Xtra Internet Thoughts

Repeating History in Web 2.0 – Part 2 – Bartering Privacy

In my last post, I argued that while Web 2.0 technologies offer great promise for more interactive and personalized marketing, they also entail commensurate ability to offend the consumer with SPAM, and therefore require greater vigilance to protect the trusted relationship between a brand and its customers , i.e., the more personal and interactive the communication, the greater the offense when trust is violated. But, I believe this is only half of the Web 2.0 privacy and trust dilemma.

At some point, we must stop and ask ourselves why so many of these great companies, that offer so much value by making the Web more personal, social and interactive are pursuing advertising-based business models where real revenue can only be achieved by asking consumers to barter their privacy in exchange for services. While it may not be much, most of us pay for mobile voice, text and wireless services, cable TV, books on Amazon, movie and game rentals, toys for the kids, and believe it or not, a premium profile on LinkedIn. The best advertising-based businesses, such as cable TV, Google or the Wall Street Journal are completely non-intrusive and often offer enough value to supplement this revenue with direct subscriptions. Are we really supposed to believe that a company like Facebook, with a multi-billion dollar valuation can’t charge for its services?
User adoption often becomes such a religion for Internet startups that it isn’t always obvious when, who or how to start charging for services. In this regard, I think that B2C companies can learn something quite valuable from the experiences in B2B software and SaaS: the cost of time and effort it takes to adopt a new application usually outweighs the price you ultimately would pay for it by at least a factor of 10X. The result is that you just can’t even give away bad software. If you are building a company that is purportedly delivering a service of such great value, but can’t conceive of a business model where some segment of business customers or consumers at some level of adoption will pay for it without bartering consumer privacy, you really should question the inherent value of your offering. Otherwise, you will most certainly end up on the same garbage heap of all the Web 1.0 companies that chose to venture down this same treacherous path.

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