How your non-profit can earn revenue with Web 2.0: Part 2 - Intellectual property

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This week, I return to the questions I recently posed about social media and social enterprise:

  • How can non-profits assess the financial value of their social media investments?
  • And perhaps even more fundamentally, how can they find the money to pay for sites that can be costly to build, and just as costly to run?

One potential answer lies in the value of intellectual property that non-profits create or distribute through their social media projects. The creation of a sophisticated web site involves the creation of a lot of intellectual property -- property that has financial value. This property can be monetized in a number of ways:

Software licensing: If you create a software service or web platform that is useful to other nonprofits, too, they may pay you to use it. You can license your software by selling it (one-time fee), by licensing (monthly or annual fees) or by hosting (including web hosting along with the software license itself). Before you take this opportunity, though, consider the potentially benefit -- for your mission and your brand -- of giving the software away to the people you serve, or organizations that are working for the same ends.

Content sales: If your staff or site visitors create original content on your site, you may be able to resell some or all of that content to other sites or media outlets. Just be sure that you are completely clear with your contributors that you will or may repurpose their work -- even if the contributors are staff. Make sure your user agreement on the site reflects how you're re-using content, and consider sharing revenue with your users (à la Squidoo, among others) as a way of motivating their contributions.

Data sales: If you have a high volume of site traffic, or serve an influential or sought-after audience, data on your site's users or usage patterns may have financial value. This an area in which you want to tread VERY carefully -- respecting your users' privacy is crucial to building site loyalty, and is also just a good thing -- so we'll return to it in our "gray zones" post. But you are probably ok if you are selling aggregate data, rather than individual data. For example, you could survey your users and sell the results of that survey -- perhaps as a quarterly "subscribers only" report. Here more than anywhere it is crucial to be 100% transparent about your use of data; burying this aspect of your business model in the fine print of your user agreement may provide legal coverage, but it won't make your users happy if they're caught by surprise. If you can explain how data sales support your work -- ideally, not just financially, but in some way supporting your mission -- so much the better.

mini-case: the Environmental Defense Fund launches GetActive

Environmental Defense is a large US-based non-profit that works on environmental issues, with a 300 person staff and a $72 million annual budget. In the late 1990s, Environmental defense had a total of about 8 staff on its online team, which was responsible not only for maintaining the main ED web site, but also a couple of related projects. One was scorecard.org, which provided information about environmental performance to the public. The other was actionnetwork.org, a site that gathered supporters' email addresses and turned them into online activists -- winning an early victory when they mobilized thousands of supporters to win a ban against the practice of "shark finning" (where hunters catch sharks, amputate their fins for sale, and return the sharks to the ocean to die).

As the team behind these two Internet projects outgrew its place within Environmental Defense's organizational structure, it came up with an innovative solution: spin the Internet project team off into a separate company. The new company launched in 2000, and eventually became GetActive Software. GetActive supplied software and services to Environmental Defense, and Environmental Defense got an ownership stake of less than 20 percent in the new company. GetActive earned an estimated $13 million in revenue in 2006, making it one of the largest software vendors to the non-profit sector, before selling to competitor Convio in early 2007. Later that year, Convio announced its intention to go public -- putting Environmental Defense in a position to reap the rewards of a still-forthcoming I.P.O.

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