Telnic's Blog

With the global recession’s milk teeth dropping out, some much sharper ones have replaced them, or so it seems.  As economies struggle with sovereign debt, there’s a general sense that we might be getting to a stage that there’s not enough money to go around.  And it seems to be starting to impact on the services that many of us take for granted – and take for free.

Some social networks that were the shining example of social media just two years ago are struggling.  Take Bebo in the UK for example, which at one stage was larger than MySpace UK and which was subsequently acquired by AOL.  Founder Michael Burke sold Bebo in 2008 for 850 million dollars.  Having invested so much, it has been left to wither on the vine, prompting an announcement from AOL earlier this year saying that it was looking for a buyer.  If one is not found by the end of May, it’s likely that Bebo will be shuttered and will join the dead-pool.

Other social networking sites are taking heed in this change of temperature.  It takes revenue to create a momentum, and that revenue was missing from Bebo after it was acquired.  It also takes a business model to get acquired in the first place, and some are finally waking up to the fact that their users are the ones that are the low-hanging fruit.  Take for example the recent announcement from Ning, the platform that enabled anyone to set up their niche social network for nothing.  Unless you’re an educational institution, it’s the end of the free ride, with fees from $3 to $50 per month to run a platform for your members and no free starter option.  This is a complete about-turn and has had some strong impacts on the favourability of its brand online.

Whilst this is a transparent move into a commercial business model, and one that is of course necessary for organizations to succeed in the long term, moving from a free to a paid-for model without any prior indication is a huge issue for people relying on the service to communicate with customers, partners or friends.  Ning however is not the only platform making this move.  This week, after purchasing and releasing ‘official’ Twitter apps for a number of different devices over the past month or so, Twitter also announced a change to its terms of service, stating that it would be blocking the injection of paid advertising into the twitter stream.  At present, this remains undefined and could quite possibly be used as a step into generating revenue from businesses using twitter in any way to profit from its services.  The difference with Twitter is that many have seen this move coming and others even speculate that a paid model by end users who don’t want to see adverts in their Twitter stream might also be a possibility.  Even so, with the success of Twitter and its increasing penetration in countries that don’t use the computer as the first point of entry to the internet, this business model by stealth again has a reputational issue and the uncertainty may turn both developers and ultimately end-users off.

There is of course another organization that is trying to create revenue from its users ‘by stealth’.  One cannot help also see Facebook’s flip-flopping over its privacy rules, “features” and controls, as well as its recent security scares with the integration of the Like button, sharing information with other sites on the web.  We know how it makes its money, and any attempt to close down information about users is going to impact on that ability.  If the issues are big enough to focus the attention of many Governments around the world, Facebook may just become – along with Google – this decade’s equivalent of Microsoft in the previous decade for legal wrangles.  These can be quite expensive and long-fought battles, and the revenue needs to be found to fight these from somewhere.

But do all of these signs add up to the end of ‘free’?  It’s perhaps a little too early to tell quite yet.  Certainly, there are many different services that provide basic free services with additional paid-for access to additional features or other low-cost communications channels.  But these again don’t command the same level of interest that ‘the big guns’ do from the media and consequently struggle to gain a large enough base in order to become a de facto standard that a majority of people can use as their main communications channel with confidence.

What this does lead to is that 2010 is going to be the year of further disruption in terms of communications choices.  As those disappointed that services are shut down (Bebo users are, it seems, very loyal) or charged for (the jury is still out from Ning’s users’ perspective), many are looking around for alternatives.  The question is, how willing are people to get burned by free services again when it comes to making a choice?  How easy is it for them to port their social graph to other services?  How important is it now to people to be discoverable through more than one service?  And how much investment have they made in terms of their time in investing on those services that the now, for one reason or another, cannot use?

So perhaps whilst this still may not be the end of free, it may well be the beginning of the end of trust in free to be around for as long as people want it to be.  And that trust is an important factor in being able to commit to services with time and value invested in those services.  At the end of the day, it’s interesting to note that recent statistics showed that US teens now prefer texting over any other form of communication with their friends.  Certainly not a free service, but one that’s established a level of trust worth the investment.