Engagement as the Unit of Monetization

Posted by: Matt Shanahan

The digital world has changed the revenue dynamics for publishers. In the print world, a publisher’s shipment of physical media was the basis for generating revenue. In the digital world, availability of media is insufficient to generate revenue. In the digital world, consumption of media is the basis for revenue generation both in advertising and subscription models. In other words, engagement is the unit of monetization.

For me, the most striking example of this move to engagement as the unit of monetization can be found in high profile companies like Demand Media relying on algorithms and SEO to generate engagement. Another example is how some publishers chop up their content into smaller fragments to generate more “clicks” (i.e., industry standard engagement metric) per audience member.

In subscription models, a publisher can expect a cancellation if the subscriber doesn’t use the service (i.e., the subscriber is not engaged). Likewise, the publisher is more likely to convert a daily user of a trial account as compared to one that that used it once during the trial period. Engagement is the basis for monetization.

Regardless of the techniques for creating engagement or the business model to monetize it, publishers are starting to understand there are limits to the revenue it produces. And while digital changed the cost structure of audience acquisition, publishers still face a point at which the marginal cost is too high to increase the size their audience and depth of audience engagement.

In the next couple of posts, I’ll describe new disciplines for segmenting, pricing, forecasting and allocating engagement inventory.