The Monetization Conundrum: Lessons for Traditional Media for Generating Online Revenues
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Consumers now have a large number of options to communicate and consume media, largely facilitated by the growth of the Internet.
Time spent on media and communications has almost doubled over the past decade. Addictive experiences on the Internet have attracted audience attention at the expense of traditional media such as television and radio. With usage increasingly moving online, the value of consumption has declined due to the proliferation of free services, as well as the ability to consume content selectively on the Internet. Moreover, music and video piracy offer free alternatives to online users.
As a result, consumer spend and advertising revenues have not kept pace with the growth in usage, resulting in what we refer to as the “monetization gap” estimated to be worth £4.1bn in the UK over the past two years. Closing the monetization gap is a key issue for media players, who are looking at new ways of generating revenues from their existing content, as well as diversifying into new online services to capture consumer interest.
Two distinct models for monetization of online content have emerged. Some media players have successfully executed a “volume strategy”, which generates ad revenues by leveraging existing content, unique demographic and large audience to attract advertisers. On the other hand, some companies such as ‘World of Warcraft’ have started to see success with a “value strategy”, focused on offering premium content and creating a compelling user experience to consumers willing to pay. Media companies, through their ownership of valued content, relationships with advertisers and existing audience loyalties, already have some of the assets necessary for success. Players will have to build expertise in online advertising, adapt their revenue models for the new platform and attract audiences to their portals. Media companies can build, buy or partner to obtain these capabilities.
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