The Gratis Economy: Privately Provided Public Goods

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THE GRATIS ECONOMY Privately Provided Public Goods

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THE GRATIS ECONOMY Privately Provided Public Goods

ANDRAS KELEN

* T b

CEU PRESS ‘A’

Central European University Press Budapest

02001 by Andrhs KeIen

English edition published in 2001 by

Central European University Press An imprint of the Central European University Share Company Nador utca 11, H-1015 Budapest, Hungary Tel: +36-1-327-3138 or 327-3000 F ~ x +36-1-327-3183 :

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in Canada by CEU Press c/o University of Toronto Press Inc. 5201 Dufferin Street, Toronto, Ontario M3H 5T8, Canada Tel: + 1-800-565-9523 Fax: + 1-800-221-9985 E-mail: [email protected] All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by any means, without the permission of the Publisher. ISBN 963 9241 22 9 Cloth ISBN 963 9241 33 4 Paperback

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Printed in Hungary by Akadkmiai Nyomda, Martonvasar

For Professor David Farber in acknowledgment of the insight enabled by his IP-an arch-genre of the maturing information society


TABLE OF CONTENTS

List of Boxes Preface THESES TO INTRODUCE THE CONCEPT OF THE GRATIS ECONOMY The Main Drivers of the Gratis Economy Description of the Following Chapters

xi

...

Xlll

1 2 4

ESSAY I: THE TRADITIONAL GRATIS ECONOMYUNCHARTED FACES OF PRO BONO WORK

1. The Social Basis Of Volunteering Liturgies as the Generalization of Volunteering The Heritage of Volunteering in Antiquity Condescending Medieval Charity Enthusiastic Messianism: The East Central European Socialist Experience in Volunteering Modern Applications of the Generalized Notion of Volunteering Loci Classici on Liturgical Associations Military Service as Liturgical Duty Involuntary Labor Service: Labor Battalions in the Second World War Warrior Ethnicities Voluntary Border Guards Foster Parenting Classical Fields of Volunteering-The Receding Gratis Economy The Professionalization of Sports Laicism in Office-Holding The Provision of Commercial Exposure for Sponsors by Non-profit Organizations

7 7 11 13 18 27 28 31 34 35 37 38 41 41 53 58

viii ESSAY 11: THE VIRTUAL FACES OF THE GRATIS ECONOMY-BUSINESS-OPERATED SIZZLING GRATUITIES 63 77 77 78 79 83 84 86 87 87 88

2. Free of ChargeExcept for Advertising Technology Bringing Forth the Banner Model of Advertising Banners on Demand New Browser against Pop-Up Advertising Suppressors, Filters Bandwidth-Adaptive Advertising We-Pay-You Advertising Deep Linking Ad Savers Ad Serving Publishing Sites Using the Site Model Ad Serving Solution Third-Party Ad Server Using the Network Model Ad Serving Solution A Counting Methodology for Third-Party Ad Servers in a Proxy Server Setting Online Business’s Comparative Advantage as to Timing Validation and Visibility of Business Communication in Cyberspace Conclusions

90 102

3. Free of Charge-Except for the Commodification of Privacy Between the Right to Traceability and Anonymity The Two Drivers Coinciding-Privacy Predicated Targeting Tools Policy Deliberations Predictive Profiling Tracking Online Targeting Customization

107 113 121 13 1 133 137 141 144

4. Gratuities Embedded in Business Processes Setting the Exposure Threshold Between Profitability and Breaking Even-Content Non-profit Endeavor Web Targeting at The New York Times Grant Economics, Gift Economics Gratis Models Conclusions

146 146

88 88 89

Provision as a 161 162 165 169 177

ix ESSAY 111: THE PUBLIC INTEREST IN THE GRATIS ECONOMY-GRATUITIES GENERATED BY THE POLITY

5. The State-Run Gratis Economy Collective Goods Full Public Subsidization of Pharmaceutical Prices Cutting Edge Research: The Human Genome Project Towards the Wireless Internet-Universal Mobile Telecommunication Services (UMTS) in the European Union Patterns of Time Release in the Economy

179 179 181 184

6. The Informational Commons The Intellectual Property/Wide Access Trade-off Alternatives to Intellectual Property-Non-Proprietary Developers Bites out of the Gratis Economy

203 209

187 192

Software 218 22 8

7. Typology of Business Intrusions Software Spying on Its Users The ‘If It’s Legal, Someone Will Do It’ Assault Threatening Free Speech The Intricacy of Data Commerce Possible Outcomes of Privacy Regulations Casuistry Grassroots Influencing Regulation

245 245 248 252 253 259 26 1 268

8. Towards the Demise of Mass Culture in Cyberspace One-to-One Targeting Space-Shifting Peer-to-Peer Sharing Peer-to Peer in Terms of Sociology ‘Gentle Money’: Community-Level Clearinghouses and Marketplaces The Design of ‘Gentle Money’ Scenario for ‘Gentle Employment’ Implications for Broad Public Policy

272 280 285 287 295 301 305 307 3 13

X

NOTES

319

BIBLIOGRAPHY AND BASIC READINGS Bibliography and Basic Readings Surveys and Reports References Advertising-Related Sites Privacy-Related Sites Targeting-Related Sites INDEX

359 359 359 359 360 360 367

LIST OF BOXES

Box 1. Underwriting as Opposed to Advertising Box 2. The Archetype of Distracting Advertisements: The ‘Sponsored’ Version of Eudora Mail Box 3. The Internet as Source of Information Box 4. Belgian Attitude Survey on the Use of Suppressors and Other Anti-Ad Software Box 5. Methods that Can Help a Business to Get to the Top of the Search Listings Box 6. The Way Marketing Specialists Think about Opt-In Box 7. NCR Study on European Popular Opinion on Privacy Box 8. Site Tracking Box 9. Profiling Techniques Box 10. DirectHit Box 11. Gallup Poll on the Extent of Privacy Fears Box 12. Human Resource Practices at Marks & Spencer Box 13. Exceptions to the US Model of Unrestricted Access to Public Sector Information Box 14. The Hacking of the Digital Video Disk Encryption System Box 15. Licensing Regimes Box 16. Special Restrictions on Intellectual Property Box 17. Excerpt from Ortega y Gasset’s ‘The Revolt of the Masses’ Box 18. The Link between Advertising and Privacy

60 64 66 82 92 105 113 129 133 134 135 20 1 205 222 22 5 23 3 275 283


PREFACE

Association of a price with a value is often misleading (Collective wisdom) There is no such thing as a free shave (French saying) There is such a thing as a flee lunch (Recent experience of cyber citizens)

The best things in life are said to be free. Public goods, however, are never awarded the coveted accolade of ‘life’ in this sense. Public goods are standard ingredients of economic lore. Economics, as we know, is the science of the rational allocation of scarce resources. To speak outright of a Gratis Economy-an allocation framework based on time alone rather than prices because volunteering and the digital world know no scarcity-beyond the scope of an elusive metaphor (rather than enumerating a few public goods such as air, advertisement-free radio, and impromptu musical performances in public places) would seem to be quite a challenge. Indeed, I have not set out to dispute this underlying tenet of economic science; I merely call attention to a considerable limitation. Digital files that can be replicated and sold in innumerable copies intrinsically undermine the fundamental role scarcity plays in economics: when technology brings abundance this threatens those ‘incumbents’ who deal in yesterday’s scarcities. The companies concerned-those profiting from scarcity-either resort to economic protectionism or find alternative ways of doing business, whether they be funded by advertising, patronage, membership, or whatever; they seek to adapt to the digital economy. This frictional adaptation process has begun and gratis models play an underlying role. My limited quest is to call attention to one of the striking features of the ‘new economy’-the phenomenon of offering a lot virtually free of charge. It is also my aim to show that, even if we occasionally do not pay for something, the derived utility can often be of a transactional or mutual-exchange character. We must try to understand or reconstruct this context of reciprocity in order to explain how simple ‘giveaways’ can still work towards business ends. The three studies in this volumedelineating three overarching generic domains of society: the voluntary

xiv

sector, business, and politics-address the classical body of knowledge known as the ‘Social Economy’, investigation of which, commencing perhaps as early as Aristotle, but certainly from Karl Polanyi to Kenneth Boulding, reveals the manifold ways in which economic transactions embed and submerge in various societal frameworks. The other academic objective of this book is to contribute to the broadening general understanding of what the established term ‘nonprofit’ can convey. In my view, this category is in flux, just as the legally-constituted third sector has everchanging boundaries in every country. In 1987, with the publication of the first research handbook and state-of-the-art survey on non-profit organizations in the USA, in the first section of the keynote essay the author stated: “Historians have tended to ignore the non-profit sector. Existing scholarship examines only particular fields.. .” More than thirteen years are quite a span in the fast-paced environment of present-day scholarship and the non-profit world has already received due attention. This is less so, however, in respect of an appropriately thorough interpretation of voluntary work (as complemented by amateurism and laymanship) and the emerging plethora of gratis services embedded in a hidden marketing context. The 1990s were a decade of ongoing and deep-cutting privatization all over the world. This prompted me to rethink the sources of cornmodification and I found that selling a state property in Europe or outsourcing a government-run program in America are only two possible forms of seizing public property. Besides the privatization of state property, another hndamental source of commodification, the so-called ‘informational comons’, shall be part of the focus of interest as an imperative fbrther tap and valve of the Gratis Economy-it is a world-wide marvel because of its open environment with minimal regulation. This vast ‘electronic prairie’ has been created in tandem with cyberland itself. Netizens, companies, and regulators are now in the pioneering process of discovering and inhabiting this virtual territory, still largely a no-man’s-land. Discoveries necessarily engender enclosure.’ In my account, I shall make special mention of current efforts in respect of which when the results of cutting-edge research are retained as a ‘common heritage’ (open-access) rather than fenced off as ‘intellectual property’. Besides privatization and the direct occupation of a ‘no-man’s land’, there are further conventional methods of creating private property when the primordial owner-or rather, the first occupant-is the state. For instance, the British National Lottery, the richest in the world, is subject to a socalled ‘beauty contest’ (public tender) for would-be operators every

xv

seven years. The Universal Mobile Telephone System (UMTS) auctions, awarding licenses for 3G wireless Internet services, have been initiated by the very visible hand of governments all over Europe. Supplementary to concessions, tenders, and auctions, mention must also be made of a unique type of ‘land run’, similar to the method of commodifying and distributing public property implemented in Oklahoma in 1889. The contemporary equivalent of the ‘land run’ is the Czech method of voucher privatization, in which state property was valued and distributed among the citizens, who, if they wished, could promptly resell their shares for the cash offered by several property management funds. Finally, I should mention the coveted domain of Public Sector Information (information belonging to the public sector or gathered through the efforts of the public sector) such as archives or geographical information utilized in partnership with the private sector. The public sector collects and produces vast amounts of information, mostly for free, much of which is of great interest to individuals and businesses and can be the raw material for value-added information services produced by the ‘content industries’, which transform this enormous potential into saleable products and services. A theory should be as simple as possible but no simpler. I cannot construct the full typology of primal acquisitions here, but I must set out to describe, weigh, and comment on how the domains of the Gratis Economy-whose boundaries are in flux because of ongoing re-creation through inventions and discoveries-are being grabbed by business interests. As to the ongoing case of cyberspace? I am convinced that care must be taken in respect of the extent to which it should be privatized: the exhaustive sharing out of cybertraffic among business interests would foreshadow the demise of the independent non-profit character of the Internet. In order to put this process into perspective, I set out to track down the origins of how something remains a public good in two further underlying and independent respects: the historical origin of voluntary work; and the origin and pragmatic management of intellectual property. My conclusion is twofold, and this may substantiate the juxtaposition of three studies so different in their methodological foundations. The first study, aimed at the hermeneutic reassembling of an almost forgotten but rich tradition in social science: introduces liturgical forms as examples of voluntary individual contributions to a community based on the motives of social rather than functional integration, in contrast to taxation. Besides fulfilling a definite economic hnction they also helped keep alive community bonds and gave rise to benign collective sentiments.

xvi

Although I shall introduce many historical forms of ‘working for free’, I cannot provide an analysis of the social conditions and exigencies that caused them to thrive or wither: my purpose is to reconstruct the rich notion of gratuity in general and voluntary work in particular. Although a volunteer is a one-man non-profit organization in himself, a pocket edition of the great foundations, little scholarly attention has so far been paid to the phenomenon. The sociological treasury and categorical abundance ofpro bono work, from coerced to voluntary labor, is as untapped as the manifold business models that inundate us with valuable intellectual property free of charge. This is particularly the case with the less pragmatic, less managerial, but rather cultural context of voluntarism as an intrinsic part of the overall Gratis Economy-that is, models of how to render a service for free. The second thrust of my investigation is towards an understanding of the public-domain component of intellectual property protection. This is no terra firma either. My findings lead to critical considerations based on case studies-full of forebodings as regards the preservation of all that is still freely available-of the current balance established by copyright legislation between what is openly and freely accessible and what is protected as private property. As a spin-off of this mapping of the changing borders of the public domain, I explore two other hot practical sources of gratis services: the often-dubious transactions with digital p r i ~ a c yand , ~ the intriguing world of online advertising. The protection of privacy-that is, capturing public attention as netizens moving their lives online grapple with the shortcomings of the emerging Information Society-is an elementary human right, such as the presumption of innocence, the right to a fair trial, and freedom from random surveillance. I also attempt to discover the capacities and limits of advertisingsupported communications. Applying these results to cause-related marketing can uncover new frontiers for the media of electronic professional communications and expand the options to support non-profit organizations’ ‘extracurricular income’. This is tantamount to the option of carrying pertinent advertisements without degrading professional dealings to the level of a ‘billboard community’. This opportunity is opening up for the nonprofit sector because there is a fledgling tendency that may tone down the purely business mindset of rampant advertising and ‘domesticate’ it to some sort of individually tailored knowledge management that could fit comfortably and without forcing into online professional communications. This domestication of often obtrusive advertising is predicated

xvii

on the endearing grand covenant of the net: measurability, in the sense of the traceability of online navigations. One offshoot of this online measurability is precision targeting. This level of information targeting and selective advertising portends the demise of mass culture. Focusing business communications and taking the educational level of the target customer into account-so far unheard of in advertising-is tantamount to niche marketing: advertisements are not disseminated in the air or on the street but rather aimed at a single person whose marketing characteristics can be established. Prospectively, this will lead to converting commercials into tailored ‘infomercials’ and domesticating pushed advertising into the permission-based agent of personal information management.

***

This book also has a practical intent: to show that the current limits of the non-profit mode of operation are in an expansive flux due to the manifold new exemplars of the Gratis Economy, an economy that makes so many new endeavors tick. To broaden our often too simplistic conceptual framework of the non-profit mode of economic activity, I have tried to contribute i. by exploring the uncharted heritage of philanthropy in order to arrive at a sophisticated typology of ‘voluntary’ giving and local cooperation as historical sources of the Gratis Economy; ii. by shedding light on emerging contemporary modes and models of gratuities. I identify two underlying sources of something’s being toll-free. Unrestricted free access to information, free content provisi~n,~ and intellectual property in general originate either in the sophisticated business propositions of e-commerce or in the unencircled ‘prairie’ portion of cyberspace. I describe this intriguing dynamic as the result of social forces in the making. As to its empirical base, this book emerged from the ‘source mining’ of a Hungarian scholar while on a Fulbright research scholarship overseas. The superpower of voluntary work has traditionally been the USA.‘ Altruistic volunteering is said to be the secret genius and strength of this great country. The idea and practice of neighbor helping neighbor is said to be a hndamental value in American life. I will not contest these claims in this book and many of my examples of sophisticated typologies come from the erstwhile ‘Points of Lights’ p r ~ g r a m The .~ necessity of beginning a new life in the New World, as the primordial experience and archetype of the American people, still makes itself felt

xviii

in a strong social conscience and religious conviction. It is also widely believed, however, that Americans are almost alone among the world’s peoples in pledging their time and money voluntarily to such an extent in the wider public interest. I shall try my best, however, to throw some doubt on this latter contention, not only by citing comparative timebudget surveys from distinctive periods of Hungarian history, but also by reconstructing aspects of voluntary work in different cultures. I have tried to preserve this exceptional bi-cultural angle-with some startling elective affinities’-by upholding a contrastive mix of examples drawing evidence from American and East Central European empirics. Since the USA is a superpower in respect of both volunteering and the digital e ~ o n o m y it, ~is plainly difficult to avoid writing a starspangled all-American book on the Gratis Economy. I have tried my best to maintain an international angle and to bring as many cases from Europe as my data permitted. Besides exploring libraries I resorted, as the only method of deriving clues concerning well-sheltered, often copyrighted or patent-pending business practices, to lurking-listening, learning, but not necessarily contributing-and (as a conscientious student of ethnomethodology in the sociology of the late 1960s) also actively participating in numerous professional discussion groups on both continents. At the same time, the theoretical paradigm is unambiguously of East Central European inception; this is due to the author’s education and formative years in social science, part of the last generation of the Budapest school of independent sociologists in the 1970s and 1980s, as Central Europe slowly prepared for transition. Central Europe represents a recurring object of thought in the book. One chapter (‘Enthusiastic Messianism’) is devoted exclusively to issues of local East Central European relevance. Another chapter, reconstructing the notion of free or liturgical labor, concerns those neglected elements of Weberian sociology that gave rise to considerations, ranging from philosophy to Sinology, on the existence of an ‘Asiatic mode of production’. In these hermeneutical chapters, aiming at the special features of the non-profit world, the reader is ushered into a scholarly frame of reference that is difficult only because of Weber’s complex interweaving of power structures, group struggles, and institutionalization-and certainly also because of its distance from life as we know it in our hemisphere today. The US ‘third sector’ was founded by people who had fled from allencompassing institutions, whether they were of a governmental or a religious character. American grant donors often behave as ‘intellectual

xix

investment bankers’, supporting a competitive selection of innovative ideas and people. In contrast, the development of the East Central European non-profit sector can be traced back unambiguously to retrenchments of the state budget in the transition towards a market economy. In Hungary, Poland, and the Czech Republic, exceptionally, we have a handful of NGOs that take pride in tracing their origins to the glorious time of struggle for institutional independence from the Communist state bureaucracy. Ever since, independence has been a qualified notion when it comes to financial matters. What is more, as the predominant statism commands that new ideas should first take the shape of a statefunded statutory institution, East Central European grant makers often only operate as a Doppelganger; that is, they reiterate on a more modest scale the funding logic of the state administration, thereby confirming many social-service groups in their status as merely state appendages.” Gratuitousness is universal (perhaps no less than an anthropological constant), but the cases I have chosen to deal with, the experience in its inception, and the entire paradigm as presented in this book is certainly rooted in Mitteleuropa. The motto of Freudian dream theory is also seamlessly applicable here: Flectere si nequeo superos, acheronta movebo (“If I cannot bend the heavenly powers, I will move the infernal regions”). ‘Beneath’ is a reference to his exploration of the subconscious. There is, then, a possible and remarkable interpretation of junk and the unvalued as a parallel to those events of little consequence or rather of ambivalent relevance that we forget, misspell, or refer to in our dreams. There are forerunners in the tradition of researching the ‘irrelevant’ in society carried to a grandiose climax by the innovation of bringing jokes, dreams, and errors into focus. Furthermore, a good twenty years ago E. F. Schumacher introduced the proper appreciation of “smallness”, in the sense of neatness, into economic thinking. There has always been a train of social thought addressing the ‘uninteresting’, such as the Austro-Hungarian author and philanthropist L. von Hatvany’s Wissenschaft der Unwissenswerten [Science of the ‘not worth knowing’]; I might also mention other initiatives, such as M. Thompson’s ‘Rubbish Theory’, addressing the phenomenologically necessary blindspots of sociological perception. There was a seminal thrust in the 1980s when the social sciences increasingly took notice of the role of the informal spheres, that is, local spheres of working and producing beyond the boundaries of the global economic system. There is even a portmanteau word for this productive but informal work: ‘prosumption’.’


T H E S E S TO INTRODUCE THE CONCEPT OF THE GRATIS ECONOMY

I intend my theses as an introduction to the concept of virtual gratuities. With this term I attempt to put a unified frame over diverse domains and ambits in society. First, I identifL the main driving forces that render valuable products and services free of charge. I also furnish evidence concerning the material bases of the work. Then I present theses epitomizing the major findings of the three essays which make up this volume.I2 Finally, having made my point that the Gratis Economy and netizenship are pairconcepts, I develop policymaking guidelines concerning this sector of the economy, which is eternal, but ever-changing. I identifL three, top-level domains of the Gratis Economy. These domains are dealt with in three essays, dealing with (i) private systems of social obligation, (ii) privately provided public goods, and (iii) the uncharted face of the Commons. The first essay depicts unique features of philanthropy with a strong presence in contemporary economies. Reconstructing the important notion of the liturgy, I generalize voluntary work as one form among others of private systems of social obligation. The second essay looks at marketing methods; freeware is treated as part of a wider revenue model or product-selling strategy mix. Grant or gift economics-buzzwords of the 1980s and 1990s-do not fully apply here. This domain of quidpro quo is a ‘sizzling’ sector worldwide. I return to the non-profit sector to the extent of weighing arguments concerning whether pockets of the Internet are turning into a very important, special new edition of the non-profit world, in which independent resourcing and local co-operation are upheld and enabled against all the challenges and attractions of for-profit misrepresentation. This intriguing outcome is predicated on issues of Internet governance: it is an ongoing conflict but a favorable outcome for the Internet’s ‘privatization’

2

The Gratis Economv

from being a US government-run entity towards acquiring independence cannot yet be excluded. Independence from government is somewhat beyond the scope of this volume-given its transnational character cyberspace is not easily regulated-and I shall concentrate on how the attained level of independence from business can be preserved. The last essay concerns politically constituted collective goods. This segment of mostly tax-supported items has a substantial history: the chiliasm or unconditional hope of the imminent termination of the evils of capitalism in early East Central European Socialism was the culmination of gratis solutions based on one-way income transfer and socialpolicy-induced redistribution. Although this zenith has long been left behind, predicated on political will or a benign budget surplus, politicians still occasionally try to make political capital by making something free by fiat. No reform movement other than abolitionism has absorbed the energies of so many Americans as the drive for public education, or has created such widespread and bitter opposition. The perhaps somewhat pale (but certainly not haggard!) current equivalent of this grand old example is the emerging issue of public assistance towards the cost of medicines. It is often easier to declare something free than to revoke it as budgetary preconditions wane. Many stick-in-themud, non-discretionary items of state budgets-called the implicit (unaccounted) debt-were once declared political gifts. Beyond elaborating this and a few other examples of gratuity delivered by politicians, I have come up with an original contribution of my own as a further type (time allowances).

T H E MAIN DRIVERS OF THE GRATIS ECONOMY The free nature of the Internet is said to have been lost to business interests; it is often claimed that this erstwhile ‘public utility’ is now run mainly by private companies. I contest this claim by showing that the general non-profit character of the Net has only been limited or contained. As the best stuff on the Web is hidden behind error messages, unlisted databases, and little-known links, most of cyberspace is still open for serendipity and will remain free as long as the emerging but by no means all-encompassing business communications offer compromises in matters of time-use and privacy. I claim that time-use and privacy-compromises related to our attention focus and info assuranceare the most important drivers that foster non-charging business solu-

Theses to Introduce the Concept ofthe Gratis Economy

3

tions and render more and more products and services free. This is a tacit give-and-take, but the outcome belongs among the core drivers of the new economy. Online marketing and commerce proceed on the basis of a market of clicks-not just users’ mouse clicks but also the clicks of third-party meters counting time, compiling statistical profiles and measuring user behavior. Advertising can help cyberspace remain toll free by compromising netizens’ time but offering something in return for using their (personally identifiable) data in business. I will trace these innovations to the extent necessary to understand them and evaluate them in terms of how force-fed or interruptive they are. There are intriguing new initiatives to render commercials less aggressive and more relevant, more permission-based and even more dependent on bandwidth. l 3 These targeting initiatives promise the demise of the mass culture of advertising as we know it, helping commercial messages to evolve into personalized individual knowledge management for optingin netizens. This endeavor is part of a wider project to understand further the phenomena of the emerging ‘Gratis Economy’. Besides the demands on our time described above, there is another underlying driver of this fledgling online Gratis Economy: we are being offered compromises on our privacy. In my approach, privacy ceases to be an issue between the state and citizens. Big Brother may be alive and well, but the crucial issue is to be found rather in the corporate world. Businesses avidly search for consumers’ personal data. In my critical evaluation of privacy policies I delineate a-still hypothetical-tradeoff that does not preclude the data flow of personally identifling information in exchange for the evidence-based, enhanced targeting of online ads. This individual targeting (selective serving) of advertisements is a great promise of the Internet. By delivering on this promise, an interactive medium is in the making where publishers can weigh up, advertise, and serve one person at a time. They can get direct and immediate feedback. They can push manifold as yet unheard-of services which effectively reach one person at a time. Over time, these emerging new personally tailored services can operate only if users ‘surrender themselves to browsing’, that is, hand over personally identifling information for commercial purposes. l 4 The commercial development of the Web is predicated on giving consumers the opportunity to be authentic and anonymous when engaging in information exchanges and online transactions. Non-profit development, at the same time, presupposes, trading personally identifling information in exchange for being given personally tailored services and more relevant advertising. This means no less

4

The Gratis Economy

than: ‘give your name to your browsing’ [lit. ‘give your name to your work’ in the sense of taking responsibility for it]. By giving our name-tag to our browsing we renounce anonymity while online, but in return we are offered better, relevant advertisements. Besides compromises on our innate digital privacy, there are other drivers that I call in sum system/lifeworld partnerships. This term, parallel to well-known publidprivate partnerships depicts models how the economic and administrative system can support gratis services and philanthropic endeavor in general.

D E S C R I P T I O N O F T H E FOLLOWING C H A P T E R S Chapter One: This is a reconstruction of the social context of historical volunteering with modern applications. With reference to the Weberian theory of liturgies I attempt to subject the original concept of charity to economic analysis. Throughout these expositions, I discuss the traditional form of giving something for fiee: voluntary work. It is extremely difficult to say something new on this, but I have set out to present only the uncharted aspects of voluntary work. Ancient and medieval forms are contrasted with more recent historical types and variants. The opening up of new or rather reconstructed territory for scientific investigation is made possible by a new paradigm ofpro bolzo work: voluntary work is portrayed as running the gamut between choice and compulsion; as an assumed obligation, whether pleasant or coerced. This obligation is predicated on the perception of a community, whether ‘gentle’ or coercive. In order to arrive at a multifaceted approach that makes possible a generalized notion of ‘free’ (both voluntary and gratis), I painstakingly restore the enabling sociological framework of social integration, communities where voluntarism can emerge. Ultimately, I claim that cases of volunteering or giving away or receiving something for free must be understood within either a social context or a business model. Formulating it as a thesis, I construe the concept of gratuity (in contrast to grants, gifts, or any other sort of unrequited giving) as emerging within either a community or a business model. The social context usually already exists in our community heritage; the creative talents of marketing establish it within the framework of a business proposition. Very recently, the two branches have begun to intertwine. Chapter Two: This is an explanation of how the New Economy in general,15 and dot-coms in particular, operates by taking up the user’s

Theses to Introduce the Concept of the Gratis Economj)

5

time. Although this volume is not about the Internet Economy proper, and I am interested in e-commerce and the business of dot-coms only to the extent of presenting my theory on how something toll-free is created, I give a detailed analysis of unfolding methods and an evaluation of the adopted technologies of online advertising. In the previous chapter the notion of ‘non-profit’ is construed in broader terms than economics or taxation; Chapter Two continues this embedded, interdisciplinary approach with an attempt to integrate the concept of public goods with the emerging phenomenon of the New Economy. The concept of virtual public goods emerges here in a context that leads me-following a rich tradition of economic sociology-to apply the notion of a Gratis Economy. The digital world offers a wide range of services for fkee-a phenomenon that is structurally new compared to both volunteering and traditional public goods. The costs are hidden here behind a marketing faqade-and thus are by no means ‘sunk costs’-and are calculated and shifted along to be borne by other actors in the economy in a quite sophisticated manner. Chapter Three: The practice of commodifying digital privacy has been brought to public awareness. This issue will soon be higher on political agendas, too. Throughout my expositions I maintain a stance responsive to business interests because I am aware of the intriguing innovations that cannot unfold without the use of personal data. From the perspective of a possible net gain for netizens, I try to develop a position that strikes a balance between the ambitious demands of online business and the observation of clear-cut and well-sanctioned minimal regulatory requirements. Chapter Four: This concerns the structure of gratuities embedded in business models that provides the theory of the business operated part of the Gratis Economy with its clearest statement. Chapter Five: This considers the role of government in setting policy and otherwise regulating the Gratis Economy-regulating that domain of the overall economy that was user-driven well before the creation of cyberspace. I sketch the scope of gratuities generated, constituted, and maintained by political will. In addition, I discuss here policy-related matters including the description of an underlying struggle for competence over the as yet non-privatized domains of the Gratis Economy. In a series of case studies I recapitulate how the free distribution of goods occurs at the prompting of political interests. This chapter invokes, among other things, the story of the quest for the sequencing of human genes, in which a private company and a public research consortium are

6

The Gratis Economy

competing, with the latter putting all of its findings into the public domain. Chapter Six: Politics is more than state administration; public goods and gratuities that affect the public interest-such as newborn babies, to take an unusual example-are also dynamically articulated outside the legislature. New claims and solutions emerge, while existing ones withdraw. The expositions on the ‘informational commons’ provide a statement of the analytic contribution of this book: the informational commons is under direct threat. A discussion of issues of intellectual property protection is connected to the issues of the endangered public domain. Chapter Seven: Besides the role to be adopted by governments and international covenants, I draw into focus the activity of civic initiatives which are endeavoring to settle the controversies over ‘knowledge grabs’. Chapter Eight: Technological developments bring about a situation where mass culture yields first mass customization then, perspectively, one-to-one and peer-to-peer mechanisms of communication. Complemented with improvement in non-global economic communicationmoney-, this may further empower forces of locality. Finally, a brief policy discussion brings the theory of the polity-generated part of the anthropologically construed Gratis Economy to its conclusion.

ESSAY I

THE TRADITIONAL GRATIS ECONOMY-UNCHARTED FACES OF PRO BONO WORK 1 . THE S O C I A L B A S I S OF VOLUNTEERING L I T U R G I E S A S T H E G E N E R A L I Z A T I O N OF V O L U N T E E R I N G

I shall undertake the hermeneutic reconstruction of the rich treatment of voluntary work in ancient philology as an essential anchorage for sociological thinking on the Gratis Economy, the aggregation of zero-revenue services. This reconstruction will lead to the introduction of such historical social institutions as: voluntarism in its primordial form; the voluntarist origins of obligatory duties; and liturgical alternatives to monetary contributions. Later on, I trace liturgical status-motivated volunteering from Antiquity through medieval Christian practice and European aristocracies to modern transformations of pre-modern philanthropy. All the reconstructed patterns of how people performed their volunteering are shown meticulously within their original context. This is important because, beyond the actual toil, service, or performance, the intended meaning is always an indisputable part of the voluntary structure. When the perceived meaning is absent and forgotten, volunteering yields to various forms of withdrawing the surplus product in society (that is, taxation). To arrive at these three components of the rich, full notion of working gratis and reconstruct them conceptually I have had recourse to the Weberian concept of liturgy. Liturgies are a historically surprisingly persistent, alternative structure for the redistribution of surplus product in the polity (inclusive of civil society and public administration). The theoretical tradition in economic sociology has used the concept of liturgy too narrowly, in relation to understanding the social forces that contributed to the throttling of the

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The Gratis Economy

germs of early capitalism in Antiquity. Even after the decline and fall of status-based political orders, status-enhancing public service has stayed with us. An abiding concern with status-honor has certainly survived into modernity. As managerial practices and commercialization in philanthropy are nowadays pushing the third sector towards an antipodal path of development, liturgies can have modern relevance only if their entire rich and contrastive meaning can be unfolded. I shall therefore attempt an etymological and cultural reconstruction of the original meaning. This meaning seems to have remained invariable throughout the colorhl history of voluntary work. In the city-states of Antiquity which, at least in their heyday, were thriving communities, deeds performed for the public played an iwportant role. They were called ‘liturgies’, a compound of two Greek words: ‘Zaos ’ (=people, cf. laity) and ‘ergon’ (=work). Thus, we have: “duty perfornied for the people”,’Gor “a public office which the richer citizens discharged at their own expen~e”.’~ The theologian Karl Rahrier, observing that Christian usage gradually narrowed its meaning to designate public worship, also notes in connection with Christian liturgy that “liturgy should transmit the eschatological contents of the Christian message not only in a symbolic-damped form, but should also be the scene of the people’s own practice [my italics] and genuine manifestation”. This reference also alludes to the early Christian communities where the observer and reader of the mass were not so discernible. Later on, preaching became clericalized as the prerogative of holders of a particular office. With the ban on lay preaching and lay sermons in the ninth century the originally rich idea of the ‘priesthood of all believers’ became lost. There emerged a constricted medieval tradition identifjing priesthood with the administration of the sacraments. Thus, this profession became a special class (in the eyes of God) with special powers and a higher morality. As early as the third century AD the distinction in the ecclesiastical vocabulary between laicism and clericalism led to a heresy called Montanism, which accorded more authority to prophets than to priests and bishops, leading to a hierarchy of an unusual kind, probably including women. Later on, the persecuted Anabaptists took this phrase to mean the thoroughgoing abolition of any functional distinction between clergy and laity. Only very recently did Vatican I1 revive for Catholics the idea of sermons given by lay people without specific ecclesiastical permission or training. The Septuagint’* translators of the Old Testament also used this Greek term to denote the service of God in sanctuary. In the Hebrew

The Traditional Graiis Econoniy-Uncharted Faces of Pro Bono Work

9

original it has various kindred meanings; in the Old Testament it usually denotes the service of a Jewish priest. In the New Testament it is used of any service rendered to God. In the fourth century, the word as applied to priestly ministrations was already generally recognized. Athenian liturgies amounted to citizen participation in public affairs. As a result of habit and tradition, several types of liturgical commitment developed in which, in a way approved by the community and in a sense clear to everybody within the tradition/ pledges could be accomplished and sacrifices rendered for the wider public. More exactly, liturgies in Antiquity were services aimed at lightening the public burdens of the polis and satisfying local public needs. The citizenry performed these services voluntarily, that is, from their own resources, in a planned and determined sequence. Everybody with wealth amounting to two talents could be required to undertake a liturgy, but only after the lapse of one year and for one purpose at a time. In difficult economic circumstances liturgies may have imposed serious burdens upon well-to-do citizens, and especially upon important families. Occasionally, through the almost unrestricted demand for liturgies, the city-state was able to exercise far-reaching control over private wealth.20 Immunity was usually granted to the archons (holders of public offices), to orphans before reaching majority, to heiresses, and to corporate wealth. Colonists were also excused liturgical service at home, as of right. Demosthenes, for instance, once makes explicit mention of three gentlemen of particular merit who were granted immunity. From the fact that the sources reporting the life and history of the city-states, at least until their decline set in, never record a case when anybody refused to shoulder communal work, the conclusion may be drawn that the Greeks regarded it as a status-enhancing duty rather than as burdensome ‘forced labor’. Self-esteem, pride, and ambition are thought to be the main driving force behind liturgies. True, Theophrastos in his Charakteres devotes a section to the Niggard, who in order to promote the victory of his tragic choir, renders his duty with a wooden tripod; ... or in the case of spontaneous public pledges he also makes a proposal, yet either he keeps silent as far as the sum is concerned, or escapes unobserved in the middle of the meeting; ... as a trierarchos he spreads the steersman’s blanket on the deck and puts aside his own.

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The Gratis Econoniy

It is surprising, furthermore, that the holding of public offices--arch& in Greek:’ nobile oficizim in Latin-was presumably of the same origin as the rendering of liturgies. The rendering of public offices and thereby the giving of one’s resources is not only a reminder of the liturgies, but is often referred to as synonymous (Jones, 1979). This is such an important issue that I shall investigate it at the level of the primary sources in some detail. Shedding some light on the voluntary spirit of the Athenians, Isokr. 12 (Panathenaikos) 145 writes: the morally excellent people are recruited as archai. People rendered this service in the same way as the liturgies that are burdensome, but at the same time those recruited acquire a definite distinction. Those who were appointed arch6 were compelled to neglect their own estates.

Pauly-Wissowa concludes that archai and liturgies were never identical in significance. In Lysias XIX. 52 we read: “My father never aspired to be an arch& but duly performed his liturgies.” However, Philostrat. Life of the Soph. 11. 10. 20. 1. shows them as synonyms: “He was entrusted with the honor of eponymos [one of the Athenian administrative leaders known as archons] and epiton hoplon [one of the Athenian military leaders known as strategos].” This topos, however, is not decisive because Philostratos lived much later than the classical epoch. A difference may exist in the fact that office-holders were usually elected to the councils while voluntary work alone did not carry this distinction. In fact, freedom from performing liturgies was regarded as a genuine privilege,22 while the exemption from holding the office o f magistrate was rather seen as a penalty. This pair of concepts armchk/liturgy seems much more suitable to reflect the whole range of POtential shades of meaning which the phenomenon of modern voluntary working may convey. Local communities made suggestions concerning what liturgies should be performed, and these were considered and approved by highranking officials. From this it does not follow that the sequence could not be changed or reversed. In any case, if a citizen found his assignment to be too onerous, he could voice his opinion, although this involved the risk of having to accept what was called antidosis, a forced exchange of estates. Attempts to evade the more onerous liturgies were usually made with reference to some other eligible person, who was perhaps wealthier and therefore better able to shoulder the burdensome liturgy in question. In this way, the head of a family trying to evade the

The Traditional Gratis Economy-Uncharted Faces of Pro Bono Work

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burden assigned to him could easily be compelled to take over an estate which in his own estimate was larger than his own and to give up his own wealth (considered in the community’s judgment to be more valuable). At this odd price one could be relieved of his Antidosis is my main proof of how a living tradition of genuine volunteering functions in a living community. It is natural that a contributorwhatever warm sentiments he may foster towards his polis-will try to select among the available options. This person will also compare other people’s contributions. Antidosis is a form of very human (perhaps even very Greek) bargaining within the framework of a community requiring and a household accepting a task to perform. What I am describing is the ultimate sanction, lurking in the background. Certainly, this solution may nowadays seem somewhat romantic, nevertheless it exemplifies a balanced, well-legitimized, and-as far as reconstructed power relations are concerned-undistorted social relationship at the glorious height of Greek history. THE HERITAGE OF VOLUNTEERING IN ANTIQUITY

The extraordinary liturgies reserved for the richest in the community were as follows: (i) trierarchia, that is, a ship built in its frame and structure by the state had to be finished, supplied with a crew and armaments, and maintained; occasionally the command of the vessel had to be taken care of, too. In the context of this type of liturgy Demosthenes XXI. 167 mentions that this seems to be almost an income-generating form of activity. (ii) The so-called architheoria, that is, the sending of a large-size and highly respectful delegation to regular festive celebrations. Such extraordinary burden-bearing, often of the order of an enterprise, approximated what we might call the ‘conspicuous prestige conversion’-that is, the new rich laundering and consolidating their wealth with social influence-of mighty fortunes. In his Kimon, Plutarch gives an account of the conflicts arising from the social perception of such ostentatiously performed liturgies. The usual forms of liturgy, available for and extracted from most heads of families, were as follows: gymnasiarchia, that is, the maintenance, for a period, of one of the principal elements of the city’s communal facilities, the gymnasium, taking care of the pedagogues there, the acquisition of possibly rare sorts of oil needed to rub the body with, and so on. Obviously, one could make more or less effort while performing one’s liturgy in sponsorship of a gymnasium. The city officials

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The Gratis Economy

in charge of games and festivals ranked among the most highly honored citizens. There was one category of competition, a team event called the lampadarchia or torch-race, which was particularly widespread all over Hellas. Throughout its history, it remained above all a religious ceremony: its ritual aspects took precedence over its competitive and liturgical character. The event served a practical purpose: the carrying of the sacred fire from one point to another without extinguishing it. The fact that it had to be transported apace to preserve its purity and power resulted in the bearers’ vying for swiftness and the evolution of the techniques of relay running. The ‘finish-line’ of the torch-race was an altar on which the winner had to light the fire with his torch. The costs of equipping and training the runners were met by a special levy which the state demanded from the appointed volunteers who superintended the recreation enter.^^ An important variation on this event was the nocturnal torch-race on horseback. We know from Plato’s Republic that this mounted version held a special fascination for the Athenians. Hestiasis referred to the (generous) entertainment of a clan on certain special occasions. Choregia was the acquisition and training of tragic and comic choruses performing at lyric contests. It is known from Lysias that, for example, the efforts made to present a dithyrambic chorus had to reflect the splendor of the ceremony in question.25A male chorus may have cost a (considerable) sum of around 2,000 drachmas in around 41 1-410 BC. According to a passage in Demosthenes, the performance of a men’s chorus was a much more demanding enterprise than that of a tragic chorus, primarily because of the larger number of participants.26 Even the forms presented above reveal that liturgical structures bore definite meanings which were constantly being reinterpreted and reconstrued by the participants while carrying out the traditionally prescribed activity. Thus, it may also have occurred that while some oblique forms lost their meaning and thereby their hermeneutic validity, others may have had their socially constructed and communally established meaning transformed. The latter was the case when gymnasiarchia gave place to the torch races (Zampadarchia), and choregia was embraced in the more general agonotheta which comprised all sorts of competitive organizations. For instance, in charge of the ancient Olympic games an agonthets was always appointed, a sort of referee-general (Sawhill, 1928, 113-1 16). Choregia flourished again under Roman rule. Arrephoria had become an empty routine alienated from its traditional meaning. Lysias, XXI. 5, makes mention of it as a liturgical type,

The Traditional Gratis Economj-Uncharted Faces of Pro Bono Work

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and, as Pauly-Wissowa’ s Realenzyclopaedie contends, this ceremonial procession was barely comprehensible as early as Alexander’s time. Philological research has also scarcely been able to clarifL the cultural intricacies of a kind of ceremonial procession of Attican girls devoted to Athene. Further customary patterns of liturgical activity include: euandria, that is, the competition of ‘male-beauties’, where brawn and aesthetic appearance were assessed equally. According to Andokides, IV. 42, these competitions were occasionally also organized, to save state expense, in a liturgical form. Ezrtnxia (IG, 11. 172) was the staging of callisthenic exercises simulating military discipline (Spartakiads as they are called nowadays in Slavic countries). Finally, the so-called knnephoria was a liturgical form which provided selected women with an honorable opportunity to take part in a procession carrying pitchers on their head. Liturgies were known and practiced in poleis other than Athens, and thus there may have been some diversity in certain details. There were places, for example, where resort to money was forbidden and only “natural [personal and in-kind] achievements” were allowed (Miletos), and elsewhere it was not usual for certain recurrent requirements to be allotted on an hereditary basis to one family. C O N D E S C E N D I N G MEDIEVAL CHARITY

At least since Thomas Aquinas the collection and distribution of alms has been an important aspect of the Christian Church. This cannot be regarded exclusively as a socially oriented or charitable action, because the donor is often inclined to help the destitute in a sort of strategic or socially-oriented fashion than to ‘exercise virtue’ for its own sake and in the interest of personal salvation. Through charity, for instance, medieval donors often sought to purchase paradise. Charity was advocated to enhance penance, along with prayer, vigils, confession, and fasting. The very concepts of stewardship and serial reciprocity evolved here with reference to the Biblical notion that human beings are servants of God and therefore must contribute a large portion of their time and personal wealth towards accomplishing God’s work. As God’s partners, human beings can perfect the world through good deeds; this tradition should be preserved by passing on the good works done for us by doing good works for others. The well-to-do have always been encouraged-or pushed-to continuously provide (and often in a statutory fashion) insignificant use-

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The Gratis Economy

values (gifts) to the community. The purpose has traditionally been to maintain people unable to earn a living, in particular those who, with their traditional ‘laboriously idle’ (that is, informally working a great deal but with little to show for it by way of income) way of life, are irrevocably severed from the new wage-earning livelihoods dictated by modernization, urbanization, and indu~trialization.~~ The historical roots of social policy and organized philanthropy go back to late medieval times when the traditional structures of a subsistence economy within urban communities became overburdened by an increase in the number of inhabitants and the influx of rural population. This era of forced development had brought about new wealth and new poverty alike. Until that time monastic establishments and the alms distribution of the church had been sufficient to maintain social balance. The emerging new insecurity had to be encountered by different means, by secular urban organizations that were an early sprouting of welfare bureaucracy for the appropriation of poverty taxes. The production of new norms ensued in order to define and regulate cases of entitlement, that is, to determine the expected conduct of those who benefited in return for communal provision. The famous distinction between the ‘deserving poor’ (citizens with a proven incapacity for work or unemployed due to circumstances beyond their control) and the ‘undeserving poor’ (aliens, vagrants, and idlers) was established at that time. The undeserving had been relentlessly crowded out of town.28Contemporary language identified not only the deserving and undeserving poor but also so-called “sturdy beggars”. They were recruited from the ordinary unemployed; unemployable, discharged soldiers; serving-men set adrift by impecunious gentry; Robin-Hood bands driven from their woodland lairs by deforestation; and ploughmen put out of work by enclosures. “Sturdy beggars’’ were as likely to be whipped as pitied. The relevant provisions were dependent on those criteria-orderly behavior, regular duties, and moral normalcy-that were widely supposed to help those affected to obtain a livelihood, although they had apparently failed to do so hitherto. Clerks checked the observance of these criteria. The earlier direct and unregulated link between donor and alms recipient turned into a more disciplined relationship, generating a degree of social security at the price of enhanced severity, known as ‘rationality in provisioning’. This process is important for our purposes because a new, only recently charted facet of modernization comes into focus here as the other face of civic socialization and social integration in general: marginalisation or stigmatization. Only by looking at both sides of the coin can we

The Traditional Gratis EconomjLUncharted Faces of Pro Bono Work

15

understand what, since Weber, has been called rationalization; philanthropy and poor relief in general are always coupled with such categories as “social discipline” (Oestreich, 1969), the evolution of societal techniques of dominance and contr01.~’This social disciplining of manpower reached its climax with the onslaught of industrialization when working time was molded to the rhythm of machines. This dialectic of social integration and exclusion is not without examples in philanthropy because good works are predicated on accepting the exclusionary and pauperizing tendencies of market economies (Van Dulmen, 1982). Having mentioned the early forms of bureaucratization I shall now turn my attention to voluntary forms of poor relief. The custom reflects an ancient tradition and doctrine of Christian duty concerning how the empowered rich should help the impotent poor. This way of coping with mendicancy nevertheless has its dubious aspects. According to the historian E. M. Leonard monastic charity was rather “unorganized and indiscriminate” and contributed “nearly as much to increase [the number of] beggars as to relieve them”. The monks in Chaucer’s England were worldly and well-to-do, living a life of sauntering comfort in the monastery ... They were not numerous, and having abandoned the manual labor practiced by their predecessors, they maintained armies of servants to carry on the daily routine of their great establishments ... The monks performed in person their obligations of prayers ... they gave daily alms in money and broken meats to the poor, and showed lavish hospitality to travellers, many of whom were wealthy and exacting guests. (Leonard, 1900)

AAer the dissolution of monasteries and the pensioning of monks, friars, and nuns in England and the cessation thereby of the dole at the abbey gate: the care of the village was a duty recognized by many a squire’s wife, sometimes even by a peeress who used to visit the sick, dose them, and read to them ... Gradually a proper system of poor relief, based upon compulsory rates, and discriminating between the various classes of the indigent, was evolved. The double duty of providing work for the unemployed and charity for the impotent was gradually recognized by Tudor England as incumbent not merely on the Church and the charitable, but on society as a whole. Administrative schemes evolved: at the end of Elizabeth’s reign and under the early Stuart kings, it had become a duty prescribed by national legislation, enforced upon the local magistrates by a vigilant Privy Council (the factual governing body of Tudor England), and paid for by compulsory Poor Rates. (Trevelyan, 1942)

The spoliation of another ecclesiastical establishment, the ~hantries,~’ also affected contemporary non-statutory public services. As Protestant doctrine triumphed in many regions, prayers for the dead were pro-

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The Gratis Economy

nounced ‘superstitious’. Yet many of the chantries were the property of lay guilds, and their endowments went to pay not only for prayers on behalf of the dead, but for the maintenance of bridges, harbors, piers, seawalls, and schools, thereby paving the way for modern charitable fund-raising. Besides the disendowment of monasteries, hospitals were also destroyed by Henry VIII. The disendowment of (foundling and other monastic) hospitals was especially injurious to the poor as they were located exactly where they were most needed. Later on, with the waning of the religious crisis, they were refounded under lay control and henceforward with a secular purpose. In the ensuing paragraphs I draw heavily on J. M. Bennett’s (1992) findings concerning an exceptionally non-condescending variety of medieval charity. A ‘help-ale’ was a communal drinking-session to raise money for humanitarian purposes: a carefklly selected and ‘deserving’ member of the community was licensed to brew beer and invite partakers to purchase it at inflated prices. The proceeds benefited a designated person, group, or cause. The most familiar forms were church-ales (to raise funds for parochial expenses), bride-ales (to endow marrying couples), and help-ales in general to assist those who had fallen on hard times. This event combined poor relief with social obligation. Charity at ales was not always given freely, for people were sometimes compelled to attend and coerced to be generous. Charity imposed by officials was by no means a rarity in the Middle Ages and thereafter.3’ Temporarily they could even prohibit commercial and licensed brewers from operating in order to boost proceeds. Unwilling neighbors attended and spent money from fear of official harassment. We might wish that all charity be spontaneous, free, disinterested, discreet, and habitual, but few people in medieval and early modern Europe gave to charity entirely freely or unselfishly. What is more, charity dispensed at help-ales was quite discriminating: the authorities made a judgment concerning who deserved aid and endorsed the initiative only after vetting the donee. Charity-ales drew participants from the ‘middling sort’. Neither the very rich nor the desperately poor were involved: the former attended only perfunctorily, and vagrants, beggars, or idlers were generally excluded from this assistance. The charitable institution of help-ales fit closely into the existing political order: the Church occasionally prohibited them, only to resuscitate them later on. Charity-ales offered assistance to the poor in a way different from that dispensed by the upper classes. The charitable institutions of the powerful clearly gave to the poor in a condescending fashion, demanded

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17

deference, and, by identifying the deserving poor, clearly differentiated between patrons and humble clients. Charity-ales, in contrast, benevolently blurred the social divisiveness of poor-relief. Alms-giving at ales was also obscured by communal conviviality. Later on, the mingling of commerce and charity also helped to make societal cleavages more fuzzy. Some elements of charity-ales survive in later friendly societies and box clubs, as well as in modern wedding celebrations, rent parties, fund-raising events for political causes, and church bazaars. As an example, I now turn to Bernard de Mandeville, known for his outspoken, if not exactly warm-hearted nature, who professed another view on the ‘macroeconomic consequences’ of private charity work and ‘commiseration’ (a sort of condescending solidarity) in general. In his Fable of the Bees he presents the infamous thesis, completely in consonance with his ethics and anthropology, that all forms of condescending welfare activity, private and public charity alike, and the patronizing of the poor, are functionally harmful to the productive operation of the economy. He points out that among the moral motivations of benefactors and foundation makers we invariably find vanity and even megalomania, hence the same inducements-by no means sui generis virtuesas in the case of such private vices as gin and the slave trade. The private vices result in a common good, as prostitution works to maintain monogamy and the gin trade leads to the accumulation of great wealth. He admits that the ambitions of generous benefactors have created more hospitals than all the virtues and welfare-oriented political will put together, yet he condemns them indiscriminately because they slow down the process of primary capital accumulation. True, he understands that to walk undisturbed we do not side-step beggars, but ‘fob them off with a few pennies - that is, we ‘micropay’ them-just as we have our corns removed if necessary in the interest of the same walking, yet he is of the opinion that it would hardly be detrimental to society if less dead capital were hoarded. It would be desirable for the community if the gap between the productive and the so-called ‘unproductive’ classes were much wider, with the repudiation of all spending on unproductive-say, cultural-ends. Philanthropy, claims Mandeville, helps only to blur (and extend) the natural boundaries of societal If we leave that out of account, foundations and donations may soon reach a point at which laziness and shirking are stimulated, thereby undermining labor morale in the lower classes. (Mandeville’s theorizing on the original accumulation of capital also influenced the late thought of Karl Marx, a structuralist with less social sensitivity than before.)

