Results tagged “businessmodels”

Bob Metcalfe's most famous pronouncement is known these days as Metcalfe's Law, the idea that the value of a network increases with the scale of its number of members. Metcalfe formulated this concept in the context of telecommunications networks, but it is broadly applied to online social networks as well, and taken almost as an article of faith when designing new networked systems.

What happens, though, if a user on a service breaks the connection the network? A member of the network could do this either by disconnecting from the network (temporarily or permanently) or by choosing to omit or falsify some of the metadata that connects them to the network.

Why would someone make the network less pervasive or reliable? Well, there are lots of reasons. danah has admirably outlined some of the social reasons that teens disconnect, and of course I've been rambling for a while about the fact that unexpected expansions of existing networks often negatively impact those with less social privilege. But there are lots of other reasons people would want to unplug from networks that are smaller, or less focused on personal data, than services like Facebook. On GitHub, while forking is a feature, some who choose to collaborate on code there might be unwilling or legally unable to allow certain types of collaboration, and may want to sever their work's connection to the network of collaborators there while still using the robust technical capabilities of the service. On systems with tag-based navigation like Flickr and Delicious, tagging provides personal utility for information that a user wants to keep private, but the available privacy settings necessarily sever that photo or link's connection to the rest of the network that shares its tags.

In short, there are legitimate reasons users would want to contradict a service provider's desire to maximize the network effects of their community. These reasons primarily center around privacy, control, security, policy and other social considerations that provide important justifications for resisting the pull of Metcalfe's Law. But current network providers are often tempted to disable, circumvent, or modify the terms of a user's connection to the network in order to satisfy the provider's business goals, resulting in a sort of "connectivity creep" as we see today in Facebook's ever-evolving privacy policies, but as we'll inevitably see across a large number of network-focused sites. Right now network providers have a disincentive to give users the power to sever their connection to the network, even in limited ways, because it could jeopardize the growth of the network itself.

Maybe there's a way to reconcile this tension.

A Metcalfe Tax

Today, the low-level layers of our communications networks are ideally designed to see breakage as damage and route around it. But perhaps the social layers of our networks should see breakage as opportunity, and build revenue models around it.

There's a model for this already: GitHub. When a user wants to use a non-open source license, or keep their code private, they can pay for the ability to do so. This is important, because using a closed license breaks the network effects that open source licenses are designed to enable around code modification, and obviously keeping code private breaks the network effect of being able to see the history of a project or contributor.

Could other services adopt this model? Let's consider the biggest of them all: Facebook. If Facebook simply charged a nominal fee (it could be different prices in different parts of the world) to give users full, rich control over the ways they are connected to and discoverable by the network, how would things be different? First, Facebook would directly profit from users who wanted control over their presence, turning them from a thorn in Facebook's side into their best customers. Second, Facebook would have a bottom-line motivation to keep making better, more usable, more powerful privacy controls in order to serve them, instead of often treating privacy features as an afterthought. Third, the users who value their privacy or control would be more likely to advocate the service to their friends instead of warning them away, since they would have their primary concern addressed. And finally, the places where a user's information or identity is shared on the network would become much more clear and predictable if some parts of those interfaces were designated as paid-only features.

Now, "payment" in this case doesn't have to just mean dollars. In our newly gameplay-obsessed industry, maybe some networks would allow users to pay for these privacy features by completing tasks or performing functions that were important or valuable to the site. But overall, the process would be the same: The site would benefit from users who have legitimate reasons to not stay completely plugged in to the network all the time. And a precedent would be set for having the site be rewarded for honoring those desires, instead of constantly pushing against them.

So, which site's going to be the next to build a Metcalfe Tax into its business model? Seems like one of those rare delightful moments where a new site's business model could be inherently aligned with the desires of its users, instead of working in tension with them as the network grows.

The New York Times is removing the payment barrier from its TimesSelect content. Hooray!

I pundified* incorrectly about this two years ago when they launched TimesSelect -- go look and marvel at my foolishness! Update: Andre points out that this is just a Hail Mary play to win a bet. The Long Bet is broken anyway, because it presumes a blogs-vs-Times model, which of course isn't accurate.

* "Pundify" is to pontificate without the burden of facts and in full embrace of intellectual dishonesty.

A little while ago, my friend Michael Sippey, whom I had the pleasure of interviewing the other day, sent me a link to the new Google Voice Local Search.

Now, this new services seems like a good product, and I know I'm supposed to say "Wow, cool! Nice work, Google!" But because I work with Michael, we are often each other's toughest critics -- we want the stuff we do to not suck, and try to structure as much of our work as possible in a way that prevents the sucking. So my initial response wasn't positive. My gut feeling was "Why the hell aren't they charging for this? That sucks!"

Here's the thing -- I don't care about whether Google makes money on 411 services or not. They're going to do billions of dollars worth of AdWords sales regardless, and even if this new service becomes a huge hit, the revenues would just be a drop in the bucket. Certainly not enough to affect the overall direction of the company.

But having paying customers (or the equivalent -- something to indicate users were invested) would help focus the product team. This is Google, which means you've got enormous resources behind you if you're launching a product, both financially and intellectually. If your product "may not be available at all times and may not work for all users" (as it says on the product's homepage), then either fix it or get yelled at by angry users. Either one is a good option. Don't hide behind a "well, shucks, we said it was beta, and it's free..." excuse. Being accountable to your users makes your product better.

