Design of the Web's Perceived Value

The earliest version of the commercial internet had a business model which required users to pay for its use and its services. Companies like CompuServe, Prodigy, and America Online sold customers these products.  An integral part of the design of those products was the fact that you had to pay for them and that, in turn, led to their perceived value to users. Google and Facebook as well as a host of other contemporary companies have designed their products to be free services which has resulted in a perception by their users of the services having a very low monetary value to them.  Many often balk at the use of the term "products" when referring to what these companies provide. Of course, these companies are supported through advertising revenue or venture capitalist funding with the promise of future advertising revenue based solely on the number of eye balls staring at those services and the resulting potential ad impressions. In its most recent earnings statement, Google reported that $10.2 of its total $10.65 billion in revenue for the quarter came from advertising. It is also expected that Facebook has even greater ad revenue potential given its greater reach.  Of course, the value in this advertising is in its ability to target advertising for particular products with laser precision at potential buyers of that product based on the advertiser's detailed knowledge of the receiver of that advertising. The way the advertiser is able to get that detailed knowledge is by Google and Facebook making more and more of that information about their users available.  

Users are upset about the constant changes to the services that they use everyday with every change targetted at making more of their information available to advertisers.  However, they're not upset enough to not want to give up the free nature of the service.  In a recent discussion on my Facebook account showed that fully 75 percent of my friends wouldn't pay $5 per month for an ad free version of Facebook.  Given the initial design of these services as being free, it isn't possible now to introduce even a small fee for their use.  What I find strange and unfortunate about this is that I can think of no other industry that relies exclusively on advertising revenue because its customers aren't willing to pay even a small amount of their own money for the products of that industry.  I worry how sustainable such a nondiversified business model is for the industry as a whole.

There are portions of the industry that are trying to design offerings that include payment. Apps are a good example. However, as I've written about elsewhere in this blog previously, the monetary value designed into those products is also incredibly low. Most apps are free and an app that costs $9.99 or even $4.99 is perceived as expensive.  

It is unfortunate, in my view, that web services and "products" were designed by contemporary companies as free and that the only real business model with any presence and success is one that is almost exclusively based on advertising revenue.  While I lament the app-ification of the web, its introduction of some level of payment may be the only way to diversify the business model of what is an incredibly important industry.