If you're a Web 2.0 devotee, your world is about to change.
According to Internet World Stats, as of March 31, 2009, there were approximately 1,596,270,108 people using the Internet, or 23.8 percent of the world's population. And with the explosive social networking component of the Internet just getting underway, future projections seem unfathomable.
Most of these users have enjoyed free content, making the Internet their indispensible tool for information, business, entertainment, news, analysis, and socializing.
We're hooked, hooked big time.
Companies that fuel this insatiable thirst for online content, including purveyors of entertainment (movies, music, videos, and television), share some common features:
- They are firmly tied to our economy.
- They are firmly entrenched in our social lives.
- They take up a good percentage of our entertainment and recreational time.
- As of now, for the most part, their services are free.
But the party train is coming to a screeching halt.
This is hardly news. As the financial crisis enters its second year and industry after industry topples, one can only assume the world will not be quite the same. International order will be rearranged, the economic rankings will be reshuffled, and business will no longer be done in the same haphazard manner.
Meanwhile, the Internet tears through the evolutionary process, gobbling up tremendous amounts of time, space, and terabytes. Clearly, online content providers cannot continue to take massive losses in perpetuity. Under present business models, they're losing millions of dollars annually. The whole game is in the midst of a major overhaul -- and it's going to be pay to play. No longer can brand-name Websites provide free content, support, and security for the sake of visitor numbers. With advertising suffering its worst slump in decades, revenues just don't support all the work and costs associated with multimillion-member sites.
Worried about internal data theft? Check out
IE's tutorial on mitigating the insider threat
Reduced ad revenue isn't the only sign of strain. As made apparent in David Silversmith's latest blog, financial liabilities connected with bandwidth, content acquisitions, revenue sharing, data center costs, and administrative costs show the free lunch is over.
Further, providers of online entertainment have waged a raging battle for years over copyright infringement, illegal file-sharing, and blatant piracy. The losses bandied about annually are in the $20 billion range. Of course, digital piracy will continue as long as the hackers stay in front of the good guys, but those costs will be passed on to the consumer. Content providers have little choice but to put up pay walls to support their industries.
Taking another tack, Time Warner Cable is introducing consumption-based billing. The pricing model appears to target customers who download more than 40 Gbytes per month. If the rollout is met with little resistance, others will follow. In a similar vein, the AP's threatening stance on Internet portals and aggregators posting content without paying licensing fees forebodes sweeping changes.
The economy has forced the Internet's hand to act as a serious business, with all the responsibilities that go with success. For us as end users, it will take some getting used to, buying the milk when the cow was once free. But in these troubled times, we have little choice but to accept the inevitable. As President Obama's chief of staff is credited with saying, "Never let a serious crisis go to waste."
Apparently, Internet content providers are heeding a similar message.
— Chris Poley has been a professional trader for more than 20 years.