Monetize. Monetization. How It Works + Examples (2023) |
In the year Luis von Ahn famously created CAPTCHA-you know, those tiny letters you need to write to prove that you're human, he created one of the most innovative monetization models ever. The application would pick several random phrases taken from the archives of the New York Times, and the user was required to type what they had seen. It was not known that they were contributing to digitizing old books and newspapers, and those companies paid for the service.
It was a creative approach to introduce a second revenue stream to the secure digital data.
In this article we'll explain the terms monetize and monetization. We'll define what each means before guiding through various types of monetization and how to create a strategy to monetize your brand.
What is business monetization?
The process that generates revenue from items or actions that don't currently make you money. In internet-speak, monetization is usually the way we consider how people as well as companies who create software and content can be compensated for their efforts. With any product, service, or software, there are a number of ways to make money depending on how people use it.
In some cases, monetization is integral to the digital process. For instance, a content gate may require people to purchase a product in a direct way. That's what happens when you are using the New York Times or Netflix require subscriptions.
In contrast it is possible that monetization involves including extrinsic materials. In a traditional newspaper advertising format, advertisements consumed more space and necessitated the addition of pages. But companies paid to insert the ads where they knew people were looking for them and gave newspapers enough revenue to continue their work of reporting the news. TV works the same. The same is true for internet display ads or YouTube advertisements.
Online monetization
When we speak of monetization, it's usually discussing different methods users can make money online, such as a YouTube Channel, a TikTok following, or a blog or website. This has led to common terms like "Are you making money?" or "I need to make money." We've also heard the story about the blogger or influencer who makes $50,000/mo.
There are numerous ways of making money from on the internet. As an example, a blogger could monetize their website using display ads, affiliate products, and an online course they offer. Social media firms monetize their user's data rather than providing users with a complimentary experience, but requiring companies to display advertisements in front of users.
There are many ways to earn money, monetization needs creativity about how you monetize something-which is what Luis von Ahn came up with in CAPTCHA. There are methods of monetization all around us. As an example that the market for stocks lets shareholders monetize their ownership of businesses, while derivatives markets add an additional way to monetize the stock market with things like options and calls. (If you've watched the film The Big Short, it compares these to "side bets" .")
While you consider your model of monetization and method, think of ways to be innovative with your approach to the issue, and determining a method of monetization which is effective for you.
Monetize means "to convert something to money." When you have something you've created: digital products, content such as apps or software, monetize means to convert that product into cash. Of course, you're taking this action in a literal sense. Most of the time it's about figuring out ways to make money out of the usage of your item. You're turning uses, views, subscriptions, members, etc. into money.
What is a monetization strategy?
A monetization plan is a method or methods to earn a profit by selling a service or product or creation intellectual property or perhaps your personal name. There could be different components to your monetization model-all of them must work together to produce the revenues that you require.
In the case of example, if you are creating an application You could decide to incorporate in-app purchase, charge for downloads, include advertisements, or all of the above. In the event that you developed software, you may choose from different monetization models. You could "white label" the software and then license the software to clients to use with their own branding. You could sell access under your own brand or provide access for free with a the "freemium" upsell.
A monetization model is the way that individual (or multiple) streams of income come together to make up the total income of a brand.
The types of monetization
These are some of the most popular methods of monetization. But they're not the only methods to earn money. There are even new monetization methods being invented every day. It is important to note that these methods are not mutually exclusive-many brands use more than one of these (and there's a cross-over ).
Members monetization
The growth of members through member-led development is among the best ways to monetize. The next generation of businesses that will grow rapidly are expected to be the ones that will convert their customers, users, and subscribers into subscribers. And they'll do it at an incredibly large scale.
Membership-led monetization is easy as just creating the possibility of a fee to join a community. This can result in regular revenue. Additionally, the members contribute contents and share it with others, helping your community grow in a way that is automatic.
Here are some instances of how member-led marketing work:
- An entrepreneurship org. It launched a brand-new app for 5000 members. The app earned over $35,000 in two and a half weeks.
- Health-related launch for 100 members with high-tickets added $40,000 in ARR.
- A speaker and author launched a 4-week promotion in their membership community and saw an additional $30,000 in revenue.
- An author and podcaster offered 5,000 tickets to the $997 course within 10 days, to members who are already in.
- A community has launched the course for 13 weeks and brought in an additional $100k of revenues in only two months.
