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

[mouser]

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?"..

http://www.betanews....kes-money/1259882572

[JavaJones]

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

[mouser]

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?

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

[app103]

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.

[rgdot]

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.

[40hz]

why is advertising suddenly not a viable model for sustainable web businesses

-JavaJones (December 04, 2009, 03:04 PM)

Primarily because it's too easy to evade advertisements either by blocking the ad content - or going to an alternative site that doesn't have ads.

Advertisers want guarantees that their copy will be seen. That's why network ratings and circulation figures are so critical to the people who want to sell add space or time slots. Ad rates are based on the number of eyeballs the ads will likely be seen by. And since you can no longer provide audited viewer statistics or circulation numbers, the advertisers have all become less willing to accept quoted ad rates without question as they once did.

Back when there were three networks to choose from, an no effective blocking technology, TV viewers basically had to choose between watching entertainment (with ads) or not watching at all.

With the advent of cable, and later the web, all that changed.

[zridling]

That's true, cable brought us HBO back in the 70s. I pay $5.99/month for DishNetwork's NFL RedZone channel, which is only broadcast Sunday afternoon for seven hours, showing every play (and lots more, such as after game coaches/player interviews, extended series of key games, etc.) within the 20-yard line and every score of the day as it happens. With NO COMMERCIALS, it's absolute heaven. Imagine the world free from ads!

But if everything is going digital, going onto the Net, where is the money for advertising going to come from?

During the first Hackers' Conference in 1984, Stewart Brand uttered the infamous maxim, Information wants to be free. But he meant freedom, not necessarily price.

Entities like Rupert Murdoch's newspapers and TV stations don't "own" the news they cover. RARELY do they write anything original, unless you consider a columnist such. Thus, whatever Rupert's selling, so are many others, but then I can also obtain "it" (the story, the news, the info) for free from other sources (such as daily company press releases). News is not treated as property such as a physical music CD, a book, or a film. Apple's solution is to control access and destination points, which as we all know is expensive.

* Musicians will have to go on tour.
* Newspapers will have to go digital by selling a futuristic digital reader activated by your fingerprint, and then uploading fresh content to it 24/7.
* Novelists are making the transition to ebooks and actually getting paid more per book than paper copies.
* Actors will have to work for $50,000 rather than $25mn per picture; oh, the horror!

I could go on, but the 21st century is a digitized one. Guys like Murdoch and Mandelson (look up "ACTA") prefer the analog economy of the 20th century, where business titans can control supply and artificially leverage their profits at the expense of the consumer. (Bought any computer memory in the past 20 years?!) In a digital economy, some people will have to go back to work and not live off of copyright lawsuits.

[JavaJones]

zridling, I think you've hit on a key point: control. It's not just about profits, it's about control, and of course the profits that such control allows. But the key is the control. Even if you were to show newspapers, or other big media, a way to make as much or more money from their products than ever before, they wouldn't be likely to accept it unless they could exercise the same amount of control they've always had. And I grant that, from a business perspective, a revenue source without control is less attractive than one with control, even given the same amount of revenue. The problem is their control is now illusory and that's exactly why they're losing market, profit, and relevancy. The revolutionary changes that digital anything makes to the world are pretty well uncontrollable by any one entity, at least not for long. So they'll need to find a way to work *with* it not against it. So far organizations that are doing that well seem to be succeeding...

As for ad pricing, etc. being different from newspapers, TV, etc yes that's true. But TV has widespread ad blocking now too with TiVo, etc. And the ad model on the Internet is based on a young market. It may mature into something similar to what newspapers had. In fact some of the most successful sites are not the "throw any PPC ad up there" type, rather they are like newspapers in that they select the ads that go up, and position them semi-carefully within their content. Look at www.penny-arcade.com for a prime example of an effective new model for online advertising. For example the PA guys frequently draw art and write copy for the ads on their site, making them more interesting to their visitors. And hey, isn't advertising online more trackable than print or TV ever *really* were? The viewership/readership stats of newspapers and TV were illusory, mere extrapolations at best, but advertisers bought into it because they had no other choice. Now they have choice, the value per-ad is diminished, but the ability to serve relevant and contextual ads and a lot more variety of ads is improved. So I think things will stabilize over time. The best thing people like Murdoch could do is work towards a more stable online advertising market I think.

