Freelusion: The illusion of free

I keep wondering how many people still do not understand that "There Ain't No Such Thing As A Free Lunch." Mostly, we pay indirectly for all these free product and services as in the "razor and the razor blade" approach. Ever wondered why for many products and services the actual production costs are only a fraction of the price? Who pays for the advertisements on "free" news sites? So every time you see an advertisement of one of the products you buy on a web page, consider yourself to be a paying customer. ;-)

What can be the case is that some end up paying the lunch of other. This is model that has been around for a long time and people may be quite willing to do so, as, for example, is the case with charity. But one may wonder how sustainable this, as a commercial model, is in the long-term.

For example, many people have been buying "high-quality" paper newspapers. Nowadays, those who do not care about this kind of quality read their news "for free" online and may be paying for it via their car insurance. So, this will ultimately require that those who do value these "high-quality" newspapers have to start paying the actual costs without cross-subsidizing and they may pay either via their subscription or via their car insurance. So, the internet may in fact be making people pay for what they actually consume!

'Engagement Advertisements’

One of the interesting development with respect to social networking is how the companies providing the platforms will make money ('monetization'). One of the most innovative companies in this area is Facebook (see also its business solutions page targeted at advertisers), which was discussed in an insightful article on CNN Money called 'the Facebook economy'.

Forrester Research analyst Jeremiah Owyang discussed on his blog the launch of a a new product called ‘Engagement Advertisements,’ which should integrate with natural user behaviour. These engagement ads should encourage members to interact with the ads by leaving comments, sharing virtual gifts, or becoming fans.