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ENTHUSIASTIC h4ESSIANISM: THE EAST CENTRAL EUROPEAN S O C I A L I S T E X P E R I E N C E IN V O L U N T E E R I N G

Enthusiasts of all periods claim that they possess a particular wisdom. They claim that the Spirit working in them has revealed the truth to them personally and directly. There is always a double opposition in the zealous attitudes of religious enthusiasm: their direct revelation is opposed to the word of Scripture and to a communication of the Spirit which is supposed to come through ecclesiastical office. Movements of enthusiasm, social revolutionary enthusiasts notwithstanding, are as old as the Church in their recurring quest to challenge prevailing institutions (Knox, 1950). Fanatics of Eastern religions and patriots ready to die a ‘noble’ death for a cause, such as the Japanese kamikazes of the end of the Second World War, are well-known, often sinister phenomena. In the following, I restrict myself to enumerating and cursorily investigating examples of enthusiasm connected to voluntary work within the Communist movement in Eastern Europe. Enthusiasm might have been perceived subjectively by the participants at the beginning, but the altruistic movement of working for free soon became an expression of status or honor for the new elite. This depicts the-othenvise abundantly documented-degenerative regression of the socialist movement into a status-based political order. The most salient phenomenon in (former) East Central European voluntarism is the obligatory or apodictic nature of voluntary work. This is the result of two concomitant historical trends coinciding in the East Central European blend of socialism between 1917 and 1989: the sectarian messianism of the early,33non-bureaucratic Bolshevism, and ‘Asian’ or redistributive character traits. In order to orient the reader I shall succinctly outline the historical components of this unique labor configuration. The social engineers of early East Central European socialism believed that housing, educational, health, and recreational needs would be covered collectively in the form of social benefits. Thus, the reproduction costs of the labor force, such as accommodation, education, health care, were not built into the wage structure but provided as public goods for all. This redistribution driven to its extremes served rapid urbanization and galloping industrialization, but was exhausted in the 1970s to the extent that the welfare budgets of the countries concerned have still not recovered. Our brief story concerns how calling upon the principles of social integration gave rise to a pure-bred brand of volunteering. 1 draw my

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cases from three East Central European countries, all pluralistic societies with ethnic minorities. This means that the levers of social integration would never have been capable of mobilizing the whole society, not even to the extent of volunteering, but at an exceptional moment this did happen. All moments and facets of acting for the collective good became intermingled and crosscut: volunteering as working from one’s own resources was often mixed with working with a view to belonging voluntarily to an organization that was dedicated to providing aid and succor to others less fortunate. There were even voluntary pledges of surplus production. After two or three years, however, this voluntary spirit became distorted by the malign power of the Cold War, within the framework of which attempts were made to regulate and channel independent initiatives. The post-War period, with its initial impulse of reconstruction and ongoing industrialization, affected masses of people in Hungary. Today, it is no longer possible to ascertain who-and in what spontaneous or, rather, coercive ‘work organization’-took part in the rebuilding of the destroyed Danube bridges, in clearing and repairing the ruins, and in launching new life in the city. It was at that time that the terms ‘communal labor’ and ‘shock work’ gained currency. Although 1945 was by no means a happy ‘liberation’ for the Hungarian people,34it is certainly true that a universal enthusiasm obsessed most survivors, the widest strata affected by social progress, and manifested itself in work imbued with altruism and sometimes carried out for as little as a daily dish of hot food.3SIt is of particular importance that this historically unique moment had for a time-as regards the clearing of ruins, it was still being done in the Castle District by schoolchildren as late as the 1960s-a generally mobilizing capacity that encompassed most of the (urban and politically uncommitted) population. Ever since, and all over the world, work motivated by altruism, rewarded by extremely small payments, often called stipends or reimbursement, has been a standard feature of modern voluntarism. With all its inhumanities and sins, the precommunist system in Hungary had deeply debased and destroyed the cohesive forces deriving from traditional, national values. At the start of the post-War period something new and socially innovative commenced and the enthusiastic spirit brought forth the eruptive forces of a radical, utopian polity. The sweeping impulse of industrial and urban reconstruction and the foundation of a new political regime affected the people at a primal level that exceeded material interest. With the establishment of new orientations

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in society, and with the emergence of new, as yet unfrustrated prospects of development, and the foundation of newfangled (Soviet) mores, these social energies rose again and-put in the service of honorable human and material values-began to function with renewed force.36 In a strongly traditionalist society, as Hungary had been before the War, policymaking was rapidly transformed into an ongoing d i ~ c u s s i o n , ~ ~ setting aside established norms, giving rise to genuine enthusiasm in many. In the making of a temporarily over-interactive self-governing society, the over-burdened and worn-out consensus-bestowing capacity of old norms and values was sidelined. Even everyday praxis became politicized, and a constantly redefined critical, constantly questioning consensus took over from the co-ordinating force of tradition.38 The Cold War’s political exorcism prevented these new patterns from settling down into an innovative, hitherto untried normative order. This sweeping, all-pervasive universal enthusiasm, characteristic only of rare historical events, soon yielded to a logically closely related, but somewhat different phase, the enthusiasm of an emerging social avant-garde. With the sharpening of political struggles there emerged a vanguard party that increasingly sidelined and later even physically eliminated rivals in its fervor to carry forward social progress. I shall not give details of the parties-several hues of the political Left-involved, or of the issues and directions of ‘progress’, because my main focus is the permanent structure of pledges and devotion generated by social engagement.39 At the onset of the Cold War this movement was still made up of a multifarious, heterogeneous set of activists. Although they did not renounce the already not quite unequivocal claim that their political aims were of a universally mobilizing character-they of course assumed the existence of a tiny reactionary stratum-they became objectively and increasingly separated from most other social forces. Certainly, with the passing of this ‘state of grace’, the all-embracing seamlessness of a universal community in political affairs was already out of question. Although the intermezzo of the ‘priesthood of all believers’ soon elapsed, the leftist movement at that time did not become fully enclosed in sectarian exclusivity either (later on, enemies multiplied increasingly). Collectivist hype was laid bare in this context, even in the eyes of committed people, to the extent that it is appropriate to regard it merely as a ‘grand narrative’, a historical account of the past and correlative anticipation of the future that performed tasks of social integration and political legitimization alike. Like so many other twentiethcentury ideologies, the narrative of socialist enthusiasm, which will

The Traditional Gratis EconompUncharted Faces of Pro Bono Work

21

remain in existence as long as there is a political Left, has been irreparably fragmented into a multiplicity of political and other ‘languagegames’, whose truth-claims are localized and relativized. What I find most characteristic among these fragments is the ecstatic messianism of the so-called People’s college^.^' It was here that the virulent experience of social mobility was accompanied by an exceptionally efficient and feverish activism-just short of unbridled fanaticism-that had a bearing on their inclination to render voluntary work and, to a certain extent, also on reforming the social perception of physical work in general. In this field alone, the members of these People’s Colleges-a sort of enfants terribles who fought against apathy in all its forms and felt moved to recklessly destroy everything traditional-did much voluntary work. Typical of the many stances of this kind was the notion that by altruistic working, by transforming oneself and one’s immediate social environment, one could transform society as a whole and thereby launch a new age of moral perfection. As part of their ‘counterculture’, they participated in the land claims committees involved in the repartition of privately owned landed estates, engaged in politics as a social commitment, and visited factories, providing occasional assistance where work brigades were wanted. They also, in an ecstatic outburst of activism, revived the work-camp movement, again appealing to the ambiguous weapon (the Nazis also made full use of it) of political enthu~iasm.~’ They took part in summer camps in neighboring Yugoslavia to strengthen international solidarity. Their labor activities stemmed from an envisaged communard-ethos,42from their desire to revolutionize life in its entirety. The charitable work of the Colleges, combined with study and a passion for social justice, was a way of coupling personal and societal redemption. These independently organized labor actions (sort of “action directe” to evoke sinister modern parallels from the genre of urban terrorism), along with endeavors to collect voluntary donations for their political objectives often not fully reconciled with those of the higher authorities on the political Left, were very characteristic of College members, partly because they were imbued with student politics, partly they stemmed from a new, emerging socialist ethos: the revolution of the whole lifeworld of working youth. They preserved, as long as they could, their alternative way of life, their politically maintained autonomy in the face of the prevailing political power. The rhetorical and social structures that evolved during the post-War period survived this short but impressive era (at least until the onset of

22

The Gratis Economy

the Cold War). They made their effects felt even when the enthusiastically mobilizing reserves of this rare source of social integration affecting everybody-apart from the cautious few who perceived the portentous signs and were anxious about the political future-had long been depleted. In this way the discursive structures of propaganda and social engineering became empty and alienated from their interim context of ‘a happy communion’ and lost their meaning. By the end of the 1940s’ the well-known historical necessity in East Central Europe known as ‘Stalinism’ had led to a situation in which enthusiastic and autonomous volunteering maintained by the impulse of social engagement was increasingly being subdued by cold systemic requirements. Grassroots initiatives were grudgingly but unavoidably fitted into the higher economic and political structures and functionali ~ e dAfter . ~ ~ all, permanent enthusiasm is hardly possible if the revolution is not permanent. And the counterculture nurtured by College people longed for absolutes: they could not accept bureaucratically assuaged messianism. It was a scaled-down movement of this kind which motivated young party functionaries in the 195Os, who, when the flag of the official League of Communist Youth was unfurled in 1957, in the wake of the ruthlessly crushed uprising, participated in draining and rendering fertile huge tracts of moorland within the framework of summer labor camps. After that, until the end of Communist rule in Hungary, thousands of youngsters visited summer camps and worked there for two weeks without pay and innocuously, just for the sake of it and without any particular political overtones. I mention in passing a much more baleful example of this kind, within the framework of whichespecially in the Soviet Union-scholars and students were sent every year to participate in ‘crash’ harvesting as a way of instilling ‘bluecollar work ethics’ into employees from the ‘non-productive’ sector. This structure of abandoned enthusiasm and bureaucratic depoliticization of social engagement leads us to a pattern called ‘subbotnik work’ (Saturday work4‘). By way of illustration I paraphrase from the diary of one of the authors invited to the famous Soviet Writers’ Congress of 1934. We are told that the construction of the first ball-bearing factory in Moscow was started from scratch. To create at least the conditions for construction, the neighboring factories gave assistance in the form of ‘subbotnik work’: they built the first barracks and workshops and thus imposed a moral obligation on the newcomers to requite this favor as soon as possible. Later on, the already established factory organized an unremunerated Saturday-shift on four occasions to build two kilometers


23

of road and a streetcar line to reach the site of the plant and so serve the whole neighborhood. Management and charwomen alike, the general manager and the janitor, took part (they also planted trees).45Often everybody was regarded as a volunteer: on city streetcars, for instance, the job of conductor had traditionally been rendered superfluous by the practice of newcomers flashing their validated ticket at their fellow passengers. Similarly, due to the shortage of car repair shops new cars came with a wide assortment of tools to make self-help easier. The historical roots of this phenomenon are closest to Trotsky’s concept of labor battalions, in the front line of the construction of socialism.46The leaders and theoreticians of the young Soviet state, in their hard-pressed ideological circumstances, found it a not unrealistic proposition that, until the social conditions of alienated wage labor had been eradicated, the “proletarian militarization” of the world of labor would be an appropriate form of e m p l ~ y m e n tI. observe ~~ in passing that railway workers, miners, postmen, and even paramedics in state-run emergency services have often worn uniforms and have held their quasimilitary ranks ever since. As Mannheim observed in his seminal Sociology of Knowledge, this unconditional hope in the imminent termination of evil has been called chiliasm throughout history, and Bolshevism, in its quest to redeem capitalism, fostered close, relatively spontaneous ties with this theological tradition. In the 1920s an essential element of Bolshevism was the degree to which it tried to secure and incorporate every aspect of human practice and experience. Entire areas of everyday life, manners, language, dress, and sexual relations, were taken out of the private domain and became part of public political discourse. In the 1920s everyday aspect of behavior was in focus. In the years of the Civil War a good communist was largely defined by revolutionary enthusiasm, and in the sinister 1930s by his attitude towards work. Whereas in the 1920s the political enthusiasm of the Bolshevik avant-garde was expected to ‘percolate up’, the 1930s brought about the era of ‘trickle-down’. To be particular in manners, in literary taste, in artistic creation, or grassroots-initiated spontaneous volunteering was increasingly perceived, first as ‘guerrillawarfare’ (in terms of which one would be strategically reconciled, but in practice working on one’s own initiative), then as outright deviation. Autonomy in this political situation began to subside into something poignantly ‘belated’ vis-i-vis the “bubble-up enthusiasm” of many authentic or ‘believing’ Bolsheviks. Those whose pride prevented giving up autonomous thinking and behavior were taken away - leaving be-

24

The Gratis Economy

hind a society with less civil courage, sense of citizenship, and creativity. We shall briefly recall a few patterns. What is equally typical of them is the fact that the elements of material and moral incentives, the motivations of the lifeworld, and the inducements of the socio-economic system were intermingled. There were widespread house-building initiatives for young people, in which the urban development agencies specified an area for building housing estates and drew up the plans, in which the future residents sometimes also had a say. Then an enterprise-level work competition was organized to mobilize and select the most worthy future residents. The estate was constructed by a contracting enterprise from the building industry, but occasionally, and regularly on weekends, the selected residents also took part in the work so that they could get to know each other. This pattern coupled self-help with socialization. This distribution of coveted consumer goods within the framework of moral incentives was specifically a Soviet phenomenon,@’ as distinguished from the original Bolshevik ‘traditions’ : the political exigencies of the shortage economy superseded communard theoretical principles. These principles, by the way, castigated philanthropy as a superficial approach to social misery. Planned economies, at their best, tried to unify economic policymaking with goal setting in social policy. In other words they submitted economic considerations to higher goals, among whichnever ranking first-social policy was a legitimate concern. In the ‘ancien rkgimes’ of East Central Europe the most common feature of volunteering was the launch of ‘work competitions’, moral incentives to honor and encourage ever higher productivity. They were announced for either a philanthropic purpose or to highlight a Communist holiday, such as a party congress.49 Voluntary work in these circumstances was predicated on apodictic identification (a binding commitment permitting no deviation whatsoever) with the yearly plan, the nation, or socialism. To emphasize the keen irony inherent in this term ‘apodictic identification’. in respect of volunteering I shall present the case of the ‘unofficial colleagues’ of the Secret Services. From East Germany’s Stasi documents we now know a great deal about the relentless manner in which communist secret services acquired information about their own societies. As unofficial colleagues were almost never kept on a payroll-in sharp contrast to their official counterparts (spooks, shills, moles, and other agents)-we may categorize them as ‘volunteers’. They seldom signed an agreement to work for the secret police, nevertheless they

The Traditional Gratis Econoniy-Uncharted Faces of Pro Bono Work

25

were always assigned a code name if considered reliable. They met casually or regularly with their minders. The whole range of subjective motives played a role in the recruiting of Stasi volunteers: open blackmail,” usually in connection with a pending legal case, in exchange for information services; sometimes also political persuasion; in a great many cases self-promotion. The outside observer must concede that theirs was a highly professional and thorough form of human resource management in the choice of their external reporters.’ Interestingly, occasional payments or ‘gifts’ in unofficial cases are not always an indicator of authenticity of involvement, but rather reveal motivatedness, the lack of a voluntary spirit, or the inapplicability of open pressure in the recruitment of collaborators. When asked about their motives, informal collaborators now often refer to their wish to ‘extend walls’, to broaden small liberties within the system, or to keep dialogue alive; these considerations are usually the revealed, subjectively felt motives of their indecent a~tivity.’~ Dialogue, strategic communication, or one-way-reporting: this is the underlying issue here. Blackmailed agents, by way of rationalization, often perceived themselves as double-agents. “How do you measure guilt?”, asked Manfred Stolpe, Premier of Brandenburg, a popular politician in contemporary eastern Germany when confronted with his contentious past. Does it begin when you talk to people in power? At what point does a negotiating relationship cross the line and become collaboration? People who were dissatisfied with the political conditions responded in two different ways: the civil rights activists denounced the regime but could not accomplish anything concrete. By remaining in touch with the people in power one could improve the situation and humanize the system step by step. Unscrupulous as they may seem to the very few heroic dissidents, they often portray themselves as gifted diplomats who helped to alleviate repression. This search for motives is, of course, possible only in those East Central European countries where former ‘fellow workers’ have been exposed to the public. (In Hungary, for instance, access to the files of Communist informers is still limited; many suspect that a large number were simply ‘turned’ and taken over by the new regime, which amounts to taking all the old informers into a general ‘witness protection program’.) They claim to have helped the authorities to better understand (in an empathic sense) real societal processes. Understanding (and the perception of security) is said-counterfactually-by these sources to have often pre-empted crack-downs. Party members never became en-

’

26

The Gratis Ecoiiomy

tangled in this business. It was their official duty, not ‘occasional voluntary work’ to report on their fellows. On the other hand, the secret services tried in this manner to acquire objectivity and trustworthiness as regards information received. The work of ‘unofficial colleagues’ is typical ‘voluntary’ work prompted by a whole range of incentives, from coercion to personal identification with the regime. The informal (at the same time heavily regulated) and ‘volunteer’ (assent was ‘extracted’, sometimes by torture) nature of this employment relationship faithfully mirrors the sociologically mixed nature of volunteering. This is perhaps the clearest exemplification of my claim that the pair archdliturgy (the first of which distinguishes the agent, the second of which places a burden upon him) is the proper means by which we may understand voluntary work. Finally, I wish to look at the distinction between kolkhoz and kibbutz. The early co-operatives of the modern state of Israel are a good example of how direct democracy, solidarity based on equality and ideological commitment can produce and maintain links with the state other than those of a mere taxpayer. Regarding its relationship with the state and the national economy, the kibbutz is historically exceptional. The kibbutzim existed before the birth of the state of Israel and of a comprehensive, diversified national economy. In fact they were rather the birthplaces and cornerstones of both. Several tasks, otherwise fulfilled by government, were carried out by the kibbutzim; not only military protection, but also regional administration, education, and the reception and integration of needy immigrants and orphans of war and the Holocaust, largely without remuneration. In emergencies the raising of levies for public needs, as liturgical contributions, also occurred-and still do-in the form of voluntary pledges, but independence, freedom from directives, was maintained. This is a good example of informal coordination. Enthusiasm and moral incentives play a definite mobilizing role, too. The social role of kibbutzniks is very significant, and much greater than a quantitative analysis would estimate (Bergmann, 1980). On the other hand, the opposite case of an absent citizenship or alienated relations leads us back to the sinister phenomenon of ‘passive liturgical special-purpose associations’ (‘Zweckverband‘ in Max Weber). Remaining with the co-operative movement, the kolkhoz as invented during the Soviet era represents the counterpole of the kibbutz. It is relatively easy for a government in a planned redistributive economy to withdraw ever more from co-operatives. But the more is demanded, the less members are able to feel that the co-operative is their own demo-


27

cratically managed institution, and the less decisions-suggested or imposed by the planning authorities-can be taken within a democratic framework of balanced power relations. Extensive compulsory transfer of the co-operative’s surplus cannot be achieved by persuasion or democratic discussion and thus leads to the diminution of integrative forces and to the enhancement of administrative power. M O D E R N A P P L I C A T I O N S OF T H E G E N E R A L I Z E D N O T I O N OF VOLUNTEERING

Liturgies are by no means only of historical relevance. In order to substantiate this claim, I shall specify several modern applications. The patterns in focus will be treated in some detail in the form of case studies. First, I shall reconstruct the classical Weber texts on functional liturgies. This tiresome task is unavoidable for the sake of thorough sociological reconstruction. Functional associations were the prototypes of the emerging medieval cities in Weberian urban sociology. In the Middle Ages this included such disparate phenomena as the coercive guilds, delivering and repairing military equipment, in which handicraft workers were hereditarily bound to their trade, and village communities of Russian peasants (obshchina) which were collectively responsible for paying taxes and recruiting soldiers. In modern times, people of Jewish descent were legally discriminated against by the Axis powers and their menfolk drafted into labor service during the Second World War (though by this means often avoiding an even worse fate). The ensuing case studies have one underlying feature in common: a distant analogy with passive liturgical associations can be perceived throughout the examples of full-time unpaid voluntary work when for the sake of building up a way of life, a skill is exercised informally, not within the framework of formal employment. This can often be a form of deactivation (in labor market terms) with cost reimbursement by social service departments and some limited additional compensation. Another example is the volunteer-only army say, the USA. I might also mention foster parenthood as opposed to foster ‘grandparents’ who are usually mainstream, part-time, and informal volunteers of the ‘befriending’ type. The differentia speczjka is always that socially extremely useful non-commodified work is performed within-the confines of either the home or other premises rather than in a normal (commercial) workplace.

28

The Gratis Economy

Loci Classici on Liturgical Associations The Weberian concept of liturgy, due to its lack of systemization, can be traced most easily in his sociology of history. In the context of ancient states, Frank H. Knight, the English translator of Weber’s General Economic History, uses the unexpressive term ‘managerial’ for liturgies, contrasting managerial states with taxation states. I have reconstructed the full meaning of liturgies in order to show the notion’s primary relevance to voluntary work. As a derived application, the notion also concerns functional (as opposed to voluntary) associations. Their logic, according to Weber, may generate a community,54and by the same virtue, in respect of their social function, may also perpetuate them in a feudal way, making them corporately responsible for the satisfaction of some social needs. If so, the affected group becomes a functional association with an inescapable liturgical purpose. Thus, a formerly genuinely voluntary contribution, once institutionalized, can take on a compulsory or sanctioned nature. The extra status it confers becomes, by way of normalization, indispensable to the group concerned and its voluntary and supplementary character may eventually fade away and yield to routine provisioning. By way of this dynamic the history of many institutions, and the voluntarist origins of obligatory duties in particular, can be traced back to social exigencies or a quest for distinction. These coercive liturgical associations are counterparts of contemporary voluntary association^.^^ As an important case with illuminating force the typical path of urban development in the Middle Ages is worth mentioning further. According to Weber the cities were transformed from compulsory seigneurial associations into autonomous corporate bodies. With this achievement, emancipated townsmen made the first breach in feudal power, eventually leading to the emergence of the bourgeoisie. At the time of the foundation of medieval cities, the establishment of corporate bodies was for the purpose of securing specific privileges. From the king through the landowners to the parliament, all rights consisted of a complex of specified privileges. Anybody exercising a right which did not derive exclusively from private contract could do so only within strict limits and on the basis of a recognized letter patent. Therefore, all corporate bodies were primarily someone’s ‘special-purpose association’, having been at some time granted permission and a license by somebody else. The political authorization inherent in granting a concession was at the same time an acknowledgement that the corporation had been fitted


29

in to the prevailing order in respect of its social function. Settlements were established mostly as ‘special-purpose associations’, being collectively responsible for satisfying the material wants of their owner, their seigneur. This liturgical satisfaction of needs, for which responsibility was jointly borne by the whole settlement, its guilds,s6 and its religious community, constituted the basis for their collective behavior and for the evolution of their corporate character. In the most radical cases of such liturgical bondage, the peasant in his person, the craftsman in his trade, and the whole settlement in its relationship to the feudal lord were all tied hereditarily as a liturgical fimctional association. The citizens of the settlements slowly turning into cities were for a considerable time treated by the seigneur, the depository of political power, as a passive liturgical ‘special-purpose association’ of his own. The privileges attained by the feudal lord-and subsequently ceded to the urban professionals-were typically these: market monopolies; staple rights; privileges to pursue industrial activities or trades, but also the right to ban trading; all sorts of privileges concerning military service, taxation, and so on. All these distinctions were attained not by the corporate bodies of the citizenry, but appeared to be the achievement of the political lord. It was he and not the citizens who acquired these rights that made it possible for him to maintain his share in the benefits deriving from liturgies. Thus in Weber’s urban sociology these hnctional associations became the prototypes of the emerging medieval cities fighting for autonomy. Let me cite in detail Weber’s exposition of ‘Liturgy and Collective Responsibilities’ : The patrimonial satisfaction of public wants has its distinctive features as well as features which also occur in other forms of domination. The liturgical meeting of the ruler’s political and economic needs is most highly developed in the patrimonial state. This mode of meeting demands has different forms and effects. We are here interested in those consociations of subjects which derive from liturgical methods. For the ruler liturgical methods mean that he secures the fulfillment of obligations through the creation of heteronomous and often heterocephalous associations held accountable for them. Just as the kinship group is answerable for the crimes of its members, so these associations are liable for the obligations of all members. Among the Anglo-Saxons, for example, kinship groups were in fact the oldest units which the ruler held accountable. They guaranteed to him the obedience of their members. Similarly the villagers became collectively liable for the individual inhabitant’s political and economic obligations. We saw earlier that this could result in the hereditary attachment of the peasants to the village; the individual’s right to a share of land could in this way turn into a duty to participate in the production of a yield, in the interest of

30

The Gratis Economy

the contributions owed to the ruler. One example is the guarantee of public peace and order called in England the frankpledge: mutual suretyship or the compulsory collective liability of a group of neighbors for the law-abiding behavior and political compliance of every member. This institution-a vast social network for the purpose of repressing crimeis found in East Asia (China and Japan) as well as in England. For the sake of public order neighbors were organized and registered in groups of five in Japan and of ten in China and made collectively liable. The beginnings of such an organization existed in England already before the Norman period, which greatly relied on such arrangements. Compulsory associations whose members were collectively liable to criminal persecution were made responsible for the appearance of an accused in court, for giving information about guilt or innocence in criminal cases involving a neighbor-a function from which the institution of the jury developed-for the appearance in court of ‘jurors’, for providing the militia, for the military trinoda necessitas and later for the most diverse public burdens; these associations were at least in part established specifically for these purposes, and landed property in particular was made liable for the obligations imposed ... For these reasons the liturgical compulsory organizations later became the source of English municipal associations and therefore of selfgovernment ... An example is the office of the justice of the peace. Thus, a liturgical meeting of public needs could develop into two very different structures: In one marginal case it could lead to local administration by largely independent honoratiores (notables); this administration was connected with a system of specific obligations whose extent and manner were traditionally determined and which rested on specific property objects. At the other extreme a personal patrimonial dependence of all subjects could develop which tied the individual hereditarily to the land, the vocation, the guild and the compulsory association and which exposed the subjects to very arbitrary demands; these demands were advanced within highly unstable limits merely set by the ruler’s concern for the subjects’ permanent capacity to fulfil1 their obligations. The more technically developed the ruler’s own patrimonial position was, and especially his military power on which he could rely against his political subjects, the more easily the second type, total dependency, could prevail ... Besides the army the coercive administrative apparatus available to the ruler was important for determining the size and quality of enforceable demands. It was never usefhl or possible for the ruler, if he strove for an optimal personal power position, to turn all desired services into liturgies based on collective liability: he was always in need of a body of officials (bureaucracy). (Weber, 1978, 1023-25)

Having commented on the relevant loci classici on functional associations, I turn to their modern applications. This may be of interest because-in order to remain within our specific frame of reference-we have identified trends conducive to what could be called ‘early capitalism’. In contrast, I now turn to a few modern phenomena which have their sociological roots in historical times, in liturgical functional associations.


31

Military Service as Liturgical Duty In Rome military service was liturgically classified according to property and involved the self-equipping of propertied citizens; however, the knightly strata were later freed from military service and replaced by the state-equipped proletarian army, elsewhere the mercenary army, the costs of which were met by mass taxation. In medieval times, knights performed military duties in return for tenure of feudal land. Services and equipment were supplied at the vassal’s expense. Originally, the normal period of service was 40 days a year. As time went on, service was rendered in scutage, a tax paid in lieu of service. By 1330 the increasing use of mercenaries heralded the commercialization of this ‘voluntary’ form of soldiering. Secular knightly orders, however, still exist in the form of titles bestowed by sovereign^."^ In merry old England the duty of military service and the requirement of self-equipping was graded according to personal wealth.‘* This pattern automatically placed the rich in the cavalry, the less well-to-do in the infantry, and left the others at home as begetters of children. In every country with conscription the ‘impressed’ youth constitutes a group performing a liturgical duty. I cite in some detail a rare historical extremity as regards the military draft, the Ottoman devshirme: The Ottoman rulers, who until the 14th century were supported in essence only by the Anatolian levies, resorted for the first time in 1330 to the famous conscription of boys, since the discipline of the levies and also of the rulers’ Turkmenian mercenaries was insufficient for the great European conquests; from conquered peoples who were religious aliens (Bulgarians, Bedouins, Albanians, Greeks) boys were recruited for the newly formed professional army of Janissaries (yenicheri means “new troops”). Boys aged ten to fifteen were conscripted every five years; at first 1,000 were recruited, later increasingly more; finally their establishment numbered 135,000. The boys were drilled for about five years, received religious instruction (without being directly enforced to embrace the Islamic religion), and were then incorporated into the army. According to the original regulation, they were supposed to remain celibate, to live an ascetic life in barracks under the patronage of the bektashi order, the founder of which was their patron saint, and to refrain from commercial activities; they were subject only to the jurisdiction of their own officers and had other significant privileges, officers were promoted according to seniority, there was an oldage pension and a daily allowance during a campaign, for which they were obliged to furnish their own weapons. During peacetime they were dependent upon certain jointly administered revenues. The extensive privileges made the positions desirable, and Turks, too, attempted to have their children accepted. The Janissaries, on the other hand, attempted to monopolize the positions for

32

The Gratis Economy

their own families. As a result, admission was first limited to relatives, and then to children of Janissaries, and the devshirme was practically stopped at the end of the 17th century; the last conscription order, which was not executed, was issued in 1703. The Janissaries were the most important force for the great European expansion from the conquest of Constantinople to the siege of Vienna, but they were a corps so prone to reckless violence and often so dangerous to the Sultan himself that in 1825 a Moslem army was conscripted , .. and the Janis59 saries were annihilated in a tremendous blood bath in I 826.- (Weber, 1978, pp. 1016-17.

Posse con~itatus(the county force) was a body of men above the age of fifteen in a county (exclusive of peers, clergymen, and the infirm) whom the sheriff could summon to hunt down a criminal or repress a riot. It was from this tradition that Great Britain derived impressment, the drafting of British subjects to provide a crew for naval vessels. It was abandoned in the mid-nineteenth century in favor of long-term volunteer enlistment and the development of the naval service as a career (Anderson, 1982). As to American practices of military conscription, Congress recommended a draft in 1777 to all the colonies, although the fortuitous aid of the French made it unnecessary. In the American Civil War the governments in Washington and Richmond struggled with the pressing problem of recruiting soldiers. In the early months, when enthusiasm ran high and most people thought the war would soon be over, volunteers enlisted faster than they could be armed and equipped. By the end of 186 1, however, enlistment fell off. Both governments then offered bounties (cash payments) to attract recruits. State and local governments added their own payments so that a volunteer from the North might get as much as USD 1,000 in cash for pay and victualling. The payment of bounties led to bounty-jumping. Some volunteers would desert after receiving a bounty in one town, enlist again in another place, and collect a second bounty. Both sides found it necessary to draft men for the armed forces. Before the end of 1862, the Confederacy issued a draft which made every able-bodied white male between 18 and 45 liable for service. The North, early in 1863, began to draft able-bodied male citizens from 20 to 45 years old. In both sections, however, high government officials, preachers, and teachers were exempt. Moreover, a drafted man could hire a substitute to take his place. In the North he could also get exemption from service by paying USD 300 to the government (a rich man’s war and the poor man’s fight). In several northern states, officials encountered violent resistance to the draft law. In New

The Traditional Gratis Econontv-Uncharted Faces of Pro Bono Work

33

York City four days of rioting followed the start of the draft in July 1863. Nearly a thousand people were killed or wounded before troops could restore order. In his memoirs, General W. T. Sherman decried the efficacy of state coercion as a means of raising a military force. The men who voluntarily enlisted at the outbreak of the war, he wrote, were the best, better than the conscripts and far better than the bought substitutes (Ellis and Noyes, 1990). This reminds me that volunteer blood donors also yield better quality blood than paid ones. In 1940 Congress instituted the first peacetime draft which lasted, with one brief interruption, until 1973. This eventually became a lottery draft with very few exceptions, deferments, or excuses. The draft came with ‘ribbons’ attached. Under the original GI Bill of Rights, exservicemen were offered education, housing, and employment in exchange for service in the Second World War, Korea, or Vietnam!’ Military service entitles the ‘volunteer’ to defer repayments of federallysponsored loans such as student loans. I mention this incentive feature of military service to emphasize its close kinship to volunteering. Nevertheless, all over the world, especially in countries with conscription, the American armed forces would be termed ‘professional’ (in the former Soviet terminology ‘mercenary’). In many other countries, for instance in Hungary, where the draft is permanent, the option of alternative service was constituted first for the religiously ‘hyperactive’,61 and later on for everyone. The option of civilian service duly legitimizes conscription. Students have to suffer a shorter service period anyway. As it is believers whose lifeworld is above all endangered by military service, the churches managed first to reconcile their interests with the state in the last year of Communist rule.62 Some 1,000 applications are made each year to the Ministry of Defense by drafted young people for alternative service. This is very low, reflecting the fact that in society it is an accepted manly virtue to ‘volunteer’ for the national army and it is by no means popular to be a refirsnik. (In neighboring Austria the number of applicants has more than doubled since the religious-pacifist constraint was abolished and civilian service was made more or less optional and fully voluntary.) At the same time, the grassroots organization to help those opting for alternative service claims that more than half of all applications are rejected without satisfactory legal cause. They also complain that their ‘enlightening’ work is, at best, only tolerated, and they are not allowed to promote their activities. The underlying character of this motivation

34

The Gratis Economy

can perhaps be best accentuated by mentioning that even in Israel the Orthodox are also exempt from the-relentless as it may be-draft. The question now arises whether an all-volunteer army can be regarded as a liturgical association even in the absence of duress in raising recruits, Instead of listing the main, somewhat threadbare arguments pro and contra, I shall cite a convincing paragraph from a classical economist who seems to take the view that voluntary military service-or peaceful national service,63 the “moral equivalent of wartime martial service”-greatly resembles liturgies. Parenthetically, I cannot resist mentioning that countries with a permanent draft often denigrate allvolunteer armies as “mercenaries” and try to present their practice as genuinely voluntary.64To refbte this ideologically charged issue, it may suffice to point out that in Antiquity armed service was compulsory for every able-bodied citizen well-off enough to equip himself with the requisite bronze armor-helmet, breastplate, and greaves-and with shield, sword, and spears (Finley and Pleket, 1976). The Greeks did not count this service as a liturgy. Without regarding the danger ... young volunteers never enlist so readily as at the beginning of a new war; and though they have scarce any chance of preferment, they figure to themselves, in their youthful fancies, a thousand occasions of acquiring honor and distinction which never occur. These romantic hopes make the whole price of their blood. Their pay is less than that of a common laborer, and in actual service their fatigues are much greater. (Adam Smith, Wealth of Nations, I, 10)

Involuntary Labor Service: Labor Battalions in the Second World War Forced labor battalions are a unique phenomenon in Europe. They were pervasive throughout the Second World War. Forced labor based on the logic of passive liturgical special-purpose groups, as we find it in Weber, I could best exemplifj with the following concise case study. (a) I shall rely heavily on the findings of Elek Karsai and Randolph Braham who have, with evocative force, catalogued and published many of the documents of the sinister social institution called ‘labor service’ or ‘labor battalions’. Several hundred-thousand men aged between 2 1 and SO, and deemed to be ‘unreliable’, were affected by draf’t measures: they were drafted, serving under military officers, but unarmed and ununiformed. Their mission was to carry out military construction work. At the outset, in 1920, with the assumption of political power by


35

counter-revolutionary nationalist forces in Hungary, the industrial proletariat was regarded as unreliable in its entirety and so excluded from the (honorable) duty of serving the country under arms. Soon Jews, later on national minorities, trade union leaders, and communists, were added to those exempted from this national service. Soon afterwards, the practice of auxiliary unarmed service was discarded, although discrimination against Jews continued: they were never conscripted for military duty between the two World Wars. Then in 1939, parallel with the ‘ethnic cleansing’ of state administration, apartheid in labor service was resuscitated, this time with extreme harshness. Usually a vetting procedure was adopted to the depth of four grandparents in order to ascertain descent. Pedigree was germane to determine eligibility. According to a 1939 law, all those who were unsuitable for, or excluded from, serving with the armed forces were liable to serve with auxiliary labor battalions. These units were under the jurisdiction of the military authorities, and the individuals serving in them were under military discipline. However, they were deprived of the rights and privileges of soldier^.^' Discrimination prevailed in discipline, accommodation, and pay. (b) The ethnic Germans in the Soviet Union received harsh treatment during the Second World War. Unlike people of Japanese origin in the USA, they were not merely rounded up and incarcerated, but also drafted into an unarmed paracivilian or ‘labor army’. Similarly to the American Japanese, the ethnic Germans in contemporary Russia are now entitled to reparations. Instead of restoring them to their full national rights, their indemnity brings about a sort of positive discrimination: they are entitled to all those privileges granted to fighting soldiers. Thus they have free travel on urban transport; when applying for telephone their claim is preferred in rank order; their rent is statutorily halved; and, above all, they have access to special food stamps. (c) My last twentieth-century example relates to the harvesting duties of students and academics in general throughout the former Soviet Bloc countries.

Warrior Ethnicities The logic of functional liturgy also gave rise to entire warrior ethnicities in history: Cossacks, Transylvanian Szeklers, or the Hajduks of the Great Hungarian Plain. Weber’s words apply here:

36

The Gratis Economy

the liturgies may be organized ‘correlatively’ by associating specific monopolies with the burden of rendering certain services or supplying certain goods. This may take the form of organization of ‘estates’, that is, of compulsorily forming the members of the organization into hereditary closed liturgical classes on the basis of property and occupation, each enjoying status privileges. (Weber, 1978, p. 197)

Cossacks speak Russian, and though there are many elements of shared historical experience there is no autochthonous Cossack culture. It has always been its rigid military structure that has held this people together. They inhabit vast territories from the Don to the Pacific. They have never had a homeland of their own and they claim to be a people of no less than 30 million (although the Columbia Encyclopaedia, for instance, makes mention only of four million Cossacks.) The ancestors of the Cossacks were peasants who fled Ukrainian villeinage66 for the then no-man’s-land on the border between Tartary and the Russian Empire. Largely mercenaries and freebooters, they protected themselves against the Tartars and helped Ukraine in the fifteenth century, then part of a unified Polish-Lithuanian state, to take defensive measures against the devastating raids. This role led to the rise of the Cossacks and by the sixteenth century they had settled along the lower and middle Dnieper. Similar communities on the Don and its tributaries were settled chiefly by runaway peasants. Their polity was governed by the assembly of all the Cossacks, which also elected the hetman or ataman. Under the leadership of famous chiefs like Bohdan Khmelnytsky (1648-57), Ivan Mazepa (1687-1709), Stenka Razin, and Yemelian Pugachoff they also fought bloody battles against Polish and Russian grand seigneurs who were striving to bring them back under their yoke. Parallel with the overall political situation, when the harsh conditions of East Central European serfdom took hold in Ukraine, the state administration at last succeeded in integrating them. These peasantsoldiers (the upper crust at least), however, were able to retain certain privileges in return for rendering military services.67They were relieved from feudal bondage, from the obligation of serf labor or corv6e.68At the same time they undertook to provide hereditary military service at their own cost. Thus, the formidable Cossack military organization emerged to serve the Tsar’s might. It was they who invaded Siberia: they crossed the Urals in 1581 and reached the Ohotsky sea as early as 1639. They are said to have been as relentless as the Spaniards in Latin America.69


37

They also excelled in the conquest of the Caucasus. In the wake of this war they were granted the possession of rich Kubany lands in the foothills of the Caucasus mountains. It was also the Cossacks who suppressed freedom fighters all over East Central Europe during the nineteenth century. What is more, they were the last followers of the tsar: the Civil War ended in 1922 only after the last pockets of Cossack resistance had been mopped up by the Red Army as far as Vladivostok in the Far East. The Soviet government abolished all their privileges, but in 1936 their status was partly restored and they were allowed to serve in the army.

V o l u n t a r y B o r d e r Guards In this series on the Gratis Economy-privately provided public goods-I take the reader first back to the Anglo-Saxon frankpledge that was the archetype of a private system of social obligation in which all adult males were responsible for the good conduct of others. To formalize this social obligation, all males were grouped into tithings headed by a tithingman. Each tithing, in turn, was grouped into a ‘hundred’. The hundredman served as both administrator and judge. The most radical liturgical arrangement is the hereditary transfer of vocation: thus corporations, guilds and other vocational groups established, legalized or made compulsory by the ruler become liable for specific services or contributions of their members. In compensation and especially because of his own interest in preserving the subjects’ economic capacity, the ruler customarily grants a monopoly on the respective economic pursuits and ties the individual and his heirs to the association, both with respect to their persons and their property. The obligations may consist of contributions specific to the respective trade, for example, the production and maintenance of war materials, but they may also comprise other duties, for example, ordinary military contributions or tax payments. Sometimes it has been assumed that even the Indian castes were at least in part of liturgical origin, but at present [the 1910~1there is no sufficient basis for this opinion.. . . But elsewhere the compulsory liturgical association has been common, and by no means only in patrimonial regimes, although there it was often installed with the most radical thoroughness. For such regimes it is natural to view the subject as existing for the ruler and the satisfaction of his needs, and therefore also to consider the significance of his economic activities for corresponding liturgical capacities as his raison d ’e‘tre.Accordingly, liturgical methods of meeting public needs prevailed in the Orient: in Egypt and in parts of the Hellenistic world, and again in the late Roman and Byzantine empire. With less consistency these methods were also applied in the Occident and played a con-

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The GratisEconomy

siderable role, for example, in English administrative history. Here liturgical bonds usually do not significantly fetter the person, but essentially affect his property, especially his landed property. However, they share with the Oriental liturgies the existence of a compulsory association guaranteeing collective liability for the obligations of the individuals, on the one hand, and a link, at least de facto with a monopoly position on the other. (Weber, 1978)

The Szekelys or Szekler people were historically a border guarding ethnic group: as their example is so striking I shall limit myself merely to describing the pattern of private delivery of a public good. They were border guards of the old Kingdom of Hungary, burdened/distinguished by this hereditary dutylprivilege. They were exempted from corvke in return for their precious border guarding liturgy. One could escape this bondage only if the family was large enough and so exemption could be granted.” Only as late as 1851 did regular corps of border guards assume this state function. The old tradition of the border guarding duty of frontier villages in Eastern Europe was almost completely forgotten until the onslaught of the Cold War and the descent of the ‘iron curtain’. Then, the inhabitants of the borderland settlements, like the posse of a sheriff in the US ‘Wild West’, were required by the Communist authorities to report, hunt down, and help arrest trespassers.

Foster Parenting In most countries there are time-honored schemes to promote baby farming rather than orphanages and institutional child rearing. Foster parenthood in the USA usually entitles the parents to modest remuneration, if not an allowance. An amount lower than the minimum wage is paid when the foster child is between the ages of 3 of and 10. Social security contributions are also borne by the state. The system is often under review, and it is expected that foster parents with less than three children will be excluded from the scheme. Some half-a-million children are being raised by foster parents and the average waiting list for child-seeking families is three years. Until the end of European feudalism religious institutions provided the only organized care for children orphaned, deserted, or neglected by their parents or born into such poverty that their parents could not support them. The Poor Law of England ( 1601) provided for poor children by farming them out-acknowledging the state’s obligation to the needy. Until about the end of eighteenth century the main methods in England and its colonies were still indenture (binding the child out as an apprentice to a master who expected a


39

return in labor for anything expended7’). Children were sometimes indentured and were not free until they were 21 years old. Baby farming has been an alternative solution to orphanages and institutional child raising ever since. In Athens and in Rome, until the fourth century, unwanted children were left or exposed in appointed places. The Second Nicene Council in 787 ordered the establishment of foundling hospitals in all large cities. In England foundlings were supported in children’s homes run by the local authorities or boarded out with suitable families, which received a subsidy for this service. If an.unwed mother chose to keep her child she received state support. In the Soviet Union, the state provided for the maintenance and education of children of unmarried mothers and widows if such help was requested. The state also maintained homes for deserted children and for unmarried mothers and their children. In France deserted children are placed in institutions or with statesupervised families, which receive allowances for board and lodging. In the USA, the first orphanage was organized by philanthropists as early as 1800. The first foundling hospital, St. Vincent’s Infant Asylum, was started in 1856 by Catholic nuns in Baltimore. This was soon followed by the founding of other infant asylums supported by religious denominations or private philanthropists. In the 1850s the Children’s Aid Society of New York began sending dependent children from eastern cities to homes in the west. At present, institutions for deserted children are supported by state governments and may be partially financed by national grants-in-aid (tax credits) for which a state qualifies by maintaining minimum standards of service and administration. These services come under state public-welfare departments and the services are provided by district offices. Each child’s situation is evaluated individually and if they cannot remain with their own family they are placed in a foster boarding home or child-care institution, depending on which type of care is best suited to their needs. Other maternal and child-care policies are financed by municipal agencies or under the social security pro gram. There are still many private and parochial institutions which care for deserted children. I shall describe the present structure of baby farming in Hungary in a typical ‘baby-farming’ family with more than six children: the father usually provides the principal income and is only involved part-time in foster parenting; mothers are usually the exclusive foster parent. In such cases the father may receive about half the average wage as a cash benefit usually somewhat less than the legal minimum

40

The Gratis Econoniy

wage. Mothers receive around the average wage as a cash benefit from the local authorities. Annual holidays are provided either in the form of a vacation for the whole family in a trade union-run holiday center or by transferring the children to a state-run home during the vacation. Sick pay is also available. Another type of baby farming is practiced by SOS Kinderdorf International. The idea goes back to 1949 when its originator, Herman Gmeiner of Austria, solicited popular support for his child-village scheme. Within six years he was able to construct a village for 15 families. In 1979, the United Nations ‘Year of the Child’, this enterprise had some 4 million donors and cared for 600,000 children in 70 countries. In order to preserve families, applicant women are selected in a +‘-c)rough vetting procedure, and endowed with a house in a newly-built village and a monthly income in order to enable them to start a family and raise there a large number (some 6 or 8) of ‘state’ children. Adopted children are raised together with the mothers’ birth children. In sharp contrast to institutional care, this project tries to maintain family links after the departure of young adults from the illa age.^' It is difficult to imagine, but even this special kind of professional and fulltime voluntary work-an innovation derived from the reconstructed, all-encompassing conceptual frame of reference of the Gratis Economy-can be subject to political pressures: in the heyday of the German Democratic Republic the children of political detainees were often taken into state-run homes and later on, having been given new names and identities, passed on to ‘high-fidelity’ foster parents. Mrs Margot Honecker is often accused of having dreamt up and supervised this sinister practice. On the first count, 1 can only report that the former Soviet Union and Hungary adopted similar policies in the worst days of Stalinism and occasionally declared stigmatized parents unfit to rear their own offspring. I interpret foster parenthood within the conceptual framework of what is called ‘adoption philanthropy’, as a means of giving and volunteering, establishing a direct link between donor and donee without the intermediary role of non-profit organizations. The personal adding and mixing of voluntary labor with charitable contributions enables benefactors to observe the impact of their good works directly. There is a personal and often unmediated relation between philanthropists and the individual or collective beneficiaries. This direct link between donor and donee does not require tax deductibility and blurs the distinction between giving and volunteering.


C L A S S I C A L F I E L D S OF VOLUNTEERING-THE ECONOMY

41

RECEDING GRATIS

T h e Professionalization of Sports Amateur sportsmen are unremunerated but not necessarily engaged only in the pursuit of leisure. There is a long history of attempts to define amateurism. In a relatively late, diluted version, sports authorities came to regard those as amateurs who-instead of employing independent agenciessubjected themselves to the authority of amateur federations. As a working definition, however, it is best to consider someone as ‘amateur’ if he is an athlete only on a part-time basis. Furthermore, as amateur activities are rarely subject to commercial attentions, genuinely voluntary-that is, amateur-sports always preserve the essence of their ‘playfulness’. This lack of ostentation is a salient and constant feature of untainted amateurism. The infiltration of sport by business can be traced back to the fact that a good sporting event is a coveted marketing tool for the corporate world. Whereas fund-raising for a charity ultimately bridges the gap between donee and donor, the marketing relationship in sponsorship adds the momenturn of ‘reselling’ and brings the consumer directly into the picture. Actually, sponsorship is product placement, with the advertiser persuading the content creator to make some positive reference to a product. This threesome of content-creator-advertiser-consumer brings forth a particular dynamic. But even when sport has fulfilled its role as the communication tool for the donor, the circuit is not yet closed: the consumer has yet to take action and to complement and finalize the transaction by his buying power. The focus of mass attention on competitive sports and other showbiz events is mainly (but not entirely) absent from philanthropy. Image linking is generally accepted as the incentive force behind sponsorship. Corporations are said to be in search of an incontestably benevolent reputation. Some of the public image of revered cultural bodies, such as symphony orchestras and sports teams, is supposed to imbue their sponsors. Businesses are ready to invest huge sums in order to attach their logo to an athlete’s image. The S t o r y o f Commercializa tion-The

Olympic h4ovenient

The Olympic Movement is an organically grown ‘purebred’ in the global non-profit world. 1 regard the Games as a collective marketing effort on the part of the less glamorous branches of sport. Whereas those

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The Gratis Economy

branches of sport which have successfully become part of the global entertainment business may or may not participate in the Olympics, the non-telegenic ones have free access. Whereas a professional tennis player, the American basketball league, baseball, hockey, professional boxing and a few other branches can sell themselves without the collective marketing effort orchestrated by the International Olympic Committee, sportsmen in less obviously appealing sports renounced the search for sponsors and TV coverage individually and resorted to building the Olympic brand collectively. This is the current guiding philosophy of the Olympic movement. To keep at bay both politics and commercialization-this is the original underlying tenet of the Olympic Charter; I interpret the former as the guarantee of independence, and the latter as a barrier against outright professionalism and unfettered business. They have traveled a long road to arrive at this self-definition. In the late 1960s and even in the early 1970s, before the onset of live TV coverage, international sports federations-the supervisors and, subsequently, the ‘owners’ of every Olympic sport-were still very parochial and amateur organizations. Only some of them had permanent staff, their volunteers being recruited from former sportsmen. Many federation presidents worked from home or, at best, from modest off i c e ~ In . ~ 1965 ~ the IOC ruled that cities bidding to stage the Games should be barred from holding receptions at IOC sessions. They also ordered that not more than six delegates of any bidding city could attend the decision-making session.74In the 1960s these sports officials threatened to ban from the Games anyone found guilty of taking money for business promotional purposes. Competitors and federations were denied the right to carry commercial logos on an athlete’s clothing. Sponsorship was unheard of: the very notion of sports sponsorship-linking the sporting interests of the masses to a commercial message-had not yet developed. Using sport as a means of commercial communication was still only a germ of an idea, as far from many people’s minds as the ‘outsourcing’ of the musical accompaniment of a church mass. Soon the germ grew, however, and ramified into categories such as stadium advertising, the title of official supplier, the use of mascots and emblems, and franchise opportunities. Today, a fierce battle is being fought even around the ownership of the Olympic torch: the Greeks are trying to assert their rights even in the case of the Winter Games where the Olympic flame was first lit as late as 1952 in Oslo. The original statement of the Olympic Charter insisted on the ideals of sport as leisure and fair play. In order to enforce this austere ideal,


43

various standards of amateurism were experimented with. Until as late as 1971 the International Olympic Committee adhered to a strict application of the amateur rule; only the ‘state amateurs’ of the Eastern Bloc were approved as exceptions. This favor by no means applied to company sponsored amateurs. With the emergence of many sports as marketing tools for global companies, the standards of amateurism were redefined in the early 1970s in somewhat pressurized circumstance^:^^ someone who acknowledged the authority of national and international sports bureaucracies could promptly be admitted to the ranks of the movement, irrespective of earnings. Only those who entered into a professional contract, employed their own agents or managers, and planned their race scheduling and events calendar independently of national Olympic authorities were classed as professionals. This autonomy signified that such athletes were capable of raising their own means instead of being the recipients of trickle down through their federation. To put it bluntly: those capable of selling themselves as a marketing tool can be expected to question the ownership rights of the sport as a whole. Such a challenge clearly impairs the ownership rights of the Olympic Movement. This criterion is already a soft one in keen contrast to the austere original constraint because it does not raise the question of appearance money and in-kind benefits if they are drawn through the authorities as go-betweens. Interestingly enough, this stance was also acceptable to the erstwhile Communist sphere, whose motivation was less to enhance the proprietary status of sports authorities. Bureaucratized communist institutions continued to disdain the autonomy of individual sportsmen just as they disdained that of everyone else.76 Sport became professionalized under East Central European socialism, too. Athletes were enjoined to treat their performance as a way of making a living. The source of this livelihood, however, was never corporate sponsorship. Instead, state-run companies took athletes directly on the payroll. Unless by defection, there was no way for these stars to join the professional circuit either. Excellence in sport became the equivalent of the achievements of the shock worker in industry: a muscular advertisement for the credibility of the regime. A hierarchy was established, including that of Merited Master, paralleling the introduction of the Merited title in arts and education. ‘State amateur’ sportsmen in their thousands were granted paid ‘civilian’ employment in government-run companies with ample or full-time allowances to enable them to train and prepare for competitions. In accounting, for instance, the term ‘sports positions’, referring to sportsmen on the

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The Gratis Economy

payroll who never actually made an appearance at the company itself, gained full currency. By means of professionalization and bureaucratization Communist sport avoided becoming part of show business. There was, of course, no showbiz in those countries anyway. Instead, the patriotic elements were enhanced and popularized. It is not by chance that Soviet authorities always resisted attempts to downgrade or abolish national sentiments in relation to the Olympics. For them, the raising of national flags, the singing of anthems, the oath obliging the athlete to strive on behalf of their country’s honor were all too important for them to acquiesce in the so-called cosmopolitanization of the Games. What is more, the Soviet authorities also fully embraced the ritual shenanigans of the modern Olympic Games with the torchbearers’ relay, flags, victory celebrations, and team marching. As Riordan notes with bitter irony, most of these elements were introduced at the ‘Nazi’ Olympics of 1936. The same hidden logic seems to apply when models are admitted to ‘official’ national-level beauty contests. National title holders are acknowledged only if they have never appeared nude in magazines or have never otherwise commercialized their talents, with the exception of acting. Beyond ownership that remains impeccable non-profit, the last remaining voluntary features of the Olympic movement are: (i) There are some one-hundred members of the International Olympic Committee, often dubbed ‘Lords of the Ring’. As a governance group the IOC has traditionally been predominantly white, elderly, male, and from the Old World. Progress is being made in this respect. Membership of the IOC is by invitation and then by election by the full membership. The Olympic movement enjoys an exceptional degree of autonomy; I can benevolently liken it to the privileges of autonomy of the grand professions such as doctors, lawyers, and professor^.^^ But who will guard the guardians? To less magnanimous observers the Committee might seem to be a typically unaccountable and self-perpetuating organization with rights of ownership over no less a fortune than the proceeds of the Olympiad. This income has increased from almost nothing to hitherto undreamt of riches over the past decade. The disposable money, of course, trickles down to national level organizations and even to individual sportsmen.78 The remainder usually goes to the Swiss-based foundation. The honorary positions on the committee are unremunerated and nearly life-long


45

appointments. Usually no one is relieved of duty until well into their twilight years. Exceptions usually involve the member’s country ceasing to exist, as was the case with Marat Gramov of the Soviet Union, who was relieved of duty altogether, and Gunther Heinze of (East) Germany who was downgraded to honorary membership. While carrying out their duty members are reimbursed at an appropriately luxurious level. Members travel firstclass to their many meetings and stay free of charge in the best hotels. @)Before and during the Games local volunteers are usually mobilized. At the 1992 Games in Barcelona, for instance, there were 20,000 voluntary contributors, from doorkeepers to security personnel patrolling the premises. As for the 1996 Atlanta Games, ex-president Carter noted that the city had over 50 churches with more than 5,000 members, each which could be pressed into service. In addition, over 140,000 people are reported to have called the Olympic organizing committee to volunteer to help prepare the city for the Olympics. The current situation is obscure. Whereas Steffi Graf could play at the Olympics (the Grand Slam and other professional circuits are not controlled by the Olympic movement) a Maradona in soccer remained excluded (FIFA belongs to the Olympic movement and would not do anything to undermine the status of its World Cup where the best players invariably show up). This unfortunate state of affairs spells the unsavoury demise of the Olympic Movement as an unambiguously not-forprofit organization. At the same time, Katharina Witt, a skating champion who had joined the professional circuit, was allowed to return to the amateur movement in order to participate in the 1994 Winter Olympics. It is interesting to note in this regard that in the very Britishalthough Australia are currently by far the best team-game of cricket even in post-war years the players (from the same team!) were listed in the match program as ‘Gentlemen’ if they had been to public school and did not make a living from the game, and ‘Players’ if, like the famous Freddie Trueman, for example, they had started out as, say, a coal miner and played ‘for money’. If asked for the motives behind the promotion of such elite athletic system,79 and prohibitionist Britishstyle amateurism in general, the typical response conveys the following message: physical fitness, true competition, and the spirit of fair

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The Gratis Economy

play are conducive to the evolution of a social elite. For an elite, amateurism was an obvious virtue and sufficient reward in itself. The infiltration of professionalism perverts the game-character of sport. When money is at stake, sportsmen will inevitably tend to rate the end above the means, or rather to misconceive the true end. The commercialization of the Olympics was already taking place in late Antiquity: what was originally fun, recreation, a diversion, and a pastime became an instrument. This business-like state of affairs symbolized something to which the Christian fundamentalists of the time were opposed. The Games lost their purity and high idealism, and were finally abolished. Let me add that the abatement order was issued in the advent of the Middle (‘Dark’) Ages by the highest religious authority in its fight against pagan festivities which, in fact, accompanied the contemporaneous Olympics.80 Emperor Theodosius the Great, a champion of extinguishing paganism within the Roman Empire, implemented this order with full vigor (H. Savage, 1929; Avery Brundage, 1948; D. C. Young, 1984; cf. also the Colzimbia Encyclopedia). College Sports

NCAA (National Collegiate Athletic Association) rules prevent any student athlete who receives a scholarship from working during the academic school year. University scholarship athletes are not allowed to receive compensation above tuition, room, board, and educational fees. This limited compensation system for athletic scholarships based on athletic ability was introduced by the NCAA in 1952. The student athlete on a full scholarship may not be paid for his athletic prowess,81and is prohibited from working for additional spending money. This is still the prevailing stance of the National Collegiate Athletic Association, although such restrictions do not apply to other college students. Harsh rules, of course, give rise to an entire underground economy of improper benefits, ranging from low interest loans, money for travel, jobs for relatives, and the use of cars and hotel rooms. Later on, not earlier than the 1970s, reimbursement gained citizenship rights. The fiction of all support being granted solely in kind was maintained (but practically never adhered to). Olympic Rules and Regulations rule 26(1) holds that receipt of a scholarship will not render an athlete ineligible as long as the financial assistance received is tied to the completion of academic obligations and not to athletic achievements. This last, soft criterion was rendered obsolete and discarded


47

when ice hockey and tennis stars (sports with an open labor market) were admitted to the ranks of Olympians a few years ago. Nowadays, athletes involved in non-NCAA track meets are entitled to receive appearance and endorsement fees provided that the money over and above the necessary travel and living expenses is properly maintained in a trust fund, the withdrawal of funds from which is regulated by the governing bodies (nevertheless one famous runner was able to drive both a Ferrari and a Porsche and Car1 Lewis, who was unbeaten for 9 years, became a millionaire while maintaining amateur status). As trust funds are a legal instrument, their management is independent of the beneficiary. At the end of his amateur career the athlete gets full and unqualified access to his earnings. In this way a tiny symbolic difference is upheld between professionals and ‘amateurs’. However, trust funds are not applicable in case of collegiate sports. Coaches were originally volunteers. Federal regulations instituted in 1972 requiring equal opportunities for American athletes in college turned many previously volunteer coaching jobs into paying ones. This was considered to render them more attractive. Nowadays, a good coach with endorsements can earn millions but the players who make him famous can be disciplined, even suspended, for accepting such trifles as a free meal and an evening on the town from a money-slinging booster. In this sense, athletes are a sort of volunteer within the big business of university amateurism. Coinm odifica t ion

There is an entire narrative of the gradual waning of elitist amateurism and of commodification in sport. Commodification can be explained in terms of the following distinction: while sport played by an amateur is a leisure activity and represents ‘consumption’ in economic terms, professional sport is ‘production’, which, for instance, increases a country’s GDP. Within this theoretical framework the unpaid ‘professional’ athlete in collegiate and varsity sports is carrying out ‘voluntary work’ aimed at generating publicity for their university. Their volunteering is aimed at capturing the attention of consumers like freshmen and this underlying motivation applies to college sports, too. I speak of voluntary work because the athletes are not employees of the college’s publicity department; similarly, the old-fashioned non-profit-sector manager who, in order to attract donors who may be inspired by the financial sacrifices of the donation-seekers themselves, accepts somewhat less than he could

48

The Gratis Econonty

command in the commercial sector-by also be counted as a ‘volunteer’.

virtue of his sacrifice he can

Most popularly, an amateur is defined as someone who participates in sports solely for pleasure and for the attendant physical, mental or social benefits. The amateur receives no financial gain of any kind for athletic prowess. The amateur participates in sport for the glory of sport alone. (Shropshire, 1991)82

