Your Current Monetization Method Won't Last Forever
Sooner or later, monetization is crucial for any young company -- the time when its potential as a business must be demonstrated. When an attempt at a particular monetization method is successful, it’s natural to want to ride the hot hand. Startups with a taste of success will want to extrapolate a future based on the idea that the present will last forever.
But often these emerging companies are too reluctant to invest resources and energy into preparing diversified new methods. As the saying goes, "If it ain't broke, don’t fix it." However, monetization strategies often have a finite lifecycle. And different methods will also perform different ways at different times. If you allow your startup to become complacent with what’s working right now, you're quite likely setting yourself up to get burned later. A startup that can successfully monetize should not take it as an excuse to rest on its laurels, but should instead be vigilant in monitoring that success -- and to always look for signs that the methods being used need to change and evolve.
Say, for example, that your burgeoning company has managed to establish itself by being written about often in audience-relevant, well-read blogs. It’s a great channel -- the blogs love and promote your product, generating referrals and new customers. You have strong relationships with your bloggers, and you’re continuing to see steady traffic and convert it. You’re monetizing. This channel is a goldmine, and from where you sit you can’t imagine where your good fortune with these bloggers will end.
Thinking of any particular channel as a goldmine is appropriate and instructive -- even as you’re piling up riches, you have to know there’s only so much gold in that ground. Say a particular blog has 300,000 readers, a nice rich vein of leads and customers. Eventually, though, you will tap that vein out. Channel exhaustion is more common than many early startups realize. Once that blog’s entire audience of 300,000 has been exposed to your product, all of a sudden it no longer delivers -- or at least not nearly to the degree of growth it once did. Even if the blog sees steady audience growth, your further growth from that channel is now limited. That goldmine’s output has peaked. The blog will no longer perform as a primary growth channel.
This same dynamic of exhausting the goldmine can occur with any channel, whether it’s an affiliate program, a certain calibration of your site’s SEO, or systems where algorithmic changes can dampen any easy advantages you’ve enjoyed. Unfortunately, nothing stays the same and nothing lasts forever. What is fortunate, however, is that by accepting this truth you can be more ready to adapt and succeed.
In my experience, many startups need to develop far better foresight to anticipate change and not be surprised when the same channel activities suddenly produce different, less beneficial results. The key to this is good data. You should always be measuring the productivity of your channels and watching your numbers for any signs that certain course corrections could be in order, or that it’s getting to be time to invest in opening new channels entirely. Flexibility is an essential trait for any business that wants to succeed in the long term. Being stubborn or sentimental about continuing to tap a spent channel is a path to ruin. Being eager to adapt -- and always, always being on the hunt for new opportunities -- is the road to longevity. When that road turns, you’d better turn the wheel too.
Entrepreneurs less experienced in the ways of monetization are often able to rely on their VCs to provide expertise. Without someone on the team with a deep understanding of how to monetize, it can be easy to fail. VCs usually have experts who can deliver sage guidance and speak from experience, having dealt with every kind of monetization channel time and time again. The core of the advice they’ll supply: channel measurement numbers are your guideposts. To grow, wake up and go to bed looking at numbers.
Igor Shoifot is Investment Partner at TMT Investments, a venture capital firm focused on high-growth, internet-based companies across a variety of B2B and B2C sectors. TMT Investments is traded on the AIM market of the London Stock Exchange. Igor lives in San Francisco.