Mutated freebies

Published on 28-Mar-2001, at "TheMarker.com" (a business and technology Israeli site). Translated from Hebrew by "TheMarker.com".



With the dot.com wave over and dotaholics finally drying out, it's time for the hi-tech world to beat its breast and confess its sin. The sin is no other than the freebie.

Freebies are dying, they say. But I say it isn't dying, it's morphing.

The days of projects burning up millions but never returning a dime are long gone. Over. Gargantuan cash-hemorrhaging freebies couldn't live forever, if only because at the end of the day stands a livid businessman, furious that his cash hasn't yielded some wonderful new technology.

The gratis-giants are dead. Long live the shrewd little hidden freebie.

A freebie can be any aspect of a business model, as long as it attracts customers while ensuring revenues that however vaguely stem from the free activity.

An illegal example would be to sell the personal information of web surfers.

A legitimate example would be to embed a sales site in a news site, the kind of thing now happening on the Israeli site Ynet. It added a link on its home page to a site selling Passover gifts, which directs surfers to a separate window designed much like the rest of the website, yet the links and the inner pages attest to the site's affiliation with the Netvision/Nana ISP. I'm assuming Ynet gets something out of the deal.

A growing realm of competition

A less familiar freebie is the home one, the personal one. Internet boosted sales potential for companies, but also expanded the competition space, and not just with other companies.

Every developer knows that somewhere in cyberspace someone, an individual or a group, is developing a comparable software product that will either be supplide for free, or will at least compete with his development. Be it a calculator or an entire operating system, like the VA Linux Systems (Nasdaq:LNUX) for example.

True, the other system is more often than not hardly as professional or as well thought-out as the original one. But it doesn't require the same resources - capital, real estate and personnel - making it cheaper, which gives it an edge over the real McCoy.

The same applies to content-oriented websites. Many professionals are establishing non-profit websites for their mere pleasure, to show off their academic skills or simply to share their knowledge with the world.

These sites are usually free, and they also take part in various banner campaigns. These sites don't often "count" as competition, but they certainly are one for the simple reason that they are more focused, and a treasure trove of information for the knowledge-seeking surfer.

These websites can adopt the micropayments system to help them achieve relative growth.

Micropayments, which are a system whereby users can easily and safely pay small amounts of money - say $1 - for a service is considered to be the future of small business on the Internet. Using micropayments technology, small websites will be able to make some money, while paying some small fee to a clearing center. When and if the business increases its revenues, it will be able to progress to a more advanced means of payment.

The underlying assumption is that finance companies will believe they can make extra profit from existing clearing systems that will handle the surge of requests for elfish amounts.

This is naturally the real question. The answer will determine the future of this entire model.

None other than IBM is currently in initial stages of applying a micropayments model. The technology was developed in the IBM lab in Haifa, a coastal city in northern Israel.

Why Internet advertising never made it

Advertisements appearing in newspapers, or on TV or radio, will reach thousands of
customers each time. On Internet, exposure is permanent (like a bulletin board) but traffic is not at all a certainty, not a massive one, anyway.
That's why prices if Internet ads are lower.

Unlike the tried and tested media, the Internet is decentralized. It's segmented to an unbelievable degree. It's that very variety advertisers have traditionally pined for, but now that they have it, they don't want it.

I'm afraid traditional advertisers don't have the desire, the tools or the awareness needed to create real vertical advertising.

They use the same team to create an ad for a car, then an ad for electronic components – without providing their team with the necessary knowledge of the professional jargon with which to advertise the specific product.

There aren't enough ad firms prepared to specialize in one specific field. Maybe it simply hasn't been financially feasible. Truly, not every field should or can pay for mass media advertising.

But there is an infinite number of websites now that specialize in their field. From organizations and companies to individuals that build websites as a hobby, and who could just as well have been pros.

The decentralization the web proffers will encourage professionals to open small offices, which will combine Internet advertising pros with professionals from various fields. These offices will gladly search and find the specialty sites as well as advertise in them, as long as they prove innovative and professional, no matter the size of the institution or the person that stand behind the site.

Freebies will not die as long as the need to draw the moths (surfers) to the flame (the sale) persists and people are ready to show off their skills to others.

The Internet has surely created a new economy, but no, it isn't one of cash burn without recompense. It is an economy which allows smaller institutions to hop onto the financial ride, bringing us closer to a cutting-edge market with more competition, more means of production, more products and yes, more than ever, a lot more freebies.