This is the creed of the gentlemen-amateur athletes of Victorian England. The most distinctive sports in this tradition are those that ensure the most distant relationship with the opponent: they are also the most aestheticized. Unfortunately, social distance is easily simulated in the practice of sport without the maintenance of amateurism. Elitist values were rapidly translated into (exclusionary) social practices when serving to establish eligibility criteria at first for races in general,83then for Olympians. Violence is also widely euphemized in them, and form (rules, equipment and institutions) prevails over force and function (Bourdieu, 1988a). The role of varsity sport as the forum of amateurism and laicism in the USA is in Europe played by sports clubs. The essential idea behind the foundation of clubs and voluntary organizations was that of collaboration. With the waning of feudal guilds and village communities there emerged an organizational vacuum which could advantageously be replaced by clubs around the end of the nineteenth century. Social recruitment, ideology, and cultural context were all nearly as important in the life of these sports clubs as the sporting activities themselves. The amateur sports pursued in the clubs became a physical instrument in preparing young males, with character building for the socialization of the classical virtues, such as strength, courage, discipline, gratification deferment, and the setting of long-term goals. Facilities were provided by local hnd-raising and volunteering. In America the scene of student sport is predominantly the university. To proclaim their amateurism to the world, while in fact accepting a more or less professional and commercialized mode of operation has been the lingering dilemma of collegiate athletic departments in America at least since the 1920s when student athletes started to compete for the entertainment dollar. The original statement of collegiate amateurism insisted on the ideal of sport as leisure and fair play. In order to enforce this austere beau-ideal, various standards of amateurism were experimented The difference between a hobby-group and a voluntary organization can also be made evident by an example taken from the initial period of

The Traditional Gratis EconomdwUncharted Faces of Pro Bono Work

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workers’ tourism under socialism. Another relevant example is that of the construction of Alpine club-huts in Switzerland. Not so very long ago, people regarded the gigantic world of the Alps with exaggerated respect, and the feelings it aroused were anything but agreeable. Only in relatively recent times did the spirit of scientific inquiry gradually engender a new attitude to nature in general and mountains in particular. The foundation of the Alpine Club of London in 1858 was followed by a meeting of “35 Swiss mountain and glacier travellers” at Olten railway station on 19 April 1863, from which sprang the Swiss Alpine Club (SAC). Its stated objectives were “to extend the knowledge of the Swiss Alps, to contribute to the preservation of their beauty, and thus to awaken and foster love of the homeland”. The construction and maintenance of mountain shelters such as club-huts and bivouacs ensued-together with the encouragement of climbing and the training of guides. The operation of rescue centers also belongs to the tasks undertaken by this voluntary association. As early as 1867 the decision was taken to build at least one hut annually. The purpose was to provide on the one hand fixed base camps for mountain tours and ascents, and on the other hand homely and hospitable rests for the climber. Although they were by no means conceived as tourist attractions, or even as mountain inns, it is interesting to observe how this infrastructure of the later tourist boom evolved out of community needs. The construction standards speci& that new huts may be built only on living rock and in locations secure from avalanche. For the most part, the club-huts in use today are small masterworks of high-altitude building construction, offering shelter, warmth, and comfort in a particularly homelike atmosphere. The Swiss Army also makes extensive use of them. Many Swiss men conscripted into mountain units become enthusiastic climbers in civilian life and join one or other of the existing clubs? Maintenance, enlargement, and refurbishment of the 153 clubhuts cost more than 2.5 million Swiss francs. The other side of the balance-sheet is the gain in human terms, namely the benefit to physical and mental health, the pleasure and contentment that they bring to the climber in the Alps. If good care continues to be taken, the mountains will long remain a haven and a source of inner strength. I understand amateurism as an informally coordinated domain feeding back into professional sport. Within this feed-back model anything which promotes activity is the equivalent of prevention in health care: a health-conscious person is an amateur doctor. They follow rules set by professionals, utilize their own skills and self-perception by following

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dietary and other regimes. The taste of connoisseurs has also been developed by examining artifacts created by professional artists. Amateur sportsmanship at any level helps to preserve health, thereby also serving doctors and the health care industry. Amateur theatre helps to develop skills that come in handy to professional artists, just as genuine connoisseurs will also ‘consume’ their productions-anybody who is taught music at school will probably be a consumer for the music industry. Ultimately, amateurs come to ‘employ’ professionals: instead of the conventional ‘trickle-down’ model of economic development where the wealthy employ the poor, my thesis is that professionals-in order to maintain their high status and ‘expert culture’ - thrive and become progressively dependent on the ‘entertainment patterns’ of amateurs. As these ‘percolate-up’ patterns rapidly translate into the commercial interests of the health industry, the pop industry, and sports goods manufacturers I contend that adjacent popular skills and amateur interests that feed back are the ultimate driving force that make ‘expert cultures’ tick. I interpret health consciousness as a motive to acquire the lore and skills necessary to preserve health, and amateurism as a medium/subculture by which active and community-building entertainment gives rise to new, often sophisticated needs which champions and professionals can cater for. Sport is nowadays deeply rooted in mass culture. This is in sharp contrast to Victorian England where gentlemen pursued leisure sports and participated in tournaments without having a financial stake in the outcome. This also kept the lower classes, with their allegedly inferior competitive ethics, away from the athletic field. At the same time, in my view the current configuration of the sporting scene is by no means set in stone: the trend towards commercialization may in the foreseeable future reach a climax and start to reverse itself. There are a number of indicators which might be taken to show this and soon facilitate a comeback for more ‘gentlemanly’ sport: ( 1) Genuine feedback between sporting professionals and leisure sportsmen is becoming more and more difficult to achieve. The progressive constitution of an autonomous business governed sphere reserved for professionals goes hand in hand with the dispossession of lay participants who are reduced little by little to the role of spectators. Take the historical example of court dancing. In contrast to folk dancing, which often has ritual and ideologically imbued functions, court dancing became a show. Court dancing required possession of a specific knowledge (one had to understand tempo and the steps) and therefore masters

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of dance were led to accentuate technical virtuosity and to undertake explication and codification. Starting in the nineteenth century, professional dancers began to appear who performed in salons before people who practiced dance themselves and could still appreciate it as connoisseurs. Over time, a thoroughgoing distinction emerged between great dancers and spectators who did not practice dance and were restricted to passive observation. From then on, the evolution of professional practice depended increasingly upon the logic internal to the field of the specialists, while the non-specialists were relegated to the rank of a public less and less capable of the kind of appreciation practitioners themselves can offer. In sport, one is often, in the best case, in the situation of dance in the nineteenth century, with professionals who perform in front of amateurs who still practice or have practiced. But the diffusion made possible by television brings in more and more passive (but committed) spectators bereft of all practical competency and who care more about the extrinsic aspects of sport, such as results, scores, and victory (Bourdieu, 1988b). The following factors make sport part of show business: the generation of irrational loyalties; ascribing prominence to winning and to setting records; the collection of trophies; the accompanying ballyhoo. There are two extremes: show business-with the loss of leisure; and circus-with the loss of playfulness. Both portend the demise of the feedback model in sport with the termination of amateurs’ lifeworlds channeling into professional sports. I think the Gratis Economy requires a number of public policy protection measures in this respect, in the form of some system/lifeworld partnerships. (2) More and more people are breaking with the mass culture of watching sport and switching to its active pursuit. This may restore a harmonious relationship between elite competitive sport and lifeworldoriented leisure sport. There cannot be a continual expansion of the gap between amateur and professional sport. College sports will cease to be synonymous with big time entertainment and will begin to fulfil1 their true mission, to instill a particular set of values diverging from the corporate image and skills beyond those required in fitness centers. Collegiate sport will then encourage young people to continue sporting activity throughout their active life. (3) Participation in sport reflects social inequalities. As the values of leisure sport are different from those of business, there is a gap to be bridged before watching sport can be transformed into participation. (4) Professional sport is a pioneering forum in which the old economy is adapting to the new. This adaptation process is subject to as

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much friction as any market adaptation in economic history. Before the Summer Games in Sydney, the IOC and its broadcasting partners banned video images of Olympic events from the Internet. This ban was meant to protect the value of broadcasting rights that could be jeopardized by webcasting. Broadcasting rights are the source of advertising revenue-this applies both to TV and webcasting. Adapting to the new economy means maximizing all the Internet can offer without cannibalizing traditional revenue streams. A struggle is commencing over the right to use the Internet as a global platform to transmit sport events. The struggle is between bigtime broadcasters (TV companies) and fledgling webcasters (Internet Service Providers). As a sports property owner the IOC also has a stake in the new delivery mechanism of webcasting. They do not yet know whether webcasting will be limited to niche events in niche sports that cannot be found on TV, or whether webcasting will affect their revenue base. Broadcast deals then may easily come tumbling down. The International Olympic Committee sells one of its most precious assets, the television rights to the Olympic Games, many years in advance. At the time of the Sydney 2000 Olympiad, coverage entitlements were sold until 2008. Irrespective of the IOC ‘legacy’ business model, Web TV has arrived and threatens to drain this income, not by channeling part of it into someone else’s pocket, but by diminishing the already skyrocketing price of coverage rights that can henceforth no longer be exclusive. Of course, the inexorably raw webcasting coverage will never be as attention grabbing as the programs of an established TV company endowed with a commentator, many value-adding statistics, intriguing inserts, multiple camera angles, and the whole gamut of televisual tricks. Thus, when it comes to mere viewing, Web TV will never pose a real threat. It is perhaps the opening up of innovative new ways for fans to use adverts, slides, and photos of their beloved athletes that might somewhat depreciate the value of conventional TV coverage. Still, the Lords of the Ring, who admit only accredited journalists to cover Games events, unanimously threatened to slap an injunction on any server trying to offer coverage. The 60 technicians tasked with implementing this ban had a daunting task. They began by selecting 25,000 sites that made prominent mention of the Olympics. From that pool, they kept a close eye on a few thousand sites that had heavy traffic. They checked as many as 200 sites a day for violations. Patrolling the Internet for unauthorized use of Olympic symbols such as the interlocking rings, technicians at Copyright Control Services, an


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independent company hired by the IOC, found a Web site that was illegally posting shots of the Opening Ceremonies. During the 16-day Olympic festivities, Copyright Control Services and three other technology firms working for the Olympic organizers identified approximately 40 Web sites that featured unauthorized video or images. As Sydney is such a remote time zone for European and American viewers, and as Web TV is independent of any time constraints, this breathtaking restriction is a smoldering one and will certainly put this issue high on many netizens’ political agenda. Having learned the lesson of the music industry’s current woes, I interpret this rash, shortsighted, and automatic ban as a harbinger of the demise of prevailing sponsorship models of the Olympic Games. Downloading sports events onto a computer means the freeing-up of the time constraints of TV coverage. Fans can view events as they wish. Webcasting reaches fans outside the normal broadcast footprint. Watching a game on a computer instead of a TV set may increase exposure for otherwise ignored sports and regions. This is the true globalization of publicity. This helps create a global community around brands people feel passionate about. Unrestricted free webcasting can deliver a better branding awareness and perhaps generate related e-commerce, too. If sports organizations have the ability to sell webcasting rights as they see fit, sports sites will develop into a staging area for B2B commerce. This stranglehold over hundreds of sports prevents athletes from marketing themselves independently on the global platform of the World Wide Web. Television usually only dips its toe into many sports, so the webcasting of little-covered sports represents an important opportunity.

Laicism in Office-Holding We speak about laicism when a judgment is made or work is done based on everyday skills and common sense. Lay reasoning or amateurish pursuit, if part of an exchange, is always part of the Gratis Economy; that is, within the division of labor we are all supposed to be ‘skilled’. The assumption of archai-honorary posts-using one’s own resources was common practice within public administration in ancient Greek city-states. Max Weber put considerable emphasis on this sort of volunteering when laying the foundations of his economic sociology. Having assembled that part of Weber’s work that relates to liturgies I shall now focus on their counterpart. Unlike honorary degrees and titu-

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lar office-holding, honorary posts and trusteeship in general constitute a meaningful, time-honored model in the practice of volunteering. Board memberships in a non-profit organization are coveted accolades for seatstacking managers and the intelligentsia, the ‘honoratiores’. I begin by quoting a passage from a dictionary of antiquity describing perhaps the most important of classical Greek honorary posts, that of the archon. Archon (ruler) was the name of the highest public offices in Athens. Though the way of their election is debated among scholars we know for sure that they were elected for a period of 9 years. Their duties had been set and regulated by Solon. In the course of expanding democracy the scope and powers of archontes diminished and from Kleisthenes they became honorary offices open to all citizens and decided by lot. In this form the office survived for a long time; we have a rich Athenian from as late as 450 AD who fulfilled this honorable duty. (Boeckh, 1886; cited in Nagel, 1971)

In general, the democratic participatory principle that all public offices should remain open to everybody was only restricted by the hard fact that the fulfillment of higher offices required the onerous mobilization of one’s own means-such officials were not paid.8GAfter the epoch of the Republic, in the Emperors’ era of enhanced state redistribution and taxation, all offices-the former voluntary ones notwithstandingbecame paying ones: according to Suetonius Claud. 24 a procurator earned an annual 200,000 sesterces. In a passage in Weber’s Economy and Society, in conjunction with the early development of Venice [‘Sociology of the City’], we find: The increasing localization of administration was furthered by the ever more liturgical character of the late Roman and Byzantine state. The soldiers of the local garrisons were increasingly recruited from the local population, which in practice meant that they were furnished ... by the local estate owners. The military unit was commanded by a dux and his subordinate officers, the tribuni. This tribunate, too, had formally become a liturgical burden, but at the same time it was in fact a privilege of the local possessors, the estate-owning families who supplied these officers ... With the shrinking of the money economy and the increasing militarization of the Byzantine Empire, the power of the tribunitian nobility completely overshadowed the curiae and the defensores (the civil local authorities) of the Roman period. The curiae was the local administrative council, composed of liturgically drafted officials and responsible for local tax collection; defensor is the late Roman designation for the highest magistrate of a city. The contrast is between these civilian liturgical offices and the military tribunate which predominated from the sixth century on (Weber, 1978, pp. 1268, 1297).

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On the origin of the institution of ‘Justice of the Peace’, an archetypal honorary post from which so many contemporary local administration jobs derive-from the office of coroner to the police force-Weber says: At its peak the English administration by the justices of the peace was a combination of patrimonialism of the estate type with a pure type of autonomous administration by honoratiores, and it tended much more toward the latter than the former. Originally this administrative system was formally based on liturgical obligation-for this is what the duty to take on the office involves. But in reality, due to the actual distribution of power, it was the voluntary co-operation not of subjects, but of free members of a political association of ‘citizens’, that ison which the prince depended for the exercise of his authority. (Weber, 1978, 1063)

Honorary office-holding-arch& in Greek, Ehrenanztlichkeit in German-is widespread throughout the economy and society. This includes activities to which considerable esteem attaches. This sort of volunteering is always amply endowed with what we call ‘system support’ or ‘system/lifeworld partnership’, that is, (i) time allowances, (ii) reimbursement of incurred costs, and (iii) attached formal prestige that can often be converted into either formal employment, power, or influence.87 Office-holding can be characterized as voluntary work endowed with the utmost social discipline. Volunteering always brings with it a degree of socialization for those who otherwise lack it-voluntary working is a good preparatory school for participating in society. Formal employment always entails participation in the web of social exchange.88Informal working is mostly more of a counterculture where promotion and income do not play a role. Volunteers (especially those within an institutional framework) when carrying out their assumed duty can only participate within a relatively limited horizon-their direct team, the lifeworld of their activity. This is always the periphery of the societal system even if volunteers often ‘simulate’ a quasi-formal employment relationship. In case of voluntary office-holding the anticipated upward mobility is manifest. Just as, since Napoleonic times, every common soldier has carried a marshal’s baton in his pocket, volunteers on the periphery of a system can also be elevated in ‘rank’ (a systemic notion, par excellence) and rise to prestigious and influential leadership positions while remaining within the confines o f p r o bono working. As a successfbl conversion of informal prestige attained by honorary officeholding one often encounters a later switch to formal e m p l ~ y m e n t . ~ ~

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This is mostly the case with political volunteers and fund-raisers in the entourage of successful candidates. There is also the option of a switch to figurehead offices, merely titular office-holding. There are two main forms of unremunerated office-holding today: (i) elected representatives and (ii) voluntary board memberships. Whereas to be an elected representative amounts to taking up a public duty in the polity, the turn-out at elections is no less a measure of political participation: I also regard registering and voting as sui generis voluntary work, a form of intermittent office-h~lding.~~ It is not by chance that in some countries, such as Italy and Australia, voting is compulsory; government pays, for instance, some 30 percent of the fare to those who must return home from abroad. On the other hand, American employees who take time off from work to participate in electoral activities, such as serving as election officers, precinct inspectors, clerks, or poll workers will not necessarily be granted leave of absence for these activities. Any time spent in this way will be subtracted from the employee’s annual leave, compensatory time, or credit hours if on a flexible work schedule. I now turn to the waning practice of public duty on a nonprofessional, lay, and voluntary basis in Hungary. Honorary officeholding is by no means without traditions in Hungary. Take the historical example of the Hungarian Lord Lieutenants or county high-sheriffs. This was for centuries a post in the highest echelons of the Hungarian state, a nobile oficium that was an honor for well-heeled aristocrats. Later on, the post became regulated by constitutional law, but its voluntary character was preserved. Only in the nineteenth century, with the advancing economic difficulties of the Hungarian gentry and aristocracy, did remuneration commence, but this was hardly enough to cover the costs related to the office. To run in a democratic election will always preserve some features of its origin, the illustrious Greek archi. The conditions of this special sort of ‘employment’ are multifarious. In France, for example, the remuneration of a Member of Parliament is supposed to be sufficient to relieve them of material worries in order to keep them morally unblemished and to make sure that they are not diverted from their civic duty. They are therefore strictly barred from holding any other publicly financed job. Thus while former French Prime Minister and Professor Raymond Barre could carry on giving courses at the university, a famous surgeon switching from the hospital to the Parliament was advised no longer to accept private clients.

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Members of the ‘ancien regime’ Parliament in Hungary received 40 days paid leave (their regular employer was reimbursed by parliament) as a time allowance in order to carry out their (not all too) honorable public duty. It is striking how much the former Communist system insisted on having ‘volunteers’ or ‘laymen’ as parliamentary decisionmakers. When the political class confined elected office-holding to nonprofessional politicians, they did not intend to reinforce the value of lay opinion in society, however, but rather to reduce Parliament’s weight in favor of the ‘professional revolutionaries’ of the Party. The post-1 989 democratic regime enhanced the prestige and political stature of Parliament (and representative democracy in general) in comparison with its predecessor, but did not fully abandon the voluntary status of representatives. Instead of being a salaried public servant, they are reimbursed for their incurred costs (staffing and travel), supplemented by a sum for the ‘recompense of foregone income’. This represents the opportunity cost of being an elected representative. In addition, severance pay is granted in the amount of six months’ pay if a representative is not returned to Parliament at the next election. Moreover, no sanctions are foreseen in case of unreported absences. This state of affairs clearly accentuates the voluntary character of this prominent public office. The voluntary nature of parliamentary representation in our example is severely marred by a missing provision, however: there is as yet no elaborated rule of conflict of interest for Members of Parliament. Elected representatives are permitted to take whatever employment they see fit, including public service, although the preferred sinecures are company boards, particularly those of state-run enterprises. This is virtually what is often called ‘office patronage’. On the other hand, it could be argued, company boards of directors are no more than the owners’ means of exercising their statutory rights and implementing their management strategy, so why should MPs not play their part? However, suitable experts could do this more credibly and so help political parties to avoid accusations that the ‘political elite’ is nothing but a ‘closed shop’ or of initiated ‘cronies’. By contrast, in the UK a Member of Parliament cannot give up his seat other than by accepting employment with the Crown because this is irreconcilable with public duty.9’

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The Provision o f Commercial Exposure for Sponsors b y Non-profit Organizations Many industries in contemporary societies are run on the basis of hype. We have seen webcasting as an exposure-boosting lever for lesstelegenic sports. We shall continue now to use this to weigh up the chances of publicity for non-profits in general. Charities-and the nonprofit sector as a whole-also have a few commonplaces that are reiterated over and over again: that is, philanthropy as mission-fulfillment is run on the basis of an attractive and very special mixture of popular values. In the next few paragraphs I shall discuss ways and means of generating more exposure with publicity in this still more or less spotless (hype-free) field. The range of charities’ ‘commercial exposure’ may include utilizing privileges in the form of financial or tax concessions. Lawmakers usually positively discriminate in favor of the third sector in order to enable charities to operate as smoothly as possible. The granting of such privileges has something to do with liturgies. I mention this concept in this context because privileged empowerment well exemplifies Weberian theory on liturgy-related privileges; I mean the ceding of a marked advantage to non-profit organizations by endorsing their readiness to surrender themselves to enhanced commercial exposure. This political influence has in many countries led to the division of the non-profit sector into more (typically churches and sport) and less favored parts as far as the granting of benefits and financial privileges is concerned. One issue here is how much commercial exposure, especially advertising, should be tolerated without their charitable character being forfeited. With increased targeting of online advertising a Web site frequented by those with a special interest starts to be a considerable niche marketing tool for corporations with related business interest. This is a challenge to decency and prudence since specialist and professional online communications-such as Web sites where specialists and professionals of all sorts convene-can also open up ample financial sources for the delivery of relevant advertising. In the offline world, [charitable] cause-related marketing is relatively new in the financing of non-profit organizations, interweaving the promotion of new commercial products with the purchased use of the logo, goodwill, constituency, and so on, of charities. This ‘and so on’ opens up considerable opportunities for creative marketing talents. Unfortunately, differentiating between what is impressive and what is not is not much easier when acts


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of charity are included in the horizon of public relations firms. They hype certain philanthropic missions, while others, often more noteworthy, are ignored. The chances of causes linking themselves with businesses vary greatly. There is no business-related ‘equal opportunities scheme’ that could secure exposure for all worthy causes. Adding a further element to this unfolding newfangled competition for publicity, non-profits bidding for greater visibility must learn to take commercial criticism and perhaps relinquish some control to their paymasters. Philanthropy that sells (hopefully only to quality media) will be subject to judgment, commentary, and societal criticism. This way, better publicity may strengthen mission fulfillment in philanthropy. A good example of this is the fact that American colleges are often threatened by the Postal Service with losing their non-profit mailing status if they carry advertising ‘not substantially related’ to their primary mission-for instance, in a publication meant for alumni. Any advertising of consumer goods would mean that the magazine would have to pay commercial, mailing rates. To determine how much to charge for sponsor benefits, charities may also take into account the economic health of the region. One can demand more for sponsorships aimed at increasing product sales than for promotions enhancing a firm’s image. There is, of course, a limit to cause-related marketing. If non-profits go too far in promoting commercial products of sponsors, they may end up owing unrelated-business income tax (UBIT) on their sponsorship earnings. Corporate donations to non-profit organizations are exempt from UBIT, as long as donors do not receive substantial tangible benefits or services in return. Although public recognition of donors is normally considered an incidental benefit, corporate contributions will be considered advertising income subject to UBIT if it is determined that the charity actively promotes the donor. When an American charity applies for IRS tax-exempt status (501 [c][3]), many of them learn only in the process that standard advertising is a big no-no. However, ‘underwriting’ is allowed, which is like advertising except that the messages cannot actually push products; that is, non-profits can provide the sponsor’s name, contact information, and a description of the sponsor’s service or product, but cannot say ‘buy this’. Many companies promote themselves and their products through public radio and television stations in this manner.

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Box 1 . Underwriting as Opposed to Advertising As a non-profit, tax-exempt (50 1[c][3]) organization, the streaming video Web site ‘The Archaeology Channel’ (www.archaeologychanne1.org) is not allowed by IRS rules to employ ‘advertising’ as a revenue source, but it is allowed to include messages from and about ‘underwriters’. Money they receive from underwriters is considered a tax-deductible grant, and in return they are permitted to post lots of information about an underwriter, such as the nature of their business, the services and products they provide, contact information, hyperlinks, logos, etc. They are prohibited from overtly promoting sales by such statements as ‘these people make the best widgets’, or ‘buy these widgets’, or ‘widgets now offered for only $49.95 apiece’. Although this might appear to be a handicap, actually a great deal of commercial advertising is designed not so much to stimulate sales directly as to create knowledge of and prestige for a brand name. Underwriting messages have an advantage over overtly commercial messages in that they are less likely to stimulate negative and defensive reactions from people who see them. Indeed, underwriters are seen as the ‘good guys’ of the promotional world because they support good causes. Underwriters gain prestige value for their brand. Look at who is underwriting programs on the Public Broadcasting System and National Public Radio to see the gist of this argumentation. Those companies don’t measure the value of their underwriting investments in terms of click-throughs but apparently have a broader branding perspective. Source: I-Advertising Digest (1 1 August 2000), R. M. Pettigrew, Ph.D., RPA, President and Executive Director, Archaeological Legacy Institute

The opportunities for non-profits to play the role of a billboard and tap the bulging coffers of corporate marketing budgets are not bad, especially when the ‘marketing potential’ of the voluntary sector is concerned. With saturating interest in traditional public stunts there is a clear-cut opportunity for, say, a specialist press detailing the achievements of non-profits to attract companies looking for marketing tools.


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Just as sporting heroes are needed to promote brand products, supply industries in education, health care, and other typical non-profit areas can also be enticed to accept sponsorship deals. Public service advertising on donated advertising surfaces is a fbrther opportunity for publicity-seeking non-profits. There is a danger that charities in search of commercial advantage can overexpose themselves. Some sources are tainted (tobacco companies, polluting factories), and fund-raisers are not always so discerning. Let us call it negative or inverse image-linking when controversial philanthropists attempt to launder their impaired image with free charitable giving. I know of only a few cases when such tainted money was refused. Donees are usually convinced that a grant or two from dubious personalities does not make any difference to their good name. Bernard Shaw in his Major Barbara-which deals with philanthropic motivesalso contends that to take money from the Devil is tantamount to putting it into God’s hands. These are clear cases of image-linking in which tarnished names are lent some luster. The validity of this reasoning was recently confirmed when the editor of the British Medical Journal resigned from his position as Professor of Medical Journalism at the University of Nottingham following the acceptance of 3.8 million pounds from British American Tobacco (BAT) to fund an international center for the study of corporate social responsibility. The underlying decision was made by readers, who were asked to vote on whether the university should return the money and whether the editor should resign if it did not. Of 1,075 people who voted online between 4 and 10 May, 84 percent were in favor of the university returning the money and 54 percent felt that the editor should resign if it refused. In a letter to Sir Colin Campbell, the university’s vice chancellor, the editor described the university’s acceptance of the money as “a serious mistake and [something which] has damaged the university” (Source: http://bmj .com/cgi/content/fbl1/322/7296/12OO/e). Corporate sponsorship has always sought eye-catching communications tools whether they be sportsmen’s shoes or special events. Nonprofit organizations can occasionally be appropriate communications tools, too. This can open up new funding sources for many of them, though certainly not all. Just as television ranks modern sports according to their televisual appeal, in turn fatefully determining their fbndraising capacities, similarly some non-profits are better poised for publicity work than others. What makes the difference here is their capacity for ‘outreach’.

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Corporations in many countries are in the course of discovering that not only publicity stunts but also respectable charities may serve as communications tools. The target audience for charity-conveyed communication does not necessarily differ from those targeted by, say, sports sponsorship. If scrutinized, many museums, symphony orchestras, and so on, are able to boast a fairly wide outreach. After having analyzed and established the demographic, sociological, and earnings data of a charity’s catchment area, corporations looking for a sponsorship deal and possible media recognition often decide to try their luck with purchasing the use of a charity’s logo. Detailed information on the age, sex, household income, buying habits, interests, and other characteristics of the non-profit’s donors or members is always a good way of enticing companies into a suitable sponsorship deal. Potential sponsors are particularly impressed when a non-profit group provides demographic and sociological information compiled by an outside professional firm. However, in order to facilitate specialist online communications carry ads-this is the online equivalent of cause-related marketing-the practice of online advertising ought to improve a lot. In the next essay I weigh the precondition for this: whether it is possible to serve professional niche-audiences with more relevant advertising.

E S S A Y I1

THE VIRTUAL FACES OF THE GRATIS ECONOMY-BUSINESSOPERATED, SIZZLING GRATUITIES 2. F R E E OF CHARGE-EXCEPT

F O R ADVERTISING

People have long accepted ads in and on everything that gets exposure; most have a love-hate relationship with advertising, particularly those under pressure from time constraints. We may appreciate the fact that advertising informs us about new services (as long as we have our hypefilters in place) and that it keeps the cost of the media low-in some instances, closely related to our concern in this chapter, reducing it to zero. With good cause, we often resent its intrusiveness. We are bombarded by commercial messages-on the sides of buses, on turnstiles, in restrooms, at the movies. Nowhere can we experience a full advertising black-out or uninterrupted indulgence; even churches and cemeteries carry commercial messages, sometimes by stealth. Advertising, especially propagated advertising without distinction as to focus, imposes an intangible burden on uninterested consumers. In the online world, if an advertisement annoys a prospective buyer, they will move to another site.92Therefore, the best way to advertise has always been to lure one’s prospect, subtly, unobtrusively, professionally, and with a lot of tact,93 whether with pre-sale, post-sale, or follow-up campaigns. Online advertising money chases online traffic created by the wide appeal of the Internet-the most rapidly growing technology in history-for infonauts. This money is, at the same time, not driving the development of better content. These resources are trying to distract cyber citizens who have already been attracted to some better content, who are already chasing some information. Better content is of course created by means of revenue. Advertising expenditure has always chased audiences, while the majority of people are simply resigned to wading through the adverts

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to get to the content they desire and will bypass sites inundated with banners whenever they can find a substitute. Since there is a growing insight in professional circles that banners are performing poorly because they distract infonauts with a clear destination in mind, the advertising industry’s emphasis is turning to targeting audiences with a more open mindset and with advertisements that appeal more directly to their perceived interests.

Box 2. The Archetype o f Distracting Advertisements: The ‘Sponsored’ Version o f Eudora M a i l A product of QUALCOMM, Eudora(r) e-mail has long been recognized as the premier Internet e-mail software solution. First introduced in the early 1990s, Eudora has garnered over 70 industry awards from the PC and Macintosh press, and built an installed base of over 20 million users worldwide. In February 2000, QUALCOMM added a new facet to Eudora with the introduction of a free, sponsor-supported mode that includes an advertising window in the e-mail interface. Already, nearly 1,000,000 active users have downloaded and installed the new sponsored mode, and their number is being augmented daily. Unlike other advertising vehicles now available on the Web, Eudora gives advertisers the ability to reach a technologyminded Internet audience for a definite period of time (at least 75 seconds), with outstanding frequency and targetability, and without competing ads onscreen. Ads on the Interface: You may be familiar with other e-mail marketing models that place banner ads in the body of e-mail messages. Eudora takes a very different approach. By placing ads in the e-mail interface, Eudora is able to provide more precise targeting, more face time, and better metrics than other email marketing models. Outstanding Face Time: Eudora gives users more than just an ‘opportunity to see’ your ad. By displaying ads only when the e-mail program is in active use (online and offline), and by keeping each ad onscreen for a period of at least 75 seconds, Eudora is able to ensure that each ad impression achieves maximum impact.

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An Exclusive Environment: When your ad appears on Eudora, it is the only commercial message on the screen. There are no other banners flashing and fighting for the user’s attention. There is only you and your prospect for a full one-and-a-quarter minutes of quality time. Source: http://www.eudora.com/advertise/factsheet.html

This ambivalent state of affairs is apparent on the World Wide Web. The World Wide Web is a spontaneously evolved, unregulated, global federation of content resource centers that are physically linked together by means of standard communications technology. As a network of resource centers, the Web is a thrilling source of free information partly because of advertising-in its broadest sense of ‘business communication’. When radio was launched, it was advertising-free and played classical music to bring culture to the working man. Then advertising agencies developed popular programming to build mass audiences. This sold more radio sets and created a big market for advertising. When television came along, the first few years featured announcers reading radio scripts into microphones. There was no specifically television advertising, but only ‘radio advertising on television’. It took about a decade for advertisers to figure out how to use this new medium. We are experiencing similar formative years today on the Net with increasing fatigue with random banner advertising and the unfolding of advertising targeted on individuals. As to the typology of online advertisements, banner advertisements are the predominant type of advertising, accounting in 1999 for 58 percent of ad expenditure, followed by sponsorship (29 percent), interstitial (6 percent),94 and e-mail (1 percent) (IAB Report, 1999). The immense value of the Net lies in the mass of data out there-doubling as each year passes. This ever-growing volume of exploitable free information empowers infonauts, conferring netizenship upon them. Just as our social entitlements constitute an underlying part of our national identity and citizenship, in a virtual world without freeware, there would be no room left for citizenship. Thus, Gratis Economy and netizenship are twin-concepts.

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Box 3. The Internet as Source o f Information ‘The UCLA Internet Report: Surveying the Digital Future’, a survey conducted by the UCLA Center for Communications Policy, indicates that the Web is beginning to outstrip television and radio as an important source of information among users of online technology. Interestingly, the survey found that “among all mass media sources of information, both electronic and print, books were ranked most often as an important source of information by Internet users, with 73.1 percent ranking books as important or extremely important information sources; newspapers rank second (69.3 percent of respondents), followed by the Internet (67.3 percent), television (53.1 percent), radio (46.8 percent), and magazines (44.3 percent). Source: The report is available on the Web (in PDF format) at http://ccp.ucla.edu/newsite/pages/inte~et-repo~.asp

Instead of behaving merely as customers or as victims of commercial firms vying for market share, infonauts have the opportunity to evolve into citizens of an online collaborative and participatory networking society or ‘netizens’. As to the definition of an infonaut, I would begin by citing the difference between watching television idly, accepting what comes without much filtering, and switching on only after a thorough perusal of the TV guide. These contrasting forms of media-related behavior are manifest when designing a cinema multiplex within a mall, serving people who just browse in shops and drop into a movie, and in the scattered existence of art kinos in metropolitan areas. Similarly, there are two broad strategies behind surfing the Internet: either one just surfs around without a clear intention, or one manages one’s information needs. In the latter case availability alone has little value without a purpose and the ability to utilize results. Web surfers may occasionally want curiously and serendipitously to be entertained, otherwise-when working on a project-a banner is just a blind spot. The popularity of streaming mediatypical background activities while on the Net-attests to this. A recent study by Nielsenmet Ratings estimated that 36 percent of all home Internet users tuned in to audio or video streams on the Web. The surfing metaphor seems especially appropriate: surfers (windsurfers included) are very aware of their environment and are constantly

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taking action to control their experience. Any external stimulus that distracts them from the task at hand can be very annoying, especially if the force-fed information is irrelevant or comes up with wild claims such as ‘Win a Honda SUV’. Although a Web site that actually makes a profit from advertising revenues is a rare creature, site owners are betting on the future. They know that, for now at least, Web surfers are not likely to pay directly for information, thus making advertisements their best source of cash. Today, Web advertising is often rampant. On some sites, we find banner ads at the top of pages, block ads down the side, and another banner at the bottom for good measure. Pop-up ads may appear at any time. There are even adverts found on some popular personal home pages and the intranets in the educational sphere are also beginning to carry advertisements, abandoning their traditional desire to keep commercialization at bay. On Web ‘farm sites’, which host free Web pages for people and businesses, ads pop up in a separate window as well. There are then splash screens; one has always had to click multiple times, quickly, to get rid of them. And if we are interested in what’s behind them, we are occasionally trapped. As far as the content goes, it is widely held that advertising revenue has produced better mass appeal content because it has given netrepreneurs the ability to provide such information on a daily/weekly basis. Nobody can possibly provide such information for free forever, and since television, radio, and newspaper are all advertising driven, people accept advertising on Internet sites as long as they are not bombarded with ads on a particular page. Some sites go too far with the volume of advertising on their pages; however, we are right to assume that many people will avoid such sites unless the banners lead to a related page or promise believable and relevant deliverables. Better Web sites usually have one banner ad per page. This seems like a fair trade for content when we consider that a daily newspaper rarely has just one ad per page. Romantic anti-capitalism, the complaints about lowbrow commercial intrusions, and the desire for escapism are particularly strong amongst netizens (in contrast to consumers in general) because the Net has only recently started to give way to commercials, consumerism, and mass culture. The inception of the Internet, as we know, was academic (tainted by military exigencies). Everything derived from government grants and foundation support. The whole Internet was based on scientists and academics sharing information, collaborating on projects, and posting research papers. Hence the assumption-widely held in the

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business community-that the Internet is primarily an instrument for commerce is disturbing to some. The Internet is undoubtedly one of the most powerful tools in human history-for good or ill. It is in fact a tool for people to communicate with one another via other powerfbl tools, namely, computers. If that facilitates commerce, great, but let’s not put the cart before the horse. I think the bubble burst of the New Economy will make possible a more sober approach: there was no dot-com revolution, only an Internet revolution. The expanding commercialization of cyberspace seems to have leveled off. A valid role for the Gratis Economy can be taken for granted. Connectivity between PCs has crept in slowly. Not so long ago, people could not even conceive of a mass market for PCs. As word processing programs and spreadsheets emerged, however, the usefulness of the PC became increasingly apparent. Still, few people in the 1980s imagined that one of the PC’s primary roles would be that of a communication device. At first limited to a handful of military and academic users, e-mail usage began to explode in the late 1980s. Early e-mail had been built around a few academic mainframes. A PC user would get a campus account-either on a mainframe or minicomputer-in terminal mode, not as a true computer. He would dial up to that account via a modem, at 300 or 1200 baud. That computer would link to other computers in a crazy quilt pattern called Bitnet, which had spun off from ARPAnet (a Defense Department initiative). Over time, data files were stored on various university mainframes. Using this network of computers, the user could hop around the world. Out of this primitive connectivity came the explosion of the unlimited World Wide Web. Later on, vast portions of the Net, its mail transport mechanisms, and bulletin board discussion fora owed their creation to the willingness of programmers to write code and ‘donate’ it to the general public, reaping the benefits only indirectly and after some delay, perhaps through professional fame. Historically, the Internet has always been an environment to experiment in. There have been a few basic rules. The most important are the standards for the Internet Protocol (IP) and the Transmission Control Protocol (TCP). There are other important standards for promulgating routing information and the like, but the real power of the Internet idea is that there are no mandatory standards for what can or cannot be put on the Net. Anyone who adheres to the TCPLP standards can, without the knowledge or authorization of an Internet service provider, create new applications and run them. The Internet is based on a so-called end-to-end architecture.

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Reliance on traffic alone-revenue generating customers lumped together with unprofitable eyeballs-produces unpredictable results as regards wealth creation. Leveling off commercialization occurred with the discovery that a click-through is not a sell-through. New industries can be launched almost overnight, however, and existing industries have been impacted, if not disrupted. Contrary to what the dreamers thought, e-commerce has not been unbundled from conventional business; pure players-once created as spin-offs or through the financial gimmick called tracking stock”-have merged back into their parent companies or remain a rarity. The evolving organizational pattern is now of the socalled ‘clicks-and-mortar’ variety: corporations are reducing erstwhile dot-com spin-off companies to mere company Web sites. The Intemet will be as much part of the business sphere as the telephone system. This was already true before the first disappointments, let alone the big April 2000 meltdown in the New Economy. Until that time, traffic alone was the driver of share prices. Traffic-centered dot-coms were driven by the assumption that at some top-line number, scale alone would translate into profit. Having survived the first big share price plummet, dot-coms are now being valued on a more time-honored basis (traffic is no longer the one and only indicator), which is being reflected in more realistic share prices. Cross-financing, however, remains the stand-in for a sound money flow, even for the long run, and this threatens to prolong the bad practice of dot-coms chasing investors rather than customers. The main result of years of non-profit orientation on the part of the Internet has been the creation of a worldwide publicly exploitable infrastructure that facilitates measureless activities, co-operation, and collaboration. This Gratis Economy is still a tool-lending library stocked with usefhl items of every description. In a world increasingly run by software, the creation of this library is of incalculable value. Up until recently, the production of these tools occurred on a more or less spontaneous basis, according to the energy and enthusiasm of program developers volunteering their spare time. One of the best features of the Gratis Economy is the fact that it engenders partnership, and business models which enable everybody to exploit our cultural heritage. The ‘legacy model’ of the independent non-profit sector as we know it; adsupported publishing; offered compromises of innate online privacy; and time allowances-these are the main current business models that convey services, information, and much more free of charge. Many more creative new partnership and business models will certainly be invented provided that the issue of preserving an encompassing infor-

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mational commons receives the same protective awareness as nature conservation. In my view, free access to information also works against ‘knowledge rationing’. The opposite of rationing is ‘squandering’, generating informal prestige within an organization for those knowledgeable few who can afford to squander, who are able to teach others without being tainted by protectiveness, covetousness, and jealousy. I think the same applies to those organizations that maintain gratis services, too. The most important thing to be understood as regards the sprawling Gratis Economy is that it is not a case of free riding. Giving our attention in return for getting something free, or relinquishing full privacy to open up free access to an online service is now an overarching commercial model opening up new modalities and combinations of online business. Unfortunately, too many online marketers are demanding attention rather than trying to earn it or finding some way to repay the audience for that attention. But can attention that is forced from someone by technical means really be valuable? Particularly at fault in this respect are hopeless measuring techniques that measure attention rather than sales: most measurement techniques give only eye-blink values as a result. The best indicator of commodification, Web advertising has been around for only a few years, commencing with banner adverts not earlier than 1995.96 Before I can formulate and answer my underlying question concerning whether advertisements are germane or not to upholding the primordially free character of cyberspace, I shall interpose a short digression on what one might call ‘malleable employment policy’. Time is not only money, it is also a matter of opportunity cost: we can forgo expenditure if we are ready to devote time. One exchanges time for money when engaging in employment; this is especially clearly felt in the case of ‘alienated wage labor’. By pursuing gainful employment one usually invests time to the extent of sacrificing leisure. This is the conventional manner of satisfjring needs;97this is the route of economic growth and consumer culture. The roundabout one is more a personal life-style, predicated on individual coping strategies. Part-time working is the pervasive example, but when trying to generalize this pattern we also come across the alternative culture of many young intellectuals who, on the brink of taking up lasting employment, dabble in their future profession and participate as unpaid volunteers or freelancers-perhaps because such precarious jobs are the only ones they can find; perhaps because they suspect that, having once committed them-

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selves to full-time employment, the way to a “finely-tuned managed inactivization”-towards less participation-would be much more difficult, often impossible. In conclusion, I claim that genuine two-way flexibility is the ingrained expectation of citizens (when employed) and also of netizens (when using the Internet). Their clear interest in either case is to save or win time without relinquishing their income level or without submerging too deeply into the business models (adverts and others) that make the gratis character of online services possible. Having explained this simple mechanism of participation/inactivization let us determine what quality of trade-off they can offer. High-value employees, having reached the peak of their career, often wish to renounce a portion of their earnings by putting in less time. One can volunteer (certainly this option is much less widespread, investing limited time in return for more value or mission identification9*);one can do teleworking, and, at the price of isolation, become one’s own boss in work scheduling, share jobs or work part-time. One can also resort to human resource management novelties such as a collectively bargained initiative in Belgium, where working time credits are offered to enable some respite in milestones of an employee career. A switch towards a more contemplative life has so far only occasionally been reconciled with the familiar work ethos. For the happy few who can afford it, this switch is a step towards a more relaxed way of life, while working people at the lower end of the earning scale usually toil to their utmost. In our consumer society only the scarce official leisure time ‘released’ by the economy stands at the disposal of the nine-to-five population. At the same time, there is an emerging innovative political agenda which is trying to render the important (but currently still somewhat futuristic) time/money switch (less time and more leisure) fea~ible,”~ flexible, and socially more viable. Economists traditionally regard the economy as an income generating entity. However, our gainfbl participation in the economy also relieves us from much toil, chores, and cares. As an outcome of work parallel to money, time is released for our pleasure. Freeing up leisure is as important a measure of economic performance as the creation of income. Although one cannot hoard leisure time as easily as one can accumulate income there is a definite efficiency trade-off in the economy between (pecuniary) gain and (divertible time) release. Although less at the forefront of political economy than conventional growth, economists will one day also optimize resource allocation in terms of spare time. Having addressed the labor market aspects of the timelmoney switch, let us turn to the question of how flexible this switch is in the case of

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sponsored media. Can we choose less advertising and have a more expensive medium? More or less-rather less than more. This trade-off is as little supported by social measures or inactivization models as the above-mentioned ‘alternative’ intention of calibrating an individually appropriate or ‘gendered’ (it is fair to assume that it would be eminently the female workforce that would welcome this) time/money trade-off. This is as rigid as the freedom of choice between working on as usual and maintaining our earning capacity or bargaining with our employer for more leisure time, say, in a job-sharing scheme. Revenue models of the gratis sector-hidden or embedded as they mostly are-of the economy are intriguing because they come up with innovative solutions in the direction of making time/money elasticity more flexible. I shall now examine this elasticity in the time uses of online advertising proper. As regards content provision, a pledge that no advertising material will be included on pages reserved for paying visitors can be taken as a sign that the provider is offering the user a choice, or at least some room to maneuver. A less attractive idea is to solicit a fee for the option of suppressing the ad banners included on the page. The only content that is not specifically relevant to the site might then be at most a copyright statement, which usually appears in small type.]” Perhaps the best example of a really flexible open solution is the advancing practice of telephone and Internet providers’ including a basic-level (gratis in exchange for advertisements) package for consumers. I shall illustrate my point with the description of the revenue backbone of this burgeoning new medium of gratis telephony. The worldwide patent holder is an independent provider of valueadded services for the telecom and media industry. They have invented a system that monetizes telephone interactions through the input of commercial messages and information during a call, so subscribers can call for free. In fixed and mobile networks alike, the service for the residential market of local and distance calls was first introduced to the (Swedish) public in 1996 and the company intends to become a global player. For the first time people have the opportunity to make phone calls for free if they are prepared to listen to commercials every second minute. The service enables the caller (A) to make a free call to (B) and, in return, both parties-(A) and (B)-are fed short (ten-second) commercial breaks during the call. The system is flexible and has various constraints as to the length of commercials, intervals, and total call length. When becoming a subscriber, consumers fill out a lengthy ques-


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tionnaire inquiring about their age, sex, household, interests, habits, and so on. This enables operators to provide (A) and (B) with different messages in real time related to each member’s individual sphere of interest. If a non-member (C) is called by (A), ad tailoring and selection can of course proceed only based on time and geographic area. Sponsored telecommunication along these patented lines is likely to grow, with licensees world-wide promising the media market a unique way of reaching consumers with 100-percent attention, targeting precision,”’ and measurability.’02If a licensee is an existing telco, consumers can be offered the possibility of choosing between full-cost or commercially-sponsored calls. This level of consumer choice approaches what can be regarded as the seamless transition between high-end and gratis services. Telephone customers can surf the Internet without missing callsand without purchasing a second line. It works like this: when a subscriber is online and a new call comes in, it is forwarded-on-busy to the company platform. The caller’s experience is that he reaches an answering machine. The platform uses an instant-messenger-like protocol to noti@ the subscriber’s computer of incoming calls. When a new call arrives, the subscriber’s computer rings and its company-specific window displays ‘new call’ (and other call progress messages). When the caller leaves a message, it is instantly downloaded as a compressed audio file and played through the subscriber’s computer sound system. To set up the application, the subscriber downloads the companyspecific client from the company’s Web site. Once installed, the client displays a tiny window whenever the subscriber goes online. The subscriber also needs to order forward-on-busy from the LEC and set it to forward calls to the company’s platform. The application is expected to evolve in ‘Internet tirne’.lo3 Soon it will show caller ID, allowing subscribers to screen calls in real time. Subscribers will also be able to cause the client to drop the Internet connection so the platform can complete the call by extending it to the originally called number when the line clears. The price is unbeatable-it is free. The start-up company’s value proposition is based on ad revenue; the downloadable window displays ads when there is no incoming call. A click on any ad starts the browser and brings up the advertiser’s Web site. Beyond telephony, this business gambit has found its way into Internet service provision, too. In an effort to both ride the wave of free Web access and actually make money from it, Internet service providers are offering subscribers discounts for watching ads. They supply unlimited access as long as customers provide personally identifying information

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(the disclosed information, supplemented by the observed navigation habits of unsuspecting users, is occasionally passed to network advertiser partners such as auction houses, matchmakers, and booksellers) and put up with targeted (less annoying) advertisements streaming to their desktops. If customers shut the ad window, their Internet connections are cut off. By using a feature called the Surfree Surfbar, an ad window is, as it were, built in to the browser. As long as subscribers keep this window open, they will pay less for monthly access. The longer they put up with ads, the greater the discount. If they close the ad window, they begin paying fill price. This amounts to taking the ad revenue and passing it on to the user, an advertisement subsidy for Internet access. As a third model supplemented by gratis Internet provision, gratis PC provision in return for force-fed commercials, this revenue model can also be construed as one which helps consumers to behave rationally in relation to advertisements. Freebies serve people who are ready to trade time to save money. Most people are alike in this respect-to a certain extent. To clear up possible misunderstandings, freebies are by no means junk products even if the classical sociological definition of junk may apply: Junk is the ideal product ... the ultimate merchandise. No sales talk necessary. The client will crawl through a sewer and beg to buy ... The junk merchant does not sell his product to the consumer, he sells the consumer to his product. (Burroughs, 1986)

Freebies are rendered free not by their intrinsic quality but rather by their fitting into an objective marketing strategy not necessary divulged to consumers. Even if freebies are not junk, they are meant to satisfy thrift and once more enable us to economize with time. Those who exploit themselves, for example, corporate. executives doing voluntary/expected/required overtime, go too far by sacrificing due leisure; they are certainly no clients for freeware"'-from a 'small man's perspective' this might be called the Concorde-phenomenon. Others with much slower taxi-meters cope with often sophisticated and timeconsuming strategies of self-servicing because of their sagging capacity to generate enough disposable income. Thus, self-help is always a buffering counterbalance to time selling, that is, earning. People diverge in the spending of their time-budget as much as in other dimensions of assets and inequality. There is an entire sociology behind this issue: who is ready to give time for money and, vice versa, who is interested in saving time by spending more money?

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Whereas voluntary timesharing and intentional job-sharing serve the middle class (at least that portion of it which has been found to be interested in relinquishing some income for more leisure time), gratis solutions of the offline world are meant more for the lower strata, including the active poor, the 'laboriously idle', or the 'alternative' scene. As for the online world, the Web is gradually becoming available to the middle class as a wh01e."~ Net-powered consumers are incorporating the Net into their lives as intimately and instinctively as the older generation embraced automobiles and television. Therefore, its multiplying free solutions carry less of a distinguishing social character. This is the case even if benefits and free loot particularly draw the interest of younger strata with less purchasing power. I think it is safe to assume that in the foreseeable future (NSTIA Report, 1999) everybody (in the middle class and the active poor) will have an e-mail address, although this alone does not mean the bridging of the informational divide. (In a later phase of the wired household all processor-endowed gadgets will have their own IP-address.) With faster Internet connections becoming more widely available; with the worldwide adoption of the deregulated American telephonic practice of flat rates for local calls instead of charging by the minute; and a few other decisive steps in the direction of making Internet access even more user-friendly-such as voice steering of computers and the onset of the wireless Intemet-we may soon witness the maturation of the information society throughout the developed world. By then, the Net may cease to be a tertiary medium in its own right; instead there will be several media, such as PC monitors, printers, personal organizers, and speech synthesizers, but also appliances such as digital cameras, MP3-players, cellular phones, and WebTV that can access the Internet as the interoperable arch-medium. In such a case the challenge for the future is to preserve the adaptability of the Intemet as, with increasing mobility, gadgets connected to the Intemet increasingly depart from the model of a PC tethered to a desktop. There is rapid growth in devices connected to the Internet. There are currently some 40 microprocessors in the typical American or European household, and they will be joined by many other intelligent communication capabilities. The simple current operations, usually initiated by direct human action, will be supplemented by interactions among a variety of partially autonomous devices. It will be the performance of entire systems, not just communications links, that will have to be optimized. The time spent perusing or glimpsing an ad is not much less than the customary time an experienced medical practitioner devotes to choosing

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a treatment, or a clinical professor devotes at the bedside to making a judgment on the referral of a junior doctor concerning a patient’s condition. This short but decisive time is similar to the so-called ‘elevator pitch’ in the course of which a junior employee can put ideas to the CEO if he has a minute between floors to get him interested. I am afraid that the tapping or ‘excise taxing’ of such audience time by media owners is currently not flexible enough-their market is by no means complete. As a rough classification, there are cost reducing adverts (quality newspapers, most broadcasting, most media carrying high culture) and supplementary-where the endeavor is basically for-profit, that is, revenue from ads is a plus-ones (TV, sports). In the latter case we are fed ads not merely to the extent of covering some costs in either media, but to the extent that we can take it, or the size of the paper can carry it, or the media regulatory authorities permit it, or the media owner can garner it, quantities which are becoming ever smaller. This is parallel to the ubiquitous fact that the rank-and-file usually earn as much money as they can without worrying about a healthier or laxer trade-off between toil and leisure. Flexibility will be attained earlier in online advertising than in employment policy. I shall now examine in some detail several sophisticated technological developments that affect the occasionally obtrusive character of ads by managing the main patterns of time use in their consumption in order to arrive at a judgment about the degree of elasticity (how far they can eliminate the meddlesome nature of ads) that they can bring to electronic publishing. These examples are important because the preservation of pockets in the online world with a non-profit character and the overall growth in the Gratis Economy-with no entry fee other than our time-is predicated on social innovations rendering this switch more flexible and on solving the privacy challenge posed by invasions which in the next chapter I will call evidence-based smart advertising standing out against the knowledge-grabbing threats to the status quo of the informational commons. Many of the marketing devices business uses online have an offline parallel. Personalisation, O6 database marketing, predictive profiling, lo7 up-selling, cross-selling, limited time offers, free gifts, coupons, entries in sweepstakes, rewards, and a whole lot more. Nevertheless, in the hurry to recreate what works offline, it is easy for marketers to ignore what can work only online. This unique feature is the specific time relation of cyberspace. If we seek to define the definitive essence of the Internet, there is no other dgerentia speczjka than the fact that we


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choose when we access it and when we drop a connection. In addition, one thing that is unique to direct marketing online is that we can control the time that our e-mail is delivered very precisely. Offline, we are always at the mercy of whatever postal service we depend on. In some countries, we can be sure at least which day our message will arrive; in others, the guess could be days out either way. A few observationsfrom a plethora of possible ones-may be useful here. TECHNOLOGY BRINGING FORTH THE BANNER MODEL O F ADVERTISING

Banners on Demand The problem with most banner ads is that consumers see them out of the corner of their eye while they are doing something else, which is why most banner click rates are so low and keep on dropping. There is a site for advertisers that serves banner ads to people when they want to see them! The inventor said the concept boosts banner click-through (banners’ response rate) by 5 to 15 times the industry average.lo8For a standard banner, that average is widely reported as less than 1 percent: that is 1 percent of visitors receiving ad impressions are curious about what is being offered at the other end of the banner. DestinationPoints (the business that deals in selling these ads) solves the problem by aggregating banner ads, grouping them by interest, and giving incentives to surfers for clicking. Banners are organized under nine categories: People and Communities, Computers and the Internet, Games and Gaming, Music and Entertainment, Money and Careers, Shop ‘Til You Drop, News/Sports/Weather, Travel, and Cars. Advertisers can sign up and offer to more than 300,000 registered members a loyalty reward program. Members receive points for visiting sponsors. Points are redeemed for gift certificates or products. Visitors to DestinationPoints get points for clicking on banner ads. The people who visit there are the same folks an advertiser might target at any number of sites on the Web, the main difference being that they come when they are receptive to advertising, not resistant to it because they are doing something else. According to mainstream advertising psychology, the average consumer has at least 200 relevant needs, but only one or two of them are at the front of their mind at any given moment. The chance of an advertiser’s product or service being one of them is only 1/2-1 percent-the click-rate most banners on the Internet get. DestinationPoints gives ad-

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vertisers somewhere where their banners are the main attraction, a place where consumers can go at their leisure, and connect with the same advertiser and message they might completely ignore at most other sites.

New Browser against Pop-Up Advertising Ads, called ‘pop-ups’, spawn small windows on the screen that block part of the underlying Web page. They are designed to save mouse clicks-we see them without deciding to click on an ad for more detailed information. There are browsers that eliminate pop-up advertisements, while maintaining all the Java and JavaScript capabilities of modern browsers. They are free for download on company Web sites. In addition, these special browsers include a feature that allows people to anonymously and voluntarily choose to share their browsing history with the issuer, enabling them to compile an extensive data-set on what is popular on the Internet and, additionally, to use this data to refine their search engine’s ability to find frequented sites. The owner is a member-built Web index in which people register themselves for free membership, receive a password, and are then able to put rings around subjects of interest to them. The site claimed 1.4 million visitors in February 1999. What is the business value of a registered customer? Once somebody registers, the business can calculate that they will usually visit the site X times per month, generating X impressions in ad inventory per month, times the CPM (cost per thousand impressions) rate, times the percentage of inventory the site sells each month. In other words, one way or another, whether it is by calculating how much ad inventory they generate through return visits or how many times they buy from the site, a lifetime value can be assigned to this registered customer. The more information a Web site can provide to advertisers about the site’s audience or who they are reaching with their message, the more valuable its ad space will become. Then, since some visitors have registered, the site is able to offer more relevant advertising (a fairly meager attraction as yet) or simply to communicate with them and bring them back to the site when content is updated and new products are offered. Both business objectives generate new traffic. When registration is part of a business model, this value is to be weighed against deterring some customers who dislike being confronted by data collection on entry.

