Stop Saying 'If You're Not Paying, You're The Product'

from the there-are-more-options dept

We just wrote about how silly it is to argue that companies you pay for their services or software somehow treat you better or are more "aligned" with user interests than those who give you products and services for free. When you dig in on the subject, such claims don't make any sense. In both cases, companies have some alignment with users -- because without users, they're nothing -- and some alignment with trying to make themselves money. And sometimes those two alignments conflict, whether or not the user is paying directly.

Derek Powazek (random trivia: whose work inspired me to learn how to create a web page back around 1995 or 1996 or so) has an excellent take on the pithy and dismissive phrase that many often use to argue that free services treat users worse:

"If you're not paying for the product, you are the product."

It's pithy and clever... and wrong. Powazek dismantles the claim eloquently. He attacks the underlying assumptions in that statement. He highlights that "free with advertising" has been a pretty big business for a long long time, in which there's no indication that users were treated as "the product" or somehow treated poorly. And then there's the key one: this is not an either/or situation:

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.

He also points out, as I have many times, that there are plenty of companies whose services you pay for who treat their users atrociously. And then points out what many of us have been arguing all along: there are all sorts of business models online. Some work in some cases, others work in other cases. But to argue that "free" services mean you're "the product" and thus not treated as well, simply isn't an accurate or realistic statement. So can we please agree to kill it?

Filed Under: customer service, free, internet business models, paid, product, users

Why Music Is Not A Product & Three Reasons Why That's A Good Thing

from the check-your-assumptions dept

Perhaps the biggest illusion in content-centric industries is the belief that the content itself is the main product. For the end-consumer, music is not a product or a service. End-consumers rarely pay for music. They put down money for copies of music, such as CDs, sheet music or music downloads. They put down money for tickets to live experiences. They put down money for subscriptions to music services. Those are all products, but music itself is not. Arguably, the only way to directly 'pay for music' is through commission or donation.

So what is music, or any other type of content? It's what adds value to the CD in the box. It's what makes 2 covers separated by a stack of paper worth buying from the book shop. It's what brings hundreds of people to one place for a shared experience. But it's not a product.

For people that have effectively programmed their minds to see their content as a product, this might be an uncomfortable revelation. Yet while uncomfortable, it can also be very empowering and here's why:

• Digital-proof. For a long time the music industry 'got away' with believing that the content is what people buy. However as music went digital, an increasing amount of people were able to separate the content from the product; thus leading to an uncontrollable proliferation of the content through unauthorized networks. Understanding that music ≠ the product fully acknowledges the digital reality, which is the first step to finding viable alternatives for products.
• Flexibility. Understanding that music is not the same thing as the product which creates the financial reward is a great way to rethink the products that are created surrounding your music. Music is neither a CD nor a download. It can add value to anything. Some people actually create content around physical things to make them more valuable and easier to sell (it's called Significant Objects).
• Fan-centrism. Separating product and content means you no longer have to sell fans what you want them to buy. You can sell them what they want to buy and let the music add value. By understanding who your most avid fans are, you can provide them with something they'll be happy to spend money on. Example (oversimplification alert): got hipster fans? Sell subscriptions to exclusive content via an iPhone app. Got teenage girl fans? When doing a live show, give them a number to send a text message to for an x amount of money & give them exclusive backstage content from the show when they return home. You can do anything; just understand your audience by being connected with them and realize that it's not the content itself that's being sold.

This way, everybody wins. The fans win, because what they pay for is more relevant to them. The artists win, because not only do you have increased chances to monetize, but you will also create a stronger connection with your fans by giving (or selling) them what they want.

Some great, classic examples of artists & labels that 'get it' are:

• Nine Inch Nails' Trent Reznor (Mike's case-study on Trent Reznor & the formula for future music business models);
• Younger Brother & Twisted Music (Case Study: How Shpongle Went From Yelling At Fans To Embracing Fans);
• Cee-Lo Green (uses his content to make himself & his endorsement the scarce good);
• Dave Matthews Band (particularly the fan club and the emphasis on merchandising).

In short, the value of the products you sell can be raised dramatically by attaching your content to it. Your content is valuable, but for end-consumers, it's not your product.

Filed Under: music, product

Does Google Have What It Takes To Be A Platform, Rather Than A Product, Company?

from the the-challenge-is-(still)-on dept

Nearly seven years ago, I wrote about the idea that there was a "battle to own the internet," and that if Google really wanted to succeed, it had to move away from just being a product company to being a true platform company that had a much more open setup, which did much more to encourage developers to build on top of it. Over the years, occasionally I've repeated that point. And while Google has done a few things at the margin, it still has always seemed to resist becoming a true platform. There are, certainly, some folks inside Google who get this, and I seem to hear from a bunch of them any time I bring this up. But the company has a history of having trouble really opening up to outside developers.

So it's really interesting to see this "internal" note from Google employee Steve Yegge, that he accidentally posted publicly via Google+. It's a very detailed and honest criticism of the company's attitude on certain things, but not done to slam Google, but rather to push Google to change. It's getting tons of attention, and Yegge removed the post, but has allowed others to keep up a reposted version. He's also pointed out that Google PR was careful not to pressure him to take down the post, noting that employees are free to express their opinions.

Some have been reading it as an insider's "attack" on Google, but I don't see that at all. It seems like a call to action from someone who thinks the company is missing the boat on being a platform. Yegge spends a lot of time talking (very openly) about his prior experience working at Amazon, and about how Jeff Bezos got the "we need to be a platform" religion big time nearly a decade ago, and effectively forced the entire company to focus on that as job number one. While Yegge criticizes many problems with Amazon, he does recognize that such a vision has put Amazon in a good position (along with others who have clearly embraced being "the" platform: Facebook, Apple and, almost by accident, Microsoft).

