Free is never really free
Advertising is a $500B industry that has been successful largely due to the free-flowing exchange of data between customers and brands: I’m willing to share personal information about myself to get something meaningful from you. Historically, there’s been a transparency to the process–you fill out a form, you sign up for a loyalty program and you get coupons based on your purchase history, for example. With the advent and meteoric rise in popularity of social networks, though, the transparency around the exchange has largely disappeared (unless you’re willing to read–and can understand–lengthy terms and agreements) and I often wonder if most users realize that personal data is actually a transaction fee for services.
The free sharing of personal information is a financial boon to brands’ (and platforms’) bottom lines–in Q1 2018, Facebook reported nearly $12BN in revenue–but no one has been forced to be transparent on what the real trade-off is and how consumers contribute to it. The industry as a whole needs to be more open in explaining what’s going on in these transactions. Some behaviors might change, but we’ll still see many people opt-in for convenience, similar to what we’re seeing with GDPR. But using terminology such as “free” to describe these services isn’t truthful.
It’s a critical issue to figure out, because in 20 years that might not be a Facebook. While today’s consumers still see the value in sharing data with Facebook and other social networks, future users will likely adopt higher standards in regards to their exchange of private information with brands.
This inherent lack of transparency is partly why I think Facebook will struggle with converting users to a tiered subscription/paid model should they actually launch one. While the platform isn’t in danger of losing users–by last count, upwards of 2.2BN–I think most people will be inconvenienced by paying for Facebook to avoid ads. It also doesn’t solve the viewership problem Facebook, and most platforms, are struggling with today. Sure, advertisers could see some short-term success should Facebook adopt a paid model, but users paying for Facebook content will dramatically change the value of the platform for both brands and advertisers. And, at the end of the day, users are still paying to use the site with the thing that’s the most valuable: personal information.
Brands need to be transparent on what the trade-off is and how consumers contribute to it. Consumers need clarity on what the exchange is and how data will be used and, in many case, who is going to use it and for what end purpose. They should be told outright, if you want this free content, you need to pay for it with your data. Some companies are already making steps to solve for the lack of transparency with consumer data: Australian app maker Unlockd proposed that the consumer should get a cut of mobile-data business, in the form of rewards or other incentives.
The industry understands that free isn’t actually free, but it’s likely that the average consumer doesn’t. At Blis, we’re proud of the industry-leading level of transparency we provide and it’s time for brands and platforms alike to get onboard and start speaking frankly about the value exchange.