Dalton Caldwell’s ‘Alternative to Advertising Hell’: Making People Actually Pay For A Web Service

Dalton Caldwell is a very smart guy who has been a prominent entrepreneur and programmer on the Silicon Valley scene for a while now, so any time he announces a new project you can pretty much tell it is going to be newsworthy. The blog post he published today about “refocusing” his App.net company to being a real-time feed API and service (essentially, a new version of Twitter) was no exception.

The post, entitled “Announcing an audacious proposal,” hit Techmeme within minutes after it was published, and he immediately started receiving enthusiastic messages from other influential industry folks.

Lots of things about Caldwell’s new direction for App.net are interesting: It’s a big idea, attempting to go up against a big competitor, and he’s going about funding it in an interesting Kickstarter-like way. We will absolutely be reporting on all of that and more in the coming days. But to me, perhaps the most compelling aspect of the whole thing is his assertion that the currently dominant revenue model for web startups — advertising — just cannot go on any longer.

In his pretty epic blog post, Caldwell points out that the major sites of today’s social web — Facebook, Twitter, Google+ — all make money primarily by selling ads targeted to users based on the data they feed into the system:

“Why isn’t there an opportunity to pay money to get an ad-free feed from a company where the product is something you pay for, not, well, you. To be clear: I’m glad there are ad-supported options, but why does that seem like the only option? … I want a real alternative to advertising hell… I would gladly pay for a service that treats me better.”

And it’s not just social networks that are dependent on ads, it’s practically all startups in the “Web 2.0” space, Caldwell says. This is an era that he and others feel is now reaching its inevitable end:

“One session at Foo Camp this year felt like a wake for Web2.0. We discussed the progression: a free service with a vague business model captures the hearts and minds of a large user base, and becomes vitally important. Because the hosting bills and payroll balloon as the service grows, founders are left with a very difficult decision to make. Sell the company? Cram the site full of ads? Keep raising money to delay having to deal with this issue as long as possible?

…If I am honest with myself, I just don’t have the will to ever play that particular game again. Running a service that is important to people with some sort of hand-wavy platitudes about someday launching a ‘new form of advertising’ is not OK. It’s not fair to users, it’s not fair to employees, and we should all know better.”

And that is what he is shooting for with this new direction for App.net — it will be something that he calls a “financially sustainable ad-free service” that sells a product, not its users’ data. This of course means that people will have to pay. He’s crowdfunding the site’s development, soliciting $500,000 from anyone who wants to pitch in. According to him, they’ll need just 10,000 paying users to make it work.

It’s a very ambitious proposal indeed, but I have to agree that it’s high time that the advertising dominance has to come to an end. We pay for so many other things in our lives — it’s how commerce works — but for many reasons we haven’t become used to pulling out our wallets for services we use on the web. It’ll certainly be exciting to see if Caldwell can help push people forward into changing how they feel about that.