Welcome to Web 3.0

Faster, Richer, and Omnipresent, the Internet is an Integral Part of Life; Now We Have to Pay for It.

The internet is roughly ten years old. Lot's of nerdy folks will argue that the internet has been around many more years than that, and email and local area computer networks existed long before that on college campuses. But the main stream internet we think of today is about ten years old. An eighteen to twenty-four month window a little more than a decade ago brought the launch of Amazon, eBay, and Yahoo. The New York Times has been on the internet since the same period. During this time, the internet transmission from research tool to modern living room convenience as most service providers switched to a flat rate monthly fee system, including America Online's conversion in 1996, from an hourly fee system.

Sometime around 2001, the internet era came to a screeching halt. Or at least, the dotcom frenzy did when the market crashed. Web services that had been hemorrhaging money were no longer worth operating. The "second" generation of the internet was labeled Web 2.0 by OReilly who then subsequently held conferences to discuss what made the new, modern web fundamentally different from the early days. More recently, Web 2.0 was in the news again as competitors of OReily's trademark were sued. As bloggers condemn OReily for their "abuse" of trademarks, let's consider that, in part, the whole lawsuit is in why Web 2.0 is now irrelevant.

Web 3.0 is perhaps just the next step in the evolutionary process of the internet, yet for better or for worse, these changes making the internet more expensive.

Paying for Content

OReily's first example of Web 1.0 vs. 2.0 is the difference between DoubleClick, the ad software notorious for popups and spyware, and Google's Adsense, the benign text ads that quietly wait for a reader to click. But text ads, served by Google or yahoo and now even Microsoft are slowly losing credibility with advertisers as click fraud becomes an evident problem. Advertisers as a result are paying less for ads.

In addition, the maturing internet audience is now keen on ads, dubious or genuine. The shock value of the world's first Banner Ad was a brilliant marketing ploy. How many thousands of users clicked on it? Yet, so ubiquitous are ads today that users are much more able to zone out all the ads. The result is one of two things; the much more aggressive Flash ad that engulfs the webpage (though you can avoid this by not installing the most up to date version of Flash Player), though these too will lose their shock value, or the alternative result, paying for content.

A millennia ago in internet years, content was free for the taking. Some content providers required "registration," which usually meant forking over an email address that would eventually be spammed, but the content was free. The content of course was paid for through internet ads, largely based on DoubleClick software or similar products from competitors. That's web 1.0 according to OReily.

Google News was launched in 2002. Google news is an aggregated search engine of various news websites. The service allows access to many more news websites than an ordinary person might read on any given day. The net effect of this is the devaluation of news. Why pay for a copy of a news story from one online paper when another, similar article is freely available from another online paper.

Meanwhile, the rise of the blog produced millions, hundreds of millions, or even billions of pages of "fresh" content for the web. Blogging software eliminates many of the technical hurdles associated with operating a webpage. Suddenly the whole world was a content creator. Obviously, this further devalued web content by providing so much more of it. Even if most or almost all of blogs are useless, banal pieces of information, the universe of blog pages is so vast that even a small percentage of valuable information is a lot of content.

Finally, the rise of Wikis, or group edited webpages, has meant that the accuracy of information has improved on the internet. Now, "accurate" does not necessarily mean Britanica.com and "truthful" does not mean a .gov url. Wikipedia has become an invaluable resource (perhaps too valuable, considering the number of instances 'professional' reporters have been caught citing whole passages without giving credit to the source). Again, Wikipedia is devaluing products like Britannica's online subscription by making content so cheap its impossible to charge for it.

That's Web 2.0 according to OReily.

Yet despite all odds, a few months ago, the New York Times launched Time's Select, a subscription service that allows access to "premium" content like Op Ed pieces. Essentially, the Times is saying their Op Ed pieces are more valuable than the opinions bloggers offer for free. CNN also offers premium content in the form of restricting access to certain video feeds over the internet. Or consider Fark.com. Developed during "Web 1.0" as a place to amass links for friends of founder Drew Curtis, it evolved during the "Web 2.0" phase as a community site allowing users to leave comments and feedback. Since then the site has been commercialized with a "premium content" section known as Total Fark where users pay a fee.


