The Current State of the Consumer Software Industry
Most consumer software products today take advantage of the humans that use them. Even though these products are always useful to users in some way, the owning company is extracting additional value from the data they generate by using the product, none of which is shared or returned to them. Whether it’s to sell targeted advertisements or to train “AI” models, user information is harvested like a crop and productized without meaningful consent or benefit to the user generating that value. While other industries might critically depend on resources like oil, ore, or timber, the software industry today is now critically dependent on data. Though hardware is and will always be essential, its value is fixed and depreciates over time. The data that hardware holds, however, can be analyzed and monetized in ways that are only limited by the creativity of the one who holds it. The tech industry has realized this and adjusted accordingly, with business forecasts and stock prices being skewed under the assumption that the amount of data will just keep growing and that more value can always be extracted from it no matter what. Silicon Valley has transformed into Data Valley.
Prevailing Business Models
Free to Use
Many tech products require a network effect in order to be useful, thereby making the creation of that network the greatest barrier such a new product faces. Such products, therefore, want to gain users as fast as possible In order to achieve this effect and a common approach to doing so is to make it free for end users to sign up and use. This creates an obvious problem where users are not paying for the service that they are using even though it costs money to keep the service running. The company must ultimately find some way to generate revenue to pay their costs and the most prevalent one is advertising. User data is meticulously tracked, analyzed, and built into a profile that is then used to match with advertisers willing to pay to get their message in front of that person. As the saying goes, if it’s free to use then you are not the customer, you are the product. While this may appear as a fair exchange similar to ads on TV or radio, the amount of information gathered about the user as well as the corresponding value that information generates for the company is far greater than in more traditional advertising markets. The companies are directly incentivized to make their apps as addictive as possible, as the more time users spend in their app, the more data they can gather and the more ads they can sell to their true customers.
Subscription as a Service (SaaS)
Another trend in the tech industry is to create a product and offer access to it as a subscription-based service. Software needs to be maintained over time and special care must be taken to ensure that data is preserved even in the case of hardware failure, thus many companies naturally lean towards doing this care and maintenance in-house. In this model, the customer is paying to use an application and so therefore the company does not necessarily need to find another way to monetize the data they are collecting, though they still can do so if they feel there is value in doing it. While SaaS applications can be more respectful of user data in this way, the user still lacks meaningful control over the software they are paying for and their data within it. They do not actually own the software they are using, they are merely paying for a service. And unlike a magazine subscription, if the software subscription is cancelled for any reason, they are not entitled to keep any copies of the software they used while they were subscribed. Nor do they own their application data, rather they are simply renting the hardware which the company is using to store it and paying them to maintain it. This model can lead to users feeling trapped, as once they start paying the subscription and have data they care about stored in the application it can be difficult if not impossible to withdraw their data or migrate it to another product.
Data Brokering
There are a few more business models used in the industry in addition to the ones described above, including paying for consumption, acting as an intermediary for vendors and service providers, and micro-transactions. Though these models are based on a more traditional approach of transacting for goods and services rendered, they can still profit from the value of their users’ data. Every software product today, regardless of business model, inherently collects data about their own usage. As a result, all software companies, regardless of business model, have a secondary way to monetize data about their users by selling it to third-party data brokers. These brokers will purchase whatever datasets they deem relevant, analyze and curate information they can parse across all the sets, and then sell those datasets and insights to advertisers to help them create targeted campaigns.
The User Experience
The ecosystem of companies based around such business models directly shapes what it feels like to be a consumer in the marketplace. Though all the issues stem from users’ lack of meaningful control over their data, these effects ripple out beyond the tech sector and into the broader economy.
No Expectation of Privacy
Any app that is free to use can safely be assumed to be collecting as much data as it can about the user, even for things that occur outside of the app. So much information is being tracked and collected that blanks can be filled-in by inference even if the user didn’t share that information with any one app directly. When a single company owns multiple apps, this capability grows even further. Since more information about the user allows them to target ads better and therefore sell them at a higher price, they are directly incentivized to collect as much data as possible in any way they can. And even if a company is not directly monetizing the data they are collecting, they can still sell it to third-party data brokers who will do exactly that.
Subscription Sprawl
Though the subscription model has its own costs and benefits in isolation, the fact that it is such a common business model for so many consumer software products today creates a new problem in the aggregate: subscription sprawl. In the current environment, end users face an ever-growing number of services for which they will have to subscribe to indefinitely. As paying separate subscriptions for every service becomes very costly very quickly, many simply go without certain services or violate the terms of service to take advantage of a SaaS’s separate pricing tiers such as sharing a paid account or making several accounts within the free tier limit. There is also increasing awareness around the fact that having a subscription means you do not actually own anything which is causing a growing number of people to feel a sense of disempowerment when it comes to their digital lives as more and more services are exclusively offered as subscriptions.
Navigating a Minefield
With apps that are always ready to process a transaction and pricing models that can be complex or deliberately opaque, it can be easy for users to accidentally rack up a massive bill. Apps targeted towards children are especially dangerous as they may not even fully understand what they are doing is going to cost their parents real money. Unless the app offers some way to set limits within it, the only options left are constant supervision or ceasing to use the app entirely.
The Gig Economy
Many services used to be provided directly by a vendor or agency but have now been stripped away from the vendor and absorbed into an intermediary service in the form of an app. Workers gain some flexibility with this arrangement but are also treated as independent contractors in this model rather than employees, and consumers get to use a service which feels very efficient. The app facilitates transactions between vendor and consumer and the company takes their cut from each one. This means the consumer is paying a higher price to cover the margin that the app takes and the vendor is paid a small portion of that price for providing that service. Intermediary services have their place but tech-based ones are particularly extractive because they have no stake in either party transacting on their platform, in addition to their ability to monetize the data they collect about their users on the backend.
Alternatives
Alternatives exist but they have their own limitations which prevent them from being adopted by the general masses. These alternatives are typically open source and available at no cost; however, without a dedicated financial backing, they tend to have fewer features than the latest commercial solution. They also require a level of time and technical knowledge which must be used to deploy them that most people do not have. As a result, these alternatives tend to be used by people who are tech professionals or hobbyists but are not realistic options for the vast majority of people who do not already have those skills. Services that benefit from some level of centralization as well form an inherent moat around the company providing the service, one large enough that independent, decentralized groups of such tech professionals and hobbyists are unlikely to bridge themselves.
Outlook
Every business model described above rests on one core assumption and operates under one core principle: that average people are unable to host their own server stack, and that increasing a user’s time spent in an app must also increase the revenue that app generates. Combined, this results in the world we live in today, where massive technology corporations have complete ownership and control of the data that their users generate because that is the source of their revenue. If that core assumption was challenged in any way, the principle which rests on it would inherently be as well. Therefore, creating a new, successful business model in this industry requires challenging and successfully overturning that core assumption. Companies will not willingly abandon their currently profitable business models if and only if the means for them to successfully pivot have been created. The Human-Centered Computing Foundation exists to try and facilitate this change by being a counteractive force motivated by ideology rather than strictly profit. The ideology guiding us is human-centered design (HCD), a set of principles that are informed by the field of human-centered computing. In order to affect change in the world, principles must be applied in practice, and we intend to use HCD in everything that we build. And we believe that in order to have the greatest impact, we must target the most critical components of the entire tech ecosystem and reimagine them based on HCD principles. By taking this approach, we believe we can meaningfully alter the way that everyone experiences the technology they use every day.