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
    Matt Flaschen (profile), 13 Aug 2012 @ 6:47pm

    Too dismissive of basic ideas, commerce and customer service

    It's certainly true that ad-supported platforms can't ignore users wholesale. And a lot get the balance pretty well, like the NYT. If users get upset enough, they will leave.

    And in fact, some already have left both Facebook and Twitter. But a lot of others will just create Facebook groups asking Facebook to change their policies. When Facebook does not, they will grin and bear it. After all, its free. Also importantly (and unlike a newspaper), people have network effects tying them to social networks. These make them reluctant to walk.

    I think it's silly to say, "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."

    When I walk into a local grocery store, I want to buy food at a reasonable price. They want to sell food to me at a reasonable price. Sure, I want lower prices, and they want higher ones. That's why, like you said, competition is vital.

    But they also want to please the person paying them money. That's why they try to help me find things, and bag my groceries for free (some offer to walk them to my car). We both want me to have a happy experience so I become a regular. So we're not "diametrically opposed."

    Any ad-supported service also has to try to please the people paying them money (advertisers). That doesn't mean they can or want to stab their users in the back at the first opportunity. But the tension is always there.

    With app.net, there are only two masters, users and developers. They have to choose prices that seems reasonable to the user and developer base, as well as their company. After that, they strive to please the two paying groups (whose interests are mostly aligned).

    There is no tension between pleasing customers and beneficiaries, since they are the same.

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