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  Can Community Generate Revenue?
How can I make money with an online community? Is there any business in an online community?

This is one of the most crucial of questions regarding online community, as your community does need to contribute financially to your business in one form or another.

There are some basic things to bear in mind.

First, unlike many online components the correlation between community and revenue is not always direct. By fostering community on your web site you are encouraging a sense of loyalty and bonding with your site and your services or products. For example, by providing a community for users of a software product you may not be directly increasing sales from those individuals. However, the product might well attract new users because they can see that there is support for them and that by buying the product they are buying into membership of a community of like-minded people.

Second, the ROI (Return on Investment) for community is complex. It is not simply provided through investment, launched and then you walk away leaving it to generate business. A community which is going to generate business for you is also a community which you will have to have a long-term involvement in and strategy for.

Third, there are different forms of community which have differing revenue potentials. Choosing what kinds of community components are a) practical b) affordable and c) viable long-term, is central to how then that community provides you with business and what forms of revenue generation are available to you.

There are four keys ways in which community assists and encourages revenue, usually through e-commerce or other revenue-led bases such as advertising:

1. Assisted purchase – as mentioned above, the presence of other consumers in a purchase setting encourages new consumers, be that presence in the form of support for a product after purchase or information and review prior to purchase. Research shows that people will often use a community to find out about their purchases and are more likely to purchase from a location with such a community.

2. Referrals – community members are more likely to “spread the word” virally about their participation, their activities and purchases, leading to a good source of referrals.

3. Targeting Response – research also shows that community members are more likely to respond to targeted advertising and offers as a result of their bond to a community-focused web site. This includes such things as e-mail newsletters, but also because of the repeat visits to the community, community members remain targeted and can be targeted over time.

4. Repeat visits – community members re-visit their communities more often, by definition, and they also, according to research, are more likely to purchase and purchase in greater quantities than single-visit users.

There is definitely lucrative business potential to be found online by providing a solid community structure to your members. However, it is important that the community is built with goals in mind, aside from making money. For example, how many members you wish to reach, providing the most comprehensive site and community, provision of support to the membership, etc.

As mentioned before, it is not enough to place community components on your site and say that you have community. In online community building the phrase, "If you build it they will come." does not necessarily work. It is important that a community be well thought out, well designed, managed and maintained. That includes direct participation by you, and/or your site staff. When members feel as if they are getting the attention and time they deserve, not only will they frequent your site, but they will tell others and purchase any products you are selling on the site.

A well thought out, well-run community will help you to see the best ROI. Good luck!!

- Jon Nix and Pam Thomas
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