Wednesday, April 7, 2010

Who Funds the Internet?

While on the Internet the other day I realized that I don’t pay for any of the services I enjoy. I don’t pay for YouTube, Hulu, Facebook, Twitter, Blogger, and the list goes on.

Traditionally if you want a product you pay for it. If you want to go to the movie theater you buy a ticket. The same goes for food and every physical object.

On the Internet the people using the products are not the ones paying for them. Sadly advertizing covers most of the tab. They receive our attention, however brief, in exchange for money. Some sites and niche programmers operate on donations (Wikipedia)

Nothing is free.

Not even on the Internet. The information is free in terms of dollars but not in terms of information. Many sites need you to create an account to access the full range of their product. An account provides them a way to always communicate with you (by email) and to keep you hooked on their service.

Keeping you hooked lets them charge advertisers money for you attention.

A similar thing happened with cell phones. A company would cover the cost of the phone if you agree to a contract. The Internet is free but often access is not free.

It’s a great concept because the consumer doesn’t have to pay. How to bring it out of the Internet and into the “real” world?

Like above pay for the service and not the product. That way the consumer still needs you. Consumers traditionally want something that will forever but that is a poor business model for any company. Everlasting Gobstoppers (in the movie)? What happens when everyone has bought one?

So by giving away the physical product and charging for the information the company can make money by giving the customer something always new.

This will not work for every product. Specifically objects that don’t provide information.

As learned from my entrepreneur class owning information is great because other people cannot copy your hardware & software and take your business.

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