The bottom line is I think the flagging success of major media can be demonstrably tied to their lack of embrace of changing times. This is all the more compelling because it's happened many, many times before, and it's always virtually the same story. Life goes on, the big titans of the day die off, and new titans replace them. Maybe Google is one of those titans, who knows. But unless Murdoch and company change their approach, they won't be, that's for sure.

Above all it's important to remember it is not some new and uniquely pernicious thing, this interwebs and its series of tubes. Technology has always challenged the status-quo, and upset the establishment. That's a good thing. Without it we would still be listening to live piano players in movie houses with silent movies, there would be no record sales because recording music is the devil's work, and etc, etc.

P.S. Can you imagine how the lamp lighting industry suffered when electric lights came along? Youch!

- Oshyan

[40hz]

During the first Hackers' Conference in 1984, Stewart Brand uttered the infamous maxim, Information wants to be free. But he meant freedom, not necessarily price.

-zridling (December 04, 2009, 05:04 PM)

He later added a second comment to his original:

"Information wants to be free. Information also wants to be expensive."

And there, in a nutshell, is the paradox lurking behind the problem.

And as Stu Brand also noted: "That tension will not go away."

--------

In a digital economy, some people will have to go back to work and not live off of copyright lawsuits.

-zridling (December 04, 2009, 05:04 PM)

Have to be careful about going to far with that argument.

While what you're saying might be true in some cases, in many more cases the following will be even more true:

In a digital economy, no one will receive any compensation for digitized copies (i.e. audio, video, image) of their original creative works since copyright law has been rendered unenforceable by new technologies for the digital duplication and transmission of such works.

The other thing we need to be careful about is allowing people to hide behind the anti-DRM flag in order to mask what they're actually doing.

DRM gets bandied about as the big reason for bucking the recording industry. But I think what's going on for most people has very little to do with DRM or the recording industry.

What I think is really going on is fundamental shift in public perception. Basically, the general public is reaching a point where it no longer views recorded anything as property.

Simple truth of the matter is a huge number of people are basically saying they're no longer willing to pay for musical recordings. Period. That's not to say that they no longer want those recordings. It's just that they don't see the need to pay for them - and furthermore - they won't pay for them. Period.

And that is going to hurt everyone in the long run.

[JavaJones]

Here's an interesting, topical article by a former Salon.com Managing Editor about his experience with putting up, then taking down "paywalls": http://www.guardian....ries-paywall-pioneer (by way of Slashdot)

- Oshyan

[Paul Keith]

It's a misleading (and mistaken) question.

"No one" is too sensational.

Education is strongly tied to the value of information.

>>>Information wants to be free>>>That's why the model is shifting

>>>Information wants to be more expensive>>>Replace news reporting with "how to" report news

Blog books, freemium services, paid instructors increases in demand.

Expensive journalism, newspapers, product/item advertising decreases in demand.

(I don't really know how to state my point so I'm just putting what makes sense to me in this reply.)

[40hz]

+1 with Paul. In some respects, the question is misleading.

None of the web is actually free.

Somebody, somewhere, is somehow paying for every bit of it.

Possibly what's happening is that the people who have been paying for it all along are now saying they want (or demand ) other parties start paying for some of it too?

In some respects it's another example of the maturation cycle for technical change. In the early stages of introduction, adoption can be accelerated either by subsidizing or offering the technology to the public for free. It used to be understood that once general adoption was achieved, the subsidies would be dropped, and it would the go back to business as usual.