The key part of the post, which is what many people are focusing on, is where Yegge criticizes Google+, and how it wasn't designed as a platform, whereas its main direct competitor, Facebook, has clearly embraced being a platform in a very meaningful way.

Google+ is a prime example of our complete failure to understand platforms from the very highest levels of executive leadership (hi Larry, Sergey, Eric, Vic, howdy howdy) down to the very lowest leaf workers (hey yo). We all don't get it. The Golden Rule of platforms is that you Eat Your Own Dogfood. The Google+ platform is a pathetic afterthought. We had no API at all at launch, and last I checked, we had one measly API call. One of the team members marched in and told me about it when they launched, and I asked: "So is it the Stalker API?" She got all glum and said "Yeah." I mean, I was joking, but no... the only API call we offer is to get someone's stream. So I guess the joke was on me.

Microsoft has known about the Dogfood rule for at least twenty years. It's been part of their culture for a whole generation now. You don't eat People Food and give your developers Dog Food. Doing that is simply robbing your long-term platform value for short-term successes. Platforms are all about long-term thinking.

Google+ is a knee-jerk reaction, a study in short-term thinking, predicated on the incorrect notion that Facebook is successful because they built a great product. But that's not why they are successful. Facebook is successful because they built an entire constellation of products by allowing other people to do the work. So Facebook is different for everyone. Some people spend all their time on Mafia Wars. Some spend all their time on Farmville. There are hundreds or maybe thousands of different high-quality time sinks available, so there's something there for everyone.

Our Google+ team took a look at the aftermarket and said: "Gosh, it looks like we need some games. Let's go contract someone to, um, write some games for us." Do you begin to see how incredibly wrong that thinking is now? The problem is that we are trying to predict what people want and deliver it for them.

This part rings incredibly true. I know that when Google+ launched, I liked it as a program, but asked people about APIs, because it needed to better integrate into my workflow -- and was told that that would be coming "sometime later." And while I still mess around with Goolge+, it's largely become an afterthought to me, because it just lives off in its own separate world, rather than integrating well. There are still features I like, but until developers have a chance to dive in and make it useful... it just doesn't feel like a necessity.

But there's a bigger lesson in this, beyond Google's continued platform-itis. And it goes back to the issue of cargo cult copying -- a topic I've discussed a number of times. People seem to think it's easy for companies (especially big companies) to "copy" products of their competitors. In fact, with Google, many people think it's so easy that there are antitrust investigations going on. But Google+ and the points that Yegge raise remind us, yet again, that while copying the basic "features" of a product may be possible, really recreating what makes it tick and what makes it successful is difficult.

It's easy to copy the superficial. It's difficult to copy the soul.

With Google+, the company built a really nice copy (with some clear improvements) of Facebook, the product -- which is the superficial, public-facing part. But it completely missed the boat on Facebook, the platform -- which is the real soul of what makes Facebook such a powerhouse. Google certainly can get there. And, in the back of my mind, I'd always assumed that was exactly the path they were on. But remembering that post from 2004, and the lack of any sustained, involved effort within and across Google to be a platform, combined with this post from Yegge, again makes me wonder if Google just doesn't recognize the importance of being a platform.

I've argued in the past that one big achilles heel for Google is its awful reputation when it comes to customer service, but it's lack of deeply ingrained platform-focused thinking may represent a much bigger threat.

Filed Under: apis, platform, product, services, social networking, steve yegge
Companies: amazon, apple, facebook, google

Security-As-A-Feature And The Economics of Abundance

from the a-feature-not-a-product dept

The always insightful Bruce Schneier has a new piece out arguing that the stand-alone security industry is doomed, as security increasingly becomes a feature of other products, rather than a product in its own right. He points out that hardly anybody wants to buy a "security product." They want to buy useful products -- operating systems, databases, web servers, whatever -- and take for granted that the developers of those products have designed it to be secure out of the box. Schneier points out that consolidation in the security industry has not taken the form of large security firms buying small security firms, but of non-security-focused software firms buying security firms to help bolster the security and reputation of their products. This may indicate that developers of other software products are recognizing that better security is one of the key features customers are demanding in their products.

If you'll excuse me for jumping on a Techdirt hobby-horse here, this is another example of the economics of abundance at work. Security products are increasingly becoming commodities. Obviously the software ones -- anti-virus tools, software firewalls, intrusion detection systems -- have a marginal cost of zero, and even many of the hardware devices are built on commodity parts that get cheaper every month. What hasn't gotten cheaper is the expertise required to put the bewildering array of security tools together into a coherent system that's customized for a firm's particular business. Indeed, as security products have gotten more numerous and more complex, it has actually gotten harder to keep track of them all and know which security tools are the best ones to use in any given situation.

And crucially, this isn't something you can outsource to a third party. I've written before (in the context of e-voting) that encryption isn't magic pixie dust that automatically makes a system more secure. The same point applies to security more generally. Having the best firewall in the world won't do you any good if it's not configured properly, or if your network hasn't been designed with security in mind. And because every large organization has different security needs, every organization needs a slightly different security setup.

This creates a huge opening for companies who understand that customers are not looking to buy a security software product, but a suite of software that they can count on to be secure without worrying about the details. We've pointed out that this is essentially the business Red Hat is in: not selling software but selling the expertise of its employees with respect to the software. Security is a big part of that. "Security software" is an infinite good, and the market for it will get increasingly crowded in the future. On the other hand, the expertise needed to build complex software systems securely is as scarce as ever, and such expertise is one of the key ways that software companies can distinguish themselves from the competition.

Filed Under: abundance, bruce schneier, feature, product, security, service