Thursday, November 5, 2009

Advertisements Fuel the Internet, Other Revenue Models Will Fail

It strikes to me as ironic that people lash out against ads on website that owe their very existence to ad revenue. The online services that I use on a daily basis are all free and I have come to depend heavily on them. Imagine if we had to pay for search, email, social network, forums, news etc. We spend hours online each day on facebook, gmail, youtube etc. without paying a dime. That leads us to the question, if we don’t pay these services then who does? Most people know the answer, but some don’t want to admit it. Advertisements are the fuel for the World Wide Web as we know it.

This leads us to an interesting case. How will the World Wide Web function if advertising was not an option? Here are the obvious models:

Pay-to-access: Websites will charge users to access content. For example you will pay a monthly fee to access facebook, gmail, twitter or any of your favorite website. This will wipe out all the mid to small independent sites because most people will subscribe only to a finite number of top sites.

Website-bundles: These are packages that include some top sites with few mid tier sites thrown in. You pay a monthly subscription fee for the bundles. For example the basic package will include Yahoo, Google, Gmail etc. The gold option will add Facebook, Twitter, top 10 blogs etc. Similar to your cable programming packages. Your ISP might start offering these.

Product placements: Advertising will morph itself as paid placements. Suddenly you will see sites endorsing various products. Today if a blogger writes “I was stuck in LA traffic”, without “advertisements” it will be, “I was stuck in LA traffic in my Honda Accord sipping Coke”.

There could be many other models that will rise out this scenario. Unfortunately I’m yet to come across a single one that seems better than the existing advertising based revenue model.


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