The Business Pursuit

by the way…

patriciahandschiegel:

…on the topic of monetization…

How things are monetized on information delivery and communications platforms has historically been different, entirely tied to specific platform and service. The internet as a platform combines these two environments in one, the only platform on either side to do so to date with exception to radio, which did allow it but not to the full robust functionality and capability the internet can.

In the communications service environment (landline/PSTN and cellular platform), advertisement was rarely (if never) tolerated by users. It’s very hard to stick an ad before, during or after a conversation, which is what communications platforms enable. Therefore, communications platforms have been traditionally monetized this way:

1. Subscription - Users pay a fee to gain access to the service — i.e. your phone bill

2. Value added services — Service providers then offer a range of additional, optional services at an additional cost. Users choose to add certain useful services to their experience by choice. Voice mail and texting is an example of this. ‘Unlimited’ use of a value added service is in reality just this cost baked into a fee that is mutually suitable for the communications service provider and the user. The user still pays.

In an information delivery environment, monetization is different. Users tolerate (if not expect) advertisement, however, historically information delivery can not adequately meet the reader’s interest/demands regarding information on ad revenue alone. It’s too volatile of a market, not enough of it, etc. This is why most information delivery (but not all) is monetized like this:

1. Subscription — Users pay a fee

2. Ad revenue - Information is then monetized by advertisements, provided in tandem with the information that the user seeks.

Because the internet combines dual platform environments into one, there’s some blurring of the lines now between each. This will likely cease versus grow as the division of the two environment shifts, evolves and increases and users use the internet in these very different, unique ways. But, in general these are the models that have existed, thrived, and survived in platform business on either side since the invention of the earliest of platforms, such as radio and the printing press. These models have survived despite multiple disruptions and new innovations since. But the same can be said for all basic business truisms - the business, the world, and all kinds of other factors may change, but the basics of how business is done has not and will not. And so it’ll likely be with the internet.

It’s also very worth noting that scalability in these two environments is very different. That’s why the largest newspaper in the country (Wall Street Journal) has a million subscribers, while the largest telephone carrier (Verizon) has 70.8 million. A social network, which is essentially a communications provider at its core functionality, is able to grow into billions of users because it is not sitting on a legacy platform, and therefore isn’t limited in its reach. Which you can imagine makes a social network potentially interesting to a legacy telco company, particularly because voice phone calls over the internet is not just when scenario but soon will be. Even though the telcos are who own the internet’s infrastructure, and already have huge user bases in terms of combined offerings they can migrate internet-based services to, they’re limited within U.S. borders and therefore, the pre-canned international user base that a site like Facebook might offer is pretty sexy. All that would need to happen then is for the telco to shift and start to offer what it does via legacy platforms (like cable TV content, mobile and landline/PSTN) via the internet to all those billions of users and global position could be complete. It’s a little more complicated than this but exactly why it’d be wiser for Facebook to ditch the user generated ‘sharing’ thing it has going on and make a hard play to be a carrier.

I’ve posted a few things on this in the past that are similar to the above, but here it is again so that those interested in the topic don’t have to go digging through archives to read.

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