Long before the days of the Internet or smartphones, I’d fly to New York and switch on the hotel TV in a jet-lagged stupor. Like all visiting Brits, I was amazed to find a hundred or more channels running 24/7. Back home there were only four. We had commercial television, but not this commercial. You hardly noticed the shows between the ads. And then there were those infomercials. Who was buying vegetable slicers or exercise machines in the early hours?
When I ventured out for breakfast, every copy of Sunday’s New York Times looked to my British eyes like a pile of newspapers: but no, that was just one copy—stuffed with ads. American media was powered by ads.
Not all Americans approved. Google and Facebook both started in universities and their Ivy League founders were not big fans of advertising. When Google’s Larry Page and Sergey Brin presented a paper about their new search engine at a conference in 1998, they all but ruled out ads as a source of income: “We believe the issue of advertising causes enough mixed incentives that it is crucial to have a competitive search engine that is transparent and in the academic realm,” they wrote.
It was only when Stanford’s computer network could no longer handle Google’s voracious need for storage and processing power that Page and Brin had no choice but to turn Google into a business. As early Google biographers David A. Vise and Mark Malseed put it, they “were now entrepreneurs, if perhaps still a little reluctantly.”
Facebook fell into the saving arms of advertising a little sooner than Google—a mere two months after it launched, to be precise. But, as Harvard’s student newspaper reported, Zuckerberg “said he did not create the Website with the intention of generating revenue.” In his early biography of Facebook, David Kirkpatrick sums up the early days: “Making Thefacebook [as it was then called] fun was more important than making it a business.”
As both businesses grew, their experiments with advertising soon turned into dependencies. It was the habit they couldn’t kick. At first, Google’s ads had their own column on the right of the web page so as not to be confused with the ‘organic’ search results. But as time went on and Google wanted to make more and more money, the differences became increasingly blurred. Some of the ads moved to the top of the left-hand column, marked with coloured backgrounds. Over time, the distinctions were watered down until today, you have to look closely to see whether you’re clicking on an ad or a search result.
Today, advertising isn’t the only way the tech giants pay for their expensive habits. There’s also data collection and selling—the ‘surveillance capitalism’ that Shoshana Zuboff has named and described so effectively. She sees the appropriation of users’ information as today’s version of the plundering of natural resources by imperialists before anyone had considered who those resources rightly belonged to.
If Zuboff is right, we may be reaching the time when the digital ‘natives’ (an appropriate word in the context of her imperial analogy) are beginning to assert their rights over the resources they have been unwittingly contributing to the building of the mighty tech businesses. Despite my early impressions of ad-dependent media in New York, it turns out that advertising isn’t an inevitable business model, even for U.S. media. Who would have predicted in the late nineties that a new movie and TV business worth $240 billion could be built in the U.S. with no ads? Yes, well done Netflix.
Who would have expected the New York Times’ latest financial results to show a 48% annual increase in subscriptions alongside a 26% fall in ad revenue? It seems readers are ready to pay for news and no longer assume that because it is online it must be ‘free’ (i.e. ad-supported). And who would have thought that Facebook would go along with the wishes of WhatsApp’s founders not to have ads on that massively-popular platform?
Although the ad-funded tech giants might appear unassailable, there are signs that the door is open to new ideas and new business models.
Enter Bitcoin, offering the prospect of low-cost micropayments and scalability as an alternative to ads and data collection. Bitcoin is already the enabler of any number of new business models. Some, such as revolutionising supply chains, collecting Internet of Things readings or storing healthcare data are industrial—in the sense that their adoption does not depend on millions of consumer choices.
But other Bitcoin-powered startups address individual users. We already have examples such as Twetch, PowPing, Streamanity and Relica, all of which, loosely speaking, offer alternatives to ad-supported tech giants. Instead, they create transactional relationships based on micropayments, giving an extra dimension to the experience of content creation or consumption. And crucially, the tiny revenue slice they take from their users means that they can also provide their services with no ads and no data collection from their users.
So the revolution is already happening? Well, up to a point: the good news is that these services are up and running. But it would also be fair to say that adoption hasn’t exactly exploded—at least not like it did with the launch of Google (which just produced much better results than other search engines) or Facebook (which provided instant gossipy connections with people you knew or wanted to know).
So what’s the holdup? Well, although we may like the idea that we pay for what we use (rather than paying for being used), are we going to change our habits, and our addiction—shared with the businesses themselves—to ‘free’ models? Dr. Craig Wright has said that Google could increase its profitability massively by imposing a small charge on each user instead of taking advertising and selling data. But is Google going to risk disrupting itself? Probably not.
If the history of Internet startups is anything to go by, the best strategy is to avoid a direct assault on an established business, but instead to start by serving a small market very well. Amazon began in a basement, not as ‘the everything store’ but by offering book buyers a bigger catalogue than their local shop ever could. Venture capitalists sometimes say the kiss of death in a startup’s pitch is to argue that a market is worth x billion dollars, ‘so if we only had one per cent of it, we’d be worth y’. As venture capitalist Peter Thiel says “competition is for losers”. His message is there are secrets—about technology and people—still to be discovered and that winners look for their own monopolies to exploit.
The superpowers of Bitcoin—micropayments, scalability and low fees—will come into their own when entrepreneurs find ways of using them to create services that are addictive, unique and something their uses want to tell their friends about. And the good news is that that is happening all the time.
Just in the past couple of weeks, as a user, I’ve discovered both TonicPow and Haste, and have been spreading the word. I’m not waiting for either of them to do something bigger than they’re doing (although no doubt they both will). As a customer, I’m happy with what they do now.
So, yes, the online ad and data collecting model can be replaced. But it doesn’t have to be like for like—any more than radio replaced newspapers, TV replaced radio, or the Internet replaced either of them. Innovation is thriving in Bitcoin SV but my prediction is that its successes will be by adding to the world we know, rather than by destroying it. Because, for all the innovation of the past decades, those vegetable slicers are still being flogged in the middle of the night.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.