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January 08, 2008

Trying to Avoid the Advertising on the Horizon

Catching up on my feeds from the weekend, I came across danah boyd's posting about youth, advertising, and social responsibility.

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by strangeinterlude

The short of it is this: marketing necessarily creates ideals, these ideals put substantial pressure on our youth, and the "kids", in turn, take it out on each other. In her blog, danah discusses how fundamental this dynamic is to both marketing (manipulation at its core) and our economy (we need growth and therefore new / young markets).

In my last post, I put up a graphic listing one of Swift Kick's basic tenets as "Don't be full of it". This is primarily about proving the efficacy of our efforts, and, short of that, being as transparent as possible about our failings, but it is also about avoiding hypocrisy as much as possible.

The marketing dynamics danah discusses, inspired by a National Union of Teachers report about commercialization available here, have created some significant strategic challenges for us. Challenges that are still bouncing around in our efforts and may cause real problems.

danah:

It's easy to demonize marketers - they make for good punching bags - but many of us live off of the cud of advertising and marketing. Most of the tech industry is indebted to advertising and much of what we use for "free" is because we are eyeballs that can be manipulated.

We chose to pay for and grow Red Rover internally because a) we thought we could and b) we would avoid investor encumbrances that would likely include "you should put google adwords all over everything."

As danah points out, giving out software for free and selling the eyeballs is the normal modus operandi of web 2.0.

While I think there is an important difference between adwords and Paris Hilton print ads in Teen Cosmo, I would like to avoid the slippery slope. We just don't think that we can be all about getting the users to do the best thing for themselves educationally and then mix in a bunch of "buy some shoes" along the way without being hypocritical. We would prefer to not mix advertising and education unless we absolutely have to.

In talking with my recent business partner, Mike Jones of Userplane, he put it pretty succinctly - "Investors don't give a shit about subscription revenue, it doesn't scale, they want millions of page views . . . sure, it's kind of gross, but if you are going to play you have to drink the Kool Aid."

Usperplane, btw, gave its software away, sold advertising and then sold to AOL, where Mike is now a VP and swimming in the Kool Aid. His opinion is clearly backed up by his experience and success. The difference, perhaps, is that he's not in education.

Red Rover has taken longer than we hoped, and by switching our programming team from Uzbekistan to San Francisco, we have tripled our costs (but at least the new team is getting it done.)

In hindsight, it would have been better to spend more from the beginning, but we may not have been able to do this without either going more substantially into debt or getting investors with their reasonable need for ROI and a marketing business model to get it.

So here we are, trying to hold the line in 2008, live experimenting with danah's closing question:

How can companies be both ethical and financially successful?

We are watching other companies struggle with this and lose, and listening to Hoffman, because he has more history in this slice of tech than I do, and it's all concerning.

The project needs to sustain itself to provide any value.

Options for the short run:

- Cash flow / debt from Swift Kick (current choice)
- Investors
- Grants
- Subscription from users (we've opted out of this option as it reduces scale which is where much of the educational networked value comes into play)

With grants: We don't have much experience with this world. From the outside it looked like a new arena to learn with low control and long lead times. Despite this, we did submit a proposal to the MacArthur DML competition way back, and we find out how that went sometime in February. Because of the opacity of the process, it feels like a lottery ticket strategy. Nothing to bank on, great if it works.

Here are the possible paths I see moving forward:

1) we get Red Rover to the adoption stage on our own with SK cash flow and by eating Ramen Noodles.

Then:

a. Paid features are added on top of the free "core" service in time for next fall's orientation, enough schools buy in to pay for continued maintenance and development.

b. New partner school(s) come(s) forward and takes on the maintenance for the good of education. We spread out responsibility in an open source community type arrangement.

c. A corporate partner approaches, we negotiate a small stake sale, maybe some back room deal like craigslist, and our ideals remain sufficiently intact.


2) Red Rover needs more work / done faster than SK can support.

Then:

a. MacArthur grant comes through, one year budget is taken care of to get us to a and b scenarios above.

b. We work with a progressive investor that will invest the long term, balancing the goal of education with a return.

c. We develop a school coalition to spread out the initiative among their existing grants.

Problem with the last c. option is that we focused our network building on our main school user, activities advisors / directors. While they can turn this system on, they probably are not the people that would be interested in a collaborative tech dev project. That would be someone over and down the org chart in IT somewhere. We don't know many of these folks yet.

Notice the hedging with the investors / corporate partner options. We are very idealistic, and, if it comes down to an investment/adwords with the system or no system, we will likely choose the former. There has to be an element of practicality. I do believe that the benefit of involvement will outweigh the .01% click through rate distraction of advertising.

At this point, we believe we have the cash flow to support Red Rover development through June. Is that enough time to get to where we need to be? Is that spending rate / development rate fast enough? This is a developing picture.

Part of our ethical balance is the transparency of this conversation. We have, thus far, taken the risk of being a little extreme with our ethics. We are paying for it currently by being later than we wanted (money roughly equals speed).

Many schools have moved and are moving to the other side of this line for long standing "practical" reasons.

It would have been much safer financially for us to get an investment at the beginning, if our bottom line was our only motivator. Balancing the additional hippy, and philosophically difficult to quantify, variable of "societal good", and putting it in the primary position, makes life more challenging.

If anyone has any new options, or insights into this challenge, I would love to hear them!


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