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If you’re not paying for the product, you are the product

May 17, 2011

Flickrverse, Expanding Ever with New Galaxies ...

Image by cobalt123 via Flickr

This was a line from TVO’s Search Engine. It’s a great line.

We don’t pay for Facebook. So, we are the product. More importantly, the data is the product. The likes, comments, engagements are all part of creating a social graph about all of us, and mining it for marketers.

When likes and friends, and the likes of friends get plotted, the social graph can look more like the social universe. The social graph has a person in the middle. Surrounded by the person are their friends, and likes. Surrounding those people are more likes. The interconnectedness of likes can create valuable insights for marketers.

For example; lets pretend that Facebook plotted all males aged 18-24 in the US who like Guitar Hero. They looked through the data and determined that 70% of those people liked Dove Soap. That insight could lead Dove soap to consider advertising in Guitar Hero.

The previous example was simplified and made silly to make a point. Data points about what we like can create patterns that aren’t easy to spot in the real world. Those insights are valuable to marketers.

So who cares if I’m the product? 

That’s a good question. A few years ago, Facebook redesigned and people got mad. Last year, Yahoo decided to sell Delicious, and people got mad. This year, Twitpic decided it could license photos (to make money) and people got mad.

In all cases, people got mad because a thing they used all the time without paying for it was changing in a way that was designed to make it more money.

Yes, Facebook redesigned, and renamed Like in order to collect more data about what we like for the express purpose of selling that data to marketers. Our data is the product.

Google gives all of the wonderful services away for free because, again, our data is the product.

Yahoo sold Delicious because it can’t quite figure out how to make our data the product.

Twitpic is actually the most simple one to understand. It wants to re- license the photos it stores for all of us to online photo companies. It wants to make money off the product.

We get free services, from Gmail to Facebook to Twitter. Those services have overhead. There are people to pay, lights to turn on, coffee to buy.  For these services, there are really only two options:

1. Sell to a bigger company. Skype sold. Tweetdeck sold. Way back when is was called Del.icio.us, it sold to Yahoo along with Flickr. Sell and be part of a group of offerings.

2. Monetize with advertising. The tricky part of this but is that online banner ads suck. Yes, they have a chance at getting better, but right now, they’re not sure what they want to be. The true value is in insights. That’s why a TubeMogul can put out white papers about usage and generate revenue that way.  It’s still not as simple as 1, but the more data we give companies, the more insights they can sell.

Is that a big deal? Maybe. Maybe not. I’ll save that for another blog post. And for the record, the goal of this blog is to monetize your insights. I don’t think Google will ever buy it🙂.

So what do you think? Do you care that free sites want to monetize your data?

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3 Comments leave one →
  1. Rod Gotty permalink
    May 17, 2011 7:41 pm

    Excellent article Matt. Sometimes we don’t see the forest through the trees. I like you explanation and examples. I remember when Google started and it wasn’t clear to me then how they could make money and survive. Their excellent search engine was/is only a pawn in the whole game.

    -Rod

  2. May 29, 2011 9:38 pm

    Thanks For This Post, was added to my bookmarks.

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