How is it that major media companies are operating with a business model that involves giving away so much for free? I suppose this has always been the case, and it fits right in with the broadcast/advertising model but things are a little different on the internet. For one thing, I remember way back when, shortly after the dot com bubble burst, nobody believed that the internet had any direct advertising potential whatsoever. Oh that makes me feel old. Yet even then, it was impossible not to see that it was on the track to becoming one of our primary if not the primary media source.
I started a net radio station with a little background as a network admin, strong interest in broadcasting, and a lot of luck, because the convergence of media simply made it possible. It is still running today, thanks in large part to various ideas that AOL has in regard to content and their own business model. What is certain, is that neither of us make any profit to speak of from the entire operation. When you factor in cost of operation, how does a site like facebook for example keep from going under? Even though the value of banner adds has increased over the years, and myspace has fully capitalized on this, I highly doubt that it can cover their expenses.
So what do they have that is so valuable? I'm sure we all know it's us, but if they are strictly web based, and even millions of banners are not going to cover their costs, what are they banking on? My guess is lots of speculation right now, but I am really interested in knowing what those who are investing in operations like this have in mind for the future. The subscription model is one possibility that comes to mind but in order to get subscriptions you have to have a cultural image as something that's worth paying for. Paying for some of these sites would even seem to contradict what makes them popular, so what do they have in mind? -James
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