Recent Adventures in Making Money
(or Not) on the Internet
by Chris Kelly

It's a familiar staple of movie and television plots: the guest who has overstayed his welcome. Whether it involves the adult son forced to move back home with his parents, the down-on-her-luck friend who needs a place to crash, or the distant relative who's just moved into town, the basic storyline is the same. At first there's the camaraderie of being together, and the host doesn't mind the small inconvenience of providing free room and board.

Then the honeymoon atmosphere ever so slowly fades away. The guest grows increasingly casual about eating whatever he wants, and as much as he wants, whenever he feels like it-seemingly taking everything for granted. All the while, the sense of being imposed upon grows from a nagging itch in the back of the host's mind to a conscious gripe: This is costing me money! Being generous is fine, but now I'm being taken advantage of. How long am I supposed to put up with this deadbeat?  But then comes the uneasy question of how to end the one-sided relationship. What's the polite way to ask someone to pay for something you've been giving away for free for so long?

Well, guess what… for years now, you've been living this scenario every time you surf the Internet, and you're the deadbeat guest. And your hosts are getting more and more impatient about finding a solution to your freeloading habits, if only because their own survival is often at stake.

The Failure of Advertising

As usually happens in these situations, no one figured you'd go this long without paying your own way. A common early assumption was that the Internet would operate like other mass media (such as television or radio stations), where content providers earn their money not from you directly but from advertisers.

This turned out to be a workable system for the handful of websites that earn 95 percent of all Web advertising dollars. But today's Internet was built on the notion of thousands or even millions of sites providing useful content—of whom, well, thousands or even millions are left out in the cold by an advertising-based income model. As leading techno-philosopher/analyst Jakob Nielsen says, "Venture capitalists will now laugh you out of their office so hard that you'll tumble across Sand Hill Road if you present a business plan that relies on Web advertising revenues."

And who could blame them? I remember being part of a focus group for a major webzine, and telling them that I loved banner ads, because it was so easy for me to tune them out completely. I never clicked on them, and the rest of the focus group confessed that they didn't, either. The TV/radio analogy to the Internet, as it turns out, didn't take into account how much more active Web surfing is as a pursuit. It's much easier, for example, for people staring at a computer screen two feet away to focus only on the content they want to look at, ignoring ads at the top, bottom, or sides of the screen.

The major websites already committed to surviving on the money from ads seem to have learned this lesson all too well, as they pursue ever more intrusive advertising methods. The menace of pop-up and pop-under ads seems to have spread nearly everywhere on the Internet—even to sites such as the New York Times and Los Angeles Times, which once seemed too prestigious for such mercenary tactics. Maybe, though, we shouldn't be too surprised. As MTV's fictional teenage curmudgeon Daria Morgendorffer explains: "While individuals do things for any number of reasons, companies just want to make money. Corporate-sponsored websites are nothing more than used-car lots without the flags. Pop-up ads? Those are the flags."

Perhaps sensing that even the jolt of a new browser window is not quite attention-getting enough (am I the only one who makes a sport of clicking the "X" in the upper right corner of the window before the ad itself is downloaded?), the misguided geniuses without whom we would be ignorant of the X-10 wireless camera's potential for long-distance lechery have brought us another innovation: floating ads. This term is a euphemism for those garish, screeching animations that blot out your view of what you thought you wanted to see, with all the subtlety of a pterodactyl-sized pigeon dropping its payload on the center of your monitor or laptop screen.

Does these ads bother you? Does it bother you even more that they take advantage of advanced features like support for JavaScript, Flash multimedia, and dynamic HTML that you thought were included in browsers for your benefit? (Silly you!) Well, tough luck. If advertisers want to stick their virtual thumbs in your eyes, sites will let them, because they're the ones paying the bills, not you. As Patrick Hurley, senior vice president of business operations at Salon.com, told an Associated Press reporter, ordinary people surfing the Internet will "have to either pay with their attention or pay with their pocketbook."

Nothing Else Works, Either

And although we may grumble when we visit sites with obnoxious advertising techniques, those that have tried to reach for our wallet directly have found we simply won't visit them at all. It's a classic example of the all-too-literally free market at work: as long as someone's providing similar content for free, sites that try to charge for theirs are in for a rough time. Slate, the current-affairs webzine backed by Microsoft, experimented with subscriptions and returned apologetically to free access within months. Its major competitor, Salon, was free at that time but has since gone toward subscriptions itself; like Slate, its subscribers have numbered fewer than 5 percent of the visitors the site received while it was free. Without the same megacorporate backing as Slate, Salon's ability to survive into 2003 is in doubt.

