The Most Neglected Source of New Revenues

A significant overlooked source of revenues is frequently misunderstood: User-generated revenue. Instead of selling advertising, local sites can sell items directly to online visitors.

User-generated classifieds are similar to the revenue stream classifieds used to, according to Pat Scanlon, Director of Interactive at the Pittsburgh Gazette. "Readers spent $2 here, and $5 there to place a classified ad in a print product."

Those same users are still massively aggregated by legacy media companies and a key market for adding numerous small transactions.

Our Top Nine  article this week suggests key transactional revenue areas being tested around the country including Scanlon's top four user-generated initiatives that each bring in six figures plus  (you can also read how he doubled members in PG+ here  and in a Q&A style interview  here.)

User-generated revenue is also revenue that will be “taken” by pureplay competitors if local media companies do not take over the space.

As usual, most of the resistance comes from fears that connecting small and medium-sized busineses directly with buyers will wind up substituting smaller dollars for larger dollars. Anthony Wills, CRO of AllMenus.com says  that in almost every case, advertisers are willing to spend more on traditional advertising after  they see measurable results (a point we've made here before).

“It’s a chicken an egg situation. In the old way of doing things, we said give us $500, and we’ll bring you customers.

“Now we say, we’ll bring you customers, then spend some money and we’ll bring you more customers. It’s much easier to do it in that format.”

While traditional media was down-sizing,  Wills' original online-ordering business Campusfoods.com was just hitting its stride.  In the last six months Campusfoods.com sold 42,000 meals at 60 to 80 restaurants around campuses in Pittsburgh, alone. A review of the partnership opportunity with Allmenus.com, "Is AllMenus about to eat your lunch or buy it for you " is here.

Whlle user-generated dollars are only one leg of the new business model, local media is far too banner-centric. We’ll continue to look at who is having success with user-generated revenues in the weeks ahead.

Corrections: I've been informed that my headline "The difference between a ham sandwich and an omelette" got the joke wrong; it should have read the difference "between ham and eggs". My apoligies. 

Also, Stephen Weis graciously explained that the most important drawback to  partnering with Groupon is that the media company loses control of the e-mail list, which accumulates with each offer but belongs permanently to Groupon. Groupon knock-off companies offer partnerships in which the newspaper owns the email opt-in lists, providing a source of data for future programs. Point taken. 

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