are you the customer or the product
6 Oct 2011 06:41 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
kaigou[Note: get a drink and have a seat. This is almost up to my usual levels of longwindedness, but this time, I do have a point! Other than the one on the top of my head.]
I came across an insightful comment the other day while researching, and the comment resonated with me strongly in light of the requirements compiling I was tackling at the same time.
"If you're not paying for it, you're not the customer; you're the product being sold." -- blue_beetle
Think about that for a bit, but first I want to run past everyone some of the thoughts bouncing in my head as a result of researching Delicious, Diigo, Pinboard, and various other (past and present) bookmarking applications. One particular journal entry (from 2008) compares Delicious and Diigo, though I'll rephrase some of the author's conclusions, since I think he got his main summary backwards. Here's the basis of his argument, thought:
In essence (and to undo the backwards of his summary): Delicious is grounded in using content to find users, while Diigo emphasizes using users to find content. Somehow, I'm not surprised that so far, of the folks replying to my informal poll, that most of you have indicated that you follow the content and then, as a secondary step, discover like-minded users -- seeing how many of you have said you preferred old!delicious and don't like or care for the diigo approach.
Granted, these two things (users, content) are intertwined: you find a tag you want to follow, you start seeing the same names pop up, you realize the same people are marking things you're also liking, and you may switch your focus from the tag to the user, in hopes they'll lead you to even better stuff.
Here's the crux, though: what is the actual product?
This shit ain't free, y'know. Servers and storage and developers and designers don't just grow on trees. It's got to be paid for, either in cash or in kind or in stock or in some way, but usually cash since most landlords & mortgage companies don't accept vegetables, these days. If you see a product that you can consume, and it's free, someone paid for it. Maybe not you, but someone: NSTaaFL, after all.
In Delicious, and other user-generated-content sites, I'd argue the product is the content. If everyone posting on Livejournal, Dreamwidth, Wordpress, Blogspot, or any other journaling app were to summarily stop posting... the affected app would pretty much be rendered useless. In other words: if what draws people to your site is content, then it's not much different from, say, a three-author fanfic or fanart archive. Those three authors are limited (being only three people), but wow, between them, they've got hundreds of stories or art pieces or filk or whatever. The extent of their content overshadows any issue of the number of users. We go to those sites to immerse ourselves in content, not to be inundated by a bazillion users. (Not to say it's not a benefit if there are a bazillion users, just that if the users drop off, the content remains our primary lure.)
Diigo, however, appears to be following the later-model 2.0 path a la Facebook, or Google+, or even social sites like LinkedIn or SpiceWorks. They all allow free use. In the case of Spiceworks or Google+, they may even tell you outright that they're not going to be charging -- even ever -- for you to use their social site, err, service.
Let me step back here, to the days when I first found an investor, wrote a business plan, and opened a bookstore. It's really simple to write a business plan, for the most part. You show your overhead -- rent, insurance -- and your expenses -- materials, time, the cost of goods sold -- and your intended/hoped-for intake -- the cash you get for what you've sold. All business plans are a certain amount of fudging because it's damn hard to know ahead of time whether what you're selling is what people want, or even if they'll pay what you're asking, but you can usually get somewhat close to reality, give or take a bit.
Fast-forward to when I watched the world explode with the dot-com boom. Business after business after business, I saw some of those business plans, and many of them amounted to nothing more than: "If we build it, they'll come." Then what? How much do you actually make? How do you even know they'll come? (And who are 'they', anyway?) Add in the absolutely ludicrous concept -- still ongoing -- that online ads will actually create and/or increase sales (and this was in the days before 99% of the 'net had developed banner-blindness!) and I was, and remain, baffled as to who could be bamboozled into thinking any of this was a solid business plan. It's like that old joke:
1. Build it.
2. --stuff happens--
3. Count your profits!
The simple fact is that money makes money, and it's not a business unless you have something to sell. So the question I'm always asking is: if the service (read: social network) is free, then what's being sold?
The answer, dear reader, is us.
We are the product. Facebook, as the current presiding daddy of 'em all, doesn't really care if you post long and involved substantive content. Hell, it barely gave you 255 characters for most of its existence. Twitter gives you what, 140? It's purely a byproduct, I'd argue, for Facebook to claim copyright on all pictures you post; they're just being opportunistic. What they really want is foot traffic. Three users and five hundred pages of content would be a complete fail for this business model... but five hundred users and only three pages of content would be a success. Because the more users, the more there is to sell to advertisers.
Here's how the basic business model works: advertisers pay for a venue in which they're guaranteed a captive audience of X number of eyeballs. Okay, then, we just need to come up with a service that will captivate at least X number of eyeballs, for long enough to register their visit and count it as a hit. Content is a plus, because that does get users to come back repeatedly, but the hits are what we really want. That's how we make money.
