So You Want to Make Money While You Make Friends

This is not the same as monetizing your blog or social network with advertising. I've been pondering this question for several years.

At times, we discussed how we could charge for Fast Company readers' network events to cover venue costs and possibly snacks, yet the path of least resistance ended up being finding a sponsor to provide the physical meeting place or pay for the snacks. Our work was simply donated to the network.

Piers Fawkes [hat tip to Greg Verdino] revisits the concept in the 50/50 corporation. My experience is consistent with his - if you build a network as a free resource to get people to sign in, you will be hard pressed to charge once they are in. You've created a certain set of expectations.

Not only that, you may also have provided incentive for a certain dynamic that may end up muddling the real value with low involvement. How? The perception is that free or cheap equals less value, especially when the value resides in what you need to do to get results. In our case, part of it was showing up.

The Case for Charging

Once I was very close to starting a non competitive network for high level referrals and business deals. One people would need to pay for to join. The idea was to make it part career support group, part business referral place - a mix of people working on the client side and providers.

Then I talked to a couple of people who were part of such a network created for that purpose. It would be easy for me to think mine would work. Yet I'd like to evaluate the feedback from the other group with you here.

• While the network was created expressly to provide a way to pass on warm leads and referrals to others, no leads had exchanged hands. Why? From talking to various members I can infer that each was playing their cards very closely.
• The events ended up being unproductive sessions where people talked more about misadventures than about ways to help each other build their business.
• The fees were perceived as too high, which leads me to think that indeed nobody saw value in the membership.

It seems to me that a couple of forces may have been at play. They are the same reason why I seldom go to events organized by the professional associations I subscribe to. I tend to go to events with my blog and personal identity lest I get pitches upon pitches. Which is what happens when people learn I work on the corporate side. The dynamics are:

1. Everyone ends up being a seller and nobody is buying.
2. Everyone is talking and nobody is listening.

Charging makes sense when the group and face to face opportunities (or online support) have real and perceived value embedded in them. From the start, as Piers validates. Would this be a 50/50? Probably, but not in the sense he means. I'm thinking more about managing to hold overhead costs low and making the events also social.

The Case for Free

At the other end of the spectrum, I am seeing more and more companies giving away what they used to charge good money for. That's because they've learned that now the game changing piece is making friends. In other words, touching those people (note I did not say influentials) in networks and communities who are seeking that information and may likely spread it.

Is a company a network? Yes and no. The network is how you get things done inside a company, yet a company defines itself with an organization chart. There are some new generation companies that operate differently - that difference is built in the product and service itself. Piers cites a great example of that with Google.

Google - 80% Profit - The first day you came to Google.com you knew it wasn’t just there for fun. Still, the most profitable revenue generation is ambient - from advertising that’s contextually designed to be more ‘helpful’.

I'm now wondering if SEO and SEM are the two percentages for other companies. You give away thought leadership material to generate SEO and then sponsor key word searches through SEM to inform people of all the other solutions your company offers. They complement each other and can be calibrated to be meaningful in affecting traffic to your online presence.

To Profit or Not to Profit

This is the question. Given a choice, I think we'd all rather profit in some form. Yes, I know there are plenty of ways to gain referrals and business through blogging, sharing information, and building relationships. My take is that it is not inherently bad to want to make some money in the equation.

Many authors, for example, make little money from the book. The money is in the speaking gigs they can get as a result of having a book. Or in consulting based upon the book. The Power of Full Engagement is a book, and a training and organizational assessment methodology. I mention it because I evaluated it a couple of years ago for a company-wide meeting.

Whether you intend to make a profit or not, one thing is ringing as true today as it has always been - you need to make friends as you plan to make money. I suspect that the answer will be calibrated more and more within individual business models rather than being one solution fits all. Yet, I have not heard of a business that did not have as its first goal to stay in business. And that requires funds.

What are you seeing?

Comments

[Rebecca Thorman]

This is really interesting to me since my organization plans a wide variety of events, and a common complaint at some of the events is that no one wants to get pitched by a realtor. Most people want to make friends first, regardless of what business they're in, even the ones taht are selling (because the smart ones know that selling is really building relationships).

Having said that, I think great networkers and businessmen are great at combining the two, and it just takes practice. I often meet with people and spend the first 75, 80 or 90 percent of the conversation just talking about them. Only 10 or 20 percent is about business.

[Valeria Maltoni]

I don't like to be pitched by a Realtor, either ;-) In all seriousness, I stopped going to networking events when the pitches got so aggressive and numerous that it was ridiculous. My office phone rings from 8AM-5PM and it's all sales calls; my email is filled with newsletters people signed me up for that I did not want to receive.

There is so much clutter that breaking through is easier than ever. When listening and being a resource comes first, if the advice holds water, will almost guarantee people will come to you.

It's a fine line to navigate, I realize. Yet as you say here, the most successful people learned (or knew) how to master that.

[Jason Rosado]

Very interesting blog entry and comments. Networking is SO important for entrepreneurs, small business owners and sales professionals. I agree that the main goals of networking are to listen, learn and provide value to those you meet.

If you master those three skills in networking settings, then systemize your follow up and repeat, you will certainly boost your business.

