Recently, I have been reading a number of blog posts about how to monetize social media. Twitter, for instance, has yet to monetize its service even though it has rapidly become integrated into our social fabric. Despite Twitter’s leagues of users, if they tried to charge for their service, people would likely switch to one of its free and open source competitors (like Identica).
The traditional approach to monetizing social media has been to sell advertising (as on Facebook or YouTube), but this puts the social media providers in a slightly antagonistic relationship with their user base. In addition, advertising itself is becoming less relevant when word about the existence and quality of products can spread so easily. Just look at Yelp! Social media has empowered word-of-mouth over traditional mass advertising, prompting the neo-marketing mantra “the best advertisement is the quality of the product itself.”
This leaves social media providers in a difficult position vis-à-vis monetization, since one of their few viable income streams is rapidly being made irrelevant by social media itself. So what can social media do to be financially sustainable?
To answer this, lets first look at why people don’t want to pay for these services. No social media provider will ever be able to charge for its services in scarce dollars since there will always be free alternatives. But what about charging in a currency that is not scarce by design? What if people had a completely different relationship to the money they had to pay? What if this new money was backed by the reputation of the users of the social media itself? Social media has already empowered user-generated reputation to the point of threatening the relevance of advertising. What if it could do the same to banks’ exclusive monopoly on issuing money?
This new process of issuing money would have to be open, distributed, and transparent. ‘They’ wouldn’t be issuing the money, but rather ‘we’ would. The social media providers would simply be the platforms on which these agreements were tracked and played out.
Traditional advertisements work by generating a sense of scarcity for whatever product is being advertised. When the quality of the product itself replaces perceived scarcity as the primary reason people want to buy, consumerism can, at long last, mature beyond adolescence. Similarly, when money itself is not kept artificially scarce by a ‘them," a new sense of sufficiency will make the prospect of paying social media providers seem more than fair. For anyone who thinks this would be “funny money,” Facebook is expected to have 200 million users by the end of 2009. If Facebook were a country, it would be one of the biggest in the world.
Imagine a mutual-credit-card without transaction fees and with little to no interest. People could pay for any social media service with the currency they helped enable. Given social media’s colossal user base, providers could pay their expenses with this near universally accepted money. Sounds much better than what banks can offer.