Social Media

Inside ADN: A Deep Dive into the Business of App.net

Inside ADN

App.net is an alternative approach to running a social networking website as an ad-supported venture. By charging a subscription fee, App.net changes its users from being the product for advertisers to being the consumer. Here is a look at how App.net came about and how it hopes to succeed in a growing market.

 History

Launched in August 2012, App.net is ‘premium’ social networking site, meaning users pay a subscription fee in order to gain an account. The website was founded by Dalton Caldwell and Bryan Berg with seven core values in mind. They are:

  • We are selling a product, not our users.
  • You own your content.
  • Our financial incentives are aligned with members and developers.
  • App.net employees spend 100% of their time improving our services for you, not advertisers.
  • We are operating a sustainable, predictable business.
  • We respect and value our developer community.
  • Our most valuable asset is your trust.

Prior to its launch, Dalton Caldwell revealed in July 2012 that one of the key reasons behind the creation of App.net was a belief that social networking websites shouldn’t be reliant on advertising. Caldwell was critical of ad-supported business models that Facebook and Twitter began adopting, saying that not only does it hurt the user; it also affects online development.

In November 2012, in an effort to increase the number of App.net users, those with accounts already were allowed to invite their friends to make an App.net account and get a month free of charge.

In February 2013, in a further effort to drive up its user base, App.net announced plans to add a ‘freemium’ tier of membership. Established users were given five invites to distribute to their friends, allowing them to sign up for free. The ‘freemium’ accounts can’t follow more than 40 users and free file storage is limited to 500 megabytes.

 

Company structure

Software producers Mixed Media Labs (MML), a company started by current App.net Chief Executive Officer Dalton Caldwell and Chief Technology Officer Bryan Berg, owns App.net. Dalton and Berg are no strangers to tech start-ups, working together on imeem, a social music website, selling it to MySpace in December 2009. Marc Andreesen, a board member at Facebook, initially joined them, but left Mixed Media Labs in August 2012 after Caldwell wrote a negative blog post about Facebook. Scott Weiss replaced him soon after.

Caldwell and Berg’s experience in technology start-ups will surely benefit App.net as the duo will have undoubtedly learnt a lot about how to manage a social media business during their time with imeem. Caldwell also has previous experience with picplz, a photo-sharing network similar to Instagram that was launched in February 2011 and shut down in July 2012.

 

Markets

App.net is trying to compete in the social media and networking market, which already features some big players, including Facebook, which has over one billion users, and Twitter, which registered User ID 1,000,000,002 in December 2012.

In terms of demographics, a study of 1000 App.net users by BuzzFeed a month after the site was created found that 94% of users were male and 92% were of white ethnicity.

White-other graph Male-Female users graph

(BuzzFeed, 2012)

The company initially targeted users who don’t enjoy seeing advertising when they use other social networks and/or morally don’t agree with social networks ‘selling’ users to advertisers. Furthermore, App.net is aiming to attract developers frustrated with Twitter’s API changes that made it more difficult for third-party applications to be competitive.

The developer market is the biggest market App.net can tap in to. Twitter used to enjoy a wide range of third party applications but since the company has started to prioritise advertising over its developer community, the number of genuine alternative options to the official Twitter application are now limited.

App.net, however, takes a different approach. It encourages developers to make high quality applications for the social network, with the view that good apps will attract users. [pullquote align=”right”]App.net encourages developers to make high quality applications for the social network, with the view that good apps will attract users.[/pullquote] This is reflective in one of App.net’s founding values: We respect and value our developer community. They elaborate on this value, saying, “we pledge to never shut down developers acting in good faith, even if it means that we will forgo some huge future revenue streams”. App.net has a developer level account, which grants the user full access to the API, documentation, support and feedback.

Furthermore, in September 2012, Dalton Caldwell revealed the launch of the ‘Developer Incentive Program’, an initiative that looks to reward developers that are making applications that a large number of users choose to use. Users score the participating apps they use each month and developers are rewarded financially based on how well they performed. App.net initially budgeted “at least $20,000 per month” for the program, a figure that rose to $30,000 in March 2013.

 

Revenue Streams

Given App.net is entirely advertisement free; it differs greatly compared to other social networks when it comes to revenue streams. The website’s revenue is generated entirely by its subscription fees. There are four different levels of subscription:

  • ‘Freemium’: as mentioned earlier, users with a yearly subscription can invite their friends to join App.net for free on an account with limits. These users can follow no more than 40 people, and have a 500mb limit on file uploads.
  • Monthly subscriber: for US$5/month, a monthly subscriber gets full access to App.net with no limit to how many people they can follow and 10gb of file upload storage.
  • Yearly subscriber: for US$36/year, a yearly subscriber saves 40% on paying a monthly fee, has no following limit, 10gb of file storage and the ability to invite others to make a ‘freemium’ account.
  • Developer: for US$100/year, a developer is granted access to the API from which they can build applications, documentation that outlines important information about App.net, support forums and networks and feedback from the rest of the developer community. Full access to App.net is also included in the $100 fee.

These subscription fees are what keeps App.net going, any revenue generated is pumped back into the company which then looks to improve the product it can offer to its users. This again comes back to one of its core values: Our financial incentives are aligned with members and developers – “App.net’s financial incentives are entirely tied to successfully delivering a service you can depend on and that you would pay for”.

 

The rise of mobilisation

Mobilisation has been one of the major factors behind the success of social networking websites. Mobile application usage in America grew 120% between July 2011 and July 2012 and social media consumer’s use of apps grew by 76%. By supporting its developers, App.net now has a large directory of mobile applications for all of the major mobile operating systems, including Android and iOS, which encourages users to stay connected when out and about.

The value shift within the media and entertainment industry has seen the power shift to device manufacturers, away from content providers. App.net has acknowledged this by building a service that makes money directly from the users, while also accommodating mobile devices by making the API available exclusively to developers to produce mobile applications.

Link: The Social Media Report [PDF Format]

What are your thoughts on App.net? Has it lived up to the ideals that is has proposed? Do people find an innate value in an ad-free network? Are you a big fan of App.net? Comment with your thoughts below!

About the author

tpollock

(Former Contributor) - I’m a journalism and digital media student, avid football fan and tech enthusiast from Melbourne, Australia. I spend my spare time managing MFootball, a website I co-founded, and following Liverpool FC. I have an interest in social media as well as the latest gadgets and apps.

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