This is the transcript for The Dirt show, Monetizing Your User Experience.
Tim: Hello, and welcome to Episode 3 of The Dirt. I’m your host Tim Wright and I am not here with Steve this week. Right now we have Mark Grambau here. Mark is a great artist, he’s the one that’s doing the artwork for the shows most of the weeks. He’s an avid clammer and he’s a former resident of Pleasantville, New York. Mark, say hello to the world.
Mark: Hello, world. Does that make me software? Does that make me, you know, saying hello world —
Tim: That was actually is subliminally brilliant, I think.
Mark: Alright, good. Alright, goood.
Tim: Today on the show we’re going to talk about how to monetize your user experience and before you hit the stop button it’s actually kind of an interesting topic, I think. Because we kind of grew up in this world on the web where we give everything away for free. And I brought this up last week that I — the last week or the week before, I don’t remember — where I just mentioned that I prefer to give everything away for free. We got into this intellectual property talk that I thought was pretty interesting and we kind of wanted to expand on that. But before we get into that — in Episode one we talked about using images in a retina display and I found a plug-in called Retina JS that I wanted to let everyone know about. It’s probably been out there for a while but I was reading a smashing article and I saw a roundup of good plugins lately, as they do from time to time. And it’s a plugin that will search your file system for images that have @2x appended to them, and if it finds one it will load in the retina version of the image so you can have this higher quality image on your retina displays. That being said, you still have to deal with the double download issue, but that’s kind of a topic for a whole other show and I don’t want to get on that too much.
But, moving on to the main topic, monetizing your user experience. Mark and I were actually talking about this yesterday. We’re putting a talk together for a Boston area meetup and we talked about monetizing your user experience behind the scenes without getting in the way of anything. Without degrading the user experience, because we see this as a pretty big problem. What do you think?
Mark: I agree. The internet is on the whole, feeling some growing pains around this on a technical level, on a business level and really on a cultural level. Because we do have a culture where you go 100,000 users, a million users, what have you, and then we’ll figure out a business model, right? Of course, there’s the way of adding advertising into your stream and there’s all these various different ways. But what it really comes down to, and we’ll get into the details, but what it comes down to is the way that you choose to monetize using your data, using advertising, using whatever method you do. It really defines how you’re moving forward as a company and your relationship with your users and where you see your users in your business model, in your cultural ecosystem.
Tim: Right. We go to conferences like An Event Apart and South by Southwest and Web Directions and all these user experience focused conferences, but we learn about mobile first and user centered design and this stuff, and we go with this mindset where I feel like we’re learning in a bubble to where everything is purely for the user and it’s all free. I actually very much like that model, but there’s a culture shock when you get into the real world. And I’m lucky, to this point, to not have to be thrust into that world, to this point in my career.
Mark: Tim actually is a cartoon. You wouldn’t know it listening to his voice, but I swear to you I’m sitting across from a cartoon. He’s completely two dimensional and if I were to turn just a few degrees, he might disappear.
Tim: I don’t know how to take that. Mark is actually drawing. Is that me?
Mark: I think that’s me looking terrified.
Tim: Mark’s drawing himself.
Mark: I’ll draw you looking terrified next.
Tim: And we actually do have Steve in the room. Steve, can you just give a shout?
Tim: That was Steve, if you heard Steve. He’s taking Mark’s place in drawing us, so we’ll post the drawing afterward. But I digress.
Mark: But real world. Real world problems meet design and UX and developer ideal world. How do we make those meet properly?
Tim: Yeah, I have a lot of close developer friends who are in the corporate environment and it’s all about getting it done. And you do the best you can with performance and user experience but in the end, you’re kind of at the mercy of these advertisers and making money. It’s unfortunate, but not everybody can live in that 100% user centered world, I guess.
Mark: Or at least so they want you to think. So we’ll pitch the opposite. Maybe I can stand here as the, ‘No, you can live in the user focused world and make lots of money. You really can’. It’s all trying your best to —
Tim: We’ll get some debate, some heated debate.
