A Fee-Based Twitter Is No More Ideologically Pure Than An Ad-Supported Twitter

from the drop-the-crap dept

A few weeks ago, we posted a bit about Dalton Caldwell's argument that a fee-based Twitter made more sense for users, because the company wouldn't put advertisers first. Caldwell, of course, has now put his development skills where his mouth was and recently launched App.net, which kicked off with a Kickstarter-style funding campaign in which it sought $500,000, mainly from users who would pay $50/year for the service. Developers could pay $100 and there was a "pro" tier for $1,000. Over the weekend, the fundraising effort hit the target mark and it has since shot well past the amount.

First of all, I think it's great that we're seeing alternatives and someone like Caldwell trying to do something different. More competition is something I always think is a good thing, and I'm happy to see more players in the market trying different ways to do something. If anything, hopefully it will drive Twitter to stay more focused on providing a great service.

But I do have a complaint: Caldwell and others seem to be acting as if this fee-based effort is somehow more ideologically "pure" than a free-based system that makes money on ads. You can see it all over the website and especially in the video announcing the launch:
In that video, Caldwell insists that by setting up a "paid" service, he's aligning the economic incentives of the company with its users, and suggests that's not true with ad-based services, who focus on pleasing their advertisers first.

That's hogwash.

Two points:
  1. First off, App.net's interests are not economically aligned with its users. It wants money from those users, and all things being equal, those users want to keep their money. So their goals are actually diametrically opposed. Who's to say that App.net will always cost $50 per year? What if, a year from now, it needs a lot more to keep the service going. App.net has incentives to figure out ways to raise the price to bring in more money. Now, that's fine. That's how businesses work. But to suggest that the economic interests are aligned is simply not true. Coldwell argues that the interests are aligned because it now has to make the service as good as can be so that users will want to pay. But the same thing applies to free-based services, as we explain in the next point...
  2. A free-based service, supported by advertisers, has tons of incentive to keep its users just as happy as a fee-based service. Why? Because if it doesn't, people go elsewhere and the advertisers go with them. If the advertisements are too annoying and/or intrusive, people will go away and the value of that advertising drops. Any smart media property knows this, and actually works quite hard on keeping the user experience as good as possible, which quite frequently means pushing back against the desires of advertisers. Caldwell acts as if all such companies immediately give in to any ad company desire, which is either spoken from ignorance or out of a desire to misrepresent reality to benefit his own effort.
Again, none of this is to suggest that either model is "the right" model. But it's flat out ridiculous to suggest that either one is somehow economically pure or has interests more aligned with users. What amazes me, however, is so many people are repeating Caldwell's assertions as if it's absolutely true, when it's clearly not. App.net may turn out to be a success or it may be a complete flop. I hope it succeeds because I like to see new companies innovate and do new things. But if it succeeds it won't be because it's more pure or more aligned with users. It'll be because it just executes better.

So, please drop the moralizing about App.net being more pure. It's not. It's economically interested in taking its users' money. That's not that much different than a site that's economically interested in taking advertisers' money.

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  1. icon
    Ninja (profile), 13 Aug 2012 @ 11:31am

    Re: Re:

    $1 a month? who can't afford $1 a month?

    Pretty much any1 in a convoluted environment. They may have the money and be deprived of means to pay for instance.

    I don't think it's fair to say that a $1/month subscription fee would limit the appeal of Twitter to a niche portion of the population.

    Maybe a niche is indeed too small to describe but it loses reach. As I said, $1 may seem a tiny amount for you but it may not depending on who you are talking about. Maybe Justin Bieber Fans might pay to keep in touch with their stars and so on but merely to get in touch with friends? Sorry, there are better, free alternatives.

    Let us think Brazil for instance. Make it paid and they will lose the vast majority of Brazilian users. Much like if Facebook starts to be paid. A good portion wouldn't be able to pay in dollar but even if they could they wouldn't care. But they don't mind seeing the ads.

    I just don't think people, even cheap and broke people are quite as cheap and broke as you make them out to be.

    And yes there are those who can't spare a dime, I have friends that won't spend $3 on an extra portion of fries because they can't. Maybe this is not the case in America or in the developed world where no1 ever uses the neighbor's open wi-fi because they don't have the money. Hint: I have relatives in the US and my cousin who is currently a student does that.

    There's also the idea of making the services fee based for affluent countries and free in developing countries. That way the poorest of the poor (who live int he poorest places) won't have to pay but those who can afford it (on balance) will. Are you now going to propose that even poorer North Americans can't afford $1 a day? That's a little tough to defend...

    Get out of your bubble. And I don't find it quite fair to offer free for a group and not for another but it could be a business model yes. But then again, why not offer everything for free with a decent advertisement set up that's not invasive? Google does it right.

    Your thoughts on Spain and the Middle East aren't relevant and so while they're just an illustration, they detract from, rather than bolster your point.

    So you mean that the fact that there are manifestations, political, social or whatever, that use twitter (reddit, Facebook, Blogger...) as a platform is not a relevant argument that keeping them free increase their reach. Interesting. I'll ignore your friendly advice ;)

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