Here’s my idea: We’re going to open a chain of fast-food restaurants serving hamburgers, french fries, shakes and assorted other tasty, health-endangering foods. We’ll keep the bathrooms sparkling and inspect our kid’s-meal prizes to minimize the lead content.
I know what you’re thinking: That market is saturated -- ever heard of McDonald’s, Wendy’s, Burger King? But here’s the difference: Those places charge for their food. We’re going to give it away.
Uh … OK, and how are you going to make any money?
Isn’t it obvious? We will be deluged with customers day and night -- advertising! We’ll sell ads on the restaurant walls, the floors, the tables, the crew uniforms, the parking spaces, the bags and wrappers – every inch of the place. Companies will pay big money to have their messages exposed to the kind of traffic that will be moving through our restaurants day and night.
Does this idea sound ridiculous or just familiar? A little of both?
Here’s why it should sound familiar:
Think about all the commercial sites on the Web. Now take away the e-commerce retailers like Amazon.com, eBay and Best Buy, the places where money is actually exchanged for goods and services (usually goods). Almost everything you have left -- Facebook, Yahoo, NYTimes.com, WebMD, etc. -- is pursuing the model of our revolutionary burger joint above.
A key difference, in case you don’t see it, is that it costs the same amount for the Times to produce a story that’s read online by one person as one read by 1 million. Not so with giving one person a free hamburger versus 1 million people.
But the idea is the same. The free-service sites are saying, Here’s something we know you need or enjoy. We’ll give it to you for free. And the way we’ll make money is by bringing in more ad revenue than it costs for us to provide what you came here to mooch.
I want to say a few things about this.
First, life is good in this matrix, and I don’t want to leave. I love getting stuff I want or need for free. I remember back when I started using MapQuest (Google Maps, etc.) and thinking, something isn’t right about this. Why am I being given unlimited free access to something so useful, something I’d happily pay, well, something to use?
I was forgetting about television. This same business model brought us old-fashion over-the-air TV. Fifty-some years ago companies started sending us hours and hours of occasionally entertaining and informative programming at no cost -- other than the cost of a TV set, which eventually became affordable to most households. The commercials, in aggregate, not only covered the cost of production and transmission but made network executives, actors, directors, investors and others rich.
What I’m wondering is, can this model be sustained forever on the Web?
What if traditional ads go the way of the woolly mammoth? As Professor Schaff alluded to last week, traditional advertising –the “Hey, everybody, look at this and buy it” kind – is ridiculously inefficient. Advertisers could wise up and devote more effort and money to viral marketing, word-of-mouth and search-engine optimization. This could make Prof. Schaff very rich.
I also wonder if we’re not already in a house-of-cards scenario. Many of the ads I see today in the margins of sites like Facebook point to websites that, like Facebook, provide something for nothing, paid for by ad dollars. And many of the ads on those sites take you to other sites doing the same.
It will be interesting to see how long we can continue to get good stuff online for nothing, other than the nuisance of ads in our peripheral vision. Maybe forever. But if our sugar daddy, display advertising, takes a shine to something else, I don't see how.
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