Path pledges to be ad-free: Will consumers pay for their privacy?

SAN FRANCISCO -- In a world where conventional wisdom is that advertisements -- no matter how annoying or distracting -- must permeate every online moment to afford people access to free services, Dave Morin has very deliberately taken his own path.

It couldn’t be more different than the path followed by his former company, Facebook Inc., which has won back the confidence of investors and a market value that tops $100 billion by selling ever more ads on mobile devices.

Morin has pledged he will never run ads on Path, the mobile-only social network for sharing your private, intimate moments with close friends and family members that he co-founded in 2010. Instead, starting Thursday, the company will offer a paid version of the service with premium features.

It’s a bold play: There is still no proof that people are willing to pay for their privacy –- i.e., having greater control over their personal information and how and with whom they share it. Nor is there proof that a social network can make enough money to thrive, let alone survive, without selling ads.

“The kind of privacy we want to provide is only possible by creating an ad-free social network,” Morin said in an interview. “We want to bet our business on serving our users directly. That’s the important value for us here. One of our founding ideas here at Path was to try and build a social networking business with no ads. I think that what that does is enable us to build a different kind of business. Sure, the risk is that we will have to make things that are worth paying for.”

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Path users who pony up will get more digital bells and whistles: free and unlimited access to all the stickers and photo filters in the Path store. More digital goods are coming, such as ways to customize and personalize Path, company executives say.

An annual subscription will set users back $14.99, or they can get a one-month subscription for $1.99 on Android or a three-month subscription on iOS for $4.99.

“We are starting in a very modest place. Our goal is to continue to add new things and see which things people like and which things people love,” Morin said. “Our intent here is that by subscribing, our users are going to get more and more premium functionality as we add it over time.”

For a company whose selling point is privacy, Path has had some unfortunate mishaps. It had to pay an $800,000 fine to the Federal Trade Commission for uploading users’ address books to its servers. Last April, it was accused of spamming users’ friends with text messages in Britain.

But Path seems to have put much of that behind it.

And, in what could not be a starker contrast to Facebook, Path is offering its users even more privacy options. It’s unveiling “private sharing” and “inner circle,” tools designed so that people can share those “just between us” moments with a select few.

Morin calls “inner circle” the “purest expression” of what he is trying to do with Path. The feature makes it easy to share only with those closest to you, say baby photos with your immediate family or prom photos with your childhood friends. Friends know they are in your “inner circle” by a star in the top corner of the “moment.” Users can also filter the stream of updates from friends to show only the moments shared by those in that circle.

“People continue to ask us for more control, and so I think that inner circle is the culmination of years of learning,” Morin said.

Can Path find its way to building an ad-free, sustainable business? It’s unclear if the start-up can clear enough money on subscriptions to pull it off.

But Path is not the only one splitting from conventional wisdom and making a go of the “freemium” model. Think Dropbox and Evernote.

And Path, after a rough start and some stalled growth, is catching on quickly. It hit 20 million users in August, doubling in size since April.

Path said it has reached a deal with Deutsche Telekom to be preloaded on some devices in Germany and beyond. This week Path became one of the first companies to have its mobile app preloaded on the Samsung Galaxy Gear smartwatch. It was also one of the first apps on Google Glass.

And it’s the worst-kept secret in Silicon Valley that the 55-person company is in the process of wrapping up raising more money at a reported $300 million valuation (it has raised $41.2 million already) to seed its ambitions.

Stay tuned.

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