RSS feedsThere are many websites that, directly or indirectly, monetise the content produced by their users. Amazon , for example, depends heavily on customer reviews to drive sales, while Digg is composed entirely of news stories submitted by users, and millions of websites supply Google with the metatags that create the search giant’s content. All three sites profit from unpaid users supplying them with content, which is a fantastic business model if you already have – or can build – a loyal user base.
Many sites are now opting to share revenue with their users, which encourages participation and can help to build the community. Web 2.0 is all about user-generated content, and more and more often, those users are being rewarded for the content they supply.
Newsvine is a social media site with a mix of traditional news agency material and user-written articles. In return for creating content, users are paid 90% of all advertising revenue generated by it. However, site co-founder Calvin Tang says Newsvine users would participate even if there were no profit-sharing. “Our best contributors participate in Newsvine for the love of writing and conversing with other intelligent people,” he says. “The payments are largely icing on the cake.”
Netscape , most famous for losing the web browser battle to Microsoft in the mid-1990s, is taking a different approach to paying users for content in its Web 2.0 strategy. Rather than sharing any profit derived from a user’s submissions, Netscape has chosen to recruit a team of “super-users” from other social media sites and put them on the payroll. These 30 “navigators” are paid $1,000 a month to submit a minimum amount of content, as well as to comment and encourage unpaid users to participate in the community.
In effect, Netscape is paying users to build a community by submitting links, promoting the site and creating conversation around stories. By paying some users, it is fostering a community of other, unpaid users, who are willing to create free content.
THE CLICK TRICK
James Marcus, senior editor at Netscape, says: “At this point we’re much more focused on growing our traffic and membership base than bringing in revenue. Obviously, if you push these two numbers through the roof, revenue will follow. For the moment, however, we have advertising on the site and are discussing some potential partnerships as well.”
Marcus claims that 90% of submissions are generated by non-paid users, but a small number of loyal users, paid or not, are certainly responsible for most of the popular content. “I am personally the 70th most active user on the site, but alas have not yet been offered $1,000 a month,” he says. “Why I have been willing to do this for free is something that information holders should be focusing on.”
Marcus is keen to find other ways to improve profit, but is wary of damaging the community that he has built up. “Down the road, we’ll look at anything and everything. It may turn out that the model for monetising a social bookmarking site is completely different from the more conventional approach. One thing I do know is that we’ll be very wary of damaging the community for a short-term bump in revenue. If users feel like they’re being treated as anonymous assets, they’ll head directly for the exit.”
Netscape and Newsvine are two approaches to the same problem. A news site needs content to draw in advertising revenue, and both companies are using a slice of that income to encourage participation. The difference is that with Newsvine the entire user base is involved, and all have the possibility of profit, but with Netscape only an elite does.
These social media sites are competing directly with traditional media. Newslink site Reddit certainly is – its motto is “freedom from the press”. Other sites are working with their users not to replace traditional media, but to provide a service for consumers of that information.
Photo agency Scoopt , for example, was set up by 16,500 amateur photographers. Whenever an image is sold, the photographer receives a 40% royalty. But although users share revenue, Scoopt is not strictly a social site. The site’s Jill MacRae says: “Scoopt is run by journalists experienced in the business of actively licensing content to the media, with the reach and the networks to ensure that members get the best deal possible. It’s easy to think that you can sell user-generated content just by hosting it on your website. The reality is very different.”
The very last industry you might expect to see create a social computing business model is banking, but Zopa allows users to create an account and use it to lend money to other users or to borrow from them. Zopa profits by taking a small percentage of all transactions.
James Alexander, the UK CEO of Zopa, says the site has 135,000 users, two-thirds of whom are borrowers, and that the arrangement is mutually beneficial. “Borrowers can borrow more cheaply than anywhere else in the country, and the average return on all money lent to date is 6.75%.”
New business models like Zopa show that the social computing information revolution can take place in any industry. Sites that have dabbled with profit-sharing have found that the most important thing to do is foster a community around the core business.
Information-rich or information-producing organisations with an existing web presence have a distinct advantage when it comes to launching these interactive features, as they already have web developers and designers, expertise and often a captive audience.
So how can information professionals in other businesses and sectors help their organisation to benefit from this new phenomenon?
Well, if you’re in a business that can be monetised in an innovative way, then you are in a strong position. If not, it’s likely that your organisation will have to rely on advertising revenue.
It’s also important to think about how to overcome the common problems that arise from profit sharing. Revenue generation can affect the mood of a communit y, and can encourage users to move to whichever site offers the best return even if it doesn’t have the best content or community. Some also claim that a website where most of the content is created by paid users is a fragile one, and that if those users leave the community, it will decline quickly.
It’s the task of the site’s managers to make sure that a profit-sharing scheme is mutually beneficial, so that those all-important loyal users keep on posting. It’s also vital that users feel committed to the site. A loyal and friendly community is the first step, and revenue generation features should only be added later – sell out and you will sink.
If a company has good online content, a loyal user base and a mechanism for those users to create or add value to that content, then an important community will grow, according to Netscape. This can be monetised, and sharing profit can make users feel rewarded and increase the amount of interaction.
However, there is a risk that it could turn your community into a sterile profit machine. Users must be linked to success in a way that encourages the community to grow, not simply to drive traffic and make money off their backs.
But beware. If you don’t monetise your community, then somebody else might, and if they do it badly they may undermine your community’s authority and validity. Information professionals with existing social networking sites should think carefully before taking the revenue generation leap. But if the move is done properly, it can ultimately pay off for all involved.
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