Insomnia (insomnia) wrote,

SixApart breaks pledge, adopts ads.

So, have you seen the news yet? Sure, it's spun nicely enough, but I ask a bit of your time to consider the following:

Anyone remember this promise LiveJournal made to you back in Apr. 2004?!

We stand firm in saying that we will:

Stay advertisement free
It may be because it's one of our biggest pet peeves, or it may be because they don't
garner a lot of money, but nonetheless, we promise to never offer advertising space in our
service or on our pages.

What about this supposed principle to "Avoid banner advertisements", which is shown on, but has since mysteriously vanished?

Avoid banner advertisements
As it's one of our larger pet peeves, we have avoided putting banner advertisements on the site. Although our Terms of Service permits us to change our policy in the future, we've found throughout the past few years that our "paid accounts" business model has, so far, made banners ads unnecessary.

Or perhaps it's worth mentioning the now ironic satire of the April Fool's joke of just last year...

"Take banner advertisements, for example. Some may say that they are evil. I say that they demonstrate a strong ability to strengthen cost-profit ratios. Some say tomato, others say tomato."

I guess we're *ALL* April Fools now, eh?

When LiveJournal was sold to SixApart, I told people what the worst case scenario was:

"The economy continues to struggle, Six Apart and its 70+ paid employees never achieve a profit -- like most dotcoms -- and they go under, taking LiveJournal with them. LiveJournal may not have been as big as Six Apart, but one thing they were was financially secure and completely self-funded... unlike SixApart, which has yet to make a single penny's worth of profit.

SixApart/LiveJournal have gone on a hiring frenzy this year, and have presumably dipped heavily into their venture capital funding to do it. Admittedly, the venture capital market smiled upon them, because technology companies have performed so badly lately, a growing, popularly hyped phenomena like blogging and social software sites had the kind of buzzwords to attract investors. That said, their investors may not have expected SixApart to blow through so much money, so quickly, and if this economy gets worse, there is a real risk of additional funding drying up. (Why is the price of oil and gold going through the roof? Because that's where investors are putting it.)

Now, we all know what happened to the overhyped dotcoms back in the late '90s/early '00s. The economy hit a pothole, the additional money they expected never arrived, and they died a painful death. Well, the truth is, today's economy is worse than in the late '90s by any measurable sense of the word. It could get very bad indeed, and to run a business without taking that into account is simply irresponsible.

I'm here to tell you today that LiveJournal is, in my opinion, no longer profitable, even if viewed by itself, seperately from the rest of SixApart. It's grown too fast, hired too many people, and is almost certainly an unprofitable enterprise. Worse still, the money it does make -- and that you are paying out for every year -- is helping to pay the salaries of all those working on the TypePad side of SixApart, which still has failed to achieve profitability.

Doubt me? I challenge SixApart to open up their books to an independent auditor and show us and its investors otherwise. I'm so certain of this, that I am even willing to pay any costs for the audit myself.

I let it be known that the sale of LiveJournal was a risky act of venture-funded speculation which would make the future of the service less secure because of SixApart's lack of profitability, and that LiveJournal's previous promises to its users "may mean nothing a year down the road". Well, here we are, a year later. Were those promises kept?

Whether you are a paid user, a permanent user, an early-adopter, or a free user, there are numerous reasons to dislike this ad plan:

1> When you give potentially hundreds of thousands of people access to many of the paid features, you are putting a much greater server burden on those features... many of which don't work reliably even now. For instance, one of the paid features that are planned for ad-sponsored accounts are directory searches. But try doing a search even now for users in (insert city and state) interested in (insert hobby)? Go ahead, do it now. What?! The search is taking a long time to complete? Or maybe the pictures don't load very rapidly for you? Hey... me too!

Likewise, you can expect that images hosted on LJ will take longer to load, and that other paid features will potentially lag more. It's quite possible that server load on these kinds of paid features will double in short order. That could easily make the difference between something not working all that well and something not working at all.

2> Paid features that you might currently take for granted, such as the ability to link to your LJ-hosted images on sites other than LJ, might be taken away in the future because they are being made available to anyone willing to accept ads on their journals. Potentially, people can use LJ's image service to host a full gigabyte of images without even having an active account. This free, unpaid for service would be publically available to all spammers, adult site owners, pedophiles, and basically anyone on the Internet who wants free, anonymous image hosting. This could greatly increase the burden on the image hosting service, and could also lead to censorship, as LiveJournal users who post images intended for a select group of LiveJournal users find their pictures deleted or accounts flagged for hosting images, in the same way that users of many other image hosting sites are.

3> While free users don't have to view ads on their journals, they *WILL* have to view ads on the journals of ad-sponsored accounts. The truth is, free users will routinely be exposed to ads via LiveJournal.

4> LiveJournal is targeting these ads based on the interests listed by users, but the use of this kind of data for delivering ads is prone to considerable error. You could be interested in vegetarianism and restaurants and get ads for "Outback Steakhouse". You could be interested in "Iraq" and "nonviolence" and get Army recruitment ads, you can be interested in "BBWs" and "fat positive" and get ads for Weight Watchers. Is this really what you want, or what you want to expose your friends to?