Best,
Jason

[Greg Krauska]

Valeria, While social networks may be a recent phenomenon, people haven't changed. We all have some mix of altruism and self-interest we bring to any organization. What turns many folks off is when the others in the group don't play with the same purpose in mind as we do. Getting people to agree on what it means to serve the network while serving yourself can be a big challenge.

Regarding the idea of companies giving away stuff for free, see the latest briefing at www.trendwatching.com , called "Free Love." Great perspective on this topic.

[Valeria Maltoni]

@Jason -- you add an important component here - follow up and repeat. Strong follow up and follow through are what separate those who are successful from those who start over every time. They allow you to build upon your, shall we call it, good will capital over time.

@Greg -- "What turns many folks off is when the others in the group don't play with the same purpose in mind as we do." I tend to be very keenly attuned that what's going on in the room and I admit my turn off stems from that. Thank you for the resource, I'll check it out.

[Carolyn Ann]

Money & friends... Well, they don't mix - and never will.

Sure, that salesguy is your best buddy while he's landing the sale. And your pal is more than willing to lend you a few bob*.

But I'd recommend that no one ever confuse friendship and monetary gain.

You can reward customers when they give you their hard-earned. Ducati, Mini (BMW), Apple, etc all do that - with their exclusivity and inference of "coolness". But all those people we meet at trade shows and the like? Ships that pass in the night; and they barely pass that trivial test of loyalty. It's a cliche, but a friend in need - is a friend indeed.

Sure we can greet them as life-saving saviours and the like; that's politics and is as meaningless as the handshake. It's the conversation and the intent. (And oh so often the conversation is "well, that's enough about you, let's talk about me for a change!")

And that's the basic problem with social networking "systems": they don't provide the ability for that interaction. "I want to WOW! my audience" doesn't quite make it to the 15" screen of a laptop. Human interaction can't be boiled down to a series of algorithms; some think it can - but it can't be. We're not machines, you see.

To profit or not? Well - people won't pay for the services they need (it should be included in some other -entertainment - service, perhaps?) But "free" is perceived as lacking value. There's only one real solution: a few years of effort and the idea might, just might, take off. Unfortunately, the real world of human interaction is not the pseudo-success of Facebook and MySpace. (When was the last time you heard either of them actually realizing a profit?)

Having had the incredible, and wonderful, experience of having true friends come to my aid when I most needed them - I can say that the fair-weather friends, the ones who have a financial or status interest in my success: well, those people can go jump off whatever happens to be convenient.

Passing acquaintances do not friends make.

Carolyn Ann

*Slang term for British shillings; they're worth 12 pence... A shilling was a pre-decimal (duodecimal) coin.

[paul isakson]

Good thoughts. Thanks for sharing your experiences around this topic that has really bubbled up recently. (Trendwatching.com and PSFK as mentioned and ...)

WIRED has an interesting article on this as well (to promote their editor in chief's new book, nonetheless):

http://www.wired.com/techbiz/it/magazine/16-03/ff_free

I agree that cheap equals low value perceptions, but I wouldn't equate free with low value.

With free, you may get skepticism (what are they going to try to squeeze money out of me for with this?), but the value is tied to the content matter/utility/etc. with free, not the lack of cost.

I think the point you were trying to make though was in how to decide which way to go - free vs. paid - and then once you've made that decision, how to maximize the revenue opportunities associated with it.

This is a fine line to walk most certainly. Once you've made the decision to go free, if you didn't think of how to monetize what you're doing beforehand, you're going to struggle to introduce successful ways of doing so later.

In saying that, I think I would flip your statement, "you need to make friends as you plan to make money," around. You need to plan for how to make money before you make "friends."

I think this is what is proving to be quite the challenge facing YouTube, MySpace and Facebook. I don't believe any of them were built with an idea of how to make money as much as they were made to just help people with common interests and/or associations connect. They may have hoped to turn these ideas/sites/communities into money makers, but I don't see anything that makes me believe they had a plan for how to do so from the start.

Now as they test different ways to do this, they're upsetting various members of their communities and risk having those members disperse to places where their experience is consistent and they don't feel like they're being used or interrupted.

Anyway... a very timely post. Good stuff.

[Valeria Maltoni]

Carolyn Ann,

Of course the friend thing was not literal, or we're all looking for love in the wrong places : ) I know you get that.

And believe it or not, I knew what a bob was. Too many British movies? I love that humor. Apparently the Mr. Bean character is in reality a quite soft spoken gentleman of a brilliance unequaled.

I wrote a post not long ago about working with friends - you've got to define things really well, or the friendship goes.

[Valeria Maltoni]

Paul,

Delighted to have you here and thank you for sharing the link to Wired. That was a thought-provoking article.

"Once you've made the decision to go free, if you didn't think of how to monetize what you're doing beforehand, you're going to struggle to introduce successful ways of doing so later." You are exactly right.

I do wonder about Facebook. Wrote a couple of posts on it, too. If they were not planning, why are the legal notices and privacy notices so unfavorable to members? They *know* people don't take the time to read them. Yes, in that specific case I do wonder.

I am pleased that LinkedIn has an economic plan attached to it. It gives me and other professionals options to scale up. And that is preferable to having to opt out.