Assignment 3, NET205, SP2 2013

The Internet is not free, but it provides great opportunities for capitalism.

When Shapcott made his claim (1995), "Rule $19.95 - The Internet isn't free. It just has an economy that makes no sense to capitalism", the Internet and in particular the World Wide Web (the Web) were a completely different and very limited environment in terms of processing time, data storage, bandwidth and collaboration. From a business perspective the Web was a digital copy of the physical world with limitations in production, communication and reach. Since the emergence of Web 2.0 (O'Reilly, 2005), the opportunities for communication between individual users of the Web have improved significantly. I will argue that the liberation that took place, thanks to syndication of online content, has opened and increased opportunities for capitalism engaging in the digital world. While certain large organisations follow a strategy of oligopolising the Web, large numbers of individuals have realised the potential of using the Web for their own profit.

The Internet is not free, the Web is

The Internet is a confined area, which can only be accessed if permission is granted. Accessing the Internet requires the user to pay. But for any user, the Internet alone is useless without the application layer. The World Wide Web (the Web) is part of it and this is what we primarily sign up for with an Internet Service Provider (ISP), to gain access to Ebay, Facebook, Twitter, Instagram, Flickr, Blogger, and many other spaces of service, incorporated within the Web. While these spaces (at least in their basic version) are for free, an ISP will charge for granting access to the Internet. Internet service providers (ISP) have always controlled access to the Internet. And the power over access is increasingly centralised. In particular in the US, mergers have shrunken the number of telephone and cable providers to between six and ten, around half the total from the mid-1990s—with AT&T, Verizon, and Comcast being the dominant ones (Federal Communications Commission, 2010).

While the Web still remains a free space, its capabilities have changed dramatically to the advance of the individual user as well as to that of individual businesses. While there is a sense of market concentration regarding the gatekeepers of the Internet (ISPs) in real life (RL), and outside the digital world of cyberspace, the following observations will clarify that within the Web, such market concentration is hard to achieve, if possible at all. The notions of physical dimension, time and location are as diffuse on the Web as in the universe. Therefor, an attempt to split up the Web would be similar to the attempt of splitting up the universe or any other infinite space. There will always be a separate sphere outside those created by online service providers, fencing off their space from the rest of the Web. This rest of the Web is used by a large number of individuals and organisations that can make use of digital tools to achieve something collaboratively. In a traditional, physically limited economy, that would have been impossible without large amounts of money.

More ‘Free’ all the time

As Wired editor in chief Chris Anderson once put it, there are three things on the Internet that are becoming increasingly cheap: bandwidth, storage and processing (2008). As of 21 May 2013, making use of cheap storage space, the Flickr photo sharing service has enhanced free storage space for its users to 1 Terrabyte (Wolford, 2013). Wherever possible, more and more businesses will transition from the physical world of RL into the digital space, which is the Internet and in particular the Web. Products (such as images) will be offered in digital form and more and more services will be provided in the form of software. Not only will services and products increase in quality, they will also drop in price.

In an article for Wired magazine (1997) Kevin Kelly already explained the paradox of inverse pricing, when hardware and storage were quickly enhancing in performance and capacity while at the same time dropping in price. In alignment with Anderson’s remark above, Flickr or other services - such as the LinkedIn Social Network Service (SNS) for professionals - the basic services can be given away for free, as they hardly incur any costs. Giving away services for free attracts attention, which leads to increasing registration numbers. Once the product's/service's worth is established, upgrades are sold (e.g. ad-free space on Flickr, premium membership for job seekers on LinkedIn), which then again support the free basic versions, creating a profitable circle. This business strategy is referred to as 'Freemium'.

The definition of 'Freemium' was first introduced by the US American blogger Fred Wilson (2006). He explained that online users initially subscribe to a free service, but then decide to upgrade for enhanced services and products. While it seems in the first place that businesses give away their services and products for free, this is a deliberate strategy to make users familiar with a basic product, at the same time offering enhanced features for pay (premium fees).

Syndication ruined traditional capitalism

To get to the point of ‘Freemium’, one essential change in the way Web users communicate had to occur. Without this change the sense of community, collaboration and an altruistic sense of sharing as we ubiquitously find it on the Web today, would have been impossible: The syndication of Web content.

The most important change was the emergence of Really Simple Syndication (RSS), a methodology that makes syndication of Web content (changes on Websites, added blog posts, news items) possible (ICSC, 2008), creating a multidirectional information flow, blurring the lines between producer and consumer, as product items can be re-consumed. Information that had to be delivered online in the past in a single direction, one-to-many approach (mainly websites, forums, email), could now be requested by subscribing to any information source available on the Web.

Product wise, from an economical perspective, the downside of syndication on the Web is that the author of any digital product loses control over their content. Aiming at making a profit, digital media has some very special qualities detrimental to capitalist principles. Every physical item that can be reproduced on the Internet, in a binary expression (text, music, images), automatically turns into a commodity. In short they lose their most important quality - limited supply.

Syndication can happen between all users of the Web. Once a media item has been released from its original source infinite copies may emerge - there is very little on the Web that cannot be reproduced effortlessly by 'copy-and-paste'.

Although Wired Editor in Chief Chris Anderson (2004), and Foster & McChesney (2011) had their concerns that monopolists will take over the World Wide Web, by splitting it up amongst themselves, (Apple, Google, Amazon, Facebook) what they didn't consider is the infinity of the Web, which defies the notion of splitting. While the mighty few mentioned above might try to shoehorn customers into their world, it is up to the customer to decide if they would like to join. As Anderson states (2010), 'Over the past few years, one of the most important shifts in the digital world has been the move from the wide-open Web to semi-closed platforms that use the Internet for transport but not the browser for display. It’s driven primarily by the rise of the iPhone model of mobile computing, and it’s a world Google can’t crawl, one where HTML doesn’t rule.'