Mark: That’s ight.
Tim: So, what is UX in the business world really mean? I mean, does it just completely take a backseat to revenue? I think a lot of places it does — I’m not going to single out specific sites or applications or anything — but I know there’s a lot of sites. DoubleClick, the ad network, DoubleClick is huge and I know that they really bog down requests to a page. Anyone hooking up with Facebook, if you want to hook up with Facebook for that social aspect on your site, that’s another external request that a lot of times bogs down performance and can hamper user experience. But what do you do, because businesses have to make money and we need to understand that as designers and developers, as unfortunate as that is, we have jobs. You know.
Mark: We do.
Tim: We do, indeed, have jobs.
Mark: Yeah, so, as Tim’s saying, and is the business world. It comes down to motivations. As in any negotiation, as in any trying to find a middle ground in a successful place, you’re coming about, your understanding the motivations of where someone’s coming from. In the business world, they’ve got their shareholders and they’ve got their ads and we have our user testing. We have our progressive enhancement, accessibility, our motivations and our goals may seem diametrically opposed. So let’s look at some ways that we do generate revenue and we’ll talk about what’s good for user experience, what’s bad, and how we can improve these things. So we threw together a list of some of the top things we see as models for this, including ads.
Tim: Right. Ad revenue is obviously the biggest. I mean, Google makes almost all of their revenue on ads, I believe. They probably make some from Android and some of the devices, but I think they’re primarily ad revenue. And there’s somebody suing Google right now for basically all their ad revenue, so it’s definitely a big market. It’s a problem. It’s a problem in responsive design, not to circle everything we talk about back to responsive design, but ads unresponsive. A lot of times, ads are in the sidebar and when you do a responsive site for better or for worse, a lot of times that sidebar drops to the bottom of the page and it’s no longer super visible. So there are not revenue problems. But —
Mark: But there are too a point. There’s a lot of talk, as Facebook has changed, for example. Facebook is a company that, while it’s from a perspective on the top of the world, they were built as a desktop software company. And now it’s very clearly a mobile world and they know it. Here’s Mark Zuckerberg out at conferences saying, ‘We are a mobile company now.’ But you run into the issue of they built their revenue around advertising and these partner programs on the desktop, but people don’t click on ads the same way they do in mobile. So it does become this sort of crisis of revenue. Crisis of culture. So ads really do present a problem of user experience and to a business level, business model, when you switch over to a mobile-centric environment.
Tim: I thought that when Zuckerberg came out and he gave that talk, I don’t know, not too long ago, maybe a couple weeks ago, and the news blew up. Like, ‘Oh my god, Mark said the world mobile fifteen times.’
Mark: Dear god, yeah, they added up, mobile, mobile, mobile.
Tim: They have commitment now. And I mean, I wonder if he actually cared. I mean, I’m sure he cared because he owes it to the stakeholders or the shareholders, to bump up the stock price, I guess, but I wonder if he actually cares if they put ads on. It doesn’t really matter if they put ads on mobile if they make the ads on desktop more relevant or higher click through rate or what have you. Or they just make more money. It doesn’t really matter where the ads go, I guess. Some of the user experience related problems with the ads, like you mentioned with DoubleClick. A lot of them load in with iframes and with extra resources that you need to download. And as a front end developer, I try and cut down on those http requests as much as possible with combing and catonating scripts and numification using sprites, and making sure you’re using efficient code. It almost feels like it’s for nothing because now you’re going throw a bunch of ads on the site, clutter the interface —
Tim: — and hamper the experience.
