Andrew Lewis made a great comment on user-driven content back in 2010 in a metafilter.com exchange that since has become a Internet meme of sorts on the range of free Internet services being offered from Facebook, Google, MS, Yahoo and lot's of others: "If you are not paying for it, you're not the customer; you're the product being sold".
Great one-liner, but what does it mean? Well, it lead to Mr Lewis, of course, starting his own online shop offering t-shirts, coffee mugs and aprons with that same slogan, going almost meta on his own meta.
But in the setting of free or "free" Internet services like Facebook, Google, Yahoo and MS online services, running on some of the largest server and application platforms ever deployed and developed at a significant platform and man-hours cost one must assume, why is it offered for free?
One obvious answer is advertising and the development of personalised or context driven, online advertising on the Internet and mobile devices. Be it in the form of banner ads, splash ads etc or product content being adapted to user location or ZIP-code, time of day, device type and earlier browsing history for the user in question. This gives advertiser a way to achieve much better and greater ad targeting than usual shotgun advertising of "manual" or analog media, and it's much easier to see ad hits, view times, conversion rates, also in real-time than with traditional media. So giving away IT-services like storage, communication services like email and IP messaging or content is a way to attract users, get them registered, build user base and attract more advertising dollars.
Another angle is collecting and aggregating user data per site, device type, ZIP-code or region and use this aggregated user and usage data for business analytics, trend watching, benchmarking new service offerings and competitors services. That then goes into the continuous re-work and make-over that most large IT companies do all the time. Analyzing customers and customer behaviour should lead to greater service offerings. And we are over in big data and analytics territory.
And one of the most fascinating stories of using big data analytics to understand customer behaviour and wants, comes from Netflix and how the House of Cards TV-series got created, partly at least if we are to believe the backgrounder here. Netflix has been very open and explicit about its plans to exploit user data logging and its big data capabilities to influence its programming choices well before the House of Cards TV-series was aired. Netflix has detailed viewer logs for any market they are in, broken down by content type, country, ZIP-code, time of day and device type and more. Knowledge of Netflix subscribers viewing preferences pointed towards a political TV-drama with a number of defined attributes, among them starring Kevin Spacy for the lead, that would ensure high engagement levels and viewership through the Netflix recommendation engine, that is claimed to influence 75 percent of Netflix subscribers in viewer choice. Big data logging and recommendation engines are a match seemingly made in heaven.
Other reasons for giving away IT and communications services for free are simply to stay competitive and doe service bundling and/or upgrades. One guy is selling 2 GB of storage for $5 per month - that doesn't cover cost anyway and nobody actually uses 2 GB - why not give it away and attract more users, and then later on try to move them to more premium, paid service offers, presumably with better performance and higher service levels?
And that has been the approach for introducing Internet services or offers for the last 20 years or so. Hasn't worked, best-effort free services worked too well in most cases - and generated tons of user and usage data anyways. that at least kept the marketers and advertisers happy.
Erik Jensen, 28.10.2013
Great one-liner, but what does it mean? Well, it lead to Mr Lewis, of course, starting his own online shop offering t-shirts, coffee mugs and aprons with that same slogan, going almost meta on his own meta.
But in the setting of free or "free" Internet services like Facebook, Google, Yahoo and MS online services, running on some of the largest server and application platforms ever deployed and developed at a significant platform and man-hours cost one must assume, why is it offered for free?
One obvious answer is advertising and the development of personalised or context driven, online advertising on the Internet and mobile devices. Be it in the form of banner ads, splash ads etc or product content being adapted to user location or ZIP-code, time of day, device type and earlier browsing history for the user in question. This gives advertiser a way to achieve much better and greater ad targeting than usual shotgun advertising of "manual" or analog media, and it's much easier to see ad hits, view times, conversion rates, also in real-time than with traditional media. So giving away IT-services like storage, communication services like email and IP messaging or content is a way to attract users, get them registered, build user base and attract more advertising dollars.
Another angle is collecting and aggregating user data per site, device type, ZIP-code or region and use this aggregated user and usage data for business analytics, trend watching, benchmarking new service offerings and competitors services. That then goes into the continuous re-work and make-over that most large IT companies do all the time. Analyzing customers and customer behaviour should lead to greater service offerings. And we are over in big data and analytics territory.
And one of the most fascinating stories of using big data analytics to understand customer behaviour and wants, comes from Netflix and how the House of Cards TV-series got created, partly at least if we are to believe the backgrounder here. Netflix has been very open and explicit about its plans to exploit user data logging and its big data capabilities to influence its programming choices well before the House of Cards TV-series was aired. Netflix has detailed viewer logs for any market they are in, broken down by content type, country, ZIP-code, time of day and device type and more. Knowledge of Netflix subscribers viewing preferences pointed towards a political TV-drama with a number of defined attributes, among them starring Kevin Spacy for the lead, that would ensure high engagement levels and viewership through the Netflix recommendation engine, that is claimed to influence 75 percent of Netflix subscribers in viewer choice. Big data logging and recommendation engines are a match seemingly made in heaven.
Other reasons for giving away IT and communications services for free are simply to stay competitive and doe service bundling and/or upgrades. One guy is selling 2 GB of storage for $5 per month - that doesn't cover cost anyway and nobody actually uses 2 GB - why not give it away and attract more users, and then later on try to move them to more premium, paid service offers, presumably with better performance and higher service levels?
And that has been the approach for introducing Internet services or offers for the last 20 years or so. Hasn't worked, best-effort free services worked too well in most cases - and generated tons of user and usage data anyways. that at least kept the marketers and advertisers happy.
Erik Jensen, 28.10.2013
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