Monetization methods and profit models of social products

There is a widely circulated formula in the Internet industry: users = traffic = money. For social products, this formula is very consistent. Since users are equal to traffic and equal to money, how do we convert users into money? This article discusses and analyzes the profit model of social products from three perspectives and shares it with you.

If the time when social apps were launched is used as the dividing line, according to Qimai data, from 2008 to 2015, a total of 153 social apps were launched in these 8 years, with an average of 19 apps launched per year.

What is surprising is that throughout 2018, we can see that the number of social products launched on the shelves has been booming. In this year alone, 159 social apps were launched, and 59 products were launched in the first quarter of 2019. This does not include social mini-programs and H5 products. It is an indisputable fact that the number of launches has surpassed that of 2018.

We all know that no social product can escape the path of ultimate commercialization and profitability. Even a big product like WeChat cannot ignore the profit model, because only with profitability can a company thrive better.

The profit model itself can be simply understood as a way to make money, but we cannot use a simple way of thinking to understand and find the profit model of a social product, because any profit model is composed of a combination of multiple monetization methods, and it is unrealistic to rely solely on one monetization method to make the entire business model run.

The following discusses the monetization methods and profit models of social products from three different perspectives.

1. Advertising Revenue

In 2019, the scale of China's mobile advertising market will reach 415.87 billion yuan. Advertising, a powerful form of monetization, is continuing to exert its potential. Advertisements in social products are divided into several forms: hard-embedded ads, short video ads, information flow ads, etc. Most of them are based on hard ads and native ads. Due to the different user groups of social products, the ads delivered are also very different. However, the benefits of this type of advertising are particularly obvious, but inaccurate placement will cause the greatest harm to users.

It is relatively simple and direct to achieve profitability by attracting brand advertising through its own user resources, which coincides with market demand. In 2019, 46.5% of users will spend more than 15 seconds browsing information flow ads , and WeChat has the upper hand in this regard. Since WeChat covers more than 90% of users in China, as the largest traffic portal in the social field, it is also extremely important to advertisers.

The data released by Tencent also confirms this: According to the financial report data released by Tencent, Tencent's online advertising revenue increased from 17.468 billion yuan in 2015 to 40.439 billion yuan in 2017; among them, social advertising revenue increased from 8.7 billion yuan in 2015 to 25.61 billion yuan in 2017, and the proportion of Tencent's online advertising revenue increased from 49.8% to 63.3% .

Tencent social advertising includes: WeChat friend advertising, WeChat public account advertising, CQ space advertising, QQ client advertising, etc.

Social advertising is also an important source of income for Tencent, and the huge amount of revenue it generates is obvious.

For other social products, how to generate revenue and profits through advertising? For example, products like Momo will choose to adopt a multi-pronged approach: opening screen animation, information flow advertising, mobile alliance advertising and other dimensions to place advertisements. We do not comment on the form of advertising, because it is a product of the Internet era and an inevitable path to commercialization. However, the enrichment of advertising forms and the uniqueness of content can improve the accurate conversion rate of advertising for users to a certain extent.

2. Value-added Services

1. Membership

For social products, membership is an inevitable profit-making method for most social products. For social products, membership is almost everywhere. The membership system can not only connect core users, but also improve monetization and profitability. This is a very important means for the product itself to establish user stickiness and encourage user consumption.

So, how to realize monetization through membership system?

——Create rich membership privileges and product features to help users bind to the platform and expand subsequent consumption.

Here we take Red and Blue CP as an example. The membership system can enrich the gameplay and fun of social interaction. The super membership system in Red and Blue CP includes:

• Membership ID
• Unlock nearby people
• View recent visits
• Unlimited shake
• Increase user popularity (through popularity matching)
• Shake to revoke permissions
• Roaming chat history
• Super exposure
• Super Match (Unlock Super Match)
• Members-only costumes
• Any change in positioning
• One-week CP activity privileges

There are many membership benefits here, which users can enjoy after becoming members, and these benefits are tied to the reasons and needs of users using this product. At the beginning, users can enjoy 60% of the functions of this product, and these benefits will enhance the experience of the remaining 40% by 200%, allowing members to be deeply bound to the product. At the same time, the interaction between users, such as dressing up and recent visits, is used to continue the enthusiasm of each user to use the product.

The membership pricing is: ¥18/month, ¥45/3 months, ¥108/12 months. The threshold of ¥18 per month is relatively high, but there happens to be a ¥108 per year pricing. As a reference, ¥18 per month itself is the worst choice.

When users have no perception of the overall value of the membership system, they cannot discern the value of the membership fee, so they need a reference. The ¥18 per month here serves as a foil to the value of ¥108, causing users to misjudge prices and choose the most expensive but most valuable option.

As for how this type of membership system helps products make profits, in fact, for social products, the membership system is often just an introduction. Through such a mechanism, the product can feel the atmosphere of membership everywhere. However, the entry-level membership fee is definitely not enough to maintain the profit model of the entire team, so it is necessary to combine more monetization methods.

2. Paid emoticons

Paid emoticons first appeared in Japan in 2011 as a featured feature of Line, a free instant messaging service in Japan. Line has long seen the feasible path of turning emoticons into IPs. Line's emoticon store and its own official image IP Line friends have always been important revenue channels for Line. Since then, many chat emoticons have entered the era of copyright and payment. At the same time, many users have also begun to make their own emoticon packages, adding different texts to various emoticon packages.

At that time, in China where copyright awareness was weak, this kind of monetization method might be idealistic. In 2015, WeChat launched paid emoticon packages, but this method seemed somewhat bleak at the beginning.

