There's no free lunch, not even online

Ever used Google? How about the Firefox browser? Or maybe you are Facebook fan? Enjoy reading Thought Leader?

Or maybe you have something against using free stuff?

Chances are, you love free stuff. And that is a good thing. But it is a problem for all the business suits peering over the shoulders of all the creators of all the free stuff that we use every day: someone, somehow, some day has to pay for it all.

Certainly, that is not your problem, and lucky for you, nobody is insisting that you whip out your credit card just yet. In fact, developers, investors and marketers are falling over themselves to build applications that seem to have one function, differentiated a hundred ways: to give you something with which you will fall in love, and which you will share with your friends.

Jason Calcanis, the man behind Netscape and Mahalo, had this to say specifically about Twitter (but feel free to apply it to almost any online service you use that is free):

… [Twitter] shouldn’t worry about a business model for another two years. Just build the service to massive critical mass. Get to 100-million users — which is where the service is headed. If the service gets to 100-million monthly users, it will be worth a couple of billion.

That’s what I learned at AOL: once you have critical mass, you can’t help but make a fortune. An absolute idiot with 10-million to 20-million users can make a ton of money. So, get to tens of millions of users and forget about money.

And then he added this:

Running a start-up is not about revenue any more — it’s about critical mass. It’s about scale. When you’re playing in the big leagues with unlimited access to capital, you shouldn’t worry about revenue before you have critical mass.

Cool enough. Except that even the leagues with “unlimited access to capital” will one day want to recoup their investment. To think otherwise is illogical. And the best way to recoup their investment? Here is a hint: there is a reason why large (huge) membership numbers are so critical to success.

Because, at the end of the day, when Google indexes the web for you, or Facebook connects you with your best friend from grade one, they want one thing in return: for you to interact with their advertisers.

So why is this such a problem? How pompous are we to presume that some of the smartest minds in the world will develop applications for our pleasure and our benefit, and that they should do so for purely philanthropic reasons?

If we were half as smart as them, we would start interacting with their advertisers, and fast, in order to ensure the continuous enhancement of the web for our good.

Instead, we create mini online riots when our trusted applications develop new methods for advertisers to say hello. When Facebook launched Beacon (an advertising initiative) last year, there was a huge outcry from the online world.

We are loath to click on ads on the sites we visit, and are bothered by the “interference” that they cause. In fact, on average, we only click about one ad in 400 that we see online.

It’s a vicious cycle: locally, since interaction with online advertisers is so poor, it is far more difficult to find funding for applications whose only business model is advertising. That is unfortunate, because we are missing out on some great potential sites. Luckily, we have developers who donate their time to create worthwhile sites without an ad in sight (see Afrigator.com for an example).

The ironic thing is that these sites are becoming smarter and smarter in figuring out what we like, and thus what ads would interest us the most. All we need to do is give them the benefit of the doubt and get past the mental block that we have developed every time we see a worthwhile ad.

So my wish for 2008? Somewhere below the desire for world peace, wider roads and a more capable Eskom is the dream that we will lose the higher-than-though attitude when it comes to online interaction with third parties on free sites, and thereby contribute to a greater, and better, web.

Cheers!