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Suppressors, Filters No law mandates sitting through the commercials while one watches the Australian Open on TV. The fact is that in the offline world the adfiltering mechanism is human. In the online world the simplest advertisement filter is the 'image off button on our browser. But this is too high a price for most of us. There are commercial ad blockers that prevent commercials on screen-TV and PC screens alike-but they do not necessarily give back the lost time in its entirety. Some ad impressions are especially aggravating because their complexity-with flashing, animated logos-causes longer waits, especially over slower connections. Often, the rest of a Web page will not load until the ad does. To the dismay of some publishers, blocking software gives the user the freedom to decide until faster Internet connections become more widely available and so time becomes less of an issue. Preventing several Internet annoyances, stripping ads from Web pages, stopping animated GIFslo9in general, preventing pop-up ad windows, muting background music, these products are time bombs in the arms' race between consumers and advertisers.* l 0 (As to these pitched battles between worthy opponents, I note in passing that any marketing trick that works will cease to work the following week when everyone is doing it and no one is falling for it any longer.) Ad-blockers are relatively new, free or inexpensive software utilities. Working with an Internet browser, these programs prevent ads from appearing on a Web page but generally display all the other text and images. Sometimes, the software leaves just a blank space where the ad was, while on other occasions there is no trace of where it would have been. The most common approach is to detect requests for GIFs of certain sizes, or coming from a server on their banned list, or with similar criteria; instead of letting that request go through, the software intercepts it and returns a blank GIF. That saves the user the bandwidth and with most sites does not mess up the layout of the page. Many also have options to disable active content, popup windows, and so on. As to exit-pop-ups, they make sense for some content sites. Having, for example, read exclusively online content at the Time magazine Web site (http://www.time.com/time), an exit pop-up offers four issues for free-this seems to be a reasonable burden for the reader to bear. Cookie/Javascript programming can ensure that the exit pop-up offer happens only once for a given computer. Cookies are tiny files that advertisers use to invisibly collect personal details about consumers, such as how often they visit a site and which pages they read. A system identification software enables Web site owners to (i) create a

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unique user ID for visitors, saving them from having to log-in each time they visit the site; (ii) keep track of goods visitors have chosen to purchase during a session on the Web site; and (iii) collect navigational information. As small text files or info tokens containing a personal identification number, cookies are the main vehicles which render the Internet really interactive. Webwasher is a proxy based ad filter that runs either locally on a PC or on a remote server. The browser sends requests through Webwasher, which passes the request on to an outside site. Webwasher strips out certain things (banner ads, JavaScript for pop-up windows) and passes the stripped HTML on to the browser. The technology works both ways. Running Webwasher and attempts to go to the Internet Movie Database will result in rejection. If they see that somebody is running Webwasher, they serve you up a special page saying that they will not give you any content. Surfing is appreciably faster with ad-blocking software. It is not just the lack of dense media ads-which are a pain for people with a dial-up connection-but also the lack of waiting time until the browser has pinged the ad-serving server. Even working off a fast connection, it is infuriating for many to have to wait through the ‘connecting to remote server XYZ’ session-set-up run-around. Some people suggest beating up ad serving companies to create more local mirror versions of their sites and beefing up server capacity, looking into caching the ads on their server locally, and/or embedding them in the pages themselves. As no one owns the Internet’ ‘-some ardent copyright lawyers tend to call this the ‘Achilles heel’ of cyberspace-a Web site owner necessarily places his page in a public venue. Everybody, as an individual, may have elected to place a software program on a computer that he owns to provide certain functions. It is his right to place software that blocks ads on his computer. This modifies the ‘publication’. The software manufacturer is simply the messenger in this constellation. And we cannot shoot the messenger nowadays. The publisher has made his choice by placing the site in a public venue; consumers have just as much right to modify data entering their computer in any way they elect as long as they do not pass on copyrighted material with modifications. It is really no different from a consumer placing a piece of tape over his screen to block the view of that particular part of the screen. As a marketing professional wittingly observed, the tape manufacturer is guilty of something. It is perhaps wise to think of online advertising in terms of sitting on a bus: when a commuter hops onto a city transit bus, he knows that he will find ads there, right in

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front of his face. When hopping onto the Internet he is expecting something to be done for him in that borderless communication network. In return he is asked to do something for the company producing the content, and that is to view the ads. The Internet may be a ‘public venue’ in technical terms, but this does not make the content on the Network ‘public domain’. Billboards are public venues, but modifying them would be vandalism. Nobody has the right to mod@ copyrighted content under current law. The key factor in this is the fact that ad-blocking software companies are profiting fiom modifying content. Someone’s content. Simply because the product being transmitted is in binary format does not mean that one has the right to modify it. For the security-minded, ad-suppressers can prevent the planting of cookies on the hard drive. As to attitudes towards cookies, out of 100,000 visitors, over 95 percent accept cookies. This tells us that while some in the advertising industry are concerned about cookies, consumers either (i) are unaware of an issue or (ii) do not care, or (iii) browser technology to filter cookies is so cumbersome and intrusive it renders the browser experience impossible due to the cookie request window being displayed continually. Therefore, consumers have to put up with the acceptance of hundreds of cookies with 50-year expiry dates. The following features are usually being tracked: source of traffic; number of visitors; number of page views; number of page views per visitor; popular and unpopular pages; sequence which a visitor travels; exit pages; traffic by hour/day/week/month; which search engines bring in traffic; which links bring traffic; how long visitors are staying; percentage of single hits (responses); number of downloads; number of sales; amount of sales; number of hits to get one sale. A cookie management program with a flexibility exceeding any currently available program is needed if Internet tracking is to be reshaped along strictly voluntary lines. Not only must they be enabled to rehse to accept them, but also they may want to periodically delete the file that contains the cookies, thwarting advertisers’ targeting efforts.’” Ad-blockers can also prevent referrals, by which two Web sites share information about how you got from point A to point B. Ad-suppressers can make a list, or log, of everything it does. You can then read the list and see how many ads, animated GIFs, background tunes, or referrals you avoided. You can also turn off ad-suppressers temporarily without actually shutting them down. They are the software equivalent of fast-forwarding through TV timeouts during a sitcom. The marketing of these romantic self-defense products, however, by no means forgoes advertising.

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Box 4 . Belgian Attitude Survey on the Use of Suppressors a n d Other Anti-Ad Software To show how few people use these anti-advertising softwares I quote from the second Belgian national survey on ‘Belgian Internet users and online advertising’. Three of the questions asked were: Have you installed banner-banning software [it is important to know that at the end of 1998, Siemens launched an impressive campaign-from banners to newspaper ads-to promote their Webwasher software]? Do you use this software or do you use your ‘images off option to avoid banners? Would you install plug-ins to be able to view certain types of online advertising? The Restilts:

0.3 percent of Belgian Internet users had ad blocking software installed; 80.3 percent of users never use this device feature or select ‘images o f f ; 12.9 percent of users rarely use it or select ‘images o f f ; 5.5 percent of users use this device or select ‘images off’ every now and then; 1.3 percent of users often use this feature or select ‘images off. So, if we conclude that 19.7 percent of users had at least once done something to avoid online advertising, a maximum of 0.3 percent of them used ad blocking software to do so. Concerning Plug-Ins:

34 percent disagreed with them completely; 32.5 percent disagreed; 26.3 percent were neutralhad no opinion; 6.6 percent agreed; and 0.6 percent agreed completely As regards another underlying attitude of netizens, I cite another survey on Internet taxes. Along with the erstwhile scholarly imprint of the Net, its tax advantage over conventional commerce is also waning. An anti-tax sentiment among Internet users is not the slam-dunk we might expect. The Internet Consumer Organisation polled 1,000 people in late 1999 and found

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mixed attitudes on the issue: among people with Internet access, 58 percent oppose Internet taxes, whereas among people who have already bought online, 66 percent oppose taxes. When fairness to other retail merchants was considered, opposition dropped considerably (eMarketer, 10 January 2000).

Bandwidth-Adaptive Advertising This is a courtesy on the part of the advertising industry. A patentpending American service allows Internet advertisers and Web sites to deliver different versions of advertising and content to users with varying connection speeds. The delivery mechanism is automatic, transparent, and intelligently identifies user bandwidth capabilities in real time. Since many factors can affect a user's overall transfer speed on the Internet at any particular time, the service monitors available user bandwidth and calibrates itself to provide a Web browsing experience finetuned to each user's capabilities. For example, if a user is experiencing reduced bandwidth because of telephone line noise or other browser instances, the software detects it, and adjusts content and advertising accordingly. Content providers or advertisers can divide users into as many speed categories as they wish. For example, T1 users might receive a higher-quality, longer film clip than ISDN users, while 56k modem users will receive larger graphics files than 28.8k modem users. Future prospects are limitless in the wake of the increasing market penetration of the most recent developments in optical transmission components that use flashes of laser light rather than electronic pulses to convey the on-off semaphore of digital information. The use of larger ad impressions or rich media often slows download times to a crawl,"3 resulting in the serving of incomplete content for users with a narrower bandwidth. With bandwidth-adaptation, advertisers and content providers can ensure that all users receive some content regardless of their connection speed-high-bandwidth users get more sophisticated rich-media content and lower-bandwidth users get quicker downloads. In short, the Web-browsing experience is enhanced for everyone. An advertiser, for example, might prepare three different ads based on the viewer's connection capabilities: potentially a black-and-white static advertisement for low-bandwidth users (14.4 kbps modem), a color animated version for average-bandwidth users (28.8 kbps modem),

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and a rich media, interactive version for high-bandwidth users (ISDN or T1 connection). Profiles are used to predict a user’s connection speed at any time, based on measurements taken at similar times of day. This reduces the need to perform a measurement for each request. All data can be used in conjunction with advanced ad-targeting systems. On the basis of the experience of market-leading turnkey solutions in online advertising,“4 we may conclude that there is considerable technological innovation in this field. Because of the nascent state of online advertising, we currently have a plethora of venture-funded start-ups with patents yet to be utilized in their hands. Intriguing online advertising solutions have emerged which promise to render many electronic publications free of charge with less and less aggressive ads. If the time uses of advertising become more malleable then the time/money switch in general can also become more flexible. Flexibility of this important trade-off means in this respect nothing less than consumer-driven communication as opposed to interruptive force-feeding of commercial communication. This limited flexibility can bring about one-time changes in the overall elasticity of time uses presupposed by advertising as well. As to its social consequences, this can only be likened to the ongoing experiments worldwide to render employment more familyfriendly and flexible as to its time uses. The experiments are at best conducted in a ‘throw-it-against-the-wall-and-see-what-sticks’ fashion. However, we know for certain that elasticity in employment is important in the ongoing global project of redistributing work, while elasticity of time use in advertising is important to deepen a new way of delivering electronic publications free of charge.

We-Pa y- You Advertising The future of direct marketing is selling to people who have already said ‘yes’. When it comes to ROI, no marketing tool is more effective than this. This marketing concept is so powerful that it may forever change the way people think about direct response marketing. The target group must be a network of at least one-million members, each of whom have already said ‘yes’ to e-mail messages from marketers selling products and services in which they are interested. A further requirement is the screening of sellers in order to acquire the trust of the e-mail recipients concerned: if they trust and want to read then the direct marketer’s dream of a highly effective, completely turnkey, and inherently trusted network will come true.


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One company is already betting that visitors will come to its site for the pleasure of reading ads-and making money. Click to it; answer some questions about yourself; then read an interactive ad. If you stop in the middle you do not get paid, but if you read the ad until the end, they offer tokens that can be transferred to a bank account, credited to your credit card balance, or turned into cyber cash. The pay is not bad either: between 50 cents and USD 4 per ad, although you can only earn money from each ad once, and you cannot make more than USD 100 per month. The company acts as a mediator, receiving a commission, the advertiser knows you have read the ad (and in some cases gets your name, address, age, and e-mail address), and you get paid for your mind-work. Another American company is offering a currency almost as coveted as dollars: frequent flier miles. Read the sales pitches at a registered site and you accumulate points which can be converted into miles with six major airlines, or into free merchandise. The company has contracts with the biggest brandnames. In fact, the different ways of rewarding surfers have barely been tapped. A third company is working on a program that would pay ‘ecentives’, which could be redeemed for products, information, or services. Imagine shaving cash off your monthly ISP bill or getting free time on pay-per-view sites. Free software, flowers, discounted stock trades, coupons, and tarot card readings-the range of rewards is limitless. Better still, most of them elude the tax authorities.”’ Electronic junk mail, the scourge of the Internet, might be close behind in this business model.116Direct e-mail is a marketer’s dream: it is instantaneous, easy, and astoundingly cheap because mailers do not have to pay for postage, paper, or printing. One company would like to pass these cost savings on to recipients-in the form of cold cash. Tapping into the most comprehensive mailing database in America-the registration records of 138 million voters-the company pays recipients roughly 50 cents for each piece of mail they read (the company claims it can prove whether the message is actually read). Recipients can accumulate reading fees until they reach USD 100, then receive a check, or use it to pay a tax bill or social security contribution. Mining other sources of revenue, recipients can fill out a checklist of their interests, indicating what kinds of junk mail they are willing to read. The company then charges premium prices for access to these highly targeted lists. A few freaks will try to make a career out of reading sales pitches, then ignoring them. But they can be weeded out from lists fairly easily. The richest markets for we-pay-you advertising are those who do not

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read online ads, or at least do not admit to it. But when their old automobile needs to be retired and an ad for a Honda pops onto their screen, the USD 1 incentive might just buy 60 seconds of their time. Is this effective advertising? A far more likely future, if this revenue model proves effective, is that, instead of charging us a little a month, the ISP will pay us to log on.

Deep Linking When considering the time budget of cybernavigators, it is important to look at how interruptive ads are. Perhaps the most sinister practice is the resistance to deep linking. Every public Web page’s URL-its address-is available to all; we can link any Web page to any other. That is why the Web keeps growing. That does not stop a growing list of companies from contending that certain kinds of links are illegal: go ahead and link to our site, they are saying, but only if you link the way we tell you to. They argue that, since they sell ads on their home page, ‘deep links’ hurt business by bypassing those ads and maintain that if somebody wants to ‘deep link’ to their site, one has to negotiate a deal with them first. A federal judge recently (Financial Times Online, 31 May 2000) ruled that the use of automated crawlers to collect data constitutes trespassing. This decision has the potential to alter the Internet landscape for some time to come. The practice of deep linking, by which Internet users are taken directly to an item on another Web site, depends on the use of automated crawlers. Outside sites that charge subscription fees for access are rare on the Web, for good reason: from the early days of HotWired-which originally required visitors to register for access-to the present, Web sites have learned the hard way that users tend to go away when they hit any kind of barrier. This is again a case of business interests, and especially advertisements, making browsing interruptive. Objectors to ‘deep linking’ want to have their cake and eat it as far as their Web businesses are concerned: they put their services and content out on the public Web to attract users, but they also expect to be able to control every facet of how those users access their services and content. They want their pages to be openly available to individual visitors but not to other sites-a division rendered nearly impossible by the very nature of the Web. Linking today remains primitive; we need new elaborations of the Web’s interface and underlying protocols that, for instance, allow links to contain more information-so that they become less like unmarked doorways and more like well-mapped paths.

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The most successhl companies online understand that the more people who link to you, the better. Affiliate programs, for instance, paying a small fee for referrals, flourish. The resistance to deep linking is an example of losing time while digging through a Web site, say for an article, when the previous one only provided a top-level link. Consider how much time is being wasted by Net users because of obtrusive online commercials standing in the way of smooth surfing.

Ad Savers A new Washington DC company called AdSavers has been launched with an opt-in (predicated on informed consent), advertiser-oriented business model. AdSavers are animated screensaver ads that use a proprietary screensaver technology. Consumers need to give the company permission to send AdSavers which can be used to connect to a brand’s Web site. The screensavers can be e-mailed as well. In common with other desktop branding players, AdSavers claims to have interested takers for the technology, but no actual paying advertisers. The opt-in quality of the ads may be attractive to prospective advertisers. This concept of desktop branding is proving to be an effective way of measuring click-through and ROI for advertisers, who are given a new way of creating brand perceptions.

Ad Serving Internet advertisers often compare a publishing site’s ad performance report to reports generated by other sites or advertising n e t ~ 0 r k s . l ’ ~ What is not evident to the uninitiated netizen is the fact that the numbers in these reports are often measured using different methods, at different points in time, making comparisons between them difficult. Browser and proxy server issues make comparisons between reported numbers even more difficult. With many advertisers and agencies now using third-party ad serving solutions, both publishers and advertisers count campaign impressions. Third-party ad management solutions give agencies the ability to centralize the results of a campaign without having to collect weekly data from the publishers. Publisher sites (portals, search engines, commerce sites, independent artists, universities, and researchers have all become ‘publishers’) may therefore serve their own advertising, or they may accept ads served by agencies or advertising networks. This has resulted

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in the development of two different models of serving and measuring advertisements: there is (i) the site model and (ii) the network model. Publisher sites use the site model, and agencies, advertising networks, and service bureaus use the network model. These two models serve ads differently and, more importantly, measure advertising activity in different ways.

Publishing Sites Using the Site Model Ad Serving Solution The browser requests a page from the Web server, the ad is inserted into the page and counted, then the page is downloaded to the browser. If the browser has the images option turned off, the ad will not be requested. Browser and proxy server caches often hide impression- and user interaction data. To combat this, some ‘cache-busting’ solutions force browser activity and thereby slow down response time, thus impairing user experience.

Third-Party Ad Server Using the Network Model Ad Serving Solution By contrast, ads can be delivered to users on the Internet using a thirdparty serving solution, such as an agency utilizing a service bureau to serve its own campaigns. The agency solution using a network model ad server uses an HTML ad tag placed in a publishing site’s page by the publisher’s ad management solution. The browser requests and downloads the page with the agency’s ad tag in it; the telltale tag then causes the browser to request an ad from the agency’s network model ad server. The server selects the appropriate ad and counts it. Then the network ad server displays the ad directly to the browser.

A Counting Methodology for Third-Party Ad Servers in a Proxy Server Setting In the example given above, a user’s browser requests a page that contains an ad (1). Since the proxy server has not cached the content page (and therefore the ad), it passes the page request to the publishing site (2). Since the agency will servc the ad directly from its third-party server, the publishing site inserts the agency’s ad tag into the page, counts the insertion as an ad and passes the page back to the user (3). The user’s browser then requests the ad from the ad tag (4). Since the ad


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request has not been cached, the request is passed to the agency (5). Here is where the first step of this solution comes into play. Instead of directly returning the ad to the user, a redirect to the ad is returned (6). This redirect enables the caching proxy server or browser to cache the ad media, thus optimizing bandwidth utilization and delivery speed for subsequent ad requests while still allowing the measuring solution to count each ad request made by the user. Once the user receives the redirect to the ad, the browser will make a request for the actual ad. If this is the first request for a particular ad (7), the ad request will be passed through the agency (8). If the browser or proxy server has already cached the ad, the ad will be served from that cache (9). This model of impression measuring uses a cache-busting technology that is predicated on appending a random number to third-party ad tags in order to reduce the counting differences between publishers and third parties. O N L I N E B U S I N E S S ’ S COMPARATIVE ADVANTAGE A S TO TIMING

The maxim of exact timing in a fast-paced environment states that the marketer must deliver the right message to the right consumer at the right time. The very option of good timing was made possible only by the arrival of the Internet.l18 Nowadays, if the average Net consumer asks for something, he wants it quickly. This principle can accentuate the time-advantage of the online business that can offer speedy if not instant fulfillment. Anybody who ever had to make a choice between two similar products-one of which could be got to you right away and another that would take a few days-will recognize this advantage. Exact timing presupposes finding the right consumers in the right place. There are places online where people well disposed towards a certain product hang out. All the marketer has to do is to seek those places out and get a commercial message there. An obvious example would be someone looking for a service on a search engine, or, for those selling saddle soap, a forum or newsgroup all about horse saddles. These are the places where a marketer may want to get his message seen: electronic communities, online focus groups. (Kannan et al., 1998). Thus we have the equivalent of strategic positioning in conventional marketing lore. Sometimes the right message is conveyed to the right consumer, but at the wrong time. Maybe the consumer is simply not ready to buy right now. Timing is temporal positioning. In the offline world all a merchant can do in such a situation

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is to create a sense of urgency by explaining what would happen if the consumer did not purchase the product today. What would he stand to lose? Through the Net, however, marketers might want to acquire some foreknowledge concerning the time-uses of their prospective customers and deliver their commercials accordingly. I am sure that, just as the Christmas season has its effect on selling, individual weekdays-for instance-are important as far as the timing of certain advertising impressions is concerned. This is less well charted territory as yet, but discerning ads like this will certainly be welcomed by consumers as a further courtesy on the part of the advertising industry, rendering commercials step by step, invention by invention, less and less obtrusive. The impact of commercials can be improved by the synergy of product positioning and message timing. V A L I D A T I O N A N D VISIBILITY OF B U S I N E S S C O M M U N I C A T I O N IN CYBERSPACE

As regards viewing ads as the opportunity cost of purchasing entry to a Web site, I shall devote much attention to ways in which ad impressions may be rendered less obtrusive and interruptive, and more relevant. There is, however, an inherent problem attached to changing the nature of commercial communication, one which is little different from attempting the domestication of a black panther into a pussycat. I refer to the old problem of the often dubious validity of advertising content. I am not speaking about deceptive practices, but merely the fact that commercial messages are designed less to convey informative content than to stir desires. Therefore, they do not even try to be objective. Ads are nearly always predicated on some degree of gullibility. In contrast to e-mail advertising and keyword advertising, banner advertising is still fairly effective compared to the following ‘outlying’ genres. When installing software on a computer we often find that an icon has been placed somewhere on the task bar without our permission. When installing a free Internet-related product it can happen that an animation appears, directing the user somewhere. Some sites clog up the computer’s speed and memory and throw windows at the user that confuse the concentrated navigation task. This is like watching a movie on TV with advertising continually superimposing itself on the screen and, at the end of each ad, the advertiser ringing our home to ask if we are interested in their product. Moreover, the only way to stop the ringing would be to pick up the receiver and then put it down again.


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I doubt that the victimology of advertising will change as the online world develops. The invocation of desire is an inexorable part of advertising. Perhaps outright rip-offs (especially in investment solicitations) may be phased out by profiling. This uncompromising invocatory character may never cause a problem as long as consumers do not act as infonauts and do not take commercial messages for information. The Net as operated increasingly by business has an inherent inclination to hide or veil corporate interest and to neglect truth for publicity. This gives rise to an intriguing challenge: the targeting of ads is becoming more and more ‘scientific’-does it entail their content becoming more evidence-based, too? Within the confines of this volume I can offer only a summary of targeting methods in order to weigh up whether personalized information management (‘the domesticated cat’)’19 is a feasible goal within the framework of current practices of selecting and targeting advertisements (‘the panther’). At the cutting edge of technological development, traffic attraction and especially targeting are business secrets. (Another trade secret of this new industry is that ad-space owners count figures and third-party measurements rarely concur in the chase for Web traffic.) By dynamic targeting I mean well-segmented, perhaps even one-to-one targeting of Net content with strict privacy controls and total confidentiality or even anonymity.120 How to use the power of the Net to grow a business and to leverage a site’s overall audience-this is a puzzle that occupies the minds of visionary netrepreneurs. Today’s information overload diminishes the return on this sort of human capital; depreciates certain simpler forms of adding value in the knowledge industry; and cries out for indexing, metadata, and metainformation that may help infonauts to orient themselves. At the same time, informing neutrally and thoroughly concerning details and content-this is perhaps not what knowledge management in marketing is for. The right online marketing and promotion will certainly enable customers to find a site more easily when they are searching for products or services. Search engine positioning will make or break an online business. However, in return for a ‘slotting fee’ there are also trickier methods of granting a preferred position for a paying site, to enhance their visibility. These methods apply tools that advantage paying sites to the detriment of others, skewing the ranking criteria in accordance with business interests.I2l In sum, Web advertising and customized ecommerce applications are to be viewed as methods of establishing trust and an ongoing relationship with a customer. This is a process in which

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both entities try to figure out if they have found the right partner: did the publisher choose an adequate commercial and did the user visit the right place? A large part of this conversation-the interaction between data collection as evidence gathering by the content provider and internal navigation by the user-is about interactively figuring out what customers need from information. Knowledge management of this sort is the art of the ‘maybe’.

Box 5. Methods that Can Help a Business to Get to the T o p of the Search Listings Link popularity. Search engines such as Excite, Infoseek, and Lycos will check how many links there are to a site from others. Links boost ranking. Infoseek has a more complex link popularity system, which places the emphasis on linking site status and relevancy. To be a highly-linked Web site is to be highly visible. The Electronic Frontier Foundation, for instance, often boasts of being the fourth most-linked-to Web site in the world. Hidden keywords. Most engines favor the use of keywords in domain names. Domain names are passports that enable citizens to cross the borders of cyberspace. Keywords in subdomain (secondary) names help too. Lumping keywords together is not conducive to boosting rank postings; words are to be separated by dashes. Some Web page designers, art directors, and copywriters insert keywords or phrases in various parts of the Web page, wanting to give a boost to the keywords. Not all search engines recognize comments as keywords. ALT text for images is another trick commonly used. Case sensitivity and text in meta tags are less important. Infoseek, Lycos, and NorthernLight will search for variations of a word based on its stem: for example, searching for the word ‘optimization’ will result in pages containing ‘optimize’ or ‘optimizes’. Altavista, Hotbot, and Webcrawler view consistency of keywords throughout the page as important. Hence, keywords have to be spread over the Web page, particularly at the bottom. Invisible and Tiny Text. Excite is the most ‘spam-able’ search engine. It will index invisible and tiny text. Webcrawler and Netfind allow invisible text and Infoseek and NorthemLight will index tiny words. Invisible text (to Web browsers) can be


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achieved by specifying foreground and background in the same color. Tiny text is text placed on a page in a small font size. A page with a lot of tiny text will be treated as spam by major engines and they will refuse to index heavily tiny-texted Web pages. These are some particular cyber ways and means of acquiring unprecedented publicity. Cyberpublicity to make brandnames known and products available worldwide is as much a precious and scarce good as any other source of publicity. Here is a brief description of how reputation works. An audience is the ultimate resource. Publishers’ products include not only content but also audiences. In traditional media the audience is perhaps the real product. Advertisers purchase access to an audience in order to sell something. In this process, the size and quality of audience are both important. If the advertiser makes an inadequate pitch or prepares some poor creative (graphical or verbal solution), the audience will not be approached with success and the resource is being wasted from the perspective of business communication. Reputation is built out of attention-especially but not exclusively from media attention. The keen attention of interested people is a unique resource and an underlying driver of social forces comparable only to power. Empathy is one of the most coveted accolades a beloved can offer. Attention is the operationalized form of empathy, reaching far beyond the sphere of intimacy. In modern post-industrial societies with wide affluent strata, our attentive time is even scantier than money. That is why reputation-the accumulated form of publicity-makes wealth (the amassed form of money) often look somber. Some people and some organizations receive unsolicited attention; others pay for their visibility. This is called advertising. The Stoic philosophers and the followers of Epicurus sought to dissuade us from the vanity of pursuing eminence; their advice is to hide from the world. Celebrities also often complain of the backlash to which fame often gives rise and advise keeping a low profile. But, as the philosopher Kolakowski remarked in his concise lecture on fame (Kolakowski, 1997; cf. Franck, 1993), one can hardly believe this because it is they who chase media attention by every means possible. Publicity is built on attention just as money is petrified toil. Publicity, the accrued quantity and crystallization of attention, is a desired commod-

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ity that constitutes prominence, one of the modern equivalents of noblesse. This commodity of attention-related income is produced by the media constituting a virtual market for vanity (vanity because the coveted esteem of attention is always personal, but what is actually granted is mostly alien and businesslike). One can nevertheless milk fame, feed and grow upon public attention. The ‘attentive’ revenue of celebrities derives from their attraction potential and the Internet has added to the publicitygenerating and attention-bestowing capacities of global media.122This potential is amply rewarded by the market: some investigations (based on Frank and Cook, 1995) even speak about ‘Winner Takes It All Societies’, with reference to a definite skew in income distribution to the advantage of ‘superstars’ picking up the lion’s share of available income in a particular business, such as research, medicine, or showbusiness. This is beginning to be the case in every business: as markets correct, to the victor go the spoils. There is another famous contrastive application for this trendy expression: there is no coalition government in the USA, the winner takes all, whereas in the European Union there is no political majority, only political, national, or ethnic minorities. These tendencies come into play whenever the first person to achieve some result gets a special reward, for example, a patent for his investment in the development of an invention. Thus, economic activity becomes a ‘horse race’ which only the first horse across the line can win. Markets affected by these tendencies-the entertainment business, for example-are ‘winner-takes-all’ markets, and this sort of competition is called ‘winner-takes-all competition. This iron rule applies to online advertising, too. In this rapidly growing business segment the top 50 Web publishers reap the overwhelming majority of ad money, accounting for 95 percent of revenues for ad-supported sites in the USA in 1999 (E-commerce Times, 1999). Fame that was once attained by deeds or virtue is in fact merely a matter of media exposure. An income based on fame could be drawn long before modern media emerged but the media has multiplied this resource of social distinction. A difference between accumulated wealth and stored-up public prestige is that the origin is far from being indifferent. One cannot derive genuine prominence from publicity among people of dubious value! This is called messalliance. ‘Attentive income’ leads to prominence only if it can be attributed to the attention of people we can accept or even honor. Just as our ‘significant others’ in the widest sense (or recently the domain of our e-mail address) qualify us, this qualification creates a sort of ‘exchange-rate’ of publicity.

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Besides fame and publicity, imitation is a hrther source of attentiongenerated prestige. This is experienced among the software developers of the technical community where the shared heritage of all practitioners can also elevate and acknowledge talents. In their world without proprietary roadblocks to innovation (such as patents) imitation by replication is the greatest form of flattery-just as scientific citation (even in the form of rejoinders and refutations) is an accredited style of approving and appreciating a peer researcher’s performance. In the end, of course, when all arguments have been put, it is dignity alone that humans are endowed with, never value. The revenue models underlying the Gratis Economy-what we might now call the economy of attention-depend mainly on time and introduce some risks of privacy invasion. Contents are mainly subsidized by attention-devouring solutions such as advertising or by the marketing utilization of acquired personal data. Search engine sites are increasingly presenting users with a mix of relevant and sponsored links, making relevant searches based on human judgment alone somewhat more time consuming. Thus the input in this bit-driven segment of the economy is comodified personal data or time.’23Actually, this is possible because time is only a proxy for attention. And the same applies to data on online behavior as building blocks in the assembled personal profiles that evidence-based marketing uses (so far stealthily) to feed more relevant adverts. If a Web site is not attracting the traffic and pitch sales it should, it is likely that it is not ‘visible’, that is, not well ranked on the major Internet search engines. According to recent Internet e-commerce studies, over 90 percent of consumers-only a subset of surfers, of course-find the Web sites they visit by using the eight major search engines, which are Yahoo!, Excite, AltaVista, Infoseek, Lycos, Web Crawler, HotBot, and Northern Light. If a Web site is not located in the top-30 listings of these engines, chances are the site will practically never be seen. Most people never get beyond the first few items on a hit list. The single most important thing one can do to increase a Web site’s traffic is to increase its search engine ranking. Of course, the (tried-and-tested) search engine ranking is only an i n d i ~ a t 0 r . What I ~ ~ really counts is how fast, fresh, and easy to use a site is. How does one’s Web site compare to other sites in the same market category? Objective Web-site benchmarks are therefore an absolute must for an online business. Unfortunately, this distinction between virtual and actual reality, appearance and value, has never been particularly characteristic of marketing.

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When one submits a Web site to a search engine to be noted and then indexed in its database, it sends a ‘robot’ to scan the page. One aim of the software development powering these robots is to filter out less relevant Web pages with an intended outcome of more accurate search results. Using complex algorithms to rank a business page for keyword relevance, the artificial intelligence involved determines whether it will be ranked number 1 or 1,000,000 when potential visitors conduct a search looking for sites like this. The search engines are constantly changing their algorithms to provide visitors with the best possible search results and bypass ‘spamdexing’. Spamdexing is ‘stuffing’ a Web page full of words for the search engine’s robots, for example, by placing many words in the same text color as the background onto a Web page. In order to counter the ever-changing search engine algorithms, one widespread practice is to create an entire series of ‘entry pages’ that are optimized for the search engines-one for every submitted keyword. In other words, instead of having only one page struggling to rank well on all engines, media owners create separate, search-engine-specific doorway pages for each keyword. The entry pages act as a welcome screen for the Web site when people enter from its highly ranked link on the search engine. One key to successful search engine positioning is an entrance page. Entrance pages are special Web pages designed solely to rank highly in search engines. The strategy here is to focus on a single keyword phrase the designer thinks customers will use and create a page that ranks highly under that phrase. The page will have a link on it to the true home page. The entrance page may not look pretty but its purpose is to drive traffic to the affected site through the search engines. The pages will say a few introductory words about the actual site, which are keyword and/or keyword phrase rich, and then provide a link that asks the visitor to ‘Click Here To Enter’, which moves them directly to the current homepage. As a result, the pages concerned rank well because they contain information relevant to search queries that are related to its scope or industry. A second generation of search engines is already making tentative steps towards measuring the relevance of Web sites. Since all search engines use different formulas to rank the relevancy of Web pages to a keyword phrase, publishers make more than one entrance page for each chosen keyword phrase, sometimes ending up with 9-10 entrance pages for each phrase.”’ Until greater accuracy is possible in searching, content on its own will only rarely excel in cyberspace-auxiliaries are thus administered

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to help it to win an audience. It is perhaps no different in the offline world either! The vintage search engine AltaVista was the first to give preferential treatment in search results to those who pay for their listings. Yahoo! soon followed suit. This contrivance has brought about an onslaught of other pay-for-position search engines. Buying such keyword placement requires a good account management system and the writing of a good specification of what the advertising site/company is about. Then the people who click on it are likely to be interested in the advertising company’s offering. This entails a reasonable level of targeting within the strict confines of a given language. When an advertiser places a bid (search terms and their placement are auctioned off) on the keywords at a search engine, they only pay when the visitor clicks through to the advertising site. Nowadays, keyword placement offers several options to advertisers, including the ability to cap the client’s spending amount, automatically replenish the account with a credit card, or automatically upgrade all bids for the number-one position with one click. Account management systems have an online reporting and management tool so advertisers or their agencies can view the status of bids in real time and easily make updates or change bids. The popular search engine GoTo.com, for instance, has a small business directory where entrepreneurs of start-up companies can buy keyword placement, much like their search service, and only the listings appear within the directory by category. Advertisers only pay for clickthroughs to the site. They have a Computer Services category which includes Web design, and a Marketing category which includes advertising, direct mail, market research, and more, so this is a valuable tool for driving traffic to advertising sites for as low as USD 25 per keyword. There is an alternative revenue model for pay-per-click engines. Before its termination, MSN’s keyword program was also involved in bidding on specific search terms. Unlike GoTo, the auctions ran for about a week. One would bid on a monthly cost. Each week, the two highest bidders would win and be charged for one week’s worth of their bid. A week later, their site would be listed on the left-hand side of the search results under a section called ‘sponsored links’. By giving the winner a week, the auction was less intense than at GoTo.com, where advertisers can get bumped literally minutes after they have aggressively bid for the desired rank. In the GoTo model, someone can bid immediately against a former advertiser for the top five or so positions, just to knock him out of those spots. As a result, the click-throughs on these promotions are extremely low.

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In a well-designed model editors review every submission for relevancy to retain a minimal degree of credibility for their search engine. In such a model engine operators will never show bidders who the competing advertisers on top are when bidding is on, thus forestalling attempts to kick someone off the top spots entirely: approved merchants are simply bidding for the position, that is, the ranking, rather than to boot someone out of a spot. Operators can indicate what it takes to attain a sought-after position in a dynamic application environment of bids, where the temporary winner does not occupy a ranking. This reflects the real-time incidence of other simultaneous bidders for the same position on the keyword, but without ruining someone else’s business. This model then lets users monitor the clicks their placement receives, but they are charged only for being online for the week. Unlike GoTo, advertisers can garner an unlimited amount of traffic. It is good to see the ongoing creation of a genuine market in such a far-flung, esoteric field as keyword auctioning. The practice of driving infonauts to prepaid pages, however, endangers the very essence of the Internet as an independent medium. Keyword bidding involves the filtering of Web pages on the basis of business interests; that is, the Net architecture in this case does not function like an open network (highway) infrastructure, but like a managed system of preferred channels. It took the health care industry (for the sake of a brief comparison) long decades to revert to a simulated market of managed care; it took a century for philanthropy to adopt sound managerial techniques in its mission-imbued organizations. This dubious practice can be likened to telephone companies prohibiting connections to certain telephones or telephone exchanges. As in most countries it is required by law to label impressions as advertisements, AltaVista says that those listings will be marked as having been paid for. Other search engines do not label, as it is their default option that they sell popular keywords. Selling search result placements is of course just the duplication of the normal practice of all Yellow Pages granting enhanced exposure to paying customers. Keyword placement gives rise to justified suspicions. Netizens need to be worried that search results, returned by other search engines, might potentially be skewed by concealed forces rather than an unbiased analysis of the sites in question, even if not influenced by financial considerations. If search engines begin to lose the trust of their users, one of the Net’s most powerful tools may be reduced to nothing more than automated pitchmen using every means possible to try to pull the yokels into the tent. Is it possible that the very success of the Net will ulti-


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mately lead to its demise as a useful resource that serves its end users? Will we see revered search engines drawing on and perhaps selling out their accumulated goodwill? It is not by chance that the term ‘precision search engine’ is gaining currency. The situation is similar to what occurred in the erstwhile command economies of East Central Europe after the transition to a market economy commenced in the early 1990s. Neutral pharmaceutical information for health care practitioners, for instance, traditionally provided gratis by a state-run agency, has been taken over by the pharmaceutical companies’ own marketing departments. The result is the growing noise of marketing efforts in a saturated market and a health policy governed by manufacturers. Compounding the already sorry state of online credibility, most Web sites feel no particular need to distinguish between what information is paid for by sponsors and what is provided as a by-product of an innocuous news story or detailed article. Unlike print and broadcast media, next to labeled advertising, the sale or barter of a hypertext link on a Web page is probably the most fundamental value exchange for those conducting business on the Internet. When a commercial link is in the proximity of an account, ‘credibility advocates’ call the practice ‘transaction journalism’. But the concept might better be called vanity publishing, applying right across the Web. Vanity publishing is fundamentally neither good nor evil. In fact, the ability to directly link pieces of information, whether transactions or content, is the defining feature of cyberspace. But precisely because the link is so powerful a tool, the very essence of cyberspace, it is particularly incumbent upon online publishers to give infonauts full disclosure-as much context as possible to enable them to judge the substance, value, and accountability of the links they might like to follow. It is becoming a valuable skill among the human capital requirements of the Information Age to be able to distinguish between reliable or new information, advertisement, and mere titillation. This skill will become increasingly important as we become exposed on a daily basis to information from sources that may simply be self-serving or downright deceptive. E-commerce is a business where improved efficiency is predicated on escalating publicity. Distributed processing advances and the onset of the paperless office through digitization may somewhat lessen economies of scale, but we are nevertheless witnessing an increase in mergers and acquisitions to acquire market share and re-engineer controllable vertical business processes. Because of ongoing and surprising tie-ups, single companies are beginning to control both Internet content and

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systems for gaining access to that content, such as cable television lines. The Web might come to resemble a shopping mall where content supply is apportioned to consumers. What is more, the list of failed attempts to develop online payment schemes keeps getting longer, though many tech analysts advise that mobile commerce is close to becoming a reality. The prospects for digital money are good and we should prepare to make payments with a computer or a cell phone rather than our wallet. When it comes to policymaking, however, it is less the evidencepooling side of that innovative cyber gambit that is to be regulated. I perceive more danger from deficiencies of fair competition. I think the underlying issues are as follows: from a fair competition perspective, access, software, hardware, and content are four self-regulating tiers of cyberspace which should be kept separate as regards ownership. 0therwise, if mergers are allowed across these layers, the scope of a single company can grow to influence or even control the entire process of their customers’ Internet use. This is the case for millions of AOLmember Americans whose cyberlife lived within the universe called AOL is technologically filtered, socially engineered, and existentially restrained. We have seen what tricks companies contrive in order to drive customers to preferred Web pages, and this practice can easily go astray into the filtering of the informational content of the world according to business interests. When anything less than the entire universe is available then a filter is in operation. This means that netizens will not have full access to all that cyberspace can offer.’26At the same time, this also means that start-up companies with no money cannot have access to prime space. An unintended consequence of unfettered mergers could be the overwhelming rule of inbuilt code as opposed to a consensual, uncoerced mode of lawmaking by political means. This influential thesis has been put forward by Professor Lawrence Lessig (Lessig, 1999), who claims that system designers and programmers exercise influence not only by defining the needs of users, but by building the rule systems that constrain navigation and conduct in cyberspace. They deeply affect society through their technology and in a way that cannot easily be modified. This lack of equal opportunity and consensual articulation of political will endangers the variety and richness of cyberspace. I perceive an enhanced need for technology assessment in matters of advertising. This might bring it about that, at the level of incipient technologies, the consumer’s perspective is reconciled with (i) the regulatory view and (ii) the manufacturer’s interest in ‘featherbedding’. Technologically enriching (that is, more tech content in a gadget) feather-

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bedding means the natural inclination of inventors, manufacturers, and engineers to claim that it is paramount for business and government to get beyond using cost as the primary deciding factor in acquiring new technology, because quality and safety are the most important things. One special manifestation of featherbedding is the tacit regulatory capacity of industry. We know that there is always a hidden regulatory force deep in software code-it is not only legal code which defines how we use systems like the Internet. This sort of net-behavior-guiding code may be the outcome of a hidden business agenda, a kind of social engineering. Programmers and hardware engineers in this way define the limits of human behavior and society in cyberspace. As to the sensational cases of digital privacy, while journalism protects consumer interests against corporate excesses, advertisers usually try to go about their business. Another example of tacit use of code to railroad Web users within the framework of the Gratis Economy occurred when, by combining online tracking with offline catalogue purchasing histories, DoubleClick put its hand deep into the online cookie jar, in every sense. The ability to dynamically target customers based upon a vast amount of integrated evidence has definitely reshaped the landscape of advertising. Advertisers will now be able to begin delivering on their old promise and display pertinent online advertisements to a more specific target audience and to follow up with a powerful telemarketing or direct mail campaign. From the consumer’s point of view, it is disturbing that so much personally identifying information can be centrally tracked, stored, and targeted without their say-so. The potential for abuse is great. Running ads across a network of opt-in e-mail newsletters is the most inexpensive and effective way of reaching a targeted audience online. Electronic mail is one of marketing’s darlings. E-commerce companies have learned that carefully aimed e-mail messages may be the best means of cutting through the clutter of the medium and delivering a personalized pitch to the consumer. In contrast, the reason banner advertising is not really interactive is that the Web-based targeting mechanisms we have today are still quite crude. Searching, for instance, for tennis-related items I may easily get an advertisement promoting theater-going. This is an ad that I am not going to click on because they have failed to target me correctly: if I was confronted by the announcement of a new tennis magazine or a link to a new information site featuring a star player, however, I would click on it for sure. Most infonauts would most likely not hesitate to change their nature and become a

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spending consumer, clicking on a banner that is even slightly relevant. If banner ads could be produced based on a consumer profile from a combination of books they have purchased at Amazon.com, music purchased at a store or downloaded from MP3.com, movies read about on an online journal, and the last 200 searches they initiated at Yahoo, then, and only then, could the promise of the Internet for TV-size audiences and individual targeting be delivered. An extension of this could occur within individual company Web sites: if I visit Amazon with a track record of purchasing the early works of John Updike, Amazon could safely conclude that I would be interested in similar genres and could highlight it on my personalized Amazon.com homepage. Customization like this is no longer advertising as we know it, but rather personalized information delivery. For example, mass market portal sites-with their primary motivation of keeping users at their multilayered ‘good for everything’ sites-are offering more audio, video, animation, and the like for customers who connect at high speeds. The additional content only hints at the possibilities, however. Web-content creators, who have suffered for so long under the constraints of slow speed, are only beginning to figure out what new ‘killer applications’ can be devised with fatter data pipes. One possible killer application will involve making advertising less distracting. Second-generation online advertisements will cease to be banners at all and start delivering on the promise of the mythical one-to-one advertising model that the Net seems to be offering us. CONCLUSIONS

In this chapter, I have investigated how developments in the time uses of online advertising could evolve a business model that will distinguish cyberspace from traditional media. This distinction is particularly sharp with regard to the possibility of (i) performance-based and (ii) evidencebased advertisements. Whereas traditional impression-based print, radio, and television ads are mostly for branding or awareness purposes, ‘perclick’ and ‘per-sale’ ads, which are more cost effective (great brands are made by persistent construction work, they are not simply bought), proliferate on the Net. The reason that companies buy online advertising based on performance rather than on impression is that they can generate and analyze the data to arrive at more informed operational decisions. The advertising process generates enough behavioral data (i) to measure performance and (ii) to support marketing decisions with an anticipated outcome that will gradually render advertising more relevant


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for their viewers (one-to-one targeting). This smarter advertising process presupposes the tracking and handling of personal data and online behavior by corporations. This poses serious privacy problems. The question is whether the advertising process will ever be capable of offering value for such compromised privacy. If there is no evidence-based targeting, ads do not have the expected results and click-through rates (CTR-the user retention of an advertisement) remain below expected levels leaving companies’ deep in the red. Therefore, some leading advertisers are drifting away from the click-through mentality of pure direct-response marketing in all cases when the choice and feeding of online commercials cannot be based on solid evidence. I perceive an unfolding tendency whereby the publicity-driven online Gratis Economy-perhaps the greatest wealth creator in history-is turning into the postmodern equivalent of conventional non-profit organizations. The principle of giving free, except for advertising, has always been a powerful business method for ad-fattened media products. Under certain conditions, the promising prospects in evidencebased marketing are easily transmitted to online communications and content sites with a smaller but valuable professional or specialist audience. This is a great opportunity for non-profit publishers, too. When it comes to information generation, high-traffic can widely be substituted by enhanced data mining. Ad space represented by well-performing niche-sites may thus grow in worth and appeal. To publish a commercial message in a niche publication has been regarded as targeting. Now targeting can be increased exponentially by fkther screening within this small audience for those who can be expected to appreciate the advert isement provided. I have also pointed to the inherent danger of mergers in cyberspace that could result in filtering content for users. I summarize my findings in the following equation, which defines the composition of a notion of paramount importance: return on investment (ROI) in online advertising. ROI = Relevance + Permission pending delivery + Incentive Relevance means content and offers that meet the needs and desires of the recipient. In addition to customizable content, personalization provides advertisers with a way of matching content to the customer in a highly targeted way. This is conceived as something like personalized drugs-based on research into functional genomics these can predict

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someone’s personal response to a therapy and are expected to control for unintended ~ide-effects.’~~ I think sites make a terrible mistake when they do not spend the time and resources to make a compelling reason for a visitor to register with their site. It is fundamental to permission marketing to establish an easy, no-risk relationship for the customer; to let them try out the site. Without this, it will become increasingly difficult to move that customer up the e-commerce chain. When we consider that most e-commerce sites convert at best 1 percent of their visitors, the opportunity cost associated with not initiating a relationship with the other 99 percent is awesome. Permission is a complicated notion in marketing. The role of permission can best be illustrated by a brief description of the logic of opting-in in e-mail advertising. Opt-in is the decent way of doing e-mail marketing programs. Marketers get pre-qualified recipients and customers are not spammed. This involves a positive and trusting relationship between the brand and the customer. Opt-in is the key to success when opting out is just as easy, otherwise it is not truly opt-in. Moreover, opting-in means to make it easy for customers to change their preferences. Unfortunately, there is sometimes a yawning gap between the theory of opt-in e-mail lists and their dismal reality. I refer to the fact that many so-called opt-in lists are generated through ‘negative confirmations’-that is, if a person does not directly state that he does not want to be e-mailed on a topic or after subscribing to a newsletter or online magazine, he is assumed to be a valuable, interested reader. In fact, of course, the likely outcome is only e-mail fatigue. Even worse, if somebody signs up to a site for one of the many search-engine services that promise to get sites on thousands of search engines, the sender implicitly agrees to be added to hundreds of ‘related’ opt-in lists. ‘Opt-in’ thus stands for lists that have people who have opted in for whole classes of ‘Interests’. I can sign up for a list that caters to, say, ‘Internet Advertising’ or ‘Internet Marketing’. I will receive offers from any business related to these. The services never bother to explain this. Without explicit approval, the e-mail address is submitted to hundreds of lists resulting in a deluge of e-mail traffic that is nothing other than spam. Under the current industry definition of ‘opt-in’, advertisers are not getting anything like the quality of eyeballs that could theoretically be expected. A basic problem with ‘opt-in’ lists is that the list gets sold over and over again to ‘related’ businesses so that eventually the careless user starts to receive e-mail from businesses in whose products he has no interest whatsoever.

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Box 6. The W a y Marketing Specialists Think about Opt-In We are building an entertainment site. We will be dealing with exclusive content about nightlife in the city. The big attraction of the site is that we have a section where people can download and print cards that will allow them to get special gifts, discounts and even free tickets to shows and concerts from our partners. To have all the benefits, visitors will need to become members of the site, with login and password. They also give us personal information (address, telephone number, age, and email) that we will use to provide our partners and sponsors with valuable statistics about their customers. We will have a newsletter that will contain all the stuff we are giving away each week. And we will also send people regular information about the site. The question is, should we ask if they want to receive those e-mails? Since they are agreeing to become members, should I ask if they want to receive updates from the site? I am willing to do the newsletter on a subscribehnsubscribe model, but should all the members be initially subscribed? How can I achieve major participation without making people angry with me? Sozirce: Fabio Zugman, www.vclub.com.br

In other fields of online advertising other than e-mail campaigns, permissiveness means an implicit (tacit if need be) contract with the customer to deliver as little obtrusive and interruptive ads as technologically possible. Providing incentives does not necessarily mean you have to bribe people to read commercials. Business objectives and knowledge of the target audience should drive the use of incentives. For instance, using free gifts to build an e-mail list always makes sense. Or a membership rewards program that provides incentives in exchange for member participation in advertising and surveys. Incentives can take many forms: usefulhndispensable content (and relevance), privacy protection, membership, loyalty programs, exclusive e-mail offers, branding, discounts, freebies, community, and so forth. One inexorable criterion is that marketing should never conceal its essence. Hype can best be dispelled if content and advertising are separable. If a search engine sells keywords or gives preferential treatment to

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paying clients, this practice should be clearly announced. ‘Page optimization’ ought to be constrained if the search engine does not sell all the keyword placements by default. Nowadays, search site promotion is considered a tactical success for an advertising agency in giving added value to a client.’28The norm of separating content from advertising amounts to drawing a line between the gratis and non-gratis domains of the economy. Sub rosu marketing campaigns are not only a serious obstacle for all i n f o n a ~ t s , but ’ ~ ~will also create the potential for a sort of ‘information pollution’ on a scale never seen before. The philosophy of online marketing is very different from all other media: the ability to monitor user patterns and online user behavior with pinpoint accuracy, and then respond to them, making each user’s experience a custom-built experience. The convincing principle involved here is that no one dislikes seeing an ad for a product they are interested in. A well-targeted banner making a clear, unambiguous, and compelling offer usually gets the click-through. Clever graphics, misleading or teasing messages may get a higher CTR, as indeed does rich media, but that does not necessarily make them more effective. If the ads that are served are customized, highly targeted, and perhaps even requested by the consumer, CTR will rise, which will benefit the advertiser. What matters is what happens once they get to the site. Those who have been misled simply back out from the advertiser’s site rapidly. In fact, personalized advertising is flattering-something like re-visiting a nice old hotel where the owner knows our name and what we like to eat. And, of course, the user is not the only winner: marketers and retailers increase their click-through-to-acquisition margins, plus a wealth of ultraspecific demographic data. Bespoke-marketing software packages are still a rarity. In addition, there is no industry standard package yet for monitoring user tracking from click-through all the way to fulfillment. Complemented by these two pending innovations, online business communication will be transformed from the muddy world it is now into an evidence-based precision business-what is more, into a scientific (mathematical, statistical) business with a bit of old-fashioned human warmth. These online initiatives bring the industry nearer to delivering on the old entertainment business philosophy: if you do not like what you see, turn it off, do not patronize it, and eventually it will succumb to market forces.

