Internet – The myth of free.

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The future for many could be subscription.

• Axel Springer, the owner of the highly popular, advertising funded tabloid website has said that its visitors must either turn-off advertising blockers or pay €2.99 per month to see content without advertisements.
• This brings to a head an issue that has been simmering for many years and was recently brought to the boil with ad-blocking support being included in iOS9.
• The main issue is that in reality, there is no such thing as free internet.
• Users either pay with cash or with personal data.
• Because paying with personal data has been almost invisible to many users for many years, it has perpetuated the myth that the internet is free.
• There are many legitimate and well respected businesses that depend on advertising to make a living, and the threat of having it cut off could put them out of business.
• RFM’s ecosystem monetisation model sees three methods of monetisation for any digital ecosystem:
  • First: Hardware. Own the hardware and keep the ecosystem or the service exclusive to that hardware and charge a premium for it.
  • This is what Apple does so effectively and where the Android makers are really struggling.
  • Second: Advertising. Make the ecosystem or service available on as many devices as possible.
  • The experience is “free” but a return is earned by using users’ personal data to generate advertising or relevant marketing.
  • This is Google, Facebook, Twitter and so on.
  • Third: Subscription Charge the user a per month fee to get access to the service and keep it free of annoying advertising.
  • This is just beginning to emerge for ecosystems but individual services like Netflix, Spotify, Amazon Prime and Xbox Live are already well established.
• Axel Springer spends money to bring its tabloid website to market and therefore has an obligation to its shareholders to make a return on that investment.
• All it is saying is that users that don’t like number 2 can use number 3 instead.
• Axel Springer is the first to do this and I do not think that it will be the last.
• In fact if ad blocking becomes the norm, I expect that every company that relies on advertising for its revenue will follow in Axel Springer’s footsteps.
• This is why I remain reasonably unconcerned companies that use advertising will continue to earn their revenues one way or another.
• In fact, I suspect that users faced with the choice of paying a few dollars a month for something that they thought that they previously got for free will opt to turn off their ad blockers and the storm will be over.
• Hence, I remain unconcerned with regard to the revenue outlook for Google, Facebook. Twitter and so on.
• That being said, I continue to see Google as fair value and would look to deploy funds elsewhere as there are plenty of other clouds on its horizon.