Making money on things ‘you can’t make money with’

One of the challenges of the Web/new media/social media/etc. is: how do you monetize it? If content wants to be free, social media activity is “junky,” user-created content is a scary wildcard and advertising is in a hole that (perhaps) isn’t coming back, how do next-generation content makers and distributors make a buck?

In the news and on the blogs in recent days are some encouraging examples of the tides perhaps turning:

  • First comes news from YouTube on plans to better monetize viral videos – those quirky, seemingly less than commercially-viable clips that seem to spring up out of nowhere to instantly garner tens of millions of views. That’s an audience that rivals network TV, yet has largely gone un-monetized because the Google-owned YouTube was worried about placing ads against this odd video fare. But earlier this year, it began placing ads on content from trusted partners. It’s now trying to take its decision-making more real-time, deciding on the fly if a hot new video is a candidate for advertising. The end result: the number of YouTube videos with ads on them has tripled in the past year, according to Google, and the numbers will only grow — as will revenues. This will impact not only the Web video market, but cable and IPTV as well as those platforms come to terms with the potential of online, user-created content.
  • Can ad-supported, “jukebox-in-the-sky” music streaming services make money in a world dominated by pay-per-download iTunes? Hot music service Spotify is now making more money for record label partner Universal than iTunes — at least in Sweden. Spotify’s royalty payments to Universal are funded largely by the advertising-supported free version of the streaming music service along with premium offers that let users pay to remove the ads. With Rhapsody and other streaming services teed up to join the iPhone app party (pending, precariously, Apple’s approval), the online and mobile music game is poised for a shakeup.
  • Those big red video-dispensing boxes you see in grocery stores, aptly named Redbox, are shaking up content distribution monetization as well. Users can get their videos from the machines for just a $1 a day, cutting into Blockbuster and pay-per-view revenue models. Today, Paramount said it would begin testing the service for distributing its movies, joining Sony and Lionsgate in testing new channels and price points for video distribution.
  • Finally, marketing guru Seth Godin this week had an interesting on how marketers and advertisers can better take advantage of what he calls “the billions of micromarkets” for content that have emerged online. In the 20th century, marketers paid a fortune for ads and ads worked because their was a shortage of outlets and consumer attention. The Internet, he writes “has done something wacky to this situation. It has created a surplus of attention. Ads go unsold. People are spending hours on YouTube or Twitter or Facebook or other sites and not spending their attention on ads, because the ads are either absent or not worth watching.” The answer, he says, is already here and growing every day in the form of  “hyperlocal, hyperspecialized, hyperrelevant” online and mobile content. The challenge will be for advertisers and marketers to figure out how to tap these emering micromarkets. “Right now, there’s no easy way for a marketer to conceptualize that effort, never mind execute it, though it’s surely coming.” And with it, another monetization model for content producers and distributors.

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