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3 . F R E E O F CHARGE-EXCEPT FOR T H E COMMODIFICATION O F PRIVACY Privacy is supposed to put people in control of their personally identifying information and, at the same time, to make the Web a safer place for commerce. Information privacy, the traditional slogan of the empowerment of the citizenry against invasions by an overarching state, is these days increasingly a consumer protection issue. Actually, online privacy is becoming a nightmarish Pandora’s Box with endless complaints and an eagerness on the part of netizens to behave online as people without a shadow. The electronic frontier, as it becomes more and more populated, is now more chaotic than ever. Most democracies have one sort of Privacy Act or another (the USA enacted theirs in 1974) trying to put limits on how government officials can compare and cross-reference databases to find or profile people. And in general, governments are kept at bay as to data collection. Governments are also supposed to limit data collection about people who pay taxes, receive welfare benefits, serve in the military, or tangle with the judicial system. In most countries one bureau or another is constantly asking for the power to track the physical locations of cellular phone users and, potentially, to monitor Internet traffic. The telecommunications industry is often asked by the authorities to design its systems in compliance with technical requirements to facilitate electronic surveillance and interception of digital communication. Cyberspace and packet-mode communication in general-such as that which carries Internet traffic-are in the process of being delivered to law enforcement agencies. Until very recently, there was no equivalent of these stringent limitations pertaining to business: the eavesdropping, Big Brother-type quest to modify the existing privacy balance by the government in the interests of crime prevention does not set the privacy standards pertaining to business. In order to put into perspective how far we still are from really empowering consumers to behave rationally in cyberspace, I quote from two recent studies (CSTB, 1999; The Forrester Report, 1999) concerning online literacy and fluency. The precondition is a sort of ‘internalization’: not to see the Web as ‘technology’ but as a fact of life for what are often Big Dumb Users. Computers are not mysterious pieces of machinery with which people need to become ‘literate’; they are just tools to get the job done or ‘live the Web lifestyle’. Seeking to understand what is necessary for educated consumers to use information technology effectively today and to adapt to changes in information

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technology tomorrow, ‘literacy’ seems too limited a term, as it is usually restricted in the information technology context to the ability to use a few applications, such as a spreadsheet program or a word processor. What is it to understand information technology from the standpoint of fluency? Fluency requires a deeper understanding of how computers work and mastery of technology for information processing, communication, and problem solving. Developing fluency is a life-long learning process that requires people to continually build on their knowledge of information technology to apply it more effectively in their lives. Fluency is also characterized by different levels of sophistication in a person’s understanding and use of technology. Fluency with information technology requires three interrelated components for using it effectively. Intellectual capabilities-the application and interpretation of computer concepts and skills used in problem solving. Examples include the ability to define and clarify a problem and know when it is solved; to understand the advantages and disadvantages of apparent solutions to problems; to cope with unexpected consequences, as when a computer system does not work as intended; and to detect and correct faults, as when a computer shuts down unexpectedly. Concepts-the fundamental ideas and processes that support information technology, such as an algorithm; how information is represented digitally; and the limitations of information technology. Understanding basic concepts is important because technology changes rapidly and can render skills obsolete. A basic understanding also helps in quickly upgrading skills and exploiting results-oriented opportunities offered by, say, search technology. At the same time, getting results more rapidly diminishes the sense of process and method, the fundamentals of education (Valovic, 2000). Skills-abilities that are associated with particular hardware and software systems. Skills requirements will change as technology advances, but currently they include using word processors, e-mail, the Internet, and other appropriate information technology tools effectively. A person fluent with information technology will always be capable of acquiring new skills and adapting other skills to a changing environment. As value to be added, I am inclined to add a fourth and fifth requirement to qualify for empowered netizenship. Emancipated netizens must always be able to distinguish between advertisements and content. 130 Last but not least, privacy awareness-that is, the ability to adjust our own assets flexibly in the ever-changing environment of information

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management. Pragmatic adaptation depends on internalizing the following criteria: (a) information is everywhere; (b) personally identifying information has a particular value; (c) there is such a thing as a free lunch, but it is advisable to understand what makes that specific type of gratuity tick; (d) building trust does not require face-to-face interaction. I think the above described skills and criteria qualifjl netizens to make enlightened and rational choices in issues of online marketing. Enlightened netizens, on the other hand, are necessary if the covenant of cyberspace is to be properly exploited: when online, we live in a virtual society where all activity is traceable, measurable, and recordable. As already emphasized, commercials are, in the long run, in the process of turning into tailored personal solutions, blurring the distinction between advertising and information. The declining click-through rate of banner advertising has prompted this course of events. That people are not clicking on ads is not so much the fault of the ads themselves, but a matter of surfers becoming more sophisticated and directed in their online activities. Coupled with the proliferation of Web sites of varying quality, it is no surprise that their appeal as an advertising vehicle (and, by extension, as a revenue producing mechanism for web publishers) has reached its limits. In the sociology of online marketing, these lofty tenets boil down to preparing the ground for ‘advertorial content’, for the transmogrified advertising business with more accountable campaigns. Enhancing editorial content with relevant advertorial content requires a great deal of technical sophistication. Ultimately, ends should meet in the postmodern consumption of advertisements and the precision management of our privacy needs. Privacy is being challenged not only by government or private snooping, but also by the constant recording of all sorts of information that individuals must provide to receive products or benefits-which is as true on as off the Internet. I shall provide a succinct analysis of the current privacy battlefield in order to illustrate my thesis that privacy as an asset, when commodified, is utilized to develop a revenue stream: granting free access to a service in return for the opportunity to manage personal data. The outcome of this ongoing conflict-across the continents-will co-determine the scope of the Gratis Economy, a neglected booster of e-commerce (give me your data and I will furnish free content or services). To give one’s phone number (especially when portable lifelong numbers are the norm), social-security number, or address has always

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carried some risk. So has filling in questionnaires or responding to telemarketers or not asking to be removed from marketing lists. When passing tollbooths on roads and when carrying switched-on mobile telephones we can take it for granted that our movements are traceable. Only strong encryption of e-mail traffic, rejection of all 'cookies', and registering under aliases guarantee the preservation of an unnoticed Net presence. When employed by an industrial giant, we can take it for granted that calls, voice mail, e-mail, and computer use are all being monitored. If one is under suspicion the same can happen in relation to any spending that involves a credit or bank debit card, most financial transactions, telephone calls, and all dealings with national or local government. Closed-circuit TV cameras now scan increasingly large swathes of urban landscapes and can screen for criminal faces with Lombroso-recorded features or without. Many companies already, putting their best face forward, declare that they will not sell information they collect about customers, but many others find it more profitable not to make-or keep-this pledge. Consumers who want to maintain privacy must be ever vigilant, which is more than most of them can manage. Even those companies which pledge that they will not sell information do not promise not to buy it. They almost certainly know more about their customers than their customers realize. And in any case, unfettered market solutions, including inf~mediaries,'~are unlikely to be able to deal with growing government databases or increased surveillance in public areas. In contrast to privacy consciousness, a fictive privacy-dumb person behaves as follows: he does not take the trouble to obtain a disposable email address; he never avoids putting his one and only e-mail address on a Web page; he readily participates in online discussion groups, and joins chat sessions. He surfs without a care, joining in discussions in numerous mailing lists, chatting in newsgroups, subscribing to selected e-mail newsletters. This imaginary, moderately technophobic lay-person without privacy-related inhibitions never suppresses referrals, by which two Web sites share information about how one got from point A to point B. He readily personalizes or customizes portal sites, feeds search engines with telling leads and frequently participates in product-related surveys, opinion polls, and questionnaires. Besides generating a huge amount of e-mail traffic he also buys all his software and books online (and not only at hacker-prone sites). His name is to be found on various Whois-servers and has submitted his Web site to search engine robots. As a consequence of this anti-privacy behavior, the marketing profile

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describing his purchasing power, purchasing habits, and consumer preferences stands at the disposal of the ad-servers of numerous online marketers. Amazon.com might know what authors he reads (it is widely held that ‘you are what you read’); CD-Now has a picture of his musical tastes. He is no stranger to Alta Vista, Yahoo, and Netaddress. As a consequence, visited site A, with a double-clicker or cookie collector, may trade cookies with B. Even if B does not necessarily carry information to C they may trade with D and E, and E may then trade with C, so closing the ring. Soon enough, all sites which collect cookie information have all the information they might need on a user who happens to visit any communicating site.’’* Many sites not only implant an identifier in cookie files, but also look through their visitor’s cache, that is, Windows Temporary Files, grabbing up all the URLs they can find, which become part of the ‘UserID’ information which is stored in the cookie. As the story unfolds, the first of these sites to discover that our surfer does not have a cookie with a UserID embedded in it assigns him or her one, and plants a cookie containing it on the surfer’s computer. Subsequent sites use whatever UserID was assigned by whichever site assigned it. And from that day on, as our surfer’s ‘dossier’ grows, each site references that same UserID when it trades with other sites.133 US Supreme Court judge Brandeis’ famous 1890 article defining privacy (the right to be left alone) was a reverberating plea for the right to sue for damages against intrusions into privacy. It spawned a range of privacy statutes in America and elsewhere. And yet privacy lawsuits hardly ever succeed, except in France, and even there they are rare. Courts find it almost impossible to pin down a precise enough legal definition of privacy. America’s consumer-credit laws, passed in the 1970s, give individuals the right to examine their credit records and to demand corrections. Privacy is a historical category that has changed over time. With ever-ringing mobile telephones and force-fed advertising as accepted features of our daily life, we are now witnessing a palpable increase in our average tolerance of privacy intrusions. When it is not a state-owned company that is being privatized, but some collective good such as health or privacy, privatization is tantamount to commercialization and commodification. In this sense, privacy is a sort of asset. The Electronic Frontier Foundation long ago announced an effort to put a price on personal identity,’34 so that Web abusers of a person’s privacy could be sued-I think this is an important step in the direction of empowering people to use (to utilize, not only to possess) their privacy as an asset. In democracies, we are born as neti-

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zens with a natural endowment of full privacy. (In extreme situations, such as in a prison cell under constant surveillance, privacy may be reduced to a minimal level, but it should never be taken away completely). As personal information starts to be progressively put up for sale and there are efforts from all sides to collect our personal identifling information most people will be compelled to economize on this reserve. People must strive for effective control of their personally identifying information, otherwise businesses may capture it and put it on the market, potentially causing them harm. Especially because the laws protecting ordinary consumers from commercial invasions of privacy, including corporate trade in consumer data (someone else's private property), are so weak that many consumers look to contrived technological solutions such as anonymisers or suppressers for protection. In order to preserve this asset of ours we must be able to maintain and manage our own privacy. Therefore, only the sternest and most unyielding international privacy regime on the Net is capable of giving us the bargaining chip that is so often needed to access something free. Relinquishing some personally identifling information in exchange for free access to commercial sites-this is the quid pro quo of electronic media where marketing imperatives place ever greater strain on our primordial privacy. There is a sort of arms race where high-potential software solutions leapfrog previous norms of information assurance. 135 Data collection schemes lead to an inevitable shrinking of the zone of privacy, even if the collecting of profile information and the storing of it in an anonymous database may help to ensure the integrity of the data while protecting the privacy of the user. Certainly, a culture of privacy on the part of direct marketers might help to preclude theft of proprietary data or identity theft, uncontrolled abuse, and other criminal activities based on the sale of personally identifjring information. The online industry keeps on giving voice to their humble wish that commercial sites with above-average traffic proffer a meaningful privacy policy pledging that they would never offer for sale the personal data acquired in the course of their normal business activities (GVU Survey, 1997; Culnan, 1999). Until watchdogs with their remedial litigation can achieve strict adherence to these voluntary guidelines, or until there is industry-wide regulation of personal data,'36 anything goes in online marketing. Even under circumstances of a mandatory regime, netizens have no other choice but to enter into prudent individual compromises concerning what to reveal and for what return.


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Box 7. N C R S t u d y o n European Popular Opinion

on Privacy A study by NCR found that 25 percent of Europeans believe they are not given a choice as to whether they want to buy into marketing programs. Europeans are willing to give away personal information online, but companies are not using that information to offer improved services. Two-thirds of Europeans surveyed said they would provide information in exchange for discounts, loyalty points, and personalized service. Those under 25 years of age were particularly in favor of this kind of exchange. Eighty percent of users under 25 in the UK and Spain were willing to provide data to improve service. The survey found that Spanish users were the most likely to give personal information. Three out of four said they would readily opt for personalization if the benefits were clear. Users in the Netherlands, however, were much more hesitant: only one in four agreed that personal data were a fair exchange for customized service. Despite the strong indications of consumer willingness, companies were not using the data to improve services. The average European consumer receives one unsolicited marketing offer every day either by e-mail, telephone, or mail; 90 percent of these are of no interest to the consumer. Sources: http:/lncr.com http:// privacyexchange.org/iss/surveys/ecomsumm.html

B E T W E E N T H E R I G H T T O TRACEABILITY A N D ANONYMITY

In what follows I shall take a look at some software of dubious value. The Internet facilitates the broadcasting of information to all other computer systems connected to the network. Sensitive personal data can be communicated to countries without an appropriate data protection level. Information providers might offer personal data from sites situated in countries with no privacy legislation where they can be accessed from all over the world by a simple mouse click. Personal data may be routed via countries without any or without sufficient data protection legisla-

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tion. ‘Social dumping’ may emerge in this respect. On the Internet, created for academic purposes in respect of which the sole regulation to be enforced is the victory of the better argument, confidential communication is not automatically ensured. There is no central switching center or other responsible authority in control of the entire network. Therefore the responsibility for data protection and data security is shared between millions of providers. Every message transmitted could be intercepted at any site it passes through-luckily, no one can tell where the passage will take place-and could be traced, changed, forged, suppressed, or delayed. That is why an e-mail should be regarded by every prudent netizen as a publication rather than a personal communication. Nevertheless, Internet use for business purposes is increasing exponentially and sensitive personal and company data are being transmitted via the Internet. This raises the issue of trust. The use of Internet services does not allow full anonymity (although we are usually given the captivating power to construct our own personae) or adequate authentication. Computer network protocols and many Internet services generally work with dedicated (point-to-point) connections. In addition to the content data the identification (ID) of the sender and the recipient is transmitted. Every electronic mail message contains a header with information about the sender and the recipient (name and IP-address, host name, time of mailing). The header contains further information on the routing and subject of the message. It may also contain references to articles by other authors. Users are bound to leave an electronic trace, which can be used to develop a profile of personal interests and tastes. Although there is no central accounting as regards access to cyberspace, the information and customer behavior of senders and recipients can be traced at least by the communications provider to which the user is connected. Netizens have an interest in the integrity and confidentiality of the information transmitted: they are interested in reliable services and expect their privacy to be protected. In some cases they may be interested in using services without being personally identified. Imprudent users do not normally realize that they are entering a global public place where every single movement may be monitored. Policy makers debate how much should be revealed about the real life identities, locations, or attributes of users engaged in communication. When developing the arguments on issues of information privacy, authors usually weigh the pros of anonymous work espoused by investigative journalists and clandestine police against the cons of responsibility, accountability, e-

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commerce, and governmental empowefment. As a study on the doubleedged legal aspects of privacy (Allen, 1999) has pointed out, offline communities have had a long time to develop the expected norms of engagement in different societal and specialist contexts. Yet every geographical space and human interaction cannot reasonably be regulated, let alone policed. A great deal takes place between people which cannot be available to scrutiny by the authorities. Nonetheless, these private contexts are subject to regulation-if need be-in certain types of activity. Whenever individuals avoid regulation by secrecy, they leave traces (social, physical, informational, or technical) of their activities that allow others to investigate possible violations of the law. How these traces may be scrutinized is legally regulated to balance the interests of society with the rights of individuals. The Internet also has classified spaces that are inaccessible to investigation. As applications proliferate that place server-level functionality on personal computers, and as ‘good enough’ encryption becomes more sophisticated, individuals and companies can create secure, private networks that are difficult to detect. In the following case study I summarize some of the new technological means of engaging in anonymous communication on the Net. The lnternet has traditionally been an open and flexible space, but has provided little support for identifying or authenticating individuals as they use it. Currently, it is still impossible to determine precisely where a user’s computer is located. However, e-commerce is reshaping this situation, having good reasons to insist on identifying buyers, sharing financial data on them, and authenticating participants in business transactions. Additionally, there is an important administrative stake in electronic signatures that could contribute to enhanced official use of the Net in the citizen/local government interface. I mention in passing the ironic situation that, while the Pretty Good Privacy (PGP) software is freely available and downloadable from the institution’s homepage, and even an international version is available for non-Americans to bypass export regulations, it is understood that people download the software for non-commercial purposes alone. There is absolutely no need for an electronic signature and long-key encryption between trusted parties. The frontline of the privacy battlefield has already spawned anonymous re-mailers, firms that forward e-mail stripped of any identifying information. A renowned Web site (annoy.com) allows users to send anonymous communications to USA public officials. Another US-based Web site (Anonymizer.com) offers anonymous Internet browsing andoccasionally, in cases when it is desirable to protect the anonymity of

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correspondents-e-mail. 137 This is an Internet service that allows users to be anonymous and untraceable online. For a small monthly fee, users can process Web browsing requests and send messages through Anonymizer’s proxy servers under accounts that mask their identity. There is also an unlimited free browsing service, but Anonymizer inserts a delay, typically 10 seconds, on page views in the free service. The paid service has no delays. For an extra fee, Anonymizer will also allow users to receive e-mail responses and set up Web pages. In either case, the user types the address of the Web site to be visited, and the request is sent to Anonymizer’s proxy computer. The proxy server strips off the customer’s identifLing information and forwards the request to the requested Web site, which sees only that the request is coming from Anonymizer. The page or graphics file is then returned to the user’s computer, and the site can be bookmarked for return visits with anonymity intact. If a company is tracking Web usage by its employees-a worldwide practice which the American courts have ruled legally permissible, along with reading employees’ e-mails and listening to their phone calls-it will see only that the user is connected to Anonymizer.com, but it will not be able to find out what sites are being visited. For that reason, a number of companies prohibit employee access to the Anonymizer site-this wanton bylaw has not yet been contested before the courts. Other companies use Anonymizer regularly to visit the Web sites of competitors and gather information, while law enforcement agencies use it routinely to check up on people under investigation. At the other end of the line, some commercial sites do not allow connections from Anonymizer, either because they require visitors to provide personally identifying information before granting them access or because they have had bad experiences with Anonymizer users who abused the system with bogus credit card scams or harassing messages. Anonymizer was forced to block its users’ access to the White House Web site because customers were sending threats to the President. Anonymizer automatically boots out customers who try to use the system to send batches of spam, or in response to complaints from people being harassed through the site. There are numerous other innovative initiatives in this field-online anonymity tools that insure privacy as well as shield wrongdoers. Electronic digital cash, for use on or off the Internet, may eventually provide some degree of anonymity although there is no more anonymous currency than cash. Created by AT&T Labs-Research in New Jersey, a

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system called Crowds operates on the premise that one can be anonymous in a crowd. In the Crowds system, large groups of geographically dispersed Internet users would be able to band together and their individual Web page requests would be randomly forwarded through a shared computer called a proxy server. The operator of the Web site would never know which member of the crowd submitted the request, and neither would anyone else in the crowd. MIT’s re-mailer is a server that sends anonymous e-mails. Anonymous re-mailers attain their goal of privacy by sending a message through a very long chain of servers. In case of emergency, all the operators can give to law enforcement agents is the ‘last step’ that was taken. Without the cooperation of the system administrators of each server, the routing information is essentially useless. Will its faceless missives allow even amateur crooks to plot, steal, and hide? Or would they rather serve to shelter whistle-blowers and human rights workers? Anonymity has incontestable value in a large number of situations, and it is constitutionally protected. Proposals to limit anonymous communications on the Internet would violate free speech rights long recognized by various constitutions. Anonymous and pseudonymous speech played a vital role in the founding of the United States. Thomas Paine’s Common Sense was first issued under the name ‘An Englishman’. Alexander Hamilton, John Jay, James Madison, Samuel Adams, and others carried out the debate between Federalists and AntiFederalists using pseudonyms (Wallace, 1999). At the same time, if citizens are serious about prosecuting crime on the global communications infrastructure, we cannot fully relinquish traceability. The issue is complicated because anonymity is not of interest only to criminals and dissidents, and not available only to the technically astute. As already indicated, new technologies are emerging that enable even casual Internet users to be anonymous online for the first time. At the same time, new technologies are poised to siphon off ever more personally identifiing information from users and to allow companies and others to track individual surfers. The Intel Corporation embedded a unique identification number in its Pentium I11 processor that would enable network operators to identifi individual computers on the Internet, and the Microsoft Corporation designed a ‘globally unique identifier’ that is surreptitiously present in MS Office documents and can be applied to trace files back to a specific person. The Microsoft Office identification number was in fact deployed in the Melissa virus investigation.

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The regulation of anonymous and pseudonymous communications will be one of the most important and contentious Internet-related issues in the near future. Resolution of this controversy will have a direct effect on such chronic Gordian knots as freedom of speech, the nature of electronic commerce, and the capabilities of law enforcement. The legal resolution of the relative anonymity issue also is closely bound up with other difficult and important legal issues: campaign finance laws, economic regulation, freedom of speech on the Internet generally, the protection of intellectual property, rights management, and general approaches to privacy and data protection law: The openness, decentralization, and transnational character of the Internet challenge the efficacy of traditional control mechanisms and have raised issues related to accountability, law enforcement, security and privacy, governmental empowerment, and e-commerce. Yet, to ban or restrict all anonymous communication online because of the harm it could bring would deny its benefits to those people who may legitimately gain from it. (Kling et al., 1999)

At the Lucent Corporation’s Bell Labs, renowned for their smart software which enhances televised sports coverage, another anonymity system has been developed. The Lucent Personalized Web Assistant allows a Web user to create a pseudonym for each Web site; the same pseudonym would be used on each visit. The Web site operator would not know the visitor’s true identity but could still build a profile of the user’s preferences that could be used to carry out all the usual statistical jobs: to tailor advertisements and content to the customer on subsequent visits. Yet another anonymity system under development, this one at the US Naval Research Laboratory, is Onion Routing. An Onion Router in one single pass wipes away all traces, hiding not only the content of messages, but also the very fact that two people are communicating over a public network. One of the more intriguing anonymity services under development is Freedom, a Windows program developed by a Montreal-based company, Zero Knowledge Systems. Freedom, which is available for public testing, is similar to the Lucent system in that it enables users to establish pseudonyms that are consistent over time. That would allow a user to participate freely in a discussion group without worrying about being identified. Freedom costs USD 50 a year for five separate digital pseudonyms. These online personae cannot be traced to reveal the user’s identity. The lack of online traceability gives police and anti-sgam activists migraines that can be relieved only by international co-operation.

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The software is being touted as heralding a time when companies whose revenue backbone is that of a data miner can no longer operate. It essentially erases all ‘digital footprints’, thus preempting Big Brotherwho is alive and well-and anyone interested in following a user’s online habits by means of cookies or other tracing devices. If the software ever takes off, the idea of targeted banners and the like will no longer work and Web marketing as we now know it may change completely. The technicalities of the software, including strong data encryption, masked Internet addresses, and proxy servers, are hidden behind a simple user interface. After a user chooses a persona by clicking on it, all identifying information is stripped from the original request and replaced by the information created for the pseudonym. Millions of Internet users already employ pseudonyms called screen names, but in most cases a pseudonym can be traced to its real owner, often when the Internet company is compelled by a court order to divulge the information or is tricked into doing so. Anonymity is currently used by the cognoscenti to browse the Web without having to give up personally identifying information to marketers, to visit certain Web sites without risk of embarrassment, posting messages on newsgroups using pseudonyms, and for avoiding spam, the non-targeted, bulk-mail advertising pitches that advertisers send incessantly to e-mail addresses they have culled from the Net.13*This exceptional practice does not solve the riddle of whether anonymity is a human right and should be treated in a morally neutral manner without resort to measures that foster socially desirable outcomes. Governments, but also supranational bodies, should be cautious in attempting to regulate how people conceal their identities on the Internet. A rash and thoughtless regulation could prevent people from seeking counseling, expressing political opinions or engaging in financial transactions, and could impede the development of e-commerce and the World Wide Web. Anonymous communication is a traditional form of communication, with all of the human complexities that we experience in modern society (my chat partner introduced as Alexander turns out later to be Alexandra). Historically, anonymous communication has been rather exceptional. In modern society people routinely communicate anonymously when they shop or travel or-as a new genre-chat (via the Internet). The whole thing seems a little more exotic in discussions of the Internet because of the social significance of especially helpful or harmful communications, and because of the technological complexities of creating or hiding online identities. Policymakers ought

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not to react overzealously because some people have misused anonymous communications on the Intemet. If anonymous communication is used for illegal purposes, the originators of the anonymous messagesif they can be identified and apprehended-should be punished. However, the positive values of anonymity more than offset the dangers it presents. Proponents of anonymity argue that efforts to use the courts or regulations to control anonymity on the Intemet can hamper technological advancement and undermine the open exchange of information. The unfolding of the wired Intemet over the last decade has created new channels for anonymous communications. Anonymous re-mailers allow netizens, free of charge, to post anonymous messages to newsgroups or to send anonymous e-mail to anyone they wish. In its simplest form, an anonymous remailer works by accepting an e-mail message from a sender, stripping off the headers that would serve to identify the sender, and then forwarding the message to the intended recipient. Under the cloak of anonymity, ‘playfbl’ users can participate in political and human rights advocacy, engage in whistle blowing, receive counseling, and perform commercial transactions without disclosing their identities. However, anonymity also helps to protect users who take part in socially unacceptable or criminal activities because of the difficulty of holding them accountable. Harmfbl communications include spamming, hate mail, child pornography, and online financial fraud. In my view, the more anonymous communication spreads over the Net, the more checks of personal acquaintance, credibility, and references to authenticate the sender will regain the value they once had in interpersonal communication. In order to give Net users the opportunity to communicate anonymously for legitimate reasons while deterring illegal or unethical uses of anonymity, several recommendations have been aired, including allowing online communities to set their own policies on the use of anonymous communication and informing netizens about the extent to which their personal details are disclosed online. Examples of both aggressive and beneficial uses of anonymity are plentiful on the Intemet. In 1996, a student at a University of California campus caused anguish for many people by sending anonymous hate mail to an Asian students’ electronic list. On the other hand, during NATO’s military attacks on Kosovo in March 1999, special services were created to help Kosovars, Serbs, and others reporting on the war to send e-mails anonymously or to post their comments on certain Web sites, avoiding both censorship and possible reprisals.

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I think the ultimate solution is the upholding of the right to anonymous communication paired with the right to demand electronic signatures. Digital signatures use encryption to scramble personally identifying information in a way that only a trusted third party, who issued the certificate, can decrypt and read. Much of this concern for privacy stems from companies that will use digital signatures to verify a consumer’s real-world identity-destroying anonymity-and proposed laws that place the onus of damages caused by this new technology onto consumers, resulting in a much less secure system. As digital signatures are an authentication ‘must’ for proving credentials in e-commerce and public administration, the preservation of optional anonymity as experienced in the heyday of cyberspace is under serious doubt. Sources

My summation is based upon studies of the special 15(2) issue of The Information Society on privacy matters. The Information Society is an international journal whose editorial offices are at Indiana University’s School of Library and Information Science. The journal is published by Taylor & Francis Inc. Peter H. Lewis, ‘Internet Hide and Seek: Staying Under Cover-The State of Arts’, The New York Times 199. John Markoff, ‘The Concept of Copyright Fights for Internet Survival’, The New York Times (10 May 2000). Study by the American Association for the Advancement of Science (AAAS). This study is the first comprehensive analysis of how to balance the costs and benefits of anonymous communication on the Internet. The study is the result of a two-year project funded by the National Science Foundation in the USA to examine online anonymity. A description of the online survey and the project can be found on the AAAS Web site at http://wwv.aaas.org/spp/anon/ (last visited: 17 January 200 1). www.zeroknowledge.com (last visited: 17 January 2001). www.onion-router.net (last visited: 17 January 200 1).

T H E T W 0 D RI V E R S C 0 IN C ID I N G-P RIV A C Y P R E D I C AT E D TARGETING T O O L S

One legal case which is certainly an important argument in the privacy battle is McIntyre vs. OHIO (1995). The US Supreme Court wrote: “Whatever the motivation may be, at least in the field of literary endeavor, the interest in having anonymous works enter the marketplace of ideas unquestionably outweighs any public interest in requiring disclosure as a condition of entry.” Mrs. McIntyre was a housewife who, unhappy with her local school board, printed leaflets criticizing them at election time that did not include her name-thereby violating an Ohio

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election statute-and was fined USD 100. In the grand American litigation tradition, however, she fought the fine all the way to the Supreme Court and won. Although the power of the Internet is helping to create the biggest marketplace of ideas the world has ever seen, precedents abound supporting the notion that anonymous speakers and critics, when informed or notified about pending subpoenas seeking to unmask them in the context of libel trials, do not have much of a chance of hiding and quashing the subpoenas referring to online free speech. This applies equally to the authors of pseudonymous postings castigating public companies and their executives. Message board operators Yahoo and America Online were ordered by a judge to comply with a subpoena and unveil the names of a lawyer’s clients so that they could be iosmally named as defendants in a libel case. In its ‘friend of the court’ brief, the American Civil Liberties’ Union argued that speech on the Internet was unique owing to the Network’s broad reach, the low barriers to access, and the ability of speakers to promptly post a reply to an objectionable posting. In light of these qualities, the ACLU said, defamation on the Internet should be subject to special court rules or mechanisms, and anonymity should be breached only when necessary. Among other things, the ACLU asked the court to first examine the underlying complaint to see if it was sufficiently detailed to warrant a lawsuit. If the case passed that first screen, it said, then the court should consider whether any defense exists to the defamation charge, as well as require the plaintiff to prove special economic harm-all before ordering any unmasking (Kaplan, 2000). The infrastructure of the Internet is being built at an amazing pace. Still, advertisers have not yet come up with the ultimate technology with which to target audiences or determine the behavioral profiles of computer users. It is time for advertising agencies, ad networks (jointly they sell the impressions of sites with fewer page hits), and sellers of ad space to get themselves together. The people who master this market stand to earn a lot of money, and advertisers, sellers of ad space, and consumers will all benefit as a result. Beyond the indicated partnership, dynamic targeting and consumer profiling also need data to carry out their task. Evidence-based focusing of ads is the fhture distinguishing feature of online marketing. As far as current trends are concerned, not only are advertisements boosted by behavioral data, but also all sorts of customized services are predicated on generating and examining customer data.’39Without these

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real-time data online marketing would be confronted with a faceless crowd of connected netizens with no clue about how to segment their target audience. The logical extreme outcome of precision focusing is one-to-one targeting. The primary principle of one-to-one targeting is memorizing the company’s interactions with customers and sifting them into microcharacteristics. This requires an intimate knowledge of the customer’s needs based on a very special relationship between staff and clients only few businesses can afford in the offline world, like individual tutoring in some universities. Online enterprises, however, are in a much better position to carry out this level of segmentation and treat their customers as individuals. They can manage without that very special relationship. They can provide individual treatment for instance by delivering them unique commercial messages relevant to their professed interests. For example, if a site sells jewelry online, the merchant would want to know which pages people were surfing, what they clicked on, if they bought, how much they bought, and if the transaction was completed. All this information is to be conveyed to the advertiser whose message was clicked on generating all these e-commercial post-click activities. Tracking a user’s post-click interaction with the next site is valuable because it allows advertisers to note a drop-off in the sign-up process, and then based on figures generated through online reports, see where their weak points lie and where users are dropping off in the process of signing up for their service. There is an expert system called ‘collaborative filtering’, for instance, which makes educated inferences about the likes and dislikes of consumers based on comparison of user profiles in a database. There is also clickstream analysis, a page-by-page tracking of people as they surf the Net, revealing preferences and interests. People ‘reveal’ their interests by conducting searches, choosing from directory listings, following link paths, carrying out keyword searches, or by exploring particular subjects. Aggregating these navigation facts and ‘learning’ the likely responses and the motivation behind this behavior is tantamount to creating a user profile. This sort of dossier generated by artificial intelligence enables advertisers to leave behind general buys and target ad campaigns to consumers classified into specific behavior groups-such as entertainment seekers, business seekers, real estate seekers, and so on-by pinpointing characteristics and interests drawn from the observed and registered navigation and click-through patterns of each visitor. With this knowledge of evaluating profiles-ethically only

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anonymous profiles, which do not include things like names or addresses-carried out always in real time, the expert system can predict likely responses and re-direct ads or change their creatives, delivering them only to the people most likely to respond. When ads are delivered to visitors most likely to be curious about what is on the other side of the banner, the all-important click-through rate can be optimized. This enables advertisers to adapt media buying money to the ‘audience that counts’ with enhanced relevancy. 140 One American provider of online affiliate network technology and services was awarded a patent for its online profiling technology. The patent is officially for a ‘Computer Program Apparatus for Determining Behavioral Profiles of Computer Users.’ The technology compiles anonymous behavioral and psychographic profiles of individual computer users through the passive collection of data about user interactions with indexed content or time-sensitive reference information. The process defined by the patent goes beyond demographic profiling; it displays customized information to computer users in real time based on their psychographic profiles. Its tracking and profiling capabilities record user activity and preferences in respect of information such as stock quotes and weather reports. Over time, this functionality creates refined profiles of individual Internet users that can be used to target online ads more precisely and eliminate ‘waste’. In the future, a number of technologies could be combined to lump audiences together. For example, on some networks, as one visits different sites, a profile can be put together of the types of sites that visitors frequent. Then the next time one pays a visit to a site within the Network, a specific banner may be served based on one’s previous interests. The gathered empirical evidence is applied in real-time smart (distinguishing) ad provision. If applied, two simultaneous visits by two netizens result in different experiences: visitors are fed, based on their tracked record in the network, individually different ads so the Web site carries out a highly segmented, perhaps even one-toone targeting. Another example of tracking data gathering is United States Patent 6,073,241 granted to C/Net’s Rosenberg et al. on 6 June 2000 for ‘inventing’ the apparatus and method for tracking World Wide Web browser requests across distinct domains. Tracking a web browser across distinct domains in a network of computers includes identifying a first server computer with a first domain name, and a first request fiom the Web browser. The web browser is then assigned a unique identification code. The unique identification code is then conveyed to a second server with a second domain name that is distinct from the first domain name. A


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request from the Web browser to the second server computer is associated with the Web browser via the unique identification code. In this way, the Web browser is tracked across distinct domains of the World Wide Web. As a result, the Web browser can be passively tracked to identify content preferences and interests associated with the individual using the Web browser. This is the underlying technology for ad networking when Web sites are networked to show their visitors ads from a joint pool of advertisements based on the evidence of behavioral profiling. The technology exhibited by these patents marks a turning point in the way retailers drive online revenue. This type of rich behavioral and psychographic data can help online retailers dynamically offer individual consumers the specific goods and services that they are most likely to purchase. Passively and unobtrusively collecting profile information and storing it in an anonymous database helps to ensure the integrity of the data while protecting the privacy of the user. What is more, the integrity of individual users is protected through encryption that assigns each user an anonymous code. The prediction is derived from statistical inferences; consumers do not disclose their offline identity or e-mail address. Derived profiles are not retained either, they are generated and regenerated in real time at every visit preceding the actual feeding of banners. All these precautions notwithstanding nobody can deny that parts of the Gratis Economy (pre-eminently one of its subsectors, nonprofit electronic publishing) pose a considerable threat to current fragile privacy policies. Efficient advertising is targeted advertising-focusing must be based on profiling yielded by sufficient personal data. More and more data are being gathered from search words through subscriptions to purchasing records. Data management of this magnitude is daunting. As a rule, targeting methods are based on observed real behavior (site tracking) and revealed preferences. This can be called evidence-based advertising. Observation means data management. Data management involves privacy concerns. This concern seems to be the non-negligible price to be incurred (or rather reconciled with business interests) in order to realize the destiny of the World Wide Web as a direct response medium. The unfolding of this potential allows marketers to refine their creative strategies and the media to engage in targeting based on evidence. The Internet has a number of commercial advantages, even over TV or radio. People make coffee, go to the bathroom, look out the window, or read the paper when the ads are on. This cannot be said of the Internet; there is no such thing as ‘background surfing’: everyone looks at their screen while they are browsing. The ads do not always register, but

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the opportunity is there to grab their attention. Exposure time does not matter either because only a simple point is being made or the response required is only a mouse click. Many TV ads require more attention and therefore more time is needed to convince. The greatest opportunity, however, is of a different kind. The underlying covenant is to mitigate the ‘force-feeding’ of ads as experienced in offline media. Ad impressions have traditionally been of an interruptive nature mediawide. One day, perhaps, they will be domesticated and assume the character of hlly permission-prompted information. Meanwhile, when not all permissions are ‘tight’ enough (you are often offered the ‘opt-out’ condition instead of a strict ‘opt-in’), the current trend is to render ads more relevant, more focused, and inclusive in the sense of attempting to appeal to wider social groups. The deep societal penetration of communications technology means that cyberspace has infinite potential for reaching the individual-life, school, and business have all been revolutionized. Perhaps the most pervasive cultural innovation of the online world is to be found, however, in the direct marketing capabilities of the Intemet. This is in close connection with the availability of gratis services. According to my thesis, the core innovation centers on the creative explosion of toll-free solutions. Though the exclusively non-profit character of the Net is long gone by the wayside, it is still a boon for netizens. The Intemet has the potential for very accurate, perhaps one-to-one targeting. This might sweeten the (often time consuming) price to be paid-in the form of unsolicited ad banners and pop-ups-for Internet content remaining free. The predominantly free provision of goods and services is achieved by the unfolding of real-time direct marketing, that is, with the emergence of really tractable advertising. Whereas the collection and management of personally identifying information in cases of drug testing, video cameras, and electronic location monitoring pose ‘only’ ethical questions-such as respect for human dignity-in the case of online marketing there is room for a genuinely businesslike trade-off: to trade full information privacy for a better tailored service. This state of affairs makes matters more complicated. Advertising has always been the scapegoat for the evils of mass communication (such as absence of quality content, aggressive ads). Most commercials have traditionally been disseminated without too much selectivity. Audience research and program timing have played a role in the conventional electronic media, but their ability to focus will soon be found wanting if the Intemet’s marketing potential can be successfully tapped. But this is a big ‘if! The wired world’s innate promise


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is to provide customized advertisements to different people predicated on the all-pervasive measurability of user navigation and user behavior. Mass customization is the selling of highly individual products on a mass scale, such as cars. Limited editions result in individually ordered custom-made cars. This could terminate inventories and production for stock. This course of events has its parallel in cyberspace. If two people are visiting the same Web site simultaneously they will be fed different business messages. This is currently more promise than practice, but rough initial measures have already been taken: search engines and big portals already feed segmented, regionally differentiated, and so more relevant commercials to their users. Effective online advertising is moving away from branding (advertising for brand awareness without seeking precise results (such as click-through or engendered purchase) leaving the building of brands to traditional advertising media. 14’ The trend is towards sending response-oriented messages to specific customers. This targeting is predicated on user data from the Web server environment-mostly browser and domain data. Advertising agencies target their commercials in order to turn more users into customers, that is, to get a higher click-through rate for their ads (leading eventually to a higher sell-through). Objectively, this should lead to greater consumer satisfaction with commercials. In the self-perception of the advertising industry, with smarter ad placement systems drawing on user demographics, ad serving adjusts ad placement decisions to increase the average click-through rate for a web site while still giving each sold ad a minimum percentage of impressions (once a creative is prepared it wants to be sold, to be matched with some audience). Objectively, this is likely to reduce the interruptive character of commercials. Commercial ad serving technology in principle allows advertisers to target by domain, country code, hardware or software configurations, or IP address. Both do a fairly good job of targeting by country, so visitors-participants in a multinational campaign with third-party-adserving-will see commercials in their own language. Web publishers are increasingly realizing that it is not enough to deliver an audience: instead, they must also hold an audience for long enough to absorb advertisers’ messages before moving on. Web publishers’ ability to allow users to personalize their experience at a given site more completely or to participate in a more hlly developed community will dictate their ability to attract advertisers to these sites. A generic ad on a low quality content site tells people that you want to be lost in the crowd-and this is only rarely what a netizen intends. If consumers are

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willing to help marketers to create an environment where advertisements are more discerning, they should above all be ready to accept cookies. This, of course, is akin to leaving behind traces like an irresponsible online-exhibitionist. This state of affairs is a clear indication that there is room for policymaking to relieve consumers of this responsibility-that is, to choose between privacy and isolation. Isolation in the sense that one cannot reap the advantages of ad targeting by media owners. A browser can include a feature that will allow people to choose to share their browsing history with their provider. If these cache data are then compiled into a database to come up with an extensive path-history on what is popular on the Inten~et,’~* the compiling provider will have a comparative advantage over competitors. Additionally, these records can be utilized to refine a search engine’s capabilities to help find more attractive sites with more relevant content. For example, as we visit different sites some networks can build a profile of the types of frequented site. The next time a visit occurs within the network, a specific banner may be served based on and appropriate to revealed previous interests. In the 1998 Christmas campaign for the first time consumers encountered discerning advertisements in the USA. Theoretically, ads could even be tailored to people of different religious denominations, just as religious and other holidays can in principle be taken into account in the presentation of products.143 In the case of dial-up connections static IP-addresses are a rarity nowadays; most Web spinners are not owners of their IP address. They are instead provided with so-called dynamic addresses: if you wish to visit a restaurant you do not take your own knife, fork, and spoon along. Thus most online access providers utilize a smaller batch of IP addresses by dynamically assigning the numbers based on demand when people log on to their network. Dynamic IP addresses prevent outsiders from accessing one’s computer through a modem, which-and most people usually forget this-are two-way devices. Dedicated IP addresses would make it a lot easier for ad servers to feed discerning advertisements; however, developments have bypassed this state of affairs because demand for IP numbers is growing rapidly due to the Net’s evolution as a market place and a meeting place. What is more, soon cars and household devices endowed with a processor will require their own IP address to communicate with the owner and each other. In contrast to dial-up connections, broadband services such as cable or ADSL are more predicated to function on customers’ own dedicated IP address numbers. In these cases cookies are not the sole vehicles of liaison.


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Registration is always akin to data collection with a possible spin-off for marketing purposes. Technically, gathering more data on more people makes for improved profiling. As far as the technology of real-time site tracking is concerned, software innovations are occurring at such a breakneck pace that one is led to the conclusion that evidence-based online advertising is nowadays the cutting edge of technological development . 44

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Box 8. S i t e Tracking The following types of information are usually tracked: traffic patterns on a site (site and page volume, popular site areas, common visitor paths); unique characteristics of visitors (countries, languages, operating systems); technical information to help optimize a site (browser usage, monitor colors and resolution); how people find the Web site (referring links and banners, search engine usage and keywords). Of interest to marketers, software provides a search engine report showing the relative percentages of each search engine used to find the member’s site. Reports also include keywords and key phrases used by the visitor arriving via a search engine. A typical online survey methodology for measuring the effectiveness and appeal of Web sites works as follows. A pop-up window is deployed to intercept randomly selected Web site visitors and collect their opinions concerning a site’s ease of use, visual appeal, and overall content, as well as to obtain basic demographic information. At the start, researchers work with organizations to study traffic and select intercept points that will yield a proper random sample. When visitors reach the chosen point, a pop-up screen offers them the opportunity to participate in the survey. Visitors who agree to participate are linked to the pollsters’ site to complete the survey, and are then whisked back to the intercept point. The entire process takes just two to three minutes. Once a minimum random sample of 200 visitors is achieved, the researchers compile the results automatically, then prepare a report summarizing the key findings. Let us use an example to illustrate the process of quantification. Suppose the Webmaster intends to create a personalized experience for each visitor, he needs to know how people surf

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on a particular Web site. If the site has only several dozen visitors, this is possible manually. However, if it has 10,000 visitors each month, an automatic analyzer is required. First, it determines what information is needed and creates the variables. Suppose the Webmaster needs to know how visitors travel around the Web site and how long they stay at each page. A timing variable is necessary for each page and a path variable for each link; for the advertisers’ sake the Webmaster might also want to know their banner-click behavior, so there is the need to create a banner-click variable for each banner on each page. Suppose there are 500 links, 100 pages, and three banners on 10 pages (a very small Web site), the result is the need to set up 630 variables to handle the quantification job. Of course, more variables can be created: does the Webmaster want to know where and when a visitor comes to the site? How many times he pays a visit? Now the real trouble comes: how to infer a visitor’s surfing preferences from these 630 variables? From how many of these 10,000 visitors is enough data available to adequately infer their likes or dislikes? Do they change content all the time? Do they add new links each day? How do these influence a visitor’s surfing routes? Source: Superstars Updates to Version 2.0, 12 February 1999 by Beth Cox 1nternetNews.com Correspondent, Advertising Report Archives.

Tracking services offer both free and subscription options, and members can log in 24 hours a day to see up-to-the-second graphs and reports about their Web site traffic. Dozens of reports are available on a realtime basis. Of interest to marketers, new versions provide a searchengine report showing the relative percentages of each search engine used to find the member’s site. This report also includes key words and key phrases used by the visitor arriving via search engine. The plug-ins report tells site-managers what percentage of visitors use certain plugins, important for deciding on a multimedia strategy. The use of frames on a Web page-specifically putting banner ads in a frame so that ads are always on the page-is widening in online advertising. The industry seems to frown upon this solution because it is too easy to scroll down the screen and never see the ads. Images, designs, and streaming content that is shown in a frame can enhance an online dialogue and exchange. It depends on how the content frame is presented. The


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frames help enhance the dialogue and exchange of information. Content in the frame may correspond to the user’s underlying experience of the Web site. As people are sensitive to this type of presentation, it is advisable to ask users for permission before showing or playing a frame filled with content. Frames do represent a different way of showing banner advertising. They should not be used as interruptions. Frames should be part of an opt-in solution. They should be experienced as the outcome of a dialogue that advertisers explore with potential, charted customers. The beauty of an opt-in advertisement experience is the sense of discovery and relevance that comes when the user makes the decision to live with evidence gathering and tracking. In this environment, frames, pop-ups and other developing uses of technology may be appropriate, but only if they make the optin experience more insightful, compelling, and engaging. POLICY DELIBERATIONS

The Internet generates billions all over the world, at least one-third of which is related to e-comerce. That proportion makes the US Internet economy the eighteenth largest economy in the world. In order to facilitate a fair deal between e-commerce and netizens, minimal standards of privacy must be defined and the compliance of the larger Web sites with these standards must be internationally enforced. On this basis alone can we start thinking about how customers could be empowered to make full use of the numerous anonymizing/privatizing possibilities of cyberspace to get some value in return for their relinquished personally identifying information, if they wish to enter the tricky domain of the Gratis Economy at all. 145 Solutions should address consumer concerns about information collection while balancing the many technologies and benefits of e-commerce. Great forces are being deployed to search for an answer here; as far as the details of such a solution are concerned I would emphasize the need to preserve as much of the gratuitous and non-profit nature of cyberspace as possible. The misuse of personal data poses a risk to individuals which occasionally may culminate in harassment, spamming, or even identity theft. Preserving what we have when we first enter cyberspace is the minimum we can expect in terms of Net privacy. Beyond this minimum, effective legal and technical means should be developed to allow data subjects to define, commercialize, and control the use of their personal information, ranging from medical data through credit card records to airline reservations. Naturally, there are more ambitious privacy pro-

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grams, too. Many firms pay to secure their communications, hiding their otherwise indelible traces, hiding the serial numbers of computers, and so on. As company e-mails, for instance, are about as secure as postcards, executives may want the same safeguards as they get in any other medium. The minimum program can be likened to public health care, in the sense that, just as everyone is inoculated against the most contagious diseases, in respect of privacy we can also distinguish a minimum level that is to be regulated and sanctioned collectively and in a mandatory fashion. Individual needs of consumer privacy, such as firewalls sheltering companies’ inner online transactions, are beyond this minimum level. It is therefore a matter for government commissioners. Enhanced private programs, on the other hand, will be taken care of by data protection officers on the corporate payroll. The genuine difficulties lie hidden in between. Privacy advocates acknowledge the seductive power behind the logic of giving up a basic liberty in return for a safer environment. The Net lends economies of scale to individuals-even to ‘infosec’ criminals. A particularly creepy aspect of cyberterrorist attacks is that they come from the machines of unsuspecting third parties which have been compromised by the attackers-that is, some people’s poor security was used to attack third parties, whose security is not compromised but whose machines cannot function because of the volume of traffic sent their way. Thus, we cannot merely say that the victims deserved it because of their own loose security. Most of the ‘public health care’ solutions suggested for such security problems (and future ones) involve strong government regulation and surveillance. Many of the reactions to the solutions justifiably point out the dangers to individual freedom if we create a Police Net-the virtual equivalent of a police state. But we do not necessarily need to make a choice between security and freedom in the terms of the famous Franklin citation: those who are willing to forfeit privacy in the name of security deserve neither. The pattern to follow is what the insurance industry and liability laws did long ago for, say, fire safety. It is perhaps more fruitful to look at it as a kind of ‘public health and safety’ problem, and to ask how we can improve ‘public hygiene’ in matters of cybersecurity.

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PREDICTIVE PROFILING

Box 9 . Profiling Techniques Profiling techniques work as follows. Using data from as wide a variety of sources as possible, including clickstream (personally non-identifiable) data, client databases, and third-party data from companies, the artificial intelligence creates profiles of every individual who enters the site. In the background, software takes the third-party database information and matches it up with any registration information or cookies on the user's machines, assembling for Web marketers a pretty good picture-and quite a long electronic dossier at that-of what type of person is coming to the site. A responsible firm assembles only opt-in and anonymous profiles without names and offline addresses. Besides collecting and reporting on the people who are using the site, the targeting-tailoring system allows marketers to shape commercial content specifically to those personal profiles. Marketers come up with content and rules regarding that content, and enter it into the customizing software. The result: if a customer with a specific profile clicks on a certain page, that action will trigger the matching content to appear on that page. Like a profile-driven targeted banner advertisement, the right content shows up in front of the eyes of the right consumers. The final piece of the puzzle is assessing the response to different offers and fine-tuning the targeting system to be able to maximize that response. Therefore, part of the solution is reporting and analytics so that marketers can, in real time, change offers as needed. The labor-intensive part of all this, of course, is deciding what creative to use and what to feed to whom.

Profiling-related practices are perhaps the thorniest issue when it comes to rendering online communications genuinely interactive. The prevailing thinking on fair information practices backs an opt-out rather than an opt-in approach to online profile b ~ i 1 d i n g . lThe ~ ~ presumption is that visitors should be tracked online unless they consistently object. Many privacy advocates vehemently object to this approach claiming that most

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people need these tracking cookies like they need a telephone survey I can nevertheless calling in the middle of a weekend family endorse this practice in order to let the covenant unfold, provided that one precautionary measure is taken. The marrying of non-personallyidentifiable, previously collected data (possibly collected offline) with personally identifiable information should never take place without the consumer avowedly opting-in. Last but not least, consumers should be given real-time access to all the information gathered about them, and network advertisers must make reasonable efforts to keep those data intact. It remains to be seen whether online profiling can in fact deliver on its intriguing promise to feed pertinent advertising to interested experimenting consumers. In Box 10 I present a tracking mechanism that holds out the prospect of delivering the covenant of artificialintelligence-aided netsurfing without suspicion of abusing privacy.

Box 10. DirectHit This search engine-claiming to learn from the search experience of millions-is based on technology that analyses the sites selected by infonauts. After proposing a choice of sites in response to a particular search, the DirectHit software keeps trace of which offered pages are actually visited by users. It stores this experience, drawing on the judgment of the committed human beings, re-using it when other visitors make the same request. Today, more than 60 percent of infonauts have access to its results through such partners as the best-known search engines.

Every effort must be made to inform Internet users when they are fed a cookie that will start to trace their surfing activities, even if their browser is not preset to do this. Once the marketing database-in-themaking identifies somebody, it can hoard information about the use of the Web garnered through its unique identifiers, called cookies. Companies interested in building a personal profile assemble an increasingly detailed dossier of a customer’s online activities, movements, and actions. As time goes by, Web sites will make changes to the deployed cookie to reflect what they know about the customer’s preferences,


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choices, and taste. This knowledge, of course, will be an understanding gained by statistical interference-not directly accessible to those concerned. In my view, however, Web sites must make it possible for customers to view all assembled personally identifying information as it is, whether picked up in the course of diligent tracking within a framework of affiliated networks by third-party profilers or assembled and utilized only in-house.’48 I could accept a compromise of sorts: not to proffer customers their raw statistical data but a profiled picture derived from the records. This would still satisfy interactivity and equity. If cookies hold the promise of customization, profiling technology is acceptable only if permissionbased and transparent. Why not allow companies to merge online tracking data with offline behavioral patterns when there is the certainty that this build-up can only proceed with the feedback and control of those concerned? Perhaps most customers would never ask for their profile because they are satisfied with the ads that play directly to their consumer interests and buying habits. Others-unaware of the fact that our backgrounds are increasingly searchable and our online behavior monitorable-may wonder how ‘outliers’ could find their way into their shadow personality and demand correction. (Again, others will want to visit one central online location and see their personal records from companies, government agencies, credit bureaus, and hospitals.) As a logical consequence of this technology assessment, companies will only rejoice if a customer tries to rectifl some details. Such good profiling practices alone can help pioneering companies to grow in the face of mounting objections from vigilant privacy advocates. This level of transparency may attract consumers and mitigate their ingrained fears. As regards the fears of consumers, see Box 11.

Box 1 1 . Gallup Poll on the E x t e n t of Privacy F e a r s Queried right after the intrusion by online vandals into flagship Web sites-dubbed cyber-terror-in early 2000, nearly threequarters of US Internet users said the Internet had improved their lives, but around half continued to have serious privacy and security fears. According to the results of the poll, only 9 percent of users had been affected by the recent denial of service attacks on major sites, but 51 percent would henceforth be less likely to give personal or financial information online. Al-

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most 50 percent of respondents said they had purchased online, but only 22 percent said they felt completely or very confident that their credit card information was safe, while 32 percent said they were somewhat confident. Other users remained wary of giving their credit card details to an e-commerce site. Of the Internet users polled, 95 percent said they went online to find information, while 89 percent did so to send and receive e-mail. A good 45 percent of users said they shopped online and 21 percent visited chat rooms. A majority of users thought the Internet was a better use of time than TV (62 percent compared with 25), but 59 percent of respondents thought that watching TV was more enjoyable. One-third said surfing the Net was more enjoyable. Source: http://www.nua.ie/surveys/?f=VS&art-id=9053 556 1 7 Full version at http://www.gallup.com/poll/releases/prOOO223.asp

There is another daunting public information task for Web publishers practicing cross-site tracking, and one which would seem to be more difficult than making the operation of cookies understood. It is important to remember here that for an advertising campaign to be successful the consumer must have faith in the ad message. If a consumer does not have faith in the communication channel through which the message is transmitted, this can only have a negative effect on their responsiveness. Consumer faith in Web advertising has been seriously damaged by waves of scandal. While online targeting tries to convey pertinent banners to willing consumers, if those consumers do not have any trust in the message the adverts simply will not work, no matter how well targeted they are. By engendering consumer trust the average netizen, pinpointed for inclusion in the data-mining network, must be helped to understand who is serving the ad and why, of all adverts, that impression has been fed. This requirement will at any rate slow down the assembly of databases. Bypassing this precaution, however, runs the risk of a backlash against site publishers. If we use a credit card in three places, the credit card company has the same database available to it, as would one ad firm if we visited the same three sites.'49 If we do not want to be tracked offline, all we can do is to use cash; and on the Net in order to avoid trap and trace practices, we can disable cookies and opt out of data collection schemes if offered. The latter is still not a practice based on informed consent-the only permissible kind. A credit card

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company is unable to act on the data available for legal reasons. Another pending American federal law has been conceived to prevent cable and satellite television providers from tracking and selling records of what viewers watch. This is necessitated by up-and-coming TV technology which can also track viewing habits via digital set-top boxes to provide targeted advertising to individuals. Electronic publishers may easily find a similar law emerging against the same practice on the Web. The stage is set for the long arm of the law to step in and take hold of the situation. Later on, the business model of online profiling must be unambiguously predicated on an opt-in instead of the currently pervasive and difficult-to-implement opt-out. That means that it is not enough to announce a Web site where disillusioned consumers can sign off. In fact, many consumers will not give branding-intent advertisers many points for taking up their precious time and making guesses concerning their surfing and buying behavior. They occasionally do not want to interact with the offered brand any more than they absolutely have to-unless the advertiser delivers some compelling reason as to why they should pay attention. Opt-out is therefore not a choice that can always be implemented. Opt-out is not fair to consumers with varying degrees of Internet savvy. Turning cookies off is also not an honest option for a fair ride through the Net. (At the same time, a satisfactory measure against spam could be a sophisticated identity composed of various e-mail addresses all forwarding incoming messages to a single center.) Consumers may not always realize that when a company says their personal data is going to be shared with a third party, it in fact means they will lose control over that data. Consumers have the right to assert their control and this ought always to be done through opt-in alone.'''

Tracking Netizens must be made aware of the fact that they are being monitored. This is an essential part of making sure that this computer-aided advertising method is a service offered with a bundle of costs and benefits. Actually, there are three steps in evidence-based marketing, each of which might be disturbing to those in search of absolute tranquility in informational privacy. The first step on the slope of bad feeling is the creation of a system to track individual identities and actions online by primary gatherers. These are sites we voluntarily visit and may well stop at again with some frequency, and the cookies provide the site with some navigational assistance in delivering content, and so on, to us.

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Step two is when a member site within the Network discloses visiting identities to the advertising agency or other secondary gatherers. I include search engines here: while they may provide a service, they do not really provide us with continuity of content. Do they really need to place cookies on our hard disk? If and when we return there, the next search is very unlikely to be related to a previous excursion. Therefore the cookies are of no benefit to the customer in the absence of value added services. Step three is the tying of aggregated online data to offline shopping behavior. This is the business of the tertiary gatherers such as Engage, Doubleclick, Flycast, and so on. These ad-serving companies aggregate our search and destination activities in a mega database in order to sell that information to additional advertisers in a convergence of the online and offline worlds.'s * The information is captured surreptitiously without regard for consumer privacy. Even if some techie-optimist would find this usage rather innocuous, there is no answer to what happens to those data files when, after a number of years, they constitute a sizeable dossier on us. With these three steps increasingly compromising privacy the pieces of a comprehensive tracking system fall into place. I am not sure that we are in need of a full policy mix here; I think the system of online profiling could well operate without the third element. However, I do not recommend prohibiting it. What should be prohibited outright-on the assumption that some companies would dare to enter this as yet uncharted territory-is the collection of offline medical, financial, and sexual behavior. At the same time, I am convinced that companies can be trusted to inhibit the tracking of children's surfing habits. Let us make it clear to privacy-unconscious consumers what deal they are being offered in matters of digital privacy.'s2 The worst offer: when arriving at a run-of-the-mill site we typically encounter a small pop-up window asking us to register and to receive something wonderful-a coupon, an e-zine, or a sales flyer. This blatant name-generation is certainly not a genuine transaction; I can only liken it to the glass beads offered to the natives in return for hospitality when colonists first arrived on an island. Likewise with sites which block all content unless you register first. People will type in anything to see what's in there, and if they like the content and become a regular, the site now has a good customer but a bad dataset. One step towards fair incentivizing looks something like this: if a site has desirable content not easily accessed elsewhere, and particularly if there is a useful newsletter associated with


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it, the requirement of an e-mail address is fair, the rule of thumb being that the more services are offered to visitors in return for their personal data, the more data mining will be tolerated. All data gathering should be based on permission and the routing of these data to the end user should be revealed in the form of a business model statement. I think business model statements could take over from currently inadequate privacy statements. Even at this level of ‘high fidelity’ permission marketing, consumers will need to display a great deal of cool judgment and counter-marketing behavior not to forfeit their endowment of privacy. In sharp contrast to certain privacy watchdogs, I am leaning towards the judgment that there is room for a fair covenant here to maximize the benefits of tracking for consumers through relevant offers and ads, while diligently protecting privacy in a way that counteracts any bad feeling. Privacy advocates contend that marketers are in the process of turning the Net into a data-mining automaton. I think, at the same time, that the data-gathering machines of the online marketing business are fledgling tools in the fight against misappropriation of personal information, junk mail, and mostly interruptive telemarketing. Evidence gathering is the mover and shaker in the growing trend of online advertising. This often means the sharing of personal data among affiliates of a network; company mergers with entrance into new marketing territories and the steady build-up of ever-bigger databases including each user’s name, address, and retail, catalogue, and online purchasing histories. There is no cause to fear the emergence and growth of these databases even if they might grow global and include, next to surfing records, personally identifying information and shopping habits, provided that their assembly proceeds according to set methodological rules based on the logic of opt-in. Regulation must not succumb to the interest of marketing firms in building up their databases as rapidly as possible: regulations hindering efforts to convince consumers to enter an advertising network will again considerably slow down the build-up of the information infrastructure necessary for online profiling. However, there is no cause for concern as no competitive disadvantage is accruing here for latecomers: this gambit must enhance the comfort and better serving of ready-to-play consumers. Privacy advocates generally oppose opting-out, saying that the practice is only a smokescreen for business. They allude to a woeful America Online policy that has again put privacy issues on the front burner. America’s leading access provider committed a blunder by starting to send e-mails to customers informing them that the privacy preferences

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they signed up for a year ago-the ones telling the company not to collect or distribute information about their accounts or online habitshave ‘expired’. AOL said that if subscribers want their preferences to remain in place, they must again fill out what is known as an ‘opt-out’ form. If they do nothing, information about their accounts and Web habits may be distributed to marketers and other interested parties. Another complaint of activists is that netizens must remain constantly vigilant to keep their online activities out of the marketing loop. The burden, they argue, should instead be on the industry. I think there is a great deal of exaggeration in this argument as netizens do their transactions in an open forum and not in their living room. When surfing the Net one is, to a great extent, a consumer. There is absolutely no remedy for escapist nostalgia here. A consumer must, in his own interest, read the privacy policies and then choose whether or not to enter a site. For consumers, opting-out means, generally, filling out a formeither online or on paper-stating an unwillingness to have personally identifLing information distributed. Users can opt out of lists used for sending spam e-mail, having logs of their online travels sold to marketers, or having information about what they buy online disseminated. When accepting the industry’s right to make itself felt in cyberspace, the general stance of keeping marketing pitches at arms’ length must also be honored. The industry must understand for the sake of consumer comfort that an opt-out declaration is irrevocable. This implies that there is no justification in bombarding seclusion-loving netizens with messages to reaffirm their wish. There is a significant obstacle to the requirement of opt-in. Realistically, how many average consumers who are not advertising addicts will really take the time to go through the time-consuming process of signing up for ads unless they are paid for it or unless they really perceive some sort of personal benefit. The consumer will only do something if he perceives the likely fblfillment of a current want, need, or desire. My recommendation is to accept this even if it slows down the building of an advertising network and audience. But this service is not part of mass communication and branding. This is a personal service and advertisers should offer pertinent advertisements as a customized consumer service. This may take time but no costs will be incurred. This precaution is especially advisable because ambitious efforts are under way to protect online anonymity. Firms are taking steps towards devising a standard that will foster untraceable communications and Web browsing for Internet users. Currently-as already mentioned-commercial products


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such as Anonymizer.com and ZeroKnowledge’s Freedom client permit anonymous or pseudonymous Net-surfing. This aims to create standard protocols that would be more widely adopted and not tied to one company’s products or services.

