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This model work for some specialist content, such as the FT or the Media section of The Guardian, but in general why would anyone ?

1. Emails (replacing letters and phone calls).
2. Weekend newspapers (can't beat paper for lots of reading).

1. Email tends to be 'free'. But as a service provider (one of the companies I work for), one of our largest costs are on servers; both in the hardware and the maintenance. What about Gmail? Well - we pay for Google advertising, which in turn comes out of the marketing budget which leaves the costs of our products and services at a particular level. Ergo, the end user pays indirectly. And lest us not forget - consumer electricity isn't cheap!

2. Professional advice, certain pieces of software (to support independent developers)

Although I do use Tweetie for Mac (www.atebits.com) which I choose not to purchase because I gain value from reading the targeted ads and find out about new products

As I no longer live in the UK, I don't have a TV license. So my use of the ³ÉÈËÂÛ̳ website is truly free, and I have yet to see any google ads on the site that were relevant to me.

Curiously, some content on this site is 'not available in your area' and there is no readily available way to pay for it. After all, how hard would it be to ask me to sign up for some form of access on a par with that enjoed by users in the UK?

Still, I can download pretty much anything I want for free. It doesn't cost the ³ÉÈËÂÛ̳ anything, and they don't give the option of paying for it, so I don't feel guilty. I don't understand the logic of providing podcasts on the ³ÉÈËÂÛ̳'s bandwidth to anyone in the world, but it being unforgivable for me to watch the Apprentice as provided by members of the public at their individual expense.

I still go to movie theatres though.

Other free things: content management systems like Joomla, Wordpress, etc. It's quite incredible that you can build a full multi-functional website with social media capabilities using free software. And how about Open Office? Gimpshop? Antivirus? And help and advice from all sorts of people on all sorts of topics. Online forums can be a great way to get answers to all sorts of small problems, thus closing the knowledge gap that keeps prices high.

Murdoch’s desire to charge for news on the Web would only work effectively if all the major newspapers acted in unison. If there’s a reputable free alternative most will use it.

I suspect that the majority of Web users only use a small number of popular websites which dominate web use. Google and its services (YouTube etc), to a lesser extent those of Yahoo (e.g. Flickr) and MSN. Facebook, MySpace and Beebo; Amazon, ITunes etc.

To make an analogy with terrestrial services: The UK has many thousands of shops, yet most people will do much of their shopping in a store run by one of the few supermarket chains.

This dominance means that a few services attract much of the advertising revenue. Facebook gets over 8% of the Web’s advertising revenue, which means FB can continue to offer services for free – unless it becomes too greedy.

The bulk of other advertising may be spread between these few honeypot sites. Google in particular must dominate income from web advertising.

This causes a problem for the many other sites. Either they rely on Google’s AdSense, or charge (but casual visitors will be reluctant to pay), come up with a valued niche service that people will pay for or have to offer a free service.

The cost of free? look for a service on Google maps and you’ll be shown a list drawn from their advertisers, not from the more complete list of entries in Yellow Pages etc.
Microsoft are even more focused on driving business towards business partners, how many users realise their options are being limited?

Over the next decade I think there will be a shaking out of web based commercial services as start up investor funds run out.
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What would I pay for on the Web? I paid to upgrade my free Flickr account to a Pro one simply because there is an upload limit on the free account. (I’m a regular user of Flickr.) I have also paid for membership of a dating site (Commentators ignore them, but dating sites involve vast numbers of those that use the web and many must be profitable.) People will pay if they value the benefits of the service enough.

And let’s not forget that having web access at all costs real money. Equipment, ISP, electricity etc.

I already pay for this ³ÉÈËÂÛ̳ site from my licence fee. I’ve been struck with the thought recently that when the digital switch-over happens I may abandon watching TV.
I watch very little TV anyway, I can catch news and repeats via the web, so why should I invest in a digital TV set? (At least provided DVDs still play on it via my DVD player.)

