This can't be sustained forever. If we want legitimate content producers to take the Internet seriously as a platform, we need to start forking over money.

Edit: To anyone replying to me, we can debate this forever. The Chris Anderson v Malcolm Gladwell debate proved it's a controversial topic. However, I don't know where you're getting "close to zero." A good engineer or other employee is at least $100k a year. It may cost almost nothing for new headlines to show up on Digg every day, however Diggs 100 or so employees all need to put food on the table somehow.

I think you're overestimating the power of AdBlock. In fact, I know friends who aren't tech savvy to whom I've shown AdBlock, and when they get a new computer, they don't even remember to install AdBlock. We tend to be annoyed by web ads because we're tech savvy, but many average users couldn't care less that they're being bombarded by a constant stream of corporate propaganda.

Because of this, while it might be exceedingly difficult to monetize a site geared towards tech savvy users (Reddit, for example), many other sites (like Facebook) get by just fine.

For example, I've clicked on dozens of ads on Stack Overflow, and even subscribed to a few things that way. I honestly think turning on AdBlock is depriving me of valuable information, on those sites at least.

The catch is that we have to reveal a lot of personal information before the ads can become highly targeted.

Not necessarily, unless that also includes revealing a lot of personal information by virtue of the site you're visiting. For example, a site focused on a specific sports team could fairly easily target their advertising to their typical user, and be showing ads that are actually relevant to their users.

For RedSoxFansWhoAlsoWearRedSocks.com, targeted advertising is fairly easy, but for sites with a broader audience, like nytimes.com or salon.com where personal information is needed for targeted ads, Facebook already has this information and can sell a connector to you, the nytimes.com ad manager.

I have been researching a new laptop for the past three months. Finally I decided on getting a ThinkPad x201. Not once did I see any laptop ads on any sites I visited except the specific niche research sites. Now I see Lenovo ads everywhere. They're on slashdot, facebook, boy genius reports. These ads would have been useful to me before my purchase, not after.

My point is that using the topic of the site alone isn't enough. Even on facebook, which probably has the most detail about me than any site, they still get the ads wrong. I rarely find them relevant to my life and needs.

The way I explain Facebook's plan to non-techies, btw: Imagine you have a friend called Jenna that has a birthday next week. Now, whenever you visit say, Amazon.com, they'll have ads saying "Jenna's birthday is next week, why not buy her this nice book?". Creepy, but that's where we're headed.

Also, the allegedly common complainers who only want free stuff is unquantified. You will need some evidence to show that most people are conscious freeloaders who complain a lot.

Currency also has little value (and is relatively easy and cheap to replicate). It's just ink and paper, but we value it as much higher.

If you bought software from me and I sent you random bytes instead, would you be satisfied? According to you, they have the same value.

You aren't paying for the bits that are assorted in a specific order. You are paying for the time, effort, and knowledge it took to assort those bits (which is still unique as the average person can't press a button and create Photoshop with no effort).

"Also, the allegedly common complainers who only want free stuff is unquantified. You will need some evidence to show that most people are conscious freeloaders who complain a lot."

As a simple example, look at some of the startups here on HN. Many have gotten rid of the freemium model. The reason? Freeloaders are taking up resources and they can't afford it.

Freeloaders are driving the cost of software to $0. Because software isn't something tangible, its value is based on what people think it's worth. If anybody can download your app for free (because freeloaders have downloaded it and spread it around), the perceived value will rapidly approach $0.

The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user.

My opinion is that commercial software will just change, not be less and less. I also thought some people are too dumb to realize that piracy is impossible to defend against and will be swept away in changes. I just realize that I wasn't looking at the right kind of people. Internet savy and those who are aware of the nature of software economic already realize this. SaaS is exactly the conclusion that I come up for a web application that I was supposed and still angling to complete.

The youth of today are Internet savvy. As time goes on, there will be less and less people that don't know how to find software, music online (for free).

That may be true, but free musics and software are often inconvenient. They might be willing to fork over cash to save time when they're older.

However, it is much possible that free software continue to drive up the standard and decrease inconvenience so long as they have the incentives to, displacing paid software.

