
2011: The Year the Free Ride Died - FluidDjango
http://www.readwriteweb.com/cloud/2011/12/2011-the-year-the-free-ride-di.php
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shabble
A consideration often overlooked in these 'pay money lest ye be the product'
quips is that quite often, a company might be pretty hard-pushed to make their
business model work that way.

If you're offering a free service to (many) users, and getting money from
(relatively fewer) advertising agents/networks, you have two things going for
you:

1) the people actually giving you money are professionals, who will probably
pay, and more importantly, will probably pay quite a lot over a single
deal/contract.

2) not having to scale your customer support to (tens of) millions of users
saves you a hell of a lot of money, especially if the people doing the paying
aren't the unwashed public who in general need their hands held to find caps-
lock.

If you switch from 1000s of customers each paying you $millions, to 10s of
millions of customers paying you $10, your support costs go through the roof:
you've got to deal with customer support/retention on a much larger scale,
your billing system needs to be up to the task, payment fraud will skyrocket,
etc.

I'm not sure how even someone like Facebook could weather the transition from
advertiser-pays to user-pays without a lot of pain and stock value implosion.

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theorique
It's not clear to me that the $4.99 or $9.99 per month will insulate you from
redesigns or other updates that the company sees fit to deliver to their
customers. If you're one customer in 1M, you're sunk if you represent a
minority opposed to a particular change (such as the Gmail redesign).

On the other hand, the ad-support argument makes sense - paying in cash rather
than advertising attention for a service removes the tension between 'users'
and 'customers' by making them the same person. Certainly a fee-for-service
Facebook might optimize the site in completely different ways from the
existing one - advertising impressions would not be a factor. However, as
others have said, it would simply not _be_ Facebook as we know it since it
would have much, much fewer than the existing 750M users (1%? 10%?).

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theBobMcCormick
Its interesting that they use Facebook as an example of the "evils" of ad
supported platforms. Facebook would _never, ever_ work as a fee-based
platform. Facebook is only useful if a critical mass of your family and
friends are on it, and that's just not gonna happen if it costs money.

~~~
gujk
How is Facebook different from telephone service, or USPS, or an ISP, under
your analysis?

(Sidenote: USPS actually is ad-supported by bulk mail, and "heavy users
subsidized" by parcel post. First class letter postage is really a nominal fee
to eliminate DOS and DDOS attacks. )

~~~
icebraining
All of those offered, at the time they appeared, a completely new service that
had essentially zero competition, and have become entrenched since then (can
you even e.g. get a job without a phone number?). Not to mention that the USPS
is mandated by law to exist, so it can hardly be compared with Facebook.

Facebook never offered anything so revolutionary. It's just a well put
together implementation of something that was already possible.

------
kbutler
What makes you think that even if you do pay money, the system you love will
continue? Or that the system you love will evolve the way you want it? Or that
you're not the product?

~~~
motters
If the systems you're paying for are proprietary, then they can, and sometimes
do, die the classic proprietary software death.

------
mwexler
Given some of the recent HN hubub over open source contribution (projects
complaining about rude users, users complaining that they aren't seeing
features they wish), I can't help but notice similar strains here in the free
with ads-freemium-pay world of online services.

Users expect free things to act like full paid products and services including
support and a recognition of their needs; free product makers understandably
want to monetize their services somehow and migrate towards approaches that
minimize costs and potentially alienate groups of users.

(Before we pull out the old canard that "yes, but you can add code to the open
source project" to belie my comparison, that "feature" doesn't help or impact
the zillions of non-programmer users of various tools and services out there
who are using it for free, can't contribute via code, but expect to be heard
because they are users (and yes, they can contribute translations, docs, etc
but again, most don't).)

I think this is a never ending conflict: users will always want free stuff.
Back in the 80s, packaged software got hammered on BBS forums (what we used
instead of HN) for making users pay for upgrades, even minor version numbers.
Users assumed that if they paid once, all upgrades should be free, even if
they delivered new functionality not originally mentioned for the purchased
version. Companies needed recurring revenue to pay for increasingly complex
development costs between major versions (well, and some were just greedy).
And so it goes.

Even if some ideas don't stick, this conflict has driven innovations in
micropayments, ad targeting, and even sponsorships. So, if nothing else, it's
a fun fight to watch.

~~~
wycats
The usual response by Open Source and free users (myself included, to be
honest) is "I'm paying with my attention".

Unfortunately, with the exception of open source contributors, that attention
is non-transferable, so while the instinct is quite reasonable from the user,
it does nothing to help defray the costs of building the free product to begin
with.

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gujk
Ads are not the only model for providing free rides. Other Sustainable models
exist:

Peer balancining: producers earn free credits for consumption. This is how
Internet backbone peering and Team Fortress 2 work.

Freemium, or light users are too cheap to meter, while heavy users pay. This
powered Zynga's IPO and many prosumer niches like Photography and web
analytics.

Open core with professional services for customization or support (a mix of
Freemium and free software). Cloudera.

------
JonnieCache
I thought he was talking about moore's law.

Surely free services have always come with a catch, since the dawn of time?

------
Tichy
To be honest, I am not interested in solving some web sites business problem.
They should be able to figure that out for themselves.

