Illustration of Derek Powazek by Adam Ellis

If You Don’t Know How A Startup Will Make Money, Neither Do They

Yesterday I posted a discombobulation of the “If you’re not paying for the product, you are the product” truism. Judging from the feedback, I hit a nerve.

Today I realized that I broke one of my own rules. Don’t just complain, propose a solution. So here goes.

Instead of telling people “you are the product,” which creates a feeling of inevitability and powerlessness, let’s say this: “If you don’t know how a startup will make money, neither do they.”

This, I hope, will remind people that the business plans of the startups they use are, indeed, their business. They should find out how the company is making money now and what their plans are in the future. They can then make an educated decision whether to participate or not. They can also judge the company by how well they keep their word.

It’s also a clear message to startups: your business plan cannot be secret anymore. People are too smart for that, too tired of getting burned, too wary of losing their contributions when a startup dies, and too annoyed by sudden changes to the terms. Communicate your business plan from the start and you’ll avoid a thousand problems down the road.

It’s a sign of the times that when I told people about Cute-Fight, their first question was usually, “How will it make money?” That never happened back in the day.

So we’ve had an answer in our FAQ since day one. In a nutshell, it’s sponsored venues. We did the hard work to have examples like this and this shortly after launch. That way, when people asked, we could point to a real example on the website.

Now, of course, this is not the only way we plan to make money. We’ve got other ideas that we should talk about sooner than later. But the point is to have an answer and make it public.

Many startups are afraid of this kind of disclosure. There was a time when you wanted to keep these plans a secret. But times are changing. People expect to know. And if we want them to trust us, we’ve got to tell them. We can change our minds, make improvements, and respond to changing circumstances. We just then tell them again. And if we’re very lucky, they’ll give us suggestions about what they’d like to pay for. It becomes a conversation between members of a community that all want the business to succeed.

I still don’t think we should yell at developers, but we should look at sites that ask for our participation and try to see how they make money. If we can’t tell, we should ask. And if there’s still no good answer, then we should assume that’s because there isn’t one, and decide to participate with caution. Some websites may be compelling enough to warrant participation anyway (Twitter), but then at least we go in with open eyes.

So, to sum-up:

People: You are not the product. You’re a smart person making an educated decision about which companies you trust with your time, attention, and contributions. If you don’t know, or don’t trust, the business model of a company, don’t use their product.

Companies: Communicate with your users. Tell them how you’ll make money, early and often. Your honesty will help you earn their trust, and their trust is your most valuable asset.

I’m Not The Product, But I Play One On The Internet

“If you’re not paying for the product, you are the product.”

I don’t know who said it first, but the line has achieved a kind of supernatural resonance online. And for good reason – it describes a kind of modern internet company that provides a free service. These businesses are designed to aggregate a large number of users in order to sell that audience’s aggregate attention, usually in the form of advertising.

But the more the line is repeated, the more it gets on my nerves. It has a stoner-like quality to it (“Have you ever looked at your hands? I mean really looked at your hands?”). It reminds me of McLuhan’s “the medium is the message,” a phrase that is seemingly deep but collapses into pointlessness the moment you think about using it in any practical way.

There are several subtextual assumptions present in “you are the product” I think are dangerous or just plain wrong that I’m going to attempt to tease out here. Many of these thoughts have been triggered by Instagram’s recent cluelessness, but they’re not limited to that. I also want to be clear that I’m not arguing that everything should be free or that we shouldn’t examine the business plans of the services we consume. Mostly I’m just trying to bring some scrutiny to this over-used truism.

Assumption: This is new or unique to the internet.

Free, ad-supported media has been around for a long, long time. When I was in college, before the web existed, I worked on alternative newspapers. Not only were they free, we actually walked around campus thrusting them in people’s faces.

I guess you could call the people we gave them to “the product,” but it sure didn’t feel that way when I was driving my VW Bug over Highway 17 filled to the roof with newsprint. The product was the thing I broke my back creating and hauling around.

Online ad-supported media is no different. It’s free, it builds an audience, and then it sells access to that audience in small chunks to companies willing to pay. There are ways to do that while still maintaining respect for the consumers. We’ve been doing it for years.

Assumption: Not paying means not complaining.

