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Online Monetization: Beyond Advertising and into Microstransactions

Let me start by saying this: I firmly believe online advertising is and will continue to play an essential role in the economic ecosystem of the internet (so much so, that I am working at Lotame). With that said, is online advertising the only answer?

Arguably No.

Microtransactions: According to learnthat.com

Microtransactions Definition

Microtransactions are small transactions, perhaps of the order of a cent. They are being considered for digital content on the web (a magazine selling an article (unbundled) rather than an entire issue (bundled with additional information that may not be of interest to the consumer). This may then open up additional revenue streams for the content providers.

As new web services, application, or any website for that matter becomes available, the priority typically lies with the user base and generating lots of eyeballs. Once that user base has reached significant mass, the service can leverage the base and monetize.

So if a company like twitter were to offer subscription based premium services, they could, in theory, generate revenue from their loyal users. But what happens if they applied a micro transaction type revenue model? What if they generate revenues based on individual actions (using a feature of the service), or premium actions (using a premium feature of the service), and charge users a fraction of a penny for the action. Granted there would have to be a standardized pay-pal like model behind this type of system, but the amount of volume or interactions that exist online, could yield significant revenue. Make sense?

There are definitley issues surrounding this idea (haven’t though them all through), but the premise is there.

Facebook Connect

Facebook is opening up the walled garden and sharing…or are they?

Their new announcement:

“Today we are announcing Facebook Connect. Facebook Connect is the next iteration of Facebook Platform that allows users to “connect” their Facebook identity, friends and privacy to any site. This will now enable third party websites to implement and offer even more features of Facebook Platform off of Facebook – similar to features available to third party applications today on Facebook.”

At a first glance, it might seem as if this is a great move for Facebook and its users. But is it really?

Some initial thoughts.

In an attempt to be the social network across the internet:

  • Users can have one web identity (see sxip) which will eliminate the need for the thousands of logins we have.
  • Facebook will become even more centralized and necessary for warehousing user information. (Federal Reserve : Money :: Facebook : User Data)
  • Third party developers can build much more powerful applications without the restraints of the Facebook platform. No canvas page.
  • What was first an attempt to build a platform or centralized location, has now become an open initiative, encouraging users to engage third party websites ultimately leaving them with less advertising inventory.
  • User data might now become available for third party ad targeting outside of Facebook.com
  • Disrupting their own Facebook App ecosystem
  • New revenue model? Their current one isn’t really working.
  • They are becoming more open
  • They are becoming more closed

 

In the end, I think the real question is whether or not Facebook actually intends on adhering to these fundamentally “open” policies they are trying to replicate from the likes of MySpace, Twitter, Yahoo, and eBay

 

Ryan Waggoner states it best here:

“As Kaliya stated, I’m afraid that this is just another strategy for Facebook to “lock-in” their users and attempt to become the central repository of everyone’s social graph. If that’s the case, this is not data portability as I still don’t have full control over my data.

Hopefully, they’re going to be fully supporting open standards, but I doubt it. Facebook strikes me as a company that pretends to be open, but is only open one-way or to the extent that they can control.

Facebook is Microsoft 2.0”

Looks like we will have to wait and see, but something tells me Ryan and Kaliya will be right.

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