Monetization means you have nothing to sell

Summary:

Monetization is a made-up word suggesting that people can earn cash on the World Wide Web without delivering products or services.

Monetization

The image of cash pouring from a website aptly depicts the fantasy and reality of monetization.

Monetization is a brilliant concept. Too bad it means nothing and is has no value. Since the beginning of time, commerce involved the exchange of goods and/or services, sometimes combined with debt financing related to that. Governments and religions had their roles, but it was pretty simple until the Internet came along. Yes, speculation has always been part of the mix, but monetization is a new thing indeed.

I think monetizing — as opposed to selling — is rooted in the web’s first glorious entrepreneurial wave in the late 1990s. Investors poured billions of dollars into every imaginable kind of Internet start-up company. On paper, or in their heads, all of them had something to sell. Many offered products to consumers. Most failed for a variety of reasons. A few got it right, like Amazon.com and Priceline.com. Others, sold “eyeballs” and “clicks” to their investors, promising to “own the space” in a particular industry or segment. For a brief and wondrous period, if you captured millions of eyeballs through investor-funded advertising and PR, you could go public and make a fortune reselling the potential of those eyeballs on the stock market. But, you had to do it before the emperor’s clothes came into full focus.

Those entrepreneurs had no time to build loyal, value-driven audiences by selling their ability (content). They had to quickly capture millions of early Internet users. Asking their audiences to pay would just slow everything down. Established publishers feared being left behind and offered their content for free. Later, Google became the web’s leading company by selling tons of advertising. Because Google dominates Internet advertising it makes sense for them to give away web-based applications. Precedents have been set. Internet users are not used to buying Internet content and tools. New companies have not tried to test their resolve.

Enter Web 2.0 and beyond. Advances in technology, combined with tremendous creativity, spurred hundreds of companies that have made the Internet hum with life and converge with televisions, phones, etc. They need to make money, want to make money, but few of them are selling anything.  Drum roll, please. So each of them is trying to figure out a “monetization strategy.”

Some of them ask for donations. Others want to deliver advertising in a way that won’t offend their audiences. Products that deliver as much satisfaction as Coca Cola, and are almost as common, are available for free to anyone, most notably Twitter and Facebook. Can their owners monetize them? We’ll see.

For companies starting out now, this lesson of Web 1.o and Web 2.0 should be clear.  If you develop something new and compelling, sell it.  Sell it for $1 or $2, but don’t give it away thinking that you can monetize once millions of people are hooked on your innovation.  Monetization is not real, it’s not even a word. Buying and selling are.

Leave a Comment

Donald Wedington August 5, 2009, 8:33 pm

Totally on point! I cannot tell you how many people come to us to build them a Web site that will eventually have millions of users, “just like Facebook”, at which time they will be able to monetize the site.

This should be mandatory reading for all would be start-ups and internet entrepreneurs!

John Cannon July 27, 2009, 8:41 pm

John, Excellent article. You and my wife have the same wisdom when it comes to pricing.

A question for you. In the crazy Internet marketplace where so many people expect applications for free and so many well funded companies do give products away for free, what are some tips for the small business trying to make it out there?