Back in 2005, some of you may know I ran a website called Great Adventure Online, a fan site for the popular New Jersey theme park, Six Flags Great Adventure. It was so popular, that for awhile when you Googled the theme park, my website would be ranked higher than the actual official site to Six Flags.
I managed to grow this site to an active online community of over 2,500 daily fans with over 40,000 hits a month; and even larger during peak season.
I still remember clearly the advice given to me by then park president, Mark Kane. He asked me how I was making money on this.
I told him I wasn’t.
He was shocked, and immediately followed up with a stern, why not?
I couldn’t comprehend the concept is making money on the internet, let alone, how to make money.
I was running this website only because I loved it.
However, this conversation immediately stuck to me and still sticks out to me to this very day. He couldn’t comprehend how me, this individual with a passionate user base, incredible search ranking, and hunger to build something, wasn’t capitalizing on this opportunity. How I didn’t have a way to see a return on investment.
This conversation is what turned me from a hobbyist into an infant entrepreneur.
Looking back at this moment years later, this was the first time I had a mentor, a role model, someone who pushed my internal compass forward into the person that I am today.
Immediately, I began figuring out how to capitalize on this platform and started earning some money.
I decided advertisements were the best bet.
After all, think of how many passionate people were on this platform, daily, involving a centralized location? I could have small businesses in the area target them as patrons; the theme park themselves advertise tickets, promotions, and more.
It’s such a specific, defined audience; there was nothing to lose.
The heart, the integrity, the reason I was doing this all as a kid.
So what was my business mistake?
Immediately upon introducing advertisements, I angered a passionate fan base, a community.
My little website had become a sellout.
No one liked it. User activity decreased.
Competitors popped up left and right.
Advertisement engagement dropped since, well, the numbers of users dropped. Eventually, no one would even want to pay for an ad, since who was going to click on one anyways?
So, what happened here? What did I do wrong as a kid, that most startups and companies are today, making the exact same business mistake except on a much larger scale?
I’m a big believer that if you’re building something for the internet, whether that is on the web or mobile; it needs to be made monetizable from day one.
The only exception to this rule is if the product you’re introducing was truly meant to be a labor of love and not something you ever intended to earn money off of, how my fan site was originally intended in 2005. However, for the sake of this blog post, I think it is safe to assume mostly everyone is reading this is either an entrepreneur, executive, or involved in some business capacity.
Here is the easiest explanation to why I inform our clients they need to focus on monetizing day one with their products: because nothing is more frustrating, more insulting, more spit in their face than telling a user what they have used for free will now cost money, even if it is just ads being introduced.
Imagine, for most of the products we use daily today; you have been using them for free, just to be informed suddenly, you now need to start paying. What if you’ve fully adapted to the ecosystem that this product promotes? What if you disagree with how much they are going to be charging, but do love the product? It is insulting as a consumer to be treated like this.
In fact, think of the opposite approach. What if something you were paying for became free? Instead of being appalled, you’d be enthusiastic.
So, how can you avoid the business mistake I made?
One of the biggest arguments you’ll hear against this approach is that the product isn’t at a point worth paying for yet.
Sure, it isn’t at your full expectation as an entrepreneur, but your product never will be. You’ll never be satisfied.
Even then, if you, deep down, believe this, why not offer monetization at a smaller rate at the start? You’re still able to make something and not feel like you’re overcharging either. If you have advertisements, and no one is willing to pay for ads yet, why not just display your very own ads? You’re still managing the expectations of your users!
Of course, a bigger thing happens when you monetize day one. You’re validating if people will pay if you have built a business and not just an expensive hobby.
I think most people punt with the latter; because they do not want to admit to themselves that they may not have a viable business or a problem people are looking to have a solution for.
Okay, there is one exception to this thought process, which I must admit. Some products will always remain free to a particular user base and introduce paid functionalities later for another group. That is fine. As long as the benefits being offered to the audience who will eventually be paying will always get what you’re giving them now for free, there is no issue. You’re not insulting anybody; you’re not mismanaging expectations of what your business is offering.
At the end of the day, I shot myself in the foot when I was a young, naive-preteen-meet-entrepreneur running a fan site for a local theme park. I introduced monetization after a user base came to expect something for free. I lost them. I insulted them.
Do you think if it didn’t work, and I took the advertisements away, anyone would have been upset? Of course not.
This is what so many entrepreneurs, businesses, and products are doing wrong today.
They’re punting monetization.
They’re delaying not only the inevitable but creating a very unfortunate time to begin making money later. They’re going to anger their fan base, their user base, their “customers” eventually.
Just rip off the band-aid day one. Learn what users think. See if people are willing to spend money. See if you have a company, or you’ve made a glorified hobbyist product like I did in my youth.
Joshua Davidson is the Founder and CEO of ChopDawg.com. He's a passionate student of entrepreneurship who also builds apps and likes to help grow companies. Co-host of #thePawdcast on iTunes. He's been featured on FOX, MSNBC, CBS, Technically, StartupGrind, Startups.co, StartupDigest, AOL, EliteDaily, Mashable and much more. Keynote speaker. Soon-to-be author (mid-2017). Twitter: @dasjoshua