Since he hit his fundraising target and launched App.net back in August, there have been few more vocal advocates for paid social networks and products than entrepreneur Dalton Caldwell. You and your data are not the product we’re selling to advertisers, he promised his backers and audience, as part of an experiment to see if users will pay for quality and ownership.
But when Caldwell’s “audacious proposal” of a paid social network opens its doors on Monday at no cost to users who receive invites from existing members for a freemium membership, it will no doubt raise questions as to whether Caldwell’s notion has failed. Critics will surely point to low membership numbers as evidence that Caldwell simply had to open his doors to stay relevant, and might say that providing the service for free totally invalidates Caldwell’s central premise.
However, Caldwell argues that companies like Dropbox and Github have proven that you can grow a successful financial model based on a freemium membership tier, and adding those free users won’t ruin his central premise that users want pay for quality (users will still need to upgrade when they hit storage limits on free accounts). His primary reasoning behind the decision to introduce a free tier is that he’s built a decent-sized network of developers and apps so far, and now it’s time to introduce users to those apps and grow the scale of the entire thing.
“In terms of the grand experiment there was a huge chicken and egg problem. The question is, do you get users first or do you get apps first? So I think the apps ecosystem is really nice and really healthy,” he said. “What’s exciting is that that part of the experiment has worked nicely. So now, let’s start seeing what happens when we ramp up distribution.”
Central to the App.net premise was that developers of the most popular apps would then make money by taking a cut of the membership fees based on the popularity of their products. But the problem is that there aren’t enough paying members so far to support the developers in any meaningful way. As developer David Smith pointed out in a prescient blog post on App.net pricing, it’s not that realistic that an App.net developer would make money off the system — a fact that Caldwell said he understands at the moment.
“The current size that we are at is not enough to sustain the developers building for it. We are aware of that. But we are working on it, and we have been working on it,” he said. “I’m not sure a one hundred percent paid thing would ever get monstrously large. And the paid services that work tend to either do lots of advertising to promote it like Netflix or they have a free tier and they don’t do advertising.”
So on Monday, existing users of App.net will be able to send invitations to potential new users, who will be able to check it out without paying. (The full details of the changes and new plan are explained on the company’s blog.) And as for Caldwell? He’s excited to see how it’s received.
“I’m excited because, look, this is still a grand expeiremnt. We don’t know if the grand experiemtn will work. But what’s exciting is that in startups it’s all about making it to the next stage. You always have to look one step ahead. And to me this is one step ahead.”