The Internet of Free Things

How Free are Free things?


On the internet, we use a lot of free things. I’m actually typing this on a free product, Google Docs.  Many of the things I use on the internet every day are free, and it is likely true for you as well. Google, Microsoft, Facebook (including Instagram and Whatsapp), Twitter, Foursquare, many TV news sites, and many others that I can’t even think of are all free services. When I look at just the websites I am listing I am not currently paying a dime directly to any of them, and I use them all every day, except for Whatsapp.  Yet, as of this writing Google is worth $397 Billion, Facebook is worth $194 Billion, Microsoft is worth $371 Billion Twitter is worth $27 Billion, and so on.  How can these companies be worth that much money when, except for Microsoft, they all provide mostly free services and the majority of the users don’t pay a dime?


The answer is simple. If you aren't paying for the product, you *are* the product.


What does this mean? The principle will be the same for many of these companies, so I’ll just use Google as the one I talk about here.  When people think of what Google is, they think of many things. Search, Gmail, android, and YouTube are their biggest products. But Google is not a search company, nor are they a mail company, a phone company, or a video company.  Google is an advertising company.  Everything Google does, some things directly, some indirectly, is designed to drive advertising. When you do a Google search, there are advertisements in the results. When you use Gmail, there are ads on the side, when you watch YouTube, there are both banner and pre-roll ads (the pre-roll ads deserve their own post another time). Google drives you to look at ads, and that is how the company makes the vast majority of its money.


That is not a bad thing


Contrary to popular opinion, advertisements are not a bad thing. So many people seem so afraid of ads when the reality is that they are what pay for most of what we do on the internet.  Part of the reason that people seem afraid is these companies partake in targeted advertising. And just like how advertising is not a bad thing, targeted advertising is not a bad thing either.


Targeted advertising is exactly as it sounds. Advertising is targeted at you. And targeted advertising has been used for as long as advertising has existed. But today there are more tools to more specifically target things, which makes advertising better, not worse.  Take TV for example. when you watch a TV show, you see commercials, which are ads. Advertisers do their best to target the ads to the audience that watches that show. This is why so much research is done into demographics, and how many 18-35 year old males watch a show, or 36-50 year old females, or whatever. Whatever the biggest demographic watches a specific show, there will be more ads targeted at that demographic than others. The problem is that doing that is horribly inefficient. One of the best shows on TV right now is The Good Wife, and it is one of the few shows I still watch live every week. But I am not the majority demographic for that show. More women than men watch the show, so when I watch it, the commercials are mostly for products that are for women. This means that the advertisements for that hour are useless to me as none of them apply to me.


Targeted advertising today is so much more effective. If I do a Google search for a camera, if there are going to be advertisements I want them to be advertisements about cameras, not about light fixtures. If I’m looking at products on Amazon, I want the “you might like” section to be based on things I've actually looked at or purchased, not random things that amazon sells. That is targeted advertising. It is better for everyone. The advertisers get more bang for their buck when they advertise because the ads they pay for are more likely to be seen by people that will buy the product. They are better for the consumer because they see things they care about. And what people do not realize is that targeted advertising is not a new thing. Have you done a Google search since the turn of the century? Than you have had targeted advertising. Google’s advertising is built around keywords. Companies will purchase advertisements on key words and then when someone searches for that word on Google, their advertisement will show up. That is one of the earliest examples of targeted advertising on the internet, and it is well over a decade old. Yet, I don’t hear many complaints about how that works.


People ask why the advertising has to be targeted so specifically. The answer is quite simple, advertising on the internet, rightly or wrongly, does not pay at the same rate as, for example, TV advertising. Targeted advertising allows for a higher rate, which makes for a more sustainable model. Paying for an advertisement about hand soap and directing it to be shown at the first 500,000 people to look at a website is not as efficient as paying for an advertisement for hand soap and then showing it to the first 500,000 people who search for hand soap on said website. It allows that website to charge more for that ad, which gains more revenue, and the advertiser gets a better advertisement out of it, as it will reach a more relevant audience.


The big argument against targeted advertising is by people who say it is an invasion of privacy, or that it is creepy. The invasion of privacy argument always makes me chuckle.  You’re using or shopping on a public service on the internet. Without targeted advertising the internet as we know it would not exist today, and our world would be very different, and platforms such as the one I’m writing this in would not exist.  The “creepy factor” is also very small minded. Do you shop in a physical store and use a loyalty program, like air miles, aeroplan, or any of the other points programs numerous hotels, grocery, restaurant, and almost any other retail store has?  By participating in those programs those companies know more about your shopping habits than Google, Facebook, or twitter ever will. Save On Foods has a loyalty card, and every time you use it, Save On has a record of what you purchase. They can tell you exactly what you buy, how often you buy it, and even what days of the week or month you are more likely buy said products. The company can then take the data, and then plan sales, stock stores, send you offers, and try to get you to buy even more.  This practice existed long before twitter and Facebook used targeted advertising. We are treated to a better shopping experience because of it.


At the end of the day, we all use the internet of free things, and we are better off because of it.  What would it cost to have the same internet but on a model where we have to pay for it? Much more than most people would be willing to bear. So the question is, would you be willing to pay a significant amount of money to continue to use the internet without advertising? Or is the internet of free things enough for you?