That's clearly nonsense. Would you buy a house and expect to show up to move in and you find a vacant lot and a pile of bricks?

There's real, cash value in organizing random stuff into coherent patterns.

Just because something cost a lot of money to produce doesn't mean you get to price it "cost + profit margin". Reality doesn't work that way.

And things does get driven down to zero. Look at pirates who offer download of vista for free on bittorrent. Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries).

Most stuff on the internet are free anyway, which should be ample evidence for my argument.

What stuff? Stuff that's paid for with advertisement dollars? Do you think this stuff would still be free or marginal cost without those advertisement dollars? I think the fact that so much software and media (probably well over 90%) is paid for in some fashion by consumers (either through advertisers or directly) is evidence to the contrary of what you are saying.

There's no such thing as a free lunch. Econ 101.

There are also non-monetary costs to pirating, which are mostly viruses and time. However, they don't generally count toward monetary price, but they are cost nonetheless.

That being said, most people don't get caught anyway. So the risk is effectively zero.

Microsoft is one of the largest software companies in the world. They can afford to take the hit with piracy. The thousands of other smaller companies that sell software don't have this ability.

"Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries)."

This is a bad example. Software and Music are exact duplicates.

..and those live performances are also pirated. How exactly is adobe photoshop CS5 all over the bittorrent networks not an exact copy of the one adobe is selling on their website?

Which isn't true. The marginal cost of copying random bits is the same as the marginal cost of copying Microsoft windows.

The piracy culture that has become rampant in the last 10 years is driving the cost down.

You take an example of people stealing a product and giving it away as evidence of the free market at work? wtf?

Most of the "free" stuff on the internet is paid for by advertising (which you pay for when you buy products) or serves as a loss leader.

Copyright is a monopoly right, not property right. People don't steal, they crack and make copies. This is somewhat analogous to me making a bunch of Honda cloning after reverse engineering one. I am not depriving of the car dealership their cars, only made cars exactly like honda more abundant.

Maybe you think people stealing away your profit is unethical, but it doesn't matter to economic forces. You will lose trying to defend yourself from massive piracy.

Most of the "free" stuff on the internet is paid for by advertising (which you pay for when you buy products) or serves as a loss leader.

You don't pay for it. You are the product.

The majority of software development, something like 90%, is already bespoke project work, which doesn't depend on copyright to fund it. In fact, the more freely we can copy software, the more value we can produce in bespoke project work. Django, Linux, Firefox, and SQLite make it possible for me to toss together a simple CRUD web site in 45 minutes.

Sure, if you're trying to alway sell digital goods at a price. However, you could try to sell things that are actually scarce and less likely to be driven down to marginal cost such as your programming services. There are bunch of business that require custom made software and they're not going to get it by pirating software.

Take commercial C compilers. Used to be a thriving industry, but once Gcc got good enough, people stopped paying.

Generally, they act more as advertising and brake to competitor substitute goods that could otherwise gain momentum.

It's interesting because DRM and the "inconvenient access" you speak of were created as a direct result of mass piracy.

People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around.

GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM.

You also have to think about "complementary products" ... Apple is investing in the LLVM/GCC compilers because it helps them sell their hardware with their proprietary OS installed, which is by no means free.

The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.

For some subset of C compiler users, gcc is an acceptable substitute, and so there's no reason to pay anyone, anywhere, $.01 for a C compiler. Their business is gone forever and it is no longer worth writing a commercial C compiler in order to get these people's money. Your market is now people with needs that gcc can't fulfill, which is smaller but quite possibly still lucrative.

Ditto for Gimp/Photoshop. I crop and scale pictures, so GIMP or Paint.NET work more than fine. Photoshop isn't worth it for me to buy. On the other hand, my wife and I have both bought laptops in the last year and I spent 3x what she did. Her cheap Dell was not an acceptable substitute, so I paid more. Even if the Dell was free, I still would have paid for my bigger faster laptop with 18.4" screen.

If in 10 years, GIMP does everything that a graphic designer or artist could want, it will no longer matter how advanced Photoshop is. Just ask film camera makers.

