When free makes your product suck

Marco Arment, the founder of Instapaper and former CTO of Tumblr, had some interesting comments on the recent dissent on Twitter, compliments of their new “dickbar” feature. As I read it, I realized that Twitter is turning the corner from a beloved, worry-about-making-money-later company into a just-barely-tolerable advertising machine. 

Twitter is entirely free. It depends on selling Promoted Tweets, “Promoted Trends” (oxymoron, anyone?) and Promoted Accounts. I remember when Robert Scoble was begging for a paid account on Twitter. He wanted to pay for a (finally) reliable service. Instead, Twitter has chosen to kill off third party apps and sites that essentially do what theirs do, and connect it’s revenue pipeline to Madison Avenue. 

Rather than create value and charge for it, Twitter (and its users) fell victim to the startup mirage that is “free”—aim for world domination growth… then hit them with a dickbar once they’re hooked. 

Twitter is still a powerful and useful tool, but it is choosing to monetize by way of degrading its users’ experiences. Kind of like traditional media, and how’s that working out?

Most startups are encouraged to subsidize the growth of their whiz bang, insanely useful product simply to get as many users hooked as possible. While yes, this can be the quickest path to more users, it often leads to expedited failure, missed potential, or pulling a bait and switch on your users.

Common outcome 1: Your startup runs out of money

This is the most likely outcome. If you don’t get enough users to impress investors who are betting on meteoric growth, or make some dough, you’ll run out of it. Good luck and godspeed on that one.

Common outcome 2: Your product gets bought and then turns into a steaming pile of suck

Remember Dodgeball, Delicious, Flickr, StumbleUpon? Their outcomes were all pretty similar. Each was a promising startup that feel short of its potential as a direct result of its acquisition. The only thing accomplished by Dodgeball’s acquisition is that it temporarily chained Dennis Crowley to a desk where he could not create his dream company. He left to create Foursquare and Google had to buy Slide to figure out “social.” Meanwhile, Yahoo will sell Delicious to anyone with $1-2MM. I think the deal may even include a box of Cracker Jacks. And StumbleUpon is on it’s second wind after getting bought back from eBay, after never figuring out what to do with it (surprising?). [1]

Common outcome 3: Your users get bait and switched

The common approach to building a web startup is to subsidize use to maximize growth. Web applications are increasingly cheap to build and usually involve near-negligible per user variable costs. Therefore, many choose to create the expectation that their service, in its entirety, should be both free and useful, then renege on that promise later. But, as a user of a service I value, charging for it actually reassures me that it will be around as my reliance it grows, building trust and loyalty (e.g. the stuff it takes to build the next Google).

Maybe your product shouldn’t be free

This is a thought exercise, not a hard-and-fast rule. But why not build a startup that offers a better experience when the user pays for it?

There are plenty of great role models for the type of product that both prints money (which investors like) and create real, scalable value for their users. Airbnb is a great one. I was actually astonished to hear how few users the service had when it closed it’s seed round, led by Sequoia. Airbnb is not a cheap service—it gets a piece of the action from the buyer and the seller. Yet if it were free, users would likely value the service less. 

Another great example is Github. While it was offered in beta for free, Chris and Tom started getting emails saying “I love GitHub. Can I start paying you guys now?” They’ve got a great business now and are having a lot of fun. I’d recommend watching Tom rub it in at his Startup School talk last year, if you weren’t there or haven’t seen it.

Smugmug is yet another great example in which cost was actually a differentiator in the super crowded photo space. And Animoto similarly built an awesome product for turning photos into music videos. You might even argue that its users, such as Mike Arrington, become even louder evangelists of the product to validate the price they pay for the service. And Dropbox has found astonishing success in focusing all of its attention on creating a valuable service that’s worth your money.

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[1] On occasion, the product and community survives and is properly nurtured. Reddit is a great example of this, having grown to a billion pageview per month site under the ownership of Conde Nast (and also would have been a thriving, awesome company today, independently). 

Huge thanks to Ed, Hoisie and Nacho for their feedback on previous drafts of this post.

The Banyan Project: New Roots for Journalism

In the latter capacity, I had the opportunity to attend the We Media 2010  conference while on campus in Coral Gables, Fla.  Among a group of stellar presenters, I was particularly impressed by Tom Stites, creator of the Banyan Project, and the winner of the 2010 We Media Game Changer Award.  This award “honors people, projects, ideas, and organizations leading change and inspiring a better world through media.”

Stites, a former reporter and editor at the Chicago Tribune, has been working with colleagues such as University of Massachusetts journalism professor Ralph Whitehead, Arizona State professor Dan Gilmor - Director of the Knight Center for Digital Media Entrepreneurship, and American University’s Center for Public Integrity director Charles Lewis to create solutions to the primary problems he sees affecting newspaper journalism.  In particular, Stites is concerned about the state of contemporary newspapers and their ability to support democracy.  He holds the view the future-of-journalism debate is dangerously narrow and binary presently and that the framing needs to be changed so improvements can be made to strengthen American democracy.

