CASE STUDY – The Internet’s Original Sin

The benefits of the advertising revenue model is that it greatly reduces the friction required for users to begin picking up your product, allowing products, especially social networks like Twitter, Facebook, and Weibo, to scale at an incredibly fast rate. There is also the benefit that the advertising revenue model was able to accelerate the rate at which businesses adopted online marketplaces, as presence on the web became much more important. Finally, there is the benefit that an ad-based model opens up your product to all consumers, regardless of whether or not they can initially pay. However, the downsides of this business model is that it destroys the privacy of individual users and creates social echo chambers and filter bubbles. For the businesses themselves, it creates poor incentives for businesses to favor shocking / spreadable media rather than thoughtfully produced content. One way to reduce the negative effects of this model and to leverage the power of the Internet is to create meaningful services that users would willingly pay for. In the article, they offer Reddit as a primary example of creating a positive culture around usage of their product, for which users actually want to pay for membership for Reddit Gold. This version of the premium model is interesting because a Reddit gold membership is often used as a reward from community members to other community members, strengthening the network and creating a nice feedback loop – getting Reddit gold enforces your desire to use Reddit more, which increases your chances of getting Reddit gold again or even giving Reddit gold to someone else.