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Discussing about pay-to-play and how it affects brands

Will people pay to play?

We’ve seen a lot of brands make money using the freemium model. It’s been mostly applied to apps, but does it work for other businesses and brands as well?

Will people pay to play or use a service that’s historically been “free”? Whether it’s an app or a game, or even in retail, does offering things for free, where people pay later work? Do you pay for Twitter? What about Youtube or Linkedin? Is it a matter of strategy?

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Recorded on June 11th, 2021

Transcript

Brad Breininger: 0:00

Hey everyone, and welcome to this week’s everything is brand. This week, we want to talk about how brands make money. One of the biggest things coming up is the whole idea of freemium when it comes to apps, and does this apply to other businesses and brands as well? Let’s discuss. Alright, everyone. So I guess the question is, will people pay to play. So whether it’s a app or a game, or whether it’s even something else, a different kind of app, or even in retail, inviting people in with loss leaders has been a long term retail strategy. Is offering things free, where people pay later, is that the way things are going? And are people starting to get used to not having to pay for things? What do you guys think?

Christian Rosenthal | ZYNC: 

I think this whole conversation started from Twitter launching its paid service, here in Canada, people are used to using this app for free, right. And now they come up with this paid version where they offer different benefits and added value. My question, I guess, would be is that added value enough? Because there’s a lot of chatter about that on Twitter, ironically, and not everyone’s happy,

Gabi Gomes: 

had they had the strategy out of the gate. Twitter’s been around for how many years 2007 or something like that, or even before that, had they had that strategy of, we’re gonna give this portion away for free and pay for the rest of it, then it would have been from the get go, but it’s like you’ve been free for all this time. And now all of a sudden, you’re going to pay something for something different.

Marko Zonta: 

I wonder if part of it is just how they’re actually going about it. Let’s face it, in-app purchases are the norm, everybody’s doing that, yes, you get the lite version of it for free, and then you’re paying for things in app. So really, the question is did Twitter actually just go about it the wrong way? Should they offer, add on services or some other benefits to it and start charging for it in very small amounts kind of strategically, very slowly. It just seems like they went out with a bold statement. And perhaps that’s something that people are responding to, because in app purchases are the norm.

Brad Breininger: 

But I mean, there’s been a precedent for in app purchases, there’s no precedent for paying for social media. I mean, social media is probably the last bastion of free. Are you thinking that there are social media paid?

Gabi Gomes: 

LinkedIn, for example, has LinkedIn premium, right?

Brad Breininger: 

Ya, how many people pay for LinkedIn Premium? People do the free trial over and over and over again, I think

Gabi Gomes: 

I think there are those who are in the sales roles

Brad Breininger: 

Those are all those people that we block you that need to connect with others. And that is one of the tools that they use to drive business for sure. There’s a market for that mean, right, like all those people that we block on LinkedIn because they have access to our inmail? Yeah, you’re right. You’re right.

Gabi Gomes: 

So there is that, whether it’s successful, we are always so jaded, honestly, because we are in this industry. We are always so jaded, but you got to think of everybody else. But yeah, no, it does work. And it is successful for that. But again, LinkedIn is a very different platform in that it’s very business oriented, business driven. We’re talking about Twitter, where the minute you post it, it’s old news, or even Facebook, I’m pretty sure Facebook, there was chatter about that many, many years ago, about having a paid version of that somehow, and that got squashed real quick. Unfortunately, I think with either of these platforms, even Snapchat, still around Instagram, I think that if you end up making these things paid, you’ll get a mass exodus, and there’ll be another platform that will have it for free that everybody will jump onto. But one of the things that I have previously mentioned before, and I’ll say it again, these platforms are still making money, do they really need to have a paid version because ultimately, their ad revenue on these platforms is huge. So I’ll bring up the quote, remember, I mentioned the social dilemma. If you’re not paying for the product, then you are the product that quote from Daniel Huberman. They’re making money even though it is free, because we are on those platforms. And we’re paying with the amount of time that we spend on those platforms.

Brad Breininger: 

But don’t you think that the reason that they’re going down this road is because they’re worried that Apple has kind of dropped the gauntlet and said, you can maintain your privacy and not have people follow you anymore, so a lot of the feed into their advertising has been cut off by the new iOS, right because Apple has changed the game a little so maybe these platforms are looking for other ways to make money and they’re looking to the freemium model and saying, can we apply this here? And Twitter is the first out of the gate, but I doubt that they’re going to be the only ones.

Gabi Gomes: 

Jer and I have this conversation all the time. How many subscription things are we really willing to have?

Jeremy Linskill: 

Does Twitter actually have ads throughout it? I don’t, I’m looking at it now and I don’t see ads. Yeah, there are twitter ads. Really? Somehow I blocked them out, I guess.

