Max Gladwell

What if we could subscribe to the social web through a centralized micro-payment platform that sustains the medium while supporting good causes? Would anyone pay?

We’ve got a business idea. Actually, it’s an idea for a foundation that could lead to business opportunities. And we’re going to share it, for better or worse. First, here’s the problem.

The social web is built on being open and free. Social networks, social news, blogs, lifestreaming, video sharing, social media aggregators, etc. They’re all valuable and yet they’re all free to use. By the same token, at least half of their value is a function of people using them. Where would YouTube be without user-generated videos? Where would Digg be without user-generated headlines? Where would Max Gladwell be without your thoughtful comments on this post? The problem is monetization.

Most revenue models are based on advertising, and few are able to support growth or valuations with ad revenue alone. Therefore, it’s up to a Microsoft or Google or Yahoo! to acquire these companies and thus provide the only realistic exit. In which case the founders and VCs cash out, and the Internet conglomerates get bigger and more powerful. Is this a bad thing? Not necessarily. Would it be preferable if these social media companies could actually sustain themselves and maintain their independence? Certainly. Especially considering the worst-case scenarios.

The Web 2.0 bubble and imminent burst is the subject of much speculation. What happens when the music stops and investment dries up and you can’t get that next round? Again, either sell to Microsoft for a song or close up shop. So how do we preserve the social web and make it sustainable? We’re proposing a new nonprofit foundation that will manage our collective subscriptions. Here’s how it would work.

Three groups provide value to the social web: service providers, content creators, and consumers. Many of us play multiple roles. Facebook and Flickr are service providers. Bloggers are creators. We’re all consumers. This foundation would provide a central hub where service providers and content creators could earn subscription fees from consumers.

For example, Twitter signs up with the foundation as a service provider, making it eligible to receive fees from subscribers. Max Gladwell signs up with the foundation as subscriber and pays an initial $10. Subscription fees would be deducted as we used various services to which we subscribed. As a Twitter user, Max Gladwell could opt in to be a paid subscriber, by way of a simple check box in the Twitter profile, and pay a few pennies per Tweet or some small monthly rate. It’s entirely voluntary, and you can opt out at any time while continuing to use the service. StumbleUpon allows you to become a “sponsor”, which is similar, but it requires running a credit card or Paypal. We’re a sponsor but only a handful of our “friends” are. Still, it’s an encouraging sign. Perhaps the buy-in rate would be higher if there was a better system.

By centralizing the subscriptions, one could seamlessly subscribe to (and support) any blog, photo sharing service, social network…any social media resource that participates in the foundation. We realize that it’s too burdensome to individually subscribe to every blog or social news site we use. Plus, the transaction costs would be prohibitive. Having a single subscription account with micro payments makes it not only efficient and possible, but it can also function as its own aggregator, providing a record of your social media use–the blog posts you’ve read, the people you’ve friended, the stories you’ve submitted, the videos you’ve favorited–together with any micro payments you’ve been charged.

As a nonprofit foundation, the organization will provide a sustainable revenue model for the social web. It’s basically crowdsourcing a revenue model. That’s the mission and social benefit. But it can also support other causes and nonprofits. Signing up for either a subscription account or a service provider/content creator account would also include choosing a charity to support. A portion of the fees, both from the paying and earning sides, would be donated to charities. So it’s doubly good.

Here’s why it won’t work: people won’t pay for anything they already get for free. Fair enough. But who would have thought Wikipedia, a 100% voluntary online encyclopedia, could ever have been successful? There is a tremendous generosity on the social web in terms of our time. Given the right model, might people also open their wallets to support their favorite blogs and services, especially if it’s also supporting good causes? Many have said they’d pay for a more reliable Twitter. Would they also pay for a more balanced and sustainable social web? The net impact could be substantial.

Consistent with the principles of social media, this foundation would put control in the hands of users. By controlling the flow of revenue, it shifts power from advertisers, VCs, and conglomerates to the people. Imagine if Twitter’s revenue model was dependent on voluntary user subscriptions and Microsoft acquired them. Many would opt out of paying but continue using the service. The revenue would disappear. So while the foundation could facilitate more sustainable business models, it could also impact valuations and exit opportunities. Companies might have no choice but to remain independent, since their profitability would likely depend on it.

In some ways, this foundation would help the social web to function like KCRW (best radio station ever). The vast majority listen to this quality, commercial-free radio station for free aka the freeriders. But enough of us make contributions (paying voluntary subscriptions) to sustain its excellent programming. This isn’t to say that these blogs and social networks can’t run advertising. If it’s reasonable and done well, users will still subscribe. After all, this is micro payments…pennies per view or post or friend. Most would be hybrid models like print magazines or cable TV (but better, of course). Gaining financial support from users could make all the difference–a good cause in and of itself–while simultaneously supporting other good causes.

In terms of structure, this nonprofit foundation would pass 100% of the fees to service providers, content creators, and charities. It would sustain itself through grants and other revenue opportunities (TBD).

We look forward to comments on this idea. If nothing else, it’s an interesting thought experiement. Perhaps there’s something like it that we don’t know about. We’ve not made any estimates about potential rates and revenue opportunities. It’s all conceptual at this point. If anyone wants to take the conversation offline, feel free to drop an email to rob [at] maxgladwell dot com.

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