What else do I pay for in the ‘real world’? Well, most goods and services.
Other than recycling projects like Freecycle or public libraries (which are supported via council taxes) I expect there to be some charge for what people offer. (I may look for cheapest, but that’s simply money management.) After all people still have to earn a livelihood. Unless food, accommodation, energy and clothing etc became available to all for ‘free’ (and without any tax subsidy) I can’t see that changing. I can’t envisage an economy successfully operating on ‘free’; other than those of the few undisturbed hunter gatherer societies that still exist.


PS. Yesterday's Dot.Life blog attracted some interesting comments on a related topic.
/blogs/technology/2009/09/an_evening_with_generation_wha.html

A few points:

(1.) There is no "free". This is a misnomer. There are costs (actual and implicit) in all online interactions ---

* monthly ISP bills
* YouTube or other music/video site download costs
* time cost of reading + commenting on articles
* reputation cost
* cost of Internet security to prevent our PCs being hijacked and identifies, content and personal information etc. stolen and misused.

(2.) "Open and free" principles of Creative Commons is a Utopian ideal but property law has origins from C12th and anyone who believes IP and DRM doesn't matter should refer to the Facebook-ConnectU case:

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or any of the headline cases involving illegal downloading:

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There are costs related to IP and they can be retrospective.

Also, anyone who's ever been locked out of their email or content account for whatever reason know the costs of not completely owning and controlling their own access and interaction with that content.

(3.) Chris Anderson argues for "free" at a time when, not only Murdoch and other media giants like Google/YouTube are examining more sophisticated pay business models, the likes of Simon Cowell were reported to be in negotiations to earn US$144 million PER YEAR to continue with American Idol, which arguably has the biggest viewing audience (and advertisers’ dream) in the US. More than Wired.com enjoys, for sure!

Now, seriously, is Anderson telling us that whilst established media channels are witnessing increasingly competitive payment for talent and their content contribution — whether this is Cowell, a film star like Tom Hanks, a director like Steven Spielberg, a singer like Mariah Carey, etc. — Internet stars are supposed to be drones working for nothing (in the interests of the "free principle" except to please the Queen (owners of the platform) if Anderson’s theory becomes orthodoxy?

In exchange for his proposed freedom of creativity? Well, Cowell/Madonna/Spielberg et al have control over their artistic creativity and EARNS LOTS OF US$ FOR THEIR CREATIVE EFFORTS!

The more I think about free content online the less I think it’s democratizing and the more I believe it’s exploitative towards user-generator-content-collaborators and…………..Communist rather than capitalist. Capitalism may be flawed but, at least, market forces can determine the value of our content rather than fool us that all content is equal and all contributions are free.

Free isn't the way forward for online democracy. Compensation for online contributions (including thread comments) and costs for content access will be.

It's simply up to netizens what shape that compensation-cost model takes and how it operates.

Here are some suggestions to test whether Chris Anderson's "theory of free" has any legs. Let's challenge him to do this:

(1.) Produce content for free for a decade and not take any salary or compensation (shares, perks, etc.) from wired.com or any other corporate entity.

This would include not charging for any books of his --- like 'The Long Tail' --- via any online or mobile channels. Perhaps he could adopt Professor von Hippel (Head of Innovation & Entrepreneurship @ MIT Sloan School of Management's) actual practice of releasing his books in full entirely for free under Creative Commons instead of charging US$9.99 for the Kindle version and US$24.95 for the print version from Amazon.

(2.) Write as himself (and not any anonymous pseudonym) about any public figure or organization with total FREE honesty.

Let's see whether on+offline laws about defamation and reputational damage don't kick in and apply.

(3.) Download and share substantial volumes of music files from iTunes, hack the MP4 and convert it into MP3 format and then send it to not only his own Blackberry --- if he has one --- but also to every Bberry owner in the US.

Let's see whether he stays a "free" guy or soon finds himself with a US$ millions fine for illegal file-sharing and in prison.



