June 18, 2011

AOL --> Hotmail --> Gmail = A Monetization Evolution

Want to disrupt your market? Sit down with your team around your monetization model and ask:

1. How could this product/service be free?

2. Who else could be paying for this instead of our customers?

3. Is our monetization model getting in the way of the product experience?

In 1989, AOL introduced the phrase "You've Got Mail!" to the world. In 1996, Hotmail came on the scene as one of the first web-based email services. Since it wasn't an ISP-based email service, users could access their email anywhere in the world and no longer felt as locked-in to their ISP, and best of all it was free! But there was a catch, it was only free to a certain level of storage space. Then Gmail (the crowd goes wild!) stepped in the room like the big gorilla it would become. Unlimited storage? Is that even possible? Would the "Over XYZ.ABC megabytes (and counting) of free storage." counter really be able to increase in perpetuity? Apparently, yes. I have 7595.2867 megabytes of free storage available as of this writing.

Could AOL or Hotmail be Gmail right now? Sure. (Note: according to comScore, Hotmail has more users than Gmail, but at one point everyone used Hotmail -- my guess is there are more active Gmail users even if there are more Hotmail accounts.) Note aside, Gmail disrupted Hotmail's market, just like Hotmail disrupted AOL's.

Gmail accomplished disruption for at least four reasons:

1. Hotmail and then Gmail provided customers with products they wanted. AOL knew what customers wanted, but my guess is that they were scared to let go of control. ISPs were popping up everywhere, but the consumer wouldn't give up his precious email address, would he? He will if he can access the email anywhere for free. He will if storage space is unlimited.

2. Gmail, in particular, innovated to the point that they no longer viewed the email product as the revenue driver. AOL viewed email as its key to keeping its stranglehold on on its revenue-driving service (but this type of view never works in a free market, or really in any successful market). Hotmail almost moved away from the focus on email as the revenue driver, but just couldn't bring itself to take that last step -- unlimited space. Gmail introduced AdWords to the email experience, thus figuring out how to leverage all this valuable personal data to monetize the experience in such a way that users didn't have to pay for it.

3. Gmail figured out how to get corporations to pay for individuals' email. As you read your emails you will (hopefully) click on the ads that (hopefully) relate to the things that you are interested in at that moment. Example: You are reading about the fact your friend just became an RN? Maybe you too would like to go to school to become an RN! Click on (this) ad to learn more!

4. Gmail didn't allow monetization to get in the way of user satisfaction. This is the biggest key. When your monetization model starts to create pain points, then you are ripe to be disrupted. (We need to make up t-shirts: "I'm about to DISRUPT YOU.") When your monetization model directly impacts the quality of the product experience, then you better sacrifice the monetization model because if you don't then you won't have a product to monetize.

When looking to disrupt (or to not be disrupted), the monetization model is a good place to start:

1. Could your current major revenue driver be offered free? Woah. Something to chew on.

2. Could you find someone (other than you or your customers) to pay for the products your customers use?

3. Is your monetization model getting in the way of the product experience? If so, watch out...disruption is coming!

1 comment:

  1. Wow, perhaps under this theory is how Kaplan Commitment was born...