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Are people willing to pay for privacy?

Social media websites and apps are going through a period of upheaval as they face the twin challenges of growing (or maintaining) usage, and monetizing their service. Traditionally, success stories like Facebook and Twitter have focused on consumer needs in terms of user experience and functionality, thereby enabling users to connect with each other and the wider world. Now these websites and apps face a critical juncture – how to turn their users into profits without alienating them?

One option for revenue generation is to sell advertising which can be targeted at users based on their personal data. However, concerns about privacy and personal data are frequent topics of debate. In December 2012, more than 650,000 Facebook users took part in a vote about changes to the Privacy Policy and Voting Rights. As we’ve previously explored, flexible privacy controls for users offer an effective compromise: “By enabling their users to use informed consent to customize their service through a series of trade-offs between using personal data and receiving some benefit in return, brands can turn the threat of privacy concerns into an opportunity.”

Indeed, some social media sites are experimenting with such data privacy models. For example, social network Diaspora enables users to remain in control of their content by allowing them to set up their own servers to host and share their status updates, photos and other personal data. It also offers social network integration, enabling users to cross-post to Facebook, Twitter and Tumblr. However, Diaspora has yet to be commercialized, and instead relies on donations from a committed user base to maintain itself.

Another new service is App.net, where users pay a monthly or yearly subscription to access an ad-free social network. The service gets its revenue from the subscriptions (rather than from selling the personal data of its users to advertisers). As a result, subscribers remain in control of their own data and can remove it at will. A recent development is the introduction of 10GB of cloud-based storage space for subscribers, which allows users to store photos and other files while maintaining ownership.

App.net targets two main audiences: privacy-conscious social media website users, and developers. It encourages developers to create applications for the site by offering incentives to those who have produced the most-used apps. With around 30,000 members, it raised over US$500,000 (around €380,000) from over 11,000 donors in a campaign of crowd funding in August 2012. And it seems there are plenty of developers signed-up to produce mobile and desktop apps. But does its subscription-based ad-free service appeal to a mass audience?

Evidence suggests that internet users are becoming more interested in the idea of paying to avoid ads online. While a 2008 study indicated that when offered the opportunity to access one of their favorite sites ad-free for US$29.99 a year (around €22.94), only 8% said they’d be likely or very likely to, research conducted in November 2012 paints a different picture; 18,000 people were asked whether they would be willing to pay ‘a reasonable fee’ to watch advertising-free online content – 33% said they would. Indeed, some app developers now cater for this need by offering a version of their free apps that users can pay for to get an ad-free experience. But what about in the case of App.net, which is a social media site rather than video-hosting service or gaming app and is offering a clear pricing structure similar to the Ad Age example?

We decided to find out. We asked three thousand people which social media sites they had heard of, and only 2% recognized App.net [1]. 2% recognized Diaspora (0.4% recognized both). To put that into context, 95% recognized Facebook, and 87% had heard of Twitter. In the same group of people, only 0.2% used App.net, with the same percentage using Diaspora (no overlap between the two), compared to 72% who used Facebook and 29% using Twitter.

We also ‘pitched’ a service based on the App.net model of a social network. Only 8% received the idea positively.

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We then applied GfK’s Truth Index, which produces a more accurate picture of actual uptake by removing over-claim. The result was that only 6% would actually subscribe to the service. Indeed, half said they would definitely not use it.

So it appears that beyond a niche interest amongst developers, App.net has yet to produce an offering that appeals to a wider audience (though unlike an ad-supported service that wants to reach large audiences, subscription services need only to attract enough users to cover their costs to maintain viability). Perhaps privacy issues pale in significance when placed into the greater context of all that Facebook and Twitter offer their users in terms of functionality and social connections. After all, out of a billion monthly users, the 650,000 Facebook users who were moved to vote about privacy concerns form only a tiny fraction.

Most users have numerous contacts on Facebook, but how many will have enough of the people they want to spend time with online on App.net or Diaspora to justify a move from the former to one of the latter? Diaspora allows users to cross-post to Facebook and Twitter in an attempt to surmount this problem, but from our research, few people are even aware of the social network. Limited numbers appear to be actively seeking out these smaller social media sites, so it seems that while users remain satisfied with their social networking experience, privacy concerns are unlikely to push them towards the alternatives, and Facebook’s advertising model remains viable.

 

[1] Monthly online omnibus study using the GfK panel. Respondents are nationally representative of the UK aged 16+. The survey ran 18th – 22nd October 2012

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