The economics of Web 2.0

Nick Carr has a post arguing against Lawrence Lessig attempt to create a new Web 2.0 dogma. That’s all very interesting, but I want to address this portion of his post (which I already did in Carr’s comments):

They fooled themselves into believing that Web 2.0 was introducing a new economic system – a system of “social production” – that would serve as the foundation of a democratic, utopian model of culture creation. They were wrong. Web 2.0’s economic system has turned out to be, in effect if not intent, a system of exploitation rather than a system of emancipation. By putting the means of production into the hands of the masses but withholding from those same masses any ownership over the product of their work, Web 2.0 provides an incredibly efficient mechanism to harvest the economic value of the free labor provided by the very, very many and concentrate it into the hands of the very, very few.

I agree, somewhat, that Web 2.0 has helped create an efficient means to use non-compensated labor for content creation. I disagree completely that it’s free or exploitative.

It’s not free because somebody pays for the pipe, and the site infrastructure and all that goes with setting up and running a Web site. The basic YouTube site wasn’t expensive to build, I’m sure, but it wasn’t a weekend hack either. Beyond that, YouTube’s telecom bill must be huge (for some idea of the bandwidth being consumed, read Om. I’ve heard $2 million a month, but I can’t find a supporting link now.

It’s not exploitative because the content producers get something out of the deal, too:

  • They get a chance to express themselves (sometimes the end in itself);
  • They get a chance to share their creation/work/ideas with a broader audience — an audience that on their own, they could probably never afford to reach;
  • They have a chance to practice their craft in front of a real audience, and maybe learn something and improve;
  • They have a chance to have their work, if they’re good enough, rise in stature to the point that it might actually lead to monetary gain;
  • Even if they do not realize financial gain, they might benefit from psychic pay (and for some, that’s enough) that they expressed ideas or provided entertainment that was of some benefit to some portion of the audience.

All of that, to me, is of some economic value. The content producer has not uploaded something and gotten nothing in return. Far from it.

The economic exchange goes something like this: The Web 2.0 company makes the initial financial outlay, takes the business risk associated with starting a new venture, and then opens to the doors to potentially legions of content producers to post content at no direct cost to the producer. The content producer realizes some portion of the gains outlined above. In exchange, the Web 2.0 company, bearing the entire burden of the financial risk, is given an opportunity construct a business model that leads to financial success.

That seems like a fair trade to me. Fair, balanced, equal. And if it weren’t, in a free market, it would never work.

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