The Internet Free Ride is Over

Image via CrunchBase

No wonder my American Express bill never goes down to zero! I am now paying for Evernote, Freshbooks,  Netflix, Audible, Scribe, Page.ly,  eFax, iTunes, Carbonite, the Wall Street Journal, TripIt Pro, FlickrPro, and SmugMug. I have already resigned myself to paying for the New York Times when it goes behind the pay wall, and perhaps even for Vanity Fair.

And who knows what health monitoring software I will have to pay for in the future, or which app that I love will decide that it has to go to freemium and kill off the very features I have come to depend on (unless I want to subscribe).

This sucks. I have become dependent on web and mobile apps, largely because they are a wonderful way to discover useful tools, and now I spend hundreds of dollars a month on tools I can’t give up, either because I love them (Netflix) or because they run my business (Freshbooks).

And I’m not alone. An entire generation has grown up thinking information wants to be free (meaning at no cost), and hoping that new business models will be found to make someone else pay for our pleasure or utility. Unfortunately, that same generation has decided it doesn’t want to be interrupted by advertising, either. Much of the software that powers Web 2.0 and gets all the hype has elusive business models. Even Twitter. Even, to some extent, Facebook. If the only way a company can make money is to sell your information, you’re pretty much between a rock and a hard place, aren’t you?

The big takeaway from my trip to AlwaysOn Media in new York last week was that advertising no longer works in these new media, so content can’t be ad supported and we’re moving back toward subscriptions or direct sales. The decade of being rewarded for just being there, being eyeballs, is over.

This will be the year of the fare increase — the year we have to pay to ride the train. What does that mean?

Well, it means we will have to make more thoughtful choices about what we really need. Perhaps I need bookkeeping software, but not note-taking software. I need Netflix more than I need Smugmug. I could buy a hard drive and give up Carbonite. Every month, when we look at our credit card statements, we will form the habit of re-assessing our need for these SaaS apps.

For the companies, it means they will lose customers in significant enough numbers to affect their revenues, their funding prospects, or their exit strategies.

The real bubble in web applications isn’t in the valuations of these companies; it’s really in their inflated customer counts. When people start paying, as they inevitably must after almost a decade of “Fun With Web 2.0,” they will learn to order more carefully. After all, tapas and sushi come in small portions, but they can add up to very expensive meals. If you eat them often, you become aware of that and order accordingly.

It means we have to make choices. Many services are fun to use, but if you had to pay for them, you’d give them up. For the companies, that means more difficulty in generating revenue, or ad dollars, or whatever they plan to use to support themselves.

I usually am the canary in the coal mine about stuff like this, and I feel it coming. Get ready to shell out some shekels or turn off some services.