Traditional monetization boasts a strong foothold in online media by forcing people to wait for the content they want to see. Users on YouTube have to sit through pre-roll advertisements, and Hulu users sit through mid-roll advertisements similar to television commercials.
This works well for static media, but the future of media is far from static -- it's live.
Live streaming apps like Periscope and Meerkat have already begun to steal users from television and web broadcasters. Like most social networking sites, these outlets seem to follow the 1-9-90 rule. The rule suggests that 1 percent of users are high-profile creators and contributors, 9 percent are passive or inconsistent participants, and the remaining 90 percent are passive consumers who are happy to scroll through and enjoy.
Advertisers need to find a way to monetize that 90 percent -- a tricky task considering most of them are only there because they don't have to pay to play.
Currently, most live stream apps on the market are completely free. Neither Periscope nor Meerkat has begun to monetize in earnest yet, but as Twitter and Facebook begin to get into the live stream market, the amount of free content available now won't last forever.
Here are four different monetization strategies that could be employed on live streaming apps:
There are a few different ways to take the freemium route. For one, apps could elect to offer the first few minutes of a stream for free and then require payment if users want to watch beyond that point. Or, they can monetize in more subtle ways by providing donation buttons (think "tip jars") or links to purchase additional videos or items related to the content being shown.
While both of these freemium options provide monetization routes, they require the 90 percent to reach for their wallets -- something that hasn't been wildly successful in the past.
If apps can't sell content to consumers, perhaps they should monetize the data that gets collected in an anonymized fashion.
Gnip, a company recently acquired by Twitter, gathers information about what products are trending, notes the people tweeting about them, and analyzes whether positive or negative things are being said about them. Live stream apps can follow a similar model by collecting data on who's watching what and then giving that data to content creators and third parties. For example, if a comedy show has an audience of teens and almost no one else, that information could be highly valuable to marketers whose products target that demographic.
Data monetization successfully keeps apps free for users while still offering a revenue stream for the apps. However, on the downside, it requires a large investment in high-quality analytic tools, and it only really applies to apps with large user bases. Small, up-and-coming apps don't yet have much data worth selling.
Premium sponsored content
Much like Facebook's Promoted Posts and Twitter's Promoted Trends, live stream apps can charge marketers for featured or premium positions to amplify their messages. In a live setting, this concept allows for an immediate, real-time, two-way relationship between audiences and marketers. Old Spice went viral with a campaign that utilized a combination of Twitter and personalized YouTube -- imagine the possibilities if that campaign was consolidated onto one live platform.
Offering premium tiered content allows brands to pay for extra exposure while keeping content free for the 90 percent, but it could potentially damage user trust if the promoted content is low-quality, distasteful, or irrelevant.
Live is free, but reruns will cost you
In my opinion, the best monetization option for live streaming apps is to offer live content for free while placing archived content behind a pay wall. The on-demand model has taken television by storm, and I can't see any reason why it wouldn't work in a live app setting.
In addition to the revenue from users who pay to watch reruns, this option still leaves the door open for two other revenue streams: monetizing data from live events, and/or offering a promoted tier of content to creators.
As live stream apps become more ingrained in the entertainment world, advertisers will have to change the way they think about monetization and revenue streams. Offering free live content gets users hooked, and providing archived content can transform the live stream niche into a serious market sector.
Adopting this strategy now gives advertisers the chance to create strong footholds in this emerging market and to maximize revenue as more live streaming options emerge.
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