What happens? You get microblogging... because this means you must check the site, and re-check the site, to see the latest, as often as possible. Every time you return, that's a hit to the site. The number clocks up one more, and the advertisers are thus convinced they're getting their money's worth. That means you don't want long and involved posts -- those keep people on the same page, for a long period of time, and it also means things can slow down, which means users might only check in once a day, maybe every few days, maybe even only once a week. Nooooo. You want users coming back again, and again, and again, so you want things to move really, really fast, so the users have to come back repeatedly just to keep up with it. And you do that by making sure that no one can be around (speak/post) very much at once. Quick, fast, get-in, get-out, but what you're really doing is teaching people to return repeatedly, check over and over, and increasing the number of hits to your site.
This isn't to say that the service provided is unwanted, or that we're all suckers for checking Twitter every five minutes. If users didn't want a service, they wouldn't use it, and obviously (as the dot-com bust taught us, though not everyone learned that lesson judging from some sites) just because you built it doesn't mean everyone's coming to your party (let alone bringing cash).
The other half of this coin are the advertisers. They're not exactly altruistic. It's true there's been no major, long-term studies (that I've seen) that verifies absolutely that online advertisements really work (especially, again, with that whole banner-blindness people have inculcated). But one truth in business is that hope does spring eternal, and even if it's only one in a hundred people will click on your link, that's still a lot of people if it's a total of a bazillion people walking by. It's the online version of the mantra, "location, location, location". (Which, by the way, is absolutely true... as far as brickfront businesses go.)
Here's the catch, though: the economy. When times are flush, you can figure the average middle-class or even working-class person has a little extra money, and they're not so adverse to spending it on things other than food, rent, the necessities. The banner-blindness won't be so severe, because the user isn't being austere. Advertisers may still be working on the 1-in-100 actual clicks, but hey, there's a bazillion people passing by. When times are bad, though, only the top-most tier is going to continue to be flush. The rest of us are having a hard enough time just with the basics. We may make up 97% of the online traffic, but our actual buying power has dropped considerably, almost precipitously. Suddenly, the numbers would be more accurately represented as 1-in-1000, if not an even greater proportion.
Which is fine! ...so long as you're advertising on a site with a bazillion people. If you're not, if your site has lower traffic overall (three users, lots of content), you're not going to be able to offset the reduced spending overall with enough numbers. That's why Facebook can continue to be flush, since it does have the bazillion eyeballs every few minutes, to keep the numbers dramatically high. It's also why Facebook keeps redesigning itself to smash up against any competitors like Google+, so it doesn't lose those numbers. Any other site -- *cough*livejournal*cough* -- that uses advertising to bolster its income is probably going to find itself losing revenue, as advertisers shy away from it.
(Tangentially: this is why Google's AdSense is so popular amongst advertisers and site owners. It compresses a whole bunch of small, low-traffic sites, into behemoths that combined can provide a bazillion eyeballs, which in turn makes them -- as a group -- attractive to advertisers, who just want the damn numbers.)
Speaking of Livejournal, this is where you get into the latter-day model of the dot-com: the blend. This is the model you also see on Diigo, on Linkedin. There's a free level, where you're going to see lots of ads, and there's the paid models, which give you a few more benefits but with no ads. Instead of a system like Dreamwidth, where the paying customers are (hopefully) enough to offset the greatly-more free users, the ads are supposed to pay for the free users, and the paying customers are enough to pay only for themselves. Basically, this kind of blend is hedging its bets on advertising being enough to pay for everything -- plus, in some cases, the application is something that's enough of a useful, or valuable, service that a decent chunk of people would pay for it.
[ETA: Technically, Linkedin is doing a variation on this, in that its ads are from its own users, such as companies and recruiters seeking employees from among the Linkedin user-group. So, still ads, but not the usual Facebook annoyance kind, being more Linkedin-related.]
There's another kind of blend, which is really just Facebook on steroids, as typified by Spiceworks. That company creates software for network management -- but the software is always free. Businesses are installing it, running it on internal servers and whatnot, but they're getting advertisements. Inside their company. Right: at your desk, at work, you're seeing ads. Talk about a captive audience -- it's your freaking job and you've still got to keep on those banner blinders.
But Spiceworks isn't entirely just free software bolstered by ads; it's also a social network. It's a big honking, complex, multi-layered BBS/forum, where people from across the IT industry can chat, provide help, ask questions, even look for jobs. And that part, also, is completely free, and Spiceworks is determined to keep it so. Again, the catch, as buried in an article from eCommerce Times:
Reread. Spiceworks is culling data (creating a product) from its "population of users" (product-producers) ... to help its customers. Customers? Who are these customers? Are they not the same as the users?
If Facebook, Livejournal, and the rest are any sign, the answer is No. The users are the product. Including a social network independent of the software just boosts the foot traffic, which in turn boosts the data collection.
And that's where we go beyond the simple realm of advertisers who want X number of eyeballs per minute... and into how we, ourselves, become the product. We're not longer being touted as foot traffic, with vague numbers waved about of how many of us might be expected to buy. It might not even matter anymore, really, whether we buy anything -- because we, ourselves, are the product. Spiceworks, like Facebook, is no longer selling eyeballs. It's selling data. It's selling our data.
