Chris Anderson: Free! Why $0.00 Is the Future of Business
wired.com
wired.com
But, there's more:
The article emphasizes that the "costs" for an Internet Service, which hitherto have been cross-subsidized by advertising are, for all practical purposes, not relevant any more. It is true that this article talks only of the bandwidth, storage and computation costs and excludes the cost of labor. But much has been said before about the costs of labor decreasing via improved frameworks and tools.
The question then becomes, "What does it mean now, that the costs to be cross-subsidized are so low?" This goes back to what PG, Marc Andreessen and others have been claiming all along: we are going to see more startups, a LOT more startups. Also, according to Chris Anderson's Long Tail, LOTS of startups in niche domains. Startups operating in niches, might not make a whole lot of money through advertising. But, this is precisely the point of the article, given the cross-subsidization needs being so low, some startups would be happy making a couple of thousand or tens of thousands a month (instead of millions).
YC uses this as advertising.
Money isn't really wealth, money is just a representation of wealth. At some point, the overhead of using money will not be worthwhile.
Money has value because we can receive it in return for value we've created (a sort of universal value system), and transform it into another form of value or wealth. I don't see how it could ever get to the point where it's not worth having a universal medium of wealth. If it did get to that point, we'd have to resort to bartering. The only alternative is to have EVERYTHING be free - not just information products, but physical products, like cars, houses, and services. And if communist countries are any clue, this isn't the best way to do things.
The faster, more fine grained, and more dynamic a system is, the less money makes sense, since the cost of managing the money comes closer to the value of the money being managed.
You also see this realization in the current trend of Services Oriented Architectures, which is basically the UNIX philosophy writ large.
A very hypothetical example: say you have millions of simultaneous users all over the world who are constantly, but unpredictably, using your web service. The value of all these people using your service together is very high. However, since people use the service irregularly, charging them a significant amount would make it not worthwhile for them to use your system, and you lose your crowd. On the other hand, the amount that you could reasonably charge them is so small that it would only cover the cost of transaction, and would make the psychological overhead great enough that you would again lose your crowd. So, overall, it is best to not charge anything, and instead extract value in other ways, such as demographic information mining.
Better to talk about currency than money. You are right, its place is where what you want to consume and what you (want to) produce are different goods. I don't see why the web would change that basic principle. You may contribute your expertise to Hacker News, an open source project and a couple of Wikipedia pages. But surely you don't want to consume only your own products. But maybe the producers of your desired "goods" (whether purely informational bits and bytes or real physical apples or oranges) derive no direct benefit from your aforementioned products. You will necessarily arrive at some medium, whether you call it credits or miles or dollars.
Another, more morbid analog to the Gilette example, is why it's always good to invest in lead and copper when the country goes to war. FMJ ammunition suddenly becomes a much-needed and much expended commodity and the raw materials prices sky rocket.
Advertisements are not a neutral way to make money. That model rewards massive infrastructure investment, control of information distribution, and overall low quality of the actual product.
It's very strange that one of Facebook's big problems is that their content is too interesting and meaningful to their users.
That said, it's hard to make content more important than my friends...
They just don't get it.
Chris is 100% right here.
"There's something interesting happening right now. Startups are undergoing the same transformation that technology does when it becomes cheaper."
Follow the money.
... on the attention economy (previously on hn)
google's ecommerce model is a by the book case, offer free content and services and sell ads
moral is, google didnt start by, we will offer this for free and they will come, they must have started by we wonna sell ads on the web, how can we make ppl come
if they do it any other way they will eventually vanish
if this is what you want to believe, fine, but there are those fields called strategic management, marketing and economics, where people study and discuss how you can make a real plan to make real money, and believe it or not it works, and many many companies survived thanks to those reasearches from those fields, and many many companies failed for ignoring those exact things
and in business just like in development, implementing is way harder than knowing, so just because you know whats right, doesnt mean you can do whats right
how goggle get advertisemnet
After "failing" to cash out, they took their confidence in what they had and built it into a public service. Initially, I think they were dead set on not subsidizing their site with advertisements and were definitely not thinking of doing subscriptions or anything of that sort.
In the end, I guess they simply weighed the alternatives (i.e. closing the doors and finishing their PHD studies) and figured that instituting any sort of sustainable business model is not so evil after all.
Good for them (and us). :)