One of the biggest challenges in operating a community-based web site also happens to be one of the age-old mysteries of the Internet: how can you monetize the site? You’ve got great content, and a growing base of members, but where is the cash? In this article, I’ll describe a rather unique method I patterned loosely after Priceline’s “name your own price” model.
Trust me when I say that up until this point, we had tried everything. We were running a massive community site, with over 65,000 active members. Our message boards were very targeted, and incredibly hyperactive, receiving over several thousand new posts each day (almost 100K new messages per month). Our ad servers were pumping out over 10M targeted ad impressions a month. We had a number of niche tools and other services as well, each of them aimed at enriching the experience of our users.
We were hellbent on not charging our members a mandatory membership fee, but we had to do something in order to break even.
I should point out that in this day and age, the landscape is a little different. Widespread user adoption of online services is present, and as long as you have (a) a viable market and (b) a product/service worth paying for, you stand a reasonable chance of having users open their wallets for you. However, this isn’t always the case. There are a lot of other factors involved.
What I am about to share with you is probably not as applicable to B2B communities, where revenues are driven primarily via transactions or regulated subscription fees. However, reliable ways to monetize P2P communities have historically been hard to come by.
We tried a variety of twists on the sponsorship and online ad models, but with mixed results. Unfortunately, it was right in the middle of an economic downturn, and sponsors were hard to come by. The online ad market had long since dried up as well. We tried experimenting with things such as CafePress.com, as well as a variety of affiliate programs, such as the ones offered by Amazon and Commission Junction. Our results were mixed.
Ad revenues are a good way to augment community revenues, but unless you are one of the top traffic gatherers on the net, they won’t cover all of your expenses. Trust me when I say that by and large, the only people getting “rich” off of Google AdSense ads are the folks at Google. As one venture capitalist told me the other day: “If an entrepreneur’s business model is predicated on Google AdSense, I quickly run the other direction.”
Then, it hit us. It hit us so hard that our skulls were ringing for a week. While we didn’t want to charge a mandatory fee to our members, there was nothing stopping us from charging a voluntary subscription fee. Thus, our Name Your Own Subscription (NYOS) program was born.
In the beginning, we simply asked our users to “name their own subscription” fee. If you could afford $5, great. If you could afford $25, even better! If you could afford $100, wonderful! And if you can’t afford to pay a fee, then don’t. The results were staggering. In the first year alone, we signed up roughly 1,000 paying members, and grew it incrementally beyond that. In the end, we built a nice recurring stream of revenue for that business.
We later evolved the program into a voluntary, but tiered program, using bronze, silver, and gold levels to denote pricepoints. Eventually, we evolved it even further, to where each of the levels had a 6 month, 1 year, and 2 year option. We used a special set of icons to denote membership status in our forums, as well as through other areas of the site. So, it was pretty easy to see who was a paid supporter and who wasn’t.
Now, I know that some of you are probably already making the comparisons to “charity” donations. However, that wasn’t the case at all.
First and foremost, our community members participated in our community to enrich their professional careers – therefore, the subscription fees to our community site were, by all accounts, a tax deductible professional expense!
Community sites have to diversify in order to survive. Ad revenues are generally not enough to sustain operations, much less growth. A combination of things such as subscription fees, ad fees, shopping cart sales and affiliate programs can provide a nice mix of revenues for a growing community site.
It is also important to point out that this subscription model has an added bonus side effect of increasing customer and member loyalty. Members realize that you need revenues in order to survive, but are generally grateful for not being “forced” into something. The acceptance rate of our NYOS program was so high, that we even had members paying for the subscriptions of those who could not afford it on their own. The lesson here is to never underestimate the value of building loyalty among your customers. Loyalty is an asset that can be leveraged for financial gain, provided it is treated respectfully and with a soft touch.