Monetizing the Alive Web (or What We Can Learn from World of Warcraft)

For the past few weeks, the biggest topic on the web was the emerging “Alive Web” stemming from the success of new services such as Yobongo, Turntable.fm, and Namesake.

For some great background on the market, challenges, and what people are doing about it you can check out my posts here and here.  However, for today, I want to discuss something that’s been entirely untouched in the conversation about the “Alive Web” going on today:

Monetization.

It all started with this tweet:

At the time, @Nabeel was discussing ways to prevent burn out – but at the same time – identified the unique opportunity for monetization available for Alive Web startups.

On a high-level, engagement on the real-time web is exceptionally different from traditional websites.  For example, compare a normal user of Facebook to a normal experience on Namesake:

  • Facebook: User logs into their account, quickly checks their news feed, potentially feeds their cow in Farmville and then logs out. Short time on site, but will be repeated multiple times per day
  • Namesake: User logs into their account and jumps onto the most recent discussion with Om or Caterina.  Text flies by, conversation is flowing really quickly, 40 minutes in and the conversation starts to wane.  When the conversation ends, some users churn out with others finding a new conversation to hop onto.  Long periods of intense engagement.  Less repeat visits.

The main difference is that the real-time web is characterized by short busts of super engaged attention while the traditional web is focused on short periods of engagement over longer periods of time.

In the traditional web, this can be seen in the way businesses model their customers:

Revenue per Customer = Lifetime Value of a Customer – Cost of Acquisition

The assumption being that, on average, if you acquire a quality customer – they will stay with you for a period of time that will enable the business to generate more revenue than it cost to acquire them.  For the Facebook example above, this includes revenue from ads, deals, and credits that will add up over the lifetime you stay with Facebook.

In the real-time web, I’d argue this equation is less directly relevant for two reasons:

  1. User engagement is much higher meaning they’re willing to pay for goods that enhance their experience and keep the good times rolling.
  2. Because the experience is so intense, users will come back less often – and part of the trick will be hooks that re-engage users – but that cost should be rolled into the total cost of customer acquisition

On point 1 – just look at the crazy users on Turntable FM in the coding room – DJ or competitive users would pay real money for extra points, special avatars or virtual goods, or even just to get on stage.

On point 2 – check out Namesake’s awesome conversations with tech and mainstream celebrities such as Om, Caterina, or Namesake Founder Brian Nouegaurd.  Those events drive users to re-engage with the site, but have a cost associated with them (even if its not dollar-based today – its time and work-based for the team.)

Some of these new revenue streams include:

1. Subscriptions

If you can create an exclusive enough real-time experience, users will pay for the right to access this special content.  For example, if you had a service that offered exclusive small performances from bands – you could charge monthly for access.  You can see this today in World of Warcraft or even with subscription cable.

2. Virtual Goods, Virtual Currency

When time’s are good, users will do anything to continue the experience – including paying cash for access or goods that enhance the overall experience.

3. Premium Subscription Feature Upgrades

This is especially true in the Apple Mobile world where users don’t even need their credit card to start making purchases.  Two clicks and you have a group of new features that makes the users experience that much better.

Overall, what the Alive Web really represents is an experience that users will pay for.  Because its real-time and has a very high level of engagement, users will be willing to pay for access and special features that enhance and extend the good feelings.

The key is what I want to address in my next post – fostering utility to increase the stickiness of the product.  Much like Zynga has Facebook so do Alive Web products need some light-weight companion utility that allow users to stop by for brief periods of time with the promise of receiving a minimum level of value.

(The example would every time I log-in to my Facebook account, I know that I will get some value from the newsfeed)

Once that user has a reason to consistently come back, it becomes much easier to upsell him into the more rich alive web experience – which is far easier to monetize.

** These are from my observations of the consumer web services as a user.  I don’t have any insight or data beyond my usage as a consumer and lover of the products listed above . For disclosure, we’re also investors in Yobongo and I work with Om at True Ventures. **

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About adam

I work for True Ventures, an early-stage venture capital fund with offices in Northern Virginia, San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth. View all posts by adam →