How Communities Generate Revenue

Communities generate revenue by providing a space where people who share a mission can gather, connect, and create value for one another. Some of that value comes from helping the members progress toward their common goal. Value is also created from the relationships that develop between members.

The key is that the community organizer does not have to create all of that value; the members also create it for each other. They might share knowledge, offer advice and feedback, provide support, make introductions, or collaborate with one another.

By providing the Community Space where these interactions happen, the community organizer creates new opportunities to generate revenue.
Sometimes members pay. Sometimes sponsors pay. Sometimes both do.

But before deciding how to generate revenue from a community, you need to understand why the community exists in the first place.

 

Community Revenue Starts With Member Value

A community needs to create value for both the community host and its members.

For the community host, that value is Organizational Value: the reason they invest the time, money, and effort required to support the community. If the goal is to generate revenue directly from the value the community creates, you're pursuing Community Revenue.

But members need their own reason to participate. The fact that the community organizer wants to generate revenue isn't one of them.

That's where the Shared Mission comes in. The Shared Mission is the common purpose that brings community members together and gives them a reason to participate. If members find value in pursuing that mission, they might pay for it.

So don't start by asking, “How can I monetize this group of people?”

Start by figuring out why these people should come together in the first place.

 

What Value Does the Community Create?

Once you understand why people are coming together, the next question is what value they create by participating.
Community Value generally takes seven forms:

• Knowledge: Members learn from what other members know and share.
• Support: Members help one another overcome challenges and make progress.
• Accountability: Members help one another follow through on their goals and commitments.
• Collaboration: Members work together on projects, problems, or opportunities.
• Access: Members gain access to people, opportunities, experiences, or resources they might not otherwise have.
• Feedback: Members offer perspectives and input that help one another improve.
• Connection: Members develop relationships with people who share their interests, goals, or experiences.

A community doesn't need to create all seven types of value. Different communities create different combinations.

A running club, for example, may involve relatively little exchange of Knowledge. Much of its value might come from Support and Accountability: members encourage one another to keep running and make it harder to skip a workout.

A fiction writing group might create value differently. Members can share Knowledge about writing, provide Feedback on each other's work, and create Accountability by encouraging one another to keep writing.

In both cases, the community host provides the space, but the members create much of the value for one another.

 

Who Will Pay for the Value?

 

Once you understand the value a community creates, the next question is who benefits from that value—and who might be willing to pay for it.
There are two potential sources of Community Revenue: members and sponsors. But they pay for different reasons.

Members share in the community's Shared Mission. They pay because pursuing that mission with other members is valuable for them.

Sponsors don't necessarily share in the Shared Mission. They pay because they value opportunities to engage with people who share that mission.

For sponsors, that value goes beyond reach. If a sponsor simply wanted to put a message in front of a particular audience, it could buy advertising. A community offers something different: access to a Community Space where members already gather, participate, and build relationships. That gives sponsors an opportunity to engage with members in a trusted context.

Members and sponsors can both pay within the same community. A professional conference, for example, might charge members to attend while sponsors pay for opportunities to engage with them.

 

How Do People Pay for Community Value?

 

Once you've identified something members or sponsors are willing to pay for, the next question is how you will monetize that value.
This is the difference between Value Creation and Value Capture. Value Creation is the process of producing benefits that people find useful, meaningful, or desirable. Value Capture is how an organization converts a portion of that value into revenue.

In Community Revenue, members create much of the value for one another. The community organizer captures a portion of that value by charging members or sponsors for opportunities the community creates.

The question is: How will people pay for that value?

• An annual conference might sell tickets to attend, while a professional community might charge recurring membership dues.
• A leads exchange group might meet every week and charge members a monthly fee to participate.
• A cohort learning program might charge a one-time fee for a program that lasts eight weeks.

Sponsors can pay in different ways, too. A company might sponsor a community's monthly virtual meetup in exchange for an opportunity to demonstrate its product to members. Or a local business might sponsor an exercise club in exchange for naming rights and its logo on the club's T-shirts.

There isn't one Community Revenue model that works for every community. The right model depends on the value the community creates and what members or sponsors are willing to pay for.

 

Community Monetization Mistakes to Avoid

 

Price is often considered friction: if you charge people to join a community, fewer people will join.
But maximizing the number of people who join isn't the goal. A smaller group of committed members can create more value for one another than a much larger group of people who rarely participate.

Asking members for payment invites them to make a commitment. Members who pay have made an intentional decision to join and have "skin in the game." That commitment matters because communities depend on members not only showing up and receiving value from others, but contributing value themselves.

A misplaced desire to reduce friction explains several common community monetization mistakes

 

Mistake #1: Building a Free and Paid Community

 

It can be tempting to offer two levels of membership: a free community that anybody can join and a paid community with additional access, experiences, or benefits.

The problem is that this leaves the community organizer effectively running two communities. Both need enough participation and attention to create value. This splits the organizer's time and resources between two groups, increasing the risk of burnout and reducing the quality of both experiences.

There's also a value capture problem. If the free community creates plenty of value, members have little reason to upgrade. On the other hand, if it doesn't create enough value, prospective members may conclude that the paid community isn't worth paying for either.

Creating a Visitor Ring, a concept introduced by Charles Vogl in The Art of Community, offers a better approach. Instead of creating a free membership tier, give prospective members a limited opportunity to experience the paid community before deciding whether to join. Their participation might be limited to a single meeting, occasional guest events, or a designated portion of an online group.