Gabi Gomes: 

Maybe you turn that feature off.

Jeremy Linskill: 

I think the biggest problem with the Twitter one is it just reeks of desperation. I really do. Like when I look down that list of what it’s offering, I’m just like, awestruck by that people would actually pay for the features, because there’s nothing there to me, that warrants being charged. And I think that that’s what people are in an uproar over. If you’re going to make me pay, there needs to be value. And yeah, there’s no value.

Brad Breininger: 

It’s a really good point, because to your point about the ads on Twitter, they kind of create them to look like posts. But right at the very bottom, they’ll say promoted. So that indicates that this is a this is an ad but but they’ve tried to make them as organic as they can. However, I think that like you said, Gabi, once you post on Twitter, it’s old news, I think it’s really going to come down to the value proposition that all of these platforms are offering, whether it’s a game, whether it’s a social media channel, even looking into the offline world, getting people into your retail location, or getting people into your restaurant, or whatever it might be. I think that more and more, there’s high competition around people’s time and attention. And the issue is, is how do you entice them with the free model, and then charge them on the back end? And how much are people willing to pay for?

Gabi Gomes: 

I put the newspapers into this bucket, because I still think that they’re struggling with subscription on that. And when you talk about value, I think these guys actually provide a high value piece, right? But somehow we don’t value it. So Toronto Star, Globe of Mail, whatever it is, they have researchers that are researching topic, reporters, etc. Highly, I think valuable folks doing very valuable work. But yet, somehow, I don’t pay for the Toronto Star, the Globe of Mail subscription. And I worry about those because those those content creators are critical, but yet they’re struggling.

Brad Breininger: 

But don’t you think that people don’t necessarily want to read a well researched in depth piece in the Toronto Star when they can read 10 sexiest celebrities on BuzzFeed? I think this is less about just the model, but also the content itself. I mean, do people still want the same content anymore?

Marko Zonta: 

But I think that people still want content. And I think that with fake news and everything else, like I think that people are actually creating solid content. But I think that when it comes to newspapers, it’s it’s an old industry that has to rethink how they, how to go about connecting with with their audience and just doing business in general, for example, like, and I mean, I only, like I have an iPhone, so I can speak to Apple, the apple experience. They have the news app, and through that app, it’s it’s a paid service. And through that you can actually pull in local newspapers. So I would assume that Apple somehow that there is some kind of arrangement between those newspapers and Apple that they’re actually bringing all the information and they get paid somehow, right? So its not a printed newspaper that’s dropped off at my doorstep anymore, it’s just a new model from that point of view. And I mean, that’s not direct, but it doesn’t really matter. What do you have to print that newspaper, and there’s some cost involved in that, or you go through Apple and Apple takes a percentage, and you still get your revenue?

Brad Breininger: 

That’s the issue. Jer, you just said the thing, it’s a big percentage.

Jeremy Linskill: 

Apple is probably just robbing them.

Brad Breininger: 

Here’s the thing about that. If you look at the streaming services, musicians have been very clear about the fact that they can’t make money from their music anymore. And I think that it’s going to be the same in these subscription services for content through the big organizations like Apple news and things like that. The issue that the musicians are doing, or the thing that the musicians are doing is that they’re looking at other revenue streams. Take someone like Lady Gaga, so she puts out a song she doesn’t make the money from that song. She makes the money from her number of followers and the ads she can do and the mentions she can do and the influencing she can do in conjunction with the concerts that she’ll do in the future. Maybe some sort of residency in a form of some kind, maybe online concerts. I think that anyone who’s looking for the ability to make money, any brand who’s looking for the ability to make money, can’t fall back on all of the traditional channels that they’ve had in the past. I think they really need to think about how can they diversify and a term that you always use Christian in our podcasts, but this omni channel approach and I think that it’s it’s key for how people are gonna make money.

Marko Zonta: 

And you know going back to Twitter and sorry, Jeremy to cut you off. But exactly to your point, Jeremy, it’s, it’s about if you are going to charge for something where’s the value, right. And I think that that’s exactly where Twitter is falling down. It’s, they’re charging for something that just doesn’t offer anything to anybody, right. So that’s your critical point.

Gabi Gomes: 

Let’s take a stock here between us in terms of who’s got subscriptions and how many subscriptions they’ve got. I for one, have got Netflix, and I’ve got space. So Google or its Apple like storage space are the things that I subscribe to, the must need “Oh my God, my folders are going to be wiped out from my phone.” Critical. I’ll pay whatever so I can get my photos. So storage is what I’m paying for, and Netflix is what I’m paying for what uh, what else is everybody subscribing to here?

Brad Breininger: 

Oh, God, that doesn’t even scratch the surface. Yeah. I’m gonna leave now.

