The community income opportunity

Why do people join online communities?

For most, it is a combination of the following:

  • Growth and development – through learning and asking questions they can’t find anywhere else
  • Increased network – through better connection to likeminded individuals
  • Better job opportunities – through an increased network and exposure to roles before they are shared in other places

All of these reasons are valid reasons to join, but we think that there is a missing piece of the evaluation criteria today. In the future, community members will evaluate which online communities to participate in based on how much money they can make as a member.

As it becomes easier to start and join communities, it becomes harder to retain community members. More options to choose from raises the quality bar, and it will force community leaders to be creative with how they encourage members to stick around. Like it or not, money is the ultimate motivator, and the communities with the lowest churn numbers will be those that give their members a chance to profit off their membership.

As we spend more time online, the places we spend on the internet become the digital equivalent of a job; if you’re spending mindshare in a certain place, shouldn’t you be compensated? Money is the second most important consideration when evaluating jobs (behind personal growth), and that will soon become the same evaluation criteria for which communities to join.

At Confluence.VC, we’ve tested this a couple of different ways. This is what we’ve learned through those experiments.

  • Payouts for referrals. We require members to provide who told them about membership, and we reward those that send paying members our way. We haven’t found a way to automate this, and it takes ~1 hour / month to attribute the results to the right person. If your membership is paid, I would recommend paying at least 20-30% of earned revenue to the person that referred the business over to you.
  • Referral contest payouts. If you want to pour fuel on your referral program, contests are a good way to do that. I would recommend doing this only 1-2 times / year, or else people will lose interest. Your cash offer for the most referrals over a period (aim for a month of two) should be meaningful enough to motivate people, and you can do the math on what makes sense for your community. If membership costs $400 / year, you convert 10% of applications to paid members, and you expect this to drive 30 new leads to your community, you can budget for $1,200 ($400 * 30 * .10), and the cost will be offset by the new revenue created.
  • Split carry for syndicate deals. We run an investment syndicate on AngelList that pools money from our community + other LPs and invests into startups. Our pitch to members is that we will give them equity upside into these deals if they help us with diligence and securing allocation into rounds. Everybody is motivated by different things, and this provides a way to compensate people for contribution over a longer time period.
  • Expert network. Communities work because of the people inside them. These people have their own sets of skills and talents, and creating an expert networkfor them to showcase those talents and be discovered for them is low-lift way to create more value for community members. Community leads can monetize on this either by taking a take rate whenever the expert network is used (difficult to do and leads to unnecessary friction), or they can make it free and leverage it as a subscriber-only feature (easier to get adoption, more perceived value to join community, easier to justify ROI of membership if your community is paid).

At the end of the day, if you’re not helping people make more money, what are you even doing?

The whole idea of building a community instead of an audience is to share the value being created. Communities have provided intangible benefits like education, networking, and better job opportunities, but they have left money on the table for themselves and their community members.

As more people form their identities online, the more mindshare goes into different pockets of the internet. People will only stick around these different pockets as long as they are being entertained or rewarded, and it’s becoming harder and harder to compete on entertainment alone. Our species is driven by financial incentives, and providing those incentives is critical for today’s community builders.

I believe the lasting online communities of the next decade will be those that help put more dollars into their members’ pockets, and we’re going to continue to build Confluence.VC with this in mind.