In a headline from yesterday, the Wall Street Journal tells us that Digg CEO Jay Adelson has one less thing to worry about: “Profitability Is Not A Problem Anymore.” In an interview with Fox Business Network, Adelson addressed the issue of monetizing social sites—but I’m not so sure I’d say profitability isn’t a problem anymore.
Adelson says that last year was the big year for pressure to monetize social sites—”to monetize fast and to get to profitability quick. This year, not as much. We’re back focused on growth.” (That’s all well and good for them—they are “monetizing well.”) And growth is good—but haven’t we learned anything yet? Having a lot of users isn’t a business model. Relying on angel investors for the next 20 years is not a business model. (Then again, I guess focusing on growth means you don’t think about the “next 20 years” just the “next 20 users.”)
Advertising, however, is a business model—and one that seems to be working for Digg, despite the economic downturn. Despite his insistence that they have no need to worry about monetization anymore, Adelson does focus on Digg’s advertising efforts—and recommends their model to newspapers (typos corrected) (because I’m like that).
Right now what we do is we go to these advertisers and try to convince them to create content as advertising. Instead of the standard billboard or whatever you read on the Internet, we’re going to create ads – and we do create ads – that are literally content, so if you click on it you read an interesting story or article, and you put branding next to it. And we get literally get 100 times the clickthrough rate of what a typical ad would get, so that’s good for advertisers. Now if I can take that same concept and syndicate it and put it on a newspaper site and help them monetize it the same way, I can help them solve their problems.
But advertising isn’t a panacea, even for Digg—while Adelson says that “We’re making money which is the most important thing” (not growth? Hm.), he also notes, “I feel like we’re going to get to profitability” (but he’s not losing sleep over it).
What do you think? Could the content as advertising model work for newspapers or other social sites (*cough*cough*YouTube)? How would you feel if you clicked on content only to discover it was (partially) advertising?