The infestation of the abstract business model.

The post bubble years have seen an infestation among online startups. An infestation of what I call the abstract business model.

Put simply, business model abstraction is where someone other than the user bears the financial cost of a product or service: ie the product revenue is abstracted from the users of the product. Facebook is currently the poster child of this approach, as MySpace was before it, and Xanga before MySpace. Note that trend.

So What Price Does the User Actually Pay?

As the phrase goes, “there no such thing as a free lunch” so what price does the user pay in this sort of setup if they’re not handing over cold hard cash?

1. Users exchange their “personal” information for access. Where “personal” can range in extremes from benign comments through to your home address and contact details.

2. Users interests take lowest priority in product development. This is the product killer. When the users interests don’t align with those providing the actual revenue, you’re doomed. Cash talks.

Bring Back The Benjamins!

Remember the time when stuff actually cost money? If you liked something enough, if it promised enough value to you, you’d hand over hard earned cash for it. Creators of that product had a vested interest in whether or not it actually offered you the customer real value, if it didn’t they were out of business. When something is given away at no financial cost, users inherently lower their standards. People will try almost anything if it’s free. People will also put up with a substandard product if it’s free. This doesn’t build user loyalty, they don’t value your offering, and will ditch you quick as look for the new kid on the block.

The balancing act between users interest and the revenue providers interests created by these abstract business models is a fragile one. History is littered with it’s casualties. The old faithful user pays model on the other hand, fosters a healthy, positive feedback cycle between users and the company. What’s good for the user is good for the company. That builds loyalty, and helps drive the development of a better product. What could possibly trump that?

Layton