Think of it like this: the problem with chanting the mantra, "location, location, location" is that the first step is therefore to figure out what's a good location. You can't just randomly plunk your finger on a map and think that's good enough, and for that matter, just driving around and seeing a place for rent might not even work. You need context. What other businesses are nearby? You need to know your own business: is it destination (like a car dealership), or is it mostly impulse/browsing (like a bookstore)? If you're a drop-in kind of brickfront, then you may benefit from being near businesses that get intentional visitors -- or you may benefit more from being around ten other businesses that also welcome foot-traffic, so you could snag some of that meandering foot traffic, too. This is the reason why mall square footage and downtown pedestrian shopping areas are so damn expensive.
All that is data. Where do the people go? What catches their eye? Which businesses do they return to? What do they tell their friends about? What attracts them, what repels them? And so on... and every time you "like" something on Facebook, or share something on reddit or digg or stumbleupon or google+ or whatever, you're being recorded, somewhere, as one more number that likes this, responds to that, and pushes along the viral trends. And if you're a company, a website, that can gather massive amounts of this information, then you are a company with some serious power: because you are the one who gets to tell other companies where the best locations are.
And when you consider how pervasive the stupid little thumbs-up "like" button is on sites all over the freaking web, you realize that Facebook isn't just tracking you as a user, on Facebook itself. It's following you everywhere -- and with Facebook, now, you don't even have to be a member. For that matter, Google's tracking you, too, and plenty of others are coming up along behind them. They're reading your cookies from other sites, seeing where you went and what you read and what you clicked on, and they're turning it into reams of data and they're selling you.
Let's consider the alternate model, of which Dreamwidth is one example. It's a purer model; I'd call Linkedin, Livejournal, Flickr, and Diigo straddlers, seeing how they have low-level with ads and subscription-levels without ads (and with increased features). But Dreamwidth is one of the few I can think of, off the top of my head, that doesn't blast you with ads even when it's free.
Again, the question is: if you're getting it for free, who's paying for it? Easy, this time: it's the rest of us. We who are paid subscribers are (hopefully) generating enough income that Dreamwidth can afford to let the rest of you tag along. It's the same model Livejournal started with.
Here's the catch, though -- and why, I'd argue, Dreamwidth must stick to the original 2.0 model, and not move to the late-model 2.0 -- the application must provide content. Lots and lots of content. Sure, you could argue semantics and say we're still the product -- or at least, we're the product-producers -- but the key here is that we are also the consumers. In a sense, we're "paying" for our use by "producing" goods-in-kind. Vegetables, or content, we're trading our production for the benefit of accessing everyone else's production.
The foundation, and possibly IMO the most important detail of this, is that it creates a symbiotic situation. Let's be optimistic and say that roughly 25% of your subscribers pay. That means 75% are getting a free ride... but not really. They're producing. More cynically, you could say that the paying users are the consumers of the non-paying users (as we also consume ourselves, and each paying-other, which is kinda gross when you think about it, but whatever). It's symbiotic: there aren't enough paying users to create enough content to make it worth paying for, so we need the non-paying, high-content-producing users to create the bulk of the value. Sounds crazy, but it works, and Dreamwidth (and, I'd say, Fanfiction.net) is proof.
That's why a business in this model absolutely can not risk losing its non-paying content-producers. Think back to when Livejournal started cutting back on its basic plan: basic users started losing various benefits and extras, while gaining the disruptive and annoying and pervasive ads, and the bait-and-switch continued up through the levels, a little at a time. That change in the weather happened after a series of Livejournal fiascoes that alienated, then outright drove off, huge chunks of its most dedicated (and oftentimes paying) customers. And in case it's not obvious, I'm talking about fandom.
So the free users left, because they weren't welcomed, and the paying customers left because (a) the content they wanted went elsewhere, and (b) the lack of content made the service less valuable, thus (c) the paying users voted their disapproval by not paying.
Thus we get the need for ads, to compensate for the fact that the service lost its original path -- where content is the value. Livejournal had swung wildly off the side of the mountain and was now careening top-speed into a rock-bottom ravine.
As a note, this isn't to say that Livejournal is dying. It's just to explicate that it can become a vicious cycle: losing your content means you rely more on advertisers, and that means needing to reach bigger numbers of people, which means caring less about content because you just want foot traffic, so you start casting off the questionable or marginal content-makers, and trying to encourage more quick-hits kind of traffic... which, by the way, was probably the basis for Livejournal's catastrophic attempt to link itself with Facebook. It had lost enough content that it needed to compensate by creating revenue by, bluntly, selling its users.
Now, the thing about an application where content is king... is that you do not want people coming by for only a second and leaving again. Those numbers mean next to little to you -- in fact, they're a sign you don't have enough content to keep people occupied on your site.
