Attack of the killer non-profits

The New York Times has an article today discussing the plight of old media companies (via O’Reilly Radar) facing industry disruption from a technology they don’t understand. Even worse, the companies they’re competing against seem to be in it for some reason other than making money, a reality-shattering proposition for most of these corporations:

These are new-media ventures that leave the competition scratching their heads because they don’t really aim to compete in the first place; their creators are merely taking advantage of the economics of the online medium to do something that they feel good about. They would certainly like to cover their costs and maybe make a buck or two, but really, they’re not in it for the money. By purely commercial measures, they are illogical. If your name were, say, Rupert or Sumner, they would represent the kind of terror that might keep you up at night: death by smiley face.Probably the best-known practitioner is Craigslist.org, the online listing site. Although it is routinely described as a competitor with — and the bane of — newspaper classified ads, the site is mostly a free listings service that acts as a community resource. When the company contemplates imposing fees for using its site in a particular city, as it has recently in New York, it does so cautiously and thoughtfully, as a means to weed out real estate brokers who are abusing the site by posting their ads over and over.

Craig Newmark is actually a personal hero of mine for this reason. He could be a multi-millionaire with a phone call, but he has “enough” and would rather do what he likes. Craigslist is kind of an extreme example though; there’s few others who can make that claim, and few other web companies that have passed up the revenue opportunites of Craigslist. Personally, I think the article is simply wrong in this respect. While a lot of these things may start as pet projects and remain nominally “free” to the end user, it would be absurd to think that these entrepreneurs aren’t looking to make money in one way or another from it.

While the idea that they’re doing it for charity has this nice 60’s hippy-love feeling to it, it’s not the reality. What old media companies may scratch their heads and wonder why they don’t go for the big bucks, I think these entrepreneurs simply understand the reality. Old media companies grew up in a world where information was a scarce resource that could demand a premium value. Now, in the world of the web, it’s a commodity, and only commands commodity prices. Since the cost of production is close to zero to begin with, they can’t charge much above that.

They’re not being put of business by not-for-profit do-gooders, they’re experiencing the Wal-Martization of their industry.

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