Evolving Monetization
The promise of a free market economy is that you, the lucky consumer, get to spend money on the things you value. And in most cases, the more you use or value something, the more you pay. Obsessed with sending Snapchats of every hipster bike you encounter on the road? You’re probably going to need to upgrade that data plan. Enjoy living in SF? Hope you’re cool parting with a chunky check every month. Want to eat another Doritos Locos Taco? Better shell out another buckeroo-fifty.
Most of the time, this is as it should be. If next week McDonald’s comes out with a Kettle-Chip-McCrunch (salt-and-pepper style) and suddenly, Taco Bell is a ghost town while the lines outside MacDonalds start resembling Snake-game all-time-high-score territory, then this is how the market has spoken. Doritos Locos Tacos couldn’t cut it in the hearts and stomachs of the consumer, so we shouldn’t shed too wet a tear when it suddenly vanishes in the middle of the night, that nacho cheesier exterior never to be seen again.
But hold up. What if it’s not so simple? What if there were a small but fiercely devoted group of Doritos Locos Tacos lovers? What if for those folks, Doritos Locos Tacos was their holy grail of food, and they would gladly pay $5, $10, or even $25 for a single Dorito Loco Taco? What if, when you tallied up all those people and all the times they’d buy a Dorito Loco Taco and multiplied that by the price they’d be willing to pay, you’d discover that Doritos Locos Tacos was actually a handsome business for Taco Bell? Then it would seem like kind of a shame if Taco Bell struck the item off all their menus.
It would seem like a mistake. An oversight where value was lost because of incomplete information.
This was precisely how I felt when the TV show Veronica Mars was cancelled in 2007 after three seasons. I loved that show. The friend who recommended it to me called Season One “one of the most perfect examples of a season of television ever to exist,” which felt pretty spot on to me. It stars a sassy, tough and nail-sharp Kristen Bell in the midst of a dark and twisted web of high-school dysfunction, class struggles, and murder. It’s not for everyone, but it was for me and many of my friends. We would’ve gladly voted with our dollars to see what became of Veronica and Logan. But there was nothing we could do. And so Veronica Mars went off the air, and I was left with the sense that somehow, someway, the monetization model had failed us.
Fast forward a few years, and the Veronica Mars story went to have a happy ending—it became one of the most successful Kickstarter projects to date, with over $5 million funded by over 90,000 fans like my friends and myself—enough to greenlight a movie deal. In a similar vein, the critically-acclaimed-but-ultimately-cancelled Arrested Development was also given a second breath of life under the subscription-based model of Netflix.
We are coming into an era where, due to increased transparency and better information flow, new business models can allow a greater diversity of goods, services and content to exist.
Kickstarter is one of the coolest examples of this—a platform that gives people a way to gather support and funding before embarking on potentially high-risk projects. Quirky is another example, where people can submit ideas for inventions that get vetted by the public before being turned into reality. Both of those services provide a way to validate an idea before investing too much time and money into it. How many incredible new things will become a reality as a result of these models? More than that—how many new ideas will be tried?
In the field of gaming, similar innovations in monetization abound. In the past, if you and I wanted to play PacMan at home, we’d each pay say, $20, for a copy of the game. Let’s say you played for a day and decided that a big yellow dot eating smaller dots was just too cannabalistic for your liking. Let’s say that I began playing every night for hours and was so into the game I began entering tournaments and was eventually crowned PacMaster (with a cash prize of $1,000,000). It would seem that you overpaid for the amount of entertainment you got, while I made away with a deal of a lifetime. In neither case was there a fair exchange of money for value.
Today, more and more casual games are turning to the free-to-play model to tackle the problem of how to best correlate value with revenue.
The way it works is that games are free to enjoy at a basic level, but players who play a lot, would rather value money over time, or who want to enhance their gameplay with more options can choose to pay. The principle here is that the more you love (and therefore play) a game, the more the game can monetize from you, whereas casual players pay nothing. This allows a much smaller number of people to financially support a game for a much wider audience while still being highly profitable. It’s not a perfect system, of course, but it’s been industry-changing. In the Apple App Store today, 25 of the 30 top-grossing apps use this free-to-play model.
Where else can such evolutions be occurring? Every other week, there is an article about the death of high-quality journalism. Is the problem that we no longer value high-quality journalism, or that the business model simply needs to change? The latter seems more likely (and happily, more tractable). How about publishing? Or music? (Already, Trent Reznor and Radiohead, among a growing number of musicians, are experimenting by giving away their music for free.)
Technology can help us close feedback loops faster and more efficiently than ever before, and enable direct connections between businesses and fans. All this makes me hopeful that we are getting ever closer to a world that abides by the true meaning of value for money.