A free community gives people a free way to belong. A Visitor Ring gives people a free way to decide whether they want to belong.

 

Mistake #2: Making an Existing Free Community Paid

 

If you've already built a free community, putting the same experience behind a paywall can make your members feel like you're taking something away. This runs the risk of alienating your earliest supporters.

Instead of restricting access to existing value, create new value that's worth paying for.

But don't assume you know what that new value should be. Ask your members what else they want from the community. What would help them make more progress toward the Shared Mission? What do they wish the community offered that it doesn't offer today?

Their answers might lead to a new Community Space, experience, program, or other opportunity. A free online community could introduce a paid cohort program that brings members together around a specific goal. A free networking group could add a paid annual retreat.

By involving members in the decision, you're not only more likely to create something they value. You're giving them a sense of ownership in what comes next. They may be excited about contributing resources to help create something that unlocks even more value for members.

 

Mistake #3: Giving Founding Members Free Membership

 

Founding members play an outsized role in shaping a new community. Their behavior helps establish the culture by showing future members what participation looks like.

That makes it natural to want to reward them, but free membership is the wrong reward. It removes one of the ways founding members can demonstrate their commitment when they join.

It can also create problems over time. A recurring payment asks members to periodically decide whether the community is still worth belonging to. Founding members with free lifetime access never have to make that decision. Some may gradually stop showing up or contributing while remaining members indefinitely.

Giving them free membership in exchange for their early work can make that work feel transactional: You gave something to the community, so the community is paying you back. But that's not the relationship you're trying to create. You want founding members to see their contributions as part of what it means to belong.

Instead, reward founding members by recognizing their contributions: Invite your most active members to take on leadership roles within the community. Publicly acknowledge their contributions with a title, badge, token, or other symbol that carries meaning within the group.

You can still offer a discounted founding-member price to acknowledge that your earliest members are taking a chance on a community that hasn't fully established its value. But ask them to make a financial commitment just like the members who come after them.

You don't just need founding members; you need founding participants.

 

Mistake #4: Selling Lifetime Memberships

 

Lifetime memberships can be appealing because they bring in more revenue upfront. But they create a similar problem to giving founding members free membership: members make a financial commitment once and never have to make it again.

A recurring membership periodically asks the member a simple question: Is this community still worth paying for? That recurring decision provides an important signal about the value members receive. Members have to decide whether the community continues to create enough value to justify the price, and the community organizer has to keep earning a yes.

Actions speak louder than words. Members can tell you in a survey that they value the community, but renewing their membership is a stronger signal. They're putting money behind that assessment.

Lifetime memberships remove that recurring signal. Over time, some lifetime members may stop participating but remain members indefinitely. At the same time, the community organizer has committed to supporting their membership indefinitely without receiving ongoing membership revenue in return.

 

Payment as a Commitment Mechanism

 

Payment doesn't guarantee participation, but it gives members another reason to remain committed to the community.

That's important because the success of a community isn't determined by how many names are on the membership roster. It's determined by what those members do when they come together. A community with 50 members who regularly participate will create more member-to-member value than a community with 500 members who rarely show up.

In the long run, the goal isn't the largest possible community; it's meaningful participation that creates value.

 

What If Nobody Pays?

 

What if you launch your paid community and the revenue doesn't materialize?

Before changing the price, adding more features, or spending more money on promotion, figure out whether you have a product problem (the community itself) or a marketing problem.

A product problem means the community itself isn't creating enough value to justify what you're asking people to pay. A marketing problem means the community creates enough value for the people who experience it, but you're struggling to reach the right people or convince them to join.

The best way to tell the difference is to look at what people actually do:

• People aren't signing up: Start by looking at your offer and your marketing. Are you reaching the right people? Do they understand what the community is, who it's for, and why participating would be valuable? Is the value proposition compelling enough to get them to join? If people aren't getting far enough to experience the community, you don't yet know whether the community itself is the problem.
• People sign up but don't participate: Look at the product. Track attendance, repeat attendance, contributions, conversations, and whatever other forms of participation matter in your Community Space. If people join but don't engage, the community may not be creating enough value to bring them back.
• People participate but don't renew: This may signal a product problem. Members have experienced the community but may have decided that the value they're receiving isn't worth the price. However, some members leave because of changes in their personal circumstances that have nothing to do with the community. Others leave because the community has successfully helped them achieve their goals, and they no longer need it. Not every departure is a sign that the community has failed.
• People participate and renew, but growth is slow: Now you have stronger evidence of a marketing problem. The people who experience the community are participating and continuing to pay. The challenge may be reaching more of the right people and convincing them to join.

Pay attention to where people stop moving forward: signing up, participating, or renewing. Their behavior will tell you where to start looking for the problem.

 

The Bottom Line: From Community Value to Community Revenue

 

Communities generate revenue when bringing people together creates value that somebody is willing to pay for.
As you think about generating revenue from a community, four questions matter:

1. What value does the community create?
2. Who benefits?
3. Who is willing to pay for it?
4. How will they pay?

Community Revenue doesn't begin by asking how to extract more money from an audience; it begins by asking what becomes possible when members of that audience come together.

Once you provide value that people are willing to pay for, there are many ways to turn that value into revenue.