Profitability is not in itself a purpose for business, just as breathing is not the purpose of life.
—Stefan Stern, paraphrasing Peter Drucker
I really just need to stop reading Hacker News. Almost every single day, I see an article that makes me angry. Today’s lucky winner: FACEBOOK: I WANT MY FRIENDS BACK. Yes, the title is in all capital letters. That’s how you know it’s a rational, reasonable, well-grounded article.
I’m not going to dissect this article paragraph by paragraph (though phrases like “the single most misguided thing a major corporation has ever deliberately done, bar none, in the entire history of American capitalism and the world.” and “How many companies can you name that you actively despise?”—the most profitable company in the world is actively despised by a good number of people—make this a decidedly tempting endeavour), and am instead going to use it as an excuse to get something off my chest. For those of you who do not want to read the very long, unintentionally humorous post: a blog built a large Facebook audience that drove a lot of traffic to their page. When Facebook’s Sponsored Stories launched, only about 15% of the audience saw content the page posted, and they were told they’d have to pay to have the other 85% see the content. They are, understandably, upset about this. They claim, not-so-understandably, that this is (and I quote) “information superhighway robbery”.
Do people still even say “information superhighway”? Apparently, they do.
But still, let’s get to my main gripe with this bullshit article: “But I can’t pay them $2000 a day and $672,000 a year for the exact same product that I was getting for free back in March!”
Let’s ignore the questionable math they used to arrive at that figure. Let’s look at the overarching argument: “Hey! You used to give me something for free and want money for it now! Stop that!”
The declaration that charging for something you used to give away for free is somehow inherently wrong is mind-blowing to me. Because Facebook was kind enough to do all the work of building the platform, gathering the audience, and giving you the tools to reach that audience for free, they are obligated to do so forever? They are somehow evil or, to quote the article, “;staggeringly inept” because they can’t afford to run a platform for a billion people on nice words, fairy dust, and smiles?
Facebook is a business. Even if their purpose for existence isn’t to make as much of a profit as they can (it shouldn’t be, in my mind), they still need to be making money to continue to exist. Just as breathing isn’t your purpose for living, but is necessary for you to live.
So how did they offer so much for free for so long? Well, they took money from investors. But that had a tradeoff: the game investors play requires a big exit. That means that Facebook couldn’t just break even, they had to do spectacularly well, so the investors could get their big payout.
So Facebook went IPO. That gave the investors the big payout, but stacked another card on top of the already teetering tower: now they have to answer to so many more investors; the public.
This is all a direct consequence of offering that service for free. That service, I might add, that the blog that is raising such a fuss built their business on.
I, frankly, can’t believe that someone has the audacity to take advantage of a temporary market condition, build a business on it, and then complain when that market condition shifts, as if they thought that the money spigot would continue flowing, for free, forever. And it’s something we’re seeing more and more. Twitter? They’re having the same problem. There is no such thing as a free lunch. And if you like a service, you shouldn’t be a free user.
Easy for me to say, right? I don’t run a successful blog that makes money from Facebook. I didn’t invest the time in building a Facebook audience, only to have it ripped away from me.
Well, actually, funny story.
Back in 2010, I wanted to learn how to write Android apps. So I wrote an app to learn. Lifehacker covered it, and the rest, as they say, is history. This is relevant, because the app required a server component. I used Google’s App Engine, a free host that required me to write code in a specific way that locked me into the service, to build the server component. After some tweaking and working with Google to improve one of their products (even debugging and fixing their code myself), I had my application serving 10,000 users for a dollar a day. Let me repeat that: ten thousand users, $1 a day.
Then, one year later, Google changed the pricing on App Engine. A lot of developers were upset by this. I was not. My prices were being hiked, and I knew that I wouldn’t be able to afford to stay on App Engine indefinitely under the new pricing and had to start making plans to switch off, but I knew better than to be upset. Why? Because I had met some of the people working on App Engine during the time I had been a customer. I enjoyed talking to them, and got to know them. When things went wrong, instead of getting angry and yelling, I offered support and encouragement. I cared about those people.
And I knew they cared about me.
If they were raising my prices, it’s because they had to. Because, at the end of the day, they had been running the service for me at cost while I built my business on top of it. It would be ludicrous for me to be upset with them for trying to finally stop bleeding money. And yet, that is exactly what is happening to Facebook and Twitter. Rather than being grateful they had the opportunity to build their audience for free, people are getting angry that they can’t continue to build their audience for free indefinitely.
Now, of course, I’m biased. That project that I built on App Engine is turning into a paid service soon. I’m going to require users to pay me to use what they previously had for free. I’m doing what I can to soften the blow, but I’m not paying for the free ride anymore. And pay I have. I listed out the finances of the project publicly a year ago, and since then, we’ve only gone further into the red. Much further. To the tune of $100 or $200 a month. And I’ve paid all of that, out of pocket, patiently. I’m not even looking to recoup that, necessarily. I just want to stop the bleeding. But users will tell me I’m selfish, that I’m trying to milk them, that I pulled a bait-and-switch. That what I am doing is not fair.
I’m going to tell them to go fuck themselves. What I have done for the last two and a half years wasn’t fair. It isn’t until now that I am finally being fair.
At the end of the day, is there any company you can trust? How do you know where to build your audience? How do you know that the rug won’t be pulled out from under you in a year, two years, tomorrow, the next day?
It’s a simple litmus test: are you contributing to the company’s bottom line? Are you paying them for the value you’re extracting from them?
If the answer’s no, you have no right to be angry when that gravy train stops running.