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Contents 1 Definition 2 Overview 3 Business Models 3.1 Advertising 3.2 Premium Offerings 3.3 AdWare 3.4 Marketing Data & Behavioral Tracking 4 Conclusion

Definition

Monetization, in terms of internet technologies, is the concept of deriving profit out of a product that appears to be free to the consumer.

Overview

As the internet has burgeoned, companies have struggled to adjust their business models to compete with one another. To improve market share, companies may offer reduced fare or free services to the consumer in order to undercut competitors. Monetization is the process of deriving a revenue stream out of a product that appears to be free.

An example is email. Historically, users would pay for a mailbox on a server hosted somewhere, either directly or indirectly as part of a larger service, such as internet access. Portability was a problem - particularly for people using ISP mailboxes - and services such as Hotmail [1] began to take hold. These services offered a web-based email client that could be used from any computer. Initially, Hotmail offered a free service for the first few megabytes of storage, with a premium offering extending that storage.

However, as time progressed and storage became cheaper, web-based mail providers began to compete with one another on the storage limitations, eventually to be outstripped entirely with the introduction of GMail. This service, which is free offers such a large amount of storage it is almost impossible for the average user to fill. The question then arises, how does a company make money from offering such a product - particularly when their competitor renders their current business model irrelevant?

Business Models

Advertising

Advertising is the most conventional way to make something free to users. One of the earliest and most effective methods of making web pages and services profitable was nesting advertisments within webpages. This started as simple banner ads [2] that rotated linked images from an advertising host who then would pay on a per-click or per-impression basis. This evolved into more complex embedding technologies such as AdSense [3] that would peruse the content of the site to determine context-relevant advertisement on the page.

Premium Offerings

This model allows for a free basic service with extended features available to those who pay for them. The users who pay for content thus support the service as a whole. This model has proven to be somewhat shaky, as the "premium" feature set can very rapidly become standard issue with a competitor. In the case of Hotmail, increased storage and email client integration were major selling points for a premium subscription until GMail upended the business model by offering those features for free.

AdWare

One of the more aggressive forms of ad-based revenue is AdWare, which is the use of an application that essentially forces the user to review advertisements in exchange for the service[4]; this is often times just integrated advertising in the application, but can be more pronounced (such as the now-defunct NetZero model) that required direct interaction in exchange for use pf the service. Generally, the user is aware of this arrangement as part of the "deal" of getting something valuable in exchange.

Marketing Data & Behavioral Tracking

Companies can often turn a profit by selling information about their users. This is highly dependent on the size of the data gathered and the relative value of this customer base to the end buyer. This has significant privacy concerns. Beyond the data submitted by users or gathered via HTTP cookies, one of the more complex methods of data gathering is deriving user behavior based on clickstream data. This information can be used to track the workflow individuals go through, both on internal sites and other pages, and can be considerably valueable both in determining where a user is heading off to after visiting a particular site as well as segmenting their tastes and choices given certain scenarios.

Conclusion

Regardless of what Chris Anderson [5] has to say on the subject, each company offering a service must determine a way to make money off of it in the long run - the fundamental economics of the equasion can never change. The trick is finding a way to make something free to users and somehow derving profitable value from that.

--Bsheets 20:44, 15 November 2009 (PST)