Gabi Gomes: 

Christian, how many do you have?

Christian Rosenthal | ZYNC: 

I don’t know. Disney plus, amazon prime to get the value of speed. And of course, you get the delivery, space to your point, yes. Spotify for music. I’ve been even tempted to get the YouTube premium because I hate the number of ads you get so far. But no

Gabi Gomes: 

So entertainment really, and storage?

Christian Rosenthal | ZYNC: 

And then of course, oh,

Gabi Gomes: 

And delivery, faster delivery. Yeah, Amazon, Amazon’s got a good thing because they’ve got entertainment and delivery. They’ve got a whole bunch of stuff bundled into one which is fantastic.

Brad Breininger: 

It’s omni channel, right? Omni channel give me more value for what I’m paying for.

Gabi Gomes: 

Yeah, Jer, where are you at?

Jeremy Linskill: 

Yeah, I’m probably have similar things to all you’re talking about. But what what is really interesting to me as, as my kids are getting older is now I’m having to multiply that by four, right? Because now we’re getting into areas where we all have different interests. And we all have different things. And so we have Netflix, we have prime, we have all that. But my kids are now, they have a Discord server, which is a big chat thing that’s online for them. Maybe there’s there’s video game subscriptions that they’re paying for as well. And so you know, it’s all that kind of stuff. So we’re seeing now that my kids are in the teenage years, we’re seeing a real division of where our interests lie. And so now we’re having it’s not just managing one set of subscriptions it’s now managing three to four subscriptions. So I think that’s a really big part of this is right. So I want to put that out there. Because it’s one thing to manage mine. I’m still paying for my teenagers. My teenagers don’t have jobs yet, so it becomes even more important and more valued, that there has to be a certain level of value for me in the subscriptions to justify the payment,

Brad Breininger: 

Get those kids some jobs to begin with. But yeah,

Jeremy Linskill: 

For sure, when they’re illegal. Yeah,

Brad Breininger: 

yeah, exactly. But here’s the other thing is that if you look at non traditional subscription, everybody and their brother is is jumping into the subscription service area, for example, I’ve ordered my groceries on voila, a couple times to get them delivered. And now they have a subscription service. So instead of paying a delivery fee, and I think Uber Eats is doing this as well. So you pay almost like a subscription fee, and you can get as many deliveries as you want in a certain period of time. I think even organizations, organizations where even the subscription model doesn’t even make sense to me. I mean, I’ll order my groceries when I need them. I’m not gonna.. anyway, but I’m sure to some people, they would say, you know what, for the way I live my life, this is actually a good thing. I think in those cases, there’s always going to be people where this model may fit. I think that a lot of these organizations are looking for these opportunities to drive revenue. And to your point earlier, Gabi, I’m not sure that the newspaper world has figured this out yet.

Gabi Gomes: 

I like where you’re going with that. Because on top of whatever you’re doing, or whatever product you’re selling, whatever service you’re selling, you’ve almost got to pivot it somehow for a subscription model. There’s something there that you can offer on an ongoing basis on a repeat basis, basically, and that’s the subscription and whether people take it or don’t take it, it really largely depends on exactly lifestyle, finances, convenience, whatever all those factors are, but you just never know. So is that kind of going to be where we’re going to go where no matter what we’ve got to come up with this subscription type model for

Brad Breininger: 

and it will fit in some places and it won’t fit in others, right? I think that that’s why we’re seeing the backlash with Twitter is that the idea of paying for Twitter just doesn’t seem to fit in most people’s idea of what they’re willing to pay for. One of the things I want to talk about is that as we kind of come out of all these lock downs, and we get more into the in person, which we’ve talked about in previous podcasts, is it going to be difficult, do live in-person organizations and brands need to figure out a way to compete? Because the reality is, if I have a prime subscription, and I can get my goods and services in like a day, am I going to be going to the mall? What’s going to happen here? Because I think that we’ve talked a lot about the online version of this, but what is what are the offline folks going to do? How are they going to compete with what’s going on in this whole online world?