The reality is that there are necessary limits and bounds to what is "free" on and about the Internet. Some of those limits are put into place to protect participants (privacy, usage of time, reputation etc.). Meanwhile, charges and payment needs to be made to reflect the value of people's contributions.

If online providers and content sites don't charge, then how will the work of editors / journalists / data management staff / whomever be acknowledged and valued? Who will pay for their mortgages, kids' education and weekly food+energy bills?

What are online participants supposed to live on? Internet ether?

Let's test the theory in a practical way. Let's see how well Chris Anderson copes --- if he's a true advocate of "free" --- and stops taking a salary from wired.com and releases all his content and creativity for free (with no get-out clauses) henceforth for the next decade.

It will then become obvious that "free" is not the way forward for democracy or the way to value online contributions or its participants.

Still.........if Anderson gave his new book "Free" away for free indefinitely --- along with all his IP and future content ---..........it would probably prove his theory better than any polemic toing+froing with Malcolm Gladwell.

This article has been bugging me all day, and the last few comments have only made me more curious.

I saw/read something recently about Japanese companies having to devise new business models on account of deflation making the old 'cost-plus' approach useless. They've had to get used to the idea that they will have to charge less in future, instead of more.

Economists also hate deflation because the knowledge that prices will probably fall discourages people from making purchases until they absolutely have to, and this further depresses prices/profits/growth.

I know exactly what they mean. I need to upgrade my computer but I know that if I wait a while I can get more power for less money, so I'm not making the investment yet.

Curiously, when you go into a computer store they always encourage you to buy the absolute biggest and best you can afford on the grounds that things are moving so fast you need to get as far ahead as you can now. But in fact, if I buy more than I need right now I will be left with surplus capacity that could be purchased latter at a cheaper price.

So I'm confused by Chris Anderson's statement that "it also allows us to build businesses without implicitly knowing how they're going to make money."

Consider this: I can invest money now and absorb the depreciation on the assets I buy, at the same time as the price I can charge for my services falls. Or I can buy the same capacity later, and offer the same service at lower cost to myself.

Obviously there's a lot more to it than that, and Amazon's strategy of focusing on becoming the dominant player before anyone else got a look-in is a good example of that. But I can't help being skeptical.

Can we find an economist who can make sense of this? Why does deflation discourage investment in the wider economy but Moore's Law-induced deflation encourage it?

@TaiwanChallenges --- ah Moore's Law..........I wonder whether anyone @ ³ÉÈËÂÛ̳ Digital Revolution's come across the hyperboles about the increase of transistor speeds and a human-AI hybrid accelerating us towards the Singularity by 2040 yet?

The hyperbolers present it as if the cause and effect of Moore's Law is a given for the costs for participation online to be driven down, to allow the other 6.5 billion people who don't currently have access to PCs or the Internet to jump onto the Mother Ship and start contributing their content and context about their cultures, perspectives, values and lives. All for free, naturally.

The problem with Moore's law and most of the "fuzzy economics" bandied around by the likes of Anderson is that it takes no account whatsoever of the PREMIUMS (or as the Japanese would call "cost plus" approach) of most corporate strategies. Nor does Moore's law factor in GATT agreements, other international tariffs and, importantly, MARKETING+BRAND+PR investment costs which companies certainly put into their cost-income analysis.

The transistor cost analysis in Moore's law is a pure production one. NO competent and intelligent corporate strategy person, economist or CFO would take it at face value and input it into their model(s) to argue that "free" (aka not charging for products+services) is the way forward because Moore's law is reducing costs.

Instead, they would generate a cost curve to meet projected sales demand FACTORING IN ALL THE OTHER ASSOCIATED COSTS.

Does Moore's Law-induced deflation encourage investment in "businesses without implicitly knowing how they're going to make money"?

Answers.....................