What's worse is the uncritical evaluations of new technologies. I don't care if an individual product or feature seems cool if it's just going to go away in a few months when the company folds. See The starting line is not the finish line:

I am, frankly, tired of reading reviews of new technology that omit the commitment of the team, that don't mention how the success of the product almost feels like life-or-death to the people making it, or ones that ignore the people who make the damn thing happen.

If we aspire to making meaningful technology (and if you don't, then please, just quit now), then it's irresponsible to let users become connected to, and perhaps even emotionally invested in, a tool that isn't going to be around for the long haul. If nothing else, it's a waste of someone's precious time to use a small company's tool that's evaporates because a big company found it trivial to clone, or because a big company decided it was too hard to charge what a product was worth. I don't believe AdWords will subsidize Voice Local Search indefinitely any more than I believed Windows 95 would subsidize MSN Sidewalk indefinitely, even though that was a fantastic online local guide product as well.

And connecting people via VOIP or sending them an SMS, two of the key features of the new service, cost money. At Google volumes, they cost a lot of money. I want to have a service I can rely on -- which again means I need to invest in it. I understand that the idea here is for this product team to use a beta test as a starting point to make the service more reliable, but the sad reality is that a line has been crossed where there's no sense of urgency or expectation that those actual launch days ever arrive.

Google's made the leap here before, by starting to charge for Google Apps. Even people who use the service for free were reassured by the fact there was a paid version. So there is still the opportunity to be brave enough again to assert that a product is worth paying for, even paying a premium for. Millions of iPod users are willing to listen to the argument.

This, I think, is the crux of the problem that David Galbraith highlighted on his site. David's is one of my few must-read blogs; I don't always share his tone of righteous indignation, but I love that a person who's often so reserved in person can be so passionate online. David mentions that new efforts by Google or Yahoo (see Google My Maps vs. Plazes, or Yahoo Alpha vs. Rollyo) can kneecap some Web 2.0 startups en passant, and posits that this is the death knell for Web 2.0. Leaving aside whether that's oversimplifying the efforts of those startups, it's an attractive argument just for the sheer audacity of his phrasing.

But that sort of reckoning is not the death of Web 2.0, that's it's promise. It's very possible to build a successful business and thrive while competing with Google and Yahoo, even in an established market. (Oh hey, that's my day job.) What's not possible is to make a business without adding significant value to the platforms provided by existing companies. This is, roughly, exactly what distinguishes current successful business models from Web 1.0.

Or, put more succinctly, I like paying for Flickr Pro. Like us at Six Apart, the Flickr team was lucky enough to start working on their company, and on Game Neverending, back before there really was AdSense to run on your site, and when virtually the only small startup charging money for a consumer web service was Oddpost. I'd argue those sorts of innovations are as important as all the Ajax work that either of those companies ever did, even though I admire and respect both teams tremendously.

This refrain never goes away, but it bears repeating. Those of us who love technology and believe in its potential owe it to our communities, our audiences, and our customers to make our efforts sustainable and accountable. I'm not an unabashed, uncritical capitalist, but I do recognize that one of the most positive effects that a classic charge-a-fair-market-value-for-your-goods business model offers is the opportunity to create an accountable and sustainable relationship with a customer.

I pay for a lot of products because it gives me the potential opportunity (though I almost never use it) to yell at someone when it breaks. I pay for a lot of other services because I want to make sure they don't go away, or they're not forced to make ugly choices about privacy or ethics in order to keep the lights on. And I am glad to use services or sites that are ad-supported when it's made explicit that the advertising is supporting a useful good or service.

If you believe in what you're doing, in technology or anything else in your life, make a commitment that it's here to stay. Do what it takes to prove it. Do what it takes to sustain it. And if it's the kind of service that you think is okay to just give up on, or that you don't want to bother to figure out a way to keep running, then why are you doing it in the first place?

I talk to a lot of consultants, freelancers, and small businesses who do web work, and I used to be a freelancer myself, so sometimes I get asked for advice on how to price one's goods and services.

I think I came up with my best suggestion today, and it involves only two simple steps:

1. Slap the client in face.
2. Tell the client your hourly rate.

If the person looked more shocked, horrified, offended, hurt, saddened, or wounded by the slap in the face, then you are still pricing yourself too low.

Your mileage my vary, this is not to be construed as legal advice, eye-poking may be substituted for slapping in some states.

On Tuesday, Jason Kottke announced that he was devoting himself full-time to working on maintaining his weblog, and asking for his readers to support him financially so he could do so. There was, of course, a lot of attention and a lot of discussion, since Jason is arguably the most popular individual weblogger on the Internet, and because his framing of his effort is fairly unique in its motivations and execution. What's more important to me, though, is that Jason's decision to work on his site professionally matters.

Of course, that's the kind of statement that gets bloggers ridiculed (often rightly so) for hubris, or for losing perspective. So let me explain. In short, Jason's decided that blogging as a medium deserves to be supported for its own sake, not as an adjunct or a lesser sibling to other media, and to put his money where his mouth is.

And this comes down not just to believing in blogs, but in choosing what blogs can be. Blogging isn't about politics, or technology, or food, or design. It's about all of those things, or none of them, or whatever topic catches your eye. It's as idiosyncratic and compelling as an individual, and it's a different medium to every person who's ever participated, or to every one who's ever dropped out. (Though they always come running back.) So Jason's betting on the potential of the medium.

More impressively, he's bet his rent that bloggers are generous enough and adventurous enough to support their own. That we all care about the medium so much that we'll make his risk worth his while. Given the track record of in-fighting and cliquishness and polarization that has characterized the weblog realm since its earliest days and worsened over the years, it's an optimistic and brave endorsement of the medium that Jason's decided to wager his entire lifestyle on our generosity.