Is Google Bad for Business? Chris Anderson and Free.
May 29th, 2008
Tonight I’m going to hear Chris Anderson, Editor in Chief of Wired Magazine, speak about his upcoming book, “Free.” In a previous post I presented my position on the culture of free, the gift economy and how I think it’s driving the quality of content and applications towards amateur hour. It will be interesting to hear Chris address web economics and I hope to engage him in a discussion about what this means for the future of web-based entertainment content.
I’m specifically interested in Google and how they’ve enabled the culture of free online. From my perspective, Google is bad for business. Let me qualify that, bad for business-as-usual (added). By offering everything you need on the web for free, Google has effectively put web-based business opportunities on life support.
Consider email. Back in the day, AOL was a pay service based mainly on an email client. They made a lot of money. Then came Hotmail where they charged you for additional storage. Then Google launched Gmail, a free unlimited storage service and the pay-for-email category died on the vine.
Another example is web analytics. Three years ago at a studio we would pay $60K for an annual license to a web analytics company. I had great service and support, but when Google bought Urchin and renamed it Google Analytics, then offered it for free, the pay-for-analytics business couldn’t compete.
Other examples: maps, photo-sharing, documents, spreadsheets… Google’s suite of free products is an ever growing list. It’s all underwritten by the highly profitable search engine business which is the digital equivalent of the Yellow Pages and, in terms of entertainment, the electronic programming guide (EPG).
Consider video. As Mark Cuban points out, Google is subsidizing the bandwidth and infrastructure costs for the majority of web video through YouTube. They’re taking one for the rest of us and we should be appreciative. Or should we? Depends on who you ask.
A whole generation is being brought up on Chris Anderson’s culture of free. If you suggested to your 17 year old sister-in-law that they pay Facebook $5 a year to be able to access the site, she may laugh in your face. She feels entitled to live her life online for free (at least until her parents make her pay the ISP bill), thanks in large part to Google.
So how do you turn the Titanic and get people to pay for value if they’re used to getting it for free? Is that even a reality? What does free mean for entertainment providers - people who make their living, whether in TV, film or other art forms by relying on scarcity and perceived value?
If Google continues to develop as the gateway company for the web and they are adamant in their lobbying against net neutrality, open spectrum access and other bastions of the free culture, how do artists make money?
Free is good for some, but bad for others. It comes down to what side of the fence you’re on. Hopefully Chris Anderson can answer some of my questions tonight and I can report back with some golden insights, for free of course!
Here’s Chris talking about Free.
Tags: Analytics, chris anderson, culture of free, facebook, free, gift economy, gmail, google, hotmail, mark cuban, titanic, urchin, wired
Posted by: jake Posted in Business, Gift Culture, Regulation, SpectrumYou can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 30th, 2008 at 6:45 am
Jake, You are so old media.
Sure Google has hurt those companies that you used to pay thousands of dollars to but they have opened the door for Independent Global Distribution.
Now artist can monetize in new ways to a global audience.
Google has helped to take the locks off the content distribution business and we need to find new ways to make money.
I worked in the Television promo business for several years and I made money creating promos for other people’s TV shows. I wrote, produced and directed the promos for shows like Buffy the Vampire Slayer and many others and I got paid but I never saw a residual. Now I produce promos for my own shows and I get paid residual advertising dollars from posting my promos on sites like Revver and YouTube. The money isn’t big yet but neither was the money big in the early days of TV when Radio was king.
The rules have changed. You can bitch about it and cry or you can be creative and become your own global distribution studio or your own one man brand.
May 30th, 2008 at 10:43 am
@Tim - the broader question remains as to the net-net of what is lost in terms of cash business vs. what is gained in the very-hard-to-quantify gift economy. I’d argue that by moving the digital economy towards free, we get ubiquitous global distribution, but at the cost of innovation and in the meantime, dollars are traded for pennies. How long that meantime lasts is unknown. We’re all looking to find ways to make money, but the irony is that the more people talk about the new digital economy, the more it starts to sound to me like the old media model. As you say, the winners are those who can be creative and become their own global distribution studios or their own one man brands. But there’s an element old-media in the digital Darwinism that you suggest. Just like in every aspect of old media business, the digital economy will only support a few who can quit their day jobs and make it but the vast majority will not have that option.
For application developers, Google’s enabling of free may present an even tougher economic landscape.
Since Youtube owns the video sharing category, can any entrepreneur even considering launching a new video site? Can any web-analytics company release a product and hope to compete with the free, Google backed product? Will there be any new email clients, ever? Maybe we don’t need them. Has free essentially created a Google monopoly or a dumbing down of innovation? Is Google the new gatekeeper. Are we exchanging one old guard, the studios, for another? I would argue that’s the case.
May 30th, 2008 at 11:44 am
Tim, while I think there’s some validity to likening the digital evolution to that of radio and TV, there’s one thing that doesn’t add up – the intended use of the platform. TV and radio were both created and sold commercially for entertainment, whereas a computer is made for work and entertainment has become an outgrowth as a result of hardware and software evolving.
Radio was an independent mass distribution entertainment outlet in its early stages, but ultimately a hierarchy of large branded channels were formed to create an entertainment economy (which meant that independants were economically forced out)—will this happen to the web? It’s tough to say because the outlet itself is actually a multi-purpose tool that’s not solely used for passive entertainment.
May 31st, 2008 at 12:55 am
Growing up, I was the weird kid who wondered why everyone complained about watching commercials when they were getting great programming for free.
The oldest answer to your questions is the ad-supported model, of course. Or rather, finding new and clever ways to make an ad not feel like an ad inside free content. But I think you’re looking beyond that obvious solution to the more fundamental sea change happening before our eyes.
Problem is, we don’t know yet. Good news is, the consumer will decide. We won’t. So it’s most important for us to be listening, experimenting and possibly engaging with consumers as peer-partners to figure it out together.
There’s a great article in this month’s Inc about the Threadless model. As the two college drop-outs lecture CEOs at MIT, the big takeaway is that innovation has always come from the end user, and rarely the R&D dept. We’d do well to remember that.
Anderson is a hero of mine as well. I remember putting down The Long Tail and thinking: There will come a time when the most talented musicians will post fully-produced works on the web for a few dozen avid fans without any hope for financial reward. I don’t think the Radiohead model will win out, btw.
Talented and passionate content creators will always produce quality work. Music, film and journalism industries will struggle to monetize. Some kid will put up a website as a joke and end up revolutionizing all three business models. You watch. I just hope it’s my kid.
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