Thinkpieces about the ethics of ad blocking are all over the news recently, because apparently things only become newsworthy when Apple stops banning them. The time to discuss ad-blocking is not now, really — after all, the largest tech companies make all their money from advertising now. The time to discuss ad-blocking was 1994, when the first banner ad was introduced.
That said, there are new (or at least new-ish) things to say about alternatives to ad-based monetization on the web, in part because during the past few years alternatives have been successfully implemented, and in part because intelligent people like Jaron Lanier have been writing at length about possible alternatives recently.
If you’re reading this, you — like most people — have probably heard the idea that advertising is justified as the sole alternative to paywalls and merchandise sales, and swallowed it completely. You probably didn’t quite realize that Kickstarter and Patreon were genuine alternatives to an ad-based revenue model. Allow this post to be an introduction to the variety of ways in which you can distribute media for free and still get paid.
Why advertising is a bad model
Some reasons why advertising on the web is bad are probably familiar to you: targeted advertising implies tracking, which eats up bandwidth and is a potential violation of privacy; advertisements are typically both irritating and irrelevant. Other reasons will be familiar to people who have hosted ads: click-through rates are incredibly low and ads have become devalued over the past ten years such that providers like Google pay fractions of a cent per click and nothing per exposure, meaning that only extremely popular sites can make more than pocket change through ads; even ads hosted through big providers like Google can be full of malware. The big one is the one you haven’t heard of, though: ads don’t work. Depending upon advertising as the basis of the internet’s economy is like tying the value of paper money to tulip bulbs during the height of the Dutch tulip bubble; sooner or later the entire system will become devalued.
A selection of alternatives
This is, obviously, not a complete list. I’m going to address the most obvious and frequently-cited ones first.
- Subscriptions: rather than releasing your content for free, you charge for access. This monetization policy is very vulnerable to piracy — if there’s an alternative source, there’s no incentive to pay. It has low discoverability — if people can’t see your content without subscribing, they have no incentive to subscribe. It’s also not particularly sustainable unless you have a lot of high-quality content being released steadily — if the quality is too low, you lose subscribers; if the content isn’t released steadily enough or isn’t voluminous enough, subscribers feel cheated.
- Paywalls: an attempt to solve the discoverability problem with subscriptions by releasing a certain amount for free. Paywalls are often easily circumvented in such a way that a subscription is never necessary. Furthermore, while discoverability is improved, the average quality of content must be high if the content released for free is to convince people to pay. Finally, and most damning: paywalls don’t even attempt to solve any of the problems of subscriptions other than discoverability.
- Freemium: while most content is free, a subscription system exists that provides users with either extra content or extra functionality. Freemium systems walk a delicate balance: if the free version is too functional, nobody subscribes; if the free version is too incomplete, it’s considered crippleware (and somebody else with lower costs will undercut you).
- Donations: fans pay on a fully voluntary basis while content is released for free. This is very sensitive to the size of a fan-base and to how much that fan-base feels like the creator is ‘in need’ — a popular franchise with a creator perceived to be wealthy will not get donations.
- Merchandise: items are sold at a high markup with images tied into the media in question. This is essentially hiding a donation inside a purchase. Because of this, it’s easy for people to undercut your prices with merchandise similar to your own and take advantage of any fans who don’t realize that their purchase is a donation. Furthermore, the primary benefit over straight donation is that fans can advertise their association with the media in question — which requires a cohesive fan-base and a cohesive set of evocative symbols to make it profitable. A popular franchise without a fanbase that sees itself as set apart from the rest of the culture cannot reasonably benefit from merchandise, nor can a popular franchise with insufficiently iconic symbols.
- Crowdfunding: fans donate money to pay for the creation of media not yet created, often with merchandise thrown in to encourage larger donations. Crowdfunding is sometimes extremely effective; however, franchises with large and cohesive existing fan-bases benefit more from it than others. Discoverability is low. Repeatability is low, since repeated fundraising runs will tire fans, meaning that this is ideal for one-off new additions to existing franchises. Generally, if merchandise works for you and you need to raise money from your existing fans for something big and expensive and non-repeating like a movie or a tour, crowdfunding will be ideal.
- The Street-performer protocol: you create something and then use a crowdfunding-style fundraising round to finance it before releasing it. On the surface this looks strictly worse than crowdfunding; however, because the thing is already created, you can avoid the common crowdfunding pitfall wherein time estimates for completion are under-estimated and the product that was funded was never created. Furthermore, quite explicitly, in the street performer protocol, the resulting media is released free to everyone as soon as it is paid for; as a result, it’s highly piracy-resistant: nobody has a copy before it’s paid for except the creator, and afterwards everybody does. During the first iteration, discoverability can be a problem; however, discoverability becomes less of a problem the more iterations you go through. Because this was Bruce Schneier’s idea, there’s some mathematical formalism and technical detail to how trust is established between various parties, which I won’t discuss here.
- Patreon-style funding: something akin to a marriage between the street-performer protocol and a subscription system. In patreon’s model, fans subscribe to a creator such that they pay a certain amount automatically upon the public/free release of a piece of media. Unlike the street performer protocol, the media isn’t created before people agree to fund it. Patreon provides a mechanism for incentivizing higher donations by allowing various donation tiers access to specific content not accessible to other tiers, but such content tends to be rough drafts and notes — in other words, content mostly interesting to hard-core fans who might donate anyhow, thus circumventing problems with a ‘freemium’ model.
- Decision bidding: fans can pay for the ability to influence the end product. Occasionally this is integrated with another model — I’ve seen limited decision bidding as an element in patreon and kickstarter campaigns. However, by treating certain classes of decisions (like what to blog about) as auctions, you gain the possibility of bidding wars. This probably will only work if you have a very dedicated fanbase.
- Decision futures: fans wager on decisions and in the process make those decisions. You can treat this as a variation of decision bidding, or an extension of the kind of decision-voting that blogs sometimes have (polls about which topic should be covered next, for instance). Fans pay some small amount to vote, and those who didn’t win get a refund. You can increase fairness and revenues by allowing multiple votes up to some limit.
- Pay-for-privacy: in a service that remotely hosts user content, public hosting is free while private hosting costs money. Github uses this model.
- Pay-to-remix: release media for free, but expect people who reuse or recontextualize it to send you some money. This is proposed in some versions of transcopyright, and implemented in some demo-scale systems like token-coin; it is also an implicit part of music industry licensing, in which artists pay a flat fee to release a cover song on a record, and in which writers and composers are paid royalties on their work regardless of who performs it.