Advertising The Way to Pay: NOT!

For class we read multiple articles about advertising and the web. On of the more thought provocative ones was called “The End of Free Lunch – Again”. It discussed how relatively few companies are able to make money off of Internet advertising. Google is the best example of making it big from advertising, but it is one of the few elite Internet companies to do so. Google also makes its money by selling services and collecting royalties. Prime examples of this are the E-commerce shopping cart, which brings in approximately 2% of the transaction cost; Google Site Search, costs at a minimum $100 per year; and Google Earth Enterprise Edition, costs around $400.

We live in a capitalistic society. You can make as much money as your product and services are worth, but not more. Many companies choose to sell their products and services for less; this dropped their value to its current state. Now many of these companies are beginning to charge for their services and are making very little to no profit at all. They had a large user base when they were free, but customer loyalty isn’t enough to make their clients pay for what they got for free.

A really cool site in my mind I have been keeping track of has been qtrax.com. Qtrax is a music distribution site that gives music away. It is entirely free and legal, having signed contracts with three of the biggest recording companies in the US. Qtrax’s model is to pay royalties for the music played from advertising on their site. From the discussion in class I wonder how long this site will remain like this. I am super excited to use Qtrax, but is it able to sustain itself from advertising alone. Since music is an extremely important part of society I feel that it will be able to survive on advertising revenue.

The next thing I think of is open source. Open source vendors don’t charge for their software and their sites aren’t riddled with advertisements. Open source projects are sustained by donations and don’t use advertising at all. Many of the programs I use are open source. I don’t donate but I do produce open source programs and I beta test many programs as well. I can’t support them monetarily but I do what I can to help move the project forward.

Society is already divided by those who use the web for purchases and products, but that gap is getting more and more one sided as the older generation is shrinking in numbers. Another gap that is more dominant is those who pay versus those who find the free alternative. There is a large group that sits in the middle who are willing to use, but don’t want to look for and learn, the free alternative. Will this divide remain or will it come together if more companies discontinue their free services? Will the middle ground people move towards one of the extremes if there are less “Free Lunches”. I hope Facebook, and Qtrax don’t start charging.