Web 2.0 and Financial Gain?

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Permalink Reply by nlowell on February 15, 2008 at 2:26pm

This is a very interesting question and it's a difficult one to answer from the traditional perspectives. As a participant in the "web 2.0 economy" - if you can even call it that - I can point out from personal experience that all the old ideas of pricing are not merely obsolete. They're more like anathema. You can't charge. It doesn't work. That's a notion that's totally counter to the culture. Monetization has to come from other ways. Ad revenue is one. It's rooted in the old economy but it still has some life.

In my case, I give my novels away for free as podcasts. Listeners who like them donate a small amount thru Paypal. I also sell tee-shirts and coffee cups (it's an in-joke that my fans appreciate) through CafePress. I can't quit my day job - yet - but I am learning a lot about how this all works and maybe in 20 years I'll be able to retire on my donations. Or mainstream media will publish one or more in paper. Or maybe I'll start my own small press. Or maybe I'll get a movie deal. Who knows?

As for monetization, Amazon and eBay have shown the power in the power curve. The value of really small niche markets lies in really low production and distribution costs. If what you build costs too much to produce or distribute, then you'll have problems finding a big enough niche to support it. But if what you produce is small, incremental, and gradually has an accretion of value as you gain audience, then this is a very good model.

The interesting thing from the perspective of education is that it requires no credential, no degree, no diploma. Anybody with an idea, a computer, and a connection can produce content and participate in the Web 2.0 economy. I've started my kids (9 and 12) thinking about it already. By the time they're old enough to go to college, I expect them to pay for tuition from their profits. That's only partly a joke.

The problem, from the perspective of education, is that there's no eBay for learning. There's no Amazon for classes. The nature of the institution as credentialing agency precludes a free market in education. There's no Math Yard Sale where you can pick up a half-dozen credits in calculus for $20. Monetization in web 2.0 education has to come from some other way. Kevin Kelly addresses what some of those sources are in Better Than Free.

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Permalink Reply by Nancy Bosch on February 15, 2008 at 4:40pm

No doubt. In two or three years most of the "free" tools will be gone altogether and many of the others will charge a fee. I stated presenting at NECC in 1995---the exhibition hall was filled with free tools, programs, applications--companies like Riverdeep, Big Chalk, eboard, Classroom Connect, Blackboard, Brainpop, were touting no-fee services. A few years later they were subscription-based or gone.

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Permalink Reply by nlowell on February 15, 2008 at 5:24pm

This crop of free tools may be gone, but they'll be replaced by others.

With a world full of people who can code, unless something happens to make connection scarce globally, free tools will continue to be available and each generation will improve on the previous.

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Permalink Reply by Steve Hargadon on February 16, 2008 at 12:12am

Yes, I agree--when companies like Flickr can be started by two or three people, there is a different economy. It's a little easier, too, to be committed to an ideal (like education) and find other ways of making money while providing the service. CR 2.0 might even serve as an example, as it has taken very little in capital for me to start, allowing me to keep it as a free service (even better, as a collaboratively built service). And it has certainly opened doors for me to find things to do for pay that are in harmony with its ideals.

I also think that Nancy is right, as well. As some of these Web 2.0 services become more sophisticated, and to get the results require deeper customization and training, many of them are likely to migrate to for-pay services. It's really hard to get into the mindset of truly giving value away and finding tangential revenue. Google has done a very good job of this, and they serve as a good example.

Another category of companies might be represented by Ning: for-pay services from the start that become convinced to help education as a secondary interest. Ning's revenue model is not geared toward education at all, but they have been very proactive in supporting education as they have seen 1) the value they bring to education, 2) the difficulty educators have in paying for something like this, and 3) the potential value of having people become familiar with Ning through educational endeavors and then using it for their own family reunions, weddings, and other community-building projects.

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Permalink Reply by Bill on February 15, 2008 at 5:55pm

The whole notion of a "free" service is a misnomer.

This includes Ning, btw.

The ad model is just the tip of the iceberg. The revenue generated from ads is minimal; the real money is in selling profile data, and, through partnerships, selling demographic data cross-referenced against browsing habits. For a sense of how Ning fares in this arena, check out the Affiliates section, and the Change of Ownership section, in the Privacy Policy linked at the bottom of the page. These terms allow plenty of room to include user data as part of deals between companies.

So, for all of us using free services, we are all helping marketers/ad execs/affiliate advertisers/data miners stay afloat.

As to whether these services continue to exist, that is really in our hands. If we stop using them, they will go away. If we pay reasonable fees for reasonable services, we can encourage companies who act responsibly, and part of how I define "responsibly" includes treating my private data as my private data, and *not* monetizing my private data through deals with affiliates.