Unfortunately, one of the side effects of having the web so heavily subsidized is that the vast majority of its users have come to believe it doesn't cost anybody anything. And from this comes the feeling that "all things web-related" should continue to be provided without restriction, and at zero cost to the consumer.

I'm not sure who these people think is paying for all that infrastructure (copper, fiber, routers, web farms, electrical power, etc.) or web content - but there you have it.

So I guess it's not so much a question of can it remain free.

I think the more real question is who will it continue to remain free for.  

[Shades]

I'm not sure who these people think is paying for all that infrastructure (copper, fiber, routers, web farms, electrical power, etc.) or web content - but there you have it.

-40hz (December 06, 2009, 02:26 PM)

In general I agree with you, but the subscription fee you pay to your ISP should take care of the infrastructure. If that is not the case, is that my fault? In my point of view it is not and because of that I don't see any reason why I should pay for the mistake between the ISP and whichever party is doing the infrastructure (maintaining/building).

Now I am not daft enough to think that I (as a costumer) will pay for such mishaps, but still.

Creating and hosting content costs money and should be non-subsidized. The only way I could see that happening is in the form of a plan similar to what cable-TV does. Besides the connection fee for your ISP, pay them an extra monthly sum for all access to sites in that plan. Content providers can be paid with that extra money.

Most people have a set of sites that they continuously visit and disregard most of the web anyway. Of course ads shown on the sites that are included in such a plan will become more valuable for both the content provider and the advertising agencies, so the money that people should pay for such a plan should not be that high.

All the Murdoch's of the web would agree with this model...as a short/mid-term solution anyway. Since I have worked several years for a content provider and nowadays just happily surf, I'm not sure if this balkanisation of the web will do us all much good in the long term though.

[JavaJones]

I agree wholeheartedily with Shades - the cost of infrastructure should be covered. The cost of content hosting is actually still much, much cheaper than it ever was in traditional media. Try reaching the equivalent of 10 million people a month with a $2000/mo equipment bill. Yes, you can get a server farm that will serve 10 million unique visitors a month with about that kind of monthly investment. It's a lot, sure, but it's pennies compared to what cable and TV equipment costs and maintenance fees are. So I don't think that's where the problem is. And anyway, there's advertising to pay for a lot of that stuff anyway.

The problem with a subscription model for "The Internet" is that it's soooo much more vast than cable TV or anything else htat has a subscription model, it would be impossible to really simplify billing to that kind of level. The only thing you could do is maybe take up a model like those old "porn networks", Adult Pass Network or whatever, and have large groups of content providers under a single banner. You'd still need to buy multiple subscriptions in some cases, but at least it would be only a few instead of 100's or 1000's. The other alternative is a broadly available micropayments system, say Paypal or Google come up with it, and then sites start implementing it just as they have with both of those company's existing payment services, out of a desire to be recuperated for their time.

Anyway I'm getting away from my real point though: perhaps the question is wrong ("Can the web remain free"), but if that's so, was the question for radio or TV or many other long-term free services also wrong? "Can TV remain free?" Well, it didn't I suppose, we have cable now, for quite a while. And yet over the air broadcast still survived. We have XM radio now, yet radio remains (struggling, conglomerating), and HD Radio - a new free radio technology - is also trying to establish itself. My point is the model that everyone says is broken online is not unique to the Internet and has been apparently working for decades in other media platforms. There are certainly possible reasons why it may not work online, btu I don't think anyone has very well addressed or discsused those here yet.

Does anyone find it interesting that the only people who seem to be complaining about this are people who already have huge companies with lots of money?

- Oshyan

[zridling]

Does anyone find it interesting that the only people who seem to be complaining about this are people who already have huge companies with lots of money? - Oshyan

-JavaJones (December 06, 2009, 03:31 PM)

Aye, and there's the rub as Hamlet would say. Those same uber-rich people are have spent quite a bit buying politicians to help them write entire sections of the copyright law that only extends in one direction -- longer and longer -- so that infringement never ends.

[CodeTRUCKER]

The Internet is the "great leveler."