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Can there be a free Web if no one makes money?

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Interesting read on BetaNews today:

Paywall is suddenly a hot topic as free content turns many longstanding businesses -- news among -- to apparent ruin. News Corp. Chairman Rupert Murdoch is mad as hell, and he's not going to take this anymore. This week Murdoch repeated his call for paid services during a U.S. Federal Trade Commission public workshop. "We need to do a better job of persuading consumers that high-quality, reliable news and information does not come free," he said. "Good journalism is an expensive commodity."

But how is the value of the digital content, whether news or some other commodity, determined when so much of it is free? Bill Buxton, principal researcher for Microsoft Research, briefly addressed this topic during an October talk at the Business Innovation Factory. "When the cost of goods approaches zero, the effective price inevitably for that product goes to zero," he said. "We've seen it in music, and the music pirates -- maybe they were bad, maybe they weren't -- were not causing it; they were just accelerating it. Every single other entity that goes digital has zero cost of goods. So, whatever's happened in music is going to happen in literature, news, cinema, theater and so on."

The prevalent theory is to fund all this stuff with advertising. "But if everything is going digital, going onto the Net, where is the money for advertising going to come from?"..

--- End quote ---

And a commenter in that thread questions exactly what I always question: if newspapers (and radio, and TV, and...) have *always* made their money almost *exclusively* from advertising, then why is advertising suddenly not a viable model for sustainable web businesses? Joe (author of the article) comments in reply, I think, that the massively greater content pool on the web means there is far more supply of advertising space than there is demand from advertisers for said space. But here's the thing, advertisers need only advertise with where the traffic is going. Just because random Joe Bob has a blog doesn't mean he should have advertiser's money. And the Pay Per Click model perfectly democratizes this (assuming the system is not gamed), since Joe probably doesn't get a lot of hits to his blog. If he *does*, then the advertisers should want to get in front of those eyeballs.

So I really don't see the problem here. Yes, the web has dramatically lowered the barrier to entry for media production, but the need for quality, or at least public appeal, has not changed. The assumption has always been that successful newspapers, TV stations, etc. are successful because they do what they do better than anyone else. If that's not true anymore, then someone else should be succeeding as a result - it's not like everyone should be losing money, assuming the ad model holds. The money is going somewhere, just maybe not to the people/companies who are used to it for the last 100 years. But the public interest is still there, and the advertising money should be too, so they may only have themselves to blame.

If the ad model is not working anymore, then that needs to be explained, because it's the same model we've used for years. People freak out like the extremely low cost of publishing content and the prevalence of "free" online is some new arrangement that radically alters everything and screws up traditional media's profit model, but that doesn't really ring true to me - most media has been that way for a long time. The only thing that has changed is the cost of production and delivery, and that should lower for the big guys as much as the little guys, provided they're willing to use the same methods.

So I can only hypothesize one of two things is happening: 1 - traditional media has failed to evolve with the times in terms of production and publishing methods, with their costs remaining higher, and so they are suffering, or 2 - someone else is doing it better than they do, and getting the attention they used to get, and hence the revenue they used to get.

- Oshyan

And a commenter in that thread questions exactly what I always question: if newspapers (and radio, and TV, and...) have *always* made their money almost *exclusively* from advertising, then why is advertising suddenly not a viable model for sustainable web businesses?
--- End quote ---

you know that's a good point that i tend to forget.

Well, for one thing, newspaper advertising is very different than online advertising. Online it is pretty much pay-per-click which means most of the time the ads run for free unless they generate clicks.

In contrast, think of the Sunday paper chock full of sales circulars, where the companies are paying big bucks to have them included in the newspaper, regardless of whether you read them, visit the store, or toss them in the trash.

Online, you can place a free classified ad on Craigslist and get responses. Would you pay for placing one on a newspaper's website, unsure if anyone will ever see it?

And most newspapers, despite the fact they make the bulk of their revenue from advertising, still charge readers for a print subscription, and even single copies will cost you on the newsstand.

The model for non-internet advertising has always been based on impressions (number of subscribers, sitcom ratings, etc.).
From the advent of web advertising impressions have been valued less and less (have to click, have to make a purchase, etc.)

That is the problem and that is where the web diverges from traditional media.


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