The performance report released by WeChat in 2015 showed that only 5.2% of users were willing to pay for WeChat emoticons. Subsequently, the WeChat emoji store quickly changed from a paid to a reward model.

To this day, paid emojis are still the choice of a few users. However, with the passage of time, at this point in 2020, young users' copyright awareness has gradually increased. As an early entrant, WeChat has attracted more and more creators to join the market. Hundreds of emoji packages are put on the shelves every day, forming a good ecology and prompting a large number of excellent works to emerge continuously.

People like me who pursue the combination of originality and fun have also become loyal paying users to a certain extent. For example, in the "Good Baby" series, every time the author releases an emoticon pack, I will immediately choose to pay for it.

Taking the "Good Baby" as an example, each paid emoticon costs only 1 yuan, and this 1 yuan needs to be divided in the Apple Store. Apple takes 30%, and the remaining 70% is shared between WeChat and the creator. The profit left for WeChat here can be imagined. If there are rewards, regardless of whether the rewards are involved in the profit sharing, the data from the top shows that if calculated at 1 yuan to 2 yuan per person, the average reward amount for a set of emoticons is 100,000 to 200,000 yuan.

Doesn’t that sound good? But there are really very few creators who can achieve this result, which truly conforms to the 80/20 rule. There are still some people who make money here, but they are still mainly top creators.

Currently, most paid emojis attract users with their original features and low usage costs. If the platform wants to generate revenue from this aspect, in fact, most products tend to combine it with the membership system and package the paid emoji package as a whole into the rights and interests of the membership mechanism. Of course, they can also learn from Line and create the IP of the emoji package.

According to data, this business contributed nearly 10.8 billion yuan in revenue to Line. The company then carried out in-depth IP development and launched toy peripherals and branded cartoons. It also launched joint products with brands such as Missha, Uniqlo, and LAMY pens.

However, these are all based on such market demands. Currently, in many domestic social products, emoticons only play the role of passers-by. Even a powerful company like WeChat only uses paid emoticons as a social component. There is still a lot of work to be done to monetize paid emoticons.

3. Paid gifts

In social scenarios, the vanity in human nature is magnified. Paid gifts (virtual gifts), as amplifiers for people to establish connections with each other, are amplified several times in social scenarios, tempting users to attract the opposite sex through material things.

This situation seems to be particularly evident in our country (without regional discrimination). From the demand perspective, users like to pay attention to face, which has been verified in many events.

As social products, "value-added services" such as virtual gifts, virtual prizes, virtual equipment, etc. have great advantages over advertising revenue and are a natural need for some users in social interactions. Of course, for some users, it is impossible for them to become potential users of paid gifts, but this does not hinder the needs of other users.

Virtual gifts are relatively dependent on the user activity of the social product itself, and the value-added attributes of gifts are generally divided into two categories. One is to increase the attribute value of the recipient, such as charm value, popularity value, etc., to enhance social attributes. The other is that the platform takes a commission from the gifts received, and at the same time allows the recipients to profit. Due to the restrictions of the common interest-sharing relationship, social products often choose the first category, so as to maximize profits, while the latter are more of live broadcast platforms, which basically rely on virtual gifts to make profits.

3. E-commerce Monetization

Where there are people, there are business opportunities, and the more people there are, the greater the energy gathered. Now that I have so many users, besides the two conventional methods mentioned above, are there any more direct ways to monetize?

In recent years, the social + e-commerce monetization model has emerged. This is a new exploration for social products to try to make profits. For example, Mr. Luo’s Chatbao (Atomic Bomb SMS) is such a form.

Let’s not discuss whether this form of profit will harm the user experience, or whether it meets the needs of the users themselves from a commercial perspective, but only consider it from the perspective of the company’s profits.

When this model emerges, we must first consider whether this e-commerce model can bring benefits to users while bringing commercial value to the company.

The answer is uncertain, because there is a certain deviation between the needs of e-commerce and social needs. If the e-commerce field is operated in a refined manner, such as marriage and dating social products selling products in related fields, the tolerance of users in this regard may be slightly improved.

However, forcibly embedding a self-operated shopping mall within an app and forcibly converting social needs into e-commerce needs is less feasible from the perspective of execution and user expression.

The reason why many social platforms have started to engage in e-commerce business is very direct: to make money. You can make profits simply and easily through e-commerce, and you can also choose brands to divert traffic and get a certain share of the profits. The reason why this type of social platform can be combined with social media is that it also requires targeted social word-of-mouth communication at the same time. The two need to be combined.

Why do so many people choose to do e-commerce on WeChat? Because WeChat has its own traffic and is used by more than 1.1 billion users, and the current cost of acquiring users is so high, why not choose social e-commerce?

The core of social e-commerce lies in the word e-commerce, with social networking as a supplement and e-commerce as the main focus. Social + e-commerce is more centered on social products, with e-commerce assisting in profit. But if you don’t even do the basic social skills well, how can you talk about e-commerce?

Summarize

The above is the author’s analysis of the profit-making methods of social products based on three perspectives. Of course, the profit-making methods of social products are not limited to these three perspectives. Whether it is business cooperation, game profits, or live broadcast rewards, offline services are all profit-making methods that can be broken through.

A person's ideas and thoughts are always limited, but there are definitely more solutions than problems. With a certain user base, any form of profit that does not harm the user experience will be appreciated. Of course, there may be many different profit models and monetization methods in the future, but for social products, it is very important to figure out how to survive and how to make money in the early stages of the product.

The above content may be a bit cumbersome and superficial. Please forgive me for that. I also hope that you will put forward your opinions and intentions. Discussions are welcome in the comment section.

Author:SenYi

Source: SenYi