Beyond Portals and Gifts
First Monday

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

The Internet is haunted by its own promise: the liberation of information. Typically, this promise is a strange hybrid of 60's progressive libertarianism and 90's aggressive venture capitalism. The slogan "information wants to be free" still shapes the dynamics of on-line content consumption and production. The results: America Online and Netscape merge and the high-tech gift economy flourishes.


The Rise of Portals
The Limits of Gifts
Towards Sustainable Decentralization

The Rise of Portals

Since the early days of the Internet, there has been a common attitude that on-line content should be free. At the beginning, this assumption was part of the pervasive culture of well-funded research institutions. This belief became one of the revolutionary characteristics of new technology which supposedly breaks with everything stale and old. Paradoxically, this attitude suited traditional 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, packaged into markets segments and sold to advertisers seeking that segment. It's a bulk business and advertisers usually pay by the thousands (viewers, readers). Replicating this model is what "portals" are all about. America Online (AOL) acquired Netscape's Netcenter, one portal producing the largest audience commodity on the Internet.

Traditional advertising and mass media are two sides of the same coin. They depend upon another and are all about control. Know your audience, attract new customers (lots of them), make them return and know who they are and what they want, so you can aggregate them into segments and put them up for sale. This is an old well-known game. Once it was adjusted to the on-line environment, the growth of this model has not stopped. For example, Yahoo's stock price went from about $30 pershare to more than $200 in the course of the past year.

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 becomes 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 or not see, thus setting up handy target groups. The acquisition of Netscape signals 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 Internet. 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]. Upon closer examination, much of the activity that is non-economic in nature on-line is equally non-economic off-line. Have you ever considered charging someone on the street who asks for directions? Do conversations in a bar merit fees? 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 do not involve the exchange of money. What makes them possible is not only the Internet 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 maintain funding which in turn sustains her ability 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 not surprising that artists, long trained in writing proposals and not being dependent on the direct sale of their "products", were among the pioneers of the gift economy model, long before the advent of Internet. One definition of a low-tech gift economy might be artistic performance in a public gallery, where a reputation is earned from an audience and the critics.

However, as public funds dwindle, this option is clearly not viable. While public funding has been unreachable for the vast majority, 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. Raj runs the newspaper's network on Linux-based computers. This situation requires him to participate in the Linux movement, share experiences and contribute to the growing open-source Linux code. Rather than another marvel of the Net, it is a specifiable institutional setting - a large newspaper in India - which creates a 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 precisely.

Raj's niche has undeniable positive side effects for the Linux community at large. But the point is that the gift economy is much more an "institutional niche economy" that benefits those that can afford to sustain these niches. The variety of institutions that can do that is vast, not just universities, art institutions or large corporations. It includes families who support their kids' on-line projects, community projects who hire programmers to run their Linux boxes, 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 knowledge (valuable as gifts) becomes ever more specialized.

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 (such as AOL/Netscape), 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 a need for institutions to aggregate information. Depending on the business model, the information being aggregated can either be on-line content, the classic subscription model, or on-line users, the standard advertisement model. If information is not aggregated then it must be given away which makes it, paradoxically, difficult 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. How will it be 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 small amounts of money. These sorts of micropayments are on the level just enough to match one query in a database (instead of having to subscribe to an expensive service for a long time), to secure one article from an independent investigative journalist, or obtain 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. We might expect to see the flourishing of 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.

About the Author

Felix Stalder is a doctoral student in the Faculty of Information Studies at the University of Toronto.


1. K. Kelly, 1998. New Rules for the New Economy: 10 Radical Strategies for a Connected World. N. Y.: Viking Press.

2. R. Barbrook, 1998. "The Hi-Tech Gift Economy," at

3. R. A. Ghosh, 1998. "Cooking Pot Markets: An Economic Model for the Trade in Free Goods and Services on the Internet," First Monday, volume 3, number 3 (March).<

4. For a discussion on the 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

5. Compaq's MilliCent, IBM's MiniPay

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