Open Business strategies
From CreativeBusiness
Christian Ahlert documented the following strategies "for content producers to monetise content in the new networked environment". The text below comes straight from the Open Business Guide. The still-evolving criteria for our research project are not necessarily those of Open Business, however their are many similarities.
If the networked information economy requires content producers to give up exclusive rights enshrined in copyright law, what other ways are there for producers to monetise their ownership of content?
This section outlines key rules of thumb for content producers to monetise content in the new networked environment. Some are adapted from strategies developed by Google consultant and professor Hal Varian at the UC Berkley School of Information. Though the focus of the 11 following recommendations is seemingly on content it applies in a limited way to services as well. If 'information' is at the heart of the business process similar revenue strategies can be used. In that sens the traditional narrow definition of what 'media' is applies in a networked environment to writing code, financial information and transactions, production of architectural plans etc..
Make the original cheaper than a copy
How can you make an original that is cheaper than a copy in an environment where content can be copied and distributed at practically zero cost? The answer lies in minimising transaction costs.
A good example of this is eMusic, which charges as little as 12p per song downloaded to mitigate against the risk of wasting time downloading poor quality music, as well as facing litigation from rights owners, by using illicit peer to peer filesharing clients. You might save money downloading music from such sites, but as Steve Jobs remarked at the launch of the iTunes store, “you’re working for under minimum wage.”
In the print industry, the print form of a novel is still much more convenient in many contexts than is the digital form. There are a range of environments, from the bath to the bus, where consumers would prefer their novel in book form, and will pay for the privilege.
Sell physical complements
Bands who develop a fan base by giving away their music online can rely on this fan base to consume physical compliments to their music, by attending gigs or purchasing products such as T-shirts, caps and badges.
Sell information complements
In open source software products, such as Red Hat Linux, are given away, and then support contracts are sold on the strength of the free product. A type of “support contract” for music might be specially packaged forms of the music, already generated by the artists during the production stages, where the different recording tracks have been separated out to allow users to remix the song.
In the same way, an academic, consultant or journalist distributing their writing free online could successfully charge for specific consultancy work based on the popularity or reach of their work. Developing ones reputation for free is a good strategy to create derivative revenue streams.
Subscriptions
The disadvantages of hiding content behind subscription barriers have already been discussed. However, this does not preclude the content producers from allowing access to special features associated with the content to paying subscribers. Slashdot, for example, gives subscribers access to their posts half an hour before they are posted to all readers, enabling subscribers to be first in line to comment on a particular post. Increasingly adaptations to old revenue models can be found where more is available for free, but revenue comes from parallel revenue streams, which are only available to paying customers. The difference being they increasingly are not paying for what used to be the main product, but for ancillary higher value services.
Offer a personalised version
Personalising content, using customer relations management software such as that employed at Amazon, can help users navigate your content by reminding them what they have and haven’t seen, as well as recommending they look at something based on what other users with similar profiles have enjoyed looking at.
Advertise yourself
As discussed, gaining exposure on the network is increased by giving away your content for free. This is a key strategy for artists seeking their audience.
Advertise other things
Though this seems to be the answer for nearly every web 2.0 entrepreneur it works for many. Once your content has enough attention focussed on it, you are in a position to sell advertising space. Advertising revenues are increasingly being diverted from print media towards the online sphere, and this trend can only continue. Plus, with Google Small Ads, there is a wider market for content producers to source advertising revenue. It will be interesting to watch what innovative forms 'selling attention' will take.
Monitoring
Collecting societies traditionally collect royalties for their members, and are moving into the online sphere. For example, Last FM, whilst offering recommendations and short previews of music, also offers personal radio stations, which play users music according to their music profile. Last FM pays the MCPS-PRS fees like any other radio station, and revenue from this is in turn distributed to rightsholders.
Selling content
If you are releasing your content online using a Creative Commons licence, then you still maintain the right to profit from your own work. And developing a fan base through freeing your content to a network of fans will make you a more attractive proposition to record labels and publishing houses.
Pure public provision
Public funding, either as seed funding or start-up funding might play a significant role in some online ventures, and funding from your own public, through mechanisms such as Paypal, could provide significant revenues.
Prizes, awards and commissions
Patronage in the form of prizes and awards as well as specific commissions, should also be considered as a source of revenue.
