Following The Money
Takeaway Points:
Virtually all "free" services are making money somehow. When interacting with free services, consider how their methods of making money may bias the services they provide.
In many cases, these trends are highly invisible and rarely discussed, making it hard to understand when we're being quietly sold to.
Only a small percentage of the players of free mobile games will ever spend money on them, but some rare, highly dedicated "whales" will spend so much money that they keep the business afloat.
As a creator, consider how your free labor will pay off down the line. As a consumer, consider what kinds of "free" services you consume and how they may be biased or bias you in turn.
I advocate the use of a really good skill I like to call “following the money”. While it's a crucial skill, it's one that's often overlooked. Here’s how it works.
No one works for free. If someone does something for leisure or fun, even if it’s what someone else might consider work, they may actually be working for free. But everyone else works because they expect some kind of payoff, whether that payoff is sooner or later.
Now let’s be clear: some people work for less than they’re worth, or work because they expect a payoff that later doesn’t end up happening. Not everyone is an absolute whiz at getting exactly what they want out of the work they do - if they were, we’d have a lot more rich people making a ton of money off of their twitter accounts.
In some cases, people do work that wouldn’t normally pay off because they’re able to get funding from other sources. This can be due to crowdsourced donations, kickstarters, investment from outside sources, and more. While the work itself wouldn’t normally directly make money, these alternative sources of funding make it possible for work to continue. There may be the expectation that this investment will pay off down the line (as in raising venture capital from investors), or the investors may be ponying up money for other reasons. Sometimes, you may just be very good at pitching yourself to potential investors, or assembling the social network needed to acquire investment.
Working for no money is an impossibility. We all need to make money to make the world go around - if we don’t have any, we can’t pay bills and eat food. We’d all like to make more than we actually need, but of course we don’t all hit it big!
What this means, is that when you’re getting something free on the internet, there’s a good chance that it’s not actually free.
Some blogs, for example, truly exist because people just enjoy writing and interacting with their readers. Most of them exist because the plan is to eventually make money off of them. The free work develops a following, and that following can later be used to monetize and get money.
When you’re getting something for free, it’s always smart to ask yourself how the person giving this free thing to you is making money. Money has a powerful tendency to warp and bias our actions, making it more likely that we’ll choose certain (money-rewarding) paths over (less rewarding) options. When money is involved, we’re all biased.
Let’s take the example of free mobile games. Many mobile phone games today are free, but offer the option of in-app purchases that enable you to get some benefit in exchange for real-world money. A badly designed game may make it difficult or impossible to play the game without making money - turning off users who didn’t really want to spend money anyway. In contrast, a good one offers tangible benefits to spending money, but doesn’t make you feel terribly disadvantaged by not spending.
In game design, the terms of “minnow”, “dolphin”, and “whale” have developed, to represent people who spend money on these games. A fourth category, “non-monetizers” generally make up virtually all of your users: sometimes 95% or more. Most users who play a game never spend a single cent. The remaining small percent is divided into minnows (who spend a little), dolphins (who spend a moderate amount), and whales (who spend a lot).
Whales, despite being a small fraction of the player base, spend so much money that the company can make a profit - often, they spend many times what a player would spend on a traditional video game. In most cases, these whales are highly satisfied with their purchases, and don't consider this to be a poor deal.
What about traditional newspapers and their corresponding websites? Traditionally, these sources make a lot of their money through advertising, which means that they have a strong incentive to drive clicks to their sites. As a result, these sites are often incentivized to draw that initial click with powerful, attention grabbing titles - “clickbait” - even if this is sometimes misleading or not fully representative of the actual article.
This effect can also be used to powerful effect by “alternative” news and health websites. These sites often tell lots of stories about how you “can’t trust” traditional news outlets, doctors, or accepted mainstream professionals, who they pitch as not caring about you and just being out to make money off of you.
Of course, since these sites are also monetized in some way or another, what that means is that they’re just the same. While “alternative” news sources are less regulated and are objectively less likely to contain good information, this doesn’t really matter because they can convince you to trust in them and believe their narrative, enabling them to sell you snake oil, supplements, ebooks, or other products and services.
Blogs and online services that use a "free" model all function in the same way. As a creator, you do a lot of free work to gain a following. Then, when you offer a paid product or service, some small percentage of that following will be willing to monetize, and the money that they pay you will be enough to keep you running. The free work helps you build a following and find customers, and then some of them will be willing to buy.
Virtually every online following is a small business in this way, whether people realize it or not. In many cases, this may not even be the initial intent. If you spent 5 years developing a following on twitter by being funny, and then decided to kickstart a creative project, get a lot of money, and quit your day job - well, you didn't start out intending to develop a following to monetize, but it happened all the same since that option was open to you.
I’ll go first - as a blogger and coach, I make my money through online coaching clients and (as of more recently) sales of my books. In order to do so, I need to be able to convince my followers that I’m knowledgeable on fitness and self-improvement topics, and that means creating the best possible blog posts and social media presence that I can.
However, there’s one reason that I may provide higher quality info than other fitness sources - I’m not associated too deeply with any particular niche, and work with clients with a wide range of goals. As a result, I’m not terribly biased to champion the specific value of any one kind of training or another. When trainers have personal programs or training styles they may be biased to provide info that fits with the narrative that this training style is superior, and avoid info that may detract from it. Some “free” blogs and services are more likely to be biased than others, depending on their niche and the kind of information that they provide.
As a consumer, I recommend that you consider what’s going on when you interact with free services. Consider where the money is going, how your favorite “free” entertainment or information source gets its money, and whether or not this will bias the kind of information that you get from it. This skill will serve you well in the long term. Avoid spending money on causes and sites that are likely to be highly biased, and look to spend money on causes and sites that you care about and support.
But then again - the best things in life are free.
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