Better Than Free: The New Business Model for Apps (and possibly everything else)
Smartphones and tokens are enabling methods of human interaction that are just starting to be explored, and the societal effects of these phenomenon are potentially far reaching. This article will focus on tokenized ecosystems as a new avenue for mobile application developers to generate an income in addition to creating novel user experiences.
Before diving into what’s arising, a quick review of the current state. At the time of publication, two categories of mobile interaction reign.
These, of course, are free and paid.
In a free ecosystem, the user’s attention is either traded for advertisement revenue or the user’s data becomes the product. This business model powers many of our most popular social networks.
Paid ecosystems create an immediate barrier to entry or purposely gate a full experience behind microtransactions. Many of the most popular mobile games have adopted this model.
There’s a third option that’s in the midst of emerging, Better Than Free. The general idea is that everything on the internet is essentially copied ad infinitum and becomes valueless. Real value comes from what can be traded but not copied.
Digital tokens are designed to be scarce; they are not copied when traded. Using the lens of mobile apps, ecosystems are Better Than Free when they reward users for their involvement and enable them to trade that reward for a benefit.
For example, let’s imagine a hypothetical mobile attention lottery. This ecosystem rewards winners with the crowd’s attention opposed to a sum of currency (a mobile / video version of the Listserve). Here’s how it can work:
1. Multiple users commit tokens to enter a lotto.
2. One user wins the lotto which provides them with the ability to upload a video (“winning video”) that would be showcased in the app.
3. Other users who watch this winning video, within a certain time period, will receive some tokens. These users can use their tokens to tip winners or enter a lottery. If they choose to enter a lottery, the more tokens they contribute, the higher their chances of winning.
An ecosystem like this has a couple of unique attributes that Better Than Free apps should strive to incorporate:
- Tokens let the user secure a benefit
In the example, tokens give users a chance to be in the spotlight.
- An incentivized action of one user provides benefit to another user. This creates a viral loop and network effect.
From the example, a user who views a video receives tokens for giving attention to the uploader.
There’s one more major benefit to Better Than Free tokenized ecosystems: the tokens are not bound to the application! This opens up the a new way for developers (and possibly power users) to generate income.
Provided that a token is useful and valuable within an application, a market will emerge via third party exchanges.
Ecosystem creators (aka app developers) don’t need to do an Initial Coin Offering (ICO) to get started. Instead, the initial focus can be on creating an environment where their tokens can be earned and spent for some benefit.
It’s worth noting that creating a Better Than Free ecosystem is not a shortcut to success. Creating interaction within a new ecosystem faces the challenge that all consumer products and services do. At any given moment, they need to be more compelling than all substitutes (Netflix, Facebook, sleeping, etc).
As application developers think big about their next project, they should consider building new and private economies instead of mere applications.
Thanks to Steve McGarry, Will Doenlen, and Yalda Mousavinia for reading drafts of this.
At Attention, Inc, we’re obsessed with token ecosystems and are creating elegant tools for developers who build them. If you’re thinking about building a Better Than Free application, please reach out! We’d love to see how we can help.
