As someone who always thought the web was one of the coolest technological amalgamations we as a species have produced, I have been wary for years of a collision between worlds. The virtual world has its own rules; the economic world has its own rules, too, but they’re closer to being part of nature.
In other words, we can represent nature by economics, but probably not by virtual world ideas. The virtual world is too cleanly cut off from the physical world, and too clearly tied up with what users think and want to believe. Because everything in this world is virtual, there’s no scarcity to force one solution to be better than another.
Now, at fifteen plus years into this little experiment, we’re seeing the worlds collide — and the physical world model is winning. Despite all the panic over the supposed demise of newspapers, the business models of old media are steadily gaining ground each business cycle.
- Advertising. In the past, I’ve written about how the people clicking are not the consumers advertisers desire. For many years, web advertising has been a free-for-all, with most ads being complete spam unrelated to what a user is seeing. The ads that do work seem to be the ones that pick up on what a person is seeking and offer a solution, but I don’t have data for that yet. What we do have is the news that users of Microsoft’s search engine Bing are more likely to click on ads. Bing and Google are two opposite strategies: Google cultivates its audience from the virtual world, where Bing gathers its audience from the “real world” more readily reached with TV and magazine advertising. Google is the new strategy of giving away expensive software services (like search) so that people buy ads; the Microsoft strategy is to use ads to get people to use services so that they can then sell them other software services.
- The virtual world model of free software is in trouble. At a time when Linux use is rising, but not as much as people thinking, other free/open source (FOSS) software makers are finding they’re facing competition — from corporations using the open source model of distribution even if not open-sourcing. Microsoft has released some code under an open source license; Google is distributing its browser, Chrome, as if it were open source software. This adds up to a problem for open source software, since most open source software packages are basically clones of existing software. Do you want Microsoft Office, or the free clone alternative, Open Office? Do you want a commercial UNIX or the free version, Linux? The main competition with open source software is piracy. If I can get Open Office for free, and Microsoft Office for free by pirating it, does the piracy being illegal affect me so much I wouldn’t rather have the better product? Look for more software houses to look the other way as piracy occurs, because having a larger installed user base is probably more important than getting people to pay large sums for software. Here we see the old model of hiring the best designers and coders and making top quality software coming out ahead.
- Net capping. The problem with the net is that people get attracted to the $50 monthly cost for broadband, and assume everything else is free. Music should be free. Software should be free. All web sites should be free, and newspapers should not charge for their online versions. Companies are finding that all this free doesn’t add up to profit, and that without profit, quality of services declines — but people are happy with Wikipedia, Google, free software, and pirating anything else. I have frequently suggested, in conversation, that newspapers make the first three paragraphs of any article available to the general public, but the full thing available to search engines, and then use either (a) micropayments or (b) membership in a monthly “information fee” group, with the percentage of a user’s clicks on each site determining how much of the payment goes to that site. People balk at $300 software, but they also balk at $20 software. The costs of running a computer are too high because the computer is now an everyday appliance like a refrigerator. People want to spend maybe $100 a month on it; $50 will go to broadband, where does the other $50? I suggest that operating system vendors open their own version of an “App Store” and sell third-party apps, possibly under a layaway-cum-subscription free that sells software cheaply, but as a bonus, gets these users registered. Software prices are going to fall except for businesses who license the stuff so they can get support; the industry will face this sooner or later, but either way, the future belongs to those who can make many bills/obligations become a single, one-stop source for software. This, again, is the old model; instead of a multiplicity of sources through which we must wade, trusting our wits, there’s a single answer — like a SEARS in the 1970s — which converts the computer from something we work on to an appliance we do work with.
As this year closes, watch for these market forces to converge. The age of the computer as calculating machine died in 1982; the age of the computer as an isolated device died in 1995; now, the idea of the virtual world as separate from physical world business models and natural world metaphors is about to die.
