Social Media metrics - pursuing the paid subscription model

Uniques	Visits	Pages/Visit	Page Views	CPM	$/Mo	$/Yr	$/Unique
1,000,000	3	3	9,000,000	$          20	$        180,000	$     2,160,000	$       2.16
1,000,000	5	5	25,000,000	$          40	$     1,000,000	$   12,000,000	$      12.00

These are the metrics that drive the page view model.  At 1M unique visitors per month, a media site can drive revenue up to over $10M by focusing on a few dials:

1) Get people to return more often
2) Encourage them to visit more pages each time they come to your site
3) Offer higher value advertising

But each user is only worth about $10/year to you in that model, in the best case scenario, so you’ll always be dependent on advertising to keep the business afloat.

There’s another set of revenue streams that start to evolve out of social media which can enhance the page view opportunity and perhaps open a more powerful business model.

Uniques	% Registered	Registered	% Power Users	Power Users	Sub Price	$/Mo	$/Yr
1,000,000	25%	250,000	50%	125,000	$    5.00	$        625,000	$  7,500,000
1,000,000	50%	500,000	50%	250,000	$    5.00	$     1,250,000	$15,000,000

The paid subscription model has been the carrot at the end of the stick for traditional media since the web began.  So, I won’t proclaim to have an answer suddenly, but I will propose that the right kind of social media service might be able to drive that model successfully. 

If you can get people to register and then build a base of power users who are willing to pay, then you get the benefit of reliable recurring revenue.  The service will get stronger with more users and then incentivize them to participate even more.  The service will sell itself, and you'll be able to drive up the percentage of lightweight users who will be easy to upsell into the paid service.

Yet again, a lot can be learned from the Netflix example.  In this case the deliverable, a DVD, has a high value to me…well, that value was about $4/item when I used the local rental shop which was probably about 2x per week or $36 per month minimum.  I’m now getting probably double the number films and spending half what I used to spend.

But the best part is that I’m getting highly relevant recommendations.  I really like my local rental shop, and the staff there gives great recommendations.  But the precision of my recommendations and the depth of my choices on Netflix are far greater than what my local shop offers.  Further, I can browse both more broadly and again more deeply with a simple click or two.

My $18/month pays for better quality choices.  What’s more amazing is that I’m happy to wait 2 days to receive these items. 

Could that be the key?  Better quality?  Is it that simple?  Social media is interesting, in part, because we can now use each other to find higher quality stuff in today’s information flood.  That has a dollar value.

The lesson of Consumer Reports isn’t about easy access or even great user interface.  They don’t employ any social media aspects to their business, but they made a bet on quality.  That bet turned into nearly 2 million paid subscribers,  recurring annual revenue without a single advertiser. 

Your site’s ability to drive subscription revenue is fundamentally based on quality, whether that quality comes in the form of important content or important services.  Deliver something that really matters to your users, and the ones that care will pay for it.  Social media tools might just be the way to give your site the edge that helps you turn that corner.

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