Online Targeting A further stumbling block in the way of smooth e-commerce is the very notion of online targeting. The online targeting covenant (‘when online, I will come across messages that are tailored and pre-selected for my special perusal’) is not yet filly functional. The profiling/privacy conundrum is far from a suitable solution and gluttony is still hampering the building of selected and trusted relationships. Greed is always a feature of the early stages of a particular business activity: customization and targeted selling should belong to the virtues of good salesmanship. Salesmanship nowadays is a genuine rarity, usually encountered only in local stores. One problem is the limited scope of the e-advertising market. According to the eAdvertising Report of 12 April 1999, US companies spent USD 1.5 billion in 1998 on advertising on the Internet, while the European ad market was only USD 132 million or 9 percent of the US total. The main stumbling block, however, is the average consumer’s lack of understanding of the issue. For example, when the public find out about what they consider invasions of privacy, such as collecting consumer information or monitoring online activity, they take action without restraint or readiness to compromise (Culnan, 1999). As Hine and Juliet point out in their study based on empirical research, almost all of those interviewed were able to draw on a repertoire of concerns about the use of personally identiqing information when prompted specifically to discuss privacy issues in relation to shopping (Hine and Juliet, 1998). Another study’s findings (Katz, 1996) sharpen our understanding of how ordinary people behave in matters of privacy. Under the title ‘Understanding Communication Privacy: Unlisted Telephone Subscribers in the United States’ the author conducted a national survey of over 1,500 US households, identifying demographic variables that can best predict subscription to unlisted telephone services. The survey was conducted face-to-face among a stratified random sample of households. The demographic variables that most contribute to concealed subscribership are: (1) being African-American, (2) not owning one’s home, (3)

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metropolitan residence, (4) multifamily dwelling, ( 5 ) lower education, and (6) low income. Characteristics commonly thought to be important, such as being young, female, having kids, or being a professional or a manager, were not statistically significant variables when considered alongside the others. The findings suggest that (i) people are slow to divulge data, and (ii) privacy of the kind manifested in the unlisted service may be valued by subscribers not only as a way of cutting problem calls (spam) and reducing outsider accessibility. Although these topics are now well to the fore in public awareness, a practical understanding of the privacy issue-fluency in ‘webology7cannot be taken for granted although its existence and manifest effects must be the sine qua non of successhl targeting operations. What is assumed here is no less than that consumers are being offered a tacit agreement which most people are not yet ready to understand or manage in all its of consequences. For instance, few netizens can be expectedwhen weighing the pro and cons of entering the Gratis Economy-to prepare for the consequences of company liquidation. In such cases hoarded personally identifying information is one of the few liquid assets. This brings with it the great temptation to sell it off. Consumers can only decide whether or not they want to give up their privacy in order to be granted a premium ad service if some basic legal privacy protection is put in place.’53 The desire for digital privacy cannot yet be fully reconciled with the desire for less interruptive advertising. Companies are spending large sums of money to perform data mining operations on inaccurate data and are using inaccurate data to target advertising to consumers. This often results in sending the wrong message at the wrong time with the wrong offer. In the absence of voluminous personal data and fine-tuned consumer profiles based on revealed preferences and experience rating, focusing outcome is still rather clumsy. Most observers are convinced that fears of losing privacy and of seeing our address and other personally identifying information spreading over the Intemet are the main reason people decide not to go online at all and that among those who still venture to do so, only 3 out of 10 give valid information when asked to register at a site. This leads us to the next underlying question: how valid is user submitted registration information? This belongs among the great enigmas of the industry. If an advertiser is paying 30-50 percent higher rates to be able to reach heads of households (the operational proxy is still ‘males’), aged 55 and over, who own investment portfolios and have a


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median household income of, say, 90 thousand pounds or higher (in the UK), advertisers can be never fully convinced that they are really getting what they are paying premium rates for if the information is user submitted. One would imagine that this possible margin for error would have a devastating effect on site-provided audience demographicscommon characteristics that allow for population segmentation by age, gender, postal code, and income-and psychographics (common psychological characteristics that allow for population segmentation by opinions, attitudes, and so on) in media kits (Web sites report their registration results in statistical terms, describing themselves as media products; these reports are published in so-called ‘media kits’ slated for media buyers in search of good exposure for their advertising clients). In fact, these operations are developing, tools are being sharpened, and focus is being improved all the time. Still, what action can be predicated on the validity of registration data and validity of media measurement results is a riddle for those outside the proud online marketing community, an ensconced riddle wrapped into an enigma. The privacy implications of modern technology will soon take us to the level of public consciousness attained long ago in relation to environmental issues. Nearly all branches of e-commerce raise privacy issues, from search engines to the personification of a portal: all advertising operations can be made less redundant by feeding them background knowledge gathered on users by artificial intelligence. This is conventionally done either by requesting personally identifying information explicitly or by observing user actions and putting the captured data into a model that predicts users’ individual needs. Can Intemet services all over the world be trusted to use this information responsibly, to stem the mounting tide of data-related snooping and forgo outright merchandising?Is4Is procurement always based on deliberate user agreement or is it rather some sort of ‘data-rape’? These serious questions are to be addressed because they will not go away: data-intensive online services promise such added value that I cannot conceive of prohibiting them only because some firms abuse their position. Neither prohibition nor regulation aiming at privacy protection are viable options. The latter would disrupt the flow of information so critical to the success of evidence-based online marketing. The woes of rampant commercialization can be expressed succinctly as follows: the Internet is emphatically a ‘pull’ medium-many perceive the very idea of push marketing as alien and inappropriate in this context. Its unfettered pursuit is certain to disaffect all Intemet users who

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have learnt to appreciate anonymity and privacy, the discreet charms of cyberspace.

Customization Let us not confuse ‘customization’ with ‘personalization’. The opportunity for personalization has always been there, from providing a knowledgeable person to run a consumer hotline to responding quickly to consumers’ letters. What the Net can provide is a deeper and richer product story for those consumers who have already been ‘seduced’ by brand-awareness-generating mass communications. This achievement is tantamount to changing content into communication (interactivity) and consumers into netizens. Used appropriately, it also makes it possible for consumers to feel that they are interacting with their brand. This feed-back certainly builds loyalty. However, in order to personalize this relationship, personal intelligence and personal interaction are needed. In medicine, injections are becoming personalized to the extent that one’s immune system remembers earlier encountered bacteria. The datadriven advances of online marketing promote customization. Cyberspace as an avenue of two-way communication can get beyond mass culture through customization alone. How can the enormous potential of customization be reconciled with digital privacy? The first, and I think most obvious, method is to keep cookie data in-house at the site where it was collected in the first place. The relationship between a consumer and a site-a site that has personally identifLing information about that consumer-ought to be strictly confidential and should not be sacrificed to benefit a telemarketing or direct mail campaign. A Web surfer should not have to worry about where his personally identifying information is going and who may or may not be using it. If confined to site level, advertisers can still carry out appropriate online targeting. To allow the same thing to a network would be a courageous step, but one necessary for better results. At the same time, there is the growing danger that information will leak because it cannot be guaranteed that a network of sites or companies will not go out of business and sell off its assets. Sites, like businesses in general, do not share information gathered from users outside the organization, and businesses do not sell or share that information with third parties unless required to do so by law. Transgressing this simple rule with cross-marketing agreements is something really extraordinary which must be treated with special care. I illustrate this with the follow-


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ing offline example. When visiting an e-commerce Web site and ordering a book, nobody minds that it is also creating a database of past purchases. The fact that such sites can serve up recommendations based on revealed preferences is a beneficial feature which adds unexpected value. It is the equivalent of visiting my local antiquarian book store and being told by the shop assistant that he has just obtained a signed first edition by my favorite author from another bookseller. He had made a note of my previous purchases as a customer service and referenced it when I entered the door. What many people may perceive as problematic, however, would be if he, additionally, had written down my name, apparent tastes, and past purchases, attached a picture of me, and circulated it to every bookstore in a wide radius. The moment he does something like this, he ruins the relationship and loses my trust. Thus the leap towards networking is decisive and critical and cries out for the imposition of guidelines. The pre-eminent guideline is preservation of the existing level of anonymity in Internet usage. I am referring to the fact that personal identities can be identified only exceptionally and only as a last resort (offline personal identity only in case of one’s being suspected of a crime). That is why the bringing together of online and offline data by DoubleClick has stirred up such a controversy. Actually, there is no need to collect personally identifiable data about users at all when it comes to managing advertising traffic and delivering software applications within networks. User information is not the same thing as personally identifiable information. I tend towards a lenient approach provided that the following additional precautionary requirements can be met. If cast-iron precautions could be put in place I could even imagine using this impeccable advertising practice as a persuasive argument against the more far-reaching mandatory initiatives on data protection. In an advertising network the acquired customer information should be used to deliver what the customer wants, not for reaping extra revenue by selling to junk mailers, telemarketers, and spammers. People may grant concessions in exchange for remembering their taste in movies, but few want that tied to their political views, street address, or other personal details. Ad subjects should be able to make instant changes to the records on which the feeding of networked ads are based. Consumers may wish to view infractions by entities that have misused that data and ‘punish’ them by withholding it from them in the future. At the same time, consumers must be empowered to ‘reward’ entities they like with deeper

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knowledge of their tastes and spending habits. This is tantamount to using my personally identifying information as currency around the world, spending it where I want, when I want-when I know as much about those entities as they know about me. Any information the affiliate network collects about us should belong to us. Everybody should have the right to edit, delete, or copy the assembled data at any time. Also, this co-editing empowerment is the only precondition of preempting selective targeting, discriminatory singling-out, stalking,'55 and racial profiling. Mere personalization is not enough to forfeit our personal data for good. Without safety precautions we can easily find ourselves confronted by the theft of personally identifying information. Online data thieves are to be dealt with using the time-honored methods used with offline thieves. And after everything else, as a last resort, we should also have the right to take all of the data, migrate, and open a new account with other banner serving agencies. These are extremely strong preconditions. Taken together with our recommendation that the build-up of the master database should be slowed down in order to preserve its confidentiality, the preconditions may seem harsh for a business person trying to serve his clientele with better advertisements. In the long run, however, this alone would seem to be an enduring and robust policy model. As this position is in full consonance with the relevant EU directive,' 56 my recommendations anticipate short-lived validity for 'safe harbor' principles and full adoption of the stricter European guidelines by the USA.

4. GRATUITIES E M B E D D E D IN B U S I N E S S P R O C E S S E S SETTING THE EXPOSURE THRESHOLD

In this chapter I consider whether cyberpublicity-the contemporary equivalent of philanthropic fundraising and cause-related marketingcan serve as a sustainable new source of revenue for the dot-org sector. In other words, will the avenues of cyberpublicity contribute to the livelihood of the non-profit sector and thus to the extension of the overall Gratis Economy or not? At the end of the 1990s, the New York Times tried to offer membership privileges and charge a fee, but failed and regressed to the free provision of parts of its content in return for publicity. They are now


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operating on the principle that online sales and advertising to an affluent audience, complemented by manifold other streams of revenue, will generate more income than a tollgate. The New York Times is a giant in its media category but perhaps not an omnipotent one. As to the smaller fish, dwindling streams of advertising revenue can in many cases keep sites free and still afloat. Some companies may even pay a dividend to their owners; other less visible ones attracting less traffic make do with opting for a non-profit mode of operation foregoing traditional ownership and equity. In what follows I weigh the pros and cons of whether technological innovation such as sharpened advertising focus and evidence-based marketing, which are so conducive to the rediscovery of online niches, can be harnessed to widen the advertising supported business model-that is, whether the publicity threshold (the minimal exposure acceptable to advertising agencies) can be expected to fall. If it can, this seminal change could expand the revenue streams to the advantage of non-profit publishers and the non-profit sector in general. What follows is an analysis of the business opportunities in advertising support inherent in the Net. How can one serve a smaller professional or specialist audience with no potential for megatraffic, but with the inspiring focus of a community? Forging a deal with an advertising agency and utilizing technological innovations, amateur musicians offering their work to the world-famous MP3 .com Web host site,’” can create banners, upload existing ones, store them, place ads, check on campaign reports, and be automatically billed. This is called ‘media buy’ in marketing. Professional or specialist content owners in general can thus actively promote their artifact in a cost-efficient manner. By making promotional and marketing technologies available, content owners have the opportunity to make money. By following a few simple steps, state-of-the-art promotional and marketing tools can be affordably and effectively used by content owners who want to enhance their exposure-and their revenue. The idea-called niche marketing-enables Web site publishers to sell ads to small businesses that would otherwise be too small to attract publishers’ attention. The partnership allows musicians to buy in a do-it-yourself manner through a Web interface, freeing up the publishers’ resources. How much can smaller sites oriented towards ‘specialists and professionals’ (in the most general sense of scientists, artists, lawyers, and so on) discover about their audience? Smaller sites that cannot generate enough traffic to rely on the rule of large numbers to drum up respondents can rely on their customers’ increased readiness to divulge market-

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ing data. In this way, smaller sites can obtain bettedmore data on their site visitors. Let us quote from the experiences of a rock climbers’ Web site.”’ The first thing to do is to send out a survey to various contacts who are into that profession in order to gauge interest and to see what kind of content would appeal to them. Based on that information a site can be created in the knowledge of what content to emphasize and what areas of the site might generate more advertising revenue. Once the site is up and running, visitors are invited to sign up for a newsletter. Visitors can simply enter their e-mail address and get added to the list, or they can opt to fill out a survey. This survey must be completely optional and sites can expect approximately 95 percent of those who sign up for the newsletter to also complete the survey, at least to some degree. The survey should ask questions about a number of things, including age group, favorite sources of practice, professional magazines read by respondents, favorite Web sites, what sports they participate in, if they have Internet access at home or work, if they own a VCR, CD-ROM, or DVD player, how they found the Web site, and any comments they may have. The results for the rock climbers’ Web site were as follows:

47 percent of site visitors are 21-30 years old; 69 percent climb 3 1 or more days per year; 83 percent participate in 3 or more other outdoor sports (hiking, mountain biking, and mountaineering); 32 percent have Internet access at home, 19 percent at work, and 49 percent have both. Of course ours is a very niche site, and rock climbers tend to be very dedicated to their sport, so they may show more willingness to provide information than some other sites may be able to garner. We do offer them top quality content and the information they want to know about Smith Rock. I believe they feel like part of a community and feel that the site provides value (it even has current weather and a webcam which is important in climbing), so they are happy to participate.

With a professional or specialist audience, it is incumbent on the publisher to not abuse the community members by throwing advertising in their faces every time they visit. Rather, they should somehow integrate the advertising message into the content, making it part of the mainstream flow of services and information, not just a way of paying the bills. Sponsors can moderate forums, write articles, give advice, and help in their area of expertise. This can create sites which are as ‘sticky’ as any advertiser could dream of, but without the excesses of conventional Web advertising. I consider it ‘excessive’, for instance, to design a frantically ‘busy’ site with the goal of generating traffic to view ban-


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ner ads. This is especially the case with ‘professional’ and scientific sites where the audience can expect special treatment. The advertising industry continuously complains about falling clickthrough rates. (This is partly due to the fact that the performance of banners can be accurately measured whereas this is far from being the case with treeware, that is, printed media). So that we can make a wellfounded judgment on falling cli~k-through,’~~ let us consider this issue more closely. The key idea is that banner ads are failing because they are not targeted accurately. Accurately targeted print magazines, such as, say Cigar Aficionados ’ Monthly always turn a profit, so why should online publications do otherwise? Some magazines are virtually one huge advertisement, almost shopping catalogues, yet people sign up for them and enjoy reading them. Thus outstanding dynamic targeting alone cannot explain falling CTRs (achieving less bang for the buck), but there is a big difference: due to interactivity, being online puts us into a commanding position, whereas buying our traditional paper is a passive, lean-back experience based on custom and routine. The mainstream advertising model with conventional targeting methods delivers limited value to advertisers since visitors to the site have no feeling of obligation to support the site by patronizing the advertisers when presented with a product they might welcome. Aggregation notwithstanding, 80 percent of Internet traffic goes to a handfhl of top Web sites, leaving only 20 percent of overall traffic to the 5 million or so other Web sites. This means that they are likely to get little business on the advertising supported revenue model. Another known shortcoming of conventional advertising is that e-commerce retail sites must omit ads. They are afraid to divert visitors once captured. As ecommerce interactive modules are attached to more and more sites, the attention of viewers is likely to deteriorate further. Thus Web sites offering only high quality content-such as the exchange of ideas among professionals or those with special interests, self-help groups, and affinity sites-with their sharp focus and high level of unsaturated interest are likely to attract advertisers. There are further signs pointing towards the containment of trafficdriven business philosophies. Burgeoning targeting experiments help towards the abandonment or at least the relativization of advertisers’ never-ending quest for mega-traffic or a mega-audience. They put out a commercial and hope for the best-this is often the case in TV, newspaper, and outdoor advertising. With technologically enhanced, evidencebased online targeting, however, they can reduce the risk: they do not

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disseminate without making distinctions-they can aim with greater probability of hitting their target. Once their probability of reaching an audience increases they are less in need of a huge catchment area. They can attain a satisfactory consumer response level with a much smaller marketing base. This means the opening up for smaller audiences of the possibilities as yet reserved only for corporate journalism. Smaller, niche audiences can also provide a good return. On the other hand, a saleable small audience can cause a Web publication to evolve into a media product, too. There is, however, an important ‘if. This non-profit boosting scenario is predicated on the eventual leveling off of enhanced targeting costs. There is little doubt concerning the Net’s positive effect on competition. In market after market, online prices are falling, and companies have been experimenting with revenue models that have lower, if not negative gross margins. In addition to affecting the absolute intensity of competition, the New Economy is having a fundamental effect on its structure. The wired world brings every business ‘virtually’ closer to the next. ‘Microeconomics 101’ falls far short of giving us the apparatus we need to succeed in a Web-based world. New developments are emerging all the time in a fast-paced business environment and actors deploying yesterday’s technology are in for a rather rude awakening. These observations apply to advertising, too. Currently, ad rates are plummeting-this operates in the direction of a growing readiness to deliver ads. But as online targeting technology is a rapidly advancing field, ad servers charge a premium for innovative segmenting and targeting that render innovative evidence-based marketing not yet affordable for smaller advertisers. This will postpone the hoped for leveling off. In the light of developments around ad targeting, I reiterate a lingering expectation: the information society will produce a more diverse electronic press, replacing the privileges which limited access and attention have granted to the world’s media elite (Mann, 1999). As online advertising increasingly comes under the control of the advertiser (as it becomes experiment-rated and evidence-based), a new situation is in the making. State-of-the-art advertising is bringing about a seminal boost in electronic publishing’s capacity to provide quality content without charging a (prohibitive) fee. The Net thus not only extends the possibilities of brands by introducing gratis solutions into marketing, but it also extends the possibilities of business to reach consumers-this is already affecting the very definition of publishing. As the advertiser’s control in targeting approaches completion, as advertisers start the crea-

The Virtual Faces of the Gratis Economy-Bi~~iness-Operated,Sizzling Gratuities

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tive process by asking exploratory questions about business processes rather than glossy advertising ideas,16' their role in corporate journalism and electronic publishing will be upgraded. The threshold for selfsufficiency is becoming wider and lower as a (perhaps incidental) consequence: not only featured sites with mega-traffic, but more and more published content-professional or specialist communications and quality entertainment (slated for the happy few)-are also able to carve out some 'extracurricular income' , drop subscriptions, and break even without charging a fee through soliciting and carrying appropriate ads. With their growing relevancy, state-of-the-art ads may soon sustain more diverse published content. This course of events-the popularization of what is called cause-related marketing-portends a strategic new frontier in modes of operation for the entire non-profit world and a net gain for the Gratis Economy. I think an example is overdue here. I have already alluded to the fact that the educational sphere is in the process of dropping its traditional resistance and beginning to open up to advertising, While at most of the 3,700 US universities and colleges students continue to use Web pages that the universities have created and paid for themselves, at some 500 budget-constrained American institutions Web services are out-sourced to commercial companies. The outsourcing trend started long ago, of course, when students' unions, catering, and copying centers were turned over to private providers. This trend has now been extended to encompass the medium of 'professional' (students, teaching staff) communication. Contractors carry on designing, implementing, and providing the expensive campus Intranet free, but the incurred business costs are shifted onto advertisers who readily pay the bills if they can reach such a new and fresh audience as students. Ivy League universities who can afford to forgo such practices deplore this course of events and point out that this may result in succumbing to feeding ads and product pitches to a captive audience of students when they check course materials or e-mails, or receive online services such as registration or admission. Looking at these developments with the cool eye of an economist, I have arrived at the judgment that in this example two threads are intertwined: commoditizing the attention and personal data of students without their permission,'6' merely because of budgetary constraints, is certainly not good practice for a university, however small. Offering at the same time two levels of campus computer use (free with ads and premium without ads) seems to be acceptable in some cases, provided that this marketing artifice does not involve the merchandising of personal

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data. Either accepting traditional advertising in return for a discount on admission fees or preserving the lofty ideals of academia and rejecting advertising-this is the choice now. A third case is also possible, in which students and professors alike relinquish their personal data in a balanced, confidential, and enlightened manner in return for a trustworthy privacy statement and a new service of personal information management on the pages of their campus intranet. Another example (Steinberg, 1999) concerns a situation in which free enterprise and free speech are set on a collision course: an Internet start-up hires students at a number of universities to take notes in core courses. These notes are then posted on a Web site and offered to others-to anybody-for free. The income stream for the new company apparently comes from selling banner ads on the site, which is heavily visited by college students. The affected professors can only complain about this offensive practice of broadcasting classes, taking away control of the intellectual and disciplinary context of their courses. Surfing with a computer is a very empowering, resourceful, and interactive experience. Surfers are usually in a ‘lean-forward’ position and in control. Watching TV at the receiving end of a cable is a ‘lean-back, activity; we are both limited and controlled. Steve Jobs once called the PC ‘a bicycle for the mind’. Esther Dyson adds in this context that what makes the PC-plus the Internet, to be sure-so exciting is what it does to the mind and its ability to communicate across time and distance by almost changing the social structure through the way in which it disseminates information: it gives people wide access to information, and fosters transparency and exposes corruption and inequality. If a site goes for mass appeal, then gross impressions matter and the advertiser targets are big branding companies who only care about exposure. This results in cheap CPM with a multitude of advertisers needed to make money. In case of a niche audience with well defined interests and an unswerving commitment to the content, the site or list will not have as many users, but advertisers interested in marketing targeted to the niche may assent to paying higher CPMs for the privilege. This ‘go-niche-shift’ is tantamount to a new competition frontier. This is our ‘lowering threshold scenario’ for non-entertaining, non-blockbuster, and non-sensational, ‘cool’ professional or specialist content. I hasten to add that the inundation of professional or specialist online transactions with pertinent commercials from suppliers are predicated on the unfolding and ripening of performance- and evidence-based online targeting that could one day offer relevant and tailor-made advertisements.

The Virtual Faces oftlie Gratis Economy-bushew operated. Sizzling Gratuities

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Let us take a closer look at the chances of professional or specialist online communications opening up to carry pertinent commercials. I shall look at the demand side and the inevitable restructuring of the advertising cake. Because with the emergence of the Net overall demand for advertising does not seem to have increased at too rapid a pace, the conclusion is inevitable: a redistribution of the (branding-pulled) adcake can be predicted among various media of business communication to the advantage of the online tools. I shall not quote here figures on the share of online advertising in the ad-cake, as the online share is still very small. As to the concentration of advertising spending in America among the top Web publishers, at the end of the 1990s the top ten Web sites pulled in 72 percent of all online dollars (eAdvertising Report Tidbit, 1999). Besides the obvious volume surge, I also perceive a qualitative change of paramount importance. The unfolding main trend-the whipping up of new demand-seems to be affecting the advertisers themselves. Until very recently only big companies could shoulder the marketing costs inherent in electronic media. Those happy few who risked their money there tried to do this in as thorough a way as possible and applied sophisticated, time-honored branding concepts. The brunt of the volume increase in marketing communication is to be expected from another source, a new market category called grouprelated niche marketing that does not cannibalize conventional branding sales. The main beneficiaries are going to be smaller companies without mature branding intentions (developing a recognizable name and identity attached to a specific product), but still liquid and well-visited enough to offer a media kit on their pages. These fresh entrants will most likely convey ad-hoc messages, announcements, and solicitations without creative content and without a clear concept of product feedback. Whereas branding-related advertising long ago moved onto the Internet, and we have ample statistics on this mainstream segment,'62 entry-level communication is a relatively new phenomenon in the electronic media. It is not that offline forms of advertising do not work to create brands. Clearly they do if the advertiser has the financial muscle to pour millions into a long advertising campaign and can deal with so many precious ad resources draining into the sands because target customers are being reached offline and have no time, inclination, or even the ability to respond to the ad. But many smaller venture-backed companies do not have these resources, and they only get a couple of shots at driving a viable brand. There is now the technology to build a targeted digital

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brand that drives sales or a call to action online using affiliates, a network of partner media-that is, tried-and-tested search engine rankings, opt-in e-mail, banner ads, newsgroup submissions, and newsletter sponsorships. Most importantly, digital branding within a small circulation professional or specialist publication is a closed loop process: the target customer is not watching a TV, driving down the road listening to the radio, or reading a newspaper; they are online and it takes just a click to respond if the message is really relevant. As the overall volume of marketing communication slowly grows, new channels of small but lucrative audiences are being created, drawing members worldwide, and as dynamic targeting techniques advance a new market situation may emerge. Advertisers are snapping up new 4 inventory such as professional or specialist group communications, small circulation online newspapers, and so on. Highbrow group communications carrying much less publicity will also attract media buyers and advertisers. This diminishing exposure level, hand in hand with expanding inventory, brings about one further step towards the permeation of society by advertising business communication. This fbrther oversupply of media, when some 80 percent of ad inventory on the Net already goes unsold, means that a growing number of publications or media products can potentially benefit from exposure to a new, as yet untouched audience and at the same time more and more audience can be integrated into the scope of online advertising. The depth of commercial utilization and penetration in this connection is boundless. There is steady, solid growth in the demand size of the cake and there is no reason to assume that the orders for online advertising will not increase fi~rther.'~~ The support capacity of the advertising industry will certainly not increase dramatically. Non-profits and professionals with their valuable audience must make a convincing case for the redistribution of the cake. The supply side is growing more rapidly. New sites are cropping up every day and every hour across regions and continents. Users are flocking to the Net in droves. The insatiable wired world will perhaps attract more and more conventional advertisers provided that vehicles will be found to advertise for small focus groups such as network newspapers. Traffic levels are also increasing-this creates yet larger inventories for advertisers. Unlike print publications that are fairly limited in the amount of ad inventory that they can hold, and television where agencies cannot invent more inventory (only 24 hours a day), the Net has a virtually unlimited amount of inventory. With the dramatic increase in ad inventory (Web sites trying to behave like media products), an increase in traffic and advertising is to be


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expected. However, the increase in inventory could easily outstrip advertiser demand, hence the falling click-through rate will not be reversed. The softening of current prices will thus continue. With a glut of space to sell, media outfits on the Net are fighting for viewers and advertisers. In contrast with the offline world, the Web will always have more supply of inventory than demand. Publishers will hardly ever compete for an average media buy. I believe that this state of affairs is systemic since for the foreseeable future the potential supply is virtually unlimited. There are no real barriers to entry (or the barriers are certainly smaller than for newspapers, even if costly innovative marketing methods are taken into account) and in a computer mediated world even the smallest of sites can have its traffic aggregated by a network as Web hosting and web-farming develop. That is qualitatively different to offline media, where barriers to market entry are fairly high and there is no such thing as aggregation. The only limits on the Web are the attention span and time available of the audience. Notwithstanding the systemic glut of space to sell I also perceive considerable new demand. The onset of behavioral and psychographic profiling implies a much larger reserve of creatives and the cessation of campaign-type provision of ads. Instead, the ad hoc feeding of advertisements is leaning towards being visitor-driven and occasional. Ads will not be put into general rotation, waiting for people to click on them. If so, the current practices of pumping-up traffic-pay-to-surf programs; incentive programs converting online customers into regular visitors with long-term loyalty-will soon become obsolete. With the already mentioned appreciation of valuable eyeballs not only mass traffic but the less frequented by-ways of professional or specialist communications will also be translated into revenue. As to other pumping gimmicks I might mention-among numerous examples-banner exchange; affiliate programs (referral or associate programs as the online equivalent of multilevel marketing) that have grown to become one of the most popular ways of earning a referral fee from a Web site’s traffic;164or the offering of giveaways and other incentives in return for spending time on a site. My second example concerns the ongoing placement of advertising in another variety of uncharted territory: Web ads pushing onto the desktop as a built-in part of software. Their originators believe that advertising in desktop applications will reduce the price of software and turn shareware into freeware. Companies create software that is inserted into the application as a thin client. The software works in the back-

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ground to automatically update and rotate ads any time the user goes online, regardless of whether that user is working in the ad-enabled application. When a user clicks on the ad, the thin client fires up the browser and take the user to the advertiser’s site. Big advertisers have already inserted their messages into applications, but the major software publishers-like Microsoft, Symantec, and Intuit-are absent from client lists. Most ad software integrators say they have approached or plan to approach the big boys, but so far have concentrated on the shareware makers, whose value proposition ‘was broken anyway’. One in 100 people who download shareware end up paying for it. The other 99 use it as long as they can for free and try to find a way of cheating the publishers. One such publisher is the maker of the popular PKZip file compression program. With its 2.7 version of PKZip for Windows, the company decided to offer a free, ad-enabled version. It also offers a for-pay version. More than 100,000 people have downloaded the free version, and contrary to the firm’s initial concerns, most users are not bothered by the ads. The company had believed that the ad-enabled PKZip would drive up registrations, and that people would then choose to pay for the non-ad version. But that has not happened, and eventually the time may come when PKWare relies solely on ad revenue. Observers think that advertisers of the less conservative sort will find this newfangled delivery platform more effective. If users register for the programs, software-based ads can be highly targeted. They also enjoy longer exposure than some rotated banners that are scrolled by after a few seconds. As a result, business analysts claim the click-through rate will become higher than the Web rate, which is now so tiny that publishers could not wedge a smart card between it and nil. Despite the low click-through rate, 16’ however, the conversion rate has been relatively high. When analysing an Internet business, there is a single metric, or tool, that represents a leveraged power similar to that of the lever or pulley. This conversion rate measures the number of visitors who come to a particular Web site within a particular period divided by the number of people who take action on that site (purchase, register, and so on) or leave a trace behind (proffer their behavioral data). Conversion rate measures many aspects of a Web site and a strong conversion rate offers true leverage to the publisher.’66 No other single metric captures so many aspects of a high-quality Web site in a single number. Some people focus on advertising CTRs, or cost-per-lead, but these numbers are inconclusive. As they say, you can bring a horse to water, but you can-


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not make it drink. It is easier to advertise effectively for a Web site with a great conversion rate than to effectively convert a customer who happens to have viewed an interesting ad. This is because conversion rate incorporates the total user experience, and advertising metrics alone do not. Higher conversion rates are to be attributed to bigger, richer ads served from a hard drive, as opposed to a regular Web server. Even with the ability to display richer, more targeted ads for longer periods of time, the cost of advertising in these applications has so far been in line with Web CPMs (cost per thousand impressions). Most integrators of the US ad market cite an average CPM of about USD 25, though they expect this will rise once the method is accepted. One ad integrator says a software publisher recently called his plans to introduce ads ‘evil’, but in fairness it seems more of a natural progression. It is where that progression leads that may result in evil. What happens when novels are published on the ad-supported Web? They will have ads, and as soon as marketers feel online readers are comfortable with novels sponsored by Honda, the show moves offline, and the last ad-free medium, the hardback, comes with the hard sell.’67 The idea is not entirely new that the ad-supported business model can have a bearing on the finances of the non-profit sector. Let me mention only one typical example: prestigious scientific or professional conferences have always offered a number of opportunities to organizations that wished to support the event through sponsorship. Their ‘media kit’ includes the opportunity to sponsor a social event, provide delegate packs or lunches, sponsor specific speakers, or offer prizes for paper presentations. Cause-related advertising, linking business sponsors to the mission of a non-profit organization, has pioneered the onerous path to buttressing and complementing charities’ sagging income. I contend that through the Internet potentially every ‘arresting’ (by no means the equivalent of eye-catching!) communication in the world (interesting for however small an audience) can evolve to the lofty status of a media product and may qualify to carry an appropriate ad that will act as a marketing tool for relevant ready-to-pay advertisers. I do not think that professional, small-audience media would ever turn advertising-driven, but the option definitely arises for many more professional or specialist communications-such as belles-lettres, distribution lists for pre-packaged corporate information flow, such as Intranets, newsletters, and mailing liststo endorse sponsors and earn new money by admitting fitting advertis-

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ing into their transactions. To be sure, they are going to be the last to be productively fed pertinent advertisements, as they are the choosiest as to letting a marketing pitch take their interest. This admittance need not presuppose a publisher. Usually, it is the publisher that elevates a journal to the status of media product. With the lowering of the publicity threshold due to ads turning pertinent and smart, I claim that this professional go-between called the publisher can be omitted for professional or specialist communications. Let us not forget: if a handful of doctors, for instance, convene, this event is well above the necessary publicity threshold for pharmaceutical companies, medical equipment producers, and other contractors to throw a complimentary dinner. They are also often ready to endorse small professional workshops, a sufficient audience for most health care contractors to merit sponsoring. In the same vein, all professional meetings representing a small but quality audience will have a fair chance of finding sponsors whose products or services are related somehow to the agendakontent of the venuekite. This lowering of the exposure threshold is related to improved targeting and aggregation. It is only because of aggregation that target methods are needed in cyberspace. Otherwise, in terms of marketing, a professional or specialist meeting or journal is already well in focus per definitionem. Of course, professional transactions and professional content would only grudgingly accept commercials provided they lose that fifty percent of them which binds ad creativity to mass culture. As explained in our ‘tame panther’ metaphor, this is beginning to be the case: the boundaries between personalized information management and advertising are being blurred by technological change. The postmodern advertising paradigm may well fit into the transactions of the scientific community: a structure where one can prevail with the force of the better argument cannot remain alien to the force of more relevant (marketing) information either. As the vast bulk of ad inventory still goes unsold on the Intemet, I foresee in the lower tiers of media profitability: (i) a simultaneous shakeout of for-profit sites with insufficient attention generation, and (ii) a definite lowering of the threshold for publicity with qualifying newcomer niche content non-profits vying for advertising income. As to the former trend, this is a normal restructuring process in all marketscoping sites still have the option of switching to a non-profit mode of operation. The concerned sites can endorse a mission; apply for grants; affiliate with a charity, community, professional or specialist group, customer service, or push channel. At the same time, with a saleable


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niche audience in their hands, some other sites that break even and have never dreamt of acquiring extracurricular income as a marketing vehicle for others, could start to redistribute the ad cake and aspire to media buys provided that sophisticated and expensive advertising and big media buyers used to mega-traffic sites begin to discover the niche sites of professional or specialist communications as a marketing tool. There is a difference between designing “a frantically ‘busy’ site with the goal of generating traffic to view banner ads” and offering original, high-quality content to a targeted audience. Thus under the constraints not of advertising but of providing personally tailored infomercials, high quality sponsored content can well fit into this exclusive terrain. To be sure, professional or specialist content putting the media kit online may hardly aspire to more ad support than what is called ‘remnant inventory’. But that is still a new source of revenue, especially if boosted by some advertising aggregators that pool sites, and if advertisers can fully chart and map the audience surrounding small professional or specialist sites. The precondition is that these sites’ audiences are giving qualified assent to an ongoing business relationship and perhaps the mentioning of-only relevant and related-products. This must be predicated on their perceiving content sponsorship as professionally relevant.I6*I think this anticipated course of events-with an appropriate measure of credibility-would be the online equivalent of what is called in the independent non-profit sector cause-related marketing. I think we are nearing the endgame for most brochureware online sites and the entire purely advertising supported revenue model. According to the iron rule of the lion’s share, 80 percent of Internet traffic goes to about the top 25 Web sites, leaving the other 20 percent to the millions of smaller Web sites. Ad space purchasers ignore publishers below the magic million impressions per month, which results in hundreds of foregone impressions to people with a revealed interest in particular related businesses. With the imminent offensive of enhanced targeting the volume of impressions will count less in media buyers’ decisionmaking to the advantage of the quality of eyeballs. Consumers would never flock to sites with small page views, and small businesses would also shun them were it not for the option of exact targeting. Once advertisers endorse this upcoming option, enabled by the sharpening of advertising focus, the descending threshold of publicity as a result will shift even further downwards. Prior to Mosaic and large consumer audiences, the academics and scientists who dominated the Internet considered advertising anathema. 169 With relevant advertising in the offing,

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this attitude may change and this may soon reach sites with professional or specialist content where a higher conversion rate is to be experienced. In such a case, I am convinced that the attraction will be all too strong. My ambitious thesis is that, at the end of the day, every professional or specialist online transaction in the world may-if desired-merge into an ad inventory, into the amount of available space for banners, hyperlinks, affiliate programs, and commercials. Given the non-profit constraint-that is, there is no urge to generate dividends-abandoning the subscription fee (and abandoning the parallels to the curbside box, too) must not necessarily imply a journalistic turn towards professional or specialist online transactions being advertising-driven. Thus the as yet internal and in-bred affairs of the scientific, artistic, and other professional or specialist communities may open up to this extracurricular income and-if need be-become somehow related to e-commerce sites, and to business communication in particular: this will be the cyber equivalent of cause-related marketing. This could perhaps be done without trying to expose their messages to a maximum number of viewers. This is possible if the information is of considerable value and the content itself is specific enough to act as a filter. My observation is that with publicity driven freewheeling we are dealing here with a further driver of the Gratis Economy. Due to improved-multiplied-advertisement targeting and interactive personalization, the emerging new, non-corporate media of an Internet-enhanced society is capable of attracting and carrying far more commercials. In return, benign and relevant commercials may support more free content. The volume of advertising supported space will most likely not increase, but a restructuring towards non-profits due to their more valuable audience is a safe prediction. The consecutive market adaptation process might lead to reinvigorated click-through rates on the one hand and to a shakeout on the general-interest Web-site side or consecutive ad server shutdown on the other. Frictional restructuring is prompted by the adoption of targetingpowered advertising methods. This comes in very handy to non-profit publishers-augmenting the overall Gratis Economy-because their size of audience is otherwise not big enough to qualifL as someone’s marketing tool.

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B ET W E E N P R 0 FIT A B I L I TY A N D B RE A K I N G EVE N-C 0 NT E NT PROVISION A S A NON-PROFIT ENDEAVOR

The Wall Street Journal-New York Times case illustrates one of the main propositions of this book, that publicity driven online services can turn into the postmodern equivalent of conventional non-profit organizations. Both sectors have invented break-even business solutions. I shall articulate this thesis now in some detail, drawing mostly on the B2B advertising of these two media giants encouraging potential new advertisers to commit themselves to selling on the Web. It is still very rare for a mainstream publisher to make a profit on the Net. For most of them, making money means supplementing (meager) advertising revenues with subscription revenues in an environment where Web users are not ready to pay for content on principle and are ready to make an exception only occasionally. Many people are still uneasy about credit-card security, and most are inclined to believe that once they have paid for a PC, a second telephone line, and a subscription to an lnternet service provider, everything else should be gratis. This ingrained expectation held by at least the less well off two-thirds of the Net community is only confirmed by the new reality that the choice of free content appears almost limitless. The Wall Street Journal is the rare profit-making exception. The Wall Street Jozirnal’s Interactive Edition, launched in April 1996, shows what can be achieved if a publisher has a strong brand, pots of money, a product that is refreshed by news-driven change, and many readers who are already wired. In return for a fee, subscribers get a sort of Global Wall Street Journal with content from all the regional editions, fuller versions of edited stories, hyperlinks to related articles in the archive, and such specialized items as company briefing books. They are also offered an interactive personal-portfolio tracking service and moderated discussion areas. What is more, WSJ.com, the subscription-based interactive edition of The Wall Street Journal, has added its own proprietary demographic slant for advertisers seeking to target their messages to an increasingly specific audience. Starting 1 March 1999, The Wall Street Jour17alInteractive Edition began to offer advertisers the ability to target ads demographically by gender, date of birth, various types of professional or specialist information, and stock transaction volume. The site has an average subscriber base of more than 250,000. However, branded news (news conveyed by a high-esteem national or global newspaper) is not necessarily the best way to reach out to new audiences in a local

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market. Thus WSJ revealed plans for a business portal, a portal that will still provide news but in a mix of such services as entertainment listings and online buying. In classic portal fashion, they are intent on becoming the place where users enter the Web before sailing off to other destinations, rather than just another stop on a busy user’s journey through cyberspace. The portals feature Web directories, shopping channels, fiee e-mail, entertainment listings, classified ads, and, most significantly, search engines, the defining attribute of any portal. As users’ ports of entry, the established portals command huge attention from advertisers, garnering 49 percent of all ad money spent on the Web. What makes that figure all the more impressive is that they do so while commanding only 15 percent of Web traffic. For advertisers the new demographics come at a premium CPM.I7’ WSJis quoted as saying that it has attained an average USD 65 CPMthe absolute peak in the online industry (Gunther, 1999). As a paid site, it has long been collecting demographic information on subscribers and can therefore serve ads based on any of those criteria. Company size targeting is already popular, as is title or language in Europe. The ability, however, to offer targeted ad inventory according to demographic and sociological criteria is a novelty. This involves significant investment in both technology infrastructure and technical expertise. But time and monetary investments can be recouped through higher CPMs and an increased advertiser base. WSJ.com is charging its highest CPM for demographic targeting-a 3 1 percent premium over subscriber-area run of site. W E B T A R G E T I N G AT T H E N E W YORK T I M E S

Most people with a ‘Concorde’ mindset and wallet avoid registration. Many middle-class people have forebodings, too, when it comes to ‘question time’. If someone wants New York news without registering they can go to Web sites like the Daily News, Newsday, or the New York Post; if they want national news they can turn to something like USA Today or CNN.com; and if they want top-notch journalism they can go to the Washington Post without registering. So why is the Times so unique; why do so many readers perform an informational striptease, divulging personal details voluntarily? It is that the viewers receive favorably specialized or personalized advertisements. There is good reason for The New York Times to assume that its audience is well educated, probably well off, and cultured. It is probably


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the same audience as that of the print version, in which Rolex advertises its prestigious men’s watches by purchasing a dozen column-inches of space in the ‘A’ section and hoping for the best. On N Y T s free-ofcharge online version, Swiss watch manufacturers are now able to deliver their message exclusively to men over 40 with an annual household income of greater than USD 90,000, thanks to a new ad-targeting technology developed by New York Times Electronic Media and Real Media, Inc. The Times hopes to leverage its database of millions of registered users by charging advertisers a premium for the sophisticated new ~ervice,”~ which can target by demographic criteria such as age, gender, ZIP code, and income, as well as psychographic criteria such as users who have demonstrated an interest in sports or the arts or any other feature covered by the newspaper (being certainly as wide as the ‘Human Condition’). Targeting according to just one criterion, such as gender, costs 25 percent on top of standard ad rates (which run at USD 20,000 for a half-million impressions). Additional criteria rack up 5 percent increases. NYT can charge a premium for advertisers because they are delivering more value with their Decision Support Program geared to addressing advertisers’ needs by precision segmenting the audience. One of the first advertisers to purchase targeted banners on the Times site is a company which advertises a high-speed Internet access service only available in certain geographical areas. Other advertisers expected to begin targeting ads on the Times site include a major financial services company and a well-known software company. A university also placed its banners in sections of the Times dealing with news and politics. The university then sent e-mails to people who had clicked on its banners and had identified themselves ready to accept notifications from the advertiser. The e-mails are quoted as receiving a response rate of more than 7 percent-much higher than that generated by direct mail campaigns, let alone untargeted banners. Consecutive matriculation is certainly predicated on communication of this kind. Advertisers have yet to express a clear willingness to pay more for focused ad delivery. Observers say they must be convinced that targeted ads will improve consumer response levels. If a site’s average clickthrough rate is around the average (that is, below 1 percent) they wind up getting 5 percent with targeting, something most advertisers are ready to pay more for. Another question raised by targeting is whether a highly segmented audience on the Web will be large enough to provide an efficient marketing base for advertisers. While the Times lays claim to 1.7 million registered users, only a fraction visit the site regularly.

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What is more, segmentation can easily run into some very small numbers when carving not really huge audiences into pieces. Then ad servers might think they do not have enough eyeballs in each small segment to make it worth coming up with specific messages for those groups. Also questionable is whether users provide truthful data when applying for a password to the Times site. Agencies that plan campaigns for Web advertisers seem enthusiastic about targeting’s potential, but have not yet begun to include it in a significant number of media buys. In traditional media, the more targeted you get, the higher the price you pay. Targeting on the Web has to prove itself before it can justi@ the cost without fbrther investigation. Their targeting system uses a small data file called a ‘cookie’, which is stored on a user’s hard drive. Written into this file is demographic information about the user, which comes directly from the Times’ registration database. Psychographic information about a user’s topical interests can also be included in the cookie. Each time a user requests a page from the Times’ site, clicking from the front page onto a story, the Times’ Web server looks at the user’s cookie to see what type of user he is. If the user matches a profile being targeted by one of the site’s advertisers, then the page that is delivered to him will contain that advertiser’s banner. For instance, if a cookie identifies the user as a male over 40 with a household income of greater than USD 90,000, and Cartier has specified that demographic group to receive its ads, then the server will include a Cartier ad on the page. If not, the page will contain ads from companies who have not paid a premium for the targeting service. The Times will not reveal the targeting system’s development costs. The newspaper is continuing its investment in the online edition by coming up with a portal, too. It is significant, however, that it cannot charge a fee for reading the online edition; it can draw revenue only from its enhanced advertising feature. Since the targeting system relies on the Times’ registration database, which has been in place since the site was launched in January 1996, it would be hard for papers that do not require registration to duplicate. The only reason it has this database is to do targeting, If this does not work, we shall see the Times dumping registration to try to boost readership. The site currently charges a premium for focused ads that appear with certain types of stories, for example, about mutual funds or technology, but advertisers have expressed an interest in being able to target by income and age as well.

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GRANT E C O N O M I C S , GIFT ECONOMICS

Last but not least, an important caveat: the Gratis Economy is not to be construed as part of either the ‘grant economy’ or the gift economy. The technical community has dubbed its practice ‘the Internet gift economy’-a way of organizing labor in cyberspace on radical sharing and mutual giving. Their ‘Gift-EconOmy.net, domain is based on an appreciation of the power of giving in an information and knowledge economy and of the material freedoms that become possible through an appreciation of the properties of information and networks. The gift economy can operate if committed members give their intellectual contribution, their voluntary work, their code, and their motivation to the tribal ~ o m m u n i t y ;the ’ ~ ~community will not only flourish, but everybody will benefit from gifts contributed by other members. Well, if it is a tribe than let it be a tribe: it is possible that the public domain can be upheld only in pockets of the forthcoming informational society. There is also a small group of underground programmers who create assault technologies that can be used in testing to improve Internet security. The weapons used in assault technologies can be traced to a loosely knit nether-community. These technophiles carry out their mission at the interface of the underground and the profit-obsessed enterprises. For instance, they often work with security professionals to identify potential threats to the firewalls of companies. In doing so they create their hostile technologies much like biologists isolate strains of viruses to develop antidotes. This Janus-faced character of their work makes it difficult to construe who is on which side. As these technologies are also posted publicly online, a handful of serious attacks renew controversy over the practice of open sourcing, too. Authoring such tools of ‘security auditing’ of course does not mean condoning their active use, as programmers keep on claiming. The delinquent attacks by anonymous ‘terrorists’ are conducive to commercial interests trying to eliminate the primordial ‘open society character’ of cyberspace and transform it into a world further encircled and enclosed by private property. I think the development of the societal techniques of dominance and control in cyberland cannot be avoided, just as-in a wider sensetraditional mission-imbued laissez-faire philanthropy has inexorably adopted the constraints of general management practices. However, this anticipated process of minimal ‘social disciplining’ must stop at important pockets of civilian use. (And in a manner hopefully more effective than the stopping of the buck at the doors of public administration.)

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Actually, the gift economy and the grant economy have nothing in common-they are independent, non-overlapping conceptual tools. As to the notion of the gift economy, I reiterate that this term relates to ‘tribal’ phenomena. Thus it correctly depicts what an occasionally world-class giveaway is going on in insulated pockets of communities until market forces, not to mention globalization, mop up them. This remark is not intended to lessen the relevance of this conceptual Eramework. Instead, it is meant to put it into historical perspective. As to the grant economy, Professor Kenneth Boulding defines it as fo110ws : From the days of Adam Smith the economy has been dominated on the whole by the analysis of how society is organized by exchange ... Exchange is a powerful but certainly not all-encompassing organizer of economic life. Grantmaking is another organizer, the grant or one-way transfer is becoming an increasingly common instrument. (Boulding and Pfaff, 1973)

The Gratis Economy remains well within the paradigm of exchange, or-if looking for forerunners-of catallaxy. Our terminological tradition in social science ranges from Aristotle to Richard W h a t e l ~ , and ’~~ to von Mises. After its hermeneutic deconstruction, the Gratis Economy proves to be based neither on reciprocity nor on unrequited giving; it eschews all notions outside market forces proper, and the ‘economy of love and fear’ does not really apply here, let alone grants or gifts. In the historical section of this book I undertook to distinguish between voluntaryhtatus-enhancing and compulsory/sanctioned contributions in order to broaden the conceptual framework that is being applied to understanding the fast-paced expanding environment of the Gratis Economy and the overall non-profit sector. In this second Essay I draw my empirics from outright business models alone, resulting in the ensuing observable ideal-types. A near equivalent of the sociological dichotomies of system vs. lifeworld, formal vs. material rationality, systemic integration vs. informal coordination can also be found in Boulding’s approach widely used in research on the informal economy. In his framework, informality is best matched with the ‘integrative Yet we claim that the heuristic power of our conceptual framework of the Gratis Economy is perhaps augmented by the fact that it need not insist on a system-theoretical approach in those informal spheres where the state and the market are no longer relevant. Thus I can describe measures and patterns that are conducive to the lifeworld-related domains Gratis Economy as drivers,

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whereas intrusions that are detrimental can be identified as colonization of the commons by the corporate system As a result of the globalization of largely unregulated and increasingly fluid financial markets, mankind may have created an overarching automaton. With this notion (a description which might be applied to the virtual personality-mirroring machine mentioned above), originator Manuel Castells refers to an electronic-based system of financial transactions which overwhelms control and regulation by governments, international institutions, and private financial firms, as well as individual investors, consumers, and citizens. He cites the trend towards the computerization of trading systems: Nasdaq in the United States; Eurex in the German bond market; the French futures exchange; the London International Financial Futures Exchange; and private trading networks such as Instinet, owned by Reuters. These increasingly interconnected electronic networks, combined with domestic deregulation, the liberal flow of financial transactions across national borders, and the constant, international flow of market-related news and information over the Internet make the nightmare of watching machines take control seem almost on the verge of becoming reality. The automaton-metaphor is a call for governments or significant segments of society to opt out of global capitalism; not necessarily to build an alternative system, but simply in order to recover some degree of control over their lives and values. Castells’ belief is that healthy global capitalism requires global financial regulation. Further, he argues that those regulations must take into account not only technological productivity and growth spurred by capital investment, but also ‘socioinstitutional engineering’ that respects, values, and includes ordinary people and different cultures. The lesson of the Gratis Economy-how to calculate rationally, not with prices, but with precious time or attention-bears no such fruit. I think this automaton is just another version of the good old ‘invisible hand’. An impersonal and unbiased allocation of scarce resources is the sine qua non of a market economy; anything else represents a move towards something different. We frequently witness such moves, but within the confines of this volume I can only refer to the bargaining rounds of the World Trade Organisation. Under the umbrella of this global institution, and under the spell of free market rhetoric, deals are being concluded and quotas are being negotiated. I have no problem with this as long as we acknowledge that world trade interests are so important that we cannot leave them to an invisible hand. Let us admit

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that what the WTO is building is ‘managed trade’, much as the simulated (between providers and purchasers) health care market is not a free market either, but rather ‘managed competition’. I have no problem with this either; the less so because it is obvious that the enemies of managed trade are isolationist forces with a dubious or occasionally even sinister cultural-political agenda who are levying duties and trying to reduce world trade in general. Nowadays in the field of intellectual property, when so many powerful devices function in the service of copying, the issue of copyright is undergoing a revamp, resembling a globally managed commerce in copyrighted materials. This newfound form of management is expected to juxtapose the nowadays fairly divergent interests of the two main categories of owners: corporations (label companies, publishing houses, patent holders) on the one hand, and authors on the other. This anticipated new approach should secure enough leeway for pockets of gratis products, informal usage, and alternative utilization c/f intellectual property, such as copying, improving or improvising on artists’, inventors’, and scientists’ work. Experience has taught us that copyright laws are not always used as incentives for scientists, inventors, artists, and writers to produce useful new work, but as revenue streams for inheritors of (often deceased) authors and intellectual-property-owning corporations. (There are various initiatives among scientists and scholars to destroy the legacy business model of scientific publishing. They claim that with virtually free-of-charge online publishing the value to be added by editors and publishing houses to the periodicals is reduced to the quality assurance of submitted articles; see www.publiclibraryofscience.org and www.openarchives.org.) It is difficult to believe that this is what the framers had in mind when they wrote or adopted copyright law. In the war over intellectual property, a lawsuit involving the work of a famous American author provides a new example of corporate interest slaughtering the public good. A federal judge blocked the publication of a novel entitled The Wind Done Gone, a ‘rewrite’ of the 1936 saga Gone With the Wind, but this time from the perspective of a slave, a half-sister of Scarlett O’Hara. The estate of Margaret Mitchell, the author of Gone With the Wind, had sued on the grounds that the book violated copyright. The decision shows utter contempt for artistic freedom, failing to note that The Wind Done Gone was a parody, a form of literature in which arguments of plagiarism normally do not succeed. Of course, one of the main sources of ongoing economic growth is the seizing and opening up of new territories, domains, and sectors.

