Spend enough time online, and you’ll start noticing the website life cycle. A site grows and becomes an essential part of everyday browsing, only to run into problems and spiral into oblivion. Digg, Xanga, Delicious, Friendster, our once-ubiquitous and loathed rival Broked — countless sites have flared up only to fade away. And there’s nothing stopping any of today’s juggernauts from doing the same (except Cracked, which is an eternal flame).
The good news is that we’ve now seen this happen enough times to understand why big sites eventually fall. The bad news? The Internet’s still fucked, probably. And that’s because …
#6. It Begins By Offering An Amazing Service For Way Below The True Cost
Facebook launched in 2004, but it was only in 2009 that it became “free cash flow positive,” which is business for “our budget no longer makes us look like we’re headquartered in a neighborhood where Sergei will break our kneecaps if we don’t pay protection money.” Facebook perfected the idea of staying in touch with old friends for free, but “free” doesn’t pay for your servers. That’s why Facebook has ads on the side, and not adorable pictures of kittens.
It’s also why you now know which of your friends “like” every fucking product they’ve ever consumed.
But that’s not enough. Take Uber, which is losing millions each year despite being valued at $50 billion. They even introduced a carpool service that’s only costing them more money, probably because wanted to snatch the name “UberPool” before Marvel used it for a Nietzsche / Ryan Reynolds mashup.
It’s the same all over. We’ve told you before of how Spotify and Shazam are deeper in the red than the Egyptian Navy. Airbnb, whose business model is “save money on hotels by putting up with the smell of cat piss,” is losing $150 million a year, and isn’t expected to turn a profit until 2020. YouTube brought in a staggering four billion dollars in 2014, which was good enough to, uh, break even. Even Reddit, which it’s easy to forget is even a business, can’t get in the black by monetizing its 70 million users. Hell, if we had 70 million users, we’d ask each one for 50 cents and then buy a spaceship.
The janitor took our old one when we fired him.
As countless abandoned Xanga and Myspace pages taught us, a good idea means nothing if you can’t dominate the market. Someone else will take your idea, improve it, and leave you in the dust. You have to monopolize the market at all costs, and then you can worry about the trivial little detail of making money.
That tedious final step doesn’t always come to fruition. For every Facebook that manages to turn its economic fortunes around, there’s a Pets.com collapsing under the strain of its own “success.” And dodging that bullet produces its own host of problems …
#5. To Lower Costs, Everything Is Crowdsourced For Cheap …
You may have noticed that more and more sites rely on users to provide content. Reddit is nothing but a gigantic series of message boards where people share fun links and racist tirades. YouTube runs ads in front of user-created videos, whether it’s Justin Bieber’s new single or “Let’s Play Black Ops 3 with VaginaBandit_1776.” Airbnb relies on users providing their own homes, Uber relies on drivers providing their own cars, and Facebook relies on people providing their own friends.
The problem with crowdsourcing, though, is that everyone in the crowd wants more money than there usually is to go around. That’s because the Internet is powered by the dream of one day turning a profit instead of the reality of doing so — a business model that’s inexplicably holding steady despite killing our all-Theremin prog rock band.
See, there’s a reason everyone’s an Uber driver now, and it’s not that it’s fun to meet new people and then clean their vomit out of your backseat. Uber is a nice service, but it’s also the beneficiary of a terrible economy — 69 percent of its drivers have another job, and a lot of its customers can’t afford a car. Same story with Airbnb: People aren’t letting strangers into their homes out of the goodness of their hearts. They’re doing it because if they don’t let tourists poop in their toilets, they’re going to get their water cut off entirely.
This explains why the logo is an anus.
Same deal with Amazon self-publishers, most of whom make next to nothing. And for every random guy who makes millions screaming at video games on YouTube, countless more make a couple hundred or thousand, 45 percent of which is then taken by YouTube (and that’s without counting their own production costs). As YouTube has grown more popular, the cost advertisers are willing to pay has gone down, because there are more advertising options — if one fashion vlogger doesn’t like your price, there’s a nearly identical one who will.
“Sorry, GrandmaReactsToPorn, we’re going with SeniorXXXclamations.”