"Premium content," is here. But how many subscription fees can users afford to pay? Web 3.0 is poised to find out.

Multi-tiered Internet

Another recent occurrence has been the idea of "Net Neutrality." The last decade of internet service has been served up under the principle that internet service providers could not effect the flow of data from a content provider to a user. But now, network owners--those sleazy folks that provide unlimited high speed broadband access to your home--have decided that they can make even more money charging not just their users, but content providers.

Widely adapted broadband internet promised faster download speeds for content rich websites. Those flash animation ads are made possible largely because high speed internet allows them to load quickly. Videos, music, audio commentary--these are all content sources that rely on broadband speed connections. Yet now that broadband access is piped into homes and businesses across the country, the service providers, looking to earn even larger profits, would like to extort content providers for fees as well. In essence, websites that serve up videos and that consume large amounts of bandwidth will either pay huge fees to individual service providers or their content will be "throttled" to a slower network speeds.

End users will end up paying for this. Either they will pay service providers higher fees for unthrottled internet access, or content providers will pay the extortion fees and make up the difference by charging more for the content they serve. Additionally, this will return power from the hands of individual net users to big corporations. "Average Joe" content providers will be forced into the slow lane of the internet. This gives large corporations an advantage in that by paying off service providers, their content will be sent to users at a faster rate than "average Joe" websites, including video and audio blogs. The immediate result will be a reduction in content, and therefore the value of content will rise.

Take for example the Time Warner company. Time Warner is a huge owner of media content including movies, music, television, websites and magazines. But Time Warner is also a internet service provider through their retail cable divisions and through AOL for Broadband internet service. Time Warner could easily leverage its market share of content AND internet hosting; users of Time Warner cable could get "fast" service of Time Warner content, while other content providers would be forced into the slow lane. As media companies continue to form ever larger conglomerates, scenarios like this become ever more likely.

Taxes

During the wild West days of the early internet, lawmakers had decided levying a tax on internet service would hinder the development of the infantile network. Well the internet has matured. As early as last year, members of Congress began suggesting it was time for an internet tax similar to other telecommunications taxes. So far the net is still tax free, but how long remains a mystery. A recession in the start of the new millennium had nearly bankrupted many state treasury accounts. Internet taxes were just one of many suggestions state government made to try and fill the gaps in their budgets. Luckily, for the most part, state budgets have rebounded considerably. But the next economic downturn may very well bring with it "innovative" state levied internet taxes.

Straight up taxing internet service is not the only place greedy government accountants have turned in recent years. State sales taxes were largely circumnavigated by internet retailers. Essentially, out of state customers never paid retail sales tax. As lawmakers grew keen to the practice--and more importantly saw sales tax revenue drop as more people converted to online shopping--state governments began closing loopholes. At present, dotcom retailers with any physical presence in a state must then pay sales tax on sales within that state. As online retailers have expanded, so have their operations in multiple states. In part this makes business sense by reducing shipping times to customers, but it also means fewer customers are enjoying a tax free savings.

The next step of state sales taxes is forming sales tax pacts with other states. In essence, several states agree to collect a common sales tax on items either originating from or shipped to their states. This extends the collective "physical presence" of online stores to many more business operations.

Finally, states are also beginning to wise up to the fact that digital goods can be taxed as well. Digital download sales of software or music or any other non physical good has quietly slipped under the sales tax radar. Not any longer. Many states have or are considering legislation to tax digital downloads. Virtual sales taxes have real effects on the cost of goods.

Service Software

ZDNet declared in November of last year that the Web 3.0 would include "Application Services." The era of stand alone software is slowly coming to an end. The future of course, is online software applications that replace products like MS-Office. Users would pay a monthly fee that would allow them to access the software and user files from anywhere with an internet connection.

In theory, this brave new world of web applications seems like a brilliant idea for the consumer. They never again have to worry about backing up their hard drive, because the web service would. They would have access to their files from any computer, not just their primary PC. And, yes, it would seem this would solve the problem of acquiring software licenses for a business computer, home computer and secondary home computer.