In his talk accepting the award, Stites said that the Banyan Project is an effort to create a new form of “Relationship Journalism” to do the following things:

• Serve the ill-served.
• Fuel deeper civic engagement.
• Create rich feedback loops to editors, while enabling readers to be co-creators of the journalism.
• Create journalism that serves the public on the deepest level.

At this point, Stites is continuing to work with colleagues to frame the possibilities for the Banyan Project by trying to set up pilot sites in three different parts of the country.  He is envisioning a turn-key franchise model that has a cooperative as the ownership model for the media organization being created. The journalism would be created for a digital platform staffed by a combination of professional journalists and editors supported by citizen volunteers who would be trained to do the work of journalists.  The professional journalists would be hired by co-op boards and they would be responsible as gatekeepers, acting on behalf of the readers who would also be owners.

This is an intriguing concept because it clearly would give the public “a stake in the game” and might more nimbly shape the journalistic agenda in a way that ensures the community’s primary concerns are being addressed.  Stites hopes to develop new software capabilities in the content management system  used to manage the journalism produced for his project.  It would use to enable the journalists to also discern unmet coverage needs being pointed to by reader responses.

As a mantra, Stites is saying Banyan-style journalism “must serve underserved citizens, being respectful of their lives and worthy of their trust.”  This mission statement resonates much more powerfully for me than one premised on the notion of “by the elites, about the elites, and for the elites”, a currently popular approach being used many places to ensure adequate revenue returns from existing advertising-driven models of journalism financing.

I share Stites’ concerns about the need to focus journalism more acutely on meeting the needs of two-thirds of the country’s population who feel disconnected from mainstream media’s focus on a daily basis.  In his talk, Stites cited the lack of trust for journalism reflected in the 2009 annual Gallup survey of confidence in U.S. institutions. This poll indicated only 25% of respondents had a “great deal of confidence ” or “quite a lot of confidence” in newspapers and only 23% offered a similar assessment for broadcast news.  Both are down by half from their highest Gallup confidence levels.  For those in the media business these numbers are not good news, but they don’t surprise me.

Adding to the challenges of the moment are the polluting aspects of shrill pundits on the right and left who are increasingly crowding out voices seeking to shed light on topics of civic discourse, rather than simply amping up the noise as a means of generating heat.  Again, I believe the toxic effects of punditry can be seen in the public responses to the healthcare debate and these are not good signs either.

In considering alternatives, Stites sees the Banyan Project as an experiment to stretch the boundaries of journalism and broaden its horizons to improve society.

In many respects, the current media landscape reminds me of the unresolved contradictions in the views of media’s role as espoused by Walter Lippman and John Dewey.  At the risk of greatly oversimplifying both men’s positions, Lippman saw journalism as a tool that would help the elites of society more effectively govern society, while Dewey saw journalism as means to educate the masses about the possibilities of democracy as the best method to advance society.  Both positions can be seen in contemporary methods being used by media companies seeking to maintain relevance with mass audiences while also preserving profits.

Stites’ view of the contemporary media landscape seems to put him firmly in the Dewey camp.  He aspires to have the Banyan Project take root as an early 21st century experiment as a means of extending the possibilities of investigative journalism focused on areas truly meaningful to a community.  He also sees the approach as a means to re-engage disaffected or underserved citizens, as a means to neutralize the political propaganda that passes for news and comment presently, and to recruit community contributors, all in the name of building civic adhesion and finding a way to permanently cement effective alliances between professional journalists and bloggers; the former needing jobs and the latter income too in the current landscape.

The method could also enable experimentation with the role of gatekeepers and help with exploration of the business model terrain.  To that end, Stites envisions the co-op model being built by a large number of small payments contributed by community members buying shares via tiny payments.  That core source of funding could be augmented by advertising, philanthropy, crowd funding of specific projects, and perhaps even syndication fees for specific forms of content.

While agreeing with Stites about the crucial need for this kind of re-invigoration of journalism, I also think his approach matters to visual journalists who have found their roles so constricted of late within media companies.  The diminution in possibilities to create rich multimedia stories to inform the public has been created by the pressure to return profits using business methods so adversely affected by advertising revenue declines.

I think visual journalists need to same opportunity to reinvent their work and to apply it to projects that serve community needs.  I remain very bullish about the possibilities for visual storytelling within the new worlds of digital media.  I hope the Banyan Project can find room for visual journalists under its big canopy and that the reinvention process will be nourished by its effort to put down roots.  As Stites said at We Media we need to think about what Web journalism would be like when it is fully realized.  We’re not even close yet.