Mark: Not ruin the experience, but definitely hamper it —
Tim: Certainly change it. Certainly change it. It brings us to another one that we were thinking about which is data mining. Something like Facebook, something like Google, they know a ton about you and they can turn that information that they know about you, from your age and your sex and your friends and the show that you watched last night, what have you, and they can make incredibly targeted advertisements, etc. Of course, it has the same research issues that Tim’s talking about because it’s about delivering ads and http requests, but it also is about the experience. The emotional experience you have going to a site and there’s a point where it does get creepy. As Tim was saying when we were talking about this, putting together a talk about how do you take the data and make ads from it, make revenue from it without being creepy. And it’s hard. Because you go to Facebook, or even in your Gmail for example, because it’s using context, it’s using data, to serve you an advertisement that they think is relevant to you and it ends up being this very strange experience where a robot thinks they know you, right? It’s a little bit like the uncanny valley of 3D models of human beings where if it’s sort of unreal it’s not a problem. And is it gets to be just short of real it drops down to this horrible, creepy, terrible place where it’s not quite right. And that’s sort of where it is where you’re feeling okay with the ads, maybe, but if just uses that right amount of data it can actually really freak you out and make you feel like someone is rifling through your drawer to try and sell you something.
Mark: Yeah, it’s interesting to balance that experience. There’s even, from the data mining aspect, if you don’t want to make money with ads, companies will sell your information.
Mark: There’s the whole — LivingSocial acquisition model was buying companies that have a huge user base to get your email address. There’s a really small company called itracker that’s almost, no one uses it, but it’s very similar to LivingSocial and Groupon. And there’s talk about LivingSocial buying that company only for the email addresses so they can just spam the crap out of people. That’s certainly a way to make money. Whether it’s moral or not, it’s not really a debate, but there are ways to make money without ads. That’s one of them. There’s also the Freemium model, that’s been very popular lately where you give access to the site at a certain level, and then if you want more access to the site, or more bandwidth or more storage or something, you pay for it, pay a premium for it. I don’t really know how I feel about that model. I guess it’s good because I very, very rarely sign up for the next tier, unless the service is great. Like, maybe Spotify, I might sign up for the monthly Spotify. I guess they make money on the higher end ones.
Tim: I think it’s the kind of thing where Freemium — I’m a big fan of Freemium. But, your books have to line up. Your margins have to be right. You can’t give away the free if 99.9% of your user base is going to do that and you’re making money off of .1. You can only do that unless that .1 happens to make you 99% of your revenue and it’s actually enough revenue to support the whole thing. If your books line up for it, it can be a great thing. Classic Freemium products. DropBox is Freemium.
Tim: MailChimp is Freemium. And these are great services, but they have enough power on the high end. Dropbox’s high storage accounts and team accounts as well as MailChimp for high volume e-mail campaigns. They’ve certainly got enough customer base there that it can support the rest. It’s not necessarily right for everyone, but it ropes people in.
Mark: It’s certainly an alternative to plastering ads all over your site. So we have the Freemium model and also the subscription models like the newspaper sites. I don’t know if Boston Globe does it, but New York Times does it for sure.
Tim: New York Times.
Mark: I’m sure Wall Street Journal, they seem like people who would want to make money.
Tim: As well as some independent blogs that are really content focused. They don’t want to be throwing ads everywhere and hamper their experience. They don’t want to be a blog or a newspaper company that’s built on headlines that are made to bring people in and click on ads and are not actually about content. So for example, I’m thinking of The Loop. I read a lot of Apple Tech blogs, that’s my nerd focus here. So The Loop, Daring Fireball, Marco Armen’s blog Armen, marco.org, these are sites that are really content focused and they have a, hold on, back up. I’m not talking about subscriptions. I was talking about sponsorships. What a completely inelegant transition.
Tim: Also there’s sponsorships. With Twitter, the most prevalent example in my mind, is the way Twitter starting monetizing their model by promoting Tweets. They promoted a trending topic, they promoted Tweets. I just saw a Sprint ad in my stream last week or earlier this week or something, when they’ve been really pushing the iPhone stuff. I think that’s a decent model. It’s not super different than ads.
Tim: But there’s a different tone.