Think about when you're shopping. Maybe you need new shoes. You walk into a store, you glance around, you see nothing that jumps out at you, and you leave. Well, so much for browsing. Any chance of a last-minute sale by the register is gone. Hell, any chance of you just being a warm body -- to make the store look "occupied" -- is also gone. I'm not kidding; one reason for foot traffic's value is that people unfamiliar with your store are still more likely to come in and browse if they see lots of people inside. They assume that "lots of customers" means you have something worth buying. It's popular, ergo, let's spend.
So you want people to come to the site, and stay there awhile. Produce stuff -- comments, posts, polls, whatever. In a shop, we get this just by having lots of people in the aisles, which brings in more people. One in ten might buy, so if you can get fifty through the door, that's clearly better than just five people who leave without buying at all. On a site, no bodies, so we have to look for their footprints: their comments, replies, posts, shares, photosets, links, etc.
The more content that's produced, the more we users see its hosting site as valuable, and the more likely we are to be willing to pay for that content. It's not like the average person really wants, or needs, or even cares, about things like other users' data, any more than we'd walk into a car dealership with the sole purpose of finding out what's the most popular car this year. We might be curious as part of the process of buying a car, but ultimately we are in the dealership to look at cars -- the product (content) itself. Knowing which one is popular is just a nice by-product. Other people's data is the same. It's a by-product. Without the actual product/content, it's worthless -- would you walk into an empty warehouse, sans cars, just to find out what car is popular?
Alright, now let's get back to Delicious before I end up keeping all y'all here all night. Originally, Delicious was classic 2.0 -- the content (links) were user-produced, and the focus was pretty strongly on managing those links, finding those links, finding new links. Finding other users was a by-product, and it wasn't immediately easy. It just wasn't the app's true focus. I've read several post-Yahoo-buyout articles that critique the Yahoo purchase, and the fact that Yahoo ended up ditching the app.
Why? Because Yahoo wanted its own Facebook. It wanted numbers... but Delicious was all about content. Now, I won't argue that it's damn hard to monetize a content-producing application if you went around insisting to everyone that you never would -- erm, correct me if I'm wrong, but wasn't the original Delicious completely free? -- but I don't think it's impossible, Dreamwidth being a very good example (along with Flickr) of how you can do it, and quite successfully. But Yahoo kept Flickr and ditched Delicious, and I think it's because the monetization wasn't there.
This part, I'm just guessing, but it seems logical to me: Yahoo took the same wrong turn as Livejournal.
They assumed the content produced was valueless.
Look, a lot of people in the world see fandom as a little kooky, if not downright scary when we start slogging it out in shipping wars. We're obsessing about television shows, for crying out loud, or bands, or movies, or books that fell into the public domain a hundred years ago. We're posting pictures of people that don't exist, or arguing over the characteristics of someone at forty who was eleven in the original series. I can't really blame someone on the outside for not taking us seriously. We are a little scary when we buttonhole people about why, exactly, the dialogue in our favorite show is just like billiards.
Delicious was all that, dialed up to eleven: because it's not even 'our' content. It's links. It's a whole bunch of bookmarks, like we've just collectively dumped our Firefox or Safari or Opera or IE bookmarks into a shared database. Hell, Google's bots gather up the same amount on a daily basis, and they don't even require we hairless monkeys at the keyboard. The Delicious users were just librarians, tagging and cataloging books other people wrote (produced), so... I can see Yahoo thinking, this isn't really content. It's all meta. It's content, kind of, about content. And a lot of it's pr0n, for that matter. Uhm. What do we do with this?
In other words, like Livejournal (more intentionally, I'd say, but still, end result the same), Yahoo saw the content-producers as being of no value, and had no comprehension of the value to the consumers themselves. What the fans produced -- created and consumed -- was devalued because fandom itself was devalued.
And when you remove the fans from the mix, as though they don't count at all... you get, well, nothing.
And if you take that nothing, and you then try to rearrange it so it'll be monetized in the Facebook style -- where the users themselves are the value -- then two things happen. One, you want even less of those kooky fandom folks with their crazy pr0n obsessions, because they scare advertisers and you can't predict what'll make fans happy, anyway. Two, you've completely wrecked the app's entire raison-d'etre -- and fans, as the Pinboard google docs have shown -- do not just get annoyed, they walk, and they make a lot of noise as they walk. And if you ask them to talk, be prepared for the deluge... and if you then do not listen, be prepared for the apocalypse. (Fanopalypse?)
Okay. Ignoring that Livejournal and Yahoo don't value fandom's content-contribution, and the new Delicious can't seem to figure out how to retain the users while still mining them for all the data it can, the only option may be to follow Dreamwidth's route through the post-dot-com haze. That is, to recognize that the only ones who truly value fandom-produced content are the fans, and to embrace the model wherein those of us who can pay, do, and those can't, help produce. And then do that whole symbiotic content-production happiness, except being fandom, we'll find a way to vid it, or filk it, or maybe we'll just link to it -- repeatedly, and en masse -- and screw up all those Facebook data crunchers.
And we won't be sold by anyone, or sell ourselves to anyone.
More thoughts later. For now, it's your turn.
