Beyond Portals and Gifts

Towards a Bottom-Up Net-Economy

The Net is haunted by its own promise: the liberation of Information. Typically for the Net, this promise is today a strange hybrid of 60's progressive libertarianism and 90's aggressive venture capitalism. The slogan "information wants to be free!" (sometimes credited to Stuart Brand, sometimes to JP Barlow) still shapes the dynamics of on-line content consumption and production. The results: the AOL/Netscape take-over and the high-tech gift economy.

The Rise of Portals

Since the early days of the Net, it has been a common attitude to expect on-line content to be free of charge. At the beginning, this was part of the pervasive culture of well-funded research institutions. Later, this became somehow the virtue of the revolutionary characteristics of the new technology which supposedly breaks with everything that used to be in stale old 'meat space'. Paradoxically, this has suited old media very well. As they jumped on the Net they recreated what they knew best: mass markets.

It's the old trick all over: if you cannot sell to the audience, sell the audience. Television's hottest commodity is not its programs, the news or sit-coms, but its audience which is packaged into markets segments and sold to advertisers seeking that segment. It's a bulk business and advertisers usually pay by the 1000 (viewers, readers, etc.). Replicating this model is what "portals" are all about. AOL, well experienced in selling audiences, its users, bought the Net where it looks most familiar: Netscape's Netcenter, one of the portals producing the largest audience commodity on the Internet.

Traditional advertisement and mass media are two sides of the same coin. They depend upon another and are all about control. Top-down. Know your audience, attract new customers, lots of them, make them return and, once again, know who they are, what they want, so that you can aggregate them into segments and put them up for sale. This game is old and well known. Once it was figured out how to adjust it to the on-line environment, about a year ago, the rise of this model has not stopped (Yahoo's stock price, for example, went from about $30/share to more than $200 in the last 12 month).

On the level of content, it is the reliance on advertisement which creates what Kevin Kelly thinks is inherent in a network economy: increasing returns and a winner-takes-all situation1. Advertisement money flows from less visited sites to sites with higher traffic. These, in return, have increasing resources to generate more traffic on their sites and thus channeling even more money in their direction: positive feedback. Less mass-market compatible sites have increasing difficulties to sustain themselves: negative feedback. Creating and surviving in a mass market is a game that requires massive resources and large organizations. Big investments for big returns. AOL has successfully locked some 10 million people into its proprietary software which allows them an unprecedented level of control over what people see and what not, thus setting up handy target groups. Expanding this into the Internet by acquiring Netscape's popular homepage is a sign how quickly the market consolidates into the old model: massive top-down organized media players arrange the information you receive for your convenience.

The Limits of Gifts

Another aspect of the "liberation of information" is the high-tech gift economy. Linux, an open-source operating system, has received tremendous exposure lately as the example for a new model for decentralized, bottom-up development of superior products on the Net. But of course, it's not just Linux that seems to defy conventional wisdom. An enormous number of difficult-to-categorize activities take place on-line to the great surprise of analysts who marvel that "as an everyday activity, users circulate free information as e-mails, listservs, in newsgroups, within on-line conferences and through websites"2. But at a closer look, much activity that is equally non-economic in nature on-line as it is off-line. Or, have you ever considered charging someone on the street who asks for the way, or your someone in a bar for the conversation you're engaging in over a few drinks? This is not a gift economy, this is social life, plain and pure, even on-line.

But there are strange new economic activities on-line that do not involve the exchange of money. However, what makes them possible is not only the Net, but social institutions of all shapes and forms which support them. Universities are, of course, the classic point in case. An academic usually does not get paid by the number of words she writes. She seemingly gives away the products of her work. However, publishing is required to keep the funding flowing which sustains her to "give away" her work. The connection, then, is an indirect one: publish now or perish later. In this aspect, the academic world is much closer to the grant-dependent, non-commercial art world than to corporate business. It is no surprise that the art scene, long trained in writing proposals and not being dependent on the direct sale of their "products", was among the pioneers of the gift economy model, even long before the advent of Internet. What else than a low-tech gift economy is a performance in a public gallery in which the performer trades his performance for the reputation that the audience (and the critics) give him in return?

However, as public funding is dwindling down, this option is clearly not expanding. While public funding has been unreachable for the vast majority of people all long, it will become even less accessible in the future.

Rishab A. Ghosh3 tells the informative story of Raj Mathur, a systems manager at the Times of India, who runs the newspaper's network on Linux machines. This requires him to participate in the Linux movement, share experience and contribute to the growing open-source Linux code. Rather than the marvels of the Net, it is a specifiable institutional setting -- a large newspaper in India -- which creates the niche for the gift economy to flourish. This happens for reasons, as Ghosh stresses, that are not at all altruistic but based on decisions that calculate expenses and returns precisely.

Raj's niche has positive side-effects for the Linux community at large. This is undeniable. But the point is that the gift-economy is much more a "institutional niche economy" that benefits those that can afford to sustain such niches. The variety of institutions that can do that is vast, not just Universities, art institutions or large corporations. This also includes families who support their kids' on-line projects, community projects who hire programmers to run their Linux box, consultants who domesticate the wild flows of information for their corporate clients, and many more.

One of the paradoxical effects of the gift-economy is that, similar to the advertisement based model, it pulls resources towards those who are supported by niches that allow them to participate in the gift economy. Those who lack these niches are progressively unable to participate in this form of economy as the knowledge valuable as gifts becomes ever more specialized.

In a sense, the current economic models -- advertisement-driven mass markets and gift-economies -- both have tendencies towards centralization. The former in a more classic sense towards large conglomerates, AOL/Netscape being the new kid on the block, the latter towards bottom-up, distributed but highly interconnected knowledge elites.

Towards Sustainable Decentralization

This situation will continue as long as money can only be transferred in amounts that make the aggregation of information necessary to match them. Under this condition, there is need for institutions to aggregate the information. Depending on the business model, the information being aggregated can either be the on-line content, the classic subscription model, or the on-line users, the standard advertisement model. If the information is not aggregated then it must be given away which makes it, paradoxically, difficult to participate for those lacking the supportive social setting.

One of the more challenging, long-term prospects of a net-based economic culture, then, is to address this aggregation question. To make it possible to add the monetary component to certain types of on-line transactions without pressing it into standard off-line models. A possible way of adressing this question could be micro-payment systems which provide protocols to transfer efficiently very small amounts of money, a few cents, maybe even fractions of cents. Just enough to match one query in a database (instead of having to subscribe to an expensive service for a long time), one article from an independent investigative journalist, or one loop from a home-based techno-producer. Without the need for aggregation, there is no need for an aggregator. Small distributed "communities of interest" which, by virtue of their size, are below the radar of advertisement are currently dependent either on institutional niches, sponsoring (always insecure and limited4) or idealistic volunteerism (with the characteristically high burn-out rate). Distributing costs for providing services among the community becomes possible by metering the flow of information. Then we can expect to see the flourishing of such highly specialized services far beyond what is currently sustainable. When the flow of on-line money becomes decentralized, then what can be done with that money becomes decentralized too.

Currently, some technologies for micro-payments have reached preliminary stabilization as the first commercial products are about to be released5. But the problem is less a technical than a cultural one. Despite years of experience with networked communication, it is still difficult to imagine what a radically decentralized and sustainable economic model might be. It is, however, an interesting vector to think along. A radically decentralized but economically sustainable flow of information creates patterns that are not dependent on aggregating channels, gateways or portals with their typical tendency of homogenizing content. Thus, the pleasurable aspects of a net-economy can be expanded beyond the limited scale of the current knowledge elite that can engage on its gift level.

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