Most things which seem to be free are actually funded by advertising, along side the service we want there will be adverts and the payment for those covers the cost of us getting the product without ourselves paying. The advertisers in turn believe that the sales they will get from the adverts will be sufficient to make a profit on their payment for the advert in the first place. Great in principle and something Google have successfully built an empire on.

Facebook claim to have a similar model, they provide the service entirely for free (the end users don't have to pay anything) and then display adverts along side the content. Similar to Google, but with one crucial difference; when was the last time you clicked on an advert on Facebook? I thought about this for a while and concluded never, I have Facebook open for a fair part of the day, every day and yet not once have I clicked on an advert.

The same is true of Youtube (owned by Google), I use youtube all the time, it's probably my biggest time waster after Facebook, yet I've never clicked on one of their adverts. Hardly surprising then that by some estimates (http://news.slashdot.org/article.pl?sid=09/04/14/1630239) every person who visits youtube loses them approximately $2, giving a massive potential loss per day of around $1.5 million. There are plenty of questionable assumptions behind those figures but the underlying problem – that it's costing more to provide the service than can be brought in by advertising – seems almost undeniable.

The general response to advertising on social network based sites has been similar, people just “don't want to shop” (http://abcnews.go.com/Technology/AheadoftheCurve/story?id=5498194&page=1), they don't click on ads and aren't particular interested in any element of the site they have to pay for. It doesn't matter whether adverts are being sold "per click" or "per impression," if the numers show that peoples response rates to such adverts are low, the value of the advert - by either metric - will fall and so will the potential revenue which can be generated. 

Part of the problem seems to be that although companies like facebook and youtube provide – at great expense – the infrastructure behind the sites, the actual content is provided by the communities. The content of facebook consists of interactions between webs of friends and YouTubes vast content base comes from user submitted video's. Users therefore are quite protective of what they may see as community creations being exploited for profit by the companies providing the infrastructure.

Recently Twitter, the latest social networking craze, has said adamantly that they will not be basing their business model on traditional advertising(http://news.cnet.com/8301-13577_3-10244449-36.html?tag=mncol;txt ), instead charging companies and professionals to have specialised pages and profiles whilst keeping the standard user elements free. Ultimately this is still advertising; companies and professionals only want pages so they can reach the rest of us with out standard pages, but it is certainly a more original way of doing it and it will be interesting to see how they get on.

Whether innovative takes on advertising can provide the necessary revenue is a topic for another day, the question remains though, if the revenue cannot be generated, why should they provide us with the infrastructure? There are numerous “we won't pay for facebook” groups and petitions around the internet, my question is why not? 

We seem to have forgotten that there really is no such thing as a free lunch, in a capitalist society we have to pay for everything we use – although that payment may be indirect – or the rules of supply and demand say that the supply will decrease until providing “it” becomes profitable. If people continue refusing to pay then supply will eventually drop to zero, and then what will you do instead of revising?

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