Mark: Yes, absolutely. It’s not so obtrusive to where you can’t do it without ruining the user experience. I think they’ve done, actually, a decent job.
Tim: Yeah, I think in the end, as we’ve said about all these, what these things do is they define your culture. They define how you treat your users. If you’re throwing up the occasional sponsor, we’re accustomed to that. We’re accustomed to ‘Here’s a word from our sponsor.’ We say, alright. It may not be great, but we don’t love it. I’d much rather watch something on Netflix or on a DVD that have to sit through an ad, but I do understand. We’ve grown up with this in our culture. So a sponsorship is a nicer, unobtrusive, wow I can’t speak, unobtrusive way to get some revenue in there.
Mark: There’s also been a interesting model going on with YouTube lately, and it’s actually more annoying to me than anything, where they’ve been putting the ads in front of the videos.
Tim: Pre-roll. Pre-roll ads.
Mark: Yeah. I’ve seen them more and more often, but they also allow you to just opt out of after five seconds or something, they’ll let you skip the ad, and I’m pretty sure everybody does that. But I’ve noticed they’ve been doing something with the link, where they have the little countdown in the bottom right corner, the link to skip the ad is not in the same spot. It’s just ten pixels down so you can’t just hold your mouse there, you have to know that’s going to be ten pixels down, which feels a little devious.
Tim: A little skeezy.
Tim: Yeah. So there’s a lot of ways that we can make money online. Some of them hamper the user experience. I hate having to balance out making money and providing a top line user experience, so there has to be some middle ground for this. I don’t know exactly what it is, and it could be the creative people talking to the CEOs, or — I don’t know who else is up at the top — the decision makers, the stakeholders, explaining why we should have a better user experience and then actually, openly discussing ways that we can also create a revenue stream.
Tim: And I think it has to be part of an up front discussion. I consider myself an idealist in this sense, not the idealist from Tim’s angle where I want the world to be free.
Mark: The world needs to be free.
Tim: I think the world should cost you all money, myself included. No, my view of this is I would rather have a — I’ve got a brilliant idea, a great product — I’d rather have 100,000 users paying $2 a month, a year, what have you, than ten million users paying nothing and trying to find a revenue stream later. Adding in ads.
Mark: Maybe plastering ads, yeah.
Tim: Yeah. I think if you have a product, I think this comes from being a designer, being an illustrator, and saying no to spec work and saying no to the concept that design should be free. If you have a good product, be it a piece of artwork or a piece of software, you put your time into that and you’re not a lawyer, you’re not a doctor, but you still need to go home and put food on the table for yourself, for your family, your pets, what have you.
Mark: Food should be free as well.
Tim: But only for pets. Only pet food.
Mark: Pet food should be free. I do go home and eat dog food like crazy.
Tim: Because it’s free.
Mark: Well, yeah.
Tim: In your ideal, cartoon world.
Tim: Yeah, so anyway. We’re being crazy here. But for me it’s having some respect for your product, and I don’t think we’re going to get anywhere as an industry and culturally unless we say our products are worth something. Our music is worth something, our software is worth something. I think there’s room to put things out for free to contribute to the community and we absolutely should be, but I think that we run the risk when we do too much like that, when we build too much and say we’ll build a community and we’ll find money later, to really dilute the value of what we’re doing in the public eye.
Mark: Yeah. I think to jump back a little bit, when you mentioned you’d rather have millions of users that are paying $2 a person. I think that brings up a good point, something that I’ve been wanting to test for a while and it’s moving that App Store model onto the web to make money. And I really wonder if people would be willing to pay 99 cents for access to Facebook or something. Maybe not at this point, but if somebody said your accounts are now closed until you pay us 99 cents, that would be awful. But there’s App.net, that’s the new one, and I think it’s like 50 bucks, isn’t it?
Tim: 50 bucks annually.
