2011: The Year the Free Ride Died | Hacker News Reader

2011: The Year the Free Ride Died

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35 pointsFluidDjango14 comments

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.

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%?).

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.

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. )

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.

First class mail generates 51% of the USPS revenue today, and is projected to hold onto 35% by 2020. Not quite a "nominal fee", I'd think.

I can send a letter or a package to my grandma via USPS without her having to pay any subscription to USPS or "sign up" for USPS in any way.

Now, the early days of the telephone system might have been a better comparison to use in your argument than USPS. But I think it could be easily argued that the early telephone offered something much more unique for it's time than Facebook does.

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?

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

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.

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.

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.

I thought he was talking about moore's law.

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

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

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