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11/07/2012 Surf Free or Die? It's Time to Pay for What We Consume.


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 their habits.

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 fees. 

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 and Twitter.

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 interested in?

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. 

ChocolateChipCookies

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.

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