I came across an insightful comment the other day while researching, and the comment resonated with me strongly in light of the requirements compiling I was tackling at the same time.
"If you're not paying for it, you're not the customer; you're the product being sold." -- blue_beetle
Think about that for a bit, but first I want to run past everyone some of the thoughts bouncing in my head as a result of researching Delicious, Diigo, Pinboard, and various other (past and present) bookmarking applications. One particular journal entry (from 2008) compares Delicious and Diigo, though I'll rephrase some of the author's conclusions, since I think he got his main summary backwards. Here's the basis of his argument, thought:
Delicious, an original web 2.0 company, still has “user-generated” as its core raison d’être. Diigo has the later-stage web 2.0 philosophy of being a “social network”.
In essence (and to undo the backwards of his summary): Delicious is grounded in using content to find users, while Diigo emphasizes using users to find content. Somehow, I'm not surprised that so far, of the folks replying to my informal poll, that most of you have indicated that you follow the content and then, as a secondary step, discover like-minded users -- seeing how many of you have said you preferred old!delicious and don't like or care for the diigo approach.
Granted, these two things (users, content) are intertwined: you find a tag you want to follow, you start seeing the same names pop up, you realize the same people are marking things you're also liking, and you may switch your focus from the tag to the user, in hopes they'll lead you to even better stuff.
Here's the crux, though: what is the actual product?
This shit ain't free, y'know. Servers and storage and developers and designers don't just grow on trees. It's got to be paid for, either in cash or in kind or in stock or in some way, but usually cash since most landlords & mortgage companies don't accept vegetables, these days. If you see a product that you can consume, and it's free, someone paid for it. Maybe not you, but someone: NSTaaFL, after all.
In Delicious, and other user-generated-content sites, I'd argue the product is the content. If everyone posting on Livejournal, Dreamwidth, Wordpress, Blogspot, or any other journaling app were to summarily stop posting... the affected app would pretty much be rendered useless. In other words: if what draws people to your site is content, then it's not much different from, say, a three-author fanfic or fanart archive. Those three authors are limited (being only three people), but wow, between them, they've got hundreds of stories or art pieces or filk or whatever. The extent of their content overshadows any issue of the number of users. We go to those sites to immerse ourselves in content, not to be inundated by a bazillion users. (Not to say it's not a benefit if there are a bazillion users, just that if the users drop off, the content remains our primary lure.)
Diigo, however, appears to be following the later-model 2.0 path a la Facebook, or Google+, or even social sites like LinkedIn or SpiceWorks. They all allow free use. In the case of Spiceworks or Google+, they may even tell you outright that they're not going to be charging -- even ever -- for you to use their social site, err, service.
Let me step back here, to the days when I first found an investor, wrote a business plan, and opened a bookstore. It's really simple to write a business plan, for the most part. You show your overhead -- rent, insurance -- and your expenses -- materials, time, the cost of goods sold -- and your intended/hoped-for intake -- the cash you get for what you've sold. All business plans are a certain amount of fudging because it's damn hard to know ahead of time whether what you're selling is what people want, or even if they'll pay what you're asking, but you can usually get somewhat close to reality, give or take a bit.
Fast-forward to when I watched the world explode with the dot-com boom. Business after business after business, I saw some of those business plans, and many of them amounted to nothing more than: "If we build it, they'll come." Then what? How much do you actually make? How do you even know they'll come? (And who are 'they', anyway?) Add in the absolutely ludicrous concept -- still ongoing -- that online ads will actually create and/or increase sales (and this was in the days before 99% of the 'net had developed banner-blindness!) and I was, and remain, baffled as to who could be bamboozled into thinking any of this was a solid business plan. It's like that old joke:
1. Build it.
2. --stuff happens--
3. Count your profits!
The simple fact is that money makes money, and it's not a business unless you have something to sell. So the question I'm always asking is: if the service (read: social network) is free, then what's being sold?
The answer, dear reader, is us.
We are the product. Facebook, as the current presiding daddy of 'em all, doesn't really care if you post long and involved substantive content. Hell, it barely gave you 255 characters for most of its existence. Twitter gives you what, 140? It's purely a byproduct, I'd argue, for Facebook to claim copyright on all pictures you post; they're just being opportunistic. What they really want is foot traffic. Three users and five hundred pages of content would be a complete fail for this business model... but five hundred users and only three pages of content would be a success. Because the more users, the more there is to sell to advertisers.
Here's how the basic business model works: advertisers pay for a venue in which they're guaranteed a captive audience of X number of eyeballs. Okay, then, we just need to come up with a service that will captivate at least X number of eyeballs, for long enough to register their visit and count it as a hit. Content is a plus, because that does get users to come back repeatedly, but the hits are what we really want. That's how we make money.
