Monetizing Something Free

It seems like everyone is using Twitter these days.  Celebrities, news anchors, even my grandmother is sending tweets. According to Wired magazine, Twitter expects to have 25 million active users by the end of 2009.

How did Twitter grow so big, so fast ?  I attribute their growth in part to the Application Programming Interface  (API) that they’ve made available to developers.  The API gives developers a set of commands that they can use to work with Twitter.  By providing a set of easy to use “hooks” for Twitter, they’ve allowed developers throughout the world the ability to integrate their own websites with Twitter (and subsequently any other website that integrates with Twitter, like Facebook).

We’ve written several integration scripts for clients.   Our favorite is to utilize Twitter to notify our client’s followers when new activity occurs – for example when a new event is added to their website.  More specifically, we take the event title and insert it into a pre-written tweet (randomly chosen), then parse the entire Tweet down to 140 characters.  Our client’s followers on Twitter receive the notification, with a link back to the client’s website (the all important “call to action”).  The goal is to use Twitter for its ideal purpose, as a permission based communication tool.

Twitter’s API has been both a blessing, and a curse.  It has been instrumental in making Twitter one of the largest and fastest growing social network platforms.  It has created a sub-economy around Twitter, creating companies whose sole focus is to build tools for Twitter.  But it has also dramatically inhibited Twitter’s ability to monetize its own user base.

This is not an uncommon problem with viral / social projects.  When you develop something with an eye towards giving users what they really want, monetizing methods are usually forgotten.  Companies are so focused on user acquisition, that they forget to (or worse yet are afraid to) implement revenue streams.  When was the last time you heard a user say “You know what Twitter really needs?  Advertising!”.  Probably never.  The bottom line is once you’ve given something away for free, it is extremely difficult to charge for it.

So what can you do if you find yourself in a similar situation ? Thankfully there are solutions!

  • Create advanced features, and charge a nominal fee.  You’ll have to keep the feature set of the free product the same (NEVER try to eliminate features … your loyal advocates will evaporate).
  • Offer advanced usage to partners for a fee.
  • Become your own partner.  In the case of Twitter, they should (silently) create a company that develops programs and sites for the Twitter platform for a fee.  This company could be a “preferred partner”, and enjoy cross marketing with the parent company.
  • Sell White Label versions.  Create revenue by licensing and supporting your technology.
  • Sell market research data.  Monetize by collecting and selling anonymous market research.  Of course, always respect user privacy.
  • Solicited donations.  You’d be surprised how many loyal advocates will reach into their pockets to support a service they use, know, and trust.

As you can see, there is always a way to monetize a user base … even one that is predisposed to viewing your product / service as free.

With foresight, you can make this process of monetizing your site much easier by establishing limitations on free services from the beginning.  Whether it be for a limited time (“free six month membership”), or limited usage (Google allows 200,000 calls to it’s mapping technology per day per website), you can always expand these limitations.  No one is going to complain that they are getting more features for the same cost.

Keep an eye out – I’ll be going over tricks for successful marketing through Twitter in future posts.

Coinstar Attracting Customers Through “Give Marketing”

Coinstar, the green automated coin counting and change conversion machines that you find at most convenience stores, is cleverly using Give Marketing to increase customer awareness.

coinstar machine


Just visit select Coinstar Centers, and you’ll be able to choose from one of a handful of charity where you can donate your loose change.  You’ll receive a receipt for your taxes, and the charity will receive the full amount of your contribution (these charitable transactions are processed sans the usual Coinstar 8.9% processing fee).

Only certain “select” charities can receive donations (Coinstar has their own internal selection criteria), and this feature is only available at certain Coinstar Center locations (presumably those with newer machines).

With this program the benefits for the charity are clear.  The main benefit for Coinstar is that they are opening up their service to new customers by aligning themselves with pre-established groups of potential customers.

For a Give Marketing campaign, Coinstar has made a great start.  But they still have left quite a bit on the table from a marketing perspective.

Coinstar should team up with these charities to heavily promote their charitable program through the charity’s normal channels.  Every successful charity has a method in which they communicate with their advocates.  Coinstar needs to embed themselves in these communications.

Coinstar should cross market with the charity.  Provide the charity with prepackaged marketing material (creative for posters, direct mail pieces, email newsletters, sample copy, co-branded widgets).  Offer to participate in co-operative traditional marketing (local TV, newspaper, in-store advertising, etc.).  Arrange for testimonials from the charity’s advocates.  Broker deals to promote the charity through the stores where the Coinstar Centers are located.

All of these cross marketing activities can be reasonably contractually obligatory; after all, Coinstar is providing the charity with something of value.

The trick to making these programs work (as I’ve mentioned before) is to make it easy for the partner to participate.  The harder it is for the partner to implement, the harder it will be for you.

If you are looking at creating a similar program, think small.  Limit the program to only a select few “early adopters” (I also like the term “charter members”).  Then create a waiting list for any new charities who want to join the program.

[A quick note, Coinstar only got part of this right.  They’ve closed off their program to new charities, offering them a reduced transaction rate instead.  That’s a great way to alienate potential advocates.  A better solution would be to explain that the program is in a limited “beta” phase, and that charities who meet the following critieria (list criteria with explanations of why those criteria exist) will be allowed to sign up for the waiting list. ]



The Brilliance Of The Secret Link

To work properly, special offers have to be … well, … special.  Ideally they are time sensitive (“And if you call in the next 10 minutes, we’ll throw in the Slap N’ Chop FREE”), they have to be of enough value to get the prospect to act, and ideally they should have an illusion of exclusivity (“Only the first 20 callers will get this special deal”).

One of the challenges of online marketing is where do you deliver these offers?  After the sale – either in an email or a confirmation web page – will help increase sales from existing customers.  Godaddy does a masterful job of offering discounts for extending subscription period (“buy for 2 years and save 20%”) just before you make your purchase – increasing their per cart revenue.

I recently came across a web site that uses a secret link to deliver a special offer.  Tucked subtly amongst a series of text links at the bottom of the home page is this “secret link”.
secret website image link

Just the mention of something secret gets most people’s attention.

Where does it go ?   It links to this secret landing page with a special offer to save 20% :
secret website image landing page

This call to action is brilliant in its simplicity.  Without spending a lot on tracking technology, they’ve found a way to reward those people who’ve spent enough time on the site to notice the “secret link”.  And if you presume that the longer someone stays on your site, the more interested they are in your product or service (and the “warmer” the lead they are), then it is a great way to move them from a prospect to a customer.

Why not just offer a discount up front, you may ask ?  Quite frankly, it diminishes the value of what you have to offer.  You need to firmly establish the value – in terms of dollars as well as worth – of your products and services.  Offering the discount right off the bat undermines that.

How do you take this idea to the next level ?  With a little creative programming, you could dynamically insert the “secret link” only after the prospect had visited the site for X many minutes, or perhaps returned to the site Y many times.  While the example above has been executed in a very simple manner, your campaign doesn’t have to be.