Free versus Subscription – Show Me the Money!

Should we expect everything on the Web to be free? Is anything really free even on ad supported sites? I was reading a post on the AuditorumA blog today – dealing with these very questions – and I think it is about time we wrestled with free versus paid as models for monetization. I have talked with AuditoriumA's CEO Tony Mars on a couple of occasions and I reviewed his upscale human search site last month. Tony makes some valid and powerful points on his blog about the Web, his vision and free vs. paid models.There is a great polar debate in the offing here and it is about time we addressed it.

The Polis and Web 2.0

I think it was J.J. Rousseau who said: "How can man truly be free when all around me I see him in chains?" I think this idea really strikes at the heart of this "free" Web issue. We need to ask ourselves: "What is the cost of ad supported versus paid for content and innovation?" If we are under the delusion that these ad supported sites have no cost to the user, this is still no advocacy for "all" sites adhering to this little Web 2.0 mantra. One of the variables driving traditional media and content to the Web is really a migration away from a proliferation of advertising. Bad (or good depending on how you look at it) SEO and spam have become the nemesis for every Internet user. These often negative and overused variables run contrary to everything our little term "Web 2.0" is supposed to be about. Yet we have all been "roped" into the "free" shell game from advertisers for decades now. How many of you out there actually ever got anything for free (not to include a $10 DVD player for paying Comcast $1500 a year for advanced programming)?

TechCrunch, Digg and Google

I have to pick on my buddy Michael some here, but he is a tough guy so he can handle it. TC is fed to a large extent by Digg and other social media sites comprised of the Google generation. TC is not the only recipient of social media love, but certainly one of the biggest and best. Google's place in what we might term – A Machiavellian Web – is well established as the Prince of ad revenue. Of course our "free" madness did not strictly come from these online entities, we have been beaten to death with this sideshow – tin salesman routine for 100 years if not more. For the purpose of this discussion we need concern ourselves primarily with this Web 2.0 dogma only. Isn't it about time we all called BS and got to the point?

Michael – Super Producer

Michael Arrington is a great guy and a genius in production and networking. Producers of media (at least the great ones since P.T. Barnum) have one mantra – give the people what they want! TC's adherence to this set of principles and its primary adversary is abundantly clear in a recent post by Mike. Arrington fairly (or unfairly) hammers 37Signals in this post for their continued promotion of the idea that everything on the Web cannot be supported with ad revenue. Is it in the interest of TC to see ad supported sites prevail and to give the Google generation (Digg) the appearance of free from Google and others? Make no mistake about it, Michael Arrington does not hit his keyboard without purpose and so often deep purpose. 

Mike says 37 has caused the "suicides" of a number of startups that tried to enter the paid-for scheme. Mike offers Feedlounge, a subscription based RSS reader, as the poster child of evidentiary proof against 37 and subscription services. It is interesting that Mike also notes that the reader was good in the same post. I don't see the correlation here, with hundreds of free startups going belly up or close to it, how can we assume that fee based monetization is the culprit? Maybe Feedlounge sucked or was more expensive than a better alternative, or perhaps some sites turn to fees just to stay alive. Does this mean anything great should be free? Mike makes a strong case for anyone considering fee based startups choosing another realm at the end of his manifesto. 

Revenue Growth

I have argued many times that the numbers game we are seeing on the Web is a fallacy to some extent. In a post on ZDNET Phil Wainewright made a case in 2005 for some concern over where the "dough" was going to come from. Based on this article almost 3 years ago, an argument can be made that many of these startups simply wanted a foot in the "buyout" door and their VC investors were along for essentially a Web 2.0 version of the Web 1.0 dot com debacle. In my experience VC capital in the hundreds of millions has been "gambled" on just such a scenario for get quick bucks ROI. Phil thought then, and I am beginning to think now, that some sites will have the necessary structure to bend with fluctuations in ad revenue, while others are simply not going to succeed.

Another interesting thing to consider is the finite nature of ad revenue. There has to be a saturation point where all the money that can be spent buying online products reaches a stasis. People simply have a rather static and consistent flow of cash to do business of any kind, so how is ad revenue going to continue to grow beyond that exploited by traditional means. At some point we are looking at a Web monetization model made of air! Perhaps this is the same mentality that drives un-renewable commodities like oil. In the end Google is really just like Walmart. Get everyone in with real or apparent value, drive the cost down to the point of critical mass (you can't buy something for nothing), and then try to expand into China. The end results are mediocre products, underpaid workers and intolerable service while the man at the top sips cognac on the Riviera.

Conclusion

Web 3.0 needs to be about the "correct" way of doing business and presenting products. The Google generation may need to evaluate exactly what they ever got for free that was worth a damn. Sure if my website can operate and provide excellent value from sponsors or ads – I would rather do that than charge people. However, if we are going to become a race of idiots that jumps over $100 bills to spot something shiny in the sand – the Web is in big trouble and soon.

Wikipedia is free out of the art and ideal of Jimmy Wales (and to a large degree out of his pocket – maybe $2mil a year), dot orgs, search engines and very high volume sites can do well with ads (even better with better ads). The bottom line is, how do you buy a Picasso at Walmart prices? There are some things that cannot be free or even "apparently" free. Rather than hammer one another, let's get into a discussion that provides guidelines and understanding of the best way to support what we want on the Web. It is fairly easy to see the Dot Com shadow looming above our new variant. Personally, I don't want Web 3.0 to arise out of the ashes of this one. BTW – was Web 2.0 coined to produce another Dot Com era? Questions with no answers – yet.