Mark: It’s something like that and people are paying it. I think it’s probably, I mean — I’m not going to pay $50 a year for a social network — but it’s a little extreme for the model, I’m wondering if you could do a 99 cent model for a web app as easily as it happens on a phone. And I think the key to something like that is making the payment easy.
Tim: Exactly. I agree. Micropayments.
Mark: PayPal, Google Checkout, Amazon has a payment service now, making it as one click as it is on the phone. I don’t know that it would work, but I think it’s worth addressing at least.
Mark: Yeah, absolutely. To App.net’s point, I don’t know if I would pay $50 a year, but I absolutely understand where they are coming from and why they are there. App.net is there as a response to Twitter, which started out as a very simple software service for this content and was really built by the developer community, right? It was built by the tech community, it was built by early adopters. And in fact, a great deal of Twitter wasn’t even made by Twitter. The Twitter bird originates from Twitteriffic. The word “Tweet” as it is comes from their community. All these things come from their community and there’s a real sense of — betrayal is a really over the top word for this — but to a point there’s a sense of betrayal amongst a certain community that now that they’ve grown that their focus is entirely on these new people moving forward, the mass market. And it shows in, more than anything, not just the advertisements, but the way that Twitter is controlling their API, controlling how they want their servers to be used moving forward to discourage third party clients. This whole community that really built their service in the first place. So App.net is a response saying we’d rather pay 50 bucks and have our community back and have the ability to make clients, etc.
Mark: Yeah. I actually, I really like the way that Twitter went about most of the stuff they did. I think the biggest problem I had with them is the restricting on the API. That’s the open source community, we’re going to help spread the word about your application, although Twitter’s word really doesn’t need to be spread at this point. But I really like how they listened to their users when they developed @ replies and hashtags.
Tim: Yes. It was a community built product.
Mark: Everything. It’s like, oh, what are they doing right now? It’s a lot of the similarities to the way the HTML5 specification was made. What are they doing? Okay, all this stuff is out there, let’s formalize it and I think they did a good job with that and I don’t have a problem with them trying to make money. It almost feels like they’re going to go public soon, actually. The way they’ve been cutting off API access.
Tim: I agree.
Mark: I know the whole Instagram thing was just getting upset about the Facebook purchase. So —
Tim: So, anyway. I know you and I could talk on that forever. Let’s circle back a little bit to talking about, we were trying to think of some good ways to think about other ways of making revenue.
Mark: Right. So we have the app 99 cent payment model. This is actually where the plan discussion kind of ended and we wanted to continue and actually, without much planning, try and discuss with the limited time that we have left, a possible solution to where UX and revenue can overlap each other.
Tim: And I thought of a couple neat things. One is a site called Storenvy. Storenvy, is, to a point, similar to Big Cartel or Shopify or whatnot, it’s slightly more limited feature set, but what Store Envy does is it lets you set up an online store. You are an artist, you’re a designer, you’re a band, you’re a crafter, what have you, you want to sell your goods. And Storenvy, for free, it’s not even like a free with an asterisk, it is legitimately free, you set up a store. What did they did was, early on, they had this second part of their business and they’ve since spun it off with a different name to help differentiate it, but what they’ve got is something now called Threadbird. Threadbird.com. What Threadbird is is the other half of their business. What Threadbird is is screen printing of apparel, of posters, of all these materials. They’re a printing company. And they figure, hey, we can give out the store for free, but if people are musicians and they want to sell t-shirts of their band or they’re an artist and they want to sell their prints, they can print with us and then put it on the store. So, to a point, it’s this parallel but unrelated business that one supports the other. And I like that model. It’s not going to work for every business, but if you think to yourself I have this technology, I have this expertise, I have this corner of my business that’s going to be really useful on a broad scale, it doesn’t cost me a ton to uphold, to keep going and server bandwidth and what not. And then I have this other part that is clearly a make money business, and one supports the other. You don’t end up getting this feeling as a Storenvy user that you don’t matter to the company, you’re just a set of eyeballs to look at ads and you feel like you’ve got a good product.
