Can Major Internet Sites Create Successful Paid Services?

Most of the major online sites we use today are free. Sites like YouTube, Google Maps, Facebook, Linked In, Reddit, etc. use advertising and premium subscriptions to make money, but ads are at the heart of their broader business model.

However, posting ads indiscriminately and not truly targeted at people’s interest is losing favor with millions of consumers. I have had ads in my feeds for bra’s, and other items clearly targeted to women. I have also had ads in my feeds for boats, private jet services, and exotic foods that clearly are not in my personal wheelhouse of interests.

Over the years, I have asked myself that if I had a chance to subscribe to sites, I use daily but do not necessarily want untargeted ads, what would I be willing to pay for them? When I did this personal exercise, I realized that the answer to that question was based on their value to me. For example, I use Facebook and Twitter multiple times during my day so they would have the highest value, and I would pay a larger subscription fee for them. On the other hand, I perhaps use Pinterest once a week and Yelp at best, every two weeks, so their value to me would be lower, thus I would want to pay a much smaller fee to use them without ads.

Thanks to a new survey by the McGuffin Creative Group, an advertising agency based in Chicago that works with consumer (B2B) companies, they recently did a survey to look at what people would be willing to pay for a favorite service.

This first chart lays out what their respondents said they would pay for a variety of highly used services:

“In a recent study, we set out to measure the regular value users placed on 16 of the most widely-used apps, asking respondents what they’d pay if a subscription fee was required. They had the option to say they would pay nothing and discontinue use, without access to a free alternative.”

McGuffin also took a hypothetical crack at what they would earn if these sites offered subscriptions as an option to their site:

“Once we gathered data showing what consumers would pay for various apps, we were eager to compare each company’s current advertising revenue against what they would hypothetically earn if they charged the percentage of users willing to pay the average amount respondents established per app.

Per this analysis, all nine companies for which we projected revenue would stand to earn more in a hypothetical paid future. That includes Facebook, which had the highest percentage of users report they wouldn’t pay anything for the app.

There are countless factors that influence consumer behavior over time, even when a business model is static, let alone when it undergoes a change of this magnitude. Our goal was not to provide a roadmap to greater technology-industry profitability, but to instead show that our digital world has upended the old idea that there’s no value in receiving something for nothing.”

Look at this potential earnings chart closely though. Reddit, whose ad revenues today are $76.9 million, would go to $8.3 billion if 77% of their customers would pay a subscription fee of $2.74 a month to get the site without ads. You Tube’s revenue would grow by 1.928% from $3.4 billion to $68.9 Billion. And LinkedIn would go from a $2 billion company to an $8.1 billion one if 79% of their customers paid $2.84 a month.

While I realize this chart on projected earnings is purely hypothetical, the survey of what people would be willing to pay for any of these sites listed in the first survey is an eye-opener.

These charts are interesting in that it begs the bigger question about the potential for an expanded business model for these sites. Free sites offered to the mass consumer will always win. But the first chart, which shows that there is a real willingness to pay a low subscription fee for ad-free content, could and should be considered as part of these company’s business plans for growth.

This particular survey from the McGuffin Creative Group needs some serious scrutiny from the companies mentioned in their survey, as well as others who today only make money just by ad revenue. Even if the first survey showed only perhaps 40% of their users, instead of the over 70% who would be willing to pay a small fee for access to the site, it suggests that these companies are leaving money on the table now that could impact their bottom line.

As McGuffin’s survey analysis points out, the idea that a free site does deliver value for nothing is no longer valid.

It could also be said that a more informed and highly interactive user base has come to realize the importance of these sites to their digital lifestyle. Consequently, people seem to be willing to pay small amounts for these services and it would be worth testing this out to see if they can adjust their business models in the next few years to reflect these changing views of their customers.

Apple’s Bullish Position on Augmented Reality

During last week’s earnings call, Tim Cook mentioned a couple of times how excited he is about products in the pipeline. While he did not reference anything specific, I am convinced that much of his excitement is around what they are doing in AR.

Of course they are doing exciting things with Mac’s, iPad’s, iPhones, Apple Watch, Apple TV and Services, etc. However, AR is a new frontier for Apple that at least on paper, promises great return for them in the future.

One of the best pieces I have seen written on the future impact of AR was done recently by Wired entitled “Mirrorworld.”

The article lays out quite well the the evolution of the three digital platforms that has and will drive our future:

“The first big technology platform was the web, which digitized information, subjecting knowledge to the power of algorithms; it came to be dominated by Google. The second great platform was social media, running primarily on mobile phones. It digitized people and subjected human behavior and relationships to the power of algorithms, and it is ruled by Facebook and WeChat.

