Free Media

January 25, 2008

While reading Chapter 3 in the Wikinomics text “The Peer Pioneers”, one thought constantly stayed in the back of my head.  “How do internet sites make money when they dont charge you for the free services they provide?”  Well then I came across an article in the Long Tail called the Media Business Model which explained the various ways these free websites make money.  For example lets take Google, it does not charge you to search however look at the right side of the page – a bunch of ads. If you click those ads – that’s ad revenue for Google right there.  Google displays ads based on your search to get a sense of your interests and lure you into those ad sites. 

Another method is to purchase something from the website whose ad is displayed and only the purchase would be monitored proving beneficial to the site on which the ad was displayed known as “cost per transaction”.  This one makes more sense to me since what benefit to the company to click on an ad and not buy anything.  Other ways is by selling our data to third parties such as our preferences etc. 

One method which is also used by traditional businesses is to get the customers through the door for a bargain – “some gas stations sell milk at cost in charlotettown – whats the point! – make you spend on other things”, the internet uses it to provide other supplementary services for a cost.  SO you come in through a site, surf it for free, but then realize you need the advanced features and decided to spend.  For example Stockhouse – a stock trading website – you can view information but if you want streaming real time data – you would have to register and pay around $13/month.  In addition they advertise to gain revenue.  I just wanted to dig into the dynamics of free services and understand how they survive.  Some might be critics of these free web services having so many ads, however, I totally support it because if they dont have ads on their websites then get ready to pay  for those services we currently enjoy for FREE.



One Response to “Free Media”

  1. Sofonyas Says:

    I’ve always wondered how sites make money beside advertizing. I guess the above mentioned methods are the most common ones. Also, you could probably include paid directory services and reader donations as a revenue source, since many blogs an online sites (Wikipedia for instance) are able to bring in a significant amount this way.

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