Let's see......if tech start-ups are becoming cheaper to set up and participation is free, as also per Anderson's example of flipping the chocolate bar costs in his book 'Free', then VCs and private equity investors should be flocking to buy-into these tech start-ups and pumping lots of investment into them, right?

Errrr.......why then have there been such notable layoffs and LACK OF INVESTMENT in the sector during the climate of recession and deflation?

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Whilst, certainly, our global society is at a point of reflection and pivot wrt capitalism --- given the impacts of and fallout from the global financial crisis, that's not to say that "frenomics" is a sound economic alternative.

In the first place, "frenomics" advocates can't even get their Moore's Law calculations and production cost analysis curves right, never mind the demand-wage-advertising barrier intersects.

The issue of charging for the online content is NOT a quantitative one of "Will it be more or less?" As with everything about the Web moving forward it will be a COMBINATION OF QUANT * QUALITATIVE.

Where and why can Company X charge for content A.

How and when can Company X compensate online participants for their contribution and engagement.


To stick with a purely quant and linear (mathematical-metaphysical) heritage of the way we perceive the world will become increasingly.....redundant, unimaginative and under-informed.

If we look at the developments in the Semantic Web as spearheaded by Tim Berners-Lee and the W3C, we can discern that there's an attempt to extract more qualitative (or contextual) meaning from the keywords and links we use in searches and online interactions.

What will we be prepared to pay for in the future? What we've been prepared to pay for throughout the history of the Web to-date.

Companies --- analysis and insights into consumer's values, brand associations and purchase decisions

Netizens --- perceptive and engaging content, privacy + security, interactive environments to share and collaborate with others, utilities which provide transaction or tracking services (e.g. money management tools)

Governments --- information about criminal activity online

Other(s) like NGOs --- exposure to netizens so that they can either contribute to funds and/or participate in activities.

Ah and I should say the economics model of the future online needs to be a MUCH MORE HOLISTIC ONE than that of pure capitalism, communism or frenomics.

It should be more perceptive, more values-based (whereby values are not determined by a quantity alone but take into account qualitative factors like culture, gender, etc.), more democratically distributed (in so much as your clicks will earn YOU money and not the company only), and needs to factor in a COS (contribution optimizing society) payable by the company towards local communities.

In a sense, it may also be helpful to pose the question, "What are companies prepared to give or pay towards US AND SOCIETY to value our involvement and engagement with them and their content / brand / product / service online?"

Before anyone thinks this is an odd suggestion, you may all like to remember Walkers approach to online engagement. THEY paid winners of their competition (to find new crisp flavors) GBP tens of thousands plus a percentage share in future sales of the crisps.

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Addendum to my point on what we're prepared to pay for in the future online:

INVESTORS --- a defined, sizeable and active user base, innovative technology, management team that delivers (strategic vision with operational soundness) and clear route to market business plans.


It's notable that despite techcos becoming "as cheap as chips" to invest in during the global downturn, the financiers didn't pile in and have actually been MORE DISCERNING in their investment criteria. New investment is down and any re-investment carries with it even more stringent terms for ROI (return on investment) than when the techco's shares were priced at higher levels.

That fact in itself completely blows apart any theory that if we make things cheaper or free people will want to buy-in to it in greater numbers and be part of the "free wave".

Now, why is this?

Well, any economist worth their salt will mention the words "FLIGHT TO QUALITY." In a deflationary or recessionary situation it's not about the quantity or price point of what something is worth in production cost terms that drives the market of buyers. It's about the perceptions of QUALITATIVE VALUE of a brand / product / service.

The only notable transactions of the last 12 months have both involved Facebook:

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Although the amount paid is lower, what's noticeable is the quality dimension --- principally the quality of the way the AJAX is integrated (for instant messaging, for content management, for search) and, importantly........SCALEABLE.



@³ÉÈËÂÛ̳ Digital Revolution team: It may be a good idea to interview some tech investors to get additional perspectives on what the market is prepared to pay for and how.