LiveJournal Is Forced to Bring Basic Accounts Back
07/17/2008, 1 month 3 weeks ago
Looks like the users still have the power to influence decisions of service providers in the web 2.0 era. I have just seen the news (on a Russian-language blog since LiveJournal is a platform mostly popular among Russian users) that LiveJournal management (the Russian company Sup) made a decision to give the users basic accounts back.
As a short summary, until March there were three levels of accounts on LiveJournal: basic (no cost, no ads, minimal features), plus (no cost, ad-supported, medium features), paid (no ads, costs involved, all the features). It seemed to be reasonable for some time for the company as they viewed the users that paid zero, watched no ads but still generated content as a necessary component of the system. I think by now everyone should have grown accustomed to freemium model and understand the necessity to watch some ads if you don't want to pay for the service directly. But the problem with Russian users is that we strongly hate all kinds of ads (I am not but I am really an exception, unfortunately). This is one of the reasons that we have only a handful of healthy profitable web companies in Russia - and those are the companies that have reached mainstream users that simply have no idea that ads can actually be blocked.
It is obvious that the basic users generated absolutely zero income for LiveJournal but still cost it money for hosting (not to mention staff salaries, office costs, etc.). And with the huge number of such users that were comfortable with only a minimum feature set but very uncomfortable about ads it has evidently become too heavy of a burden for the LiveJournal owners. And back in March they have made a decision that no new user could choose to have a basic account and no existing user could switch to a basic account any more. This was not a welcome decision - in fact, it was encountered with users' revolt (passionately described by Veronica Khokhlova at the Global Voices Online). The decision even resulted in a one-day content strike by a number of users (some of them very popular) when they published no posts and submitted no comments.
I myself can not agree with this type of reaction as I know that running a company (especially a huge one) involves costs and these costs should be covered somehow - by fees charged or by ads watched. But the Russian users think different: they believe that Livejournal (and Sup) is nothing without them, that it only exists because of their efforts and because of them taking the time to create the content for the platform. Watching the companies fail due to their inability to make any money, I have come to believe that there was nothing wrong with the decision from the business point of view but it seems that sometimes users' revolt can be too powerful to resist. So contrary to any business logic, the company has made a decision to return the basic accounts some time in August. But it looks like there will still be some changes to the previous structure anyway - the company will work closely with select users to find a compromise solution to make sure that the company still can make money and the users will be happy at the same time. Right now the users are not exactly happy about this new decision anyway as what they actually wanted to have was status quo (before the March decision) instead of some consultations intended to find a compromise. But I still feel it is a very generous move for Sup proving that they value their users very much - maybe too much for the users that don't want to realize that they use a service that needs money to survive and grow - and continue to make them happy.
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Call me dumb, but how did LJ manage to get their revenues from subscriptions before?
Alex, actually I am not really an expert in LJ revenues as I have absolutely no figures at all. And my general impression is that they make more money on ads than on subscriptions but I can’t be sure. And canceling basic accounts is another proof of this assumption - they need users that watch ads. And if they still have users that generate no revenue for the company at all - neither with subscriptions, nor with ads, they will eventually find themselves in a constantly deteriorating financial situation.
Keep in mind that LiveJournal was not always owned by Sup. At it's genesis it was owned by an unknown computer whiz with business sense named Brad Fitzpatrick. He didn't use advertising AT ALL for the first few years of LJ's life. In spite of that it grew to proportions that most businesses only dream of. Word of mouth drove the growth and ultimately the sales. Then one day Brad sold the company to SixApart, who owns Vox among other things. SixApart then sold to Sup. SixApart is the one who started the ads as I recall but their idea behind the advertising was to limit them only to the users with Plus Accounts. Paid account members would never see those ads. But before SixApart there was never any advertising.
The reasoning behind the Basic Accounts - according to one advisory board member, see her argument here: http://danahboyd.livejournal.com/1396.html - is this: the people with Basic Accounts are reading the content produced by the people with paid accounts. The Basic Account holders are then, basically, what drive the paying account holders. That is the essence of LiveJournal. LiveJournal is not MySpace - never has been, and if the irate users who staged a revolt have anything to say about it, it never will be! Me personally, I'm a permanent account holder. I produce a lot of content, not as much as some, but a lot. The ones reading my journal have Basic Accounts. It was a good business decision to bring Basic Accounts back. The paying account holders ARE the advertising! That's what made LiveJournal grow to the proportions that it did in the early years.
Advertising works great on a site like MySpace where advertising-minded people gravitate. LiveJournal has traditionally been a place for thinkers, idea-driven people - not revenue-driven people.
To read Brad's take on the killing of Basic Accounts a few months ago, here it is: http://brad.livejournal.com/2368071.html
Sarah, I know the history of LJ acquisitions, obviously (in Russia LiveJournal is a very special service everyone truly cares about). And I am aware that it was a very peculiar accounts structure that many users found very attractive - and this is also why Brad Fitzpatrick was so very much against the decision of canceling the basic accounts. But I still think that in some cases business owner should try to educate their users instead of following their demands. Internet has grown a huge business instead of some commune it used to be in its early days - and running a web service as huge as LiveJournal is costs a lot so users should finally realize that if they want to use the service, they should also pay for it in some way at least. And I really don’t understand the users that fail to realize that they are not the service itself, they only participate in the service, they use what the owners develop and pay for. I think LJ users should finally realize just that - and figure out that if they enjoy LiveJournal as much as they say, they should also pay for it.