4 ms·

It's the same thing that happens to all "free"/ad-sponsored/VC-backed services. Unless you're FB or Twitter or YouTube, your ads aren't profitable enough to run

It's the same thing that happens to all "free"/ad-sponsored/VC-backed services. Unless you're FB or Twitter or YouTube, your ads aren't profitable enough to run your business. The business model is unviable unless you get that big. So you lose a bunch of money until you find a way to monetize or close. This always takes the form of user-hostile anti-features. Currently that's forcing users into your special apps, where they can't install an ad-blocker. Historically it's been stuff like increasingly scummy ad behavior, and/or requiring paid accounts to access features that used to be free. Your platform gets less useful and gets replaced by the next "free"/ad-sponsored/VC-backed money loser and the cycle repeats. It's happening to imgur and Reddit now. Time to find the next big thing.

msluyter 7y ago
I call this the dismal equilibrium. Anything free that provides value is, in brute economic terms, mis-priced. Thus, it tends to degrade due to attempts at monetization until a balance is reached between its inherent value and the pain one must endure to use/access it.
- noir_lord 7y ago
  > Anything free that provides value is, in brute economic terms, mis-priced. Damn, that's a good way to put it. I assume value includes non tangibles, otherwise open source wouldn't work.
  - coldpie 7y ago
    > otherwise open source wouldn't work This is more a case of non-open-source software trying to force physical-world business models into a world where physicality has no meaning. Most open source development is paid for by paying for the work to be done. In other words, much open source software is not free; rather, it's already been paid for.
- ativzzz 7y ago
  > in brute economic terms, mis-priced Is this necessarily a bad thing? Or are you saying this is basically an arbitrage opportunity waiting for someone to exploit it? How would we structure something free that provides value, and keep it free in the long term without degradation?
  - msluyter 7y ago
    Well, not really saying it's bad in a moral sense or making a value judgement (though it does tend to be "bad" from a usability perspective), just noting what I've observed. And it applies even to things that aren't free, but which you pay for via some fixed initial cost. For example, I bought Words with Friends a long long time ago, and for a while it was great. But now they've added tons of gamification features like powerups that bypass game rules, social, awards, etc... to try to get you to engage more and pay more money. Now, various awards screens pop up and waste seconds of my life after every move. I just want to play standard Words with Friends with my wife like I have for the last 10 years. But one can see that folks like me aren't making Zynga any (new) money, hence the other inducements.
    - ativzzz 7y ago
      In your example, it seems the app was not mis-priced for you. In fact, it was the perfect price, until the company decided it was mis-priced for them. So now they add all these unfriendly features, which now makes the app mis-priced for you. My point is that mis-pricing can be different depending on who's perspective we look at. So in an economic sense, when we say something is mis-priced, from who's perspective is it?
- drtz 7y ago
  Another side of the same coin: anything "free" that you wouldn't use if you had to pay for it isn't providing value.
- rurp 7y ago
  That's a great term that really captures the dynamic. It's sad to see it taking effect on so many previously useful platforms.
- matheusmoreira 7y ago
  What if the thing provides maximum value only when it's free? Monetizing via advertising implies losing the speech the advertisers don't approve of. If we had discussion forums that didn't allow free accounts to post, we'd lose the speech of people who can't or won't pay. Would be interesting if some rich benefactor randomly decided to run such a community.
deleted 7y ago
[deleted]
Glyptodon 7y ago
I'd caveat this very slightly, as sometimes a business model turns out to be existentially viable, but lacks the kind of scale, revenue, or exponential growth that VCs want to see.
- coldpie 7y ago
  If your business model doesn't include paying back your investors, it's not viable. If your business model does pay back investors, or doesn't require them, then congrats! You've avoided the dismal equilibrium and have a successful business that serves its users instead of abuses them :)
  - deleted 7y ago
    [deleted]
- jimbokun 7y ago
  Which means the business never should have taken VC funding, because it just puts the whole venture at risk while adding zero value.
hahla 7y ago
I just fail to see how old Reddit could not have been a sustainable standalone business. Conde Nast had a huge opportunity once they acquired it as it no longer needed "VC growth" but they failed. I wish I had the opportunity to acquire it for 10-20 million[1]. [1] https://www.cnbc.com/2018/07/25/the-1st-thing-alexis-ohanian-bought-after-he-sold-reddit-for-millions.html https://www.cnbc.com/2018/07/25/the-1st-thing-alexis-ohanian...
- deleted 7y ago
  [deleted]
the_gipsy 7y ago
It's like image hosting sites.
wool_gather 7y ago
> increasingly scummy ad behavior [...] It's happening to imgur and Reddit now And Stack Overflow: [Why is StackOverflow trying to start audio?](https://news.ycombinator.com/item?id=20288768 https://news.ycombinator.com/item?id=20288768) [Ads on Stack Overflow are increasingly \[terrible\]](https://meta.stackexchange.com/questions/329547/ads-on-se-sites-are-excessively-animated-irrelevant-dubious-and-resource-inten https://meta.stackexchange.com/questions/329547/ads-on-se-si...)

