In the last couple of months the debate about paying users has come to life again. During the first Internet Boom there were several ISPs offering pay to surf and an online currency company (Beanz? I can’t remember) whose key way to market was by offering themselves as a rewards program for other dot coms who, if they lacked a USP to offer to their users, might offer to pay them instead. It’s very possible that I’ve mixed up the details here, we are talking at least 6 or 7 years ago.
What’s different now?
In the Web 2.0 world is a subject is more relevant than during the first Internet bubble for several reasons:
- The dream of user generated content is real – millions of uses are creating content in one form or another.
- Revenue is real this time and is incremental to the amount of content generated so the question of paying becomes an obvious business issue.
- In a highly competitive environment all things will be considered.
- With programs like Adsense and Yahoo Publisher’s Network there are creative ways of paying users that make it more easy to share revenue with users both in terms of practical considerations (by getting rid of admin costs) but also because it’s tied to growth and doesn’t mean the paying out of money from the bank (it does mean that some revenue converts into a content acquisition cost, but it’s paying for itself).
The issue of easy payments systems was very important years ago, especially in Europe; for as well as all the hassle of managing micro-payments, in many European countries there are draconian laws making payments to a person who is not an employee, company or registered freelance practically unworkable.
So who’s paying?
Two key sites – Netscape and Yahoo! Answers – are paying users.
Lots of start-ups within the social bookmarking space are paying users
and here in Spain Digg clones Meneame and Fresqui have both announced within a day or so of each other that they’ll pay users via the AdSense route.
Epinions is a veteran in the field of paying users, but as TechCrunch points out, they started paying their users and Ciao, the European copy of Epinions also pays users for their reviews.
What are the reasons to pay users?
- Give back to your users. Within a community model (after all every site is a COMMUNITY these days), isn’t it churlish not to share the wealth?
- Ensure core content. See Mr.Calcanis again, and his 1, 19, 80 rule.
- Ensure freshness and quality.
- Build content and user base quickly.
- Stops user churn, especially of core users.
- Competitive advantage/matching competitive offering. Especially when coming from behind
Why not pay?
The reasons for paying users seem to be straightforward, the reasons for not paying are less so, and in some sense touch deeper on the issues of creating and maintaining a real community:
- Payment does not necessarily offer a unique user proposition and may seek to simply hide or compensate for issues with your service and model.
- Markus Find of PlentyofFish suggests stopping the churn of your top users is actually a bad thing, as the create cliques and eventually this turns other users off;
In places such as the forums i’ve gone and banned the top 50 users several times as cliques just get to out of control and have no connection to the mainstream anymore.
- Problems with spam, copyrighted and duplicate content. Whilst paying users a share of you ad-revenue might seem to be a great idea, it leaves your site open to many abuses by users attempting to game the system and spamming your site. There may even be legal issues.
Types of sites.
The current wave of user payments seem to center around social bookmark systems – Digg, Netscape etc. It may make sense for some sites to pay:
- Market Places, where users are reacting to the specific demands of others users. Example: Yahoo! Answers
- Freshness and topicality where how up-to-the-minute your content is can be very important. Examples: Digg (news), Epinions (Product reviews). These sites tend to be the ones competing with traditional media which, by strange coincidence has a similar model – paying people money to create the content.
We have yet to see a Flickr/Zoomr type site pay their users, or a more niche community-driven site like Yelp or Insider Pages. I also think it relates to whether your site is more of a community, that is a grouping of people interested in the same subject matter, or a an application that is fed by it’s users.
Closing Thoughts
Many sites don’t need to pay, they have a position of dominance where their size, community and network effect far outweight any small change that a competitor might offer their users. Flickr is a case in point, Del.icio.us, Amazon spring to mind.
Paying users is very direct, perhaps the path of least resistance and not necessarily connected to community building. There are many examples of successful user-generated content sites that don’t pay users, or at least reward them in different ways by recognizing publicly the contributions and the different types of users within a site. This is classic Online Community theory.
Researching this post makes me ask, is all social media community? We have a tendency to use the two as interchangeable, and I think that might be a mistake. Certainly sites like Del.icio.us and Yahoo! Answers may have a small part community, but that is not why the users sign up and are attracted by the service in the first place and in the great majority of cases, it isn’t why they stay.
Yelp have a very creative way of rewarding not only their most prolific contributors, but also tie it to quality, which is decided by the users through their Elite Squad program.
Flickr.com has managed to thrive without offering rewards, in fact it’s the other way round on Flickr, the users pay to have their accounts converted to professional and see it as a badge of distinction to show that they are serious and the normal users aren’t. (N.B. I am a Flickr Professional User).
I think to make your service really different, it has to be in other terms, especially to begin with. Rewards, but not straightforward payment. In the examples that we see here, the users essentially become content partners and I think that loses some of it’s charm and special dynamic.
Caterina Fake, co-founder of flickr in her post 9 reasons why people will *love* your web site lists 8 different reasons why people will love your site (the ninth is money, granted). In it she quotes Georg Franck’s essay ‘The Econonmy of Attention
Attention by other people is the most irresistible of drugs. To receive it outshines receiving any other kind of income. This is why glory surpasses power and why wealth is overshadowed by prominence.
This story will continue I’m sure.
UPDATE:
New startupo mojopages.com have been considering similiar issues: To offer incentives or not to offer incentives, that is the question.
UPDATE 2:
I just found a great post on Wisdump, the blog of Paul Scriven, founder of the 9 Rules blog network. In it he quotes from wikipedia the theory of the over justification effect and how offering rewards may have the opposite effect on users contributions:
The overjustification effect (also called the undermining effect) is the effect whereby giving someone an incentive (monetary or otherwise) to do something that they already enjoy doing decreases their intrinsic motivation to do it.