We are now at the dawn of the third platform, which will digitize the rest of the world. On this platform, all things and places will be machine-­readable, subject to the power of algorithms. Whoever dominates this grand third platform will become among the wealthiest and most powerful people and companies in history, just as those who now dominate the first two platforms have. Also, like its predecessors, this new platform will unleash the prosperity of thousands more companies in its ecosystem, and a million new ideas—and problems—that weren’t possible before machines could read the world.

The article goes on to lay out how AR will be a key part of this third platform that digitizes the rest of the world and explains well why AR is important and will drive new innovation in the coming decade.

But this is the money statement in the article:

“Whoever dominates this grand third platform will become among the wealthiest and most powerful people and companies in history, just as those who now dominate the first two platforms have.”

It’s no wonder that Tim Cook and Apple officials, who know their AR strategy and, more importantly, know how they will implement AR into their eco system of products and services, are bullish these days.

After the WWDC keynote that Cook introduced AR Kit and spoke about their deep interest in AR, I had some time with Tim Cook at a private reception that evening. He had come early to the event, as did I, and was very open to spending some time with me to discuss AR. In fact, he was very animated when he shared his thoughts with me and even said that that for Apple “AR may be one of Apple’s biggest product contributions and successes in the future.”

Given their success with the iPhone, that was a pretty heady statement. But I could tell that he was sincere in his view and not being boastful or in Apple promo mode, but rather stating how important he saw AR to Apple’s future.

Many people have already experienced AR in some form. If you ever played Pokemon Go, you know how digital content can be superimposed on real life objects and spaces. The iPhone has many apps already that integrate AR into applications, such as the iKea app that lets you place virtual furniture into any rome in a house. Bit the apps are teasers.

Apple gave us another glimpse of AR being used in Apple maps at WWDC that will appear later this year. Instead of a flat 2D map we have today on IOS and Mac’s, these new maps are more 3D oriented with virtual data being superimposed on a person’s surroundings. This particular AR feature on their maps is best on an iPhone and iPad or their eventual AR glasses, and when walking instead of driving. But the short demo they showed was impressive and when AR is applied to maps, it will be a game changer in terms of personal navigation.

What is intriguing about Apple’s role in AR, is that they are most likely the company that will bring AR to the masses. There is a lot of work going on in AR from many companies but almost all are making AR devices in siloed efforts. While Google is the other company that could challenge Apple head on, the fragmentation of Android will make it harder for them to gain the kind of quick buy in where a IOS and its earlier iterations in most cases will allow for backward compatibility from any AR app or related solutions Apple brings to market. I do suspect that a special version of an iPhone that will be optimized for some type of AR glasses will be designed to maximize the experience. But, I also think that Apple will make AR glasses work with existing iPhones too, albeit without some extra AR capabilities that would come with an iPhone designed around glasses as an extension of the AR experience.

An iPhone will be the delivery system for most AR apps from Apple, but Apple clearly understands that some type of goggle or headset also needs to be part of their AR solution. They have many patents in the works on AR but the most recent patent applied for shows a mixed reality headset that tracks your whole face.

While it is impossible to completely decipher what Tim Cook and team are talking about when they say that they are excited about what is in Apple’s pipeline, I am convinced that the greatest excitement is around what they are doing in AR and how that will impact Apple’s longer term growth.

If Wired’s comment that the people or company who dominate AR “will become among the wealthiest and most powerful people and companies in history,” if accurate, Apple’s fortunes will be rising, not falling.

Why Robot Umpires are Inevitable in Baseball’s Future

I have been a baseball fan since I was eight years old. Being born in the San Francisco Bay Area, the SF Giants were my team growing up, and I became a fan during the era of Willie Mays, Willie McCovey, and Orlando Cepeda.

I also got a chance to play baseball in Jr High and High school and was a catcher with a pretty good hitting average. I was too thin and short then to even consider playing baseball beyond high school and instead became an ardent baseball fan as well as a student of the game instead.

As a fan, I have watched games and viewed plays hundreds of times that I thought the umpire got wrong. For most of my life, we did not have instant replays where an umpire could review a play if one of the managers challenged their decision. But this process takes time and slows down the game.

As a technologist, I have watched baseball games more closely with an eye on how technology could be used to call balls and strikes, which is one of the most subjective actions done by an umpire during a game. It appears that each umpire has their own version of a strike zone, and as they say, “call it as they see it.” But with TV broadcasts superimposing a true strike zone graphic based on a batter’s stance, a TV viewer can actually see if the pitch is a strike or a ball.

While umpires traditionally have an accuracy rate of between 90-95% with their calls, the calls they do miss could clearly impact everything from a batter’s statistics to the final outcome of the game. Instant replay does help with field calls, but cannot be used today to change a ball or strike decision.

Knowing technology as I do, and the power and accuracy of things like sensors, radar, laser guidance systems, and imaging, it has been clear to me for some time that the technology is already here that could enable robot umpires to assist real umpires in calling truly accurate balls and strikes.

