We recently hosted a very successful serial founder and sometime investor at our online Investor Insights, who just launched yet another company – his third. It was fascinating to listen to both his advice – and his history. His first company was quickly acquired by Google, which was ‘clearly’ a win, but careful there, founders: great to be ‘adopted,’ but not all ‘parent’ companies are the same. He served his time, celebrated the day the golden handcuffs came off, and quickly launched his next company, which pivoted a few times, as all companies do, but did find its footing and a sustainable revenue stream. Acquisition offers were proffered and rejected, perhaps since the entrepreneur had been there, done that.

The company is still alive and well and turning a profit to the tune of hundreds of millions a year.

Nice revenue stream.

When he started his third company, he charged users from Day One. It’s doing well – and growing.

Live and learn, and in the startup world, the latter being the operative.

The Tech Cabal Is Now Covering Their Ads

Google launched in the days of Web 1.0, when the mantra was eyeballs uber alles and became profitable – highly profitable – when they incorporated their ad model, which also got them into no small amount of trouble. In fact, earlier this year, the U.S. file(d) second antitrust suit against Google’s ad empire, seeks to break it up. The case is currently being tried in the courts (5 things we learned so far about the Google antitrust case). As TechCrunch reported, “The government has argued that Google uses its platforms and deals with partners to block out any competition in search or advertising, thus hindering competitors from accessing the data they’d need to improve their products. Google argues that…Everybody wants Google as the default engine because it’s the best.” Reread the government’s argument, but we digress.

Times and tech change, and since we now live in the age of ad blockers, YouTube (Alphabet/Google) is getting serious about blocking ad blockers. YouTube has confirmed that it has ‘launched a global effort’ to crack down on ad blockers, The Verge reported. “…you may see a notice that says “video playback is blocked unless YouTube is allowlisted or the ad blocker is disabled.” It also includes a prompt to allow ads or try YouTube Premium. You may get prompts about YouTube’s stance on ad blockers but still be able to watch a video, though, for one Verge staffer, YouTube now fully blocks them nearly every time.”

Given that there’s been a decided move to streaming, especially on mobile, Alphabet/YouTube wants that revenue, but the company has never been one to shrink from overreaching. As one reader noted in the comments on The Verge, “In Australia their premium family package just went from $18pm to $33pm which is insane… How they can justify charging a similar price to a streaming service like Netflix etc baffles me. I guess, I’ll just take my eyeballs elsewhere.”

If you’re going to start charging, always good to be reasonable, or read on through the comments, where someone else posted: “Just have to get the right extension: Fadblock  https://chrome.google.com/webstore/detail/fadblock-friendly-adblock/mdadjjfmjhfcibgfhfjbaiiljpllkbfc and if you’re using other adblockers you need to allow ads on youtube for fadblock to work correctly, enjoy!”

Gotta love the wisdom of the crowd!

Said another poster: “If YouTube becomes more trouble than it’s worth, I’m not suddenly going to want to give them more money. Corporations bullying people is why competition is good. Every company that is armed with the knowledge that they’re the only game in town is an a**hole company, at least in my experience. Treat their customers like chattel.”

It’s important to listen to your paying customers, but guess we’ll have to wait and see what happens in the anti-trust trial…

We recall that when Facebook (nee The Facebook) first hit the zeitgeist, it was suggested that they charge either $1/year or $1/month – we don’t recall exactly – but that didn’t fly in the age when hockey stick eyeball growth was the order of the day. Zuckerberg, too, opted for the ad model and selling information to third parties, but his somewhat premature foray into the metaverse has taken its toll. In fact, “Zuck’s Metaverse Bet Bleeds Billions, said Zero Hedge. “…in the first nine months of 2023, the company’s Reality Labs division, i.e. its forays into AR, VR and metaverse-related software, recorded an operating loss of $11.5 billion, which shows the company might be on course to break its own negative record of $13.7 billion in 2022.

“That’s on top of a $10.2 billion loss in 2021, $6.6 billion in 2020 and $4.5 billion in 2019, bringing the total wager for Zuckerberg’s big bet close to $50 billion over a period of four years.”

The answer: charge. Which is precisely what Facebook is doing, As The Guardian reported, “Facebook and Instagram users in the European Union will be charged up to €12.99 a month for ad-free versions of the social networks as a way to comply with the bloc’s data privacy rules… Starting in November, users on desktop browsers can pay €9.99 ($10.50) a month, while Apple iOS or Android users will pay roughly €12.99. The higher prices reflect commissions charged by the Apple and Google app stores on in-app payments.

“The fee will cover all linked Facebook and Instagram accounts until March, when Meta will start charging €6 for each additional account on the web and €8 for smartphones.”

And no doubt coming soon to a desktop/mobile device near you, rest of the world.

With governments cracking down on the overreach and data gathering that tech has enjoyed since Day One, it seems that even tech is going back to business as usual. Meaning, traditional business, where consumers paid for products and if anything, we’ve certainly learned from the tech paradigm that free is anything but free.

And so much for the so-called New Economy.

Which should be a heads up to founders. Tech entrepreneurs have traditionally relied on outside funding to help launch or grow their products. ‘Launch’ is one thing, where founders often need the influx of funds to help get to a full product launch. But even at that early stage, a business model is essential. As we’ve been witnessing lately, investors are not dispensing funds as quickly, readily, or yes, as blindly as they have in the past, so you’d better have a product that people are willing to pay for – and prove it.

When he spoke at our investor breakfast a while back, Howard Morgan, then co-founder at First Round Capital, now Chairman at B Capital, said that product/pricing fit is often a tough one – but it has to be done.

When one door closes, another one opens, and this may well be a turning point or a testing point in tech. Will all those eyeballs that so readily subscribed to YouTube and Facebook/Instagram be willing to pay for those services? Are they asking too high a price and will subscribers experience sticker shock? There’s always another fish in the sea, so when it comes to pricing, know your audience, and the platforms of the tech cabal have become so ubiquitous, do they know their audiences?

And at what cost to users? Their ‘free’ services have cost us our privacy and even our freedom to express ourselves openly.

In tech, there’s always an alternative platform somewhere, that suddenly rises in popularity. Case in point: Zoom, which became a verb as a result of the lockdowns. Time will tell if the gorillas have overstayed their welcome or overstepped this time. Are they truly worth it? This may be the tipping point where people will no longer pay any heed to those bulls in the china shop and at long last open their eyes to the elephant in the living room, Onward and forward.