In a recent ThinkerNet blog post, Andrew Keen, author of The Cult of the Amateur, asserted that the "free" Web 2.0 economy would start to come to a close, as job-endangered citizens would stop giving their knowledge services away to sites like Wikipedia that don't compensate them. Instead, he says, the economic situation will "result in the rise of online media businesses that reward their contributors with cash" (e.g., Mahalo over Wikipedia; Hulu over YouTube; etc.).
Sounds good to me. But what happens when the startups doing the handouts are responsible for the layoffs?
One startup on both sides of the fence is Helium.com, a citizen journalism site. After receiving $17 million in funding, Helium -- which rewards its contributing writers with cash -- cut loose 30 percent of its staff.
Helium's articles are written and ranked by its community members. However, CEO Mark Ranalli calls the site a "meritocracy" rather than a "democracy" because the system tells users which articles to rate based on their areas of expertise -- unlike a site where a user could rate any article and possibly game the system.
Helium compensates its contributors in two ways: via sharing ad revenue, which Ranalli says rewards writers with tens to hundreds of dollars each month; and via writing for its "freelance marketplace," where publishers post story topics and price points. Writers making money from this model share 20 percent of their revenues with Helium.
In a recent interview with Internet Evolution, Ranalli said that his company wasn't profitable yet. But "the underlying model is working," he claimed, even though today the company shed 30 percent of its staff to compensate for deteriorating ad revenues.
On a similar note, last week, human-powered search site Mahalo, which also rewards users for their contributions, laid off 10 percent of its staff. These were revealed in a blog by the site's founder, Jason Calacanis, who attributed them to an advertising climate which "for the next two years will be severely depressed."
Layoffs are part of the process, especially in a time of financial turmoil. But these particular layoffs are a tad paradoxical to Keen's overall point that a bad job market will demand that Web startups compensate their users. While the good news is users are starting to get rewarded for their tireless efforts, the bad news is, in turn, people with previously steady jobs are getting fired.
So while some Web 2.0 startups might wise up to the need to compensate their users, without a solid business model, it might be at the cost of employing a staff.
Many of these new startups if not all are making attempts increating new business models and as with everything; there will be ups anddowns.
No one wants layoffs and perhaps, it would be prudent toreview their performance to the year to determine how to best avoid or at leastmitigate these situations for the future.
Nevertheless, it is exciting to see startups furnishingtheir site’s content from viewers like us.
You raise a lot of good points, jabailo, and I appreciate you answering all of my questions even though you only intended to ask some of your own!
It's an interesting argument because what you attribute as the greatest problem with the Internet, the other sect of the culture considers its greatest asset: that people come together online to create and share content without asking for anything in return.
But the idea that many have that all of this "free" content is going to turn the world of paid media on its head, it seems, is kind of coming to a crash as content creators can't seem to pull in the cash they need through the free/ad-supported model. And if we are going to start paying for content, that call for "quality writing" and "quality editing" will have to be more than just the pipe dream it seems to be now -- or at least when taking a glance at the blogosphere.
Yes there are a lot of people out there who simply wish to contribute what they know and what they have to the ever growing cyber literature and possibly commerce without thinking that their contribution could in fact earn them something. They only see the cyber space as an opportunity to share ideas and proposals perhaps but not as an opportunity to earn until they see some website inviting interested people to write for a fee (but somehow they have to register and pay some amount first to be able to earn).
I think the problem with subscriptions is that people will become saturated rather quickly. Right now I pay for Netflix and Rhapsody...it bugs when a film or song is not on their database and I have to purchase an external source (like a rare Cd). So, the idea that someone will be willing to go around to tens of web sites and subscribe seems not likely.
Should we be paying to use search engines
No, the search engines should be paying content writers. Google is the greatest seller of unpaid labor in the world! They "leverage" off the backs of the toiling writers and artists who created the web so that it can be presented through their "portal".
and to watch
videos and to read blogs?
I do pay to watch videos as a Netflix subscriber. I feel that the $24 a month I pay for 4 dvds and unlimited streaming is very reasonable for the delivery.
Yet, at the same time, I "consume" the web far more frequently and pay nothing! At the same time I spend far more time contributing to the web and get no monetary reward!
Right now the Fed is telling banks -- give the money away! It's time for the money supply to meet the 21st century economy. The "Web" has basically been an underground economy where people barter and sell ideas because it hasn't been tied into the money supply.
One good thing is that the cost of almost all traditional goods could come crashing down: housing, cars, oil, energy. That leaves more money for us to buy and sell text and content. So, I'm hopeful...
Do you think these models would actually work
on the Internet?
Media has always been driven by sales -- whether its a cable subscription or tv advertising or buying a movie ticket. It's only the vast archive of text media on the Internet that has been created with backbreaking labor and yet is given away for free. Yet, the Internet can consume 40 hours of the "average" person's week!
