After reportedly being valued at $3 billion by Facebook and then at $10 billion by Alibaba – neither deal actually happened – the ephemeral messaging service Snapchat is finally getting a revenue stream. After deliberating for more than a year on how to make money, its solution is the most unoriginal imaginable: advertising.
Though business founders and customers alike hate it, and Web pioneers are sorry they helped it become so pervasive, adverts seem set to fund the Internet industry’s future as well as its past.
Snapchat founder Evan Spiegel explored the in-application purchase model that’s used by the Japanese messenger Line, which makes most of its money selling stickers: Snapchat’s customers, mostly aged 13 to 25, might go for it.
He considered “native advertising” – a cute expression for ads masquerading as content. He talked about supporting upcoming artists and actors by letting them create ads that would have a value to users. Instead, he appears to have opted for standard pre-roll ads.
According to a Wall Street Journal report, the company will launch a service called SnapChat Discovery showing users news stories preceded by ads. You’ll have to hold your thumb on the phone screen to see the news, so you can’t avoid the pre-rolls.
To a user, that’s an unpleasant bit of manipulation, just like Google’s Adwords, which 41 percent of searchers perceive as organic search results, or Facebook’s infamous mood-programming experiment.
The ad model – with implications including massive data collection and tricking users into clicking on information they never asked for – is legitimate, but it feels dishonest to most people outside the advertising industry.
Internet users accept it because it gives them access to free stuff, but try to cheat it in return by not clicking on ads, though they are no match for Google. I know people who claim they have never clicked on an ad; I also know I’ve been beaten at this game numerous times by companies who are making a bigger effort to win than I am.
The builders of some of the first money-making Internet sites are unhappy with the turn the Web has taken. Designer and programming guru Maciej Ceglowski made a poignant presentation about it in the German city of Duesseldorf in May, speckled with pictures of cute animals to take his listeners’ minds off the depressing content.
Ceglowski posed a question: “How do we build an Internet we are not ashamed of?” Shame was also a central theme of a lengthy essay published in The Atlantic recently by Ethan Zuckerman, director of the Massachusetts Institute of Technology’s Center for Civic Media. Zuckerman was a founder of one of the Internet’s first commercial successes, Tripod.com, where he worked from 1994 to 1999. He wrote:
“Over the course of five years, we tried dozens of revenue models, printing out shiny, new business plans to sell each one. We’d run as a subscription service! Take a share of revenue when our users bought mutual funds after reading our investment advice! Get paid to bundle a magazine with textbook publishers! Sell T-shirts and other branded merch!
At the end of the day, the business model that got us funded was advertising. The model that got us acquired was analyzing users’ personal homepages so we could better target ads to them.”
There’s only so much time investors will give a startup without revenue; so speeches about supporting young artists are out one day and plain, old ads are in.
Zuckerman now says advertising was the Web’s “original sin.” He hopes micropayments to support content creators, subscriptions, even crowdfunding might help undo some of the damage ads have done to the Web – and are now doing to the app industry. He highlights Ceglowski’s current service, Pinboard.in, a bookmarking site that you pay a small, one-time fee to sign up for. Facebook’s WhatsApp is also adamant about using that model, rather than its parent company’s ad-driven one.
The current dominance of the ad model, and the associated quest for better targeting, is at odds with the growing competition for user attention. Perhaps, as people clean up their digital lives, they’ll someday only use the services they want and need enough to pay for, be it news, messaging or live-content streaming.
Otherwise, why is YouTube, which has lately turned into pre-roll hell, planning a subscription-based, ad-free service? Movement toward healthier models has to start somewhere. •
Leonid Bershidsky is a Bloomberg View contributor. He was the founding editor of Russia’s top business daily, Vedomosti, as well as the first publisher of the Russian edition of Forbes.
