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?!?

##

WSJ Extracting More Economic Value from Digital Subscribers...Again

The Wall Street Journal has always been the best at monetizing its publication online. And they continue to demonstrate their pricing power as the #1 newspaper in the US.

This month, my digital subscription to the WSJ went up yet again! This is my third price increase over 17 months. I previously blogged about my last price increase. While this latest price increase is relatively small, going from $21.62 per month to $21.99, it's the cumulative trend that amazes me.

When you compare the price increase to other benchmarks, it's quite astounding.

From the chart above, I've plotted how much my digital Wall Street Journal monthly subscription has gone up, relative to how much the Dow Jones Industrial Average, the average price of a regular gallon of gas in San Francisco, and the Consumer Price Index - Urban has changed.

As you can see, the WSJ went up 47% from December 2011 to the present day. Meanwhile, the price of gas has gone up as high as 28% and then down to 12%. The Dow had a good 2012 and a strong 2013 start. Yet, even the market has not gone up half as much as the WSJ with 20% growth in the past 17 months. Meanwhile, inflation has been in check while the economy recovers. So it's no surprise its 3% increase was no match for the pricing power of the WSJ.

So does it make me feel better charting how much the WSJ has me locked into their publication paying such high prices? No, not really. As long as they keep putting out an awesome paper, it's worth it.

##

Wall Street Journal Further Monetizes Digital Publication

Rupert Murdoch and News Corp made big news themselves this week by announcing a separation of its entertainment and publishing businesses. But another less splashy event occurred today too.

Those of you who read my blog know how much I LOVE the Wall Street Journal. For a little bit longer than half a year, I've enjoyed reading it on my Kindle Fire and my Droid 3 when I'm on the go. I find the Kindle Fire user experience to be quite good. And unlike my mobile app version, the Kindle Fire version downloads my morning paper over wifi in the wee hours of the night so the entire paper can be read offline by the time I wake up. That part is awesome!

Source: WSJ

Good ole Rupert Murdoch is more than happy to extract as much value as possible from this love affair. Everyone knows the WSJ is one of the most successful DIGITAL publications out there who never fell victim to a pure advertising-based revenue model and decided to run a paid subscription for its walled off garden of content FROM DAY ONE. That's one of the reasons why Murdoch bought Dow Jones a few years ago. As a business person, I can respect that.

As a subscriber, the WSJ continues to push my price sensitivity. Here's a great example of their "pushing" recently.

When I signed up for what they call the "Wall Street Journal Kindle and Digital Plus" last winter, it was a great package where you can read the WSJ on any digital device for one rate. At that time, it was $14.99/month, which was actually higher than my print subscription. But the convenience of multi-device consumption and the environmental benefit outweighed the higher cost. Then, on February 17, 2012, I received an email that my subscription was increasing to $18.29/month. For you kids at home, that's a 22% increase!

TODAY, I received an email saying that effective August 29, 2012, my rate is going up to $21.62/month. That's another 18% increase! This is all within the past 6-7 months. I don't know what other industry has that kind of a growth rate, especially in a down economy!!!

Am I going to cancel? NO. The WSJ is my cocaine. I love it. I need it. It's my friend. I gotta have it. So, Murdoch, you got me...again.

##

WSJ: One of the last "walled garden" content providers

In my post last Friday, I mentioned in passing the ability of the Wall Street Journal to charge a premium for online access. In thinking about it more, I came to realize the WSJ is one of the more successful newspapers out there...even more than I realized!

I love the WSJ and read it each day on the way to work. Recently I was looking at the Kindle 2 by Amazon and was excited to see the WSJ as one of its periodical offerings. But what shocked me was it would cost me $10 per month to download it on a Kindle. That would be on top of my online and print subscriptions I have today. Amazon doesn't break out sales of its Kindle, let alone subscriptions.

I would not be surprised if they had some takers. But wouldn't it be great to have platform-agnostic use of the same content for one bundled price? Why pay 3 times? (Actually, WSJ does have print and online bundles.) Of course, the fact that the WSJ has commanded this premium is a testament to its valuable content!

Furthermore, unlike Apple and the iPod, Amazon is selling the Kindle (a.k.a., the "razor") to make money on books (a.k.a., the "blades"). But Apple is making money on the iPod ("razor") and not music. So unless Amazon thinks subsidizing WSJ subscriptions would drive major book sales, I'm probably out of luck for better pricing.

In the end, content is king! In other words, I guess if you continue to have beautiful flowers in your walled garden, you can charge admission.

##