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There are no free lunches

The first lesson of Economics is “there is no such thing as a free lunch.” This remains true online. The free content we enjoy is paid for by the information we “freely” provide by our activities.

One of the first thing you learn in Economics is “There is no such thing as a free lunch.” It’s a lesson that seems to be quickly forgotten. Thanks to the Internet everything seems like it can and should be free. So who’s paying?

For many sites, ad revenue is paying for the content/service being provided. Even more profitable is information, specifically user (read: your) information. The old saying that knowledge is power holds true online as well. The more info about who you are the more relevant they can target the ads presented to you. A better targeted ads bring in higher revenues.

Combining multiple user’s data into anonymous and general statistical data can be worth even more. Marketing companies will pay big money to get access to qualified demographical date. It doesn’t have to be much or even private. Knowing things like how many 11-14yr olds saw the Transformers movie, could be the deciding factor between releasing Product X or Product Y. The collecting and selling of statistical data is nothing new. It’s the same principle behind the membership cards at the grocery store, VISA and those people at the mall that just want to ask you a few questions.

Facebook like many other social networking sites are rich with statistical information. Well, a few weeks ago Facebook altered their Terms of Service (TOS) to assume permanent ownership rights of any content that the users add to their service. Then yesterday, under mass protest from users, they returned to their previous TOS while they rework the verbiage. Ultimately Facebook (and others) wants the ability to use/sell any data collected without worry of legal entanglements. Someone needs to pay for the endless hours users spend using their site.

Just like your first economics class told you, there is no such thing as a free lunch. The Internet with all it’s innovations is still subject to this rule. The free ride of the social web is paid for by the ads we see and the personal data we provide. It’s just something to keep in mind while you enjoy your lunch.

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