Felix Stalder on Sat, 19 Dec 1998 05:02:29 +0100 (CET)

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<nettime> Beyond Portals and Gifts: Towards a Bottom-Up Net-Economy

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 is 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

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 situation [1]. 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 markets 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 to 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 that 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. Ghosh [3] 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

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

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 every 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 limited [4]) 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 released
[5]. 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 than can engage on its gift level.

[1] K. Kelly: New Rules for the New Economy: 10 Radical Strategies for a
Connected World. Viking Press 1998

[2] R. Barbrook: The Hi-Tech Gift Economy, in Nettime (ed). ReadMe! Ascii
Culture and the Revenge of Knowledge, Autonomedia, 1999

[3] R. A. Ghosh: Cooking pot markets: an economic model for the trade in
free goods and services on the Internet, First Monday Vol.3, Nr. 3 (1998)
[http://www.firstmonday.dk/issues/issue3_3/], for a abbreviated version,
see Nettime (ed). ReadMe! Ascii Culture and the Revenge of Knowledge,
Autonomedia, 1999

[4] For a discussion of sponsoring of on-line art, see the Ada'web thread
in Nettime (ed). ReadMe! Ascii Culture and the Revenge of Knowledge,
Autonomedia, 1999, or in the Nettime archive at http:www.nettime.org

[5] Compaq's Millicent [http://www.millicent.com], IBM's MiniPay

[This essay will be published soon at Telepolis [http://www.heise.de/tp].]


Les faits sont faits.

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