This is just the beginning

The news of Google closing down some of its non-profitable services is just the beginning of what we will see during the coming times. Either popular websites and services will start to be closed or something has to change in how they make their income.

Sure, web services are closed down all the time because of non-existant revenue models, bad management, small traction or other reasons. When that happens, many say, no big deal. What is different this time and the months and years to come is we will see closure of many good, popular, loved sites which have become part of our life.

Many consumers consider it self-evident, that we can use free web services, not thinking who pays for developing and running them. We do forget, that companies are giving us expensive gifts and not getting much back. “$0.00 is the future of business,” wrote Chris Anderson for Wired. At the same time Google kept developing and running close to 50 services, which bring them nothing more than fame and losses.

What Google under their new CFO has done is effectively saying: “You were not paying for what you got, we were making losses, it was not fair to us, so that’s the end of it”. Sure, closing Google Notebook or Jaiku might not matter to many. Pulling the plug on Youtube, Picasa, Orkut or hundreds of other top services, still loss-making, either from Google or others is a different matter. But these things will happen to some of them.

It was fun, while VC money was pouring down the skies. Free was sexy. During the recession, now that CFO’s rule and profitability will be the key, nobody cares about sexy. You make losses – you either restructure or you kill it.

Sure, investors and enterpreneurs will suffer. The bigger problem is that the consumers will suffer. The only reason to that is being used to the “Church of the Free”. We’d rather see things we love going down the drain than being willing to find the $1, $10 or $100 to pay for what we consume. After all, The Church said the right price is $0.00 and someone else should pay, the mystic Advertisers.

The solution? I am not sure, but I do believe we have to start paying more for what we as consumers use and charge more for what we as web startups provide. The payment systems have to evolve, either in micro-payments or subscription models. Our mentality must change in being willing to pay.

The question is not just about startups and more mature companies surviving or profiting. It’s all about continuing innovation, creating value by people who get paid and find motivation to do something. It’s about media investing into journalists, photographers, videographers and us as citizens having quality news sources, based on deep research, in addition to yellow entertainment news snippets produced cheaply by cut-down media organisations under the pressure of decreasing ad revenues.

Free will not disappear and everything will not become paid. But unless there is drastic change in the current online advertising models and mechanisms, what we have become used to in the last few years will not be sustainable. Seeing that innovation in online marketing is something we should wish for, both as web enterpreneurs as well as private consumers. Until that day, follow the news of your loved ones biting the dust.

5 Comments

  1. Osa süüst on kindlasti kasutajatelgi. Igavesti ei saa kõike tasuta.
    Kuid ka ettevõtted, antud juhul just Google teevad vigu:
    http://advinci.ee/google-pole-ariplaani-ja-pole-plaaniski/

  2. toivo

    “At the same time Google kept developing and running close to 50 services, which bring them nothing more than fame and losses.”

    http://www.google.com/apps/intl/en/business/editions.html

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  1. [...] hetk tagasi Jüri Kaljundi postitusele “This is just the beginning”, kus ta räägib, et oleme harjunud, et kõik teenused internetis on tasuta ja seetõttu suletakse [...]

  2. By Online business model revenue gap - Jüri Kaljundi on 16 November, 2009 at 10:50 pm

    [...] the cost base of quality businesses. Downturn in ad revenues has made this even more visible from my last posting in January, to which this posting is a continuation. Some companies talk about going fully subscription based [...]

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