The “you are the product” line is most often repeated when a company that provides a free service does something that people don’t like. See Instagram’s recent terms change or any Facebook design update. The subtext is, this company does not serve you, you don’t pay for it, so shut up already.

But that’s crazy talk. If a company shows that they’re not treating you or your work with respect, vote with your feet. Uninstall. Delete account. Walk! And make sure they know why you split. It’s the only way we have to make companies feel the repercussions of dumb, user-hostile decisions.

Assumption: You’re either the product or the customer.

I’ve worked for, and even run, many companies in the last 20 years with various business models. Some provided something free in an attempt to build an audience large enough to sell advertising, some charged customers directly, and some did a combination of both. All treated their users with varying levels of respect. There was no correlation between how much money users paid and how well they were treated.

For example, at JPG Magazine we sold something to our audience (magazines, subscriptions, and ultimately other digital services) and we also sold ads and sponsorships (online and in print). We made it 100% clear to our members that their photos always belonged to them, and we had strict rules for what advertisers could do in the magazine. We also paid our members for the privilege of including their photos in the printed magazine (as opposed to Instagram’s new policy that they can use your photos however they want, even in ads, without paying you a dime).

This example is much more complicated than the black and white “you’re the product” logic allows. In some cases, users got the service for free. In others, they paid us to get the magazine. In still others, we paid them! So who/what is the product?

And just because you pay doesn’t mean you’re not the product. Cable TV companies take our money and sell us to the channels, magazines take our money and still sell ads, banks and credit cards charge us money for the service of having our money. Any store that has a “loyalty card” takes our money for products but gives us a discount in exchange for the ability to monitor what we buy. In the real world, we routinely become “the product” even when we’re already paying.

Assumption: Companies you pay treat you better.

I should be able to answer this with one word: AT&T. Or: Comcast. Or: Wells Fargo. Or: the government.

We all routinely pay companies that treat us like shit. In fact, I’d argue that, in general, online companies that I do not pay have far better customer policies and support than the companies I do pay.

The other day I had a problem with my Tumblr account. I sent an email. In less than an hour I had a kind, thorough, helpful response from a member of their support team. Issue fixed.

The next day I had a problem with my internet connection. I called my provider. After listening to hold music for a long while, I got someone on the phone who obviously spoke English as a second language, was not allowed to deviate from their script, and had less experience with the product than I did. They did not fix the problem. I was told to wait until it fixed itself.

The difference between Tumblr and my ISP? I pay my ISP over $50 a month. I pay Tumblr nothing.

Thinking critically about the business models of the services you use is a good thing. But assuming that because you pay means that things will be better is a very bad idea.

Assumption: So startups should all charge their users.

The apex of this argument is Maciej Ceglowski’s Don’t be a free user essay, in which he advocates that people “yell at the developers” of sites that don’t charge money.

Look, I’m thrilled that Pinboard has been a financial success for Maciej. I’m a paying member! And he’s right that it’d be nice if more companies could turn their users into customers that support the business.

But not all businesses can be run that way. Entertainment and media companies are rarely able to charge their consumers for their product. My company, Cute-Fight is a fun game, but I couldn’t throw up a brick wall on the homepage and expect it to succeed as Pinboard does. It’s just not that kind of business.

This blind “my way is the only right way” thinking is a poison to innovation and destructive to those of us building free services that do have business plans. Some businesses require mass adoption to work because they depend on economies of scale or a large audience. There is nothing inherently wrong with that.

What’s inherently wrong is a company changing its terms of service to screw their users. What’s wrong is a company that sells your data without your consent. What’s wrong is a company that scales back customer service to save a buck, leaving its customers angry and frustrated.

But those things usually have nothing to do with whether you’re paying them or not. They have to do with the company’s leadership, their level of complacency, and their demonstrated respect for their customers.

Bottom line it, Derek.

We can and should support the companies we love with our money. Companies can and should have balanced streams of income so that they’re not solely dependent on just one. We all should consider the business models of the companies we trust with our data.

But we should not assume that, just because we pay a company they’ll treat us better, or that if we’re not paying that the company is allowed to treat us like shit. Reality is just more complicated than that. What matters is how companies demonstrate their respect for their customers. We should hold their feet to the fire when they demonstrate a lack of respect.

