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Slide 1: Monetizing the Net: Creating Profits through Anything but Advertising! Eric K. Clemons clemons@wharton.upenn.edu Information Strategy & Economics The Wharton School 17 June 2008 Eric K. Clemons © June 2008 1
Slide 2: Context Why must all content be free? Why must all revenue from the ‘net be based on advertising? “Planet of the Advertisers” And the extinction of the Irish Red Elk The search for alternative revenue models And the challenges this will pose to strategy, management, and systems 2
Slide 3: Context All this hype: Will we still need advertising? Will social networks replace email? Will social networks replace our stores? Our sales and service agents? Our markets or exchanges or EDI or ... ? Will social networks replace our lives ... as in The Matrix Reloaded? Should we be in the web business instead of what we do now? Will everything be virtual? Or is all of this just silly? 3
Slide 4: Overview — what? Trying to force-fit the new into the old Old Media: Broadcast Bundled — free content, subsidized by advertising Monopoly / captive audience In contrast, ‘Net as a milieu, not a medium A medieval fair, not a movie theater Participatory Voluntary, and easy to exit 4
Slide 5: Overview — and why? Old media’s need to replace traditional advertising Grabbing on to the net Making the obvious mistakes And yet ... real possibilities, and not so real possibilities, exist 5
Slide 6: Advertising and the Net Surely not a marriage made in heaven Traditional media losing their viewers Traditional advertising losing its clout P&G needed something News Corp needed anything 6
Slide 7: Advertising and the Net More like a shotgun wedding Traditional media owners starting buying into web technologies And traditional advertisers looked for something … anything … that might work 7
Slide 8: Sources of Value from Net Numerous possible sources of value Perhaps these can be monetized? (1) Learning about preferences, individual or emerging societal preferences (2) Actually selling actual stuff (3) Actually selling virtual stuff (4) Revenues from content, games and experiences (5) Selling referrals from social network friends (6) Selling referrals from snooping (7) Selling referrals to mobile users 8
Slide 9: (1) Value from Observing Possibility One: Information about things from watching what we do on the net Appearance represents choice and represents investment of time, money, or both Therefore chosen appearance informs us 9
Slide 10: (1) Pretty Traditional But what are we learning that teaches about meatspace? From traditional to perfect, they paid to look this way! What surprises do we have here? 10
Slide 11: (1) What have we learned? All other things being equal, in virtual worlds: Large secondary sexual cues get attention Perfect bodily symmetry gets attention Perfect skin and perfect teeth get attention Hot tubbing and sailing confer status Casual sex is a good way to pass time When nothing else works, add wings and animal ears, symmetrical of course And if that does not help, take off your clothes, expose your large secondary sexual cues And this is somehow new or useful? 11
Slide 12: (1) What have we learned? Mini-disclaimer I’m actually using YouTube to assess emerging trends in viewer preferences We may all need to start paying more attention 12
Slide 13: (2) Value from Selling? Possibility 2 — Everybody knows we can sell actual stuff online 13
Slide 14: (2) Value from Selling? Possibility 2 — Everybody knows we can sell actual stuff online And it works especially well for long tail items So ... in case you need to wind two self-winding watches while you wear your third ... or you need to wind your mechanical watch by machine when you’re wearing both those automatics ... But no surprises ... 14
Slide 15: (2) Value from Selling? Can we sell actual stuff in a virtual store? Why even ask the question? 15
Slide 16: (3) Value from Selling? Can we sell virtual stuff in a virtual store? Virtual clothes for avatars? Colored virtual bubbles instead of Coke? But this is not big business! 16
Slide 17: (4) Value from the Virtual Experience Possibility 4 — direct revenues from the game itself (without the virtual store?) This can be a meet place outside meat space! Hot party … and they are actually dancing together! Subscriptions, rent and real estate sales, add-ons Finding photos got almost voyeuristically addictive 17
Slide 18: (4) Value from the Virtual Experience Can you charge for content or relationships? New York Times, Wall Street Journal Need for new revenue models! Jaron Lanier “Pay me for my content” And death threats 18
Slide 19: (5) Referrals and Value from Social Content Social content can have great value Piggybacking referrals 19
Slide 20: (5) Referrals and Value from Social Content Some companies have found a way to monetize this But tripadvisor had a unique relationship with hotels.com 20
Slide 21: (5) Referrals and Value from Social Content Most attempts to monetize referrals have been a disaster Invasions of privacy Spam And we are no longer captive viewers 21
Slide 22: (5) Referrals and Value from Social Content This will be done correctly eventually Social Search — Search engine in conjunction with a social network Where do my friends like to stay in Chicago, or like to eat in Montreal? Not invasions of privacy — friends, not a friend Not spam — when I ask for it, not when advertiser wants to pay for it 22
Slide 23: (6) Referrals and Value from Snooping? Google ads stuck into Google mail Based on the content of the email Based on the content of the attachment How will that look in the future? How will that look to an employer How naïve can you look? “Hire me and our attachments will be scanned by Google” “Yeah, that sounds creepy, but at least it’s free” 23
Slide 24: (7) Referrals and Value from Mobile Networking? The Great Unknown of mobile computing Are mobile network ads the most expensive form of spam? Are mobile ads the only ads we’ll ever really want? You’re in New York and Clark Terry is not sold out at the Blue Note tonight at 8! ... Great! Mido in Ardmore has a sale all week on stinky tofu and preserved durian ... Not so much ... 24
Slide 25: (7) Referrals and Value from Mobile Networking? The Big Three of Mobile Computing Relevant — I care, because of who I am and where I am Time sensitive — I care now Actionable — I can do something with this now 25
Slide 26: (7) Referrals and Value from Mobile Networking? The Great Generational Divide: “I get and answer 30 emails on Saturday night from the guys, even while dating” vs. “The only thing I wanted to hear on a Saturday night was not from the guys...” “I forwarded like 90 text messages when Heath Ledger died” vs. “Forwarded text is spam” “Like, Cone Day at Ben & Jerry. I texted all my friends” vs. “Forwarded commercial text is worse than spam” 26
Slide 27: Conclusions All that great new technology It would be a pity to pretend it’s no more than a new way to deliver television, newspapers, or one-to-one messages Or to think it’s just about ads It is going to enable online communities Voluntary, participatory And with all the behavioral norms of a community 27
Slide 28: Conclusions Watch for ... Monetizing the experience Monetizing community content Monetizing social search Mobile ads Augmented reality Beware of investments in ... Invasion of privacy, tailored spam And the monetization of snooping in general 28
Slide 29: Conclusions Build for observing ... Online behavioral trends Online reviews Behavior that correlates with reviews Relationship between reviews and revenues Beware of... Managing the content instead of managing the customers’ experience 29