What happens? You get microblogging... because this means you must check the site, and re-check the site, to see the latest, as often as possible. Every time you return, that's a hit to the site. The number clocks up one more, and the advertisers are thus convinced they're getting their money's worth. That means you don't want long and involved posts -- those keep people on the same page, for a long period of time, and it also means things can slow down, which means users might only check in once a day, maybe every few days, maybe even only once a week. Nooooo. You want users coming back again, and again, and again, so you want things to move really, really fast, so the users have to come back repeatedly just to keep up with it. And you do that by making sure that no one can be around (speak/post) very much at once. Quick, fast, get-in, get-out, but what you're really doing is teaching people to return repeatedly, check over and over, and increasing the number of hits to your site.
This isn't to say that the service provided is unwanted, or that we're all suckers for checking Twitter every five minutes. If users didn't want a service, they wouldn't use it, and obviously (as the dot-com bust taught us, though not everyone learned that lesson judging from some sites) just because you built it doesn't mean everyone's coming to your party (let alone bringing cash).
The other half of this coin are the advertisers. They're not exactly altruistic. It's true there's been no major, long-term studies (that I've seen) that verifies absolutely that online advertisements really work (especially, again, with that whole banner-blindness people have inculcated). But one truth in business is that hope does spring eternal, and even if it's only one in a hundred people will click on your link, that's still a lot of people if it's a total of a bazillion people walking by. It's the online version of the mantra, "location, location, location". (Which, by the way, is absolutely true... as far as brickfront businesses go.)
Here's the catch, though: the economy. When times are flush, you can figure the average middle-class or even working-class person has a little extra money, and they're not so adverse to spending it on things other than food, rent, the necessities. The banner-blindness won't be so severe, because the user isn't being austere. Advertisers may still be working on the 1-in-100 actual clicks, but hey, there's a bazillion people passing by. When times are bad, though, only the top-most tier is going to continue to be flush. The rest of us are having a hard enough time just with the basics. We may make up 97% of the online traffic, but our actual buying power has dropped considerably, almost precipitously. Suddenly, the numbers would be more accurately represented as 1-in-1000, if not an even greater proportion.
Which is fine! ...so long as you're advertising on a site with a bazillion people. If you're not, if your site has lower traffic overall (three users, lots of content), you're not going to be able to offset the reduced spending overall with enough numbers. That's why Facebook can continue to be flush, since it does have the bazillion eyeballs every few minutes, to keep the numbers dramatically high. It's also why Facebook keeps redesigning itself to smash up against any competitors like Google+, so it doesn't lose those numbers. Any other site -- *cough*livejournal*cough* -- that uses advertising to bolster its income is probably going to find itself losing revenue, as advertisers shy away from it.
(Tangentially: this is why Google's AdSense is so popular amongst advertisers and site owners. It compresses a whole bunch of small, low-traffic sites, into behemoths that combined can provide a bazillion eyeballs, which in turn makes them -- as a group -- attractive to advertisers, who just want the damn numbers.)
Speaking of Livejournal, this is where you get into the latter-day model of the dot-com: the blend. This is the model you also see on Diigo, on Linkedin. There's a free level, where you're going to see lots of ads, and there's the paid models, which give you a few more benefits but with no ads. Instead of a system like Dreamwidth, where the paying customers are (hopefully) enough to offset the greatly-more free users, the ads are supposed to pay for the free users, and the paying customers are enough to pay only for themselves. Basically, this kind of blend is hedging its bets on advertising being enough to pay for everything -- plus, in some cases, the application is something that's enough of a useful, or valuable, service that a decent chunk of people would pay for it.
[ETA: Technically, Linkedin is doing a variation on this, in that its ads are from its own users, such as companies and recruiters seeking employees from among the Linkedin user-group. So, still ads, but not the usual Facebook annoyance kind, being more Linkedin-related.]
There's another kind of blend, which is really just Facebook on steroids, as typified by Spiceworks. That company creates software for network management -- but the software is always free. Businesses are installing it, running it on internal servers and whatnot, but they're getting advertisements. Inside their company. Right: at your desk, at work, you're seeing ads. Talk about a captive audience -- it's your freaking job and you've still got to keep on those banner blinders.
But Spiceworks isn't entirely just free software bolstered by ads; it's also a social network. It's a big honking, complex, multi-layered BBS/forum, where people from across the IT industry can chat, provide help, ask questions, even look for jobs. And that part, also, is completely free, and Spiceworks is determined to keep it so. Again, the catch, as buried in an article from eCommerce Times:
Specifically, Spiceworks is beginning to harvest activity data from its growing population of users to produce interesting benchmark statistics that can help its customers better understand industry best practices.
Reread. Spiceworks is culling data (creating a product) from its "population of users" (product-producers) ... to help its customers. Customers? Who are these customers? Are they not the same as the users?
If Facebook, Livejournal, and the rest are any sign, the answer is No. The users are the product. Including a social network independent of the software just boosts the foot traffic, which in turn boosts the data collection.
And that's where we go beyond the simple realm of advertisers who want X number of eyeballs per minute... and into how we, ourselves, become the product. We're not longer being touted as foot traffic, with vague numbers waved about of how many of us might be expected to buy. It might not even matter anymore, really, whether we buy anything -- because we, ourselves, are the product. Spiceworks, like Facebook, is no longer selling eyeballs. It's selling data. It's selling our data.