When you're selling an item that is based on membership it is likely that you typically earn revenue from both the members' memberships as well as the other things your members buy-a business model McKinsey describes as an Community flywheel .
Digital Subscriptions
Subscriptions and monetization work similar to a membership model, but your subscribers aren't adding value. They instead consume content or software which you've created or licensed. This is a common model used by software companies as companies like Microsoft or Dropbox have created subscriptions as their mainstay.
The same is true for the content, too. Netflix and Disney+ have built empires with subscription services. Subscriptions also saved The New York Times; in 2020, there were eight million digital and print subscribers.
Freemium
Freemium monetization is a model that's really popular with software firms, as it allows customers to test a product for free before signing up. In this case, the structure of monetization is designed to take care of the free trial which means that there is no need for things like "money back guarantees" since the payment isn't made upfront. However, it also lets members, users, and so on, easily upgrade to get past the paywall, either after a certain duration or gain access to additional features.
Content monetization
There are many methods to make money from content including digital subscriptions and memberships. But for content creators it is not a matter of deciding which options to choose. Here are a few typical options:
- Affiliate marketing: When you discuss items on a site or feed on social media and someone clicks a brand-approved tracking link, you can receive commissions. Numerous websites and blogs earn money with affiliates.
- Ads: Monetizing using advertisements is another proven and tested monetization strategy for content-heavy brands, from TV channels to websites and apps (more about this in the next minute). Advertising can be paid per ad, or paid per click (usually called RPM=revenue per mille ).
- Sponsorships: The term "sponsored content" is usually refers to a sponsored blog post. The majority of sponsorships are content created by an influencer.
Social media monetization
Most of us consider social media monetization being the ways people make money through their social media platforms. The majority of social media owners make money using different methods already on this list: affiliate marketing, ads, and sponsored posts.
There's the issue of how social media platforms actually make money, and they're creative. Below are two instances of how the social media giants generate profit:
- Meta: By leveraging its most popular brands like Facebook as well as Instagram, Meta makes money through selling attention. And with two billion users every day, there's lots to offer. Meta gathers data from users and offers companies the opportunity to get the right advertisements to their customers, with highly targeted details about demographics. This led to a staggering the amount of $32 Billion in the final period of the year 2022. Meta's collection of data is so potent that it has been the subject of investigations (think Cambridge Analytica's efforts to influence elections).
- LinkedIn: LinkedIn is much smaller than Meta which has 141 million daily users. It has developed its own unique revenue model for monetization which fits with its strengths as a platform. Because it's a career-focused and networking site and a networking platform, it is able to sell Premium plans to job seekers (giving them a competitive edge on job applications) as well as offer special plans to recruiters as well as employers at a premium. This lets every type of user access the features they want through the platform. And it also sells advertising. LinkedIn generated more than $13 billion in revenues in 2022.
If you take a look at any of the social media sites there's one thing in common. Almost none of them charge users to join the website at all. Their aim is to gain massive engagement and attention, which is followed by the conversion of some customers to premium plans, or more common-to sell their users' attention to advertisers.
App monetization
The world of app monetization is of its own, and we've created a tutorial on this. But let's just say that there are a variety of methods to increase the value of apps through memberships, subscriptions, as well as ads. What makes apps unique is the purchase in-app.
These are the 13 ways mobile applications can be monetized in the future, so be sure to go through our guide to Mobile app monetization for an in-depth look at each one.
- Freemium
- Ads and Premium
- Ads Only
- Ads + In-App Purchases
- Subscriptions
- Memberships
- Courses
- Events
- Product (physical as well as digital)
- One-time purchase
- Services
- Selling user data
- Crowdfunding
Monetization based on product
Sometimes, the best method of monetization is to create an item. It could be a digital product; for example, a flagship online course. For example, we mentioned above that a podcaster as well as an author on Mighty has sold 5,000 tickets to an online course of $997 in just 10 days. It's an amazing online product monetization strategy.
But selling physical products is a tested and true method of monetization, too. And there are some truly amazing brands who have grasped the art of turning digital hype into actual product sales.
Take a look at Peloton, who created a physical bike that could plug you into exercise routines and other fitness buffs at any time. It also helped that Peleton was born in the midst of the epidemic, and people were looking for a way to exercise. Celebrities have also launched physical goods and utilize their names to market them. This is similar to Ryan Reynolds' Aviation Gin brand that he recently sold at $610 million.
The incorporation of services that are online-focused is only beginning, but we'll see more in the future.
