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
    Mike Masnick (profile), 14 Aug 2012 @ 7:13am


    1. A paid service is primarily interested with keeping its users happy with the service, or they lose business. The primary goal is the users' happiness. In this respect, they are economically aligned, since the user will only pay for something they LIKE.

    But that argument fails, because the SAME THING is true of a fee based service. They have to be primarily focused on their users' happiness or their users go elsewhere and the advertisers go with them. Advertisers will only pay for something that has users, and users will only show up for something they like.

    Advertising-fed services can find themselves at odds with the users when they want to start discussing things which stand at odds with their advertisers. The service is obliged to 'filter' content at some level which stands to lose their advertisers money - or they lose the advertisers.

    Again, they can't get any advertisers at all if they don't have users, so the users' interests are still primary.

    Again: in my mind, fee-based service providers tend to treat me much worse than free ones. My mobile phone provider is always jacking up prices. Ditto my broadband provider. They certainly don't put my interests first.

    But then I think about the free services I use online, and they often do seem to put my interests first.

    I just don't see how one is more pure than another.

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