On Advertising for the Common Good

ABSTRACT:

This article examines the benefits and costs of adopting site-wide advertising on Steemit, concluding that introducing at least some limited third party advertising could really benefit the Steemit community and the Steem economy and currency.

INTRODUCTION:

In researching this article, I found surprisingly little previous discussion of the proposal I present here: To start site-wide advertising to help boost the Steem Economy, and bolster further investment in the currency. As I discuss the proposal I will do my best to link to historical discussions elsewhere, but please post below in the comments section links to other relevant discussion you know of.

Thrown in at the very end of the Steemit white paper (page 43) is a section explaining why the decision was made to go adless, but since then, we have already agreed as a community to add a “promoted” page, and I think the original whitepaper arguments against ads were a little misplaced:

“Replacing Advertising with Blockchain-based Content Rewards:

Under most content monetization models, content creators leverage advertising in one form or another. Many >creators recognize how advertising may diminish their work’s value to the consumer, yet creators very often must seek >returns on their time by monetizing. Advertising represents a double-edged sword: With ads, a creator can make >money most easily. Without ads, monetization is difficult but the content is richer.

Creators posting to social media outlets that are connected to Steem may monetize merely by having their work >recognized (or ”liked”) by the Steem community. Blockchain-based payouts are completely digital and have no >middle-man. Therefore monetization by blockchain-based content rewards should be faster and much lower barrier >to use than monetization by advertisements.”

-Steemit white paper, Page 43

When we talk about putting ads on this site, we are talking about placing third party ads, most likely from ad networks that pay a fee per one thousand ad views. This could be implemented for example by placing a banner ad at the top of every page, or placing ads in the left and right margins for desktop browsing. The original theory presented in the whitepaper was that these ads can be distracting, and really do detract from the quality of the presented work. Not only that, but further, the ads aren’t necessary to provide revenue for content providers because of the innate nature of how Steemit works. And yet, one of the main goals of Steemit is to reward producers and curators of the community for their work rather than the website domain owner who would have used the community’s work for their own advertising profits. Steemit is first and foremost a place for community, where community members work together for their own interests. But, as a community, we should seriously consider whether advertising might actually be in our interests. After all, one of the best communities which seems to have possibly*1 inspired this enterprise to begin with is Reddit, a site where as a community they have decided to allow certain types of non-intrusive advertising for everyone’s advantage.

COMMUNITY BENEFITS OF ADVERTISING:

Given that the value of a currency depends on how strongly it is demanded, it makes sense that during its fledgling stages, the greatest segment of demand comes from those who want to invest in the currency and its developing economy, but long term success of the currency depends on demand for the currency developing from other economic interests; its short term value depends immediately on the current demand for the currency.

From a solely economic perspective, the large-scale adoption of advertising has two immediate benefits. First, it creates a second source of demand for the Steem currency, and second it encourages investment in the currency. Currently, Steem dollars and the Steem currencies more broadly aren’t accepted too widely, and everyone must sell their Steem dollars to do anything useful with them. In time this will surely develop, but as early as tomorrow we can create an immediate demand for Steem currency so that it may be spent on pay per view advertising. Of course, it’s likely that ads sales would be conducted in dollars, but those dollars could be used to purchase Steem currency which would then be distributed evenly among Steem owners as interest on the currency. Steemit is still rather small to have this be a significant source of interest, but it does make for an attractive value proposition for long term investors who expect the exponential growth of this website to continue.

While the current income from advertising could be used to pay dividends or interest to Steem holders, I don’t think the income would be that much. Eventually, after further exponential user growth, it would be nice to use the fund to pay interest or dividends to reward those who invested in Steem, but our community is still in the “start-up” stages, and the income should be reinvested into the community in more fruitful ways. This for me personally is the strongest point for adopting advertising on our site. Before we start rewarding ourselves with advertising dividends, we should focus the money on community projects like developing smartphone apps for example, and just making the site infrastructure better.

