Wednesday, May 13, 2009

The Fall of Free Internet

Last summer while looking in an airport bookstore, I found a book about how the world was entering a new age of "free" stuff, where we could get things for free, enlist help from people remotely to solve complex problems, and generally improve our ability to get things done and done cheaply. While the idea of improved interconnectivity may well assist in finding solutions to complex problems-there are a number of examples of this that I will not go into,-nothing is or ever will be free. My question then is who will pay?

It has been thought for qutie some time that internet content would be fueled and funded by advertisements. The problems with this are that there is significant content that may lack the popularity to gain advertising revenue, but, even more importantly, we are so over-saturated with ads that their value is decreasing and increasingly becoming dependent on their effectiveness (i.e. number of clicks on an ad) instead of just a flat rate for a banner. While ads will likely always be important for funding the growth of web services, I see another, perhaps more important source that will, in effect, make the internet just like any other service.

This new source of funding comes from...wait for it...US! Of course it does. Increasingly I have noticed a trend away from everything being free and toward a pay-for-use service. I believe this is how it should be. Recently, some markets have been experimenting with micro-payments. I support this innovation because to me, there is great value in things like AP news stories that we will not be able to afford if we do not pay for them. I had thought just a few months ago that the age of news may have been at an end, now I recognize that I was sorely mistaken. Instead of being at an end, we are experiencing an uprecedented opportunity to select subjects of interest for us and actually suppport quality reporting/service at the same time by paying a few cents for a story or to watch baseball online, etc. I am happy about this change because it means that my greatest fears may not have been realized after all.

When people argue that everything will be free, they are demonstrating their lack of understanding to market processes. Nothing is free, it is always a question of who pays for it. Who pays for it determines its content, quality, and continuity, and is therefore extremely important. As websites have gone from being pay-for-use to free and now are moving back to pay for use (albeit in a form of a free demo version with payments creating the opportunity for improved service).

While paying for use will ensure the services continue to grow and improve, they also pose a challenge to the casual web surfer since now great amounts of truly valuable information will be hidden with only small amounts exposed. This poses a challenge to those who are unable or unwilling to pay (how many times have you as students not read something because it cost a few bucks to get it online? I know I have). Nevertheless, even with the falling "basic" service quality (interestingly, cable television is identical to this in the falling quality of the basic service while vastly improved pay-for-use service), we can look to this pay for use model as the way to ensure quality in a world where accountability is disappearing, and a way to maintain some control over the services because we are paying for them rather than relying on someone else.


  1. I'm assuming you're talking about Chris Anderson's book which is an expanded form of his Wired article:

    His actual argument goes into far more nuance than "yes, everything will be free" and takes a serious look at the economics of free.

    The classic argument against micropayments is Clay Shirky's on mental transaction costs: and, while I don't think it's neccesarily a deal killer, it adds significant complexity that must be accounted for.

    Have you taken into account how piracy will affect the landscape? You can try and charge as much as you want for content but if a widely available pirated copy is around, that's going to affect how much you can charge.

    In short, I, like many people interested in this space think free will remain the default with some interesting paid niches.

  2. I see your point, but I feel that what will happen is a choice between high quality paid service and lower quality free service. Also, piracy was the rule rather than the exception in music, and now people are willing to pay for it. Of course there will be piracy, but the service can still be valuable if it is possible to get, for example, a treasure-trove of information all in one place that would not necessarily be as simple through piracy. I feel that also as paying is made easier, people will be more likely to subscribe. The key is to make something that has to be subscribed to in order to get the full value, similar to cable television.

    I do not remember the name of the book that I picked up, I just felt that talking about free as it did in the introduction and in the synopsis seemed a bit naive.

  3. The problem is that typically, the services seeking pay to play aren't of particularly high quality. Certainly, almost nobody was willing to pay NYT to read Maureen O'Dowd's or Tom Friedman's screeds and Rupert Murdoch seems to have gone senile thinking that ANYBODY is going to pay over the web for the content, if that is the word, that he publishes in his tabloid newspaper and television offerings.

  4. The services are of an increasing quality and as the costs of providing those services continue to rise, these places will have to charge. I do not read NYT for its editorials, but for its investigative reporting. International coverage and investigative reporting is important and I believe that getting quality stuff will require some way to pay for it. Regardless of what you say about Murdoch (and I agree with you) his Pay for Use Wall Street Journal is making money because it offers some services for free, and the better stuff for a fee.

  5. Lol! You seriously read the NYT for international coverage and "investigative" reporting? Wow!