5> SixApart says that they will not give away our personal information except "with our service providers and vendors in connection with the operation of the service and our business, where we think it is appropriate . . . or if the business is being sold or reorganized." How is this in any way a promise to protect our personal information at all, either now or in the future? Isn't providing a user's interests to an advertiser giving away personal (and often valuable) information, if not specifically about that user, then at least in aggregate? Can a user "opt out" of providing their personal or aggregate information in any form that might eventually be used by advertisers, data miners, or other unwanted entities?

6> If you get rid of rules against ads on some journals, you invite them on others. In fact, SixApart has already mentioned that there are plans for encouraging an ad-driven culture of paid accounts too. (Some people will do anything for a few extra user pictures, I guess.) There is even talk of allowing paid users to independently host ads on their journal, which is something previously not allowed. And if they can do it on their journal, why not in their posts... and, therefore, in your friends list?

7> If you're a paid user, you won't see whether or not there is an ad on any given LiveJournal site, but if you link others to that site, they'll see it. Do you really want to do that?

8> It further balkanizes and diminishes the site's sense of community. LiveJournal is rapidly becoming a closed, gated community of "friends only" journals. Creating a whole community of ad-supporting users would cause further balkanization and seperation, with some users and communities choosing not to associate with ad-supporting users. (I know I'll avoid them, whenever possible.)

9> It sets a bad precident. SixApart previously agreed to "avoid banner advertisements" because LiveJournals existing business model made them "unnecessary." We must ask them this... why did they change this policy? What prevents them from changing any other supposed "principles" they hold in the future? What new circumstances exist which makes this policy absolutely necessary for LiveJournal users, to such an extent that SixApart can no longer avoid serving us ads?

10> It's potentially bad for business. I was there when LiveJournal hosted banner ads before briefly, back when the site only had about 15,000 members. While the banner ads did raise a *VERY* small amount of money (we're talking only a few bucks...) they also decreased site growth by approximately 30%. People opted to use other services, because their first impression of LiveJournal was seeing someone's site with a banner ad on it. LiveJournal's history of success is based upon a "free, but paid" business model, specifically intended to promote growth, because site growth allows the site to scale and for overhead to decrease, allowing LiveJournal to spend more of its money on doing what you really want them to do -- improving the site. Adding a large influx of business reps, marketing personnel, and ad execs does very little to improve your LiveJournal experience, and often creates a self-perpetuating bureaucracy... so why would you want to pay for it? Remember, LiveJournal is *still* a pre-IPO startup that could go bust. Shouldn't you desperately want them to be lean, mean, and focused on profitability instead?

11> It simply isn't necessary, and SixApart has done nothing to show that there is any need to violate their pledge to "avoid banner ads". In fact, I suspect that SixApart's new ad scheme is largely a waste of money. According to LiveJournal's own statistics, there are currently only 1,301,145 users who have updated in the past 30 days. These users are only about 8% of the total user base, but they probably make up over 90% of the site's traffic. If you subtract paid users from this total, you're left with about 1,000,000 users as a viable target market for ad-supported journals. Of that total, it would be optimistic if one-in-eight of those users opted in for ads, or approximately 150,000 users, whose journals are soon going to be a helluva lot less popular with other LJ users in the future. How SixApart intends to use such a low number of ad-bearing accounts to reliably pay the salaries of the third-party, tracker-installing biz people and the "ad people" that SixApart have hired who "don't necessarily understand LiveJournal users yet" is far from clear.

(I'm sure there are other potential -- and largely unavoidable -- flaws to this plan. If you can think of any good arguments, please share them in the comments and I'll add them to this post.)

Compare the potential positives vs. the potential negatives, and it becomes pretty clear that this ad-driven plan is pretty risky, unless your priorities are to have more userpics (and ads...) as opposed to a functional, well-working site and business.

What is my answer to SixApart? Keep your promises to your customers. (You know, the promises you knew about and accepted when you bought the site...) Let us know that you have a business plan that takes in to account the potential for catastrophic change, so that if the economy tanks, we'll know you'll still be around. Show us that you have a business plan in place that will guarantee that SixApart is on a rapid course towards profitability, and won't be sunk if additional venture capital funding fails, as it did for so many other dotcoms in the past. If that means cutting back on hiring new people (or, even worse, having to fire your ad guys) then sobeit. You'll be thanked by millions of the site's users. Hell, you'll be thanked by your investors, too!

As for what to do about this course of events, I suggest that all of us who oppose this ad-driven future for LiveJournal speak out loudly. "Friends don't make friends watch ads" banner ads would be a good start. Forming a community and acting in unison with email campaigns of SixApart's staff, support requests, and other acts of polite disobedience would also be a good idea, and could throw a wrench into the plans rapidly, or at least lead to the more odious aspects of the plan to be changed.

So, if you're having second thoughts about all this "great news", and would be interested in working together and contributing ideas to see what can be done to change this situation, leave me a comment, and let's get started. And yes, please do link others to this post. I want to work with others to form a central place where those of us who oppose this idea can share our thoughts and dissent from this unnecessary and damaging betrayal of our trust.

As for me, I do know that I'm likely to defriend people who opt for ad-sponsored accounts, and will avoid linking to any such accounts in the future. Nothing personal. I just don't believe that friends should force ads upon other friends, unless it's necessary. (Yes, even LJ friends...)

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