I thought I'd share this article from the NYT Magazine, called Online Cesspool Got You Down? You Can Clean It Up, For A Price. Basically it explores the maxim that “if you're not paying for the product, you are the product,” contrasting free-to-use web apps like Facebook and Gmail that mine user data for info they can sell on to advertisers, with paid apps that pledge not to (and often have nicer, cleaner, trendier interfaces to boot). What it goes on to conclude is that, essentially, being able to pay for the nicer, privacy-respecting option is a privilege which has become a kind of status symbol; if you're on a low income, you don't have the choice.
What it didn't really go into is platforms that have both free and paid tiers (like Dreamwidth), or platforms that are free but rely on donations from more moneyed users (like Mastodon instances), that nonetheless don't scrape user data for onselling to third parties regardless of whether you've paid or not. I feel like it's this which is really the way out of the binary they've presented.
I do think it's an interesting question: how can you create an ethical online platform, that doesn't violate user privacy (or degrade the user experience for advertisers' benefit) but is still financially viable? After all, things like servers, bandwidth and developer time aren't free – someone has to pay. It'd seem that, after ten years of operation, Dreamwidth has struck a sustainable balance: they get enough income from paid users to cover the costs incurred by the userbase as a whole (and have also carefully balanced the paid tiers – and what you get at the free tier – to try to ensure this happens). LiveJournal had the same system once upon a time, although as I recall, once they removed the invite requirement to create a free account, the system became unsustainable and then they felt they “had” to introduce ads. Dreamwidth hasn't had the same problems after removing its invite requirement, probably because the site never really went “mainstream”, so its user base is smaller but more dedicated (so, a higher proportion of users are paying). At least, that's what I would think on the matter.
Mastodon (and the rest of the Fediverse) has taken a different approach that I also think is interesting, where the platforms are decentralised and federated. That means that server/bandwidth costs are distributed across a much larger number of people (everyone who runs an instance), although of course individual donations to instance maintainers are welcome (and probably necessary, once an instance reaches a certain size). Mastodon does seem heavily reliant on volunteer labour though, both to develop and to moderate. I also, honestly, would be unsure of how “permanent” you could consider anything uploaded to the Fediverse to be (insofar as anything online is permanent, of course!). Instances can shut down, and I've also heard of media (like attached photos) being lost even when the toot they were attached to remains – like, I saw people speculating that it can get kind of unreasonably expensive to retain all the media ever uploaded to you (or federated to you) forever, so some instances (they say) are not doing this. I don't spend much time looking at ultra-old toots so I couldn't really tell you.
See, whether you consider that a problem depends on what you're using social media for. Mastodon, at least, is a Twitter-like platform that doesn't make it easy at all the look back into your archive; ephemerality is really what you expect from it. Whereas, say, if you're talking about a blogging platform (or really anything with a navigable archive), you want uploaded media to stay put.
Anyway, I clearly do prefer the user experience of the “sanitised” web (like, Mastodon is just so much more pleasant than Twitter to use), and I do have a few subscriptions going to different things, which I guess makes me one of the privileged that the NYT is talking about. Now that I'm an adult with a bit of disposable income (!) I don't mind chipping in a little bit to keep the services I value going. But I do also think it's unfair for those without that ability to be saddled with ads-infested experiences where all your data gets sold to third parties (and it's not like many people can pay for every site they use online…), which is why I think developing business models that strike that middle ground are so important.