Licensing
This is a model of monetization that's under-appreciated and for those who own some sort of intellectual property, licensing can be a fantastic way to monetize. Essentially, licensing means you are the owner of a particular method or design and sell the rights to others to use the model. If you find someone selling the "Trademarked X method to X", you're probably looking at a licensing model.
As an example many thought leaders will build their brand around topics like TED Talks and op eds, but will allow the use of their theories to corporations.
Consulting and services
Similar to licensing, but those who build expertise around their online content can often sell the application of the content. In the case of LinkedIn, for instance, lots of content creators on LinkedIn as well as YouTube that share their expertise are able to be hired by individuals as well as companies to utilize it directly. If you owned your own YouTube channel focused on helping entrepreneurs build their business It stands to reason that some might want to hire to coach them. That's why consulting and services are often a great business model for monetization.
Data
Another monetization strategy is to profit from data. In this example, a platform collects data regarding its users and sells that data to third party advertisers. This is a common practice of the social media industry (above) However, these companies aren't the only ones that collect and selling users' data.
In pretty much every industry including health care, to finance, companies are capturing and making money from user data. While selling information is a monetization model employed by lots of technology companies, it's not one that small-scale creators and brands make use of - and for the reason that it's not used for. It's complicated, difficult, needs to be done on a large scale as well as having a lot of legal considerations.
What monetization model is most efficient?
Each model comes with benefits and drawbacks. The freemium model lets users test the product or service prior to charging and help in selling more easily. Charges upfront require more sales effort, but may result the cash in earlier upon. Subscription monetization models bring the same revenue each month, but requires ongoing support for customers. Additionally, you require customers to stay long enough to reap the real value of recurring revenues.
There are dozens of ways to make money off of any, product, or service, especially in the realm of digital which is why choosing a monetization model that lets you balance access, user growth, and the goals you have set is important.
Monetization model examples
- Vikrim creates an online forum and decides to set a single fee up for the first year that gives annual access, and include everything under that.
- Ali produces a pay monthly newsletter that includes advice and offers that she mails out every month.
- Charles has been a major influencer and sells social tokens for people who want to gain access.
- James creates an app that is free to download with In-app purchases.
- Jen is an author and thought leader who makes money through speaking and book sales.
How to develop an monetization plan
If you are planning to market your business HTML0, here are some guidelines for establishing your strategy:
- Know your strengths: Many marketing efforts don't succeed because they don't know what strengths their brand has. Let's take an example: there is a tiny number of loyal members. Advertising isn't the best method of monetizing, as they need to be in large quantities. The product you are targeting could be ideal. On the other hand it's possible to have the website that didn't have a clear area of focus and lots of users, ads might be more appropriate. The product won't achieve success without having a distinct market. Find your strength and pick the one that best fits your needs.
- Ask your members When you're thinking about developing a service or product that you intend to sell, ask your existing members to find out what they most want from you. For a community on the internet, this can be as easy as asking a question.
- Make sure it fits the target market: Many monetization efforts are unsuccessful because of misunderstanding their audience. There's an instance of a story that a blogger gave career advice to unemployed millennials and decided to create a high-ticket product. It failed miserably. People were enthusiastic but didn't have any money (remember, they were unemployed! )
- Align your tech: Monetization-especially done online-usually takes some sort of tech solution. If you're planning to make a profit from an online community, it could be as simple as turning to a membership program or a bundle. However, every monetization strategy requires some planning. Do you want to self-publish an eBook? You'll have to be familiar with the format of the book, its cover design and how to use the KDP platform (or find someone who understands it). Are you looking to add ads to your site? The first step is to sign up with an advertising network such as Mediavine or Ezoic and set it up.
- Know the business aspect even if you do it on the internet, making money is something the IRS is a bit of a skeptic on. You must be aware of what you need to do to report the earnings. If you are in the area, a visit to the local business center for small businesses may be in order. They will usually provide the help you need.
- Test, adapt, and learn Try different monetizations: The first one you try might not be the best one. Do not be scared to test various options (and take things slow) until you figure out the best solution for your needs and your customers.
Conclusion
As you try to find the right monetization model take note of the things that work for your brand and your members. Don't force it. The process of monetizing needs to be handled with care, and without risking customers' loyalty, or damaging the user experience of the product.
If you're looking for an effective way to build a member-led expansion business, then join us upon Mighty! The community can be monetized through or courses, as well as content and live activities. And you can try it free in 14 days!