Thoughts on monetizing online communities

November 18th, 2008 • 13 comments Social Media

These are random and slightly haphazard, so bear with me.

I’ve been part of a few discussions the last few weeks that have resulted into me going back home with the ultimate question in mind:  how do you monetize a community? Or rather – can a community even be monetized?
Everyone is trying to do this – from our clients to startups and even Facebook (did you see that Facebook’s internal evaluation went down to $4Billion from the earlier estimation of $12.5 Billion?)

The only successful case-study that I can think of is Threadless.com. They have nailed the revenue model and the community aspect both – a feat very difficult to achieve in today’s web world. Also, they have done so without really relying on “Advertsing” or “subscription” (the most commonly resorted to rev. models for communities)
I have a theory as to why they are so successful:  threadless.com set the expectations from their community from the very beginning.

Threadless was in the business of selling T-Shirts that people will want to buy. That’s it. The way they find out what people will want to buy is by soliciting designs and having others vote on them which has resulted into a strong community around the core proposition. (Which, btw is not revolutionary – this is how traditionally communities have formed around products, movies, stores etc. – The expectation is always set) In these cases, communities may also stand for “fans”

When I look at some of the recent start-ups and existing networks,  – it clearly comes off as these sites were started to 1) build a community first and  2) figure out a rev. model then.
The risk these companies run with such a model is that the expectation for the community is already set: the community already believes that this is a free service and they begin to conform/ expect and fall in love with that frame of reference.
Once you try to change that frame of reference, you risk uspetting or even losing your community or your fans. And rightfully so – because you are trying to change the core product that the community first fell in love with.

Which is why, it only took Threadless 3 years to make profit and neither of the companies stated above are even breaking even yet.

Which is also why, I think Opensource and crowdsoucring and “Free” are the domains of companies that already have money and are not particularly expecting to see a return on investment. I also think Opensource is a fantastic domain, and possibly, should become the only domain for social good/ social design and social causes. When the collective agenda is to ultimately “do good” – concepts like open source and crowdsourcing are not only incredibly useful, but also cost-effective.

However, for a first-time entrepreneur (like majority of cases) I’m not convinced that Opensource or even “community” is a way to go. While having a community of supporters is incredibly instrumental for any new business, I’m not convinced that this community will convert into paying customers unless the expectation is set at the very beginning.

And lastly, for corporations and clients – I think every established company or organization already has a built-in community. The job of social media/ web is to bring together this community under one umbrella (or at the very least, be findable when they come looking for you) and treat them well and continue the relationship.

To Bombay we will go!

November 11th, 2008 • 4 comments On my mind...

Wheeeee!!!! I am coming home after a long 3.5 years. I just booked my tickets to Bombay from Dec 20th – Dec 30th. Yes, its ten days only but even then I’m psyched and it just means that I’m going to be doing very little sleeping.

I’d love to meet and make some new friends while I’m there and if you of you fancy a coffee or a drink with me, I’d be much obliged

Also, as I mentioned -I haven’t been home in a long time, so I have to re-introduce myself to this city and get to know it again. So any recommendations on things to do, places to visit, people to meet and places to eat at will be very much appreciated.

This year was a double whammy – I’ll be spending Thanksgiving in Mexico with my closest girl friends and then Christmas in India with family, old friends and new friends.