Think of it like this: the problem with chanting the mantra, "location, location, location" is that the first step is therefore to figure out what's a good location. You can't just randomly plunk your finger on a map and think that's good enough, and for that matter, just driving around and seeing a place for rent might not even work. You need context. What other businesses are nearby? You need to know your own business: is it destination (like a car dealership), or is it mostly impulse/browsing (like a bookstore)? If you're a drop-in kind of brickfront, then you may benefit from being near businesses that get intentional visitors -- or you may benefit more from being around ten other businesses that also welcome foot-traffic, so you could snag some of that meandering foot traffic, too. This is the reason why mall square footage and downtown pedestrian shopping areas are so damn expensive.
All that is data. Where do the people go? What catches their eye? Which businesses do they return to? What do they tell their friends about? What attracts them, what repels them? And so on... and every time you "like" something on Facebook, or share something on reddit or digg or stumbleupon or google+ or whatever, you're being recorded, somewhere, as one more number that likes this, responds to that, and pushes along the viral trends. And if you're a company, a website, that can gather massive amounts of this information, then you are a company with some serious power: because you are the one who gets to tell other companies where the best locations are.
And when you consider how pervasive the stupid little thumbs-up "like" button is on sites all over the freaking web, you realize that Facebook isn't just tracking you as a user, on Facebook itself. It's following you everywhere -- and with Facebook, now, you don't even have to be a member. For that matter, Google's tracking you, too, and plenty of others are coming up along behind them. They're reading your cookies from other sites, seeing where you went and what you read and what you clicked on, and they're turning it into reams of data and they're selling you.
Let's consider the alternate model, of which Dreamwidth is one example. It's a purer model; I'd call Linkedin, Livejournal, Flickr, and Diigo straddlers, seeing how they have low-level with ads and subscription-levels without ads (and with increased features). But Dreamwidth is one of the few I can think of, off the top of my head, that doesn't blast you with ads even when it's free.
Again, the question is: if you're getting it for free, who's paying for it? Easy, this time: it's the rest of us. We who are paid subscribers are (hopefully) generating enough income that Dreamwidth can afford to let the rest of you tag along. It's the same model Livejournal started with.
Here's the catch, though -- and why, I'd argue, Dreamwidth must stick to the original 2.0 model, and not move to the late-model 2.0 -- the application must provide content. Lots and lots of content. Sure, you could argue semantics and say we're still the product -- or at least, we're the product-producers -- but the key here is that we are also the consumers. In a sense, we're "paying" for our use by "producing" goods-in-kind. Vegetables, or content, we're trading our production for the benefit of accessing everyone else's production.
The foundation, and possibly IMO the most important detail of this, is that it creates a symbiotic situation. Let's be optimistic and say that roughly 25% of your subscribers pay. That means 75% are getting a free ride... but not really. They're producing. More cynically, you could say that the paying users are the consumers of the non-paying users (as we also consume ourselves, and each paying-other, which is kinda gross when you think about it, but whatever). It's symbiotic: there aren't enough paying users to create enough content to make it worth paying for, so we need the non-paying, high-content-producing users to create the bulk of the value. Sounds crazy, but it works, and Dreamwidth (and, I'd say, Fanfiction.net) is proof.
That's why a business in this model absolutely can not risk losing its non-paying content-producers. Think back to when Livejournal started cutting back on its basic plan: basic users started losing various benefits and extras, while gaining the disruptive and annoying and pervasive ads, and the bait-and-switch continued up through the levels, a little at a time. That change in the weather happened after a series of Livejournal fiascoes that alienated, then outright drove off, huge chunks of its most dedicated (and oftentimes paying) customers. And in case it's not obvious, I'm talking about fandom.
So the free users left, because they weren't welcomed, and the paying customers left because (a) the content they wanted went elsewhere, and (b) the lack of content made the service less valuable, thus (c) the paying users voted their disapproval by not paying.
Thus we get the need for ads, to compensate for the fact that the service lost its original path -- where content is the value. Livejournal had swung wildly off the side of the mountain and was now careening top-speed into a rock-bottom ravine.
As a note, this isn't to say that Livejournal is dying. It's just to explicate that it can become a vicious cycle: losing your content means you rely more on advertisers, and that means needing to reach bigger numbers of people, which means caring less about content because you just want foot traffic, so you start casting off the questionable or marginal content-makers, and trying to encourage more quick-hits kind of traffic... which, by the way, was probably the basis for Livejournal's catastrophic attempt to link itself with Facebook. It had lost enough content that it needed to compensate by creating revenue by, bluntly, selling its users.
Now, the thing about an application where content is king... is that you do not want people coming by for only a second and leaving again. Those numbers mean next to little to you -- in fact, they're a sign you don't have enough content to keep people occupied on your site.