In the last couple of months the debate about paying users has come to life again. During the first Internet Boom there were several ISPs offering pay to surf and an online currency company (Beanz? I can’t remember) whose key way to market was by offering themselves as a rewards program for other dot coms who, if they lacked a USP to offer to their users, might offer to pay them instead. It’s very possible that I’ve mixed up the details here, we are talking at least 6 or 7 years ago.
What’s different now?
In the Web 2.0 world is a subject is more relevant than during the first Internet bubble for several reasons:
- The dream of user generated content is real – millions of uses are creating content in one form or another.
- Revenue is real this time and is incremental to the amount of content generated so the question of paying becomes an obvious business issue.
- In a highly competitive environment all things will be considered.
- With programs like Adsense and Yahoo Publisher’s Network there are creative ways of paying users that make it more easy to share revenue with users both in terms of practical considerations (by getting rid of admin costs) but also because it’s tied to growth and doesn’t mean the paying out of money from the bank (it does mean that some revenue converts into a content acquisition cost, but it’s paying for itself).
The issue of easy payments systems was very important years ago, especially in Europe; for as well as all the hassle of managing micro-payments, in many European countries there are draconian laws making payments to a person who is not an employee, company or registered freelance practically unworkable.
So who’s paying?
Two key sites – Netscape and Yahoo! Answers – are paying users.
Lots of start-ups within the social bookmarking space are paying users
and here in Spain Digg clones Meneame and Fresqui have both announced within a day or so of each other that they’ll pay users via the AdSense route.
Epinions is a veteran in the field of paying users, but as TechCrunch points out, they started paying their users and Ciao, the European copy of Epinions also pays users for their reviews.
What are the reasons to pay users?
- Give back to your users. Within a community model (after all every site is a COMMUNITY these days), isn’t it churlish not to share the wealth?
- Ensure core content. See Mr.Calcanis again, and his 1, 19, 80 rule.
- Ensure freshness and quality.
- Build content and user base quickly.
- Stops user churn, especially of core users.
- Competitive advantage/matching competitive offering. Especially when coming from behind
Why not pay?
The reasons for paying users seem to be straightforward, the reasons for not paying are less so, and in some sense touch deeper on the issues of creating and maintaining a real community:
- Payment does not necessarily offer a unique user proposition and may seek to simply hide or compensate for issues with your service and model.
- Markus Find of PlentyofFish suggests stopping the churn of your top users is actually a bad thing, as the create cliques and eventually this turns other users off;
In places such as the forums i’ve gone and banned the top 50 users several times as cliques just get to out of control and have no connection to the mainstream anymore.
- Problems with spam, copyrighted and duplicate content. Whilst paying users a share of you ad-revenue might seem to be a great idea, it leaves your site open to many abuses by users attempting to game the system and spamming your site. There may even be legal issues.
Types of sites.
The current wave of user payments seem to center around social bookmark systems – Digg, Netscape etc. It may make sense for some sites to pay:
- Market Places, where users are reacting to the specific demands of others users. Example: Yahoo! Answers
- Freshness and topicality where how up-to-the-minute your content is can be very important. Examples: Digg (news), Epinions (Product reviews). These sites tend to be the ones competing with traditional media which, by strange coincidence has a similar model – paying people money to create the content.
We have yet to see a Flickr/Zoomr type site pay their users, or a more niche community-driven site like Yelp or Insider Pages. I also think it relates to whether your site is more of a community, that is a grouping of people interested in the same subject matter, or a an application that is fed by it’s users.
Closing Thoughts
Many sites don’t need to pay, they have a position of dominance where their size, community and network effect far outweight any small change that a competitor might offer their users. Flickr is a case in point, Del.icio.us, Amazon spring to mind.
Paying users is very direct, perhaps the path of least resistance and not necessarily connected to community building. There are many examples of successful user-generated content sites that don’t pay users, or at least reward them in different ways by recognizing publicly the contributions and the different types of users within a site. This is classic Online Community theory.
Researching this post makes me ask, is all social media community? We have a tendency to use the two as interchangeable, and I think that might be a mistake. Certainly sites like Del.icio.us and Yahoo! Answers may have a small part community, but that is not why the users sign up and are attracted by the service in the first place and in the great majority of cases, it isn’t why they stay.
Yelp have a very creative way of rewarding not only their most prolific contributors, but also tie it to quality, which is decided by the users through their Elite Squad program.
Flickr.com has managed to thrive without offering rewards, in fact it’s the other way round on Flickr, the users pay to have their accounts converted to professional and see it as a badge of distinction to show that they are serious and the normal users aren’t. (N.B. I am a Flickr Professional User).
I think to make your service really different, it has to be in other terms, especially to begin with. Rewards, but not straightforward payment. In the examples that we see here, the users essentially become content partners and I think that loses some of it’s charm and special dynamic.
Caterina Fake, co-founder of flickr in her post 9 reasons why people will *love* your web site lists 8 different reasons why people will love your site (the ninth is money, granted). In it she quotes Georg Franck’s essay ‘The Econonmy of Attention
Attention by other people is the most irresistible of drugs. To receive it outshines receiving any other kind of income. This is why glory surpasses power and why wealth is overshadowed by prominence.
This story will continue I’m sure.
UPDATE:
New startupo mojopages.com have been considering similiar issues: To offer incentives or not to offer incentives, that is the question.
UPDATE 3:
Just to note that I’ve got the tag ‘payingusers‘ going in Del.icio.us where I’ll add any new stuff I find on this.
