Bait 'n' Beer

Last week on Twitter, my friend Guy LeCharles Gonzalez (@glecharles) suggested, maybe a little in jest, that the official T-Shirt for the 2011 Digital Book World Conference (www.digitalbookworld.com/conference/) should read, "WHAT'S YOUR REVENUE MODEL?". I thought it was great, but I responded that I actually thought it should read "WHAT'S YOUR PROFIT MODEL?" since, at least for most of us, businesses really aren't sustainable without earnings to support growth, further investment, and innovation.
 
In other much-discussed news, many publishers (print, digital and both) are focused on building communities. Mike Shatzkin has written and talked about it extensively most recently here www.idealog.com/blog/publishers-brands-and-the-change-to-b2c, where he has coined the term "verticalization"  (from the verb, "to verticalize"?) which, sorry Mike, makes me cringe. Another good post on the subject came from the same Guy LeCharles Gonzalez yesterday here:(www.digitalbookworld.com/2010/your-brand-is-not-a-community/) where he postulates that a brand is not the same thing as a community. And I agree.
 
So you're asking yourself, where are you going with these two threads, Don?
 
Communities are interesting but not valuable if they cannot be monetized in a profitable way and doing that isn't easy. In fact, it's not a skill set that most publishers, including (maybe especially) the newest and most innovative ones, possess.
 
Monetizing communities for profit requires several things. Among them are:

1. A thorough understanding of customer acquisition costs;
2. The ability to convert a community member to a paying customer (and an understanding of the associated time and cost of doing it),
3. Frequent and consistently good, relevant content flow to keep the customer engaged (and paying),
4. Wrapping your mind around the concept of the 'lifetime value of a customer', and
5. The ability to scale the offering to a large enough audience or, in the alternate,  to command a premium price.

There are a few publishers who get this and do, in fact, have the people and systems to have a decent chance of pulling it off. Most that I can think of, Harlequin excepted, have their roots in the magazine business where these skills are like mother's milk. Amazon certainly understands it as well.
 
While you're busy building your community, don''t forget the object of the exercise is to make money from its members. Otherwise, you're in Dragon Country.