Sunday, 15 November 2009

In a world where everything is free does payment come through advertising?

I'm always fascinated by the future and I'm hearing time and time again that kids these days are living in a world where things most of us are used to paying for are now assumed to be free. So a whole generation are growing up expecting something for nothing and they have the ability to get just that.

To be honest I believe it's true. I think as progress marches on it's greatest impact is to render things free or virtually so to the consumer. Education for youngsters in the west is free and a human right. It's paid for but not by the children. Basic health is the same in many developed countries. Tv, radio, free newspapers. There's quite a list once you start to think about it.

But we all know these products and services still cost money to run and have business models behind them.
Education and health services were once wholly private but are now often state owned with state funding. The balance of which often threatens to change depending on who's in power but we've all got used to the status quo and seen enormous benefit because of it. It's possible web technologies could be financed in a similar way. I believe some scandinavian countries are starting to enforce the right to a decent internet connection for each citizen and may lend a state hand to achieve this but I think most governments would rather let the market model deliver than intervene themselves.

For me there are two basic market models of funding that fit perfectly for software and the whole of the internet world as it stands. These are subscriptions and advertising. Placing adverts within software isn't actually new it's just not that wide spread. The tech is there. Google make 97% of their profit through adverts and have extremely sophisticate methods of providing them within software.

I see them within gmail all the time and they don't bother me at all. As a consumer I'm inherently mistrustful of an company or developer that has access to my private information but no business model. One that provides ads is being open and honest about how they fund the service, in theory. One that doesn't makes me wonder whether they're selling my details on to balance the books.

Facebook is a perfect example. They place ads across their main pages. We're all used to tuning out. Yet I hear that all these apps that keep popping up and getting me to sign up have complete access to my personal information. I then hear that some may be selling on details to thrid parties and when I find out the information these apps are privy to I understand why they go to the trouble. As a consumer the only problem I have is that this activity is hidden from me and I have no say.

that's why I believe that as the internet matures and we all begin to understand how it all works we'll start to develop a clearer census of which business models we'll trust. I don't expect a complete revolution. Instead an evolution of existing advertising and susbcription models to support web based content and functionality.
For basic content you'll see ads just like we do in gmalil and yahoo. If we'd rather not have ads we might pay a subscription. I also expect a blend of the two just like many of us do for tv. We get the premium content in all it's high quality and full on ness and we accept the ads that come with it.

I think this is the future mainly because everyone can understand it, is used to it and trusts it on a basic level. It doesn't require massive change in industries, just an evolution in everyones thinking. We just figure out how and where to put the ads and distribute the money. I'm sure that's probably already been figured out. I don't see a need for a large overhaul of anything to move to this approach because it's really been there from the start. It's just becoming more sophisticated.

I also see it as the best model for anyone who wants to solve a problem but doesn't have big resources. We'd all rather put all our effort into solving the problem, we just need a little money to pay for the tools and time we need. If we could just sprinkle some ads here and there we wouldn't have to charge the consumer. So they get a free app. The temptation might be there to sell private data but that will be dealt with through other channels like the feedback mechanisms already in place. We're all getting smarter about these practices. Protecting reputation. By keeping consumer trust is how brands are built and where the real money is.
So using an off the shelf ad model to fund your solution you can spen say 2 hours setting up the ads in your software and the remaining hours, say 40 for a hobbyist putting something simple together. And you might hope to get 10-20 bucks a month from it.

It's not hard to see the attraction for a developer. I always rate free apps above paid for because I expect lower quality for free. As long as the ads don't get in the way I'll accept glitches and slow features and other niggles when I haven't paid but the second I do my attitude changes. Even if it's just £1 or so. I expect that bit more because I've handed over my hard earned cash.

Handing over payment also raises concerns of support and ownership. If I pay £1 or £10 what am I getting. Is it a lifetime license or just for a month. Do I get free upgrades, enhanced support?
All these issues are fine for large companies to deal with but the lone developer who also has a day job. This is all a bridge too far. All he wants to do is get his solution out there and see a return. If he starts with ads first he can release free software quickly. There are no barriers to consumers getting his product and he can see a return almost instantly. He has no obligations to the consumer except to do what he said he would which is solve the problem he said he would.

This all makes for a much simpler, streamlined model for the start up large enterprise alike and it's a tried and trusted model. Adding in subscriptions muddies the water but is also well understood so feasible.
The point to all this is that for mass market stuff simplicity usually wins. As I see it these are two relatively simple methods for monetising products that are getting easier and easier to implement. So I expect it will be very soon that this will become the norm and also fuel a huge array of solutions.

Either way I've put my stake in the sand. It's giving me focus on how to make my dreams come true. I just need to put ads in any software I write and then explain to people why they're there and how it benefits them in the long run.

Edit 20091208
Adding to this I just read a fascinating article suggesting that adverts targeted to our 'cognitive style' are just around the corner and will increase advertising effectiveness.
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