow these links so as to have done the background reading....

menéame -Part 1
menéame - Part 2

So basically the question on the table now is what is it that menéame can be doing to better monetize the user base that it currently has? Some thoughts:

• Before taking any specific steps, it seems more than warranted to start off by understanding the issues to a much deeper level. This would mean running a marketing research to better understand its users' behaviour but also understand why there advertising revenues are not pouring in, in other words, what is keeping advertisers from menéame.
• menéame has also maintained a policy of not collecting any specific demographic data on its user base. This might seem to be something they should consider changing since a better understanding of what kind of user base they can offer advertisers will make a more solid sales pitch to advertisers
• Currently menéame has seen a more prevalent appearance of CPC (cost per click) advertising which might not be the most successful considering that the majority of menéame users are not actually the "clicky" type, therefore, although probably generating less commission per unit for menéame, CPM (cost per thousand impressions) would prove to be more profitable overall.
• menéame does act as a traffic broker for some of the mainstream Spanish media websites and this can also be a place where menéame can search for revenues. How can menéame monetize its positive impact on such media websites? The creation of click through cuts or charge for direct menéame links from the media wesbites might be an option. However, this would need a closer look at how the online media industry works and what value-added services menéame can provide to the media websites. Although menéame would have a certain degree of leverage since it is the leader with no real competitors in its field in Spain
• Creation of paid corporate accounts and clearly marking them as such is another option. They need to be clearly marked as being corporate accounts since their objectivity will be highly contested and it would be needed to set them apart so as to stick to menéame stands for in terms of an untainted democratic space.
  
• For many of the proposed alternatives to be successful, there needs to be a great degree of transparency with menéame users so that their support wouldd guarnteed and no adverse impact would occur on the user base.
  
• One of my classmates, Alberto, brought up a suggestion with regards to setting up a donation campaign so that users can be contributing to menéame, similar to what Wikipedia does. However, I would be more skeptical on the results of such a campaign since Wikipedia is run by a non-profit foundation which in many users' minds warrants the collection of donations. Therefore, I would probably only consider such an option in the case that the initial marketing research tells us something that might support the running of such an initiative.
• Finally, there was a point brought up with regards to that the brand menéame might have had a deterrant effect on advertising due to the sexual connotations it carries. This is something to investigate through the research to be conducted. In the case that these assumptions are proven correct, then menéame should look at an incremental re-branding effort. It might be a scary prospect due to the brand equity that the brand name menéame currently carries, however, there have been many cases in the non-virtual world were companies and products were re-branded successfully, the key was an incremental long term approach.
  

Today was the last day of my Web 2.0 classes but it will definitely not be the last day for this blog...I had discovered the power of blogging a few years back but then now I am much more determined to think of it as a muti-purpose tool that I will continue to use to become a greater part of bringing my existence to the virtual world....

Quickie: ICT Spending spike in the Middle East and Africa

IDC, a technology research and analysis firm "forecasts global spending on IT to rise by just 0.5 per cent this year, while spending in the Middle East and Africa will grow by 6.7 per cent. The region’s estimated US$63 billion (Dh231.4bn) in new spending this year will be focused largely on software and services as companies look to squeeze maximum value out of existing infrastructure." - The National - Full article here

Giants in Distress

"In a damning sign of the times, Fujitsu’s bosses recently called upon the firm’s 100,000 employees in Japan to buy its goods. This week shares in Hitachi and NEC fell to their lowest levels for three decades. All this seems to have prodded the giants into action: all have announced job cuts and factory closures of extraordinary brutality by Japanese standards." - The Economist

In the latest edition of The Economist, an article sheds light of the magnitude of the woes of the Japan's electronic firms that are going through one of their worst times ever. Once the rising stars of innovation and technology are now "too big" to deal with an ailing Japanese economy that no monetary policy actions are bringing it back to its feet. The companies are looking at abandoning the law of the samurai and are starting to surrender, the first being Sanyo Electric, which got bought over by Panasonic.

Has the pre-longed Japanese economic slowdown brought the sun to set in what was called "the land of the rising sun"?

India's Newest Budget Item

After launching the low cost car, there is news about a low cost laptop...

"The cheap laptop has been developed as part of a broader national plan to update the technology used by Indian colleges and schools.

Details of the laptop are scant, but it is reported to use wireless to connect and have 2GB of memory on-board.

It will stand as a rival to the other cheap laptops made by the One Laptop project and Intel."

-www.bbc.com