The roots of this attention-versus-pocketbook dilemma lie in the fact that we've all become accustomed to the Internet as an essentially free medium. In fact, Jakob Nielsen points out that this sense of unlimited exploration is the most fundamental appeal of spending time online. And the infinitely more democratic nature of providing web content (compared, for example, to owning a TV or radio station, movie theatre, newspaper, or magazine) exponentially increases the competitive pressure that makes the first provider to charge more—or anything, in this case—all the more likely to fail in the attempt.

Nevertheless, at some point most websites are going to need money to survive. So the question is, how can they get some from us without making Web surfing feel less free? The first tentative steps in this direction have involved smaller and more voluntary forms of subscriptions. A reasonable media analogy here is that of public-supported television and radio stations. Instead of having occasional "pledge weeks" like those stations do to raise money, sites using the Amazon Honor System (or a similar mechanism) set up a virtual "tip jar" into which you can donate as much money as you want. As with community-supported mass media, most people pay nothing, but at least those who do chip in succeed in reducing some of the site's expenses. Still, requiring a intentional act of support more or less guarantees that only the most devoted or conscientious visitors will make a financial contribution.

Which leads us back to the same problem: a site whose audience is wide enough or fanatically devoted enough can probably support itself through advertising, subscriptions, or voluntary contributions. The rest, however, are out of luck. Yet without these untold thousands of commercially unviable (by current methods, anyway) sites, the Internet would lose much of its appeal. Instead of an unfathomable galaxy of information, opinions, and sheer trivia, the Web would be just a handful of overly familiar sites—in essence, another dozen channels tacked on to the end of your cable subscription package, only viewed on your computer instead of your TV set.

The Mirage(?) of Micropayments

For the Web to survive in the mind-bogglingly diverse format we've all become accustomed to, everyone needs to participate in paying for it. In a truly democratic payment system, the sites that are successful now will earn the same amount of money, but in smaller individual fragments. Meanwhile, slightly less mainstream Internet destinations (like the humble yet hopefully informative newsletter you're reading now) will get their fair share of support as well, meaning that they can mature into self-sustaining ventures rather than shoestring or charity efforts.

For this reason, the holy grail of the Web for several years now has been micropayments: a system where each site you visit gets a few pennies' compensation for your time there. The cost is so small that it doesn't deter visitors (any more than the cost of electricity keeps you from turning lights on at home, to cite Jakob Nielsen again), but multiplied by hundreds or thousands of unique hits, it generates enough of an income stream that even non-corporate sites can stay afloat.

The block to micropayments has been the question of how to keep track of them. Credit cards have been the traditional method used to pay for anything on the Internet, but they're unworkable for making micropayments that are only a tiny fraction of the processing cost of the transaction. (If ordering a book from Amazon.com cost you hundreds of dollars in shipping charges for each title, how many would you buy?) One solution here would be to establish a prepaid credit balance on top of each customer's existing ISP or other network-access expenses, with micropayments deducted and transferred to each applicable site the customer visits.

In our ongoing search for a metaphor, a micropayments infrastructure like this would make Web surfing similar to using a phone card for long-distance calls. In our analogy of the freeloading guest, though, it would be more like your hosts pilfering a few coins from your nightstand every time you sneak a handful of their Cap'n Crunch from the cupboard.

Freeloader or not, you might see such tactics as an outrageous violation of your privacy. And this turns out to be one of the problems with micropayments as well. Even if they make you feel more "free" by not interrupting you as you surf the Web, they're actually far more intrusive—because in order to work, a micropayment system has to follow you to every site you visit, notching up which ones get paid and how much. If you're even vaguely aware of the fanatical devotion to anonymity many Internet users feel entitled to, you know how hard it will be for this concept to be universally accepted.

And that doesn't even take into account the sheer complexity of compensating hundreds or even thousands of sites for each individual "phone card" of Web surfing time. Not to mention the potential for fraud, which has already been the bane of digital-cash vendors such as PayPal (seen by some veteran observers as the most promising precursor of a micropayment system). If you've ever argued with the phone company, an electric utility, or even America Online over the size of your bill, you know how tempting it will be for any micropayment administrators (or sites) to overcharge you, since cheating everyone by just a small amount can produce huge windfall profits. These problems are being worked on, but solutions are still a long way off.

In short, a genuinely fair payment system that pays independent websites what they deserve (and charges you what you rightfully owe) is still closer to science fiction than it is to reality. So the eviction notice hasn't been filed, your possessions haven't been dumped onto the sidewalk—your unwilling Internet hosts are still powerless, for the most part, to stop you from helping yourself to their grudging hospitality. But don't think they're not trying to find a way out… and if you find a foreclosure notice from the bank taped to the front door one morning, don't think that it isn't your fault.



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