Mark: Yeah. I wonder how that model would actually translate over to another industry. If, like Facebook, how would Facebook do something like that? I don’t know if they make money off their apps at all, or if they have in-app purchase money or whatever. I probably should have researched that.
Tim: Here’s one interesting thing that Facebook has done just now. I think it came out yesterday or the day before.
Tim: I know, very topical. Check me out. Although by the time you hear this it will have been a week ago. So, Facebook has been able to do gifts for some time. And gifts were these little images. You were giving away icons. And at first, it was you had certain credits and then you could pay a dollar or two dollars and give a virtual gift. Facebook just launched the ability to give physical gifts, and they have partner companies that are makers of various kinds, apparel or goods. And I can give to you, Tim, a birthday gift through Facebook. What does Facebook do? They take a little share. They slice a little off the top. So there, they’re using their tremendous clout, their community, and the desire that people have to communicate for holidays and whatnot and give a gift, and do this through Facebook. It’s already this social atmosphere, you know. As depressing as this might sound, it’s replacing the birthday party because you live on the other side of the world and I still want to give you something. And what they do is the gift is sent in a box with Facebook wrapping and whatnot. It clearly has their name on it, their label, but they take a cut off the top.
Mark: Yeah. Revenue by partnerships
Mark: That’s great.
Tim: Yeah. I thought that was really interesting but it still also stays in their community, right?
Tim: It doesn’t dilute their brand. It’s an expansion of what they’re already doing. It’s an expansion of the concept of a social network.
Mark: There’s also a site called SigFig that I subscribe to. It’s a financial site, don’t judge me for buying stocks in the open source community. They have a revenue model, and they’re very open about it and it’s completely behind the scenes. You never see ads, they promise they’ll never show an ad, but it’s, they have these sponsored mutual funds, or something. It comes up and they analyze your portfolio and they’ll recommend you from this list of sponsored mutual funds. If they find one where you can perform a little bit better, they’ll offer it to you. But they don’t let the amount of money the ads contribute affect what they show. They have these huge pool and they pick out of it. It’s another behind the scenes that you don’t see this. It’s not destroying your user experience, but we are still making money. And they’re very open about it, and I really appreciate that. It’s actually right on their FAQ’s page.
Tim: I think openness and a public sense of how you are making money. It doesn’t have to be your full disclosure, your whole financials for the company, but be up front. This is what we’re trying to do. Because that way you avoid the risk of this feeling of, if you’re too dependent on ads, if you’re too dependent on this data stuff that’s really in the background and working on someone’s privacy to turn a buck, you run the risk of souring users because they’re thinking, ‘I’m no longer the user. I’m not longer the customer. The ad company is the customer and I am the product.’ And you run that danger. So, I think being up front, being transparent to a point and being forthcoming with your user base can go a long way in terms of building trust and what is user experience other than trust? And joy. You know, it really is. You’re trying to build a positive experience.
Mark: Yeah, you want to make your user feel like a person not a product.
Tim: And not a credit card.
Mark: Not just a face with a credit card number tattooed across is. Which Steve has actually, thinking about getting his credit card number and Social security number tattooed on his face.
Tim: I suppose we should correct that —
Steve: It’s a social experiment.
Tim: Yeah, he’s a very trusting guy. He just figures the world will take care of him, it won’t be a problem if he goes.
Mark: Wonderful, wonderful.
Tim: His identity is safe.
Mark: Well I think we had a pretty good discussion about monetizing user experience. We covered a lo of stuff. We covered our mindset, the business world’s mindset. What we’re currently doing and then what we can do. I think that’s probably a good time to break and we certainly thank you for listening.
Tim: Thanks for listening, and Tim, thanks for dealing with my ability to ramble incoherently, and without end.
Tim: Always welcome on the show. Thanks for listening, we’ll try to do better next time.