Do Customers Have A Right To Know How Companies Make Money?

When Google started raising money in 1998, Sergey Brin and Larry Page didnt have a revenue model or at least thats how the story goes. The companys highly successful text ad program didnt start until 2000, but Brin and Page may have had at least some idea of how to monetize the service by the time Sun co-founder Andy Bechtolsheim gave them their check. They did, after all, sign their partnership with Yahoo before AdWords launched.

I dont remember how common it was for startups to launch without at least an unrealistic revenue model back in the dot.com boom I mean, most of these companies were at least trying to sell banner ads. Anyway, Google has become the poster child for developing a user base first and worrying about monetization later. Twitters probably the visible example of a company following this example.

If investors want to back a company with no revenue model thats their prerogative. But is it fair to customers? Ive cited before frequent TechCrunch commenter Edward Boraskys assertion that users ought to know what a companys business model is before they sign-up.

I agree. As Ive said that doesnt protect a customer against pivots and acquisitions. Still, its a good start.

The cliche goes, if youre not being sold a product, you are the product. I think thats a little harsh. You can also think of a transaction with a free site as paying with your attention, or paying by allowing your behavior to be tracked and data mined. Maybe its worth it to receive a particular service, but you should at least have the right to know what youre paying.

So I was excited to stumble across the site How Do They Make Money, even though its deeply flawed. The interface is annoying, its limited to well known services and the information is shallow and in some cases may be out dated. Theres also the inherent limitation that the only things we can only know about a companys revenue model is what they choose to release (unless its a public company), and we only know so much about what third party ad networks and other partners are doing with our data.

But it has potential. For example, the site actually breaks down different Google sites, which is a great reminder that although Google makes gobs of money off its search ads, not all of its services necessarily make money. You can filter by business model so far only LinkedIn is listed as selling data (note: you dont necessarily need to sell data when you own your own ad network, like Google, Facebook and TechCruch owner AOL).

It reminds me of TOS-DR, the terms of service demystification and watchdog site I wrote about a couple months ago. It would be great to see TOS-DR start adding some revenue model information into the mix, though theyve already got a lot on their plates (oh, theyre raising money right now if youd care to donate).

I saw a suggestion somewhere that these sites should be turned into browser extensions. A TOS-DR one would be really useful. But unfortunately not that many people use extensions. However, Firefox has been tying to stay relevant and has also been pushing the privacy angle. Perhaps Mozilla should consider shipping something like a TOS-DR/How Do They Make Money mashup plugin with Firefox, along with other privacy tools.

Klint Finley, techcrunch.com