Firstly I have to say that I greatly respect ReadWriteWeb. Partly because anyone who can build a global media empire from a Lower Hutt suburban home deserves kudos, but also because RWW founder and editor Richard Macmanus is a genuinely nice guy and a web visionary. But sometimes that vision gets a little distorted from the powerful effects of the Web 2.0 kool aid that Richard and the gang drink plenty of. One case in point is a recent post where Richard denied the claim that the end is nigh for the free model of Web 2.0.
In reviewing a blog post about DEMOfall08 that calls for an end to the free model, Richard says;
Where I disagree is the notion that the ‘free’ model of the Web has ended or will end soon. Online advertising has been a very powerful business model for many, including of course the master of this Web era, Google. While I do agree that consumer apps should explore alternative business models too, in my view the statement by Chris that "free isn’t a business model" just isn’t true. Clearly ‘free’ has been a business model for many – and will continue to do so as long as the online advertising portion of the total advertising pie keeps growing
While people often cite the example of staggeringly successful businesses run on "free", such as Google, the fact is that these businesses are not in any sense free. As described in a previous post, Google monetises their "free" services via advertising revenue. This is a markedly different story from, for example, Twitter who has no real monetisation path.
I find it hard to understand how anyone can argue that services that are truly free (ie are neither charged for or paid for indirectly by a third party advertiser) are in any way sustainable. Business sustainability is about earning at least the same as you spend. Engineers, bandwidth and cool brand t-shirts require cash – no matter whether or not it’s coming in, it continues to go out and there is only so long that direction can be maintained.
In terms of the contention that online advertising is a pie that is going to continue to keep growing – given the economic environment we’re currently facing and the emergence of new technologies that could prove the end for the need or utility of online advertising, this is a pretty brave contention to make.