Free? Language and hidden costs

While traveling to and from New Orleans for the 4Cs conference last week, I got to catch up on my magazines and ran across this article by Wired senior editor Chris Anderson.

In the article, titled “Free! Why $0.00 is the Future of Business,” Anderson argues that improvements in technology have driven down the cost of serving individual web users, meaning that many products and services, both on and offline, can be provided to consumers virtually for free.

In the traditional media model, a publisher provides a product free (or nearly free) to consumers, and advertisers pay to ride along. Radio is "free to air," and so is much of television. Likewise, newspaper and magazine publishers don't charge readers anything close to the actual cost of creating, printing, and distributing their products. They're not selling papers and magazines to readers, they're selling readers to advertisers. It's a three-way market.

In a sense, what the Web represents is the extension of the media business model to industries of all sorts.

The way this works out in most instances is that companies provide services to users for little or no cost, and then make their money using one of the following models:

• “Freemium” – What’s free: Web software and services, some content. Free to whom: users of the basic version.
• Advertising – What’s free: content, services, software, and more. Free to whom: everyone.
• Cross-subsidies – What’s free: any product that entices you to pay for something else. Free to whom: everyone willing to pay eventually, one way or another.
• Zero marginal cost – What’s free: things that can be distributed without an appreciable cost to anyone. Free to whom: everyone.
• Labor exchange – What’s free: Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value.
• Gift economy – What’s free: the whole enchilada, be it open source software or user-generated content. Free to whom: everyone.

While I think this list is helpful, and I agree with Anderson that the internet has created interesting new business models, I was a little put off by some of his examples.

Consider this sidebar on Ryanair’s low-cost flights around Europe. Anderson explains that the airline can sell tickets for $20 even when the flight costs them $70 per passenger because the difference can be made up by selling premiums such as food or the ability to check extra baggage. However, one of the “optional” expenses listed in the article is a $6 credit processing fee. While Anderson presents this fee as an extra, as if consumers could choose to pay it, it seems to me to be a hidden cost—an example of “Gotcha!” capitalism—rather than a optional service.

Similarly, Anderson’s description of Comcast’s “free” DVRs is a little off. Anderson claims that “Comcast has given about 9 million subscribers free set-top digital video recorders,” and that the company makes it money back by charging users a monthly fee for the box. But Comcast customers can’t keep their equipment, so it’s not quite accurate to say that the DVRs are free. Rather, customers are hit with hidden “installation fees” and have to pay $13 a month for the equipment, which will then be reclaimed by Comcast when the customer moves or cancels their service.

In both these cases, what Anderson is describing as “free” is free in name only. Instead of describing a new business model, in the case of the Comcast DVRs the word ‘free’ seems to be used to mask the true cost of the product. While Anderson’s article is interesting, and he provides a helpful description of the uses of free products in the new economy, I think his failure to be more descriptive in this case somewhat tarnishes the overall argument of the piece.

Newspaper economics and the internet

Jack Shafer of Slate explains how newspapers hit hard times before the popularity of the internet, despite the general impression that it was the internet that began the decline of print news.

The newspaper industry began worrying about losing its hold on readers as early as the 1960s, assigning task force after task force to the problem. So acute was the perceived crisis that in 1976, Los Angeles Times media reporter David Shaw asked in his multipart series, “Are you now holding an endangered species in your hands?”

The bad news began to mount in the pre-pre-Internet days of the 1980s, when the number of dailies published in the United States began a slide that continues. By 1990, total newspaper circulation began to dip, and most ominously, the percentage of adults who read newspapers commenced cratering in 1970. About 78 percent partook of dailies then, and by 2003, only about 54 percent did.

Teens privacy savvy

CNET News is reporting on a Pew Internet & American Life Project study called “Teens and Social Media,” which found that teenage girls tend to blog more than teenage boys (35% and 20%, respectively) and that teenage boys post more videos online than girls (19% of boys have posted a video online compared to 10% for girls).

However, for me the most interesting news is that teens take greater measures to protect their privacy online than adults do.

But how safe are teens being in protecting their personal information and images? More safe than adults, apparently. About 66 percent of teens with a social network profile restrict access in some way and 77 percent of teens who upload photos restrict access some of the time, while only 58 percent of adults who post photos restrict access.

For video, a smaller percentage (54 percent) of teens restrict access, about the same as adults.

Americans want the intenet in their brains

Zogby has released a new poll of Americans’ attitudes toward the internet.

To summarize: an alarming percentage of respondents are open to brain implants that allow them to access the internet with their minds and that allow their children's locations to be tracked, they think government censorship of online video content is acceptable, the internet makes them feel closer to God and less close their significant others - but their own identities on the internet are not very important to them. This is frightening stuff.

I guess I’m not as frightened by this as Marshall Kirkpatrick at Read/Write Web (who wrote the summary above). It is interesting, however, that so many people are so open to such invasive technologies.

via Read/Write Web

Predicting the future

A few weeks ago, Richard MacManus at Read/Write Web posted a list of ten future web trends. At the time, I didn’t take much notice because the list was pretty standard and not very interesting to me. However, yesterday MacManus posted a follow-up article where he listed trends that users had mentioned in the comments to his previous post. It’s interesting to compare the two lists; for instance, MacManus lists boring web trends that will never happen (the semantic web), while his readers list pretty interesting web trends that will never happen (intelligent agents).

All jokes aside, both lists are also intriguing for their attempts at prognosticating the development of future technologies. I’m always fascinated by this behavior: on the one hand, the prognostications are always somewhat off, but, on the other, futurism has an effect on what kinds of technologies are developed. MacManus mentions the history of AI in his first post, noting that it has been a goal of computing since the 1950s. However, there is been practically no progress in the field. Most of the examples MacManus lists are actually human intelligence being connected through computers, as with Amazon’s Mechanical Turk. The only true attempt at AI that is mentioned is Numenta, which is attempting to build computers based on (what sounds like) a connectionist, neural network model. I don’t think that this model is much of an improvement (at least as far as AI is concerned) on the cognitivism model which computers are based on now, so I would be surprised if it led to true AI, but it is an attempt at something new. The point is, the holy grail of AI has been desired for years, even though it hasn’t been practical to apply, because of the effect of the kind of future prognostication that is represented by these posts.

Using this lens, the two articles represent lists of what people desire the future to be. Fortunately, both are a bit more positive than Richard Watson’s chapter on the future from his forthcoming book Future Files: A History of the Next 50 Years, where he sees a future of depressing loneliness and disconnection. MacManus and his readers are much more positive, seeing a future where the web will deliver new systems to improve people’s lives. Simply by virtue of the fact that both versions of the future coexist right now, the new web that emerges will likely contain elements of both.