msluyter 7y ago

I call this the dismal equilibrium. Anything free that provides value is, in brute economic terms, mis-priced. Thus, it tends to degrade due to attempts at monetization until a balance is reached between its inherent value and the pain one must endure to use/access it.

noir_lord 7y ago
> Anything free that provides value is, in brute economic terms, mis-priced. Damn, that's a good way to put it. I assume value includes non tangibles, otherwise open source wouldn't work.
- coldpie 7y ago
  > otherwise open source wouldn't work This is more a case of non-open-source software trying to force physical-world business models into a world where physicality has no meaning. Most open source development is paid for by paying for the work to be done. In other words, much open source software is not free; rather, it's already been paid for.
ativzzz 7y ago
> in brute economic terms, mis-priced Is this necessarily a bad thing? Or are you saying this is basically an arbitrage opportunity waiting for someone to exploit it? How would we structure something free that provides value, and keep it free in the long term without degradation?
- msluyter 7y ago
  Well, not really saying it's bad in a moral sense or making a value judgement (though it does tend to be "bad" from a usability perspective), just noting what I've observed. And it applies even to things that aren't free, but which you pay for via some fixed initial cost. For example, I bought Words with Friends a long long time ago, and for a while it was great. But now they've added tons of gamification features like powerups that bypass game rules, social, awards, etc... to try to get you to engage more and pay more money. Now, various awards screens pop up and waste seconds of my life after every move. I just want to play standard Words with Friends with my wife like I have for the last 10 years. But one can see that folks like me aren't making Zynga any (new) money, hence the other inducements.
  - ativzzz 7y ago
    In your example, it seems the app was not mis-priced for you. In fact, it was the perfect price, until the company decided it was mis-priced for them. So now they add all these unfriendly features, which now makes the app mis-priced for you. My point is that mis-pricing can be different depending on who's perspective we look at. So in an economic sense, when we say something is mis-priced, from who's perspective is it?
drtz 7y ago
Another side of the same coin: anything "free" that you wouldn't use if you had to pay for it isn't providing value.
rurp 7y ago
That's a great term that really captures the dynamic. It's sad to see it taking effect on so many previously useful platforms.
matheusmoreira 7y ago
What if the thing provides maximum value only when it's free? Monetizing via advertising implies losing the speech the advertisers don't approve of. If we had discussion forums that didn't allow free accounts to post, we'd lose the speech of people who can't or won't pay. Would be interesting if some rich benefactor randomly decided to run such a community.

deleted 7y ago

[deleted]

Glyptodon 7y ago

I'd caveat this very slightly, as sometimes a business model turns out to be existentially viable, but lacks the kind of scale, revenue, or exponential growth that VCs want to see.

coldpie 7y ago
If your business model doesn't include paying back your investors, it's not viable. If your business model does pay back investors, or doesn't require them, then congrats! You've avoided the dismal equilibrium and have a successful business that serves its users instead of abuses them :)
- deleted 7y ago
  [deleted]
jimbokun 7y ago
Which means the business never should have taken VC funding, because it just puts the whole venture at risk while adding zero value.

hahla 7y ago

I just fail to see how old Reddit could not have been a sustainable standalone business. Conde Nast had a huge opportunity once they acquired it as it no longer needed "VC growth" but they failed. I wish I had the opportunity to acquire it for 10-20 million[1]. [1] https://www.cnbc.com/2018/07/25/the-1st-thing-alexis-ohanian-bought-after-he-sold-reddit-for-millions.html https://www.cnbc.com/2018/07/25/the-1st-thing-alexis-ohanian...

deleted 7y ago
[deleted]

the_gipsy 7y ago

It's like image hosting sites.

wool_gather 7y ago

> increasingly scummy ad behavior [...] It's happening to imgur and Reddit now And Stack Overflow: [Why is StackOverflow trying to start audio?](https://news.ycombinator.com/item?id=20288768 https://news.ycombinator.com/item?id=20288768) [Ads on Stack Overflow are increasingly \[terrible\]](https://meta.stackexchange.com/questions/329547/ads-on-se-sites-are-excessively-animated-irrelevant-dubious-and-resource-inten https://meta.stackexchange.com/questions/329547/ads-on-se-si...)