Mapping Processes for Startups: Monetization

I'm a big fan of mapping out options for decisions that you have as a startup.

Using a google document spreadsheet we can start to do some basic analysis on various decisions or choices that a startup may face.

This post will attempt to describe some aspects of how to look into selecting a monetization strategy for your website. Sometimes its obvious how to monetize a technology and in many cases its not.

So here is the process:

1. Firstly brainstorm the monetization methods that you may be able to use - at this point don't kill any ideas. A place to start with this is to think in these terms:

• Advertising: Using advertising to generate revenue. E.g. CPC (selling traffic), CPA/affiliate sales (selling action), CPM (selling brand exposure) or a combination of methods.
  
• Subscription: Using a subscription model (freemium/premium) (selling service/access/data)
  
• PAYG: Pay as you go. Using some kind of pay per use model (selling a service/access/data)
  
• Non advertising commission: Commission based method. E.g. Paypal 3.5% cut of transaction (selling a service/access)
• Direct: Selling something directly whether virtual or real. (selling a product)
• Donations: Allow a community donation. (selling vanity/fear/pride/respect/vision)
  
• New Methods: Monetizing in a new ways (selling site engagement/interaction?, selling privacy?, selling identity?, selling social connectivity? )
  
• Combos: Combinations of the above. I.e. multiple revenue streams. [Useful for experimenting and gathering real data and useful when in growth phase and diversifying in search of larger profits).
  

2. Now take these specific 'monetization methods' that you have generated and analyse them using the following fields (using the spreadsheet) filling out the fields with low, medium, high where relevant:

• Description- Write a brief description of the monetization method
  
• Technology required - What kind of technology is required to achieve this. Do you have these skills in your team? Can you get them in?
  
• Product orientation changes - How much do we have to change your 'web product' by in order to make the monetization method work? Do we need new features on our site/widget/platform/technology/etc?
  
• Critical mass required - Do we need to have a critical mass of users in order to get this monetization method to work? Does the method scale better as we get more users. E.g. a market place like ebay. Or does this method scale flatly e.g. no market place.
  
• Time required for implementation - How long will this method take to implement in terms of company time?
  
• Ease of implementation - How easy (excluding the provision of time) is it to make this method?
• Consumer annoyance factor - Do we impair the customer experience by this method and by how much? Banner ads all over the place is one extreme example here. E.g. if twitter were to try to monetize and starting adding ads to feeds or your site - people would complain.
  
• Partner annoyance factor - if we are working with a partner/s do we annoy our partner with our monetization method. If so, by how much?
  
• Exposure - How large is the exposure of this method. E.g. a banner on the front page affects all your users. V.s. Freemuim models offer more exposure to the power users of the site. For advertising methods this can be quantified in terms of pageviews, uniques etc. You want to be high but targeted correctly.
  
• CPC/CPA/CPM revenue potential - this is more advertising specific but try to put some predictions down so you can compare monetization methods.
  
• Contextualisation rating - Is this monetization method contextualizable and to what degree. E.g. there is no point making a freemium model on a site like moneysavingexpert.com as the users are there to learn about saving money. There use affiliate cuts instead. On the other side of the coin Snaptalent are doing great stuff with facebook ads.
  
• Adverse effects on the distribution/growth of your site/widget/etc - a subscription model won't work well on a widget because it would probably kill the distribution effect of the widget. E.g. Subscription model is bad for sites that rely on a market place to grow. Ebay do this now that they have their market but only on the powerusers. E.g. it wouldn't make sense for Zilok to charge a subscription while they are in their growth phase. Much better to use a percentage cut of the sale.
  

3. Now that you understand a bit more about your options, now try to map the value proposition that your site/widget/app/etc has; to the monetization route that you think are candidates. For example:

• If your site makes a process easier then a clear monetization method candidates would subscription, advertising, PAYG.
• If you sell direct sell product that is innovative to the market (then you can charge directly for it).

Other thoughts:

• Make your monetization method work for you in a competitive sense
• Disrupt your competition and create competitive advantage by using a different monetization method than what is normally used in that industry.
• If you are going for multiple monetization methods, you may want to check the compatibility between them and such for the best group effect on revenue/the other factors.