However, the notion that any of us is using a "free" service is inaccurate. We just don't see (or profit from) how these companies make money from us. The value of free sites is in the user base, and in how that user base is tracked.

Open Source provides an alternative, but the "cost"of open source is time/the learning curve required to use it effectively. However, the richness of the various open source communities, combined with the true innovation within these communities are two immediate benefits of using and developing open source tools.

Cheers,

Bill

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Permalink Reply by Steve O'Connor on February 16, 2008 at 7:14am

I wholehearted agree with you Bill. That is why I prefer to use web hosting and open source solutions. Yes, there is learning involved (and that is good from my view), but it is offset by the freedom, control, and privacy. I am puzzled by many web2.0 evangelists who bypass the possibilities of open source. Granted, some don't want to get into the technical nuts and bolts, but many open source solutions are relatively simple to use and can be installed easily though a control panel in a matter of seconds.

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Permalink Reply by Paul Edelman on February 27, 2008 at 8:31am

We operate in a 'free market' economy, but that of course doesn't mean goods and services are free. Bill's reply is very astute on this point. Free services on the web will only survive if they can monetize the activity they generate in some way, either by selling ads, mining data for marketers or charging for their services.

Simply stated, a healthy and vibrant business requires revenue. There's no way around it. If a business can't generate revenue, any funds its founders were able to loan the company or that they were able to raise will dry up and then the business will cease to exist. They simply won't be able to pay their bills.

But the web has changed the calculus slightly. Relatively unique to the web, another strategy is simply to gain as many users/eyeballs as possible and then sell to a larger company who finds those users valuable. Typically, to get to a point where a service has 100's of thousands of users, they have to offer their product/service for free. It's a strategy, not a gift.

This is not a bad thing. It keeps innovation churning.

Education is not any different from other industries. Companies who serve teachers and students need to generate revenue, too, not just good will. This doesn't mean that they are evil because they want to pay their bills and cover the cost of development and customer service! The profit incentive and the desire to improve education for our kids don't need to be mutually exclusive. As Steve Hargadon says, he can do "things for pay that are in harmony with [his] ideals".

I speak from experience. I am a former teacher and the founder of http://www.TeachersPayTeachers.com. It's an open marketplace (that I sold to Scholastic but still run with my ideals intact) where teachers buy and sell their original teaching materials. Our teacher-sellers work hard on their lesson plans and sell them for reasonable prices. Have they jumped the shark? No. Definitely not. They are as thrilled by the extra cash they earn each month as they are by the neat fact that teachers and students around the country are benefiting from their work. Their ideals are stronger than ever. The chance for extra compensation actually makes them work harder on their teaching materials in an effort to make them even better. Value begets value and everyone wins in the end. It's okay.

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Permalink Reply by Paul Edelman on February 27, 2008 at 9:23am

True, indigo, some school districts have intellectual property policies that claim 'ownership' of a teacher's original lesson plans. Others don't. Frankly, it's more of a university level policy. But we definitely recommend that teachers check with their districts.

Traditionally, though, teachers have owned the intellectual property rights to their original materials. When they change jobs and move to another district, they take their plans with them rather then leaving them with the school they're leaving.

Most teachers plan after school, late at night, on weekends and during vacations and work their tails off! Prep time during the school day is not nearly sufficient, so teachers must use their own time. They own this time, not the school. Of course, if a school specifically commissions, say, a grade wide exam from a teacher or group of teachers, that belongs to the school. But most original materials are a teacher's. Also, it's highly unlikely (not to mention shameful) that a k-12 school district will spend the money to sue a teacher for making a few extra hundred bucks or even several thousand. At least, that's our position.

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Permalink Reply by Paul Edelman on February 27, 2008 at 9:45am

Your teacher friend was selling during time she was being paid to consult? That seems like a different scenario to me than what goes on on TpT. Anyway, your point is well taken.

Best,

Paul

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Permalink Reply by Nancy Bosch on February 27, 2008 at 9:55am

I was involved in this discussion last month and the point I made was saving the work done "off hours" on district servers belonged to the district. There was some question as to whether the district owned what was on their servers.

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Permalink Reply by Bill on February 27, 2008 at 10:06am

This discussion belies the need to publish material openly, under a Creative Commons (or comparable) license.

If you are storing your work on a server/site you control, and/or using an open source tool to author, edit, and distribute, you have clearly stated that this is *your* work.

@indigo96 -- from what you describe of your situation, it sounds like your district engaged in an IP land-grab. I can imagine that their approach put a damper on your desire to innovate within the workplace.

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