Comment by _fat_santa
1 year ago
> It's rare to see that a service you use actually does something that benefits the user rather that itself
The reason it's become so rare is most companies in this space (heck tons of tech companies period) have used a business model of offering a thing to one group of users and then turning around and selling the results of that thing to another group of users, where the latter group is the one actually driving your revenue. This by default almost assumes a hostility towards the former group because their interests will of course be at odds with the interests of the latter group.
What's refreshing about Kagi and other new tech companies is they have dumped this model in favor of having just one group that they serve and drive revenue from (ie. the 'old' model).
The other part to this is that the internet accelerates network-effects, which you can further supercharge by making your product as cheap as possible or free to the former group in your example.
It’s hard to make money by charging a lot to a small group of people since now you’re dealing with anti-network effects. Doubling the price of a product will likely more than halve your user base.
This is one of the best explanations I've seen for this phenomenon.
If you try to build a network of paid users, you lose because you'll be run over by 'free' competitors monetizing indirectly.
Disagree. You don’t lose, you’re just smaller, better, and still very profitable.
HBO used this model way back when. It’s been a lasting business.
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The free competitors have raced to the bottom and don't provide a useful service any more.
Playing devil's advocate...
Yeah, the ad supported model has its problems, but it also makes the internet way more accessible. If we think about it, companies and people with more money are basically subsidizing these services for everyone else. They're the ones seeing the ads that keeps the lights on for users who can't afford to pay.
If everything was subscription only, a ton of people like students, low income families, people in developing countries would be shut out. "Free" services, even with their flaws, create a kind of digital subsidy. It's not perfect, but it means way more people can use these tools.
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However, most of current fremium games are precisely based on this model (Fortnite, LoL, TF2, most of mobile games, etc...)
The service is subsidized by "whale players" that regularly spend a lot of cash, but they are a lot of freeloaders (to entertain the whales and to build brand popularity).
I think this supports my point and the OP’s example. Video game makers have figured out how to segment their customers into two groups (former and latter in the OP’s example), and this only works because they’ve made their games extremely cheap or free.
A cheap/free game supercharges network effects to amass players, each of which incrementally adds value to every other player. Most players will never directly pay enough to offset their own cost to the game maker. However, they will create a real community that draws in a small number of whale players who will directly pay for themselves and indirectly pay for all of the free players.
Not so different from the two-sided markets on Facebook and Instagram.
> This by default almost assumes a hostility towards the former group because their interests will of course be at odds with the interests of the latter group.
I would generally agree that that's the "default".
However, there are cases where two sides of a market need an intermediary with which they can both independently transact, and a net benefit of that interaction is felt on both sides. The key is to construct the solution such that the intermediary depends on the goodwill of both sides of the market.
I think Kagi is somewhat flipping the script. By "taking" data from publishers for free, they are then selling it to readers at a cost. However, there is a trade off. Kagi needs to make sure publishers continue to make their content available so that it can be searchable, or used in their Assistant product. In order to do that, they need to do the opposite of what Google is doing by trying to sequester traffic on Google.com: Kagi's best interest is to make sure that they provide good value to both sides.
Indeed, using the Assistant product, the way it is structured, I very often find myself clicking through to the referenced original sources and not just consuming the summarized content.
How this evolves over time, from a product design standpoint, will be interesting to watch.
Kagi user here. I agree!
The main driver of hostility to users is due to ad-based business models. I think we would see a much more healthy internet if we had regulation which prohibited companies from choosing ads based on any information associated with the user that the ad is shown to. That is, any data collected in the past and any data associated with the session and request must not be taken into account when choosing the ad; two requests by different users in different locations should have the exact same ad probability distributions.
I know we are never getting this because it would kill or severely harm the business models of some of the most profitable businesses in the world.
They would be a good steward of pinboard.in if it were for sale / recovery.
Direct monetization FTW. Charge people for value. Cultivate audiences willing to pay for value.
Incentives aligned. Happy customers. Good businesses. Maybe you only get 60% gross margins, or, gasp, 40% gross margins. But so much less toxic.