What sort of model do you see reasonable?
Oh, you want an answer? Wow...I'm more of a big thinker who just raises questions.
Ok, I'll try. I think that what is required are two things: We need more businesses that pay people to write stuff for the Internet...we need to return to the days of the magazine with quality writing, quality editing and publishers who make their life caring for an audience and building loyalty.
re: "It is simply a change of "staffing pattern" wherein instead of
physically present office staff we now have a cyber office manned by
cyber employees."
And not just cyber employees -- but ordinary users willing to provide content for nothing or for a very small slice of the pie.
Jabailo, thanks for the comment. What sort of model do you see reasonable? Should all content sites have subscriptions? Should we be paying to use search engines and to watch videos and to read blogs? Do you think these models would actually work on the Internet? iTunes is a good example of a success story; AOL is not. Just wondering if you can expand on this idea a bit.
Benjamin Wright made a good point in his message below: that companies laying off workers need to cover their email tracks, etc. I also think that any firm that lays off workers after taking fresh funding is likely to inspire hostility from employees who helped the startup get ahead in the first place. Possible repercussions don't have to involve malfeasance; they could include further competition and just plain ol' bad blood among key customers.
I think it's crucial that startups pay a lot of attention to who they hire, how many they hire, and how they handle layoffs if those are inevitable.
i think you hit the nail right on the head! In an economy where the cost of everything is going up and the average person is feeling the pinch one of the FIRST things that will be cut (in my budget) are the random things we buy thatare not necessary. No one is going to buy the milk, when you can milk the cow for free, and yes time is money, but i tink more people will take them time, vs spending the money.
Pay sites on the internet will lead to conglomerates. Who wants to pay $1.95 here a month, $5.95 there, $19.95 in another place. We would be nickel and dimed to death. A one stop shopping service will be the way to go. AOL used to be that one stop shopping place, until people found that they could go to bulletin boards for free, access online dictionaries, video etc... and it tanked to the shell it is. Google could one day may start charging for it's Google Docs suite...(But then it wouldn't be in beta any more.) And people would pay it for its vast resources. We are costco buyers. Become a member, buy in bulk. The one stop shop internet sites will go the way as the mom and pop stores have done in the "real" world.
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In another step toward becoming socially acceptable, Google today unveiled "Google Buzz" -- a method for social sharing from inside Gmail. Naturally, some ever-creative types are already dubbing this release as a "Twitter-killer" and a "Facebook-killer." Because, we just can't get enough of that kind of language.
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We do a lot of grousing here on Internet Evolution, and usually for good reason, considering the amount of nonsense that keeps this industry afloat on its cloud of hot steamy air!!!! But... we can still happily acknowledge those titans who have succeeded in leading the way or paving new ground in their respective fields and, in turn, give credit when it is well deserved.
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In the final episode of this series about the death of Internet anonymity, Saunders describes how the Internet of the future will start to attain a level of intelligence that requires no human intervention. Scary.
What can users today do to protect their online privacy? The simplest and most obvious option is to not use the Internet – at all. However, once all digital information is consolidated over the Internet, trying to protect digital identity by simply unplugging from the Internet becomes impossible – a fact that has manifest implications for civil liberties, Saunders says.
By 2011 the number of Internet-connected sensors will exceed 1 trillion, making your chances of doing anything or going anywhere unnoticed pretty much zero. Saunders talks about how the 'sensortization' of the Internet is eliminating the traditional divide between online and offline populations.
The 20th Century Internet was characterized by the ability to interact with other people and information on the Internet largely without anyone knowing who you were. The Internet of this century, conversely, will be defined by identity. Saunders explains how Internet users are unwittingly contributing to the demise of the anonymous Internet.
Steve Saunders talks about the risks inherent in uncontrolled, widespread profiling of Internet users, and how one day this practice could form the basis of a new industry, the Outernet, which in economic terms will have outgrown the commercial value of the Internet itself.
Search companies and social networks are collecting incredibly detailed information about their users, says Steve Saunders, who predicts that these 'profiles' could one day become commodities to be bought and sold by companies on 'profile markets' or 'identity exchanges’ – the digital DNA equivalents of the financial and commodities exchanges on which stocks, oil, and gold are traded.
One of the most important Internet issues of all time is being ignored by the media. In this three-part video series Steve Saunders explains how search companies are turning the tables on their users by creating user profiles for financial gain, and how soon this trend will explode into full scale profiling.
The PNC Financial Group is using social networking for outreach, product development, customer segmentation, branding, and more. It has also developed an iPhone-based virtual wallet application for Gen Y customers.
More companies are trolling social networks to find and vet potential job candidates. Beware the pitfalls of blurring the line between personal and professional lives.
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