Joe Marchese wrote a great piece in Online SPIN yesterday about Web 2.0 business models. Many of the companies he met with at the Web 2.0 Expo have business models that are dependent on advertising revenue. Yet, the prevalent thought amongst these companies is to not introduce advertising until their audience development is complete. The thinking is that advertising is so unwelcome by consumers that it will turn potential traffic away. So rather than risk losing a finicky audience member, Web 2.0 companies prefer to bring in the audience, get them hooked on their offerings, then introduce advertising later.
What Joe saw at the Expo is something we at the Postmaster Network see repeatedly during our discussions with Web 2.0 publishers. Many of these companies are more concerned with building audience than they are about developing a revenue model. MySpace was the first big Web 2.0 company to reap the rewards of this strategy, and many others, including YouTube, have followed. The basic premise from the entrepreneur’s perspective is to build a valuable tool and build audience, then sell to a big media company before you ever have to figure out the nagging revenue model question. Not a strategy for the faint of heart.
But, building in the revenue early is hard, especially when you are competing against so many sites that don’t. So, I’d like to suggest another strategy to consider. Adding email list rental and lead generation are two great ways to build in revenue early, without interfering with your audience development.
Why? Because these two activities – separately or in combination – can fit naturally into a site registration process. When they are done well (that is, targeted, relevant, valuable – the basics) the audience appreciates them as part of the experience.
In fact, we work with one partner that actually saw an increase in site registrations after implementing our offerings into the process. How’s that for value add?
Of course these strategies can be very intrusive, so you have to take care in the implementation or it will backfire on you. But a smart, well-integrated email and lead gen program means you no longer must choose between revenue and audience.