Has a tipping point arrived where we start paying for ads?

Summary:Wednesday, during my interview with LinkedIn's Konstantin Guericke, we talked a bit about how the company is now profitable despite the fact that most of the 5.7 million+ users are taking advantage of the free service rather than the paid parts.

Wednesday, during my interview with LinkedIn's Konstantin Guericke, we talked a bit about how the company is now profitable despite the fact that most of the 5.7 million+ users are taking advantage of the free service rather than the paid parts.  At 43:03 into that discussion (which I recorded and you can download or stream using the player that's built into the blog entry), I noted that LinkedIn's Web pages are also filled with Google-driven advertising and I asked the next natural question: Is double dipping no longer taboo? do those ads go away for paid members?  The answer was no, but Guericke admitted that eliminating ads for paid users of LinkedIn is something the company might do in the future.  In the same breath, he likened the practice, which I called "double dipping" to what happens when you buy a magazine on the newsstand [43:27].

The next natural question I asked was whether or not he had any idea how much the Google-driven ads were generating for LinkedIn (cloaked way of asking, do you need Google Ads to be profitable?).  LinkedIn is a privately held company that, like other privately held tech startups, likes to talk about the fact that they're profitable.  But, such companies also don't share the gory details that show just how profitable and what's contributing to that profitability.  Guericke said that they get about 30 cents per click and that the revenue stream is a decent and growing one [43:53] but also said that "it's not that we need that revenue." [43:33]

Why bring this up now? In response to the interview, I was pinged by CollectiveX's public relations counsel who pointed me to Mike Arrington's review (replete with nice screen shots) of CollectiveX which launched yesterday.  Wrote Arrington:

The focus of CollectiveX is on the group, not the individual. Members of the group can interact via file sharing, messaging, calendaring and exchange of leads/contacts. It frankly answers to question that many social networks pose: Ok, we’re here, now what do we do?......As I said before, CollectiveX is what LinkedIn should have been.

While Arrington, one of my favorite bloggers, has a good eye when it comes to reviewing new sites and services, even more interesting were some of the comments on his blog. One of those came from Mike Rundle who asked:

I’m a bit taken off by the fact that the $19/month plan is still “ad-supported”. What’s the point of paying anything if there will still be ads on it? Is $19/mo for a simple plan not enough money, are square banner ads still necessary?

In the comments area on Arrington's blog, CollectiveX founder Clarence Wooten responded:

Mike… to address your issue with the ad supported $19 per month plan… here is the rationale… first off… the plan supports unlimited members (for personal and informal groups)… additionally the plan increases file storage to 500 MB and supports email blast functionality....Can you imagine a group of 10,000 recieving free email blast functionality? That would be very taxing on our servers. I think its a great deal at $19/month....Otherwise.. it makes more sense to upgrade to one of our full-featured Professional Plans.

Wooten's reply seems to suggest that there's a new line that must be crossed in terms of what one must pay before a technology, service, or site is ad-free.  That line used to be $0.00.  In other words, the minute you became a paying customer, the ads went away.  The email client Eudora comes to mind.   But for CollectiveX, it's apparently $36 per month (the least expensive of CollectiveX's professional plans that triggers ad de-activation).  With LinkedIn, there is no line.  You get ads no matter what.

Have we reached that tipping point where double dipping is no longer taboo?

Topics: Google

About

David Berlind was fomerly the executive editor of ZDNet. David holds a BBA in Computer Information Systems. Prior to becoming a tech journalist in 1991, David was an IT manager.

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