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mia pearson

There's no such thing as a free lunch, just as there's no such thing as a free social network.

At this point, most people have accepted that we are able to access social networks like Facebook, Twitter and Pinterest free of charge because some of the information we provide these services will be used to help advertisers market to us. Collectively we seem to have bought into the reality of the digital age: If you're not paying for a product you're using, you are the product.

Quite simply, the long-term viability an ad-free social network is a fantasy. But that doesn't need to be a bad thing.

This is what makes the recent emergence of Ello so interesting. Ello, a new, invite-only social networking platform claims it will remain ad-free and will never sell personal data to companies for marketing purposes, standing in opposition to most social media platforms.

So just how will the site make money? Company founder Paul Budnitz reportedly plans to operate the site as a public benefit corporation – which enables it to act something like a non-profit while still paying taxes like any other company – and to generate revenue via a model where some users will be able to pay for account upgrades that unlock additional features.

Without advertising, it's clear that these kinds of new social services will need to get creative with revenue generating ideas. Rest assured, many companies will be watching to see if Ello can make good on its promise to avoid ads.

Last week, Snapchat became the latest social networking phenom to introduce advertising – with an ad for the new horror movie 'Ouija' – as the company begins to look for a way to generate meaningful revenue from its rapt user base.

The challenge for a company like Snapchat, which until last week was largely ad-free, will be in how the company manages to integrate marketing messages into its core offering without alienating users. Snapchat is likely to suffer some growing pains as it goes through this process.

Just ask Facebook, Twitter and YouTube about some of their early attempts at advertising and how those went over with users.

Ads on social media networks can work to the advantage of both the advertiser and the user. Marketers hoping to tap into the power of social media need to ensure that not only the content they are creating is appropriate, but also that the platforms they are working with are doing everything they can to ensure that advertising remains additive, and not a distraction to users.

Remember you're a guest in the community

People have always accepted advertising as a necessary evil in traditional media. On average, a person is exposed to anywhere between 250 to 3,000 ads on a daily basis. Consumers understand that advertising is the lifeblood of newspapers, television and radio.

In recent years, new media companies have promised to deliver new business models and revenue generating ideas that would render traditional advertising obsolete. While there are some exceptional services which have discovered new ways of making money, it turns out that to a large extent, new media needs old-fashioned ad revenue just as much as traditional media.

A social network employing advertising to fund itself instead of charging users for access isn't tangibly different from large broadcaster such as CBS or the CBC – who are largely available for free to users – seeking out advertising to support its programming.

Don't want ads? You will pay a premium

Just as there existed a divide between broadcast television networks and commercial free cable channels like HBO, there is emerging a separation between services users demand be kept free of charge and those they are willing to pay for.

In the case of HBO, people were willing to pay a premium to subscribe to this channel because of its quality programming and absence of advertising. It offered something different than what users could get from traditional broadcast outlets, and people were willing to pay for that.

The same rings true for social media. If social platforms don't want to clog the site with ads for their users, a paywall is inevitable. The internet is teeming with sites for which we pay to play, including Match.com, Hulu and Netflix.

One of the hottest free platforms right now is Tinder, a mobile dating service which exploded in popularity this year. Recently, Tinder CEO Sean Rad revealed the company would begin offering a new premium version of the service with additional features (although he hasn't said what those features will be).

It turns out you can't have your cake and eat it too. The relationship between the social media site, the user and the advertiser is admittedly a difficult one, but in the end it's necessary more often than not.

Mia Pearson is the co-founder of North Strategic. She has more than two decades of experience in creating and growing communications agencies, and her experience spans many sectors, including financial, technology, consumer and lifestyle.

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