The book The Innovator's Dilemma (and its underrated sequel, The Innovator's Solution) talk about this extensively.

I think a free product have to be utterly superior to a paid product in order to displace commercial products.

The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.

I am not parsing this statement. Do you mean that because it take 22 years to develop Photoshop, that it is impossible for GIMP to be good enough to be a substitute good thus eventually displacing it?

In order to completely displace commercial products, yes. But for any reasonably complex or powerful product, there's a market of customers that are overserved by it and would pay less for less if they could. This is usually handled by product segmentation - think of options in cars. If you don't need the extra power, go for the 4-cylinder instead of the V-6. If cash is more important than comfort, skip the leather seats. If you need the fastest, most luxurious car and money isn't an option, check every box on the list.

I hear this a lot, but when I see places where people have actually done benchmarks GCC usually doesn't come out too bad, and when you look at the correctness of the code (for C at least) its hard to find something better than GCC.

This comes straight from Varian and Shapiro's "Information Rules" by the way - it's not just something I'm making up.

The top content imo comes mostly from folks not being paid, at least not being paid directly for the content: university professors, essayists like Paul Graham, tech bloggers like Yosef K, and so on, who write about stuff that interests them, and publish it online. Some of them do some low-level monetization of their content via Amazon links and a few ads, but many don't even do that. It's not a pure anti-correlation, because there is good commercial stuff and crappy free stuff, but I certainly don't see a strong positive correlation either.

pg doesn't get paid directly from the essays on his site (afaik), but he does gain reputation and credibility. How many more books did he sell because of his essays (e.g. I bought On Lisp after reading "beating the averages")?

The market has been more sophisticated than "give me X and I'll give you money" for a very long time.

I like how you say we should pay, as opposed to we should ask users to pay. The funny thing about internet entrepreneurs is we want to get everything for free, yet charge users for something.

On the contrary, I'd say that entrepreneurs love rewarding fellow entrepreneurs who create a valuable service or product.

And the original comment was about all content, not some.

Right now there's only a tiny trickle of good content being created on the Internet. Of the hundreds of thousands of posts being written each day, there are maybe 5 at best that don't completely suck. What we really need is a system where the authors of the best 25 articles of the day each take home 100K or so. For the nominal cost of less than a billion dollars a year we could spark an intellectual renaissance to rival any other in human history.

I'm sorry, but that's just silly. 1) You're not reading the whole internet, 2) you're not the intended audience for much of what's written, and 3) opinions vary.

Are you proposing we replace the free market of authors and readers with some central judging authority? How would these people filter through all this content, on what basis would they judge it, and how would they be funded? How do we protected against government meddling and political bias?

This is a pretty big problem you're creating to replace a system which, basically, seems to work fine. It would be nice to help creators make money, but you can't fix human taste.

We don't have a free market of authors and readers. Readers don't currently pay authors, this is what needs to change.

"How would these people filter through all this content, on what basis would they judge it, and how would they be funded? How do we protected against government meddling and political bias?"

Not sure.

"This is a pretty big problem you're creating to replace a system which, basically, seems to work fine."

I don't think it works fine at all, judging by the fact that all of our biggest problems are marketing problems. In any given area of society the science is between 25 and 100 years ahead of the status quo.

OK. But 1) readers are free to reward authors IF they want to, and 2) authors can potentially make money from their readership by selling ads and t-shirts, getting speaking gigs and job offers and holding conferences, etc. So there's freedom, and there's a market. If people don't value something enough to pay for it, you can't force them to value it. They have a right to their own opinions.

Sure, 99% of authors make zip. But I bet a larger percentage of the population makes money creating stuff on the web than they did when you had to have a publishing deal to publish anything.

My point with "how would they be funded" was this: either it's voluntary or it's not. If you want to create a voluntary system, great - try to market some kind of micropayments thing or whatever. But if a committee is making the decisions about what's good, and I have no input, the only way I can see for them to get my money to put into the prize pot is to tax me. And I'm opposed to that, both because it's my money and because I distrust this hypothetical committee. What enlightened people do you imagine should be officially blessing The Best Of The Web? I bet my list is different from yours.

