Today, we have a wealth of opportunities to do things
digitally, through our mobile devices or on our computers. We have content to
read or watch, friends to chat or message with, pictures to posts, and snark to
tweet. For most of those, we’re able to do so by purchasing a device and Internet
connection. Few of us actually pay for all of that activity or content. No one
is paying for all of it. Some of us pay for a few things but not others.
Is that our fault or is it the fault of companies making
these things? A lot of digital businesses
still rest on the concept of monetizing “eyeballs,” that famous dot.com era
term. In the best sense that meant you’d make your money on advertising. In the
worst sense it meant that your business really didn’t have any business
strategy, only a hope that some other company would eventually buy you out. The
Instagram owners famously admitted that they had no plan to make money. Mark
Zuckerberg figured out a way for them by buying the company for $715 million.
Even if we don’t pay for using sites and service, free isn’t
free, though. The price of free is advertising. There are very few instances
where advertising doesn’t make the product worse; since most digital
advertising has little to do with the reason we use the products in the first
place. Digital advertising relies on advanced targeting which means part of the
price people pay is divulging some private information about themselves and
I struggle to find “free” advertising based content where
the advertising makes sense from a user perspective. An old example is
Stardoll, although I have to admit that most of the information about their
advertising strategy is three or four years old. They offered a smart
advertising platform that integrated with game play. I’m hard pressed to find
other good native content examples. Instead digital companies shoehorn advertising
onto sites with poor results for advertisers and consumers. No one on Facebook
is complaining that they see too few ads.
So, digital companies are changing the way they work so they
can make more money on advertising. Both Facebook and Google have implemented
changes over the last few years so that you see less content unless someone
pays for it (i.e. an advertiser).
Imagine, instead, if we actually paid for the sites,
channels and apps we used. I pay for
some of these, such as Spotify and Evernote. I pay the New York Times digital
subscription as well. It’s not a lot but paying for the extra services is worth
it. I’d pay for Instagram, Twitter and Facebook as long as they charged modest
Take Facebook for example, with its billion users. If they
charged everyone $4/year to use it, about the price of one Starbucks Grande Latte, it would triple or quadruple its income. Of
course, not everyone would pay. Even if half of all users dropped out (even
2/3, actually) they’d still make more money than they do on advertising. The people
who would stay are probably the ones who use it best, like it most, and get the
most value out of it.
Young digital companies don’t want to charge users right
away, they want to grow a following as big and fast as possible. Pinterest and
Instagram keep breaking records for the fastest growing sites or social
channels. If they charged people right away, they most likely would never have
achieved such growth.
Now that they have grown and proved their worth, is it too
much to ask people to pay to use the services? I think not. I think it’s a
choice business can reasonably offer its customers: Will you pay us to allow us
to keep making this experience better for you? Or would you rather we find some
ways to interrupt your experience with targeted or non-targeted advertising? I
would be willing to bet that the most valuable customers would agree to the
former. The overall numbers of user accounts would go down but we’re already
seeing a high number of fake or dormant accounts that populate both Facebook
At a recent tech event here, two young start-ups displayed
their wares next to each other. One was a gaming company that charged people to
download and play the game. The other was a social startup that was giving away
its software with the hope that people would use it. Guess who the VCs are more
Is paying for a good service the only solution?
If VC companies could only make money on operations and not
by selling companies, we would see a radical re-alignment of digital investment
and probably more digital properties that charged for services. If we saw more
native advertising combined with great digital ad creative, we might not mind
the interruption. But neither is likely to happen in the near term, despite the
many discussions to the contrary.
Face it, if you started a chocolate chip cookie company that
aimed to give away your product free in order to grow your customer base, every
bank, VC company and angel investor would laugh in your face. If it was a
digital chocolate chip cookie company, probably not.
I admit, that I love creating great online advertising (yes,
it’s happened more than a few times). But a look at the digital landscape’s
advertising is just a depressing and irritating exercise.
Maybe it’s time to kill Free. Let’s pay for the good stuff
and force the bad staff to improve or go away. Advertising won’t disappear but
maybe this would force it to be as good as the paid platforms it exists on.