The end of the free lunch - again
economist.com
economist.com
For example, say you created free, online computer games where people spent all day reconfiguring proteins. The game is completely free, thus providing wealth to people, and people pay the service back by using it.
The only reason money is ever mentioned is because it is the simplest, catch all solution. But, like the no free lunch theorem for search, money is your Monte Carlo baseline. For a limited problem domain there is quite likely a better technique than random sampling, and therefore a better wealth redirection technique than money. People just need to be more creative. (And, perhaps the comp sci analogy is more than just an analogy)
I've just finished reading Accelerando by Charles Stross, and one of the characters there is what he calls an "agalmic entrepreneur". He doesn't actually start businesses himself, just has half a dozen brilliant ideas before breakfast, finds the right person to implement those ideas and gives that person the idea (and the crucially missing connections to make it happen, etc). In that novel, he has no money - lives off of favours that he can call in at any time from the numerous people he's made rich.
Now, that's obviously not very realistic, but perhaps a mix between those two ideas might bear fruits.
But the basic idea is like building a village well. The rich people of the village may band together and build a well - naturally, they don't make money off it, as the general populace would be too poor to pay.
What happens is that the prosperity of the whole village increases. Disease goes down, productivity goes up - so the demand for what the richer inhabitants have to offer (e.g. goods & services) goes up.
The Internet is all about this - Google isn't the only example, but is a prime one. Whilst many of their services do not directly make any money, they make the Internet a more useful, better place... And the more that people turn to the Internet, the better off Google is.
Edit: pg touches on this too, with his comment about a startup tackling an issue like malaria: http://www.paulgraham.com/good.html Curing malaria isn't going to immediately/directly make anyone any money - but it's possible the downstream effects could generate a lot of wealth.
Google already does what you are hinting at: they give away free services and then harvest the input from that usage to make their services better. However, at the end of the day, Google has significant expensive that need to be paid in "real" money.
AOL your time has finally come!
Are advertising revenues down significantly more than, say, the Dow average? Because otherwise I would have a real hard time agreeing with the assessment that another advertising bubble is popping...
The problem with a switch to paid content is, of course, that it makes very little sense to assume that the customers that you want to pay you or what they're used to getting for free are any better off financially than you are, or any more willing to pay for the content than advertisers are willing to pay for eyeballs.
However "unproven" the advertising business model on the web may be, the user-pays-for-content model has even fewer success stories - I'm getting a little tired of people claiming that it's the clear way of the future when just about nobody has made it work yet.
Given these numerous interactions with your free product - build a perfect product and know that it is exactly what people are looking for. Make that 'not-free'.
In my estimation, the big internet sites serve everyone, not just the chosen few with money. And I want to build a big internet site.
So it must be free.