royce wells

You Can Help Medium Monetize

Friday, March 14, 2014 · 6 min read

Recommendations for monetizing Medium.

Sometime in the near future Medium is going to start monetizing. When they do, it could be the end of the beginning or the beginning of the end for this young content platform. I think Medium has a great chance to do some amazing things in this space, but I am worried that the drive for profit will screw all that up.

The Three Ways

There are currently three main ways companies make money on the internet.

  1. Getting users and selling ad space
  2. Getting users and selling their usage data to advertisers
  3. Getting users to pay for a product or service

When you look around the internet, you can roughly group the business models you see into one of these categories. Sometimes, companies rely on a combination of these.

Facebook sells ad space on their site (Method 1), coupled with targeted ads that use user data to be more accurate (Method 2). Their service and product are free, you pay by looking at ads and giving away your data.

Twitter also uses a combination of Method 1 and Method 2. They sell Promoted Tweets to companies, and also sell their analytical data to advertisers.

AirBnB, on the other hand, makes most of their money from Method 3. They take a percentage each time someone pays for a room through their site. They offer a service to help users find a product, and users pay AirBnb for the help.

The New York Times makes money all three ways. They sell ads on their site and data about their users. They also have a pay wall, and get users to pay to read the news.

What I have noticed is that while Method 1 and Method 2 often make a lot of money in the beginning, they do not represent a sustainable business model. Any company that sells ads to their users, or sells their user information, can only be profitable as long as users continue to use the service. Once the users leave, so do the profits.

We have seen this play out on the internet before. Myspace was once a multi-billion dollar company, much like Facebook. Myspace makes money by selling ads and selling user data. Yet once Myspace was no longer the cool, hip place to be on the internet, their users left and their revenue stream dried up. Now they are struggling to stay a multi-million dollar company.

Facebook faces a similar dilemma, and they know it. Facebook understands that the only way to stay on top in their business is by keeping the competition down. For the most part that has meant acquiring any and every platform that is in competition with them. Facebook has to spend huge sums of money on things like Instagram and WhatsApp to protect business. Facebook execs stay awake at night, wondering where the next challenger will come from. The harsh reality of the matter is that if Facebook lets another company become too cool and get too many users, Facebook is headed the way of Myspace. This is an eventuality that Facebook can avoid as long as they keep buying the competition. But once a competitor refuses their offer, Facebook runs out of money, or they fail to identify the competition, Facebook will head the way of Myspace.

Matter Matters

I am worried that Medium is going to kill their business by monetizing using Method 1 or Method 2. It would take minimal infrastructure changes to implement either one. Medium already collects data on what people are reading, how fast it takes them to read it, who is writing what, how people respond to this writing, and countless other metrics. All of these would make a tidy profit if turned into ads or sold to advertisers. They would also doom Medium to the fate of Myspace once the next big publishing platform appears.

The key to monetizing Medium lies in one of its projects: Matter.

In March of 2012 Matter raised $140,000 on Kickstarter, blowing past their $50,000 goal in two days. Their original business model was Method 3. Matter promised in-depth, longform journalism, at the low price of 99 cents a story. They were also planning on selling a subscription. All of that changed after Matter was acquired by Medium in April of 2013. Matter blew up its pay wall and moved all of its content to Medium. They saw a gigantic leap in growth and readership. The stats speak for themselves. People are engaging in Matter stories, taking the time to read long pieces that are interesting.

So while traditional media outlets are struggling, Matter seems to be doing pretty good. The success of Matter shows that people are still interested in deep stories that take time to read. It shows that people still want content of substance, and journalism that tackles hard issues from many perspectives.

The New York Times is bleeding while Matter is succeeding because of the quality of content. The New York Times offers news, but it offers news that can be found quicker and more cheaply elsewhere. There is no reason to pay for the paper or an online subscription when you can get the same headlines and stories for free from Huffington Post or BuzzFeed. If you just want to keep an eye on the stories of today, HuffPo is just as good as the Times. It is all the same breaking news anyways. But if you look to these sites for longform, in-depth journalism, you are going to be disappointed. People are not willing to pay for the news from the New York Times because the content is just not worth the money.

Medium has great content. That has been the goal of the site, and they have largely succeeded. The stories here are interesting and engaging, and represent a wide variety of views and opinions. Users are willing to pay for great content. This is clear when you look at the success of the Matter Kickstarter campaign.

How to Monetize Medium

So here is how Medium should monetize.

Medium needs to allow their users to pay for the content they want. This does not mean putting up a pay wall. It does mean implementing a feature that allows users to give money to authors that they enjoy reading. It does mean allowing users to give money to collections that have amazing content.

The tools are largely in place. Medium already has collections, which are essentially magazines of curated content. Let me pay the editors and writers of these magazines. Medium already has a user base that is interested in high quality content. Let them pay for that content if they wish. Medium already has a crowd-funded magazine. Let’s extend that idea to allow all Medium users to support great work and interesting stories from more than just one outlet.

I am not sure exactly what this will look like in practice, but I think it is possible, and I think it is a viable business model. It is a spin on Method 3, selling a service and product to users. There is a huge opportunity here to shake up the monetization model for publishing. Medium is in a prime place to capitalize on this opportunity. The decline of the publishing industry is happening, but people still want good stories and interesting things to read. It is not that customers are cheap when it comes to buying publishing products, it is that customers only pay for things that are really worth their time.

Medium has the users, Medium has the content. Now they just need to let you put your money in.

Originally Posted on Medium.