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.