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Having engulfed much that is available in terms of land, means of production, and artistic expression, this process has now reached the virtual world. There is an ongoing trend towards the privatization of knowledge, threatening traditional intellectual freedoms. I have not so far used the term ‘privatization’ because this term is rather of a journalistic nature: the threatening and even seizing of the informational commons cannot be properly described with this word as in this case the public domain has never belonged to the state, unlike companies or federal programs. The correct expression is rather ‘the enclosure of the electronic prairie’. GRATIS M O D E L S The very best gets cheaper each year ... . it sometimes seems as if the better something is, the cheaper it will cost ... . It is the function per dollar that continues to drop ... sliding down an asymptotic curve towards the free. (K. Kelley, ‘New Rules for the New Economy: Twelve Dependable Principles for Thriving in a Turbulent World’, Wired, September 1997)

With the arrival of the Internet, the number of free-content providers and the overall size of the domain of freebies have increased dramatically and developed into what can be called the expanding and buoyant part of the Gratis Economy as opposed to the shrinking pool of freely available ideas and the informational commons in general. This noisy domain is not identical with the scope of the digital economy proper. Some intersections and overlaps may occur but the two sections of the economy are basically not identical, nor even parallel. Internet users are today experiencing the practical return of traditional collective goods. These newfangled gratis products are always offered within the context of a business model. I shall spell out in a random manner a handful of the more typical models. (1) Giving away is often a factor in delivering on a proprietary service’s pledge of giving value for money: for instance, a calendar exclusively for customers offered by a manicurist. The aim is to improve services with value added, but price not added. Some new products, especially cultural ones, are ‘experience items’, that is, they must be sampled in order that the customer appreciate them enough to purchase them. Their merchants stimulate demand by giving out free samples. (2) Toll-free services in telephony, where the hub partner assumes the costs, are vintage marketing tools. As an enticement to fill out a survey, one can receive phone cards suitable for all standard telephone

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calls yielding considerable free airtime. Or, as a netcafk is offering their value proposition: “Buy a pizza and get free wireless broadband”. (3) In the modem digital age, when many contend that all information must be free, royalty-free stock photos are everywhere. Because the Web is a visual medium, the demand for good content that stands out from the crowd is greater than it has ever been. Collectively, freelance American photographers who belong to the Editorial Photographers Association have bargained for higher rates, in return for allowing publications more extensive re-use rights. Their freelance day rate and pagespace rate have in fact doubled, and in return publishers received the right to re-use magazine photos on their Web sites. Once a photographer’s work is on the Net, it is for all practical purposes in the public domain. (4) ‘Giving away the razor to sell the blade.’ Products often sell best with adjacent services that can also be toll-free. Alternatively, the product is free and the related services are charged for. Product manufacturers often beef up their money flow by selling adjacent services. One factor can easily be gratis in a lynchpin connection. The aim is then to sell a package. I75 ( 5 ) There is the venerable marketing solution of offering three levels of a service or of a product line: an enhanced ‘gold’ level with steep prices,176a regular yet feature-rich bundle with market-clearing prices, and a gratis option with minimum services in exchange for ads slated for entry-level customers. For instance, in Web hosting most hosts offer a bannerless premium, but not free service. The aim is here to differentiate services and tiers of attention according to purchasing power. When a range of quality is available, lower quality is often offered free with the aim of generating more developed demand at a later date. There is a characteristic dynamic inherent in this general three-tier structure. Services often re-enter the priced domain in such a way that their content is not updated any more as long as a new enhanced service is announced encompassing and replacing the previously gratis offer. (6) Restricting access to data, publications, or information is expensive. Providing open access often makes it possible to save on security systems, billing methods, and registers of authorized users. It is often cheaper to offer an open access service for the world than to develop an authentication system that would restrict access. (7) One of the most interesting things about ResponseLogic, the manufacturer of ADAPTe, a targeting software in advertising, is its revenue backbone for the technology offered. The company gives away


17 1

its software and gets paid only for performance. The software is no more difficult to install than Microsoft Office, so there is no charge for that. Instead, ResponseLogic and its clients agree on a metric by which the company will be judged. Besides ADAPTe, the company also offers consulting, for which it charges for time, and so on. (8) In their quest for everpresence, ubiquity, and visibility, big Web sites offer free e-mail (including automatic forwarding), free Web pages, free newsletters, free Internet access, bonus phone cards, cut-rate plane tickets, hidden stashes of software, hardware give-aways, gratis advertising for your Web site, and so on. The aim is always traffic improvement. As they all too easily go out of business, causing annoyance to address-owners who have already ‘spread the word’ as regards their Net identity, this service can often turn out to be worth the same as what it costs: nothing. (9) Companies and personalities can obtain or enhance goodwill by volunteering. This old vehicle of corporate citizenship can produce very important knots in the World Wide Web, such as the recently launched Internet Library of Law and Court Decisions (online at http://www. phillipsnizer.com/internetlib2.htm-last visited: 17 January 200 1). This ambitious archive of US court decisions and legislation pertaining to the Internet is a p r o bono resource provided by a law firm. Readers have access to brief synopses or detailed descriptions, indexed by subject, with links to the full text of decisions if available. The site is fully searchable and covers legal history in the making for areas such as antitrust, intellectual property, encryption, privacy, and spamming. (10) Companies are beginning to ‘donate’ certain kinds of intellectual property to the open-source community in an effort to neutralize a particular aspect of c ~ m p e t i t i o n . ’ ~ ~ (1 1) The Microsoft ‘free browser’ initiativeto move from system tools to applications-is now a part of Internet folklore, but was simply the first implementation of what is becoming a common strategy.’78To this end, Microsoft used its ability to selectively bundle products, shut out competition, and thereby lessen the pressure on prices. While they reduced innovation into engineering, they also crushed innovative entrants by providing a similar product as a bundled item. This amounts to cross-subsidization of a non-monopoly product by a monopoly product. (12) As Internet companies scramble to find value, pricing is a variable, not an obstacle. One company, if not two, wants to give away PCs and Internet connectivity, and make it up through portal-like revenue.’79 We are in the midst of the ‘I do what you do for free’ business strategy.

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(13) There are items which people expect to be free. Economic expectations are psychologically of a die-hard nature and very important in the safeguarding of the Gratis Economy. There is no Chinese wall between freebies and welfare entitlements and covert industry subsidies. The most successful gratis products, once granted, cannot easily be revoked and re-cornmodified. (14) Free stock exchange info and analyses are offered as a tie-in, inducing customers to proceed. This is predicated on engendering business. Many netrepreneurs offer free advice or free trials to lure the customer into taking up their services. Financial advice, trademark rights, personal injury, taxation, and will writing are just a few of the issues frequently addressed. Sometimes they are selling the sizzle, not the steak. (15) Emergency care is provided pro bono worldwide, and not only because it engenders business. As the lower tiers of a lucrative insurance business, this represents a sort of alms at the low end of the consumer market for health care. (16) Giving away for promotional purposes, like a fiendish new quiz with big prizes or free music on the radio. Music is then nothing more than an advertising media. Just like radio music, news from around the world is now available free of charge. More than 2,700 newspapers have online businesses, of which over 60 percent are US-based. (This proportion reiterates the pattern manifest in the skewed distribution of Internet hosts and domains up to 1998, after which proportions began to equalize.) All but three of the top 50 magazines in the USA (as defined by paid circulation) had a Web presence as of January 1998. More than 800 TV stations across the USA have Web sites. The rapid emergence of information services on the Internet is being driven by an expected shift in advertising revenues away from traditional media to the Internet. (17) A tactic from the bricks-and-mortar world for bringing customers into a store can also work quite well for bringing visitors to a Web site. One aim of incentives is to give something away toll-free. The more unusual the item, the more likely it is that Web users will take the time to visit the site. Surprise as measured against expectations is a sure winner and this is why freebies are of a renewing, non-depleting, and inexhaustible nature. This endless creativity is the value of complimentary products. Observers might be inclined to suppose that freebies are over-rated-I think creative marketing talent alone can rate gratis products. This iron rule also applies to the political capital decommodified products can forge for their inventor. (18) If the value of a particular client acquisition is high enough to justify it, higher-cost items are given away, too. After thorough filtering

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out, banks honor their best clients with courtesy gifts, occasionally of considerable value. Receiving complimentary gifts from a bank is a sure indicator that one is considered a person of importance. (19) There is much talk of a search engine for government Web sites in America. The US government alone has some 20,000 Web sites and the engine should help citizens to locate specific documents. As this must be in consonance with the administration’s commitment to ‘unrestricted access’ to government data, and charging users a fee would compromise access, the service will likely be gratis.’*’ American small businesses, freelancers, and independent contractors are eligible for free tax calendars, publications, videos, and seminars, plus courses and workshops devoted to making their business work, all provided by the Internal Revenue Service. Even judgments on tax exemptions and eligibility for subsidised programs can be elicited for free. At any rate, in the information society the lofty idea of transparent government documents will certainly create a sui generis public service subsection of the Gratis Economy. (20) The force of advertising on the Internet can best be shown with the following recent business model that can make money by selling dollars for, say, 80 cents. This is branding or identity marketing at an ‘insanely’ low price. In this way one creates a brand synonymous with a low price and hopes to become conspicuous. The plan then is to try to make up the difference through advertising. While most Web sites are shifting from a content model to a commerce model, this business uses commerce to drive eyeballs. This is then branding on the square, to make a new brand out of the selling of no-name products. (21) Since portal services are already free, the only competitive way of offering customers a better price for these new media products called portals is to pay them money. The more a customer uses a portal (page views per user), the more entries he receives in sweepstakes. Since many services are already free, the only way of offering customers a better price is often to pay them money-for instance, by offering loyal customers entries in a sweepstake. Bombarded by advertising wherever they turn, portals are running the risk of being viewed as an irritating sort of wallpaper-something to ignore altogether. Portals are not distinguishable enough to overcome the cash value of the sweepstakes, so all future advertisers may have to put out or get shut out. There are American portals giving away USD 10,000 each day, and USD 1 million each month. Success depends on how the baseline ranking results at the launch can be increased by this artificial attraction of public interest. There are enough auditors to measure rankings, above all by ‘unique

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users’. How then to translate ranking, a proxy for traffic, into revenue; how to turn each page view (excluding those who are beating the system) into income-this is online marketing that can bestow economic sense on giving money away. This is where creative business talentthe very essence and singular raison d’2tre of the Gratis Economy-can help by keeping cash flow needs much lower than accounting losses. Rather than expose itself to immediate cash needs, the company’s sweepstakes payments can be divided into monthly payments and spread across 25 years at no interest. Or the decisive part of the marketing budget can be donated ‘in kind’ by a giant network in exchange for equity in the company.’s1 Or most advertising programs can be made to pay in advance of running, which typically means that cash flow runs ahead of revenue recognition. These tricks-contrived here with some perspiration but easily multiplied by marketing gurus-can reduce cash burn rate and significantly increase the chance that the site will remain in business for many years to come. (22) As organizations open up to their various stakeholders they bring forward more and more information-formerly deemed to be strictly proprietary-to the wider public. More and more information on companies’ workers and work processes becomes public knowledge. Their active dissemination is perceived as important. Businesses also share and integrate data, information systems, and management practices with their customers, suppliers and alliance partners. Often they opt for an internet working technology without gateways-this amounts to relinquishing them to the public domain. (23) There is a successful toll-free British Internet service provider called Freeserve. Its ‘innovation’ is not based on technology, but on marketing. It gains customers by not charging a monthly subscription fee for Internet access. Currently, its revenues-apart from the usual ‘advertising and e-commerce fees’-come from garnering a percentage of the telephone charges a user incurs while online. Those costs are now charged by the minute. (24) A company describing itself as an ‘Internet incubator’ announced that it would be giving free PCs, Internet access, and e-mail facilities to 10,000 people in exchange for wide-ranging personal details. The lucky recipients will be chosen on the basis of the personal details they provide in the online registration form. The details will be databased, vetted, and chosen according to their level of interest to FreePC’s advertisers. The information provided by burgeoning free PC owners is information that advertisers, acutely aware that personal data are


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the cornerstone of online competitive advantage, will pay handsomely for in an ever-more-competitive environment. (25) Gratis products are occasionally dangerous weapons in the strategic planning of an entrepreneurial company against rivals, as pointed out particularly in relation to the free software movement. The Trade Commission in Hungary, supervising fair business practice, recently dealt with a complaint from a local private newspaper that a local authority-captured by some particular business interest-had assumed the considerable financial burden of launching another freely available, gratis newspaper in the region with the putative intent of stifling the competition. The Commission has endorsed their stance, construing the case as abuse of economic power and-in a perhaps not thoroughly considered ruling-prohibited cross-financed dailies from carrying ads. (26) As a return on fame, freebies rooted in public relations (such as VIP credits with low or zero interest) usually pile up for celebrities. There is no doubt that this is a business model in its own right. (27) As a business model which evokes negative connotations of the word ‘free’, I might mention one of the rules that generally governs the filtering of spam: if the word ‘free’ is included in the subject heading, mail will probably be rejected. (28) “I’m looking for people to help connect me to more fans, because I believe fans will leave a tip based on the enjoyment and service I provide. I’m not scared of them getting a preview. It really is going to be a global village where a billion people have access to one artist and a billion people can leave a tip if they want to. It is a radical democratization. Every artist has access to every fan and every fan has access to every artist, and the people who direct fans to those artists. People that give advice and technical value are the people we need. People crowding the distribution pipe and trying to ignore fans and artists have no value. This is a perfect system.” This is the business model of Ms. Courtney Love, part-time waitress and musician, cited from Salon magazine. (29) The free lunch that is the Internet is predicated on free data transfer by backbone providers. The reason why we do not have-as yet-tolls on the information super-highway is that there are plenty of alternative cyber-routes around the world, leaving corporate and ordinary customers alike with choices for delivering their data. The Internet backbone is a ‘fat pipe’ connecting the central points on the Internet, which then route data to more proximate locales. The major players, some of whom gained their entry into worldwide networking through US govement contracts dating

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as far back as the 1970s, can offer worldwide reach by freely transferring messages originating in a locale serviced by one provider and destined for a locale serviced by another provider. The agreement to freely transfer another provider’s data-peering-is based on a simple notion: to provide high-speed routing of messages, each backbone provider will rely on the others to direct a portion of its mail to its destination. In brief, the Internet is founded on a ‘gentleman’s agreement’. (30) ISPs bring retail giants into the free Internet fold with a COmarketing program as part of their strategy of acquiring subscribers through association with recognized bricks-and-mortar companies. Capitalizing on name-brand recognition suits ISPs well in their search for new subscribers. A wholesale warehouse can offer its members name-brand merchandise at lower prices, as it buys in bulk. As part of their membership, customers are eligible for free unlimited Internet access, and can install the software from a CD-ROM available at all locations or from its Web site. Subscribers receive 24/7 customer support and the ad banner software that goes on every account using the free Internet access. The addition of a warehouse gives the wholesale company an effective Internet presence beyond its Web site. A co-branded free ISP service enables partners to develop direct one-to-one relationships with its members to increase online brand awareness and to provide information on what is happening at their locations. (31) The Massachusetts Institute of Technology (MIT) announced a sweeping 10-year initiative that will publish, for open access on the Web, materials that support virtually every course-some 2,000taught at the university. Known as OpenCourseWare (OCW), the initiative would make MIT course materials that are used in the teaching of almost all undergraduate and graduate subjects available on the Web, free of charge, to any user anywhere in the world. OpenCourseWare seems an important value statement in understanding that universities cannot make money from course materials such as handouts or lecture notes. They have therefore reasoned as follows: why not make them openly available rather than hiding them all behind passwords in the name of protecting some hture revenue stream. The Gratis Economy is a tacit cover for unexpected competition within the overall economy. Few businesspeople complain, for instance, about the competition posed by volunteers. Such enmity may occasionally be found, however: one example is the dismay of Hungarian teachers of English in Hungary at the arrival of the American Peace Corps English

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teachers in 1989 in the wake of the regime change. The independent voluntary sector has gained acceptance all over the Western world, together with its fund-raising techniques and grant-making foundations. That part of (language-tutoring and other) business that may have been hurt by this unexpected competition has long changed its business approach. Few businesspeople complain about the competition posed by volunteers, but more businesses feel threatened by the extension of ‘fair use’ made possible by the Internet.’**Even more corporations complain of the effects of reverse engineering. Their complaints concerning the infringement of intellectual property are being contested and debunked as motivated by an anti-competitive stance. The manifold examples of the Gratis Economy exemplified in this volume often also pose a considerable challenge to business. I interpret this threat as a disruptive technology in its own right. Not only can technologies be disruptive-as we see in the cases of NapstedFreenet and Web TWOlympiad-but also business models. Litigation as a possible outcome seems to be a sure indicator of an unwillingness to adapt, similar to attempting to plug holes in a huge dam that is already on the brink of bursting. One eminent, in this volume abundantly considered, victim of the newfangled free trade generated by the Gratis Economy is the music industry. On the Internet, files are easily copied and shared, whereas physical CDs can only be borrowed or traded. And with millions of people, with some 50 billion circulating rippable CDs in their possession, electronically connected through a centralized directory, the ‘sharing’ becomes very easy. Innovative industry leaders are being urged by business analysts to embrace the new models and increase their chances of survival and success. Musical artists are being advised to switch to making more money from appearances, sponsorships, and product licensing than from the sale of the actual music. Advertising has a role, as may new business models such as subscriptions to electronic distributions, but-we are told-we may even find that artists will be able to deal directly with consumers via the Internet, bypassing the need for large record companies. CONCLUSIONS

Besides the multifarious patterns of gratis models new developments abound in online business that show Web-based companies exploring ‘pay-per-view’ or subscription-based fees in order to define their value

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proposition. Trends in online content thus often replace the diverse, expansive, and largely free Web with fee-based services and programming that will look more like commercial TV. There is no way of foretelling the outcome of the countervailing trends; by way of compensation I compiled a case study contrasting these developments juxtaposing the gratiseconomy-related business strategies of two of the giants of world media. The Wall Street Journal and The New York Times served to help articulate a thesis concerning the lowering of the threshold or level of publicity. As already mentioned, the marketing-driven progress of the online world is advancing by devouring millions of viewers. It is still safe to say that, in case of a Web site, for instance, the evertking industry’s threshold of business interest starts at one-million impressions per month. At the same time, there is some indication that academic and other sorts of serious group communications with much less publicity value may also attract media buyers and advertisers. I cannot emphasize enough that this conjecture hinges upon the delivery of the great cyberspace marketing promise: the maturation of one-to-one targeting that can render advertising more acceptable to ‘non-consumers’, for example, infonauts or professionals/specialists pursuing their interest online. As regards the mechanism of knowledge management or targeted information serving, a plethora of start-up companies in the New Economy is currently at work on the display of targeted (occupation-specific, industry-specific) information (text and ads) to visitors to a Web site. As judged by its maturity and relevance, this design can still be likened to the-rough as they are-tools of brain science, observing the energy consumption of locations within our brain and theorizing about the link between this experience and behavioral phenomena, such as discerning, distinguishing, and so on. This is still as imprecise as trying to guess what a family is doing inside its apartment by observing the electricity, water, and gas meters. Historically, there has always been a gratis sphere in all economies. The Gratis Economy-motivated giving or hidden marketing strategies alike-is an anthropological constant. I think that as economies advance technologically and human labor takes higher and more demanding forms, some residual needs will always be catered for by the evergreen sphere of informal working. At the same time, collective goods, freeware, freebies, and free riding belong to the formal part of the economy and remain well-charted notions within the science of economics.

ESSAY 111

THE PUBLIC INTEREST IN THE GRATIS E CONOMY-GRATUITIES GENERATED BY THE POLITY 5. T H E STATE-RUN GRATIS ECONOMY COLLECTIVE G O O D S

There is no need to explore the nature of public goods and of politically constituted, publicly provided private goods-both economic science and social policy-makers alike have given these topics ample attention. Neither will I enumerate the multitude of goods that are rendered free in the ‘command-economy subset’ of the Gratis Economy. It is rather the methods delivering these goods-especially those beyond subsidization supported by taxation-that concern me. Having covered individual and organizational charity in Essay I, and business-operated gratis services in Essay 11, in Essay 111I shall bring into focus the political players. It is widely held in economic theory that, when it comes to a public good, the cost of providing the good-such as a well at the roadside or a lighthouse on the seashore-is never predicated on the number of consumers who in fact benefit from it. Therefore, two criteria are usually applied to distinguish public goods from private goods: in addition to (i) the one just mentioned (the cost of providing the good does not depend on the number of consumers who benefit from it), there is (ii) the consideration that it is difficult to exclude those who do not pay for it from benefiting from the good. These two criteria are relative. Some quasipublic goods come nearer to the public end of the spectrum in that provision costs increase much less proportionately than the number of beneficiaries and the difficulty of excluding non-payers is quite considerable. Other quasi-public goods will come nearer the purely private end of the spectrum in that provision costs increase almost in proportion

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to the number of beneficiaries and the difficulty of excluding non-payers is slight. The nearer the good is to the public end of the spectrum, the greater its “degree of publicness” is (Roger McCain). There could be an argument as to whether tax-supported public goods-a fairly recent political innovation-are really free at all. If taxation is assumed to be the outcome of a publicly accountable tax determination process the results of this sort of social policy may in fact be understood as political achievements (attained by ‘the people’). * 83 I will not conceal my somewhat populist conviction that I cannot regard taxation as being basically the result of a social bargain. Having studied democratic political systems comparatively, I have arrived at the conclusion that the factual process of tax determination only resembles a contract attained after objective need assessment and social cost deliberations. It looks rather as follows: Politicians first develop the programs they deem necessary (in order to remain in power) according to the state of the ‘burning’ issues at hand. Funding for these high-level programs only implements political decisions. Implicit debt in the form of operating inherited public institutions is a form of in-kind expenditure. The political class raises the money it needs within vague constraints. For instance, it will gain access to the necessary resources to finance its adopted programs by setting the level of taxation. I would not suggest that there was no such thing as financial regimes, spending caps, or upper limits for state indebtedness-I merely regard them as constraints, not absolute hurdles. Equity considerations may co-determine whether public goods are maintained as tax supported or relinquishedlrelegated for privatization. The bottom line is that the financing of public goods is a residual sum in relation to the cost of financing the needs of the political class. Therefore, the gratuitous nature of (tax financed) public goods is as much a constructed reality-or even a chimera-as in the case of the voluntary and entrepreneurial contexts. The debunking of this virtual gratuity is always a function of the citizens’ tax-consciousness.’84Thus I construe public goods that are rendered free-of-charge and meted out to constituencies within the framework of the ‘power game’ as quite similar to the constructed reality of motivated giving, on the one hand, and to gratis

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products of the marketplace that are given away as part of a contextual marketing strategy on the other hand. Just to remind the reader: status-motivated voluntary giving and status-enhancing public service as depicted earlier in this book, and as practiced by public relations firms when attracting wealthy patrons willing to trade financial support for ennobling their name, can be construed as a vehicle of status-honor in modernity, one typical context of volunteering. Such a context is not lacking in cases of politically constructed gratis goods either. All three archetypes-volunteering, public goods, and freebies-are embedded in contextual models of their own and the fact that they are free as a constructed (economic) reality must always be interpreted within a proper frame of reference. Although focusing in this chapter on the public-good character of the Gratis Economy, I shall refrain from looking at e-commerce. Ecommerce benefits, incidentally, from significant tax relief in contrast with the economy as a whole, but this still does not mean it should be treated as non-profit. The US Congress mandated a commission in a 1998 cyber law calling for a three-year moratorium on new state and local Internet-specific taxation-for example, on advertising. The panel is studying whether Internet vendors should be required to collect sales taxes on goods sold, as sales volumes are growing at lightning speed. Whereas all our distilled experience and ideas point towards a recommendation that the acquired intellectual freedoms of cyberspace (and a fledgling Gratis Economy) must be safeguarded, I think there is little justification in positive discrimination in favor of e-commerce. Thus the slapping of value-added tax on online transactions poses no problem as regards maintaining the public-good character of the Net.

Full P u b l i c S u b s i d i z a t i o n of P h a r m a c e u t i c a l P r i c e s Perhaps the most successfbl of the politically constituted, collective gratis services in history is state ed~cation.''~ However, another very successfbl item is public subsidy of the price of prescription drugs. This is an emerging bio-political issue and has also been a long-standing feature of East European social security systems.''6 This issue is so heavily imbued with bio-politics that recently pharmacompanies were forced to agree to apply company-level cross-financing in order to make a class of cheap AIDS-related drugs available to destitute African countries. When investigating systems of free prescription drug provision, it is conspicuous how multifarious the solutions and qualifying criteria are.

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Parochialism applies in the multitude of these measures; they vary to a great extent even in centrally governed Hungary. Parochialism holds that the family, and small networks in general, should provide care and only defer them to larger, statutory institutions if and when they cannot cope on their own. The European equivalent of parochialism is the subsidiarity principle. A ‘society of subsidiarity’ will be one that gives the small circuits (such as family, neighborhood, community care networks) a chance by providing the necessary care and help. The formal security nets are reduced to a role of last resort. In cases of mixed competence the lower and simpler organizational principles should prevail. Subsidiarity and parochiality are the opposite of statism. In the case of providing free drugs for the needy this principle can be identified in terms of so-called discretionary eligibility. Local authorities can set the criteria for their appropriations. Therefore, reflecting the wide range of measures used to subsidize the price of prescription drugs for the elderly, I can only present some standard elements that serve as normative criteria nationwide: a residence requirement of longer than, for example, three years; the beneficiary must be aged 70 or above; means testing indicating genuine poverty-many wealthy retired citizens have large assets, but little actual income and thus qualify for full drug coverage; living alone with an income no more than twice the minimum pension and expenditure on drugs exceeding 10 percent of income. If living in a family, per capita income should not exceed double the minimum pension; disabled, under hospital care, or chronically ill. There were signs in the Clinton-era that the time was ripe in the USA to follow Europe in programmatic health care improvements. With the Balanced Budget Act of 1997 and later on with President Clinton’s plan to modernize and strengthen Medicare for the twenty-first century the lustrous idea has been proposed also in the USA that some retired citizens be put on a free drugs list. This means-complementing the current, limited Medicaid scheme-prescription drugs (occasionally over-the-counter ones, too) should be rendered free, dispensed without the payment of deductibles for senior citizens below or around the poverty level across the board. As the relevant policy paper states (National Economic Council, 1999), despite the indisputable importance of prescription pharmaceuticals

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to health care today, Medicare does not explicitly cover outpatient prescription drugs. Consequently, some 15 million US Medicare beneficiaries lack drug coverage altogether, many of whom are middle income. Lowincome beneficiaries tend to have disproportionately high drug costs. Enrollees with incomes less than USD 10,000 spend an average of 8 percent of their hard-pressed budget on pharmaceuticals. For those with a severe illness or in need of high-cost care, the incurred costs can easily be devastating. There is thus a perceived need for a minimum, national drug benefit option for all Medicare beneficiaries.187 Now I shall delineate the context within which a welfare measure such as public subsidization of prescription drugs, is to be construed. In an industrial context I would call this a business model; in this political context, however, it is more appropriate to speak of a partnership model. With the political construction of a new state-run fund for subsidizing pharmaceuticals Social Security Administrations (SSA) gain a new lever with which to bargain with manufacturers over prices. Thus my recommended interpretative context for this benevolent move is that of prosaic health care marketing. (With this contextual relativization, I by no means deny the practical significance of this social policy measure.) In the marketing of pharmaceuticals (in comparison with which most other forms of expenditure pale, with the exception of arms and perhaps sport) the main categories are prescription drugs, off-the-counter drugs, and completely free drugs. Different rules apply to the principles of pricing and promotion for all three classes. Manufacturers are very interested in getting their products into the publicly assisted category where demand is even less elastic than in other categories. Even if budgets are capped, there is chronic overspending here that must usually be consolidated in one way or another at the taxpayers’ expense after a few years of allowing the deficit to grow. With the opening up of this new frontier of completely free-ofcharge pharmaceuticals the administrators of social security can obtain new room for maneuver and a position of strength in their price bargaining process: if the requested wholesale price is rejected by a manufacturer, their product can easily be dropped from this fattest subsidyabsorbing category and replaced by a near equivalent from a competitor. If the SSA covers a drug, this amounts to a partial subsidy from the manufacturers’ point of view. There is a stampede by big business to capture the public interest (that is, to impose their private agenda in the guise of public interest) by getting on the coverage list in every country. Full public assistance means full subsidization. At the same time, fund

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administrators in this way acquire significant leverage: appropriating and occasionally withdrawing this subsidy is a major weapon in the hands of the administrators responsible for the Fund's solvency. During periods when marketing is in the doldrums-with all health budgets having a cost-containment ceiling-companies can increase their market share only to the detriment of other producers, and so such administrative room for maneuver is especially valuable, not to mention the glossy political/rhetorical import of the scheme.

Cutting Edge Research: The Human Genome Project Single-gene diseases were discovered throughout the twentieth century. Multi-gene diseases, together with DNA typing,"' are the work of the last decade and complex inheritance is a frontier for the twenty-first century. The tools of the Human Genome Project provide the infrastructure to open up this (last) frontier. Sequencing the base pairs of the human genome has been an enormous undertaking. It has involved international collaboration, both publicly and privately funded research institutes, and critical policy and funding decisions, and it has inevitably stirred up controversy. The Human Genome Database includes associated annotation and links to relevant biological and medical information. Potential benefits of the human genome sequence include both medical and non-medical applications: examples of the former are improved diagnosis of diseases, detection of genetic predispositions to disease, rational (in contrast to the current practice of trial-and-error) drug design, and gene therapies; examples of the latter include a greater understanding of human evolution, anthropology, and developments in forensics. Two renowned efforts-one public, one private-were launched with the intention of sequencing the human g e n ~ m e . ' ' ~ (1) The Human Genome Project is an international collaboration project begun in 1990 with the goal of sequencing and annotating the 3.3 billion bases of the human genome and constructing maps of the genome to localize the estimated 100,000 genes. The human genome contains about 3 x 109 nucleotide pairs, 99.9 percent of which are shared by everyone. Human variability resides in only 0.1 percent of the genome. Two complete chromosomes, 21 and 22, have already been sequenced, accounting for 2-3 percent of the total. (2) Celera Genomics (the name is derived from the Latin word for swiftness) was established in May 1998 for the purpose of generating

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and commercializing genomic information to accelerate the understanding of biological processes. Celera Genomics, a Perkin-Elmer company, intends to become the definitive source of genomic and related medical information. There is a qualified struggle for hegemony between statesponsored and privately funded research. The private endeavor was set up first with private funds along the lines of classical venture capitalism in return for intellectual property rights. That agreement was dissolved in 1997 and the research associated with the name of J. Craig Venter, a non-conformist scientist, now funds its research with government and private grants and is a not-for-profit institute. The public project gives away data on the Internet daily for the benefit of 50,000 biomedical scientists, 2,000 biotechnology companies, and 45 pharmaceutical companies. They do not patent raw DNA data. The private project has a business model of its own. The outcome of this unique pursuit determines the value of hture data (on polymorphism and genomic mapping and sequencing), and whether the results of the project will belong to the public domain or not. State-sponsored project members (often proxied by US, British, and French heads of state) are trying to influence this quest with ongoing public disclosures. The outcome will certainly co-determine the protection of this type of intellectual property now in the making. I shall present the business plan of one of the most successful private companies in the field. Perkin-Elmer is one of the leaders in the development, manufacture, and marketing of analytical instruments and life science systems used in pharmaceuticals, biotechnology, environmental testing, food, agriculture, and chemical manufacturing. Celera Genomics, based in Rockville, Maryland, intends to become the definitive source of genomic and associated medical information by compiling the bio-informatics tools and scientific expertise necessary to extract biological knowledge from genomic data, including new gene discovery, polymorphism assay systems development, and databases for use by the scientific community. Perkin-Elmer announced early 1999 that Celera Genomics had entered into a five-year agreement that would provide Amgen Inc. with a subscription to Celera’s database products and early access to new genomic information. A key element of the relationship is the discovery and development of therapeutic proteins. Amgen’s subscriptions to Celera’s databases also include access to associated bio-informatics systems and tools for viewing, browsing, and analysing genomic information. Under the terms of the agreement, Amgen will retain all rights to any

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discoveries it makes using the Celera databases for its drug discovery processes. Celera, whose main business will be the provision of packaged, integrated information, will rele’ase its findings intermittently to subscribers to its accruing catalogue of DNA data, but it says that, unlike other genomics companies, it will not, just on the basis of access to its database, seek intellectual property rights to those subscribers’ discoveries. Celera, however, does intend to seek rights to genes that it finds to be pharmacologically promising. This agreement models the anticipated technology transfer relationship between Celera and its future customers.1g1First, it incorporates the concept of Celera providing customers with broad access-broad but not unlimited and by no means open access-to genomic information. Secondly, it includes specialized research activities by Celera for its customers. Under the agreement, Celera will focus on gene discovery, and subscribers will be responsible for development and commercialization. Also under the agreement, Celera would be entitled to receive payments as development milestones are met, as well as royalties in the event of commercial re-sales. Celera has released the “consensus human genome” on a DVD offering academic biologists a cut-rate subscription to its database still in the making. Pharmaceutical companies are charged USD 5 million a year for the same service. Genetic research has thrown up a very similar conundrum in respect of intellectual property. The underlying issue here is that countries should protect intellectual property rights and simultaneously recognize that access to data and information is essential for scientific progress. There is always a societal need to consider-and in the light of technological development to reconsider-the scope, extent, and application of intellectual property rights in relation to the equitable production, distribution, and use of knowledge. Measures should be taken to enhance those relationships between the protection of intellectual property rights and the dissemination of scientific knowledge that are mutually supgortive. In developing an appropriate international legal framework, the World Intellectual Property Organisation (WIPO), in cooperation with the relevant international networks, should constantly address the question of knowledge monopolies. As (human) genes are too important to fall under the control of business interests, patents should not be granted on genes, but only on products and services developed as a result of having mapped them. This is currently not the case. A four-year moratorium on applications for patents on plants and animals was lifted at the


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end of 1999 by the European Patent Office following a ruling by its top appeals board that such patents are not excluded by the wording of the European Patent Convention (98/44/EEC). This emphasis on spin-off products is reminiscent of what recommendations the beleaguered music industry (cf. Alternatives to Intellectual Property) received before opting for litigation. The lesson drawn from study of the Gratis Economy envisages that the decoded (human) genome will inevitably be lifted into the public domain and money will be made from applied research alone, by inventing and selling services to make sense of the successful mapping and sequencing of the genome. Taking a birds-eye-view, most of the scientific world seems to be in flux. Scientists around the world are in revolt against moves by a powerful group of private corporations to lock decades of publicly hnded Western scientific research into expensive, subscription-only electronic databases. At stake in the dispute is nothing less than control over the fruits of scientific discovery. There is a campaign to boycott publishers of scientific journals who refuse to make research papers freely available on the Internet after six months. I can best put the above-depicted scientific race into context by pointing to a recent development shedding somewhat ironic light on competitive research between publicly and privately funded genomic investigations. Institutions, grassroots, and individuals can now create archives on their own web servers, and hook these up to similar archives, which while distributed around the world can nonetheless be searched as if they were a single archive. In his contribution ‘The self-archiving initiative’, Steven Harnad, psychologist from the University of Southampton, describes the operation and goals of this open-archives initiative (OAI, http://www.openarchives.org). Dr Harnad claims that the system, which relies on participating archives agreeing to common standards as to how they store and describe papers, could provide refereed research literature “online for everyone, everywhere, for ever”.

Towards the Wireless Internet-Universal Mobile Telecommunication Services (UMTS) in the European Union Nobel Laureate (199 1) Ronald Coase developed what is known today as the Coase Theorem or general model for the rational distribution of wavelengths for telco providers. According to the theorem, property rights are to be bundled and assigned to various portions of the spectrum to create a market for broadcasting rights. This spectrum, which is now

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subject to competitive bidding all over the world, has traditionally been regarded first as a natural monopoly then as a public property ripe for privatization. As the number of modes of communication is burgeoning, telecommunications companies are in the midst of an expensive shift to Internetbased technologies and wireless and data initiatives as the underpinning of their networks. Infrastructural spending on these networks is growing by about 30 percent a year, as they see traditional voice business revenues decline in favor of data and wireless use. Companies above all in Japan and Europe, but-with some lag-also in America, are in the process of taking what may prove to be the biggest gamble in business history. In the first few years of the twenty-first century, they will invest more than USD 300 billion bringing together the two hottest technologies of the moment: the mobile telephone and the Internet. This mindboggling sum will be split, more or less evenly, between the money they are paying to governments for licenses to use the necessary spectrum,lg2 and the cost of building new broadband networks to transport data at high speed. Elsewhere in the world, although fervor regarding the potential of the mobile Internet is just as intense, the stakes are not yet so great. UMTS, promising ‘easy ubiquity’ making the Net and other networks easily available from virtually anywhere, implements a ‘packet switched’ infrastructure as opposed to a ‘circuit switched’ one. Data transmission is to be accomplished by connecting via a normal phone call to a bank of modems that handle data transmission. The difference will be similar to that between a slow dial-up modem and connecting to the Internet via a corporate LAN. Packet-based networks are primarily suited for data transmission, supplemented by voice traffic, and result in a better ‘always-on’ user experience and lower cost. The relevant document for the EU states, regulating at the highest level the ongoing distribution of frequency licenses, is the decision of the European Parliament 12811999/EC on the co-ordinated implementation of the third generation of mobile and wireless communication systems (UMTS). The document sets the implementation of the UMTS service at 2002, at the latest. General principles for granting authorizations-for example, the granting of general or individual licenses-are set forth in Directive 97/13/EC on the joint system for general authorizations and individual licenses in the field of telecommunication s e w ices.1g3The main components of UMTS, for which authorization will be required, are:


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fixed networks, including fixed radio links; terrestrial mobile networks; satellite networks and their terrestrial stations; basic services; services with added value. The last mentioned component is intriguing because it indicates that in the third generation of mobile telecommunications telcos will seek to become both service providers and content providers. This qualifies them to aspire towards Portal Power, a brand that connects with customers. The competitive advantage inherent in being a gateway for subscribers can be briefly defined as the edge resulting from the strategic position occupied by any company that has a large number of users and can use those relationships to extract rent from others who also want to reach those customers. Everyone from cellular carriers, to hardware manufacturers, to brands such as America Online and Yahoo, as well as new mobile portals, are counting on attaining this lynchpin position. If the carriers can overcome the mistakes of the ISPs on the Internet, they should be successful in providing content for the new nomads of the future-particularly if they take advantage of the billing relationship. The wireless world is going to be based on the market of multiple touch points created for the itinerants of an anticipated new roving lifestyle, cutting the unique computer cord to the Web. I shall briefly describe the anticipated general business proposition posed by the forthcoming wireless Internet in order to illustrate its importance. Then I shall present the initial regulatory steps taken in this newly charted business territory-here, too, the first gratis solutions have already been developed. In this emerging setting, the business agenda will be to ‘own the customers’ by hosting useful information and understanding how customers are using that information. If the carriers relinquish that commanding position, they become dumb pipes, and there is the potential that Wall Street will give them only a low price-to-revenue stock multiple. The mobile carriers are forearmed with the experience of their cousins, the regional phone companies, most of which failed to enter cyberspace effectively (that is, to start providing content) despite the fact that they owned the on-ramp. Due to regulation, the phone companies were forced to cede traffic to Internet service providers, which built businesses on the back of the regional phone companies’ infrastructure. As a consequence, phone companies can only envy the value created by the ISPs and Web portals.

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The third-generation mobile service is an IP technology that breaks up a message into data ‘packets’, sends the packets separately along the paths of least congestion, and then reassembles them at the other end. Billing will most likely be based not on Web connection time-the connection is always on-but rather on the number of packets customers send and receive. In order to facilitate data traffic and multimedia use for cellular telephones, electronics companies will offer sophisticated add-ons to the basic phone, such as keyboards, mobile faxes, and GPS car navigators. Things like mobility, location, and community will make the I-mode cellular phones coveted possessions. These third-generation mobile devices will be quite different-they will be, first and foremost, communications devices, but they will also be information devices. People are now very much accustomed to their cell phones-this state of affairs only underlines how lucrative the wireless Internet may be. The new moneymaking possibilities-based mostly on the second dimension of possessing the customer data on location-are tantalizing. The wireless Internet will be not only real-time, engendering the notion ‘Internettime’ like current cyberspace, but also ‘real-location’, that is, the exact spatial location of the customer can also be utilized, spawning the notion of ‘cyber-spin’ (a reference to ‘electron-spin’: electrons have ‘tails’ which enable us to track them). Most will come from connection charges, but some small chunks will come from e-commerce action on the network, and from the ‘slotting fees’ that service and content providers will charge to sites that want a preferred position on the dataenabled mobile Internet. These moneymaking possibilities are the future equivalent of current keyword placing on search engines. The carriers of the wireless Internet will have a further huge advantage: by controlling the menus on the phones’ screens, they will have great control over which Web sites customers will probably use. It is a major hassle to type in a Web address from a phone keypad, so the preset positions on the phone screen menus-for weather, say, or stocksare very valuable, simply because they are what most people use most of the time. Carriers will certainly put their stamp on those screen menus highlighting brands and charging them for the honor of being there. Instead of allowing customers to be in the saddle, a deluge of boosterism is to be expected. Conventional marketing will be enhanced by the billing relationship: the network will know who the users are, where they live, and what their preferences are. Name, address, phone number, billing history, and even the customers’ real-time location are much more than the most daring marketing agencies,Ig4currently under heavy


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criticism and litigation, can currently raise as data. The billing relationship will make it possible to transform the rough estimates of current evidence-based marketing into precision marketing. This breathtaking business scenario is on a collision course with the passive, non-selective cyber citizens of the forthcoming wireless Intemet unless standards of sound practice for the business use of behavioral data can be evolved. Real-time location tracking by the provider, who also provides content, may result in our phones pointing to the nearest cinema featuring a film satisfying criteria derived from our surfing habits. As location (cyberspin) becomes the paramount marketing feature of the forthcoming wireless Intemet, the unfolding advertising model can be construed as our one-to-one paradigm. The great promise of the wireless Intemet is that the non-obtrusive ‘ 121’ advertising pattern can seamlessly supplement location-based services enabling hand held phones to be used as personal information devices. Returning now to the main thread of my expositions on how the licensing process is evolving in Europe, I shall present the main ways in which the natural monopoly of the spectrum is being privatized.’’’ The selection of applicants for authorizations takes place by competition, as frequencies are an extremely rare commodity. In practice the forms of selection are as follows: Public tender (based on the selected criteria, amounting to what in the industry has been dubbed a ‘beauty contest’). Auction (one round-‘single sealed’; or multiround-‘multiple open round’). Lottery. In all cases there is a minimum set of requirements for the establishment and operation of the corresponding service. One of the essential conditions is signal coverage. The imposition of fees on frequency use should stimulate the operators to use them more effectively, but it must not represent too onerous a financial burden. Most mobile carrier companies expected the auctions to be so expensive that they sought well-heeled partners to help them out. Supplementary conditions can be laid down in relation to authorizations for operators with substantial market power. With such a rich variety of potential revenue sources dangling before them, no wonder the wireless carriers are hungry for spectrum and are scrambling for a good spot. There are two approaches, with different philosophies, in the ongoing distribution of licenses by telecommunications authorities in Europe.

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The British and German method has been to auction off the licenses at prices that shattered the industry raising huge revenues for the government. This approach is predicated on the solid assumption that the market value of a telco is composed of subscribers, the value of their spectrum, and network infrastructure. Finland, however, has opted for another approach, aspiring towards an eye-catching position in our Gratis Economy, the convivial domain of gratuities. Being afraid that the victorious companies will not consider their license expenditure as ‘sunk costs’, the Finnish government pledged to distribute this precious asset for free. The Finns assumed that if a fee was charged, victorious companies would in the end shift the burden onto customers in order to preserve their fbrther investment capacity. As a second component of this seminal decision, they deemed the competitive environment in telephony ripe enough to waive fees. Such an approach is by no means unheard of. Back in 1996, the US Congress gave the television industry the space on the broadcast spectrum needed to provide digital television, valued by industry experts at more than USD 70 billion. This generous gift came with a caveat, however: as the broadcasters reap billions from use of the airwaves, they must also serve the public interest. I would not like to say whether companies have reneged on this agreement or not. The awarding of 3G licenses represents the launch of the wireless Internet. Most governments cannot resist the attraction of obtaining billions of dollars without losing votes. The Finnish model of awarding the licenses free-of-charge reminds me of the inception of the Internet proper, funded in the early years exclusively from public sources. I am compelled to voice the suspicion that the foreseeable business model portends no good for the potentially muzzled netizens of the wireless Internet because providers of service and content are in a position to filter what customers will see on their Net as a whole. Nevertheless, at this moment of inception some guarded optimism may be justified. P A T T E R N S OF T I M E R E L E A S E IN T H E E C O N O M Y

I have already introduced a number of important drivers of the Gratis Economy: publicity driven online freewheeling; the dynamics inherent in commodifying privacy; and the dynamics prompting professional or specialist online communications to become integrated into ad inventories, that is, into the amount of available space for banners, hyperlinks, affiliate programs, and commercials. But there are numerous other pat-

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terns in the making. I shall now focus on those that are related somehow to working time, such as inactivization patterns, the evolving practice of career enhancing longitudinal worktime credits, and time allowances. Collective goods that are provided free-of-charge on the basis of a political decision are usually based on tax support or tax relief. Like public schooling or full public subsidization of the price of pharmaceuticals the form of a benefit is a subsidy granted by the state. There are important in-kind forms of collective goods as well. Whereas the monetized forms-subsidies and social benefit payments-play a wellcharted role in helping households and communities, I consider them as falling outside the Gratis Economy. Not so with uncommodified patterns as levers of unpaid informal work, which belong to relatively uncharted areas of the Gratis Economy. Legitimate concessions from working time are often aimed at enabling informal or voluntary workas such they have a strong claim on our attention. In what follows I shall look at those patterns and beau ideals within the framework of which statutory time allowances-legal time-off granted and borne (i) by the employer or (ii) by a third party or (iii) by the stateand other administrative incentives encourage partial labor market inactivity. While some of the demonstrated patterns belong to an era ‘gone with the wind’, some schemes may still arrest the attention of those who seek cheap, non-professional ways and means of accommodating many societal needs. Finally, the great advantage when an economy appropriates ‘anthropological resources’ to help informal working is that this political choice involves neither mandatory spending nor claim inflation. 1. In the period of forced urbanization in East Central Europe in the 1960s, it might have appeared to the social planners of the command economy that the traditional self-help sector was approaching its end. In the case of child care, for instance, the economy was expanding enough to afford to give all mothers the entitlement-it was assumed that everyone wanted this-within the framework of that grandiose job-sharing scheme known as ‘women’s participation’ to creches and kindergartens. With the waning of ‘full employment’ and the transition to a market economy, the fact had to be faced that this had at least to be complemented-if not replaced-by a parental leave scheme in order to take a significant number of women out of the job market. It was not feminist pressure that led to the establishment of comprehensive day care, but the needs of the expanding economy. Similarly, incentives to inactivize them, such as maternity leave and child rearing family support paired with the continuation of leave, were introduced later with the exhaustion

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of rapid and extensive economic growth. Child care in the form of maternity leave is a decommodified, policy supported alternative to creches and kindergartens. The logic of this sort of leave usually allows both parents to share the scheme, enabling fathers to take time off after the birth of a child. The ceiling for paternity leave pay is usually set at twice or so the average wage. The ceiling for maternity leave pay is usually many more times the average wage. Laws usually also state that if the father decides to take paternity leave, the mother will be required by law to return to work in order to qualify for the benefits. The economy's underlying capacity to release leisure time (in proportion to productivity increases) is an important way of partially demonetizing certain societal needs. This commodification/de-commodification, handled with more precision than the social engineers of early East European socialism were capable of, is an as yet barely tapped postmodern tool for the inevitable redistribution of jobs and the longitudinal fine-tuning of careers. Scarcity of time is often a stronger constraint than scarcity of goods. Due to technological development and a few other factors-such as social inequality-it is inconceivable that the commodified bulk of the economy could ever cater for all human needs. At the lower end of the grand pool of business pursuits there will always be chores and caring activities that can better be pursued in an unpaid or voluntary manner because it would be too costly (or unsatisfactorily personalized) otherwise. '96 2. In the social policy of many countries constant efforts are being made to reduce the available places in residential institutions and to replace them by care in and by the community, or within a domestic setting. In Hungary there is a scheme for unpaid care leave with full maintenance of social security rights (family care leave). This support may be meager, but it still represents some sort of systemic compensation for socially necessary domestic work. Employees in the USA may receive entitlements under the Voluntary Leave Transfer Program, the Family and Medical Leave Act (FMLA), the Emergency Leave Transfer Program, unpaid leave (LWOP) for family friendly purposes, and for sick leave for general family care or to care for a family member with a serious health condition. Under the Voluntary Leave Transfer Program, the Emergency Leave Transfer Program, and sick leave for general family care or to care for a family member with a serious health condition, family members include: (i) spouse and parents; (ii) children, including stepchildren, and their spouses; (iii) grandparents; (iv) brothers and sisters, and their spouses;


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and (v) any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. Under the FMLA, family members are restricted to the employee’s: (i) spouse, (ii) son or daughter, or (iii) parent. When using unpaid leave (LWOP) for family friendly purposes, a family member is anyone related by blood or marriage. A maximum of 12 administrative working weeks of unpaid leave is available during any 12-month period for one or more of the following: (i) birth of a child and care of the newborn, (ii) adoption or placement of a child, (iii) treatment of one’s own serious health condition, (iv) care of a family member with a serious health condition. There is also the option for sick leave for expanded family care. This is sick leave to care for a family member with a serious health condition. A full-time employee is entitled to 12 weeks of sick leave for this purpose, if certain conditions are met (prorated for part-time employees and those working unsocial hours). Any amount of sick leave used for general family care or bereavement must be deducted from the 12-week entitlement for expanded family care. There are also entitlements making possible sick leave for adoption and also for bone-marrow and organ donation. 3. As regards housing, a considerable part of private ownership in housing is made possible in Hungary by people who build their own houses, either with the help of relatives or alone. They are legally entitled to take as much as a whole year off, without loss of the employment rights attached to continuous employment. US labor law also permits unpaid leave for family-friendly purposes which may be granted to an employee to help balance the demands of family and work. 4. In the form of study leave every Hungarian employee is entitled to a few days off for education-especially examination purposes - if the studies in question will enhance the employee’s value upon returning to work. This is an approved, even encouraged absence from duty without loss of pay and without reducing an employee’s regular vacation. 5. In the higher echelons of public service the so-called ‘furlough’ is available. This is the temporary administrative placement of an employee without duties and pay due to lack of work or funds or other nondisciplinary reasons. In the case of some of these informal activities or quasi-occupations the derived utility accrues to the employee alone, to which extent they are voluntary indeed. Other types of informal working are also recognized by public policy. This appreciation makes itself felt through com-

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pensation, primarily through working-time allowances or permitted leaves of absence, sometimes also through reimbursement or the tax deductibility of incurred expenses, and in some cases limitedhonorary-remuneration. Labor law often sanctions this type of institutional informal work, ‘gentle’ employment as it is. This logic is by no means a European prerogative: the Office of Personnel Management in the USA has also issued guidelines encouraging federal agencies and departments to support employees who want to take time off for voluntary work. To return to Hungary, jury members;’97local council members and elected representatives; association activists;198blood donors or the ‘human volunteers’ employed in the health service and in medicine; vigilantes [in the sense of special constables or those involved in neighborhood watch];’99and the best amateur sportsmen all enjoy legitimate absence while pursuing their vocation. This scheme reflects how much the system values this sort of volunteering, just as public schools express their endorsement of religious education and religious holidays by granting absences to participating children. As regards parallels of this sort of system/lifeword partnership in the USA, federal labor practices include excused absence, which is a period of administratively authorized absence from official duties without loss of pay over and above an employee’s regular leave. Excused absence is synonymous with the term ‘administrative leave’ and is distinct from the absence of an employee who performs officially sanctioned activities away from his usual workplace or regular duties. The distinction is that an employee, while on excused absence, is not within the employeremployee relationship and not deemed to be subject to the control or responsibility of the employer. Employees who are performing representational functions or are conducting the recognized business of an organization (for example, credit unions, welfare and recreation associations, or the Combined Federal Campaign) are generally considered to be acting within the employer-employee relationship. Leave-approving officials retain the authority to limit time spent on such activities, as necessary. Such officials can grant excused absences for emergency conditions, blood donation, and so on. Employees who donate blood to the US Red Cross, including those who participate in apherisis (platelet donation), or who donate in emergency situations to local hospitals or blood-banks of non-profit institutions, may be granted up to four hours excused absence from duty to make the donation. The four hours include time required to reach the donation site and return, as well as the

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time for actually donating blood and recovery. Time in excess of four hours may be granted at the employee’s request, as annual leave, sick leave, or accrued compensatory time. Excused absence may also be granted for infrequent and brief participation in civic, patriotic, or community activities, which are recognized and sanctioned for attendance by all employees. Examples of such activities include viewing a parade, welcoming visiting dignitaries, attending dedications or public ceremonies, and similar events. Civic, patriotic, and community activities which are not sanctioned for the participation of employees government-wide are not covered by such publidprivate partnership of excused absence. Approved absences for these purposes should be charged to annual leave, credit hours, compensatory time, or unpaid leave, as appropriate. In somewhat greater detail, time allowances in Hungary are as follows: voluntary activities taking up a relatively short time that are so much in the public interest (secondment) that the employer is prompted to grant leave of absence on full pay for the duration of the activity. In the 1980s, for instance, 36,000 Hungarian employees left their workplace and went on a legally permitted leave of absence to perform voluntary work as policemen,200with an average duration of three days a year; 23,464 employees served an average five days a year span as people’s inspectors; and 13,500 lay assessors engaged in voluntary work for a whole month in this form of employment. Blood donors, voluntary border patrols, umpires, and, of course, firemen are also in this group. In most cases, but not all, the employer is compensated either by the relevant voluntary association or directly by the state for the temporary loss of manpower. The following measures apply to civil servants in the USA. Because an agency is authorized to pay the salaries only of employees who perform work related to the agency’s mission and because pay levels for those employees are determined by their official duties, it is generally inappropriate to pay an employee for performing volunteer service during working hours. Credit hours, annual leave, and accrued compensatory time should be considered before granting an employee excused absence to engage in volunteer service during normal working hours. Notwithstanding these considerations, employees may be granted excused absences of short duration for volunteer service if such service: is directly related to the Department’s mission; is officially sponsored or sanctioned by the secretary of state; or

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will clearly enhance the professional development or skills of the employee in his or her current position. In many countries the day of a general election-requiring the hlfillment of an important civic duty-is declared a free day or at least a few hours of it. In the USA employers are required to provide military leave (usually up to 45 days a year) for a National Guard reservist. As far as training is concerned this is reported to have caused many conflicts. In the East European command economies-where queues were part of the everyday shopping experience-when, for example, bank holidays loomed (when the shops would be closed from early afternoon Saturday until Tuesday morning) housewives were informally permitted to leave the workplace several hours early in order to make it possible for them to purchase the necessary food for the weekend. President Roosevelt changed Thanksgiving from the third Thursday in November to the last in order to boost seasonal shopping. This contributed to the practice of taking the whole weekend off. Though not a statutory leave, there is also ‘bereavement leave’. Similarly, child-rearing women are permitted to go on sick leave in case of the illness of the child. In sum: with time allowances based on public policy or tradition, informal working activities are recognized as having public significance to the extent of endowing them with the features of ‘accredited’ employment. A last word, finally, on the waning of public duty on a non-professional and volunteer basis in Hungary. To run for democratic election will always and necessarily preserve some features of its origin in the Greek archk (honorary office-holding or officially supported volunteering). And the conditions of ‘employment’ in fact do resemble to some extent our time allowances. From the standpoint of employment law, the career of an elected public servant on secondment is much akin to, say, parental leave or other interim labor inactivation schemes. Informal activities can also be ranked alongside honorary remuneration, or, what is nearly the same thing, the (often tax-free) covering of expenses but without a legally permitted time allowance. In sports, for example, non-professional umpires and others holding club functions belong in this category, as do the bulk of paraprofessional social workers. There also exist many other amateur activities in Hungary that are supported by time allowances and also have an entitlement to the reimbursement of ‘incurred costs’. In communist Eastern Europe sportsmen picked up regular and sometimes very generous sums, but in order to

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maintain their fictitious amateur status, their payment was ranked as ‘reimbursement’. Miscellaneous forms of time allowance include the following: In order to enable employees to ‘recharge their batteries’, many companies offer sabbaticals as part of their benefit package. At Convergent Technologies, five-year ‘veterans’ can get (thirteen weeks of) Personal Growth Leave with full payment and benefits. Wells Fargo and Xerox experimented with offering selected employees with more than three years of service Social Service Leave for between six months and a year. This may be called, derogatorily, ‘company welfare’; from a human resources management point of view, however, these are sound practices. Secondments of experts by multinational corporations as part of their community liaison program. This is tantamount to volunteering on the part of the firm, rather than by the expert him- or herself. One important way in which companies can help non-profits is by seconding an employee. This form of giving is an in-kind contribution: the secondee is kept on the company payroll, but his or her work benefits the charity or non-profit organization. Small self-help groups in particular can profit from having a professional, say, prepare their annual tax returns. The decisive factor in the success of such an undertaking is the match between skills and needs. Professional help given in-house by the company. Here the nonprofit organization comes to the company rather than vice versa. This can be either a permanent arrangement or something made available for a particular need. One type of help that is often sought is with promotion or advertising. Some companies have a forrnal procedure for dealing with non-profit requests. A museum shop manager, for instance, may also find it usefbl to be given training in retailing, the display of goods, or security. There is significant growth potential in having the economy operate more as a free-time releaser than as a commodity producer.201Note the German experiences of the 1980s: decommodification in the form of collective bargaining is an appropriate vehicle with which to generate time-releasing yields parallel to productivity gains. Unfortunately, several minutes in time gains would scarcely be attractive enough to persuade people to convert their money claims into time claims, although

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economically speaking only to this extent would it be affordable and feasible. It might be more attractive if it were possible to take it cumulatively, as a sort of earned accruing extra vacation. In Hungary under communism there was the intriguing phenomenon of the ‘second economy’. In the heyday of our brand of mild and neglectful (but not to be mistaken for democratic) socialism, beyond the time allotted to the employer, time was genuinely free and unbound for a rank-and-file employee because all the costs of social reproduction were covered by benefits. The higher degree of time-budgeting freedom on the part of employees also originated in the ‘philosophical’ negligence of (state hired) managers. As distant relatives of this phenomenon, I can compare these diverse forms of time-off to the regular leaves of absence of Israeli conscripts or chronic Swedish absenteeism. It is not easy to give a final and unambiguous judgment on the erstwhile East Central European phenomenon of the ‘second economy’. At first glance it is clear that there is hardly any future for it (it still lingers in the form of moonlighting, pilfering, and so on) in a modernized market economy with as low a level of state ownership as possible. Multiple jobholding and plural sources of income seem to be doomed when jobs demand all of an employee’s energy without compromise. However, I risk being contradicted from a postmodern vantage point: if we conceive of the economy as a system or systemic tool with which we obtain our livelihood, providing participants with income to buy things and with time to spend, then the final judgment on the Hungarian brand of the dual economy cannot be so negative. True, this entire system was incapable of efficiently using manpower and consequently its record on income maintenance was certainly not good. Nevertheless, it did provide employees with ample time and the latitude to use it. However, rather than seeking opportunities for leisure and active consumption:02 the poor devils used it mostly to continue working, being so mesmerized by the available consumer goods. I think at their far from saturated level of consumption nobody, not even an ardent green activist, can take this amiss. Still, the system is worthy of closer historic study from this point of view: its ability to release time for participants as a sort of trade-off in the absence of a feasible path of economic growth. Ample research has shown that the more strongly a household is tied to an intermediary or local support and maintenance network, the more easily it can cope with economic fluctuations and challenges. The most typical of these challenges are, of course, unemployment, poverty, and deprivation, and the erosion of social benefits. In some parts of society

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there already exists a kind of ‘social economy’, with economic transactions embedded in a particular context, and this economy definitely sustains its participants. Second and even third jobs and ‘shadow’ labor in the so-called ‘alternative economy’ are being intensively studied in contemporary social research. This encompasses all forms of working above and beyond formal employment: from the new patterns of selfservicing through working in self-help, non-profit organizations and community care, to those segments of ‘prosumptive’ household work that are important in the reproduction of the labor force. Their topicality is due to the assumption that the importance of all forms of informal working have been growing as the post-industrial era has advanced. The ebbing of the ‘welfare tide’ and the protracted crisis of the welfare state have accentuated this claim, and theorists calling for a new welfare mix also stress the importance of the informal mode of service provision.

