On the internet, or more specifically, the world wide web, Yahoo search used to be the de facto search engine for many people. Launched in 1994, I personally started to use it on a 56kbps modem connection in 1998. Then, Google became popular in the early 2000s in Singapore and I switched to it sometime in 2000/2001 and never left.
In 2003, before the world even heard of Facebook, and around the time of MySpace, with its wild west-esque profile pages which contained animations, marquees, background music and mouse-following nonsense, Friendster was a popular social network in South-East Asia. Social media has evolved much since then, leading to apps like Snapchat, TikTok, and a myriad of distributed social networks.
The common thread between these two progressions have been that the users of search and social media have grown to get used to free services, even though companies like Google or Meta spend billions yearly on R&D to hook the next million users. How do they sustain such costs and growth?
These companies have of course evolved to using ad revenue as a source of revenue, and many other sources that are not apparent to the users.
Many consider ads to be an invasion of user privacy, because of what the ad companies have to do in order to increase their revenue share. Most of us know this already, but it bears a need to be rehashed. Ad companies make revenue by charging their advertisers using models like CPC/CPM/CPI.
While some companies may still use the CPM model, it is more likely that conversion-related models like CPC/CPI are more profitable as they can charge more for them. But in order to drive conversion-related metrics, while displaying the least amount of ad impressions (for cost efficiency as they only get so many user views), the ad firms would need to know their product well, aka the prospects, or the users, basically you if you’re using a service for free. And how do they “know you well”?
Analytics is the study of data to mine patterns and insights from the users to understand them better. This requires a ton of data, and when I say a ton, I mean, everything about you, what food you like to eat, where you work, where you stay, whether you have a significant other or not, what their interests are, anything they can find out about to you in order to sell you better ads. What I’ve listed is merely a tip of a tip of an iceberg.
This leads to amassing a huge amount of data per person, and with hundreds of millions, if not billions, of users, this results in so much data that companies have had to design better ways to store, analyze and process the data. Entire technology stacks have been developed in order to solve these problems.
So this brings us to my discussion point. Why should you pay for online services? This comes at the heel of Meta offering to charge EU users €10 for not getting ads and then lowering it to €6 in 2024. If this choice ever comes to you if you are living in other regions, why should you choose it instead of getting the service for free?
Of course there are arguments for avoiding centralized social networks altogether, but I’m not just talking about just social networks here. I’m talking about the core reason why one should choose a paid service over a free one is how they treat your data. It doesn’t mean of course that if you paid for a service that your data wouldn’t be sold or mined, but that the organization selling you the service would be expected to have proper revenue models that allow for the monetization of its users instead of purely mining your data for profit. (Note that you should still read the user agreements and data use policies to check how your data is used.)
And of course, you don’t really know what is going on behind the scenes. Are they just figuring out what you like? Are they working with other firms to figure out what you like? Sending your data across to multiple data processors? Are they respecting your opt-out decisions? Do they even allow you to opt-out of personalized ads? Do they use your data to sell you other services?
- Free email? Do they data mine your emails? (“Customer data monetization” business model.)
- Free social network? I guess there is enough discussion in this post to discuss the risks.
- Free app? Are they trying to lock you in and then charge you after? (“Razor and blade” business model.)
- Free game? Is there a gambling-like design mechanism that drives your dopamine production to keep you hooked? (“Freemium” business model.)
The list goes on but I think this reason in itself is the largest reason for paying for online services instead of opting for free ones that sell your data. As the adage goes, if you’re not paying for a service, you’re not the customer, you’re the product.
Every company exists to turn a profit. Or do you think that you are getting a free service because they are feeling altruistic?
Guess what, fishes swimming in lakes don’t often wonder why food gets thrown at them for free too. They too, don’t see the hooks and strings attached to it — at least not until it’s too late.
Featured photo by Kasia Derenda on Unsplash