Think about when you're shopping. Maybe you need new shoes. You walk into a store, you glance around, you see nothing that jumps out at you, and you leave. Well, so much for browsing. Any chance of a last-minute sale by the register is gone. Hell, any chance of you just being a warm body -- to make the store look "occupied" -- is also gone. I'm not kidding; one reason for foot traffic's value is that people unfamiliar with your store are still more likely to come in and browse if they see lots of people inside. They assume that "lots of customers" means you have something worth buying. It's popular, ergo, let's spend.
So you want people to come to the site, and stay there awhile. Produce stuff -- comments, posts, polls, whatever. In a shop, we get this just by having lots of people in the aisles, which brings in more people. One in ten might buy, so if you can get fifty through the door, that's clearly better than just five people who leave without buying at all. On a site, no bodies, so we have to look for their footprints: their comments, replies, posts, shares, photosets, links, etc.
The more content that's produced, the more we users see its hosting site as valuable, and the more likely we are to be willing to pay for that content. It's not like the average person really wants, or needs, or even cares, about things like other users' data, any more than we'd walk into a car dealership with the sole purpose of finding out what's the most popular car this year. We might be curious as part of the process of buying a car, but ultimately we are in the dealership to look at cars -- the product (content) itself. Knowing which one is popular is just a nice by-product. Other people's data is the same. It's a by-product. Without the actual product/content, it's worthless -- would you walk into an empty warehouse, sans cars, just to find out what car is popular?
Alright, now let's get back to Delicious before I end up keeping all y'all here all night. Originally, Delicious was classic 2.0 -- the content (links) were user-produced, and the focus was pretty strongly on managing those links, finding those links, finding new links. Finding other users was a by-product, and it wasn't immediately easy. It just wasn't the app's true focus. I've read several post-Yahoo-buyout articles that critique the Yahoo purchase, and the fact that Yahoo ended up ditching the app.
Why? Because Yahoo wanted its own Facebook. It wanted numbers... but Delicious was all about content. Now, I won't argue that it's damn hard to monetize a content-producing application if you went around insisting to everyone that you never would -- erm, correct me if I'm wrong, but wasn't the original Delicious completely free? -- but I don't think it's impossible, Dreamwidth being a very good example (along with Flickr) of how you can do it, and quite successfully. But Yahoo kept Flickr and ditched Delicious, and I think it's because the monetization wasn't there.
This part, I'm just guessing, but it seems logical to me: Yahoo took the same wrong turn as Livejournal.
They assumed the content produced was valueless.
Look, a lot of people in the world see fandom as a little kooky, if not downright scary when we start slogging it out in shipping wars. We're obsessing about television shows, for crying out loud, or bands, or movies, or books that fell into the public domain a hundred years ago. We're posting pictures of people that don't exist, or arguing over the characteristics of someone at forty who was eleven in the original series. I can't really blame someone on the outside for not taking us seriously. We are a little scary when we buttonhole people about why, exactly, the dialogue in our favorite show is just like billiards.
Delicious was all that, dialed up to eleven: because it's not even 'our' content. It's links. It's a whole bunch of bookmarks, like we've just collectively dumped our Firefox or Safari or Opera or IE bookmarks into a shared database. Hell, Google's bots gather up the same amount on a daily basis, and they don't even require we hairless monkeys at the keyboard. The Delicious users were just librarians, tagging and cataloging books other people wrote (produced), so... I can see Yahoo thinking, this isn't really content. It's all meta. It's content, kind of, about content. And a lot of it's pr0n, for that matter. Uhm. What do we do with this?
In other words, like Livejournal (more intentionally, I'd say, but still, end result the same), Yahoo saw the content-producers as being of no value, and had no comprehension of the value to the consumers themselves. What the fans produced -- created and consumed -- was devalued because fandom itself was devalued.
And when you remove the fans from the mix, as though they don't count at all... you get, well, nothing.
And if you take that nothing, and you then try to rearrange it so it'll be monetized in the Facebook style -- where the users themselves are the value -- then two things happen. One, you want even less of those kooky fandom folks with their crazy pr0n obsessions, because they scare advertisers and you can't predict what'll make fans happy, anyway. Two, you've completely wrecked the app's entire raison-d'etre -- and fans, as the Pinboard google docs have shown -- do not just get annoyed, they walk, and they make a lot of noise as they walk. And if you ask them to talk, be prepared for the deluge... and if you then do not listen, be prepared for the apocalypse. (Fanopalypse?)
Okay. Ignoring that Livejournal and Yahoo don't value fandom's content-contribution, and the new Delicious can't seem to figure out how to retain the users while still mining them for all the data it can, the only option may be to follow Dreamwidth's route through the post-dot-com haze. That is, to recognize that the only ones who truly value fandom-produced content are the fans, and to embrace the model wherein those of us who can pay, do, and those can't, help produce. And then do that whole symbiotic content-production happiness, except being fandom, we'll find a way to vid it, or filk it, or maybe we'll just link to it -- repeatedly, and en masse -- and screw up all those Facebook data crunchers.
And we won't be sold by anyone, or sell ourselves to anyone.
More thoughts later. For now, it's your turn.