Never one to shy away from experimenting, search giant Google (NASDAQ:GOOG)(NASDAQ:GOOGL) has devised a new way for the Internet to monetize itself – and the proposed new model could even disrupt Google's very own business.
Say hello to Contributor by Google.
Hate ads? Contributor is for you.
The vast majority of websites out there that you know and love are primarily monetized using ads. This is nothing new. It's just the way it's always been, and Internet users are so used to this model that ignoring banner ads has become an expertly honed skill.
Of course, Google is one of the biggest beneficiaries of the Internet's ad-supported ways. That's not just in its core search ad business, but also with AdSense and the Google Display Network.
Contributor looks to turn this all upside down. Instead of websites being monetized by ads, Contributor allows users to directly support their favorite websites by contributing anywhere from $1 to $3 per month. The result is that a handful of participating sites will be shown without ads. Google has only specified a handful of participating sites thus far, including Imgur, Mashable, The Onion, and Urban Dictionary, among others.
It's difficult to quantify what kind of impact this could have, since the program is currently invite-only and the number of participating sites is very limited. This is an experiment in every sense of the word, but it does symbolize a dramatically different monetization model for Internet businesses, which in itself could potentially have far reaching consequences.
It's unclear whether or not Google is taking a cut of these contributions, but presumably it is.
Hate ads? AdBlock is for you.
With the rise of Internet ads also came various ad blockers like the popular AdBlock Plus extension that's available on all major Internet browsers. The popularity of ad blocking software and extensions is evidence that people simply don't like ads. Some sites like Hulu won't even play a video if you're using AdBlock or AdBlock Plus, since you're depriving the video streaming site of its own revenue in the process.
Contributor is an attempt to compromise since it is effectively a paid ad blocker. But whether or not people are willing to pay to get rid of them (as opposed to using free extensions) is an entirely different question altogether.
Would you pay?
There is no shortage of examples of other companies giving consumers a choice: free (or lower cost) with ads or paid (or higher cost) without ads.
Think of Amazon.com's Kindle lineup. All of Amazon's e-readers are available with or without "special offers," with a price difference of $20 between the two. Amazon will even let you pay up after the fact if you buy the cheaper one and change your mind later. Apple's iTunes Radio is available for free on an ad-supported basis, or ad-free for paying iTunes Match subscribers. Same for music streaming services Pandora and Spotify, as well as countless mobile apps. The list goes on.
Many traditional media outlets have had difficulties in the age of the Internet. Print subscriber numbers continue to decline across the board, and only a handful of sites successfully implement paywalls. People simply don't like paying for content on the Internet wherever possible.
Experiments are a learning opportunity
That's precisely why Contributor is unlikely to pose a self-disruptive threat. While $1 to $3 per month is not a lot of money (you probably spend more on a cup of coffee from Starbucks), the challenge will be providing enough value to justify the marginal cost. Heck, people balk at spending $3 on a mobile app.
There may be a small contingent of Internet users that hate ads enough to open their wallets, but this is very likely a tiny fraction of the global Internet population and isn't enough to change the status quo. Some experiments are destined to fail, but Google will still probably collect some data and learn in the process.
Evan Niu, CFA owns shares of Apple and Starbucks. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), Pandora Media, and Starbucks. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), Pandora Media, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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