But as Gauntlett confirms (2004), it might be true that there are attempts by powerful businesses to take over the Web, but the free part that shares global ideas and information still exists. Gauntlett looks at the Web as a space of different spheres, existing alongside each other, but used for different things. So far no one is forced to register with Facebook, Ebay and iPhone or other social enclosures that create their own spheres on the Internet. There are still options for those out there who wish to make their own choices, exploring the larger, free space on the Web.

The convergence of postmodernist to digital economy capitalism

While the online economy makes sense to capitalism (again), the measures to secure competition have changed. Money alone is not the measure of choice anymore. To the contrary, a new breed of individuals involved in creating wealth on the Internet use knowledge to create knowledge in a collaborative effort. Terranova (2013) states that the concept of free labour is nothing new to capitalist societies. However, it has a different effect on the Web. Such activities are commonly referred to as knowledge work; immaterial work (Lazzarato, 1996) that is very abstract from a traditional capitalist and Marxist view, as it doesn't produce any physical value. Instead it involves 'defining and fixing cultural and artistic standards, fashions, tastes, consumer norms, and, more strategically, public opinion'.

One example of knowledge worker is referred to by Young (2013) as micro mavens. Micro mavens are Web users running small businesses that create attention for themselves by disseminating free expert knowledge in a wide range of fields. Using their own blog, appearing as guest bloggers or contributing to relevant topic discussions in SNS, these individuals use the same tactics as large organisations, in giving away expert knowledge (content) for free in the aim of creating attention for their brand. Money is made by service offerings and products that go beyond what is otherwise offered for free (books, lectures, training, public speaking, consulting etc.) - a much more powerful approach than using a limited number of experts working on an isolated project (Shirky, 2005). What they have in common is the passion for the product they are trying to improve and the love for the work they are doing (Raymond, 2005), creating a user driven environment, because those who love the product they work for also use it. 

Conclusion

The Web has become a very public and liberating space. Power distribution has shifted severely towards the individual. Every creative can use the Web to do business in their own right or collaborate with other likeminded individual Web users to create business communities. Large organisations find themselves on eye level with a powerful crowd of individual Web users. The Web has helped individuals to gain access to information that was formerly pre-selected and funneled by media organisations, in the physical world of Real Life (RL).

References

Anderson, C. (2004). The Internet is Dead. In H. R. Varian, J. Farrell, C. Shapiro (Eds.), The economics of information technology : an introduction (p. 126). Cambridge ; New York : Cambridge University Press.

Anderson, C. (2008). Free! Why $0.00 is the Future of Business [vodcast]. Retrieved from http://youtu.be/RZkeCIW75CU

Anderson C., Wolf, M. (2010, September). The Web is Dead. Long Live the Internet [Weblog post]. Retrieved from http://www.wired.com/magazine/2010/08/ff_webrip/

Federal Communications Commission (2010). Connecting America: The National Broadcasting Plan. (p. 37-38)

Foster, J. B. & McChesney, R. J. (2011, March). The Internet’s unholy marriage to capitalism. Monthly Review. New York, NY: Monthly Review Press. 62 (10).

Gauntlett, D. (2004). Basic Web Economics: How things work in the 'attention economy' [Weblog post]. Retrieved from http://www.newmediastudies.com/economic.html

Internet Content Syndication Council (2008, May). Content Creation and Distribution in an expanding Internet Universe. White paper. Retrieved from http://www.internetcontentsyndication.org/downloads/whitepapers/content_creation.pdf

Lazzarato, M. (1996). Immaterial Labor. Casarino, C., Karl, R.E. (Eds.) Polygraph Collective 1 (33).  London, UK: Routledge.

O'Reilly, T. (2005, September). What is Web2.0: Design Patterns and Business Models for the next generation of Software [Weblog post]. Retrieved from http://oreilly.com/web2/archive/what-is-web-20.html

Raymond, E.S. (2005). The Cathedral and the Bazaar. First Monday. Chicago Il.: First Monday. Special Issue #2.Retrieved from http://firstmonday.org/ojs/index.php/fm/article/view/1472/1387

Shapcott, B. (1995, July 15). Rule $19.99. Net Legends FAQ. Archived at http://www.vic.com/~dbd/nll.11.94.update.

Shirky, C. (2005, July). Institutions vs. Collaborations [Vodcast]. Retrieved from http://www.ted.com/talks/clay_shirky_on_institutions_versus_collaboration.html

Terranova, T. (2013). Free Labour. Scholz, T (ed.). Digital Labour: The Internet as playground and factory. (pp. 33 - 57). New York, NY: Routledge.

Wilson, F. (2006, March). My Favourite Business Model [weblog Post]. Retrieved from http://www.avc.com/a_vc/2006/03/my_favorite_bus.html

Wolford, J. (2013, Mai). Flick Now Offers a Terabyte of Storage, New Photo-Rich Interface [Weblog post]. Retrieved from http://www.webpronews.com/flickr-now-offers-a-terabyte-of-storage-new-photo-rich-interface-2013-05

Young, T. (2013). Microdomination: How to leverage social media and content marketing to build a mini-business empire around your brand. Milton, QLD: Wiley & Sons Australia Ltd.