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Is the future really free?
It seems we've entered an age where there's a land-grab happening for personal data and attention time. Look at all the web start-ups backed by venture capital. They aren't investing out of philanthropy. There's value there. YouTube is "free" but Google paid over a billion dollars for it. Why?
Here's a hint: It's not about the Tube.
Chris Anderson's Wired article was quite bold in its proclamations:
You know this freaky land of free as the Web. A decade and a half into the great online experiment, the last debates over free versus pay online are ending. In 2007 The New York Times went free; this year, so will much of The Wall Street Journal. (The remaining fee-based parts, new owner Rupert Murdoch announced, will be "really special ... and, sorry to tell you, probably more expensive." This calls to mind one version of Stewart Brand's original aphorism from 1984: "Information wants to be free. Information also wants to be expensive ... That tension will not go away.")
Once a marketing gimmick, free has emerged as a full-fledged economy. Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails, and a swarm of other bands on MySpace that grasped the audience-building merits of zero. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.
The rise of "freeconomics" is being driven by the underlying technologies that power the Web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.
One of the old jokes from the late-'90s bubble was that there are only two numbers on the Internet: infinity and zero. The first, at least as it applied to stock market valuations, proved false. But the second is alive and well. The Web has become the land of the free.
Has it?
TANSTAAFL
There ain't no such thing as a free lunch.
The idea behind this is that there's always some sort of exchange happening, even if it's not in cash. If I buy you lunch, I'm getting something out of it -- the pleasure of your company, a chance to boast or commiserate, an opportunity to share a new restaurant discovery, freedom from an otherwise mundane meal, relief from a spiritual debt acquired when you bought me lunch last week, whatever.
And yet when I buy you lunch, it does not imply that you now are entitled to inspect my purse, or peruse the messages in my iPhone, or rummage through my dresser. Those things are considered private to most of us, right?
Chris Anderson's entire perception of the "free" present and future seems to depend upon the assumption that not only our time and attention have no value, but that our privacy has no value ... that is, no value to us.
Those things certainly have value to the companies offering the "free" services.
Last year, Yahoo announced that Yahoo Mail, its free webmail service, would provide unlimited storage. Just in case that wasn't totally clear, that's "unlimited" as in "infinite." So the market price of online storage, at least for email, has now fallen to zero....
That's zero in cash. But just because you aren't forking over cash doesn't mean something is really free. With 'free' email, it may not cost you cash, what are you handing over otherwise? It may seem trivial enough, but you are paying for that mail in terms of having advertising rolled in front of your eyes, and in terms of handing over personally identifiable information that can then be leveraged, quantified and sold to others or leveraged in other ways.
It's now clear that practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned. Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom....
...Basic economics tells us that in a competitive market, price falls to the marginal cost. There's never been a more competitive market than the Internet, and every day the marginal cost of digital information comes closer to nothing.
This brings us back to the question, Why did Google pay 1.7 billion dollars for YouTube? Answer: It's not about the Tube, it's about You.
YouTube gets your