The most important thing we could do with the advertising revenue though, is advertise ourselves! I’m serious, people who specialize in a certain topic are always looking for new places to find great content. I think the best way to advertise would be focus on a single industry at a time and advertise our platform across their most popular sites. I’ll look at the finance industry first because it is what I am most familiar with (and it is a blogging industry that typically commands some of the highest ad rates). People with shares in particular stocks for example try to keep abreast on their stock by surfing through their favorite sites seeing what their favorite and other contributors have posted about their stock in the past few days. If they see advertisements for a new platform, I think they’ll be surprisingly eager to at least check it out. Simultaneously, content providers should hopefully be seeing the advertisements and checking out the site too, and hopefully posting experimental content to test the waters. If we can welcome these people into our community with projects like @projectnewbie, and educate them about how the site works, and if they like the results, then they may be able to ask their group of hundreds of followers across the other sites they blog for to also follow him/her on this new site too. I don’t think we would have enough money or time to focus on multiple industries at a time, but I think we have a real potential to break into new industries if we advertise correctly using the revenue from advertisements we show on our own site. To be clear, the clear focus of these ads should be to recruit users as providers and curators, not investors in our currency; that only makes sense.

QUALITY OF STEEMIT WITH ADVERTISING:

Because of the way our site is arranged, and because of the ability to word mine the content of individual articles posted within each category, I think we’ll have the ability for pretty strong targeting and pretty strong monetization. Of course, if we’re making the site worse by advertising, why would anyone new want to join anyway? Plus, we really shouldn’t sell ourselves out and make our community product worse just to try and get growth, right? Again, I would point out that we will be using the revenue to make the community better by investing in infrastructure, but more importantly I will point out that Reddit has seemed to find a happy balance of monetization with community happiness by using only well marked, textual ads. The saying “everything in moderation” isn’t always applicable, but here it is, we must find the proper balance between community needs like growth, and community needs like enjoying the content we produce. I think the happy maximum might have some limited text advertisements at the very least. Ideally, the targeted nature of the ads along with their clear label would actually be helpful enough, often enough, to make up for most of the time when they are a mild annoyance.

CONCLUSION:

While researching this idea, I found a few relevant posts of discussion on this issue, which I try to summarize below. If this is something we’re serious about I’m hoping people will be able to post foreign language summaries in the comments below so that we can involve everybody in the discussion. Steemfest would also provide a great opportunity for discussion of the issue is no consensus has been reached by then, but it may be more practical to have a webinar discussion or something of the sort much sooner.

There are many economic analogies that could be used to measure the benefit of introducing advertising, and they will have different weights for different people. For some who feel the currency, isn’t legitimate, having an income source almost as collateral for the currency may put their mind at ease. For example, the reason US treasury bonds have such low rates is that we have a very strong tax base capable of paying off the debt. Still people worry about the US trade deficit, and they may so worry about the Steem “trade defecit” since it still has a very small economy and relies mainly on investment to support its value. Other’s may simply enjoy the added interest rate on Steem while they continue to hold it, and yet others will now see an extra investment opportunity to benefit from Steemit’s longterm success. Still others will be glad to see a startup like Steemit take extra money and invest it in itself, especially the users who will always enjoy a better web infrastructure. And of course, overnight, the adoption of advertising would drastically increase the demand for purchasing steem for use in the real economy, in this case advertising. In fact, I would see advertising as a tax on our users that can be spent on common interests and used to bolster the economy via government expenditures. Even if this were seen as a selling out, we would probably make history as the first popular cooperative social media site, and that’s something I’d like to be a part of!

FOOTNOTES:
*1 In the very first paragraph of the introduction of the white paper on page 5 it talks about how a year prior Reddit announced it planned to monetarily reward their community members with ownership in the company to thank them for all the great work they’ve done building up content on the site.

“Collectively, user-generated content has created billions of dollars worth of value for the shareholders of social >media companies, such as Reddit, Facebook, and Twitter. In 2014, Reddit hypothesized that its platform would be >improved if everyone who contributed to reddit.com by posting stories, adding comments or voting were rewarded >with a fair share in Reddit, Inc . Steem aims to support social media and online communities by 1 returning much of >its value to the people who provide valuable contributions by rewarding them with cryptocurrency, and through this >process create a currency that is able to reach a broad market, including people who have yet to participate in any >cryptocurrency economy.”
-Steemit white paper, page 5.