It’s the 21st-century equivalent of the gold rush. Everyone wanted to strike it rich, but only a few did, while the rest only wasted their time and money. The only people who truly took advantage were the ones selling the equipment. Surely, a system like that could never backfire in this day and age.
#4. … Which Causes A Shitload Of Abuse
If content creators are getting screwed on the bottom line, they’re going to search for ways to screw the companies right back. Take Netflix, whose content creators are studios like Warner Bros. and Sony. Netflix pays licensing costs to access their shows, and the constant contract negotiations and shifting ownership rights are why universally beloved movies like Gladiator, Rocky, and Lara Croft: Tomb Raider routinely vanish from the catalog.
And yet this one has been there since the beginning of time.
But now it’s getting harder for Netflix to keep content, because they’re not the only game in town anymore. There’s Amazon Video, that YouTube service named after a porn site, Crackle, Hulu, and the three other streaming services with goofy names that launched since we began this sentence. There are other bidders for the complete run of Flavor Of Love now, which is why Netflix’s licensing costs keep going up while revenue tops off. They’re simply going to run out of potential subscribers — everyone who wants Netflix will have it, and it will take a couple of decades for Netflix and chill sessions to produce the next generation of fans.
But hey, that’s the way the market works, right? Unfortunately, this “be cheap, get screwed” logic manifests in more sinister ways in other online services. The advantage of Airbnb, for instance, is also its disadvantage. It’s a hotel without the cost of a hotel, but also without any safety regulations. From owners pushing out less profitable lease-signing tenants to houses flat-out killing people with unsafe amenities, there’s very much a “take the money and run” vibe. Airbnb does their best to filter out scams, but it’s not like they can go to everyone’s house and check their smoke detectors.
Uber, on the other hand, apparently runs weaker background checks than your childhood fort. Murderers, rapists, burglars … they’ve all gotten through Uber’s screening process. The recent spree shooting in Michigan? It started as a sadly typical “Uber driver from hell” story.
Then there’s Reddit, which has been involved in more scandals than a soap opera. Whether it’s mods taking bribes from spammers or banning websites they don’t like from being linked, it turns out that, shockingly, completely unfiltered democracy has downsides. Take the charming saga of r/rape, which started as a subreddit for rape fetish porn before being turned into a support group for sexual assault survivors … but it still gets lewd visits from people interested in the original function. Appropriateness aside, that kind of drama scares advertisers off faster than telling them you’re trying to form a communist utopia. Who wants to advertise somewhere that can be flooded with slurs overnight?
Oh, and remember Napster? We barely do, and we just said the name, but their never-ending parade of legal troubles were a warning to the future. Because …
#3. Eventually, Everything Needs To Be Regulated
Napster was bankrupted after a long legal battle, because letting people steal mislabeled Metallica MP3s isn’t a stable business model. The Napster name was then slapped on a legitimate music store (which was eventually acquired by Rhapsody) which became the universally beloved service we all use today.
Napster is the official music player of the Nintendo Wii U, which is unbearably sad in all directions.
From sketchy but successful to legitimate but forgotten — it’s a trend that’s easy to spot. Remember Buzz, Google’s failed social network? No, not Google Plus; they refuse to call that a failure. Or Google Wave, which was a failed “collaboration tool.” Or Friend Connect, whi- OK, look, so Buzz was a social network that failed partially because of privacy concerns. Buzz searched your email and automatically added your contacts to your network, because obviously you want your mom, your boss, and your dominatrix to all have access to the exact same information. Google tried to address the flaws, but it didn’t matter. It was like closing the barn doors after the horses had fled and been devoured by Hatrork, the Horse-Eating God.
Reddit’s tried to clean up too, because advertisers aren’t super keen on sites that openly allow more hate speech than the average dictatorship. Several subreddits were banned in 2015, most notably Fat People Hate, which allowed people who felt deeply awful about something in their own lives to take it out on pictures of random overweight people. The banning came as a shock to users who saw Reddit as a sacred bastion of free speech on the Internet, so naturally they proceeded to shit all over the website like little babies.
“Make money” and “let people post whatever stupid bullshit they want because freedom” aren’t as compatible as initially thought.
