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  • Can GroupMe’s New Revenue Model Outsmart Twitter?

    Selling advertising presents an alternative revenue option to monetize free apps. The difficulty with advertising is finding a way to introduce it in a way that subscribers can swallow.

    It’s nearly impossible to get people to pay for what they’re used to getting for free.

    You may be familiar with a 2010 survey by the Center for the Digital Future. Of the nearly 2,000 respondents, exactly zero said they would even consider paying for Twitter.

    That’s just one illustration of a major problem companies that offer free applications are facing. The money’s got to come from somewhere…

    Selling advertising presents an alternative revenue option for these companies. The difficulty with advertising is finding a way to introduce it in a way that subscribers can swallow. In the aforementioned survey, 70% said that they find ads “annoying,” even though half never click on them.

    In March, GroupMe, an increasingly popular group text messaging/conference call application, began tackling this challenge in an innovative way.

    Their idea: rather than sticking ad banners all over their user interface or blasting random promotional messages to users, they started creating brand experiences around popular television shows, musicians, and events.

    Jared Hecht, GroupMe’s co-founder and co-CEO, believes  users will appreciate that they aren’t going to start seeing advertisements. “These are essentially brand experiences that give users a great time,” he said. “It’s a really cool way for brands to engage real life groups of friends that are already talking about the brand anyway.”

    These promoted groups can be found under the Feature tab, and they are completely optional, which is part of the appeal. The goal is to be as non-invasive (non-ad-like) as possible.

    As the app is SMS-based, there are also contextual ads based on each particular group. For example, TV program groups will send “reminders of when the show is on, tidbits from the characters, the behind-the-scenes inside scoop and more.”

    The members of groups for bands and concerts will receive updates on show dates, giveaways, and even chances to interact with the stars. “Bon Jovi could jump right in and answer questions for you,” said Hecht.

    That hardly seems like advertising, at least in theory…

    How are GroupMe’s users responding to this new option? The jury is still out.

    The question remains, what is the smartest way to monetize free apps. Twitter has yet to find a satisfactory answer for that one.

    Read “GroupMe Turns to Advertising” to see exactly what they’re doing over there.

    Upstart: Business and Management for 20-40 Year Old Professionals

    Filed Under: Tech/E-Commerce


    About the Author: Donnie Bryant is a direct response copywriter and marketing consultant. He specializes in improving businesses' sales and profitability by creating compelling marketing messages and strategies. Find out more about Donnie at http://donnie-bryant.com. You can also follow him on Twitter at @donniebryant and connect with him on Google Plus at +donniebryant.

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