There is further evidence that most users turn off adblocking when using the site so that they may give it their share of revenue.

APPENDIX:

Summary of Previous Discussion I found:

This section can be skipped (Conclusion Section is next) as there is not much relevant previous discussion to summarize. However, for what little I did find, I summarize it here:

(https://steemit.com/steemit/@furion/how-to-turn-usd20-into-usd2-000-on-steemit-within-12-hours-or-is-banner-advertising-doing-more-harm-than-good)
(1) This $200 article by @furion, a reputable author it seems, starts by either saying [A] that 3rd party marketers shouldn’t use banner ads on other websites when they can just get their content upvoted on this site or [B] that we as a community shouldn’t put banner or other annoying ads on 3rd party sites, but ultimately concludes by suggesting we spread Steemit by word of mouth, which I think is a great idea! And one that could be complemented well by putting ads on third party sites in specific fields and working to make that field really good on our site.

(https://steemit.com/money/@funny/why-are-bitcoin-steem-and-other-cryptocoins-worth-real-money#@slammr76/re-blocktrades-re-funny-why-are-bitcoin-steem-and-other-cryptocoins-worth-real-money-20160914t203223509z)
(2) This $100 article by @funny, a $3,000 net worth author describes how the current value of Steem comes not from the goods and services people can purchase with it, but from our faith in its potential. Again, I have to agree to with the author on seems a straightforward idea. Still, we could create an initial economy by selling ads in our Steem currency (selling them in dollars which we then exchange for Steem).

(https://steemit.com/steemit/@illidans/why-doesn-t-quora-adopt-the-same-value-incentive-strategy-as-steem-it-for-its-user-base)
(3) This $0 article by @illidans, just asks about where the revenue comes from for paying both content creators and consumers, but its obvious from the article the author is a little confused and no one answered the question. Hopefully my answer above is satisfactory.

(https://steemit.com/steemit/@acassity/is-steemit-ripping-us-off-on-our-content)
(4) This $1 article by @acassity expresses a worry that Steemit is ripping off users by paying them relatively small amount in the present so as to take advantage of their content in the future when it does start advertising on every page. Unfortunately, for the author, it is unlikely that the site itself becoming more popular in the future will make his posts any more popular in the future too :(. No one will be led to old content on the site with rare exceptions, so the future value of the content from a monetary perspective is essentially worthless. Still, it shows I was not the first person to consider the monetary value of advertising on our site.

(https://steemit.com/steemit/@salva82/how-to-advertise-steemit-proposals)
(5) This $0 article from @salva82, a $1000 net worth individual roadmaps some ways we could advertise our site! Just remember we have to be careful to only advertise for membership, not investment in currency. Overall, I really like most of @salva82’s suggestions.

(https://steemit.com/steemit/@steemitblog/introducing-promoted-content)
(6) This $1000 article by @steemitblog, a 30,000 net worth individual, opens the article introducing the “promoted” page as a place for people to spend money without simply taking it out of the economy.

(https://steemit.com/steemit/@teamjinx/6bri15-a-roadmap-for-mass-adoption)
(7) This $0 article by @teamjinx also suggest advertising on other websites.

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(8) This $50 article by @kingtylervvs talks about creating a “promoted” page and distributing proceeds among users.

(https://steemit.com/steemit/@generalspecific/advertising-on-steemit-a-potential-game-changer-or-certain-doom)
(9) This article by @generalspecific talks about posting adds as posts.

(https://steemit.com/steemservices/@steemservices/introducing-steemservices)
(10) Lastly, this post by @steemservices is possibly the most important, as it talks establishes where community discussions on advertising should take place, and who will be doing the executing and how. Unfortunately the website they describe has been down whenever I check the link, and it seems no new posts have been made by the account in the fast several months: please comment below with information.