• Read more about Twitter paid model will be goodness for all

Twitterland is chirping with this morning's news that Twitter has announced its intention to start charging commercial users of the service. If anything good comes to Web 2.0 out of the economic downturn it's the realization that the free (don't get me started on free) business model is not sustainable and actually hurts users.

The report appeared in a piece by Fiona Ramsay in Twitter to Begin Charging Brands for Commercial Use* in Marketing Magazine (UK), in which Twitter co-founder Biz Stone said, We can identify ways to make this experience even more valuable and charge for commercial accounts. Stone did not elaborate on what those ways are, or what kind of charges might be assessed. He also gave his assurance that individuals would not be charged for Twitter.

Why It's Good News

The announcement is great news. First, Twitter could use the revenue to build more reliable IT infrastructure. Service interruptions, unpredictable availability of features and spotty performance are chronic Twitter problems. The monthly service charges probably wouldn't fund a new data center, but the validation that Twitter can make money would increase its valuation and attract more investment. Ultimately, a commercial model will bring new reliability and new functionality to all users.

The other important outcome of this was touched on by Chris Anderson in The Economics of Giving it Away in the February 2 Wall Street Journal:

Free is not enough. It also has to be matched with Paid ¦ today's Web entrepreneurs have to not just invent products that people love, but also those that they will pay for. Not all of the people or even most of them -- free is still great marketing and bits are still too cheap to meter -- but enough to pay the bills. Free may be the best price, but it can't be the only one.

By making the move to at least a partially commercial model, Twitter is sending a signal that the service has worth (and costs). Not everything in the online world wants to be free, nor can it be.

I know it sounds like I am arguing against my own best interests when I advocate the transition from free to paid for the services and content I use. But when I consider the alternative, a world in which everything is paid for with spam, contextual crap advertising, and phony informational content that is not so subtly marketing a product or service, I am glad to pay for a few choice things.

What Is a Twitter Account Worth to a Large Business?

Along with HTML and the web browser, e-mail, and instant messaging, I doubt there is anything that has changed the way people use the Internet, and the way they communicate, more than Twitter has. But just what is Twitter worth to a business? Twitter hasn't made any such announcement, but let's assume that commercial users are companies over a certain size, say, 100 people. (I would hate to see my good friends at House of Jerky or Etsy craft people charged to use Twitter, for example. That would certainly drive them off the site.) How much does a large corporation pay to keep up its web site home page, and what are the comparable benefits of using Twitter?

I have no idea what Twitter is thinking about this, but $20 a month or even $100 seems like nothing to GM (no bailout joke intended here), Dell or Comcast. And speaking of Dell, according to the Marketing piece Bob Pearson, vice-president of communities and conversations at Dell, said: 'If it becomes complicated and costly, our instinct would be to move elsewhere.' Where Bob, Plurk? Pownce? If you're a consumer business and you find benefit to being on Twitter, there is no elsewhere.

This raises a number of questions. Is the move is a good thing for individual users? For businesses? What criteria should be used in identifying commercial Twitter use? Would the term apply to anyone selling a product or service? How much should Twitter charge for commercial use?

* Why do marketers refer to corporate entities as brands? They're businesses, not brands, in this instance. Stop the industry doublespeak madness!

• Read more about The Myth of Free

We have built a country-sized economy online where the default price is zero -- nothing, nada, zip, writes Chris Anderson in The Economics of Giving it Away in the February 2 Wall Street Journal.

Semantics are very important here. Anderson chooses his words (I should say word, because Free is the title of his upcoming book) carefully. The price of nearly everything online is free, but not the cost. Anderson calls this the business model. People who love cheesy buzzwords call this monetization. I call it a fundamental misunderstanding of how things work.

Anderson has done a great job identifying the most sweeping change in the free enterprise system in the past 100 years, the price which people are willing to pay for certain things, but has missed a key element. This idea that digital goods are free is an absolute myth. As my journalism prof said, There's no free lunch, only a few stale peanuts on the bar.* What we have seen is not an evolution to free, but rather one in which the true costs of using many services are not as apparent as they used to be.

For example, even though you don't pay to use Facebook, Twitter, MySpace, LinkedIn, etc., there is actually an exchange of services (use of the social network) for an easily determined cash value. Users of so-called free Web 2.0 services are making a tacit exchange when they sign up for a particular service, create a profile, build a network of friends, and contribute to the user base of that service. The user base is the chief capital asset of any social network or site, with a discreet dollar value per user. You have exchanged your valuable time and your friendships/relationships in exchange for use of the service. And if you're at work, your employer is subsidizing that cost.

Anderson encourages entrepreneurs to innovate with new business models which, in some cases, involve charging for digital goods.

It's interesting that Anderson mentions in his first paragraph that online music is free. While some emerging/independent artists are offering free music downloads, the music industry, both publishers like Sony Music and Philips Music Group, and distributors like iTunes and Amazon, have not gone free. Technology has made it so easy to perfectly duplicate music, that huge numbers of people have unilaterally decided music ought to be free and are downloading and sharing it without paying for it. There's a big difference, however, between free and stolen.

Anderson is right, for the most part, that people are unwilling to pay up front for access to content and services, choosing instead to allow providers to extract cost/value through other less obvious means.

As John Yemma, the editor of The Christian Science Monitor, told NPR's Terry Gross, free online news is the only model that's out there. I don't think there's an alternative¦ we'd have to go back in the time machine to try to change this, but the expectation online is that news is free, and that expectation won't be altered.

Indeed, we have seen massive changes to how information and communications are delivered and to what and how people are willing to pay for them. But it's disingenuous to think that any of this is free. Nothing is free. Only the method of payment has changed.

* I have not given attribution for this quote because I found no reference to the peanuts version in my research and although some believe it was first said by economist Milton Friedman, there is much evidence that the quote is considerably older.