It’s easy to be generous when times are good.
At the beginning of the modern tech era, Google made its name by not only having the best-ever search engine, but by giving its users free email with more storage than any other competitor. Similarly, Dropbox gave out free cloud storage, Amazon offered free shipping for orders over $25, and Uber and Lyft raced to be the cheapest car services around.
Now, we’re starting to see what happens when the music stops. The combination of global political uncertainty, inflation, the end of low interest rates, and a million other factors besides has resulted in a grand belt-tightening across Silicon Valley. That’s resulted in layoffs, canceled product lines, reduced spending, and even the divestment of once-prized acquisitions.
The net result: the end of tech’s era of peace, love, and freebies—and the beginning of what you might call the Big Squeeze. From Netflix to Reddit to Twitter and beyond, the signs are everywhere that the days of seemingly unlimited tech largesse are rapidly coming to an end.
In its place, we’re seeing the rise of a new trend, as tech giants increasingly search for ways to charge for things that used to be free, hike prices, and generally make more money from their existing customers quickly.
Netflix’s password-sharing dilemma
The swirling controversy around Netflix’s password-sharing crackdown is probably the most visible example of the ways tech is getting squeezed, and then squeezing in turn.
Netflix’s whole pitch, back when it launched in 1997, was that unlike Blockbuster and other video stores, it didn’t charge late fees. A decade later, Netflix offered Watch Instantly, the first incarnation of the modern streaming model—and consciously turned a blind eye to password sharing, letting its users go wild giving access to their account to whomever they pleased.
“We’re doing fine as it is,” Netflix founder and then-CEO Reed Hastings said in 2016, when investors asked about the possibility of cracking down on the practice.
That was true, right up until it wasn’t. Last year was particularly rough for the streaming giant, as it shed subscribers amid increased competition, a tougher economy, and a return-to-office world that suddenly had less time to watch TV. And so, in February of this year, Netflix started to do the previously unthinkable, as it started to charge for accounts used in multiple households. The company went after freeloaders in Portugal, Spain, Canada, and New Zealand, and a few months later extended the move to the U.S.
The thing is that it worked: Despite all the grumbling, Netflix subscriptions spiked in the immediate aftermath of the crackdown. The company squeezed its customers out gently, but firmly, and won.
While their businesses are very different from Netflix’s, you can also see this sort of thinking in Meta’s and Twitter’s recent moves to charge users for a coveted verification mark, a digital ornament that was once free but available only to certain users.
In both cases, Meta and Twitter are promising new benefits for paid subscribers beyond the check mark (better customer support for Meta Verified subscribers; editable tweets and fewer ads for Twitter Blue users). Perhaps more starkly, Twitter went so far as to disable its users’ SMS two-factor authentication, an important security practice, unless they paid an extra $8 per month for Twitter Blue.
It remains to be seen if this kind of squeeze will pay off for the social media companies as well as it has for Netflix, but it comes from the same place. With advertising revenues harder to come by, and growth not what it once was for either company, new revenue streams are needed.
If you’re feeling queasy it’s probably because you’re thinking of the last time you got on an airplane. Want to check a bag? Pay extra. Something to eat? That’s extra. More legroom? Also extra.
And remember, when it comes to advertising-based internet services, you’re already paying your way by allowing yourself to be targeted with ads.
The internet’s plumbing is getting squeezed out, too
A less obvious, but arguably more impactful, sign of this squeeze is what’s happening with the relationship between software developers and services like Twitter or Reddit. Both companies encouraged developers to build tools that either enhanced the user experience, or even that outright replaced their own apps and websites.
Twitter’s relationship with developers has had its ups and downs over the years, but the platform has long hosted a flourishing ecosystem of apps like Block Party and Tweetbot. Reddit users, meanwhile, have had the option of browsing the site through unofficial mobile apps like Reddit Is Fun and Apollo, with the benevolent approval of Reddit itself.
Over the past several months, though, that’s changed dramatically. Under Elon Musk, Twitter dramatically hiked prices for its API—short for application programming interface, the connector that lets apps “talk” to each other—and cut off the free tier, effectively killing off its entire developer ecosystem. Block Party left the Twitter ecosystem entirely, while popular apps Twitterrific and Tweetbot offered its users refunds (but asked them to consider not taking one, to help cover costs as they shut down).
Reddit followed a similar path earlier this month, spurring a dramatic user uprising across the site that’s still ongoing. Steve Huffman, the CEO and cofounder of Reddit, has cited Musk as an inspiration behind the company’s decision to suddenly stop allowing developers to tap into the site’s API for free. The developer of Apollo said that running his app would cost $20 million a year after the changes. The reaction from Reddit users has been ugly, to say the least.
Notably, both Musk and Huffman have cited the notion that their respective APIs are being used to train A.I. systems like OpenAI’s ChatGPT without remuneration. Also notably, both Reddit and Twitter are said to have hit ad sales slowdowns ahead of their respective decisions to hike API prices.
Either way, the fact remains: Something that was free is now paid, with users and developers the ones to really feel the squeeze. And at least for now, it seems clear that the only thing to do is get used to it.
