If there is one thing keeping internet executives from throwing themselves off the window ledge at the moment it is the beckoning of a new Golden Age. They are praying they will be among the survivors of the current bloodletting and able to take advantage of the reduced competition that will ensue to do what they always wanted to do but could not: charge for the services they offer.
There is a growing feeling among producers - not yet shared, it has to be said, by consumers - that the web's digital free lunch has got to end. Businesses are not the International Red Cross. They exist to make a profit. Never in history have commercial companies been set up to provide free services for the general public.
The only exceptions have been products such as television programmes or free newspapers where advertising revenues have amply compensated for the lack of point-of-sale income. The lesson of the last year is that the banner advertising model for internet companies has failed to produce a formula for survival. There are alternatives - like being required to watch a streaming video advertisement (like those on commercial TV) before you access sites, but they are a year or two away and may meet consumer resistance, at least for the pioneers. Meanwhile, web companies must get income or pack it all in.
It is worth pondering how long this unusual culture can continue. We not only expect our email and web access to be free but we are quite prepared to ring up the host company and complain bitterly when it isn't being delivered reliably - even threatening to take our custom elsewhere. The cheek of it!
Yet how much would you be prepared to pay for email if it were not free? At 5p a throw it would be a bargain against a first class letter at 27p and the latter cannot be delivered anywhere in the world instantaneously complete with colour, or even moving, pictures.
What would you be prepared to pay for a search engine such as Google, a web browser like Netscape or Explorer or the facility to build your own website with 100MB of free web space (as FortuneCity offers)?
You would never expect oil companies to sell their product for nothing, what is so different about web companies? The answer is: a lot. First, and most important, the marginal cost of production of a web product is zero. You may spend millions building a product like a search engine or email facility but thereafter you can "produce" millions more at no extra cost (the consumer pays the very modest delivery charge when they download).
If Microsoft started charging for email, there would be a mass migration to Yahoo!. And if all the main email providers decided simultaneously to charge, then a free alternative would soon emerge from the mutuality of the web. Remember, Mosaic, the browser that changed the world when it mutated into Netscape started life as a free-to-all product developed in academia. Likewise Napster.
To escape from the - truly wonderful - mutuality of the web, companies must do one of three things. First provide such irresistible value added that people are prepared to pay for it.
The trouble is that value added - as Yahoo and MSN know to their cost, is also replicable: Yahoo! soon becomes Metoo. The newly fashionable variant of this, I am informed, is a big move by telcos, cable companies and carriers into "aggregated content packages". Consumers will be offered content as part of a package bundled into their telecom or cable charges so they do not realise what they are actually paying for.
Second, companies will try to exploit a monopoly or quasi-monopoly situation in order to charge. Microsoft's 95% armlock on operating systems enables it to charge for its spreadsheets and word processing packages while AOL's walled garden of services enables it to charge its members. Why is it that email is free but text messages (ludicrously, when you consider how little system capacity they use up) cost 10p a throw? It's because the telcos control the portals.
Third, companies will try to fill in the missing link of web commerce - the absence of a micro-payments system for charging for small activities. If this had happened at the beginning of the web explosion then punters may have been prepared to pay, say, 1p or 5p for accessing premium pages (BT's pioneering Prestel service succeeded on a modest scale) and we would not have become immunised against paying for web activity.
If this had happened it would have inverted the paradigm of web commerce and could have led to an unprecedented empowerment of individuals. Instead of the telcos creaming off all the money from web traffic (which would not exist without web sites to go to) part of the revenue would have gone to the people who created the web sites - maybe you.
The next few years will see a breakthrough in web payment schemes. Which one will win - paying by email, prepayment cards, secure credit cards or on your utility bills - I do not know. I suspect that it will lead to a new breed of quasi-mutual companies which combine making enough small profits to keep going without attracting interest from institutional or stock market investors. Will Yahoo! be the first?
