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I would like to return again to the issue of TANSTAAFL–There Ain’t No Such Thing As A Free Lunch. In the last post in the series, I discussed where money is needed. Now, I would like to give a simple overview of how that money is acquired. When I refer to companies here, I mean organizations whose primary role is to provide some service over the Internet.
Venture Capital
VC “is a type of private equity capital typically provided to immature, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company” (Wikipedia). Besides the traditional banks providing VC, some organizations have sprung up from people who were successful in businesses who are now looking to do VC funding with the money they made. One of those, and one of my favorite companies, is Y Combinator. They are slightly different in that they provide seed funding, which is the initial infusion of cash for startups and traditionally the riskiest for the loaner. One of my favorite startup blogs is that of Paul Graham, who works with the company. A great website that focuses on tech startups and the ecosystem that funds them is TechCrunch.
Advertising
Much of the web is funded by text and other ads. HowStuffWorks has an excellent explanation of how web advertising works. Google’s revenue consists almost entirely of income from their ad programs. Google’s ads are particularly interesting because they revolve around textual analysis of your search queries and the content of webpages on which Google’s ads are shown. Site owners are most commonly paid by advertisers by the click-through rate–how many people click on the ad–although many other more complicated systems exist.
A potential issue for the web is the prevalence of tools such as the free Firefox plugin Adblock and other similar tools for other browsers that block ads from appearing in your webpages by blocking known ad servers.
Other Methods
- Many websites offer premium or subscription services. For example, WordPress.com offers free blogs that are feature-limited and occasionally show advertisements. For a fee these limits and annoyances can be lifted (or you could also go to WordPress.org and download the software they use free and install it on your web server and customize it to your hearts content like I did). Of course, the free accounts are useful for hooking users into the site and allowing them to become comfortable enough with or find enough of a need for the service so that they are more likely to pay for it.
- Donations often fund open-source projects and some topical personal sites.
- Some corporations will fund open-source projects through either infusions of cash or employee time if the projects are important to them. Notable here is Google and all of its open-source efforts.
Who Uses What
- Any company with another revenue stream obviously may fund their homepage or other web presence through those monies. Among others, companies and startups will use primarily three sources of funding: venture capital, advertisements, and paid services.
- Individuals or small groups funding sites primarily for pleasure and not profit will generally fund their costs through their own monies, donations, and advertisements.
Advertisements and Me
I could care less about advertisements on the web. Although I could probably increase my perceived browsing speed by using Adblock, I feel no compulsion to use Adblock or Saft to block advertisements from distracting me from my web browsing, because they don’t distract me whatsoever. Over the past ten years or so, I’ve learned to totally ignore and mentally filter out any advertisements and to easily and accurately discern content from advertising. I surmise that the fraternal ability to this is how well I am able to filter out noises around me when reading or otherwise concentrating on a task.
