Jimrandomh's Shortform

Some software costs money. Some software is free. Some software is free, with an upsell that you might or might not pay for. And some software has a negative price: not only do you not pay for it, but someone third party is paid to try to get you to install it, often on a per-install basis. Common examples include:

  • Unrelated software that comes bundled with software you're installing, which you have to notice and opt out of
  • Software advertised in banner ads and search engine result pages
  • CDs added to the packages of non-software products

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2mr-hire7dI'm trying to wrap my head around the negative price distinction. A business can't be viable if the cost of user acquisition is lower than the lifetime value of a user. Most software spend money on advertising, then they have to make that money back somehow. In a direct business model, they'll charge the users of the software directly. In an indirect business model, they'll charge a third party for access to the users or an asset that the user has. Facebook is more of an indirect business model, where they charge advertisers for access to the users' attention and data. In my mind, the above is totally fine. I choose to pay with my attention and data as a user, and know that it will be sold to advertisers. Viewing this as "negatively priced" feels like a convoluted way to understand the business model however. Some malware makes money by trying to hide the secondary market they're selling. For instance, by sneaking in a default browser search that sells your attention to advertisers, or selling your computers idle time to a botnet without your permission. This is egregious in my opinion, but it's not the indirect business model that is bad here, it's the hidden costs that they lie about or obfuscate.
6jimrandomh7dUser acquisition costs are another frame for approximately the same heuristic. If software has ads in an expected place, and is selling data you expect them to sell, then you can model that as part of the cost. If, after accounting for all the costs, it looks like the software's creator is spending more on user acquisition than they should be getting back, it implies that there's another revenue stream you aren't seeing, and the fact that it's hidden from you implies that you probably wouldn't approve of it.

Ahhh I see, so you're making roughly the same distinction of "hidden revenue streams".

Jimrandomh's Shortform

by jimrandomh 1 min read4th Jul 201931 comments

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This post is a container for my short-form writing. See this post for meta-level discussion about shortform as an upcoming site feature.