Google and the NFL: Saviours of the free internet?

Interview: MIT tech guru Michael Cusumano discusses the internet's free future...

Michael Cusumano believes American football could provide a revenue-sharing model that might help preserve free apps and websitesPhoto: MIT

Almost a decade has passed since Skype brought free phone calls to the world. In the intervening years, consumers have grown to expect that if it's online, it's gratis.

Many free sites and services online rely on money from adverts to keep themselves afloat but despite expectations that advertisers will spend $106bn online this year, the bulk of the cash goes to major players such as Google, leaving slim pickings for smaller ad-supported ventures.

If the bulk of ad-supported sites and services are to survive, then Michael Cusumano, professor at MIT Sloan School of Management and tech guru, believes online firms should look to an unlikely source for inspiration - American football.

Since the 1960s, the US National Football League (NFL) has pooled the revenue generated from various sources including TV broadcasting rights to all games, and split the takings evenly between each team.

The collective outlook, dubbed the League Think philosophy, is based on the idea that by sharing resources the NFL can provide a product that, as a whole, is more valuable than the sum of its parts.

"I don't think advertising is sustainable for large numbers of firms [online], unless the sites that generate the eyeball traffic share the wealth," Cusumano said.

"I think Google is going to be forced to share more of its revenue to keep the searchable content flowing or to get access to the closed gardens, like the social media sites.

"It's like American football: the teams all share revenues, because they know the New York Yankees can't play if there's no one to play them - all the teams go bankrupt."

The vested interest for Google, and other major search providers such as Yahoo and Microsoft Bing, is in stopping more sites disappearing behind pay or content walls, or going bust, and its search service losing its value as a portal to interesting content online, he said.

Google already allows third-party websites and apps to earn ad revenue by serving ads administered by Google through its AdSense service, which in the first quarter of 2011 generated $2.43bn for Google, or 28 per cent of the company's total revenues.

By sharing revenue with social media sites, search providers could gain access to information about users' activities on those sites - for example, helping improve search results by ranking links according to personal preferences, as well as being able to search a wider range of social content.

Facebook and Bing have already formed a partnership that allows the Microsoft search engine to offer features such as search results that have been Liked by a person's friends and the ability to share shopping lists between Bing and Facebook.

And as features such as the Facebook Like button allow the social network to serve as a web portal curated by people's friends, it too may have an interest in sharing revenues to ensure the web doesn't fracture into a maze of walled gardens.

The difficulty in generating cash from free business models is...

...evident across the web. The videoconferencing service Skype - recently acquired by Microsoft - made a loss of $7m in 2010, despite the service reportedly having 170 million connected users, while The New York Times has become the latest in a string of publishers to begin putting its digital content behind a paywall in an attempt to turn a profit online.

Cusumano believes online ad revenues could receive a "multibillion dollar" shot in the arm from targeted advertising, whether it is aimed at a person's location tracked via their mobile or their activity on social networks. But, again, the larger online players may snap up the bulk of this cash.

An app-etite for sharing

With the rapid rise of app stores as a home for services and content - analyst house Gartner predicts that mobile app store downloads will reach 17.7 billion in 2011 - the companies running these stores may also need to share their revenues more widely, Cusumano said.

Citing Apple, which keeps 30 per cent of the takings from the sales of apps in its store, he said: "In the future they may give a piece of that to the carriers for hosting these stores."

Cusumano gave the example of US telecoms provider AT&T, which he said "has to invest $20bn a year to keep their infrastructure operating and expanding" but does not receive money from the people building services on top of their infrastructure.

Of course, once telecoms companies start taking money in return for serving high-bandwidth users, there is a danger of moving away from the principle of net neutrality and further restricting the free flow of information over the net.

Cusumano is a speaker at this year's MIT Sloan CIO Symposium.