How the Internet is Killing Our Economy
The United States is facing the most challenging economic crisis since The Great Depression of the 1930's. And if you ask me, the greatest technological invention ever, the Internet, is in no small part responsible. In fact, I believe the Internet is not only killing our economy, it's shredding our social fabric as well.
To be sure, the Internet is an incredibly useful medium. It's been a genuine paradigm shifter, altering the way we communicate, research, travel, shop and organize, educate and entertain ourselves. It allows us to do all of these everyday tasks faster, more efficiently and more cost-effectively...often times even free. And therein lies the gargantuan problem of the Internet.
As someone who's formed and runs a few businesses, I can tell you firsthand that free is not good. Free never shows up on a P&L or a balance sheet. Free doesn't fatten the company's coffers and allow for growth and expansion. And you can't pay bills with free. In short, and to use the vernacular of my 16-year-old son, free, in business, sucks.
Yet, the Internet is all about free. We can get our newspapers and magazines for free. We can watch televisions programs free. We can download movies and music free. We can book our own travel, send free mail, make free phone calls, send free greeting cards. We can, thanks to MySpace, Facebook and Twitter to name a few, even socialize for free, never having to leave the house or spend one red-cent actually socializing the way truly sociable folks used to.
Think about all the businesses, all the people, who've been slammed by this economic black hole called the Internet. Consider how much money has literally been sucked out of America's GDP by this rapacious beast which resides in our laptops, PC's, iPhones and Blackberries. Look how it's destroyed the music business, travel agencies, the publishing industry. It's killed the movie after-markets, like DVD. Look at the strikes it's caused in Hollywood, because somehow studios think that viewing content on a computer screen instead of a TV screen somehow gives license to screw writers out of their residuals.
Think of all the money not spent in cafes, bars, lounges, restaurants, clubs, video stores, and book stores because of the proliferation of impersonal, intimacy-starved social-networking sites and free-content sites. Somehow, when it came to the Internet, businesses decided the only way to truly attract a scalable audience was to give them everything free. But now that the economic shit's hitting the fan, our corporate titans may be coming to the long-overdue realization that capitalism and free are about as successful a marriage as Karl Rove and Queer Eye's Carson Kressley.
Just this week one of those corporate uber-moguls, Rupert Murdoch, announced that his News Corporation will begin charging for content on his newspaper websites within a year in a direct answer to what he calls the current "malfunctioning" business model. Citing the enviable success of the Wall Street Journal's growing online subscription revenues, Murdoch said that newspapers were experiencing an "epochal" debate over charging consumers for content. Murdoch's a guy who likes to make money. I'll bet he'll make it all work and have the last laugh. Hopefully, others will follow suit.
I'll say it again: free sucks. Nobody can make money by giving their products and services away for nothing. There can be no profit without revenue. And without revenue all you have is expense, which leads to bleeding red ink. The more people like Murdoch who wake up and smell the cyber-coffee, the sooner our economy and our once-thriving capitalist society can get back on track. When companies and individuals make money, they spend money. Just because a business operates online doesn't mean all that good old fashioned Wharton Business School stuff doesn't apply. Let's keep all the speed, the ease, and the efficiency of the internet, but how about making people pay for it all, just like everywhere else? Duh...
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The whole assumption of this article is false. The assumption is that businesses can only make money in the future the way it has in the past. The reality is that companies make money in different ways.
The same with social networking sites. The article makes the assumption that social interaction only occurs online. By connecting people with common interests who would not have met otherwise, the internet encourages different interactions. For instance, I've been to at least 20 events I found out about online at different websites. If not for the social networking sites, I'd probably have spent the time at home. Definitely not out and about supporting local businesses.
Great topic - I'm sure you get a lot of eyeballs. That's the way FREE works. You get a good headline for FREE and you get attention for FREE. Obviously you know that it works. For you, for huffington and for the rest of the world. If not make your MBA *lol*
@AxelS
Actually, the Internet is CHANGING our economy or at least changing the business models that succeed.
It's a poor workman who blames his tools.
The Internet has opened up enormous potential for those who are agile enough and flexible enough to figure out how to take advantage of it and it has tolled the final bell for those that ignored the paradigm shift that it brought with it.
Remember that the best maker of buggy whips went out of business when automobiles appeared as well. Change is a rule of nature and change can often be painful while the shaking out process is going on. Personally I have confidence in the American entrepreneur. Like I said, the Internet isn't destroying our economy, it's changing it.
All those so-called "free" sites display tons of ads and they are making quite a killing from those ads. The Internet hasn't destroyed any economy, it just made it better and more efficient. Newspapers can still make money online by offering free news and displaying ads.
People don't replace socializing with social networking, they are two very different things. Bars and restaurants are still full, concerts are full, and people in general still hang out with each other. The internet just makes it easier for them to get together.
