When use of the internet became widespread, downloading products for free was considered one of its main advantages. The record and movie industries shuddered at the rise of Napster and Torrent file-sharing. As the internet became more established, more companies emerged offering free services, such as social media apps and search engines. They could afford not to charge because they had hundreds of millions of users from whom they extracted invaluable data to feed so-called targeted advertising. And they were showered with investment from venture capital funds eager to join the party.
But that model seems to have had its day. Twitter was the first to challenge it. Its new owner, South African tycoon Elon Musk, snapped up the platform for $44 billion with the idea that it had to start making money. Twitter Blue, the social network’s paid service, had an erratic start, but has since gathered momentum. Now Meta CEO Mark Zuckerberg has decided to do the same with his two big social networks, Facebook and Instagram. “We started rolling out Meta Verified, a subscription service that allows you to verify your account with an official ID, get a blue badge, additional protection against impersonation and direct access to customer service,” he said over the weekend on his corporate blog. The price: $11.99 (€11.3) per month. Twitter costs $8 (€7.5).
Is this the beginning of the end of free products on the internet? Not necessarily, but it does suggest that those remaining will be fewer and of poorer quality. “What is happening now is normal, it had to come sooner or later,” says Rodrigo Miranda, general director of the Business and Technology School for the Digital Era (ISDI). “Massive technology business models with very small margins per user are based on, first, volume, and second, on monetizing it,” he explains. This is the basis of freemium models – a combo of free and premium – in which 95% of users access the service for free while the paying 5% is targeted for expansion. Or 100% free platforms, as many social networks have been until now, when they are suddenly starting to charge for their services.
If that leap hasn’t happened before, it’s because capital was flowing. “In recent years, there was so much money in the market that many have lived off massive rounds of financing,” says José Carlos Cortizo, head of marketing at the digital strategy consultancy Product Hackers. “Ultimately, you lived on what they gave you to do crazy things. Digital businesses were growing so fast that you didn’t have to think about other formulas.”
The other key that explains why social networks such as Twitter and Instagram have decided to charge for their services is that people are willing to pay. “Users are already used to these platforms solving their day-to-day problems, so the barrier to spending money on these services is relatively low,” adds Miranda.
“The internet has matured enough to make it viable, and increasingly common, to monetize projects of all kinds,” says Cortizo. Social media are not the only ones to have jumped on the bandwagon. ChatGPT, OpenAI’s conversational tool that has put the spotlight on generative artificial intelligence thanks to its free beta version, has also announced the launch of a subscription model that allows access to an improved version. Will we end up seeing paid search engines? This cannot be ruled out, especially if the race – currently between Microsoft and Google – to integrate intelligent chatbots continues.
Adjustments in technology companies
The big tech companies have started 2023 the same way they ended 2022: by laying off employees. Staff cuts have been in the tens of thousands after the five giants – Alphabet, Amazon, Apple, Meta and Microsoft – doubled their workforce in the three previous years. The surge in consumption of digital products, fueled in large part by the pandemic, encouraged a simultaneous surge of optimism in Silicon Valley that proved unjustified. Their profits have contracted, and the response has been to scale back on staff.
Curiously, this trend in cutbacks was also started by Elon Musk who made more than half of Twitter’s workforce redundant shortly after his takeover. So, this extraordinarily wealthy businessman who has become famous for his Tesla electric cars and space rockets was the one who triggered the rash of redundancies in tech while launching the subscription model in a social media company known for its lack of profits. For the time being, only Meta has followed suit in this respect, perhaps as a way to compensate for the so far unsuccessful investment in the metaverse and a drop in advertising.
But, in fact, paying to use a social network is nothing new. LinkedIn has been offering that option for some time, and it is doing well. “OnlyFans, too. If you want qualified, segmented content, and if you’re keen to get rid of trolls and people you’d rather avoid, subscription models are the way to go,” Miranda says. Demanding money for a service that has been offered for free for years is, at the very least, bold. As is offering less security to anyone who doesn’t pay, which is what happens now on Twitter. “You have to try to encourage subscriptions by offering something better in return, rather than making what you already had worse,” says the ISDI director.
If other social media companies decide to charge users too, and if other services that have been free until now cease to be so, we will witness the unfolding of an unprecedented scenario. The entire internet will compete for profit share – to be part of the monthly expenses of users who already pay to read the newspaper, listen to music and watch TV series. Will they also have to pay to show off their holiday snaps?
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