Monday, May 14, 2012

Native Monetization

Today there is an article on TechCrunch called Five Ways Native Monetization Is Changing Silicon Valley to discuss native monetization. Jon Steinberg defines native monetization in his blog Native monetization as follows:
Native monetization is deriving revenue from a platform in a way that is unique and organic to the experience. It’s the reason why Twitter, Facebook, Foursquare, and BuzzFeed avoid just slapping banners anywhere they can fit them. The theory behind these avoidances is that users will be happier with advertising or forms of revenue generation that fit into the context. 
Fred Wilson also talked about native monetization.

From Jon's blog and Wilson's keynote, I have some rough idea about native monetization.

Advertising is changing to more user friendly, experience oriented, and context relevance, instead of old ad banner way which was just dump the message without understanding user interest. News portal (popular website) in dot com era was the perfect place for ad banner due to its high number of visit per day. However, in web2.0 era, pulling is changing to pushing with Facebook news feed, RSS reader, twitter etc. More and more people don't go to specific news portal for daily news (I follow @cnnbrk on twitter for breaking news, follow techcrunch for tech company news). This ad channel is getting weak.

Starting from Google AdSense which displays relevance ad based on search result, new advertising changes the way to monetize your product. No matter it is inline image, audio, video or geolocation based advertisement, the promotion way is more nature, more experience oriented. There are more and more web2.0 sprees are moving towards native monetization. In my mind, native means content + advertising for user experience. Read user's mind is critical to go with native monetization.

Here are some examples without native monetization. DrawSomething free version has advertisement, but the full screen ad on mobile is not organic to the experience. Why it cannot display ad based on the guessing word? The result is less playing or blindly close it. Yahoo seems doing the same thing, when you read a news, the banner ad is kind of static, not relating to what you read (if user wants to spend time reading long article, s/he should be interested in the content, so displaying ad organic to the reading experience). The result is seeking other reading channel (ad free) or just never look at sidebar. Groupon, local advertisement, has already IPO, however I doubt its long term business model for two reasons. One is it is only venue based "native" monetization, not reading user's mind, and push coupons based on user's interests, lifestyle or purchase history. The other is too many competitors (google offer, amazonLocal, livingsocial) because its model is easy to replicate.

However, apart from facebook, twitter, google etc, amazon actually also is doing native monetization from its online purchase experience. Their advertising is more unique and nature to shopping experience. When you purchase something, will recommend others related merchandise from your current purchase, based on your purchase history and other people's purchase history. Intelligence built in amazon shopping experience is to try to read shopper's mind.

I strongly believe native monetization is about what to display (reading user's mind) and how to display (multimedia). The ultimate goal of native is to let users like advertising.

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