If your service is free someone somewhere had better be making money

John Hagel wrote a good post back in March on the future of advertising, web2.0 monetisation and the trend towards free (thanks to Bart for the pointer). He picks up on a lot of themes we have discussed here and the full post is well worth a read. This bit really stood out for me though:

if entrepreneurs want to build enduring businesses that will change the world, resist the temptation to become too dependent on advertising. It’s OK to offer many products and services for free (in fact, that will be essential for success) but just be sure you understand your role in a broader ecosystem where someone (even if it is not directly you) is making a ton of money with platforms and services that people will pay for.

Emphasis mine.

I am more bullish than John on the potential of advertising dollars to sustain at least part of the web2.0 ecosystem, although I think it will look different to today’s ads, but he is spot on with the notion that somebody had better be making money. If not there is nothing to filter down the value chain – simple as that.

Innovation in business models will also be necessary to make sure everyone gets compensated for the value they add. There was an article in the FT this week which noted that web2.0 has had a huge impact on behaviour, but has yet to generate much in revenues. If behaviour is changing then value is being created – we just have to figure out how to get it into the hands of the companies that are changing the behaviour.