Airbnb and Uber have had restrictions forced on them as well. Seattle Uber drivers successfully formed a union, which is the latest defeat for a company that could face fewer legal problems if they got out of the ridesharing business and started robbing banks. Drivers want to be treated like employees, while the company wants to treat them like contractors (read: people whom they don’t have to pay if something bad happens). And Airbnb is fighting various legal battles to avoid regulation, because if they’re held to the same standards as hotels (read: no cockroaches in the bathroom, no landlords forcing tenants out and creating illegal sham hotels), then their costs will skyrocket. And on that note …
#2. Things Start To Cost A Little More
Reddit is currently looking for ways to increase advertising and product development even as they host a subreddit dedicated to calling out advertising on Reddit because “The reddit that once existed is dead” and it’s now “censorship powered and marketing driven.” Meanwhile, Netflix raised its monthly fee by a buck in 2014, and did it again in 2015. Why? Because if you don’t make more money, you end up like Yahoo Screen, which failed to live up to Yahoo’s colossal hype due to a little problem known as “losing literally all of the money in a mere four years.”
“Yahoo Screen: Google it. We’ve got some pretty good shows.”
They couldn’t generate enough income from ad revenue, but they didn’t want to start charging viewers. So it died. That’s the downside of our first point on how amazing services are offered for far below their true cost — if they can’t dominate the market, they will go under. That’s also why Netflix’s been creating original content like House Of Cards, Bojack Horseman, and Wait, Our Focus Groups Want A Full House Sequel? Seriously? Well, All Right. Those licensing fees aren’t going to stop creeping up.
But what do you do if you’re a service, like Uber or Airbnb? If they raise prices, they lose customers, because their entire business is being the cheap alternative. Making Uber rides just a couple dollars more expensive would drive consumers to a competitor like Lyft or Ryckshaw! or Weeeeeeelbarr0w. And what if your service is free? A Facebook subscription fee would be the one thing that would make Google Plus popular, but users would rebel if there was much more advertising. Reddit faces the same problem. It’s an unsustainable model. So …
#1. Since They Can’t Raise Prices, The Users Turn Into The Product
We’d all rebel at a Facebook subscription fee, and possibly then start snail-mailing pictures of our cats to each other. But what happens if you can’t charge your customers for your product? You have to turn the customers into the product.
This is actually someone’s hand which they stole.
This is why Facebook’s stance on privacy has evolved from “You’re in total control of your information” to “You’re in total control of your information, if you can figure out our arcane controls” to “Fuck you, it’s our information now.” Sure, you may not like Facebook profiting from that time you got drunk and confessed your crush on Princess Celestia, but what are you going to do about it? Sign up for Ello? Hahahaha.
Uber shares your information, too. If you connect your Uber account to a Starwood Preferred Guest account, you’ll get bonus points in exchange for letting Starwood know everything about your driving habits. Forbes gave an example of how they profit from this — if Uber routinely picks you up from a city’s airport, you can bet you’re going to start seeing lots of ads for Starwood hotels in that city.
“Currently at ‘THAT REALLY NICE TOILET 10 BLOCKS FROM THE OFFICE’? There are (3) hotels there.”
Then there’s Google, because having a slogan of “Don’t Be Evil” doesn’t stand up in the face of “Oh, We Need to Make Money.” Gmail scans your email for keywords and targets appropriate ads at you. So that one time you ordered a horse dildo as a “joke” will haunt you forever. That’s the price you pay for a free service. Gmail is extraordinarily useful, but they aren’t offering it to be good citizens. Ask the privacy lawsuits they’ve faced as their terms of service grow more and more inscrutable. Hey, remember when Google gave a bunch of info to the NSA and we all stopped using their services in disgust? No?
Now go look at Reddit’s new sister site Upvoted, which is essentially “Stuff posted on Reddit presented in magazine format so that we can generate ad money.” That’s just a different way of profiting from their users’ information. Because that’s what every site has to do in the end: convince their users to give them money, profit from their users, or die.
Except for Cracked, of course. We fully plan to be buried alive with you instead.
For more apocalyptic visions of the Internet, check out 5 Reasons The Internet Could Die At Any Moment and 4 Unhealthy Mentalities The Internet Turned Into Movements.
Read more: www.cracked.com