Are You Monetizing Too Early?
It’s great the Internet has leveled the playing field for writers, artists, and freelancers, opening up portals for their work to the eyes of (hopefully) thousands, hundreds of thousands, or even millions of readers. But this isn’t exactly helpful when even talented creatives are forced to struggle in an increasingly competitive market to find ways to monetize their craft. Or is it?
It’s tough competing with today’s click-hungry publishers (backed by a full-time SEO dude, loaded with ever-evolving tricks to push your work of art to the third page of Google results). These advertising-dependent publishers will do whatever it takes, armed with strategies to distribute their product rapidly and prolifically — even if it requires stretching the truth in a headline or overpromising on a service.
This tough environment leaves creatives trying to monetize prematurely, asking questions like these:
“How can I launch a subscription model?”
“Is it time to build and sell a course?”
“Should I use affiliate advertising programs or Google’s ad network?”
“Can I monetize my growing email list with an ebook?”
But what if we have it all backwards. What if, for creatives and entrepreneurs, the Internet’s steroid-injected word count growth has permanently altered the path to building a sustainable business model?
The user model
Many of today’s fast-growing companies reach billion-dollar valuations before they have a dollar of revenue — particularly those with user-based business models.
Remember that scene from Social Network where Facebook founders Mark Zuckerberg and Eduardo Saverin sat down with Napster founder and tech investor Sean Parker? Sean proceeded to babble about Silicon Valley parties, his paranoia about private detectives trying to steal your idea, and his skewed view of Naptster’s rise and fa — … rise.
“Hey, you know what? Settle this argument for us,” Eduardo started, picking Sean’s brain. “I say it’s time to start making money from The Facebook. But Mark doesn’t want advertising. Who’s right?”
Sean knew exactly where Mark was coming from.
“Well… Neither of you yet. The Facebook is cool. That’s what it’s got going for it. … You don’t want to ruin it with ads, because ads aren’t cool.”
“Exactly,” Mark interjected.
“It’s like you’re throwing the greatest party on campus, and someone’s saying it’s going to be over by 11:00,” Sean continued. “… You don’t even know what the thing is yet — how big it can get, how far it can go. This is no time to take your chips down.”
But then Sean dropped a bomb, setting a new precedent with perspective even Zuckerberg hadn’t grasped yet.
“A million dollars isn’t cool. You know what’s cool? A billion dollars.”
Sure, this script is pulled from a movie — not an actual interview. But Zuck undoubtedly had a few of these conversations in Facebook’s early days given how unorthodox a no-revenue business model was at the time. A few years after the dotcom bubble burst, revenue-lacking superficial Internet companies were no longer hot stuff.
But, as the next decade would prove, no matter how crazy the Napster founder was and how young and inexperienced soon-to-be-billionaire Zuck was, the pair’s interpretation of just how valuable loyal users were was spot on.
The long game
When readers, an audience, and fans are just a click away, delivering as much value as possible without scrambling to profit may be the smartest move an aspiring entrepreneur can make.
Think about it. By far, the most important rule in building an audience on the Internet is authenticity. And how can you be authentic? Provide value. Tons of indisputable value. But how can followers see the value if creatives get too focused on getting their investment back immediately?
All value is diluted as soon as entrepreneurs impatiently try to get their return on investment too early. Passion begins to appear watered down when the artist shows signs she isn’t confident in the long game.
If some companies can wait to monetize their business until after they have millions of users, why do creatives feel a need to monetize their passion even before they have 1,000 subscribers on their email list? Why do entrepreneurs seek lucrative profits so early?
Invest in the long game. Deliver so much value that, thanks to the Internet, prospective customers will be enthusiastic to follow you, share your work, and (eventually) support your business.
Breaking even
Is your craft impossible without revenue? Maybe you build products that need physical materials. Maybe you have to invest incredible hours into your work and there’s no way to survive without cash flow.
Fortunately, there’s another model to building an audience than the no-revenue, all-value model Facebook started with. It’s the break-even model.
Forfeiting profit today in order to deliver indisputable value and grow your following doesn’t always mean giving away your work. It doesn’t even mean selling products at the cost of the materials, or offering deep discounts.
Pour your heart into it. Value your time. Charge money if you have to. You deserve a salary if your craft makes you sweat.
But don’t hold an ounce back. Deliver a product beyond what your customers would expect. Let your words breathe fire into hearts. Light fireworks with your art. Make your fans 100% certain every penny of their hard-earned money was well spent.
On financial statements, this would mean your business is teetering between profits and losses every quarter, hovering around break-even. Your salary is taken care of in the sales, general, and administrative expenses portion of the income statement. Your product’s costs are accounted for on the cost of goods sold line. Even your overhead is taken care of.
In the break-even model, revenue covers these items.
But here’s where the profitable business and the break-even business part ways. With the break-even business, there’s no fat bottom line. All your revenue is poured back into your business as you ensure you deliver as much value as you possibly can.
As you invest every dollar of profit back into your business and build a strategy based on the long game, customers will stick around. Your audience will grow.
Then… one day five years from now, after you’ve showed up consistently and built trust in a world where everyone wants to take more than they give, you’ll have intangible brand value — a living, breathing asset where your inputs will be leveraged to produce outsized gains.
All this from an investment in the long game you made years ago when everyone else was working on monetizing their half-ass ebook.