Where the first round of commercial web development focused on online services and e-commerce, the new Web focuses on sociality. People are at the core of the new Web -- contributing content, ordering it, and making connections amongst each other. Web 2.0 companies are merely 'containers' for their social activity: mediators, facilitators and meeting places. Such companies add value to users’ data by aggregating it, analysing it, funnelling the value of users’ collective intelligence back to the user.
This activity is driven by network effects, a fundamental dynamic in social networks. To get to these effects, some key lessons learned by early players and successes need to be remembered:
It Won’t Work If It Feels Like Work
Getting people to participate and contribute is key to success of many, highly distributed services. But people won’t take part in co-content systems that make it hard work to do so. In fact, the best systems are crafted to let people enjoy the network effects of sharing their data with others with a minimum of hassle.
If you can find a way of harnessing the data that is thrown off a user’s everyday life (as, for example, Flickr stores people’s photos, del.icio.us their links, or Last.fm their playlists) this will improve your chances of hosting a successful co-content service. Demanding lots of work from users will not.
Give Users Equity
Users see themselves with varying degrees of justification not as consumers of media (and services) but as its `co-creators'. Because of this they need some equity in what they produce, even if that equity is only or partially symbolic.
Tight feedback loops between co-creators and architects, in which suggestions and criticisms are acted upon quickly, are one way towards this.
Free Your Content (and service), Lose Control
Not taking ownership of content is another. Because Web 2.0 is about autonomous, distributed services and remixability, it is fraught with ownership and boundary/control issues. These present particular challenges for all players, but they must be embraced.
It is crucial that content be as free as possible to traverse the Net. At the heart of Web 2.0 is the ability to use, re-use and remix materials from all over the Net, and to combine material or infrastructure from one service with that of others. Attracting more users causes organisational effects to emerge – the ‘network effects’ that everyone wants.
Personal Benefits
Often, contributions are motivated by a personal or selfish intentions on the individual user’s part. Services such as Digg and even the new iCommons site employ these strategies. Meritocratic elements should be considered to make users/customers feel good and to keep their engagement frequent.
Feedback, Rewards, and Recognition
Rewards and positive feedback are another strong motivation for users/customers. When users/custmoers feel appreciated as a result of contributing to a system, they tend to stay active in anticipation of future rewards. Flickr’s early success in building its strong community stems at least in part from a well-designed feedback system that not only makes it very easy to leave positive comments(one-click favorites and in-line comments) but also makes sure to highlight this feedback to the user each time they visit.
Give and Take
Users will agree to contribute data if they feel they receive an equal‚ if not greater value in return. BitTorrent enforces this principle by correlating the download rate of users with the willingness to upload data. Last.fm makes it clear that users benefit the most from its system if they agree to share their music play lists. Since the required effort is minimal (installing a plug-in), many will say ‘Why not?’.
Meaningful Connections
As people spend more and time online where most interactions are mediated by text, email, IM or SMS, they increasingly seek meaningful environments in which they can connect with others based on shared interests and intentions. Flickr built a strong international community of passionate photographers; Digg has aggregated a large tech-savvy community in which people start making connections and watching each other’s stories.
Create Platforms For Attention
For many of today’s successful Web 2.0 systems, making money has been secondary to attracting attention, a term now used to describe the amount of time and personal investment that a user is willing to spend on a given site. In terms of 2.0 business models, attention has become a new currency, although the means for converting it into revenue have not yet been proven universally.
Attention is the cornerstone of building trust, loyalty, and brand recognition. For established media companies, it reinforces authority and can have cross-channel ‘halo’ effects: time spent on an online property will lead to more attention for the same company’s offline media, especially if the two are increasingly linked.
Design For Community
People are at the heart of what is called `Web 2.0’. Conversation and social activity, mediated by a Web platform or software, is the core Web 2.0 proposition. Design and architecture should reflect this, focussing on usability, clarity, and user experience.
Plan For And Enjoy Unintended Uses
Start from the beginning with the assumption that others will find your service or information valuable. Then don’t preclude them from using it in their own service because of limiting design decisions, particularly by making things complex. This means identifying and using remix-friendly techniques and technologies. Document how your services work and make the pieces and documentation easy to find.
