Sunday, August 12, 2012

Startup monetization strategy

If I'm really stumped doing my startup, it's because I haven't been able to figure out a monetization strategy. Yes, I do know that advertising is a straight forward option and so is charging customers directly. However, I don't find anything creative about these approaches. Let's talk about advertising. I personally hate ads. I don't believe in the advertising model, mostly because, how badly the plethora of ads have killed the actual experience that they supposedly support. Be it, web, TV or even mobile. Plus, everyone does advertising. It's a well refined process followed by millions. I am also ignorant of the advertising model, since I don't like it, I haven't explored the field much. 

So, what are the alternatives. One straight forward approach is to charge customers. That's again direct selling and nothing to brag about. For a mobile app, it's pretty straight forward - you really have a couple of price points to play around with. A basic knowledge of statistics and a bit of playing around will help you hone in the price point and sell your product. I'm not belittling this approach, but implying that it's a well trodden path and it's not that hard to figure out a price point.

Another alternative is the Kickstarter model. Demonstrate that your product will have value, ask for people to financially back the process of creation rather than pay for what's created. Definitely innovative and disruptive.  There are a lot of successes stemming out of the Kicstarter model, app.net being the latest. I personally like this model. For one, it breaks almost all existing norms of monetization. Two, it let's you be open and vocal about almost all of your policies and decisions. Three,  it's the most effective way to engage users with your product. 

Yet another alternative, mostly for products built around the social theme is to enable selling within the group. Something like an ebay just for your group. While selling on ebay is feasible and it works, selling within a known group has the greatest advantage of trust.  There is practically no need for a third party to 'guarantee' any transaction. It's a true democratic way of doing commerce, within the trusted group, and with some thoughts and guidelines,this can be made to scale as well. 

While I'm still stumped figuring out what's a better monetization strategy, I'm almost certain not to follow the advertising path. Sometimes knowing what not to do is more valuable than knowing what to do.

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