But the reality is, a service based software system gives more control to the software developer. There would be no pirated versions of MS-Office floating around, and today there are hundreds of thousands of unauthorized copies. Software pirates are not just in remote places like China or Russia. Microsoft has made the price of a legitimate copy of off the shelf Office so high, that the risks associated with pirating the software far outweigh the risk. Service applications however, would always be paid for because the software would run through the vender's servers where it could be verified as authentic.

Meanwhile, service applications are rented, not owned. Take for instance the Word 97 we received with our first Windows 95 machine. Part of the software bundle, the cost of the software was included in the price of the computer, i.e. "free". As we've disposed of subsequent computers, Word 97 has migrated with us (don't worry Microsoft, we've only ever installed it on one computer at a time as our older machines went defunct). Imagine instead though, that for the last nine years we were paying a nominal service fee of $10 a month for that software; instead of being "free," the cost of the software jumps to $1080.

Internet service applications may sound phenomenal at first, but really they are just another way for software corporations to squeeze even more money from consumers adding to the cost of Web 3.0.

Big Business Web

Another feature of the new internet is that Big Business is taking over. In part this will be accelerated by "web throttling" where only big business will be able to pay for bandwidth access. But its also a change in the way content is developed.

Consider for instance, flash animation websites. Flash animation has become the new standard of "professional" websites. But the software to create a flash website costs hundreds of dollars. Websites that are hand coded using a basic text editor available on every computer in America are slowly being obsolesced. The result essentially is that instead of the cost of building a website being relatively low, the minimum cost is going up.

The cost of computer hardware has come down dramatically allowing every jack ass with an internet connection to set up a website. Yet add to that a tax on hosting services, extortion payments to internet service providers, and higher fees on development software and the new, adjusted cost for operating a website skyrockets. The end result is fewer websites, less content and higher prices for everyone.

If Web 2.0 was blogging, Web 3.0 is professional bloggers. Media companies like Gawker Media and Curbed.com are built on blogs, the modern newspaper. These blog networks command higher ad prices because they receive more visitors. As a result, they are raising the cost of entering the internet media market. Ironically, Gawker's roots are in mocking the "closed society" of traditional, big business print media.

Saying Goodbye to the PC, Hello to the Fee

The internet has been for years synonymous with personal computers. Yet technology has evolved now that the internet is also available on mobile computers, cellular phones, and other devices that are not the person computer like the Microsoft xBox. Both the xBox 360 and as yet released Playstation 3 have a "premium" online component that again charges users a subscription fee. These fees are in addition to the cost of an initial game and the cost of internet access. Sure, online networking of game systems is a great leap forward in computer gaming, but at a price.

Then there are the palm pilots and blackberry systems that use wireless technology to serve the internet to mobile users. Wireless companies love these devices because they extract higher fees from a market saturated with cellular phones. There is very little room for the industry to sell more phones, but plenty of room to sell additional services like wireless internet. The key point here is that all these services add new fees to the wireless bill of customers.

And Beyond

The internet fever of the 1990's was replaced by somber optimism of the next generation internet. Yet here we are again at another crossroads. The freedom of the internet is being replaced with the fees of the internet. Once upon a time, the internet was the great leveling device allowing the common man the same privileges and opportunities of corporate America. The internet was a soap box that anyone could stand on.

The era of Web 3.0 is upon us. No longer is the soap box free to proselytize from. The same obstacles facing innovative small businesses and independent voices in older mediums are coming to the net. Greater restriction, tighter regulation, and higher costs are culminating to form private enclaves, elitism, and corporate society that the net promised to eliminate.

Yet, the internet is not beyond saving. Perhaps, the next generation of the web will reverse the trends we are now seeing. Free wifi networks as large as cities are under construction. Google is implementing free a Wifi service in San Francisco, that if successful could be extended elsewhere. Service providers like Verizon and Bellsouth have powerful lobbyists who so have so far been successful at ending “net neutrality.” But content servers like Google and Amazon and Microsoft have equally deep pockets working to keep the whole of the net in the fast lane. Perhaps a decade from now, we will remember Web 3.0 as the dark ages, that perhaps a new renaissance of the internet will be as compelling and inexpensive as the network we leave behind.