The Internet is one of the greatest inventions in history. There are many ways to make money from it. Just think and be creative. The old ways of doing business are just obsolete.
Except a lot of what is making money on the Internet has no substance. People write to match keywords to fool the search engine robots and not in any form of unique style. Music, meanwhile, in the form of MP3s sounds like crap all of sudden (no wonder no one is buying it). A lot of the money making models on the Internet are just soul-less, empty marketing schemes.
This happens in the non-Internet world too. People try to sell you crap all the time, this is not something new.
andy, my internet isn't free. i don't watch tv, so comcast punishes me at the rate of 61.99/month. and i'm not an internet freeloader. my monthly amazon bill averages more than my isp. that's because i buy things worth buying.
if you really are "mr. businessman" as you claim, and you have something worth buying then sell it. duh! i'm sure netflix will be interested to find out that dvd's are dying if not already dead. as for news, the best jounalism (spelling, grammar and structure) is coming from outside the US now. murdoch will join the dinosaurs and good riddance.
If our economy is THAT dependent on, movies, music, books, and newspapers, then the internet isn't why we're in trouble...lol.
The arts now constitute approximately 6% of GDP.
Netflix is making money. They offer DVD rentals at low prices for convenience for those who want to sit in front of the TV for an evening's entertainment. DVD's also make great gifts, even if movies can be obtained for free.
So for that matter, is Linux making money. Linux is an operating system for computers that can be downloaded free.
It's definitely not the world my parents lived in. I remember when they used to pay to watch television. Wait, my mistake; they got television over the airwaves for free and didn't pay for cable service. As the great John Stewart said, "With regular television commercials are the price you pay. With cable, commercials are the price you pay ON TOP of the price you pay."
Their radio access was free, too.
There is a problem with controlling how the content is released. In the older days, someone had to tune in to one of 3 radio stations to get the Lucky Strike Bob Hope Hour, or they had to tune into a specific network on their television to find out who shot J.R.
There is a problem, but I am not so certain that it's the internet.
The public needs to be educated on production costs. Force them to watch Public Access only for a week. Put a value on it.
Or maybe it's people like me who spent hard-earned money on a nice laptop, an iPhone, a sweet television, and pays a hefty monthly fee for wireless internet, cable internet, and cable television. With all of these expenses, I am left with one burning question:
How much money am I going to have to spend to give advertisers the privilege of delivering their message into my home?
By the way, I just read your article for free. How are you getting paid?
He's not. Huffpost doesn't pay.
there's a difference between free and gouge. These CEo's you are so protetctive of are the ones that sunk the economy, not the internet.
I read your piece. And it begins with the title "How the Internet Is Killing Our Economy". It's not. It may be killing segments of the economy but new technology always does that. Like the invention of automobiles killed off the horse and buggy trade. But new technologies also create new economies. Perhaps you should have titled your piece "How Free Stuff On The Internet Is Killing Our Economy".
It's new technology but it's not necessarily better. I'd rather listen to music on a good stereo system with something more than an abbreviated sampling rate. And I'd rather read literature than what passes time on the Net.
See Andy Ostroy's Profile
I am not saying the internet is bad, nor am I advocating its demise. If you read my piece, you'll see I actually suggest just the opposite. You prove my point though with your Amazon, Ebay, etc references. Those companies charge for their goods and services. Nothing there is free.
On the contrary, the reason Amazon and eBay are so popular is precisely that they give away so much content for free--in the case of Amazon, information about products, reviews, forums, browsing and even free downloads; in eBay's case, information about products, buyers and sellers (and maybe some other stuff--although I've looked at eBay I've never actually bought or sold anything there).
I am a successful business owner, and I've discovered that the more I give away, the more anxious people are to do business with me: vendors, employees, and customers.
What about the millions that internet companies like Google, Amazon, and EBay have made? And Google makes it's money from advertising of other companies who whould not advertise on Google unless THEY were making money. As for "free" movies...I've watched a couple but they came with advertisements, just like the "free" movies I watch on TV.
See Andy Ostroy's Profile
ps...never said the movie business is dying. Just the aftermarket: DVD sales/rentals
See Andy Ostroy's Profile
I'm sorry. The reason newspapers/mags are suffering is that they're giving away online for free what they charge readers for in print. And, they receive ad revenue for both the actual papers/mags as well as their websites. Why would most people buy the NY Times when they can read it online for free? It's not the quality of the content. It's that these companies are not charging for it. Stop with the sense of entitlement. These publications have overhead, salaries and massive other expenses. They have a right to charge for their content, and you don;t have a right to it free. The 'Net is not a free frontier. It's a business channel, just like retail and catalog/mail. The sooner businesses realize that, the richer their bottom lines will be,
if you had actually thought this through or were unbiased you would realize that almost all poor people you complain about being disinter-mediated by the internet were ripping people off. Duh.
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