And we should all stop saying, “if you’re not paying for the product, you are the product,” because it doesn’t really mean anything, it excuses the behavior of bad companies, and it makes you sound kind of like a stoner looking at their hand for the first time.

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Update: Unsurprisingly, Instagram has said they’re going to “modify specific parts of the terms” in response to the outcry. We’ll see if they make substantive changes.

Followup: Instead of telling people “you are the product,” which creates a feeling of inevitability and powerlessness, let’s say this: “If you don’t know how a startup will make money, neither do they.”

Cute-Fight: A Twitterrific New Venue

We’re thrilled to announce Cute-Fight’s newest venue, the ultimate cage match, the Twitterrific Thunderdome!

Twitterrific Thunderdome

Gilded in gold and floating through the clouds is the Twitterrific Thunderdome, where animals of all kinds do battle over the finest periodicals.

The Thunderdome is sponsored by Twitterrific 5, a simply beautiful way to tweet for the iPhone & iPad. Color-coded timelines and customizable themes make reading fun and easy. Pictures, locations, and people search means tweeting is sweeter than ever. In the App Store now!

We want to thank the folks at Twitterrific for sponsoring this new venue. Twitterrific was the first app we ever used to tweet, and version 5 is better than ever. Plus, their mascot, Ollie, is an adorable bluebird! It was meant to be. Support Cute-Fight by giving the app a try. We think you’ll love it.

And then come start a fight in the new venue! We’ll see you there.

Other Newness

We’ve spruced up many of the pages in Cute-Fight, so take a look around if you haven’t visited recently. We’re especially proud of the cool new fighter leaderboards. Is your fighter there? Keep fighting and they will be!

42And we’re always adding new badges and trophies. This week we added badge number 42, so it was obvious it had to have a towel on it. If you don’t get the reference, don’t panic.

We’ve also improved the code behind the scenes to play nicely with a wider variety of browsers. So if you had a problem with the site before, please give it another try.

See you in the fight!

Bug Demands Belly Rubs

Bug Demands Belly Rubs

Just because I was experimenting with animated gifs.

Cute-Fight: We Love Your Photos

We just released the biggest update to Cute-Fight since launch and we’re pretty excited about it. New photo pages, spiffier member profiles, top fighters, new badges and trophies, and lots of other bits and bobs are afoot.

photos from cute-fight

New Photo Pages

If there’s one thing we love almost as much as our pets, it’s photos of other people’s pets. So we’ve created a bunch of great new ways to share photos on Cute-Fight.

BobAll the photos you’ve uploaded to Cute-Fight now have their very own pages, suitable for linking. You can also add titles and descriptions (a top request). Just click them to edit.

If you’re more of a photo viewer than uploader, you can now visit the main Photos page where you can see all the new photos as they come in.

And if you see a photo that you just love, say so! Click the little heart to show your appreciation. The photo will be added to your member profile under “Loved Photos.” Speaking of profiles…

New Member Profiles

Your member profile got a big upgrade, too. It now shows the fighters you’re a fan of (another top request) as well as the photos you love. Plus it just looks a bit more spiffy. Here’s mine.

Top Fighters

MaggieYou can now sort the fighters page by most wins or most fans. That’s how we know Maggie has the most fans of any penguin, and Simon is the winningest cat. But don’t get too comfy, Cute-Fighters. There are plenty of new contestants on the rise, and we’re still working on our ultimate leaderboard algorithm.

Piece of Cake TrophyNew Badges and Trophies

We’ve also added a bunch of funny new badges and trophies. We don’t want to give away the surprise, but pie and cake both make an appearance. Apparently we’re still recovering from Thanksgiving.

There’s only one way to collect ‘em all: play the game! Start a fight today.

Other Bits and Bobs

We’ve made a bunch of changes to the site in response to your feedback. Badges and trophies now appear on your homepage. Voting and cheering is faster (just hit return to add your cheer and jump to the next fight). You can now remove cheers if you don’t like them. Sharing on Twitter and Facebook comes with better text descriptions. And, oh yeah, you can now delete your account if you really want to (but we’d be sad to see you go). Thanks for all your feedback. Keep it coming!



You made it to the bottom! You must be very good looking. Wanna go back to the top now?

Hi, I’m Derek. I make awesome community-centric web stuff. I sometimes post things to Flickr and Twitter. I’m mostly harmless. More.





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