Marko Zonta: 

It’s gonna be interesting to see that, but I think that a part of it is the experience of going out. And let’s say that you want to buy something in a clothing store, whatever. It’s the experience of going there, seeing it, trying it on that kind of stuff, right? One of the things that I wonder about is movies, movie theaters, how many of you rented like a new release? That goes for, let’s say, $25 on average I think. Really, in the past that’s really, what is it two tickets, not even? Yeah, and you don’t have to buy the popcorn, you don’t have to, you know, so the expense of going to the movie theater is way higher than $25. But honestly, when I actually see that movie, and I see that I have to pay $25, to sit on my couch and watch that movie at home. I’ve haven’t I haven’t rented a single one. I just think that it’s $25, it’s too much, even though I know that if I were to go to the theater, I would pay way more than that. Because of the

Brad Breininger: 

But they’re valuing they’re valuing the experience. movie as being the $25 of value. But that’s not what the value is in going to the movies, the value in going to the movies is the sticky floor, the smell of popcorn, the holding hands with the person you kind of like next to you, there’s a whole element of it that they have not valued. And and this is a really good point. Because MarKo, like you said the experience, some people want that experience, and some people don’t. To some people, th idea of never going to a movi theater again, is the greates thing they’ve ever heard and they’ll pay whatever it takes to be able to sit on their couch, pause, go to the bathroom, shut up their screaming kid or whatever, whatever the reason is, right? But for others, they’re not gonna pay $25 to sit on their couch and watch a movie.

Jeremy Linskill: 

Well, I think too, though, like a movie depreciates in value, right? You pay $25 for it if you want to see it the first week or whatever. But if you wait a month or two, you can see it for $5 right? Or free. So there are a lot of variables

Gabi Gomes: 

And if you wait a year, you can watch it under your Netflix subscription for whatever, for less than that.

Jeremy Linskill: 

Well, who knows that might be $50, by then the way Netflix is going.

Marko Zonta: 

To that point, like and movies maybe are a good example. Are we looking at two ways of delivering entertainment, or whatever it is going forward, you will still have movie theaters, and there are still some people that are going to go to the movie theater. And then the same will kind of be released online on the exact same day, but it is $25 or even more for people who want to just stay at home, but they still watch it on that same day.

Brad Breininger: 

Yeah. And that’s what they’re doing now. I mean, that’s what’s happening in the US because they’ve opened movie theaters already. And that’s exactly what’s happening. It’ll be interesting to look at the results of how people are actually engaging with that two tiered strategy. And I think that that two tiered strategy is is not just for movie theaters, I think it’s for probably most retail, I think restaurants are a little bit of an outlier for that. Because people, if you want to go out to eat, you have to go to a restaurant, you go with your friends, you sit on a patio, all that kind of stuff. But even trying on clothes. I’ve talked to some people and basically they get to know their two or three brands that they like, once they’ve tried them once or twice, they know exactly what fits and what to order. And they never want to step into a store ever again. So I think that these stores in these malls and they’re going to have to think of a way to offer a completely different experience. They can’t just be open and ready for business, they actually have to be open and looking for business. And I think that that’s going to be the pivot that a lot of inperson retailers and organizations and brands are gonna have to think about,

Gabi Gomes: 

it’s gonna come down to experiences if we’re talking about that subscription model. Okay, you’re a T shirt, company, whatever. We’re going to send you a T shirt a month. There’s your subscription, I paid 100 bucks, I’m going to get a T shirt a month. And that’s it. That’s why those subscription boxes are doing so well, etc, right? But it’s gonna come down to the experience. And I think, frankly, for me, the pandemic is kind of like, Yeah, no, I don’t need to go to the mall to get my T shirt, I will order my T shirt online at 11 o’clock at night when I’ve got two minutes and it’s going to come to my door and instead of going to the mall, I’m going to spend my time doing this instead and having a much more richer experience than that. Now for some going to the mall, may be the experience that they really liked, etc. That’s going to shift that’s going to shift big time.

Brad Breininger: 

Or maybe malls aren’t going to be store after store after store. Maybe they’re they’re going to have to rethink what the retail experience looks like. And then also in malls are going to be I don’t know, gain areas,

Gabi Gomes: 

new community center.

Brad Breininger: 

Maybe a pool, they’re gonna put in a pool at yorkdale. I mean, I don’t know what that’s going to look like

Gabi Gomes: 

West Edmonton Mall was ahead of its time, right?

Brad Breininger: 

Yeah, exactly. But I think the most important thing here is that everyone needs to understand what people are willing and not willing to pay for and get to know what their experience needs to be going forward. If you look at these in app purchase companies, Christian, you shared an example of a gaming company that’s making a billion dollars in in-app purchases, they’ve got the handle on how they’re going to get their revenue, whereas the newspaper industry, they still don’t have a handle. It’s been a while already, but they still haven’t found that secret sauce that is going to allow them to move forward. So I think that for any brand that is looking to move into the the elements of this new world, they’re gonna have to understand what people are willing to pay for what they’re not willing to pay for, what experience they provide, whether they’re online or offline, and ultimately be able to pivot as they go and understand that they need to try new things. They need to think about new ideas, they need to think about new things that could drive some of the revenue that they’re going to get because at the end of the day, brands can’t exist if their customers are not willing to pay in some form or fashion. So that’s this week’s version of everything is brand. Join us next week for a new topic and remember, everything is brand.

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