We love free (even when we know free will fail)

We serial early adopters can be royal pains in the ass. 

We want our shiny new web stuff, but not if it comes with a business model attached.  We try nascent services while they are free to the user and unpolluted by dirty, dirty ads.  We grouse about downtime, missing functionality and poor performance -- but we understand that new is new and, hey, it's free...

But as soon as the spectre of revenue stream begins rattling its chains, we begin scouting for alternatives.

When rumors that Twitter either was or wasn't testing ads in the stream hit the blogosphere earlier this week, at least one prominent Twitterer expressed his concern.  We did the same when Facebook began inserting ads in the feed and when Google started experimenting with in-stream video ads on YouTube.  As my regular readers know, I hate advertising as much as the next guy -- probably even more so -- so I'm one of the guys that decries any new media platform's attempts to migrate to an ad supported model.

Yet we are just as likely to complain - hell, I'm just as likely to complain -- when, in an effort to remain ad-free (or at least relatively uncluttered), our new favorites try to charge us subscription or usage fees.  Sure some web tools have crossed the chasm -- Flickr Pro and SkypeIn come to mind -- but pay for Twitter?  Shell out a few bucks a month for del.cio.us Plus?  Willing to pay $10/month for an ad free MySpace profile?  That's crazy talk.

We want what we want and we want it to be good.  And we want it to be around for as long as we're still interested in using it.  But we love it to be free.

But we're not stupid.  We're all business people here; we know that these services cost money to build, maintain, host and deliver.  And we realize that the money needs to come from somewhere.  Sure, it might come from deep pocketed investors (at least initially, right when we're first discovering the service) but we also realize that it is only a matter of time before those investors start thinking about upside -- and upside for an investor often means a revenue model for the investee.

It seems to me there are really only two revenue models for most web-based services:

• The users pay with their money
• The users pay with their attention

But it seems that, for many of us, neither option appeals.  What's a company to do?  Follow the path to monetization and alienate the early adopters who embraced it in its earliest days?  Hold out as long as possible, while running the risk of collapsing under rising expenses and non-existent revenue streams?

I don't know the right answer, but I figure some of you have thoughts on this topic.  What do you think?  Chime in.

Comments

[Steve Coulson]

I think there are probably a few other model. Jimmy Wales is looking for big pocketed philanthropists to keep wikipedia free and ad-free, and also talking about leveraging the brand by licensing it on trivia games.

But then, he's getting a lot of criticism for that too.

[David Armano]

I just don't want ads in the stream. anywhere but the stream. Please don't pollute the stream!

[Cam Beck]

No solution is going to please everybody. People are fickle and will turn at the drop of an unwelcome ad. Myself included.

The intelligence needs to get better, first of all, and perhaps Twitter could partner with a cell company to reap in some reward from text notices.

Not saying that's completely developed thought yet, but the point is that to stay viable, to increase adoption and to be sustainable, it must both make money and remain free.

They could go the banner ad route, but I suspect that would be less useful than Facebook ads.

[Scott Monty]

I'd advocate that you give people a really good and reliable service, build up the loyalty, and then begin to introduce a revenue model. At this point, if Twitter turned to its community and said it's time to pay up, I'd gladly spend a few bucks a month for that service.

The really ballsy move would be for a company to simply ask users to pay what they felt the service was worth. As we saw with Radiohead's latest album, people were pretty fair with their spending. But again, the service would have to be pretty damn good.

Oh, speaking of which - when are YOU going ad-free and removing the SnapShot pop-up ads from your blog? ;-)

[Marc Dierens]

Who doesn't like free? Of course I want Facebook and Twitter to remain no cost for me to use, and the moment I have to pay 5-10$/month my account will be inactive, at warp speed.

Do I mind the ads? No I don't because I realise this is the way these sites, which I love, remain free for me.

So rather than paying a monthly fee, I would rather have ads appearing wherever I am on these social media sites.

Cheers, Marc

[Ryan Karpeles]

Obviously it depends on the service, but...

If you have to throw some ads in the sidebar, go ahead. Users don't notice those anyway. If it makes you money and keeps it free for us - then by all means.

I usually advise companies to add value, rather than just push ads on us. But for something like Twitter I don't think it's a big deal. Most of us will never click on one of those silly things anyway.

P.S. I realize I just contradicted years of railing against banner ads, but paying for Twitter seems like a horrible alternative.

[Steve Woodruff]

Seems to me that it would make perfect sense to have paid advertisers able to inject Tweets (same size limitation) which are color-coded to indicate that they are ads. Makes it a natural fit, and also very easy to scan and skip.

[Seni Thomas]

Of course it just may never be monetized, just gobbled up by a company that can benefit from increased interactions with its overall brand. Think, e-mail.

Also what is the threshold where people pay for online services? The only site I ever paid for online was Gamespot.com when I was 15. I mean, I always wondered who was stupid enough to pay $50/mo. for access to our favorite media subsidizing content *ahem*... When you can get for free everywhere...

But, back to the point, what is the utility threshold that compels people to dish out cash for services like Flickr?

[Ryan Karpeles]

@Seni: I pay for Flickr Pro because of the additional storage space.

Perhaps Twitter could adapt this somehow... charge two cents for every character typed over 140 (???)

Not sure what the best solution is, but I like where you're headed with the 'additional utility' idea.

[nicholas gill]

Hi Greg

I would suffer a few ads around a platform like Twitter like we do with Facebook but like many of your other commentators I too would drop out very quickly if I had to pay money for the service. I just wouldn't get the benefit Vs the dollar paid. I like Ryan's idea of receiving targeted tweets from companies who fit your profile. There's a mobile service in the UK called Blyx http://www.blyk.co.uk which gives 16-24 year olds free calls and texts per month in exchange for receieving up to 4 carefully targetted texts/MMS every day. Maybe taht would be a smarter approach than blanket banner advertising people to death?