The notion of using advertising to recoup the costs of offering a service ‘free’ to internet users is definitely not a new one. Infact some would argue it’s practically as old as the web itself.

I’d even go one step further and suggest that the majority of the internet (OzSoapbox included) supports itself in some way by utilising a form of advertising. Whether it be contextual advertising, capitalising on search queries, using advertising to sell a product or service or simply just participating in social media; Advertising on the internet is everywhere.

It’s no surprise that ever since Napster gained popularity way back when that various companies have attempted to capitalise on the ‘paid for by advertising with no cost to the user’ model and apply it to third party entertainment.

Usually in Australia we get to watch with envy as these companies start up in other countries but all that’s about to change with the launch of Guvera Limited.

Guvera plan to initially offer 256kb MP3 music tracks to the Australian public at no direct charge. Instead, in exchange for valuable consumer demographic information, advertisers can elect to ‘sponsor’ a particular channel featuring an advertiser controlled playlist and will foot the bill for each track downloaded from that playlist.

The music tracks on offer are DRM free, of reasonable quality (256k MP3s certainly aren’t comparable 320k MP3s or lossless codecs like FLAC but they are decent enough), and the advertising is non-intrusive. This means it’s onscreen but you’re not required to interact with it to listen to the music. Instead the real value pitched to advertisers is in the marketing data gleaned off Guvera’s userbase.

Here’s 5 reasons I believe Guvera will ultimately fail.



1. The exponential relationship between Guvera’s popularity and its downfall.

When you run a business on a model that is aimed at compensating copyright holders with money earned through advertising, you must ensure that your advertising income matches the amount of debt your users are generating.

Each music track download is an incremental cost that you as a business now owe to the various copyright owner of the track.

As Guvera’s popularity grows, so does the amount of tracks downloaded and thus the revenue needed to be earned to pay copyright holders. At some point advertisers are going to have to seriously consider the value they are getting from market research data vs. the amount of money they are paying to Guvera.

With absolutely no disincentive to sign up other then having to provide a ton of personal information to obtain virtual credits to download music there is nothing stopping the Guvera userbase exploding.

Currently there are 46 advertisers signed up to Guvera and about 20,000 users. Guvera predicts this number will double to around 40,000 when the service goes live on March 30th. Track wise the number stands at 300,00 but the site is still in pre-launch. Guvera expects its track offering to reach over three million post launch.

I have no idea what advertisers will be paying per track download but with numbers like that on offer I hope Guvera have a strong financial sustainability department.

With plans to offer movies and television shows. which undoubtedly command higher copyright fees, in the future the budget balancing for Guvera will become even more razor thin.



2. Will the artists actually get paid?

In theory when you pay money to record labels the idea is that they pass on money to the artists. Whilst this might work for major headline pop star acts, what about all the smaller artists?

First advertisers pay Guvera peanuts per track download. Then Guvera take a cut before passing on money to record labels. The record labels then also take a cut before finally passing on what’s left to the artists.

So what’s a cut of a cut of peanuts?

Probably not enough to make the whole exercise worthwhile for the artist. Sadly there’s not much they can do about it however. One of the caveats of belonging to a record label is they hold exclusive copyright over your works.

Late last year it was revealed that one of Lady Gaga’s tracks had over a million downloads on the streaming ad supported platform Spotify.

Spotifty operates in Europe which means a much larger advertiser and userbase. Despite this over a million downloads of a track resulted in earnings of $167 US for Lady Gaga.

Good luck to smaller less known artists operating in the much smaller Australian online music marketplace.



3. Broadband limitations in Australia

I’m not entirely sure what the broadband data allowance landscape is in Australia right now but when I left late last year it was pretty crap. You either had blazingly fast speed and some tiny data allowance or a massive data allowance on a sluggish congested network.

Either way you paid through the nose for the privilege.

Music isn’t such a big issue but if Guvera plan to offer movies and television for free in Australia they are going to hit a brick wall when it comes to what their users can download.

If people aren’t downloading and subsequently viewing advertisers channels then advertisers are going to reassess the value they get from participating.

Subsequently the entire system collapses. I can tell you now that major television and movie copyright owners are not going to be giving their content away DRM free without being substantially compensated.



4. People are morons

There’s plenty of people out there who, if they have the data allowance, would happily download the entire current catalogue of 300,000 music files available on Guvera’s pre launch platform.

Not because they want to listen to them, but because they can. Some people might do it because they have a genuine interest in listening to music they’ve never heard before but the majority will just be dicks downloading because

a. it’s free and

b. because they can.

This will play in turn  play havoc with any perceived value that advertisers are getting for their channel supporting investment.

Guvera could of course go ahead and live in la-la land where everybody uses the internet responsibly but I sincerely hope they have a contingency plan in place to deal with morons.

The catch 22 for Guvera of course will be that the second anyone is penalised we’re going to see a lot of whining.

‘Why offer an unlimited music track download service if it’s not really unlimited?

I was halfway through downloading the entire catalogue when Guvera suspended my account. Then I lost my job, my wife left me and I found out yesterday I have testicular cancer. Fuck you Guvera.’


I can’t wait.



5. Advertiser relevance

Some of the big companies advertising on Guvera have been recently announced. Names such as McDonalds, Harley Davidson and Pepsi amongst them.

Now whilst these companies have unquestionably blank cheque advertising departments, what exactly are they going to do with a whole bunch of statistical data garnered from a cross section of users who like a particular track?

Presumably the advertisers are free to tailor the information they request from users but that doesn’t change the fact that the advertiser has no control over the demographic listening into a particular channel they might sponsor.

McDonalds might learn that people who like to listen to Greenday like Big Macs… so what the hell are they going to do with that data?

And as for Harley Davidson… do motorcycles even have music systems yet?

So what if Britney Spears fans think red motorcycles are better looking then blue ones?

Pepsi I can appreciate will use the market data to perhaps choose their next celebrity endorsement but for how long is that going to be worth subsidising a nations music track downloads for?


Whilst I appreciate the effort and concept of Guvera I can’t help but feel that be it a few months a year or even maybe two, the entire thing is just going to fail.

Early last year I asked why Australia didn’t have it’s own Hulu on demand service? Whilst I have heard rumours we are the next country Hulu is coming to, I can only imagine the reason it’s taking so long is because of the logistical nightmare it is dealing with copyright here in Australia.

That and our online market is comparatively small and local media distributors will be up in arms the second any online distribution models shows signs of viability.

Whilst Guvera is a step in the right direction I can’t help but feel it’s just a mishmash of old, tried and ultimately failed ideas.

Australia is a unique media market place and as such we need to bring unique business ideas to the table if legal online distribution of media is going to work here.

Sadly Guvera’s ‘advertising will cover all our costs’ business model seems far from original.



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