Earlier this month, the Independent Atlantic League became the first American professional baseball league to let a computer call balls and strikes at their All-Star game.

ESPN was there and wrote about how the plate umpire used technology to help him call balls and strikes:

“Plate umpire Brian deBrauwere wore an earpiece connected to an iPhone in his pocket and relayed the call upon receiving it from a TrackMan computer system that uses Doppler radar.

He crouched in his normal position behind the catcher and signaled balls and strikes.

“Until we can trust this system 100 percent, I still have to go back there with the intention of getting a pitch correct, because if the system fails, it doesn’t pick a pitch up, or if it registers a pitch that’s a foot-and-a-half off the plate as a strike, I have to be prepared to correct that,” deBrauwere said before the game.

It didn’t appear that deBrauwere had any delay receiving the calls at first, but players noticed a big difference.
“One time I already had caught the ball back from the catcher, and he signaled strike,” said pitcher Daryl Thompson, who didn’t realize the technology was being used until he disagreed with the call.

Infielder L.J. Mazzilli said a few times that hitters who struck out lingered an extra second or so in the batter’s box waiting on a called third strike.

“The future is crazy, but it’s cool to see the direction of baseball,” Mazzilli said.”

Up to now, Major League Baseball and especially the umpires have been opposed to using technology to call balls and strikes. From the Umpires view, they see this as eventually taking away the need for them altogether. But the way technology was used in The Atlantic League All-Star game fully engaged the umpire and really just gave him a new tool besides his eyes and subjective reasoning to make sure his calls were more accurate.

I believe there are two solid reasons why we will eventually have robot umpires call balls and strikes to make the game more accurate in terms of calling pitches correctly.

The first is one that technology can help keep baseball interesting and relevant to a younger generation who, at the moment, are not embracing baseball as wholeheartedly as their parents have in the past. And attendance at games has been down for the last three years.

“Of the league’s 30 teams, 18 are experiencing an attendance drop. And this is after a 2018 season in which attendance was down more than 3 million fans, an average of 1,237 per game.”

Millennials and Gen Zer’s are technology savvy and have many ways to entertain themselves these days. Their interests are spread thin, and baseball is just one of the things they may have an interest in. And given the tech-savviness of this younger generation, they most likely see how technology could enhance a game and make its outcome more accurate, which could increase their interest in baseball games and draw them to viewing them on TV or the Internet or going to a ballpark itself.

But the most important reason that I believe robot umpires are inevitable is legalized sports gambling. I personally am not a gambler but have watched this “industry” with great interest over the last three decades. I have become even more interested in sports gambling now that it has started to infiltrate eSports.

The Supreme Court recently ruled that a federal ban on sports wagering is unconstitutional.

Here is the conclusion of the majority opinion:

The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decided whether it is consistent with the Constitution. PASPA is not. PASPA “regulate[s] state governments’ regulation” of their citizens. …. The Constitution gives Congress no such power. The judgment of the Third Circuit is reversed.

With this ruling, the courts have been given the choice of allowing sports gambling up to the states themselves. Here is a link to the States that already allow sports gambling and the current bills in the works from the States that do not allow sports betting yet, but proposed laws are working its way through their legislators.

Right after the Supreme Court ruling was announced, MLB released this statement.

Major League Baseball:

“Today’s decision by the Supreme Court will have profound effects on Major League Baseball. As each state considers whether to allow sports betting, we will continue to seek the proper protections for our sport, in partnership with other professional sports. Our most important priority is protecting the integrity of our games. We will continue to support legislation that promotes air-tight coordination and partnerships between the State, the casino operators, and the governing bodies in sports toward that goal.”

Once sports gambling becomes legal throughout most of the US, the pressure will be on MLB executives to integrate technology to call balls and strikes in both leagues. One thing that gamblers hate is subjective opinions that impact the potential outcome of a game. They want every call to be as accurate as possible so that their bets can be made based on quality data.

Of course, old-timers and baseball traditionalists will fight bringing robot umpires into the game. I have talked to quite a few of these folks, and their attitude is that without technology, the game is played as it has for over 100 years and robot umpires to them would be blasphemy.

However, Major League Baseball is not only a game but also a $10 billion industry and has to be willing to change with the times. They know that without some serious changes and adjustments, they could lose the next generation of younger fans. If that happens, their growth in the future will decline.

Sports gambling will also put pressure on MLB leadership as it expands throughout the US and professional and weekend sports gamblers want more ways to make the game more accurate to assist in their own analysis on their betting decisions.

I don’t know how long it will be before we get robot umpires calling balls and strikes, but the technology is here to do it today. Robot umpires are inevitable, and it will only be a matter of time before it happens.