I came across an interesting opinion recently in a Fast Company piece called “Why VCs Still Love Social Media” in spite of legendary roadblocks to monetization:
If monetization is such a problem, why do VCs keep investing in social media? At [VC firm] Greycroft, we’re looking for consumer sites that have massive consumer adoption tied with strong engagement. [Greycroft has invested in the video-sharing network Viddy.] These networks, like Instagram, can be fantastic add-ons to companies for acquiring and retaining users. As part of a larger ecosystem, the business can make money from those users elsewhere.
Ponder that for a moment.
“Massive consumer adoption tied with strong engagement.”
“…fantastic add-ons to companies for acquiring and retaining users.”
“As part of a larger ecosystem, the business can make money from those users elsewhere.”
This echoes precisely what I heard from podcast giants like Kevin Smith and Adam Carolla. It echoes precisely what I heard from digital guru and entrepreneur Gary Vaynerchuk. It’s what Gary described to me as making money “on the second level.”
What VCs view as investment-worthy, in the opinion of this particular VC, is that which is popular and engaging such that it can help a company’s larger ecosystem acquire and retain users for stronger monetization. In other words, any given investment would be viewed not as a profit-center on its own but a profit-enabler for a larger ecosystem.
How many broadcasters see their digital platforms this way?
Does every initiative need to be monetized out of the box? Or do we look at each initiative as part of the larger revenue ecosystem and create expectations accordingly?
Are we wrong to count digital dollars per se? And should we instead consider how to maximize total dollars even if the digital portion of the portfolio does more to enable than to monetize?
Broadcasters need to better differentiate between profit-centers and profit-enablers.