When the Cost of Free is Too High

Sometimes you can't even sell something for free...

Advertising PhotoTimes are tough for creators of free, ad-supported content.

Ad blocking grew 30% in 2016 and now reaches some 26% of desktop users, with younger viewers being much more likely to do so. To make matters worse, Google has announced an upcoming version of Chrome will come with a built-in ad blocker to remove “annoying ads”.

Meanwhile, even the ads that are being shown are earning less money. YouTube is still experiencing an “Adpocalypse” as countless videos are demonetized following the revelation thats ads were appearing less-than-desirable videos.

This is a challenge faced by both legitimate creators and pirate sites. Pirate sites, according to a recent report by Ernst and Young, earned $111 million in ad revenue last year. While that’s a large amount, it’s approximately half what they would have made with premium advertising (as opposed to lower tier ads) and many feel the estimations are exaggerated.

Proof of that may be found in the fact that The Pirate Bay, as well as other sites, have begun having their visitors mine for cryptocurrency as a means of earning non-advertising revenue. However, it’s not just for pirate sites, Showtime recently did the same thing to its visitors, unwittingly turning their computers into cryptocurrency miners.

All of this begs one simple question: What will the cost of “free” be tomorrow and when will it be too high? Visitors already view ads, sacrifice privacy and, now, mine cryptocurrency for creators. At what point is it easier and better to just pay money?

A Brief History of Free Content

Free Stuff ImageWhen the internet was young, “dumb” banner ads and paid links were pretty much the only means of monetization. However, their effectiveness was minimal with atrocious clickthrough rates and low payouts.

They quickly gave way to “smart” ads such as Google Adsense that looked at the content on the page to come up with appropriate ads. However, they too began to lose effectiveness resulting in a focus on user targeting. Sites such as Google and Facebook use free services to amass an amazing amount of private data that is then used to target ads effectively.

But even with this hyper-targeting (at the sacrifice of privacy) ads have still struggled to pay the bills for many creators. The trend over the past ten years has been one of more ads, more targeting and more intrusiveness.

Partly because of this desperation, we’ve seen a spike in advertising-related malware, or malvertising, that infects users’ computers when they click an ad.

This, in turn, has helped spur on ad blocking. This means the ads that remain earn less revenue causing creators to put on more ads with heavier targeting and from more-quesionablle sources. This creates a vicious cycle that, as of right now, has no end in sight.

Pirate sites are, in many ways, the canary in the coal mine here. Not only do they have to rely on low-tier advertisements, but they target a younger audience that is much more likely to block ads.

This means that, they will feel the shifts in advertising first, offering a possible warning to the very creators that they steal from.

A Future Without Ads? Probably Not.

Back in September, it was discovered that The Pirate Bay, the world’s most infamous pirate site, was using a JavaScript cryptocurrency miner to earn revenue.

Basically, The Pirate Bay was (and is again) adding a script to its site that takes a percentage of the visitor’s CPU and uses it to mine for cryptocurrency. How much can this earn? One estimate claims it’s as high as $12,000 per day at current prices.

However, users are not happy about the intrusion, with some calling it a hijacking of their CPU. But that backlash hasn’t stopped other sites from jumping on the bandwagon. This includes the streaming site Alluc.ee and others. This includes Showtime, who removed the code shortly after it was spotted, indicating it might not have been an official push.

Regardless, these miners are a response to an age-old problem on the internet: “How do you get money from users who aren’t willing to pay?”

Advertising requires users trade their time, attention and, increasingly, their privacy. Miners, theoretically, require users surrender just a little bit of their CPU. If done properly, it’s unlikely visitors would even notice.

But where ads, by their very nature, are visible and disclosed, cyptocurrency miners are often not. One ad blocking service claims that up to 500 million PCs are being used in this way without their owner’s knowledge.

This has already led to a game of cat and mouse where ad blockers, and other extensions, are actively working to block such miners. Even if this method of revenue generation is preferred by users, it’s likely to fall into the same spiral of increased blocking met by escalated use.

In short, we would be right back where we started.

The Price of Free

The problem with “free” content is that it’s never actually free. There is some expense to the user.

But no matter how small that expense is, there will always be those who seek to shirk it. Combined with greed and other shifts in the marketplace, those who stay behind will see increased costs until they too take steps to shirk it.

Whether it’s ads, cryptocurrency miners or something else altogether, free will come at too high of a price for many.

The recent trend of cryptocurrency miners is dangerous because it’s often undisclosed and risks harm to the person’s computer. Though malvertising is a real problem, it’s not a deliberate one, unlike these miners.

Still, with proper disclosure and implementation, it’s easy to see why many users might prefer such miners to regular advertising. It’s just unlikely to be a long-term solution, at least by itself.

Simply put, any attempt to compel users to trade something for free content is met with resistance and that resistance builds over time. It’s like fighting gravity, any such trade is likely a path to instability.

For real stability, actual money is going to have to change hands.

A Less-Free Future

Thank You SignTrading visitor time, attention, CPU cycles, etc. for money is an inherently inefficient process that both introduces multiple middlemen and creates friction with visitors.

Such a process will almost always be unstable, especially when visitors can trivially block the way they earn money for the site.

While there have been many experiments in getting visitors to pay money directly to creators, such as Flattr (which is getting a revamp), the idea seems to have finally found its niche. Patreon, for example, doubled in 2016 and is currently on track to pay out more than $150 million to creators this year.

The idea behind this approach is simple, accept that most people can’t or won’t pay, but give those who can and will both an opportunity and reasons to do so. They then make recurring monthly payments and earn benefits and perks not available to regular visitors.

In many ways, the model is similar the “freemium” model that’s become wildly successful with mobile gaming. But where the model is controversial in gaming for often making games “pay to win”, it is far less controversial when it comes to content.

Is this model perfect and right for every creator? Absolutely not. I even attempted a Patreon on this site without success. My current consulting practice was simply far more effective at supporting this site.

However, for those it does work for, it creates a more stable income, builds a more dedicated following and avoid avoid or soften the blows created by shifts in other business models.

By eliminating multiple businessmen and reducing arm-twisting, many creators have earned more money and found greater stability than ever before.

Bottom Line

In the end, there is no one business model that will work for all creators. Every creator must find the approach (or combination of approaches) that works for them, their content and their audience.

However, the path to greater stability lies not in requiring free visitors to look at ads or mine cryptocurrency, but rather, in having them voluntarily open their wallets.

Doing this is obviously difficult giving the deluge of free content available on the internet, but those creators that have cracked that code are, in general, doing better than those who have not. Even if it’s just a supplementary business model, it can go to great lengths to help a creator earn a living.

That’s because “free” is certainly never free on the internet. It always comes at a cost to the visitor and many are going to shirk that price, no mater how small it is. Whether you view that as a form of piracy or as a natural response to an internet that’s gone ad-crazy, it is a reality.

Stability can’t come from finding new “free” business models that simply create new frictions as the previous one. Until cash changes hands, there is no peace for creators and visitors alike and there is no true stability.

When it’s all said and done, it’s money, not time, attention or CPU cycles, that has to pay for content. The more direct path between creators and dollars, the better off everyone involved is.

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