Tag Archives: business model

To pay or not to pay for Facebook

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Would you rather pay Facebook with money or data?

Not long ago, Zeynep Tufekci, a sociologist who studies social media, wrote that she wanted to pay for Facebook. More precisely, she wants the company to offer a cash option (about twenty cents a month, she calculates) for people who value their privacy, but also want a rough idea of what their friends’ children look like. In return for Facebook agreeing not to record what she does—and to not show her targeted ads—she would give them roughly the amount of money that they make selling the ads that she sees right now. Not surprisingly, her request seems to have been ignored. But the question remains: just why doesn’t Facebook want Tufekci’s money? One reason, I think, is that it would expose the arbitrage scheme at the core of Facebook’s business model and the ridiculous degree to which people undervalue their personal data…

The trick is that most people think they are getting a good deal out of Facebook; we think of Facebook to be “free,” and, as marketing professors explain, “consumers overreact to free.” Most people don’t feel like they are actually paying when the payment is personal data and when there is no specific sensation of having handed anything over. If you give each of your friends a hundred dollars, you might be out of money and will have a harder time buying dinner. But you can hand over your personal details or photos to one hundred merchants without feeling any poorer.

So what does it really mean, then, to pay with data? Something subtler is going on than with the more traditional means of payment. Jaron Lanier, the author of “Who Owns the Future,” sees our personal data not unlike labor—you don’t lose by giving it away, but if you don’t get anything back you’re not receiving what you deserve. Information, he points out, is inherently valuable. When billions of people hand data over to just a few companies, the effect is a giant wealth transfer from the many to the few…

Ultimately, Tufekci wants us to think harder about what it means when we pay with data or attention instead of money, which is what makes her proposition so interesting. While every business has slightly mixed motives, those companies that we pay live and die by how they serve the customer. In contrast, the businesses we are paying with attention or data are conflicted. We are their customers, but we are also their products, ultimately resold to others. We are unlikely to stop loving free stuff. But we always pay in the end—and it is worth asking how.

Perhaps we are headed toward a world where companies like Facebook would have to show customers (1) how much data they actually have about the person and (2) what that data is worth. But, I imagine the corporations would like to avoid this because it is better if the user is unaware and shares all sorts of things. And what would it take for customers to demand such transparency or do we simply like the allure of Facebook and credit cards and others products too much to pull back the curtain?

Is it going too far to suggest that personal data is the most important asset individuals will have in the future?

“Peer to peer” car sharing ramps up

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I’ve talked before about how car sharing service Zipcar has freed my wife and me from needing to own a car.  Unfortunately, similar non-ownership options aren’t available to most Americans for the simple reason that Zipcar’s fleet is mostly concentrated in urban centers and around college campuses.  For many suburbanites, the prospect of an inexpensive, on-demand, by-the-hour car rental hasn’t been an actual prospect.

With RelayRides rolling out nationwide this week, however, that may be changing:

Companies like RelayRides…offer a different take on carsharing than the one established by Zipcar and its competitors. While those companies own fleets of cars, RelayRides is entirely peer-to-peer — if you have a car, then you can make it available for rental when you’re not using it. RelayRides says the average car owner makes $250 a month from the program.

Since it takes advantage of the cars already on the road, founder and chief community officer Shelby Clark argues that peer-to-peer carsharing can have a big impact — after all, a fleet-based company couldn’t simply declare one day that it’s launching nationally.

This is potentially very disruptive of Zipcar’s business model.  RelayRides (and other challengers like Getaround) don’t have to go head-to-head with Zipcar in many parts of the country because those markets are utterly unserved.  And even where RelayRides has to go head-to-head with Zipcar, their prices seem comparable.  So long as the reservation process and pickup hassle is roughly the same, I know I would have no problem booking cars through RelayRides.  My purchases within an active market for by-the-hour car rentals would simply be driven by normal consumer considerations like price, convenience, customer service, etc.

Indeed, this is the beauty of the free market, as Leigh Beadon over at Techdirt reminds us:

Nobody is immune—not even the last disruptor. Companies like Zipcar changed the game with their car-sharing services, but they are already facing new challengers….How big and how successful [RelayRides’] approach will become remains to be seen, but it’s a creative idea that makes a clear point: disruption can happen anywhere, to anyone. As the entertainment industry continues to fight progress, experts from every side of the debate love to make profound-sounding statements about how the internet has changed our media consumption habits, but that’s old news. From mobile-based taxi & limo services to the coming era of 3D printers and things like the Pirate Bay’s Physibles site, digital technologies are disrupting a lot of things, not just media.

Musical innovation

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As I noted in passing a few days ago when discussing the Brittney Spears’ dispute with the Bellamy Brothers, pop songs are pretty much all alike.

The same goes for music labels’ business models.  Commenting on a recent Financial Times article, paidContent suggests that “new” music services reportedly in development by Apple and Google — allowing individuals to store music on a “hard drive in the sky” — seem to be less “innovation” than “more of the same”:

The idea sticks closely to today’s à la carte, per-track model of buying individual tracks, which itself replicates yesteryear’s model in which music was packaged up in to individual plastic units of consumer product.Growth in this method of buying digital music has basically peaked in the U.S.. Will a hard drive in the sky give it a lift? Unlikely. Some now think that illegal music consumption is so tempting that the industry should effectively mimic this “music like water” approach legally.

Of course, Rhapsody has an all-you-can-eat model, has been available in the U.S. for years, and is a bit player.  Maybe it’s time to start coming up with some actually new ideas…