Thursday, June 7, 2018

Life Without Ad-supported Products and Services

Got privacy concerns? In a recent study, 63% of U.S. adults (nearly 2 out of 3 people) said they would be unwilling to give a company access to their personal data for targeted advertising in exchange for a free service. Shockingly unbelievable! Despite all the recent consumer and political fallout about consumer privacy and ad targeting, what would life really be like without advertising-supported products and services?

Let's think about that, shall we? Starting with the 800-pound gorilla...

Google Search: You could probably still use this, but without behavioral targeting and tracking, paid search ads may seem less relevant because it'll be like going back in time 10 years when results were largely based on keywords and bids from the auction model. You may think you're mostly interested in organic search results and probably don't care about the paid listings. But don't expect Google to continue investing in indexing organic results if it can't pay its employees! Here are some alternative private search engines to Google.

YouTube: Google paid a lot of money for YouTube ($1.65 billion) and they have spent years trying to monetize it. Only recently, thanks to the growth of mobile and video advertising, does this acquisition appear to be paying off. YouTube has struggled for years to get consumers to pay for a subscription. Without advertising, YouTube would essentially be gone. There is really no alternative to this platform. Even Vevo realized this recently and announced the shut down of its consumer branded sites to focus on its YouTube channels!

Google Maps: This is the most popular mapping and GPS/driving direction service.  Google has tried to sell ads based on location and behavioral targeting. Other online maps also rely on ads. So if you want to avoid ads 100%, you will need to buy a Garmin or a similar device that makes its money from hardware sales, not advertising.

Gmail: You might think Gmail is ok as Google claims it no longer scans emails to serve ads. But it is still scanning emails in the name of personalization. For example, Google knows when your next flight is leaving, and whether or not it has been delayed, based on emails you get from airlines and travel booking sites. Also Gmail has an ad product, although you may never notice the ads if you have your settings set to not display Promotions. But Gmail ads do offer advertisers lots of targeting options. Where do you suppose Google gets those signals from??? Lastly, I feel Gmail is a Trojan horse play for Google to incentivize users to create a login (and stay logged in for checking email constantly) and user profile, which in turn can be used for your login across all Google products in order to track you with more precision across the web and across devices to serve better ads within its ecosystem. If you don't want an ad-based "free" webmail service, you may have to start using your ISP's "free" email address that came with your broadband service (e.g., Comcast, AT&T). The trade-off though is the switching cost is high if you ever want to leave your Internet service provider because you will have to tell all your friends they need to email you at a new email address. That happened to me years ago when I switched from Mindspring to Gmail.

Android Phones: Know that Android-based phone you have from Samsung, LG, or Motorola? While the operating system was free to phone manufacturers, Google uses Android as yet another Trojan horse to get mobile users to use its popular ads-based mobile apps, such as those described above, that are pre-loaded on the phones to protect its dominant advertising position in desktop and mobile devices. One alternative is to get an iPhone.

...And then there's Facebook

Facebook: By now, we all know how Facebook collects tons of data about users without their knowledge in order to provide incredibly powerful targeting capabilities for advertisers. As a digital marketer, I can attest to how precise and effective their ad products are. But as a consumer, you won’t easily find another social network where all your friends are.

Instagram: Thinking about leaving Facebook to Instagram like a teenager? Not so fast, Instagram has largely adopted the same ad platform as Facebook.

WhatsApp: How about WhatsApp? The founders built the app based on privacy concerns and started out charging 99 cents a year. When you have over 1 billion users, that's not a bad revenue model. Unless of course someone (i.e.. Mark Zuckerberg) paid you $22 billion for the company 😉 If you haven't heard, the founders of WhatsApp have fought Facebook executives for a while to keep ads off WhatsApp and are leaving Facebook over this philosophical difference. And it seems ads are coming soon to WhatsApp.

All other social networks, like Snapchat, are also ad-based. So there's no alternative service at scale really. Perhaps this will lead to a renaissance when people will actually call people on the phone again or meet friends face-to-face.

Other popular ad-based services

Yelp: Who doesn't love Yelp for recommendations? The company has ads, but it has limited targeting abilities, mainly based on a user's keyword search and location. So you can decide if that creeps you out. Also, Yelp has been building out other revenue streams targeted at businesses, like request-a-quote, that is not ad-based.

News sites: Most are ad-supported, but many don't make enough money to offset their declining print revenue. Savvy papers with loyal followers, such as WSJ and NY Times, charge a subscription and some have tested micropayments per article. But if you don't like ads, your selection of news sites is quite limited.

Mobile games: Many casual mobile games are still ad-supported. Part of the reason I think that's the case is because ad platforms have made it easy for developers to integrate ad units within their game for monetization. Many don't want to charge a fee for each download, thinking it will negatively impact app adoption. (True!) Some have found success with a freemium model, like Fortnite. But selling virtual goods does require developers to work harder to figure the "hook" to get users to pay and to develop a store in the app to sell these virtual goods.

TV: TV shows are still largely ad-based. TV started that way and some could argue there is a sea change. Netflix has built a very successful subscription model with original content and zero ads. But most video on demand or over the top (OTT) TV streaming services are currently testing a hybrid model that includes a "modest" monthly subscription fee and targeted video ads. Think Hulu, Sling TV, Directv Now, and YouTube TV.

Not all hope is lost

Not to be all doom and gloom if you don't want to use ad-supported products, as there are a few companies that still offer products and services not based on advertising.

Amazon/Amazon Prime: If you're not one of the 100 million people on Amazon Prime, you should be! This paid subscription gets you so many benefits, that I can't even list them all. Go read it here for yourself. That being said, Amazon has been slowly developing a burgeoning advertising business on its site because most people start product searches on Amazon rather than Google. As this becomes a growing revenue source for them, how long before Amazon engages in behavioral targeting for advertising, much like how it has successfully mined customer browsing and purchasing data on its site for its recommendation engine and tested ad-supported, discounted Kindles?

Apple: Apple is the poster child for anti-ad-supported products, even if its legion of app developers depend on ads for monetization. Not a week goes by these days that CEO Tim Cook is not poking a stick at Facebook and its lack of consumer privacy practices. But Apple is a highly-profitable hardware and services company, not an advertising company like Google and Facebook. So product sales and subscriptions will dominate for a long, long time!

Microsoft: Many of us interact with Microsoft via its Windows and Office products. As such, it's primarily a B2B company and makes a ton of money from charging businesses and home users for subscriptions to Office and operating system licenses to computer manufacturers. And their Azure cloud computing business is growing like gangbusters that is also subscription-based. It sells some Xboxes to consumers at retail and also generates subscriptions from online gaming. It does have the Bing search engine and an ad business. But for the vast majority of consumer's interactions with Microsoft products and services, they're not really ad-supported.

Netflix: Unlike the OTT TV streaming services mentioned above, Netflix has scoffed at an advertising revenue model and is focused on subscriptions. If their stock price is any indication, they are doing just fine without ads!

Spotify: Spotify and other music streaming businesses all seem to have landed on a $10/mo subscription model. Some like Pandora still have an ad-supported "free" option. There is also talk of Spotify developing an ad business.

So there you have it. Can you 2/3 of Americans out there really live without these ad-supported services? And how much can your wallet take to keep paying for existing subscription-based services, like Amazon Prime, Netflix, Spotify, Hulu, etc.? The dollars add up quickly, don't they?!?


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