360 views on tech #44: Six ways new social companies will monetize
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Six ways new social companies will monetize
On social platforms, the traditional ad model has been dominant for decades. Twitter, Facebook, Instagram or Youtube, you name it. Over the years, these giants have built sophisticated tools in order to collect extensive amounts of data designed for targeted ads. As a result, this model is highly profitable today — but Rome wasn’t built in a day.
What about new players in the social scene, who haven’t scaled enough to achieve user penetration and thus lack data for sufficient ad revenue? Suffice to say, new monetization models have emerged, often combined with ads or other revenue streams. Established social companies have followed their example ever since.
Here’s an overview of six promising methods:
1. VIP membership subscriptions for exclusive content
This can be implemented in two ways:
- Direct subscriptions to the platform, e.g. Weibo launched VIP memberships in 2012; Youtube introduced its first ad-free premium plan in 2014.
- Subscriptions to a specific creator, with a take rate from the platform
Although the first path has been established since the 2010s, creator-specific subscription models have been blooming recently.
How does it work ? Users are incentivized to identify themselves into different tiers based on their level of engagement. Superfans are willing to pay for exclusive content or interact with the creator. This creates a harmonized community, where users identify and interact easier with each other. User stickiness is also strengthened as creators are more likely to release authentic content inside exclusive communities. This is said to be particularly important for Gen Z, who crave connection and relatability.
However, this strategy’s success depends on the creator’s popularity. On one hand, first-timers may struggle to build a solid community because their content’s reach is narrower. On the other, established creators may disintermediate and set up their own infrastructure and community.
2. Commerce: Platforms that help creators sell products
Social platforms have become intrinsically connected to e-commerce sales funnels. For instance, Tiktok’s partnership with Shopify allows merchants to create marketing campaigns and track analytics on the video app from their Shopify accounts.
Incentives align when a creator is recognized in their particular product category. The platform takes a cut, the brand makes a sale, the creator monetizes their expertise, and the user purchases products with more conviction.
3. Virtual live experiences
Similar to VIP subscriptions, virtual live experiences give followers access to exclusive content, but are usually one-time purchases. Content can range from ticketed digital shows to one-on-ones. As anyone in the world can attend with a smartphone, platforms can capitalize on network effects while maintaining a highly engaged community.
4. Interest-based paid communities
These companies connect users with people who have similar interests or challenges, often in fields such as mental health, career guidance or fitness. The platforms act as a matchmaker, connecting users seeking intimacy and connection with top creators and experts in the community . Services often include curricula to assist the user’s skill development step by step.
Such memberships are usually cheaper than one-on-one alternatives, however they still remain expensive, ranging from $50 to several hundred dollars per month.
5. Digital goods and in-app currencies
In-app purchases are widely popular in China, where it’s common for fans to offer creators digital goods that are convertible to cash. In Europe and the US, they are still quite rare except in gaming, where you can purchase premium customization items or in-platform upgrades.
Beyond gaming, an example of virtual goods would be the Boosts offered by dating apps like Tinder which boost the user’s profile to increase the number of matches.
6. Tipping, donations, and microtransactions
Tipping allows viewers to reward creators, usually live streamers, with payments made through the platform where there is a take rate.
Since Twitch launched tipping in 2017, this type of monetization has spread throughout multiple platforms (Youtube, Twitter…) via common P2P applications like PayPal. And because tipping is most effective when it’s live, disintermediation from the platform is unlikely. Peer-pressure and fear of missing out encourage viewers to remain, which results in even more tips.
For creators, logically, this source of revenue can be difficult to predict. This is why they usually combine tips with other forms of monetization in order to stabilize their income.
🧑💻 Top readings
- FTX, the latest domino to fall
- Top Questions VCs ask during pitch meetings
- Where Slush alumni are now
- When life gives you lemons, write better error messages
- This week in Apps, especially Twitter
💸 Money matters
- Malt, freelance consulting marketplace, raised €60M, from Bpifrance Large Venture, Eurazeo and Goldman Sachs.
- MyTraffic, leveraging traffic data to unlock the full potential of retailers, raised €30M, from Axa Venture Partners, Kernel Investissements and Alven.
- Photoroom, enabling studio-quality photos on smartphones, raised €19M from Balderton Capital, Adjacent and business angels.
- Faume, second-hand fashion marketplace builder, raised €5M from Daphni and Bpifrance.
- Hummink, developing nanometric 3D printing, raised €3.5M from Elaia, Sensinnovat, PSL Innovation Fund and Beeyond.
😂 Meme of the week
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