Oh! I know! Let's have lots of committees! In fact, let's all be our own committee! Freedom of thought and whatnot!

You see where I end back up?

"I don't think it works fine at all, judging by the fact that all of our biggest problems are marketing problems."

If you define 'people mistreat their neighbors for personal gain' as a marketing problem, maybe. I think it's a lot deeper than that. I'd call it a spiritual problem.

"In any given area of society the science is between 25 and 100 years ahead of the status quo."

Not sure what you mean by this, but science is a tool, not a solution. Psychology, for example, can help you understand what motivates people and how to influence them, but it can't tell you what SHOULD motivate people and how they SHOULD behave. It can as easily be used for evil as for good. Casinos use plenty of science to drain their victims of every last nickel.

I think that's the real problem here. People don't give a damn whether Digg's employees can afford food; they want what they want, when they want it, and for the price that they want it. That, or they expect someone else to do the paying for it.

A financially stable newspaper gets around 75-80% of its gross revenue from advertisements. That's why advertisers have so much power over content, even news content. I don't know the exact figure for magazines, and it could very well be lower, but this should give you an idea.

In fact if you check the literature you'll see that a common idea is that newspapers are in the business of selling customers to advertisers, and they will try to attract a certain type of reader in order to get certain type of advertisers.

In the glory days, a solid 30-40% of revenue was from classified ads, which were _way_ overpriced, but the only game in town.

You may find this of interest: http://newsosaur.blogspot.com/2010/09/newspaper-ad-sales-hea...

So, it seemed the paper actually pays more just to get the paper delivered than the subscriber paid for it. Advertising pays for everything else.

(I'm curious how newsstands and other outlets work, but I'd have to guess that the papers/magazines are provided at very low cost as well, with most of the price on the sale going to the stand operator.)

Much to their nonpaying consumers' chagrin, naturally. Because consumers' support and service expectation does scale with the price they pay, but not all the way to zero!

On the business side, nonpaying consumers are cheaper to scale up than any product you can sell. Which is a blessing and a curse...

Any crowd is going to be part of the product being sold and the market you sell into. Any crowd, online or off, is going to draw performers, whether for free or professional.

People like to be seen, they like to be noticed, they like to contribute. I don't see user-generated sites as some kind of slave mine. Most people are online of their own free will.

It's similar to AT&T really. AT&T does not set monthly fees by dividing up the cost of running its network among all subscribers. Instead it sets competitive fees which will allow it to grow a big customer base. Then it tries to extract revenue from those customers by any means: normal fees, overage charges, selling apps or content, partnerships, advertising, whatever it can think of.

Media companies try to make money as a company, not on each transaction. An alternative strictly-fee-for-service approach would have to charge a lot more, and would likely not get enough customers to stay afloat.

Advertisers pay the newspaper immediately in order to appear on the newspaper/magazine. And because they pay so much more than people buying the actual newspaper/magazine, it can be a great business for the later to attract more people... even going as far as giving the newspaper away for free.

Apple (pre iAds) was making money from you buying the phone: compared to that making money from apps sold is peanuts. So much so that it can be beneficial to let app developers in for free just to get more people buying the phone.

To summarise: Apple tries to attract customers with apps, newspapers try to attract advertisers with customers. Customers don't buy more newspapers because there are more ads, but advertisers buy more ads space if there are more customers.

The relationship between Google and yourself wouldn’t change much if they did away with the ads and charged you money. They want to keep you happy whether you are a customer (i.e. directly pay them money) or not. Paying customer or ad target, it doesn’t really matter all that much.

Two sided markets with their network effects are certainly fascinating [+] but they are also nothing new, nothing extraordinary and certainly not abusive.

[+] It is possible to get negative prices (whenever you get anything for free you can immediately start to look for the two sided market and network effects) and prices that would otherwise be above monopoly prices.

I hypothesize that the players are merely changing and that their strategy of getting large userbase fail because the quality of content is falling, rather than rising, thus decreasing the traffic quality.

This is also in conjuncture with the hypothesis that specialized interests tend to convert better than general social interests because specialized interests tend to have product related items they like to buy.