Box 12. Human Resource Practices a t Marks & Spencer As the practice of granting time allowances is particularly widespread in the UK, I shall look at the case of a major company, Marks & Spencer. As secondments began to increase in the UK, their importance was recognized by the government who, in the 1983 budget, introduced a tax concession to encourage companies to provide the voluntary sector with help in this form. Up until 1983 the salary costs of a member of staff seconded to work elsewhere were not an allowable deduction in calculating the company’s tax liability, as they were not deemed to have been incurred wholly and exclusively for the purposes of the company. Since 1983, the costs of secondment can be treated as a deductible expense when the secondment is intended to be of a temporary nature. Thus companies are no longer compelled to conceal the fact that an employee is on secondment. Another circumvention used to be that the employee was released and an arrangement was made for him or her to be paid by the non-profit out of the charitable donations budget. Others treated secondments as some form of in-service training. For a human resource manager with a big corporation the following options were opened up:

Full-time secondment, a sort of internship-for anything up to a year for younger ‘high-fliers’ as part of their manage-

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ment training. This is said to provide good experience of hands-on management. Full-time secondment of staff in mid-career while waiting for promotion or a sideways move. This may often ease promotional logjams and manpower imbalances. This agenda, allowing many well-qualified individuals to participate as volunteers, may prove especially popular in times of economic hardship at the donor company. Full-time loan of staff in the run up to retirement. In this case managers are cautioned to keep strictly within the limits of the voluntary assignment. In all three cases mentioned so far the cost to the company in terms of staff and related expenses will normally be well above the usual level of donation a charity is likely to receive. Part-time secondment where the skill made available is matched to the needs of the charity. This can take the form of help being made available on a regular though not fulltime basis, or as and when required. For instance, the Olympic Games traditionally attracts many volunteers. Companies, especially in the Anglo-Saxon countries with their long-standing tradition of volunteering, often pledge what I call a ‘matching time allowance’. A particularly memorable success in this regard was the 1988 Winter Olympics in Calgary when local businesses pledged 10 days off work with no loss in pay for employees who undertook to spend them as volunteer organizers-these were short-term secondments or ‘missions’, the aim of which was to undertake a particular task within a limited time span that helped broaden the experience of the secondee.

It seems worth distinguishing between leisure time and socially bound time (such as paying a long requested visit to relatives, going for a haircut, discussions with a school principal) and time bound by the employer. I am convinced that the multifarious mechanisms of time allowances on the basis of all possible motives, from volunteering to the meeting of such urgent needs as building one’s own home or caring for a relative, are evolving a ‘gentler’ (for instance, a more ‘gendered’) system of formal employment.

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6. THE INFORMATIONAL C O M M O N S All rights reserved. However, world rights granted for non-commercial use on condition that this page remains intact. Rip it, steal it, web it, mail it, post it. This message wants to MOVE! (The Cluetrain Manifesto)

The availability and transparency of public sector information is an important driver of the digital commons, the general public domain of information. The closer this biggest single information resource comes to unfettered access, the more utility we can draw from the Gratis Economy, a gigantic collection of disparate databases from which information can be extracted without charge. It is clear that the success of this process is predicated as much on user skills as on dissemination efforts. Deficiencies of open access (as in cases of public procurement calls or patented information) create a hurdle to knowledge transfer and amount to a competitive disadvantage. In the current debate on free access to public sector information, three possible approaches have emerged. State-owned companies operating under market conditions and subject to private and commercial laws are not covered by any of these definitions. (i) The functional approach, in which the public sector includes bodies with state authority or public service tasks. This approach is best suited to comparing countries with different levels of privatization, that is, with different-size public sectors. (ii) The legalist/institutional approach: only bodies that are explicitly listed in the relevant law(s) have a public sector character. (iii)The financial approach, whereby the public sector includes all bodies mainly financed by public funds (that is, not operating under the normal rules of the market).203From an informational point of view, private companies dealing with some public source such as public procurement must tolerate the rule of open access of information. Extractable public sector information that is free-of-charge may be classified along different lines. A first possible distinction is the one between administrative and non-administrative information. The first category relates to the functions of government and the administration

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itself and the second category to information on the outside world that is gathered during the execution of public tasks (geographic information, information on businesses, R&D, and so on). Within administrative information, a further distinction can be made between information that is fundamental for the functioning of democracy (such as laws and the proceedings of court cases) and information without such a fundamental character. Another possible distinction draws a line between information that is relevant to the general public (such as parliamentary information) or to a very limited set of persons that have a direct interest in it. From a market perspective, information can be divided according to its (potential) economic value. It should be noted that both administrative and non-administrative information has a considerable market value. The utilization of public sector information is conceivable only in partnership with the private sector; otherwise the ugly spirit of unfair competition would soon be invoked. The USA has long experience of active public sector information policies, starting with the First Amendment stipulating that Congress shall make no law abridging freedom of speech. There followed the 1966 Freedom of Information Act, amended by the Electronic Freedom of Information Act in 1996, which guarantees public access to federal government information and transactions. Many other value-adding services have been set up, such as the Government Information Locator Services with a view to ensuring access by identifying relevant resources. Within the framework of these value-adding services the private sector exploits free public sector information commercially. Public sector information contributes to the development of a dynamic market for information goods and services. This logic of commercially exploiting something that is originally free bears a close resemblance to what we have seen in the case of publicly accessible open-source software products (such as Linux) commercialized by for-profit companies such as Red Hat. Users may be charged a fee for search results, duplication, and review costs, but not for the value added to raw data by the public sector itself. The US model of access to and dissemination of public information, along with its pricing philosophy, is cited as an example of the public sector adding value only as a tool for its own purposes, but not as an incentive for generating revenue. As the clearest manifestation of the will to ensure broad access and unrestricted use of unclassified documents,204there is no copyright on government generated or assembled information at federal level.


Box 13. Exceptions t o the U S Model o f Unrestricted Access to Public Sector Information The prohibition on government copyright applies only to the federal government. State and local governments may copyright their own information products, and many have done so. Some states even copyright their statutes, although it is unclear if the copyrighting of laws would survive a challenge on constitutional and public policy grounds. Geographic information systems offer a notable example of an information product developed by government that has a significant commercial value. Some states aggressively seek to exploit the economic value of these newly developed systems using copyright. In other instances, government records that have traditionally been publicly available are being closed. Examples include compilations of personal data, such as driver’s licenses and court records. States restrict these records so that they can be sold, either directly or through contractors who may be granted exclusive rights. The news media, information companies, data users, and others have fought these restrictions. Copyright law allows states to exploit the value of their information, just like any other copyright owner. Secondly, the Congress has passed other laws with restrictions on government information. One example is the law that established the National Technical Information Service (NT1S)-a component of the Department of Commerce-as a clearinghouse for the collection and dissemination of scientific, technical, and engineering information created by other federal agencies. NTIS is required by law to be self-sustaining and must set prices for its information products and services that will cover all of its costs. One result is that the price for many NTIS documents exceeds the cost of reproduction. Revenues from popular products are sometimes used to subsidize other products with smaller sales potential. NTIS has also entered into licensing agreements with private companies for some of its products, and the terms of these agreements have been controversial. By pricing to recover all dissemination costs, NTIS faces potential challenges in the marketplace from those who can reproduce uncopyrighted government data at a lower cost. The need to collect adequate revenues puts pressure

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on the policy of keeping government information in the public domain. This explains the use by NTIS of license agreements and similar copyright-like controls. The pressure on openness policies is, of course, significantly greater when attempts are made to sell information at a profit. One example comes from a law that required the Federal Maritime Commission (FMC) to charge for use of a federal information resource. In 1992, Congress wanted to repeal a user fee on owners of recreational boats. Under budget rules, the loss of revenue from the boat fee had to be offset by other revenues. The law accomplished this by imposing a fee of 46 cents per minute on users of a computer database of ocean maritime tariffs filed electronically with the FMC. The same fee was also imposed on any person who obtained the information indirectly, including those who obtained the data from private resellers. Despite strong objections that the fee violated established information policy and copyright principles, this ‘information tax’ passed easily. Soiirce: Robert Gellman, ‘Access To Public Information: A Key to Commercial Growth and Electronic Democracy’ (Stockholm, 1996).

Now that knowledge-driven businesses have come to recognize the discreet beauty of commercializing public sector information and with the increasing commercialization of cyberspace, the ‘informational commons’20s is under siege. As a starting point, I refer to the journalistic chitchat concerning an ongoing war for the Net (boiling down mostly to Microsoft allegedly seeking to convert its operating-system dominance into control also of the browser market). Although the market share of open-source technologies and open protocols is of interest in the context of this the underlying threat under scrutiny here is of a different and wider nature. The informational commons (along with the intellectual and the artistic commons) is the uncommodified realm of manmade products that are free per se and not because (i) they are embedded in a business model or (ii) provided free-of-charge within the context of a political-redistributive or philanthropic-liturgical endeavor. I have already touched upon this progressing metamorphosis of cyberspace; let me now cite as a further vantage point a few telling numbers from Norman Salomon concerning how news coverage in cyberspace shifted during the second half of the 199Os, yielding some alarming statistics:

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In 1995, media outlets were transfixed with the Internet as an amazing source of knowledge. Major newspapers in the USA and abroad referred to the ‘information superhighway’ in 4,562 stories. Meanwhile, over the entire year articles mentioned ‘ecommerce’ or ‘electronic commerce’ only 915 times. In 1996, coverage of the Internet as an ‘information superhighway’ fell to 2,370 stories in major newspapers, about half the previous year’s level. At the same time, coverage of electronic commerce nearly doubled, with mentions in 1,662 articles. In 1997 for the first time the news media’s emphasis on the Internet mainly touted it as a commercial phenomenon. The quantity of articles in major newspapers mentioning the ‘information superhighway’ dropped sharply, to just 1,314. Meanwhile, the references to e-commerce gained further momentum, jumping to 2’8 12 articles. In 1998, despite an enormous upsurge in the number of people online, the concept of an ‘information superhighway’ appeared in only 945 articles in major newspapers. Simultaneously, ecommerce became a media obsession, with newspapers referring to it in 6,403 articles. In 1999, while Internet usage continued to grow by leaps and bounds, the news media played down ‘information superhighway’ imagery (with a mere 842 mentions in major papers), but media mania for electronic commerce exploded. Major newspapers mentioned e-commerce in 20,64 1 articles. How did the cyberspace-pioneering USA’s most influential daily newspapers frame the potentialities of the new frontier, the Internet? During the last five years of the 1990s, the annual number of Washington Post articles mentioning the ‘information superhighway’ went down from 178 to 20, while New York Times articles on the subject fell from 100 to 17. But during the same half-decade, the annual total of stories referring to electronic commerce boomed, rising in the Post from 19 to 430 and in the Times from 52 to 731. In other prominent US newspapers, the pattern was similar. The Los Angeles Times stalled out on the ‘information superhighway’, going from 192 stories in 1995 to a measly 33 in 1999; Chicago Tribune articles went from 170 to 22. Meanwhile, the ecommerce bandwagon went into overdrive: The LA Times accelerated from 24 to 1,243 stories per year; The Chicago Tribune escalated from 8 to 486 (Salomon, 1999).

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Five years ago, there was tremendous enthusiasm for the emerging cyberworld. Talk and authorship about the ‘information superhighway’ evoked images of freewheeling, wide-ranging exploration and serendipity. This primordial conceptual framework suggested that the new connectivity was primarily a resource for serious learning, unfettered data mining, communication, and entertainment. Nowadays, ‘information superhighway’ sounds outmoded and even quaint. Today, according to the prevalent spin, the Web is predominantly understood as a way of making and spending money and of managing administrative chores. This drastic shift in media coverage only mirrors the strip malling of cyberspace by relentless investors with deep pockets and negligible sensibilities. The news media’s re-calibration of the philosophy and public expectations of the Internet has occurred in tandem with the shrinking of the informational commons. Increasingly, big money (venture capital, at that) is weaving the new knits of the Web, and the most heavily trafficked Web sites reflect that somber reality: many sites withdraw intellectual property from the public domain. Huge conglomerates now own almost all of the (English-speaking) Web’s largestvolume sites. Even search-engine results are becoming increasingly skewed, with priority placements greased by behind-the-scenes fees. Online marketing now reigns. These events bear witness to an ongoing process of ‘enclosure’ in respect of the informational commons.2o7Although nowadays no one is being expelled from his or her traditional work, in contrast to historical enclosure, this newfangled commodification is hurting a wide coalition of intellectual and public interests. Submitting new chunks of culture to market forces with no respite is by no means unprecedented. In the forefront of commodification, the USA, for instance, has been urging European nations, especially France, to acknowledge that country-specific cultural products and educational services in particular are but products in general that are to be bought and sold as usual on the global marketplace, and that there cannot be any question of favoring, let alone sheltering national or regional cultural wars over their counterparts from elsewhere. This particular issue-which is much deeper than the trade dispute over movies-is also taking a somewhat different course and is in the process of entering as a contestant in the great US culture wars.2o8 At the end of the day, all culture wars boil down to curriculum wars, although this is still far from being the case as regards preservation of the public library character of the Internet. We shall shortly look at the entrenched positions in this, but first a remark: while the Web can be a


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far more effective medium for scholarly communication than paper, so far it lacks the essential property of immovability. Libraries’ Web servers come and go, their caches are flushed at will. For good reasons, librarians have been skeptical about their ability to provide long-term access to electronic materials. At the same time, the Web editions are often the ‘version of record’ and the paper is merely a subset of peerreviewed scientific discourse. The Stanford Libraries LOCKSS project (Lots of Copies Keeps Stuff Safe) has set out to provide ‘persistent access’ to online works, and is closely modeled on the paper system. Freely distributed, off-the-shelf, open-source LOCKSS software, running on small, cheap microcomputers, will allow libraries to take physical custody of the Web journals it purchases and to preserve Webpublished academic material. The prototype of this solution-an indispensable component in upgrading and stabilizing the fragmented Gratis Economy to a vast public library-is currently being tested. THE I N T E L L E C T U A L P R 0 P E RTY/W I D E A C C E S S T R A D E - 0 FF

Fierce business aspirations are focusing on ‘knowright’ as an important point of departure in the on-going construction of the Gratis Economy, encompassing everything that is beyond the scope of copyright. To put content on tap without bothering with property rights is a fact of online life. In this world, business interests, business models, and social benefits expressed in terms of access rights are in flux. The smoldering debate between the copyright industries and the activist vanguard-selfrighteous vigilantes (Lessig, 1999)-of the technical community has largely been portrayed as that of a corporate bureaucracy responding slowly to the fast march of technology. I shall reconstruct the views of these parties in order to delineate the informational commons as an integral part of the Gratis Economy. The informational commons constitute the focal point that helps preserve the civic face of cyberspace. The openness, the decentralized and transnational character of the Internct and the tapering efficacy of traditional control mechanisms have raised thorny issues of accountability, law enforcement, security and authenticity, and government power. Yet, as we have seen, to ban or restrict all anonymous communication online because of the potential crime threat would deny its benefits to those people who may legitimately gain from it. At any rate, the open problems of anonymity contribute heavily to the ongoing regulation of the Net and to the waning of its originally spontaneous networking character. This spontaneity is due

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above all to the IP-protocol-surmounting circuit-switching telecommunications of the pre-digital age. The present network is still somewhat of a hierarchical system with its reliance on domain names, clearly identifiable machines, and clienthemer relationships. While there is no question that the commercial development of the World Wide Web is still in its infancy and growing exponentially, the problems of authenticity pose a serious barrier to full commerciali~ation.~~~ Perhaps the primary barrier to the successful commercial development of the Web, however, is the current lack of consumer trust in this new commercial medium. This lack of trust is engendered for the most part by the industry’s documented failure to respond satisfactorily to mounting consumer concerns over information practices in electronic, networked environments. Intellectual property rights are rights granted by the state in relation to products of intellectual effort and ingenuity. Intellectual property policy seeks to balance two objectives: (a) rewarding creators and inventors for innovation; (b) promoting the interests of business and the public to access science, technology, and culture. Two conditions on the basis of which intellectual property rights are granted are novelty and industrial application. It is possible to apply for a ‘utility model’ when a producer has something not entirely or scientifically new in his hands and could gain a limited-usually 10 years-business opportunity from monopoly This is incomparably cheaper because patent lawyers do not have to check its novelty and scientific operationality. After the expiry of the non-renewable exclusive (monopoly) right the invention must be laid open to exploitation by others. The technical description of production must be enclosed in the patent application from the beginning. According to the famous saying, the aim is to add the lubricating oil of commercial interest to the inventor’s spark. There are a number of types of intellectual property: literary, artistic, and scientific works; performances by performing artists, phonograms, and broadcasts; inventions in all fields of human endeavor; scientific discoveries; industrial designs; trademarks, service marks, and commercial names and designations; protection against unfair competition; all other rights resulting from intellectual property creation in the industrial, scientific, literary, or artistic fields.


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There are five basic kinds of intellectual property protection: (i) Copyright covers not only literary or artistic works, but also engineering drawings, computer software, and other areas beyond the sphere of the arts. Copyrights are a major factor in scientific and technological development. Copyrighted industries together represent between 2 and 6 percent of the GDP of modem economies. (ii) Designs related to shapes and configurations, including layout designs (topographies) of integrated circuits. (iii)Trademarks related to words or symbols applied to products or services to identifj source or sponsorship. Trademarks, geographical indications, and brand names do not protect a product, but rather the relationship between that product and its provider. Such protection is vital where counterfeiting is a significant danger. (iv) Trade secret protection is applied to confidential (undisclosed) business information. (v) Patents protect business exploitation of the inventions that result from its R&D efforts. The term ‘patent’ comes from the first Letters Patent (literally ‘open letters’) issued as early as the fourteenth century in England to grant the inventor or importer of a new technology the sole right to use it for a period sufficiently long to establish his business. Copyright and patents constitute the privatized part of ideas and forms of intellectual expression.211In the USA the ‘first to invent’ gets the monopoly. In most of the rest of the world it is the ‘first to file’ who wins. That means that in the USA even if a device is already in the marketplace, if the inventor can show, through Patent Office entries, that he ‘invented’ it first he will get the patent, and the existing product may be taken off the market. There is a requirement of ‘due diligence’ in that the inventor must work on his invention persistently, but that requirement can be met by merely writing the patent. The patent-protected and copyrighted part of intellectual property is smaller in extension than the public domain. I cannot undertake to gauge volumes and estimate sizes here, but I know that all patents and copyrights are temporary whereas numerous works are of an eternal character. The US Constitution, especially Section 8 of Article I, gives Congress the responsibility “to promote the Progress of Science and useful

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Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”. At the time of this wording the appropriate length of time for a copyright was some fourteen years with the option of an occasional single renewal. Terms have been stretched ever since. Fourteen years first became thirty, then seventy-five years. Then it became the life of the copyright holder. Then it became life plus thirty years. Now it is life plus seventy years, applied retroactively, and ninety-five years if the copyright holder is a corporation, not a person. With the lapse of the limited (long as it may be) time intellectual property returns to the fold of freely accessible, gratis information. No copyright held by a corporation has passed into the public domain since the First World War. Nothing at all has passed into the public domain since the end of the Second World War unless the uncommitted author donated it. There is a widespread expectation in the Internet community that at least software patents and particularly business methods patents will soon be shortened. It is interesting to note that this is occurring as software vendors are working to set up analogous monopolies in the form of software patents. In the area of software patents, the conflict between the rights of the public and the profits of the owner corporation is particularly painfid and clear. There is no conceivable justification for a 20-year protection period in an industry whose product lifecycles are less than two years. In this arena, more than in any other, the introduction of patents robs software developers of the opportunity to innovate in a timely fashion. Although US public opinion is far from happy with the current trend in patenting (patents can occasionally stymie consecutive innovation and cause a glut of litigation), the European Patent Office is seriously considering accepting software patent applications. Software patents are available in the USA and Japan, and multinational companies have been arguing for unlimited patenting as part of a uniform global legal framework. As The Wall Street Journal (13 September 2000) pointed out, critics fear that large companies will use the patenting process as a tool to squelch innovative technologies that threaten their standard products. British Telecom (BT) is pursuing a claim of ownership over the Internet’s hyperlink technology which links Web content together. In order to make money from an old unexploited intellectual property, sort of a ‘Rembrandt in the attic’, monster telco BT jumped on the bandwagon and entered into ‘negotiations’ with US ISPs who face a charge for using hyperlinks. The patent was lodged following work on text-based online information systems in 1976. The patent, number 4,873,662, was

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issued to BT in America in 1989 on ‘hidden pages’, as it was described there, and expires in 2006 (Internet Patent News Service at http://www. bustpatents.com) (last visited: 17 January 2001). Another expectation is that while patent propensity rates (the percentage of proprietary knowledge that is patented) may increase, not all companies will enforce their patents or they will simply use the patentability of ideas merely to pre-empt others charging a This humble anticipation was first articulated in the wake of the much criticized Amazon patents. In a brazen move to expand its competitive arsenal that shook up e-commerce, the visionary Internet retailer Amazon.com retroactively patented a few years-in-use technologies, including one which let other Web sites send it customers in exchange for a commission. Many sites, including Amazon’s competitors, commonly use these ‘affiliate programs’ to enhance their sales. A Web site can rally thousands of agents called affiliates. An affiliate program is a long-term investment that is best used to maintain profit margins within a specific cost per action or cost per sale, gradually increasing site traffic; it is less useful for ramping up visitor levels quickly. The sales representatives, affiliates, are paid a few percent-up to one-third-on any sale made within 90 days of their user’s initial visit to the Web site. Occasionally, a small commission per click-through can also be provided. Amazon’s requested temporary monopoly on the know-how (or rather inspiration) could allow the company to prohibit others from using it, or Amazon could charge imitators a license fee if they still want to use it. If the booksellers choose to enforce this, it may radically impact aspects of emerging technology for Web shopping. Contrary to the humble expectation of non-enforcement, large firms set up patent departments as ‘profit centers’ with the instruction to aggressively pursue licensing revenue from their patented inventions and proprietary knowledge. Another software company, Unisys, also sought to squeeze out money from the last days of particular patents. The licensing of software patents is a tricky business. Due to their excessive duration, which probably should be shortened from 20 years to 10 or even 7, there is plenty of time for potential licensees to develop alternatives, so licensing requires care and finesse. Patent demands may spur Unisys’s rivals in the graphics market. Unisys is expanding its efforts to license the technology behind the Web’s most popular graphics format as it continues talks with major Internet portals to pay for the right to use so-called GIF files. The company has successfully licensed its technology for years, but Web developers say it has recently become more aggressive

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in asserting its GIF patent, called LZW, targeting Web content companies and charging higher licensing fees. At least one Unisys licensee has already indicated that it plans to limit its use of GIFs, adopting a free alternative known as PNG (pronounced ‘ping’) for distributing graphics files to customers. Unisys is said to have requested as much as USD 3.8 million under one licensing scenario that Accuweather rejected. Accuweather, which sells meteorological data to news outlets and other organizations, will continue to hold the rights to use GIFs on its own Web site (Hansen, 2000). Unlike with trademark law, where holders must be vigilant to ensure that others do not abuse their logo, and so on, or risk losing the trademark, patent law permits case-by-case enforcement. With such case practice prevailing, the international Internet community’s public comments could perhaps influence the bypassing of those ‘patent mills’ that have no fundamental patents, only trivial, nuisance ones that stand as roadblocks in front of working developer^.^'^ They are roadblocks because most programming solutions now in the course of ‘(re)privatization’ are not trade secrets; they have already evolved into the known tools of the Internet programmer’s trade. The faster, shorter, and fewer such patents there are-seeking unique ownership for innovations resulting from joint and consecutive efforts-the bigger the informational commons and the overall Gratis Economy can grow. Within the informational commons (in the absence of unique ownership) where programmers seldom can prove anything according to the statutory standards of patentability , existing prior art never invalidates later solutions; imitation by a software engineer always deserves praise, as a form of acknowledgement. Ultimately, the entire Internet, as we know it, was developed as a shared heritage of all practitioners in the field, without exclusionary and proprietary approaches, out in the open, with its various parts and modules still remaining effectively in the public domain. While computer programs are protected by patent in the USA and in Japan, in Australia and Europe programs per se are not patentable, even though the interest of venture capital can often be obtained by acquired patents. A technical invention or process that applies this software is already patentable. Even if Europe does not allow patentability of software as such, in the 20 years of its existence the European Patent Office has granted around 20,000 software-related patents. The Commission intends first to harmonize member states’ legislation on the patentability of computer programs aiming at the even-

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tual dropping of computer programs from the list of non-patentable inventions. This would permit a wider ambit of inventions to lodge a claim for European-wide patents. In Europe, copyright is the established form of commercial protection for the intellectual property called software. Protection of software by copyright is obtained without formalities. The very act of creation engenders copyright. This state of affairs leads to a considerably lower level of intellectual property rights (IPR) awareness. A patent certainly offers a larger scope of protection for IPR assets than copyright does. Copyright does not prevent independent developers adding and attaching their work in an unsolicited manner. This forestalls the very option of a strategic use of patents for blocking successive innovators in the field. Copyright can also not be applied to protect the functionality of software and of the systems of which the software is a constituent. In Europe over 4 million people work in sectors related to the New Economy. Over 300,000 new jobs were created between 1995 and 1997, accounting for one-in-four of all net new jobs. It is certainly essential to foster innovation in order to maintain this favorable trend. Whether the introduction of patentability for computer programs will in fact foster innovation or block it is an open question in light of the growing awareness in the Internet community regarding the ambiguous nature of intellectual property patents. According to the conventional interpretation, intellectual property rights ensure that investment in R&D can lead to profits through the obtaining of a temporary exclusive position on the market for a specific product, service, or process. At the same time, based on the growing number of complicated infringement cases, evidence is gathering that some corporations are abusing the legal instrument of patents as roadblocks pre-empting adjoining innovation. In this volume of essays, I cannot offer policy advice for reconsidering the place of intellectual property rights within enterprises’ overall exploitation strategies, but I can contribute to exploring the conceptual tools-and their always-interesting social context-necessary for a reconsideration of what policies best serve the public interest. Patents are essential for the competitive advantage of some firms, particularly in branches where innovations are easy to imitate. In many other branches patents only confer minor advantages-other utilization methods are more effective. The basic options for a firm seeking to cash in on its R&D investment, to recoup related expenditures and to commercialize their innovation, are as follows:

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Patents-this is the ‘gold standard’ of a competitive strategy as long as the expected value of patents outweighs the eventual loss due to the unavoidable public disclosure of knowledge. Patents represent publicly available knowledge, but with temporary restrictions on its application.214 Secrecy-putting in-house or purchased innovation into a safe can bring about the coveted imitation lag without assenting to sharing information. In the absence of public disclosure this is perhaps the worst option from the perspective of social benefits because such innovations never enter the public knowledge pool. This option alone allows innovators to preserve their idea and its proceeds without inhibition. Complementary services, such as developing lead-time advantages, frequent technical improvements, skilhl marketing, aftersales support services, and extending intellectual property rights to a larger number of jurisdictions. We may also assume that there is always a great deal of tacit knowledge in every innovation that is never conveyed by the public disclosure of patents. In the knowledge-based economy the importance of competition based on lead-time and proprietary knowledge is growing. Patents are the best way of signaling expertise and attracting capital. Intellectual property holders in knowledge-based branches, such as pharmaceuticals and information technology, often urge increased protection in the wake of leakages and infringements. In fact, there is a yawning gap between the cost of discovering something and the ease with which it can be copied. Besides seeking profits, firms also patent for strategic reasons. This includes blocking of competitors from applying for protection themselves, reducing the risk of being sued for infringement, and acquiring a stake to use it in barter or cross-licensing agreements with other firms. There is much anecdotal evidence of firms abandoning important research projects because patents held by other firms are blocking progress. Strengthening patents and copyrights at the prompting of private interests may at the same time come into conflict with other policy goals, such as enhancing competition by assisting in the consecutive innovative activities of other firms and ensuring lower prices by minimizing monopoly pricing. A rare cause of conflict is Article 53 (a) of the European Patent Convention, prohibiting the granting of European patents for innovations that are contrary to the public order (a fairly conservative stance, at

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that) or morality (research is in full swing on how to make cybersex interactive: instead of ‘self-servicing’ the advanced solution is being sought in stimulating pre-determined clusters of cervical nerves that are expected to trigger orgasm). Another conflict of interest between firms applying for patents and the Patent Offices representing the cause of social benefit is the breadth of protection being asked for: if patents are not broad enough it is easier for competitors to ‘invent around’ in the form of implicit product differentiation. If anything should be strengthened, however, it is the public disclosure requirement in order to generate more downstream discoveries. The a priori incentive and ex post ability to innovate is predicated on the diffusion of scientific and technical knowledge. Diffusion of information means public disclosure enabling others to search patent databases in order to avoid wasteful duplicate R&D. Diffusion also means reverse engineering after a product’s market emergence. The process of reverse engineering-distinct from copying, let alone pirating-and public posting and commenting of code or technicalities is believed to be one of the most important information sources used by firms and fundamental to the development of science, not to mention being constitutionally protected free speech. Thus, reverse engineering is the equivalent of reading the works of others, rearranging, interpreting, and adding innovative spins and inventions-with, eventually, their own patent protection-to these works, whereas outright piracy is the equivalent of recycling and regurgitating the works of others verbatim. Therefore, there is not always a public benefit in increasing patent protection because amplified intellectual property protection can interfere with the diffusion of new inventions. Thus unreflected restraints-such as zero tolerance against leakage caused by ‘fair use’-often result in a zero-sum, non-cooperative game resembling an arms race with firms accumulating more patents and less freely available public knowledge than what is collectively optimal. In contrast to the USA, there is a precedent in Europe for fighting leakage with taxes. This is supposed to be collectively optimal. Most European countries have long had laws or industry agreements that impose copyright fees on Xerox machines and other analogue equipment, on audio and videocassette recorders, as well as on blank tapes and disks. This solution of imposed financial pressure internalizing a social cost resembles what is called in economics a Pigouvian tax. Typically, these fees are collected by government-regulated copyright societies, which collect royalties on music played on radio stations. The copyright

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societies then distribute the money back to putatively bootlegged record companies, estimating the payments by examining record sales and the program logs of radio broadcasters. A logical outcome of the piracy debate could be imposing fees on personal computers. This is, of course, a major departure, because computers are used for many purposes other than duplicating copyrighted music, videos, or books. A L T E R N AT I V E S T 0 I N TE L L E C T U A L P R 0 P E RTY -N 0 N - P R 0 P RI E TA RY SOFTWARE D E V E L O P E R S

The mounting free software movement has always cared deeply about the freedom to innovate and to publish. After prudent re-branding in order not to frighten business-school-bred executives it is now called the open-source software movement, together with open protocols and standards. ‘Open source’ means that the underlying software code will be free for the asking-and hacking. Their practice is beginning to be a model for what is called ‘Microsoft remedy’, the antidote for the woeful trend towards a handful of corporate colossi generating most traffic on the Web. It may also be an antidote for the end-to-end model (or the Isenberg ‘stupid network’ model) of the Web that does not constrain uses, even unforeseeable ones, from being phased in (in fact, this course of development cannot be attributed to the Redmond giant), and for the malfunctions of proprietary technology such as locking-in and dependency for support or high-tech antitrust issues centering on the multifaceted conflict between intellectual property and free speech. The inherent logic is a sort of generally-accepted software development philosophy where software is coded by community effort, and the software source code is freely viewable and usable by anyone, with few restrictions. As this method is also serving as a mechanism of providing peer review of software code by the developer community, the outcome is a stable voluntary pattern of community development effort that produces robust and reliable software. Open-source software development-or radical sharing-has solidified to a pattern of worldwide cooperation premised on the voluntary renunciation of intellectual property rights. The first thing to understand about ‘free’ software is that it is not necessarily free-of-charge. Free software is a matter not of price, but of the freedom to modify the software, and to redistribute and release improved versions of it. This is certainly a challenge to the prevailing copyright principles of intellectual property (the only near equivalent of


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absolute possession in the world). Such ‘freedom’ basically means the ability to access-and change-a program’s source code. The typical software company guards its source code like a pack of pit bulls standing watch over the crown jewels. Source code is the core intellectual property upon which the software industry is built. For example, Microsoft’s Internet Explorer Web browser may be free to consumers, but it is not ‘free software’-the source code is under lock and key. Source code availability is the great selling point of free software-that is, it is rather ‘source-code available software’ than ‘free’ software. What is different about Linux (and the Apache Web serving software and a handful of other important softwares)-unlike Microsoft’s dominant Windows system-is that it is available on the market free-of-charge. So is Linux’s source code, which gives any programmer the key to changing the underlying program. Users can modify the Linux system and send their changes back to Linux, which can implement it and make it available to everyone. Apart from anything else, more co-operating eyeballs on code are a guarantee of fewer bugs. Open-source is a seemingly impossible development methodology in which source code is developed and debugged by not one company, or even one group of individuals, but rather by a fragmented and distributed workforce simultaneously working towards a common goal. Programming instructions are freely available and improvements to the software are returned freely to the community. The like-minded individuals within that wider community will probably never have met in person, and provide most of their efforts on a volunteer basis. These distributed volunteer developers-their motivation being fame within the community-produce code that is perhaps less user-friendly but pretty reliable. This is a unique revenue model comparable to generic drugs the patent on which has expired, making them free for manufacture by anybody. The open-source movement’s business model is predicated on ‘volunteer developers producing robust and complex software applications that are exposed for free. But just what is free software ‘culture’? The free software community is large and diverse, not to mention packed chock-full of acronyms only a technology-obsessed geek could love-GNU, Linux, FreeBSD, Perl. It is riven by religious schisms-comparable only to the Central European paradigm-creation of psychoanalysis at the beginning of the twentieth century-and periodically explodes into flame wars over technicalities that might strike the outsider as enormously picayune. Despite their differences, free software developers share the belief that

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their movement is the Internet’s future.215Actually, this way of joint development in networks is greatly empowered by the Internet. OpenBSD is the ultra-secure version of BSD developed by programmers in Canada. Although all the BSD systems are reasonably secure, the dozen people who created OpenBSD spent more than four years doing a line-by-line audit of it, fixing security pitfalls other Unix vendors had not even imagined. Because the OpenBSD team is based in Canada, the (antiquarian?) export control laws that stifle much of the US software industry do not hobble it. As a result, OpenBSD comes with military-grade cryptography deeply integrated into the core system. OpenBSD also comes with IPsec, the cryptographic extensions to the Internet’s TCPAP protocol that let systems automatically encrypt information before it is sent over the wire. This is the same software other companies sell for thousands; it is free with OpenBSD. (NetBSD has a full implementation of IPsec; a version of IPsec is also available for Linux, but it is not built-in.) All of these combine to make the operating system a good choice for firewalls and the paranoid. The three BSD operating systems are all descended from the BSD version of Unix developed at the University of California at Berkeley during the 1980s (‘BSD’ stands for Berkeley Standard Distribution). As a succinct characterization of this renowned open-source system, also known as FreeBSD, I quote from the Wall Street Journal (9 October 1999). To serve nearly 80 million people each month, Yahoo! Inc. operates about 1,000 computers that run on FreeBSD, a program distributed without charge over the Internet ... While Microsoft almost never talks about it, its own Hotmail free email service runs not on its flagship Windows NT but on FreeBSD ... In fact, one recent survey showed that BSD accounted for nearly 15 percent of all server machines connected to the Internet. Linux leads the pack with 3 1 percent, and is the only major operating system making any gains. Windows had 24 percent.

However, there are different branches of this burgeoning business model. There is the descendant of Project GNU, started by Richard Stallman at the Massachusetts Institute of Technology. This GNU software is protected by a licensing system that requires anyone who distributes modified versions of GNU software to distribute the modified source code as well. This ensures that each future generation of the software will always remain open. The Apache Web server, on the other hand, is protected under a different, less restrictive licensing system that allows future users to do whatever they want (as long as they include the

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Apache Group’s copyright notice). Already, several companies are reported to be turning a profit with commercial versions of Apache, most notably C2Net, an Oakland, California software company that sells Stronghold, an Apache Web server incorporating public key cryptograPhYApache’s licensing is ‘more free’ because it places fewer restrictions on future users. This has helped the spread of Apache. But such an approach is anathema to the GNU people. If source code availability is not permanently protected, they argue, commercial pressures can ultimately pervert the software. GNU people believe the right to free software is ‘inalienable’. To them, it is a moral issue2I6-they do not care whether free software produces better code or is embraced by consumers. On the web, the logo of a red feather resting against the words “Powered by Apache’’ is everywhere. And for good reason-the Apache Web server, a piece of software that transforms ordinary computers into sites on the World Wide Web, is by far the most popular choice for webmasters everywhere. That fact alone is extraordinary. This server is not a commercial product-it is ‘freeware’ hacked together by a loose coalition of software developers stealing spare time from their demanding day jobs. And yet, in a market niche targeted by both Microsoft and Netscape as a crucial steppingstone to future profits, Apache dominates-it is installed on almost half of all publicly accessible Web servers. And not just because the price is right but because it is perceived to be a better product than its commercial competitors-faster, more reliable, more up-to-date. Market share is not the only yardstick by which to judge Apache. Its success pays tribute to the utopian ideals of the whole ‘free software movement’-and testifies to the enduring vigor of the Intemet’s cooperative, distributed approach to solving problems. Although proprietary software developers occasionally launch legal efforts to contain this movement there has been little explicit litigation around the free and open-source software movement. Proprietary software developers, however, often attack reverse engineering, as this is a way in which secret file formats and protocols can be figured out by free-software developers. But when the open-source logic was applied to other fields of business endeavor, especially to that of copyright sheltered fields, the monopolists’ outcry was awe-inspiring. I shall reconstruct the core event. The major motion picture companies filed injunctions concerning the illegal cracking of the Content Scrambling System for Digital Video Display (DVD) and the subsequent distribution of movies via the Inter-

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net without the necessary authorization. Referring to the defense of the future of movies the Motion Picture Association of America filed suit in order to stop (European teenage) from distributing the software designed to circumvent the encryption technology that prevents unlawful copying of DVDs. Experts did not conceal that the deployed encryption was very weak, having about 10 to 12 bits of entropy, or randomness, making it only as powerful as a 3- to 4-character password. A phalanx of corporate lawyers claim this is a case of theft: the posting of the decryption formula is no different from making and then distributing unauthorized keys to a department store. The term ‘copy control’ has assumed the role of a buzzword in the ongoing fight about closed versus open standards, monopolies and technological restrictions such as region codes versus open markets, and the right to modify software after purchase. As this ongoing litigation, also part of the grand informational commons battle, is crucial to the extension of the Gratis Economy, I shall draw on primary sources here.

Box 1 4 . The Hacking of the Digital V i d e o Disk En cryp tion System DeCSS (the ‘antidote’ which helps to crack the scrambling system) itself is not Linux software. But DeCSS would not have been possible without the Linux DVD development, and CSS playback under Linux would have been much harder without the release of the DeCSS source code. The basic idea is that the DVD is encrypted, and the decryption key is stored on the disk, at a place where it is not directly readable on an ordinary PC DVD drive. To play back a DVD the decoder software or hardware runs a twoway authentication and key exchange with the drive. The key material is transmitted from the drive to the decoder, obfuscated with the negotiated session key. How to do this key exchange has been known to the Linux community for almost a year, after an anonymous member of the Livid (LInux VIDeo) mailing list posted reverse engineered assembler code of the key exchange to the mailing list. The code had been analyzed and re-implemented in the C programming language by the Livid development members. This information is already sufficient for copying a DVD: just copy all of the sectors and the key information.

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The second step is the actual decryption cf the DVD sectors. For that, a so-called player key is required. l h e idea is that the title key (the actual key used for decryphi) is encrypted with a disk key, which in turn is encrypted with 408 player keys, and all encrypted keys are stored on the disk. The idea is that every player contains one of the 408 player keys, and if any of the keys gets published, you can just omit that slot on all hture DVDs and thus limit the impact of thc problem. Onc of those player keys, as well as the actual bulk cipher, were reverse engineered by two indepcndent parties. Both used the sourcc code developed by the Linux conmuni ty. Someone anonymously mailed the DeCSS source code to the Livid list, where the code was analyzed. (I observe in passing that distribution of means to defeat copy protection devices was thc subject of the Digital Millennium Copyright Act of 1993 in Ilic USA. Many hold the view that along the intentions of this law the negation of fq' {.ir use rights to make non commercial arcliival copies, and the stomping of free speech rights to even write about h o ~ vto circumvent the artificial barriers for fair use purposes is a threat to civil liberties). After a very short time, cryptanalysers blew a couple of deadly holes in the whole scheme, making the encryption breakable, without even knowing any player key, in under 20 seconds. Now that the scheme has been broken-and also published-in order to develop a free supplement to the Linux operating system it is possible for anybody to build a DVD player.

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Source: Transactions of the Slashdot community; Replication News, a Miller Freeman monthly, is a trade magazine for the duplication and replication industry; EE Times, published by CMP, offers the best, but only occasional coverage of the fmdamental DVD technology.

There is ail evolving lawsuit between the Digital Video Disk Control Association and a handful of agenda-guided activists. DVDCA's complaint is focused on the bypassing of their encryption method, which was intended to pre-empt software piracy and outright theft. The other party acknowledges having reverse-engineered around trade secrets but contends that everybody has the right to copy media that they legally own into other formats for their personal convenienm. Thc aim of hacking the encryption shelter was not to enable mass production or pirate labs, but simply to let the Digital Video System play tlirougli a

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Linux machine-just as software is enabled to run under open-source operating systems-that is, to watch a movie on a legally owned Digital Video Disk but using a Linux-driven machine. And as no DVD decoding software exists for the Linux operating system, ‘unlocking’ seemed unavoidable. What has in fact been bypassed-the defendants claim-is the dedicated Digital Video Disk player, yielding place to alternative open-source software driven under Linux. Advocates claim in this way to have served the interests of both consumers and content providers. The force of their attack is conceived against the monopoly on DVD players as software. The attack also blocks people from using DeCSS for purposes that are not illegal, such as criticism or reverse engineering for educational purposes. In parentheses, I observe that the stir around this technical truth relates to even wider issues: the entire business model of rental is being challenged. Rational consumers will not rent a video or DVD half-adozen times before purchasing a copy. The balance between technologyenabled Gratis Economy and the property rights of creators would definitely swing in favor of gratis access if-as the conclusion of current litigation-hackers were allowed to sink teeth into the business of repeated rentals by corporate holders of copyright. At the same time, there is a great difference between the de facto and the de jure situation. The movie industry has initiated legal attacks against Web publishers in California, New York, Connecticut, and Norway over the DeCSS software code posted on their sites. The litigation-a landmark case in the applicability of the ‘fair use’ doctrine in the digital world-has now widened, addressing complex social issues raised by new technological measures for protecting intellectual property. In August 2000, the US District Court for the Southern District of New York struck a major blow against online hacker publication 2600 by declaring it was illegal to publish information about-or hyperlinks to-DcCSS. As programming instructions are plain speech, the verdict can be interpreted as affecting rights of free speech. Of course, the syntax of a programming language cannot be identified as human language proper, a programming instruction does not take the form of ‘telling’ the computer to do something, any more than turning on a tap is the same as ‘telling’ it to release water. Programming instructions are more closely related to the functioning of electronics than to human language. At the same time, some striking parallels are undeniable. Prior restraint on free expression is one of the most severe civil penalties in Western legal systems. Even temporary deprivation of the right to speak or publish causes serious and

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irreparable harm, far more grave than any monetary loss. If anybody had doubts that the copyright vs. free speech litigation is about reclaiming something of the Gratis Economy, this context clearly reveals the true stakes. ‘Prior restraint’ is government action that prevents a citizen’s speech or publication from reaching its listeners. It can only be imposed for a very brief period, in extreme situations where the act of publishing threatens a fundamental interest. In this case, the Preliminary Injunction and later the verdict prohibited publication of DeCSS after only a brief examination of dubious evidence. Furthermore, the order is unclear about what is being prohibited. DVD-CCA claims that the defendants were misappropriating its trade secrets by posting DeCSS on their Web sites. However, trade-secrets law only prevents publication by those who have entered into contracts to protect the secret. If the scattered sorties of technology activists and programmers ever come to take the form of concerted action patent attorneys could easily find themselves less in demand. Firms instead will likely hire older lawschool graduates with business experience and an MBA rather than those with academic backgrounds in computer science or technology. Innovations enabling very small transfers of money on each use could perhaps postpone market restructuring here, but do little to alter this trend. Also, imaginations have been aroused. As a necessary step towards the ‘near future’, when all software will have its free counterpart, a (1-percent) across-the board software tax has been recommended, with the proceeds being spent on the further development of free software. By taxing computer users, inventors wish to fund the creation of free software that competes with proprietary programmers. To destroy software markets by making all software available for free would be throwing the baby out with the bathwater. It is inappropriate to deprive all software authors of their livelihoods. I think the best chance for the open-source movement is limited to being a permanent alternative and critical opposition.

Box 15. Licensing Regimes Within the open standards movement there are some important differences in licensing regimes. The Berkeley license used by FreeBSD (operating systems for the x486 platform, later on for Internet servers and high-end workstations) offers users the freedom to take code and extend it in proprietary products. The

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GNU General Public License (GPL) is designed to prevent this. There are many social, political, and economic agendas among users and contributors to the code, and also some practical concerns. Whether one thinks proprietary extensions of free software are good or bad depends not only on political and cultural agendas, but also on practical issues and commercial interests as well. The fact that no one will own the platform is an incentive for some investors in the development effort, and a disincentive for others. One of the other reasons that GPL is meeting with unexpected acceptance among corporate interests is that they can also be used to mount an anti-competitive action against a rival. Suppose we have two software companies, ASoft and BSoft, which compete in some, but not all, product areas. ASoft decides to sponsor the creation of a new product under the Linux operating system, that performs the same function as a product, which ASoft does not make, but upon which BSoft relies for a substantial portion of its revenue. The Linux equivalent would then most likely destroy the market for BSoft’s product, diminishing the company’s ability to compete in all markets. This is a particularly potent anti-competitive weapon because, unlike the BSD license, it prohibits BSoft from incorporating and improving upon the free, open-source code. It must reinvent the wheel, while at the same time attempting to compete with a product which is free-the ultimate in predatory pricing. Sounds like a wild flight of the imagination? It isn’t. Microsoft executed a similar strategy when it released its free EMM386 memory manager with Microsoft Windows 3 .O. Competitor Quarterdeck, which sold a highly rated multitasking environment called DESQview, derived the lion’s share of its revenues from a memory manager called QEMM. By gutting the market for QEMM with a free product, Microsoft destroyed the revenue stream upon which Quarterdeck relied to promote DESQview, paving the way for a Windows monopoly. The rest is history: the history of the Microsoft legal remedy evolving into a battleground to be understood within the context of the opensource software movement, that is, also within the intangible part of the Gratis


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In the wake of the Netscape source code release (Netscape has since succumbed to a hostile takeover), and Sun announcing the release of the source code and project information for its StarOffice productivity suite, the open-source community has achieved visibility it never had before and their old demand for Microsoft to release its source code seems more realistic. Influential people foresee that these developers may soon obtain more clout and informal professional prestige than some might currently imagine. The technical community, as they dub themselves, will not surrender the right of ftee expression and the ‘fair use’ of intellectual property. The technical community also takes sides in the century-old debate concerning epistemology: are there inventions at all or are there only discoveries? This is no academic question: these days animals, plant varieties, and tissues are being patented by the scientific group successfully mapping the genetic endowment.219Their answer to our epistemological question often denies the very possibility of inventing by claiming that the laws of nature already state what is feasible and what is not. After the discovery of prime numbers, for instance, mathematicians could do a lot with this ‘invention’-for example, they could use them in proofs, but they certainly could not use them any way they wished. As a result of such a state of affairs, the technical community concludes, only informed discovery is possible. A hrther debunking of the discovery process came from Nobel laureate Hungarian biologist Albert SzentGyorgyi (1893-1 986) who claimed that discovery consists of seeing what everybody has seen but thinking what nobody has thought. Paul Baran, founding father of packet switching and Internet Protocol, said the following about how an inventor realizes or discovers the possibilities inherent in his innovation. It didn’t take very long before we started seeing all sorts of wonderful properties in this model, The [packet switched] network would learn where everybody was. You could chop up the network and within half a second of real-world time it would be routing traffic again. Then we had the realization that if there is an overload in one place, traffic will move around it. So it’s a lot more efficient than conventional communications. If somebody tries to hog the network, the traffic routes away from them. Packet switching had all these wonderful properties that weren’t invented-they were discovered. I’d say they’re mostly discoveries rather than inventions. Like the realization that by breaking the physical address from the logical address, you could move around the network and your address would follow you. Logical address, also called “virtual address,” is a non-physical address used to access a device on the network. The logical address does correspond to a physical address, but it can be remapped from one physical address to another, as necessary. (Wired, 9 March 2001)

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At the same time, Patent Office examiners, European and US alike, do not consider that this simple question is up for discussion any longer when it comes to gene sequencing or natural substances. With reference to the fact that no sequence has ever been in the public domain, they grant patents on gene sequencing one after the other, although a gene sequence had, of course, existed in nature well before the method of taking hold of it was discovered. Naturally occurring substances are also patentable once they are isolated, identified, and made practically available, together with the process of developing them for a useful purpose, such as the treatment of a disease. Hence the value of most contemporary inventions in cutting-edge research lies in their functionality. A further unsolved challenge to patent law relates to the known presupposition that patents should not block consecutive research. As gene sequencing becomes increasingly automated it is difficult to regard the sequencing process as innovative. The emphasis may soon shift to patents’ role in obstructing further diagnostic techniques (Thumm, 2000). BITES OUT OF THE GRATIS ECONOMY

There are a couple of different ways in which law affords protection in new technologies such as multimedia, computer games, and cartoons. If-as the song claims-diamonds are a girl’s best friend, a netrepreneur’s best bet for protection is a copyright or a trademark, but it is possible that patent law would be applicable as well. And although these methods of protection have been around for some time, they are just as pertinent regarding new media. Trademarks typically denote a geographic or other source for products, or identify a service through a word, design, picture, or slogan. It is important to understand that the only way of obtaining trademark rights is through actual use of the mark in commerce. It is usually advisable to obtain a trademark registration when feasible, as they are fairly inexpensive, and such registration helps to convince a court should a competitor subsequently infringe a mark. In Europe, a Community Trademark registration is now available where one application covers the entire European Union. People also refer to ‘trade dress’, which is essentially the total ‘look and feel’ of how to package or present a product or service. For example, some merchants display software in characteristic packaging. Although one cannot register trade dress, usage (especially of an arbitrary nature) still provides business with some protection from com-

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petitors that attempt to compete with a trademark owner and use simi 1ar packaging . However, a businessman’s best bet in new media is copyright. Cartoon characters (and of course any stories or software games featuring these characters) are copyrightable lasting some fifty years past their originator’s lifetime. Copyright can also protect computer programs, affording a remedy should an end-user copy object code for another, or should someone take the literal source code, even if translated to a different operating system. Obtaining a copyright registration is not always inexpensive.220Registration makes available a number of favorable presumptions if the worst does in fact happen. Recent developments in US patent law have provided patent protection for ‘methods of doing business’. Patent protection lasts a much shorter time than copyright; in the USA it is twenty years at the most from the date of application. One of the more famous Intemet patents, recently issued in the USA, is Amazon.com’s ‘one-click’ shopping. The development of 1-Click addressed a pervasive problem in e-commerce, that the majority of shopping carts are abandoned before an order is completed. By simplifying the process to a single mouse click, the intent was to increase the percentage of completed sales. Barnes & Noble, seeing the advantage of this approach, created a similar simplified shopping system for their Web site. Amazon sued Barnes & Noble during the 1999 Christmas season and obtained an injunction forcing them to eliminate their single-click ordering function. But there remain lingering questions about whether such patents will hold up at the end of the day. To take one last aspect of ownership rights (a sort of land grab) in cyberspace, with regard to domain names a prior registrant of a trademark always has a claim to another registration of a domain name, but typically only if confusion arises over the use of the site among the registrant’s customers (Porsche sued a natural person with this name in America who set up a personal homepage, claiming that its customers would be confused). If a famous mark is not at issue, the domain name is not being used in bad faith, the mark is not being tarnished (for example, by association with a pornography site), and it is being used in a different field than the registrant, it is unlikely that any court would enforce the handover of the domain name. According to the US Digital Millennium Copyright Act (DMCA), prior trademarkkopyright holders have sweeping powers to protect their domain names, even if they do not currently have them registered. In other words, even if Coca-Cola didn’t register Coke.com, it is not clear whether anyone else could regis-

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ter it. Also, the World Intellectual Property Organisation, an arm of the United Nations, ruled in favor of trademark holders. ICANN, the ruling body for domain names and eminent aspirant for Internet governance in general, also supports existing trademark holders versus cyber squatters (or even innocent users). Traditional trademark, copyright, and patent processes seem to be the norm worldwide. Also, NDAs (non-disclosure agreements) are common between prospective partners, generating a little more trust. Recent court decisions have upheld that traditional offline protections also apply to the Web. Most countries adhere to the Bern Copyright Agreement and the Paris Convention, furnishing a small amount of protection online. Unfortunately, a site can easily and quickly move to various servers around the world. And, of course, some will go to servers hosted in countries that do not adhere to the Bern Agreement. The bypassing of owner’s and licensee’s rights, however, is no rarity and by no means exclusive to software. As to hardware, I refer to the following case study. Online database compilations are free; netizens do not face an electronic toll gate each time they try to access information assembled and indexed by a third party. This is particularly the case with forthcoming real-time interactive databases. They are not copyrighted-as yetalthough the value added by compilation has given rise to such claims. An emerging issue is whether database owners and licensees should obtain-historically new-protection for the public facts they compile and resell. It is widely held that some unfortunate outcomes of intellectual property protection (for example, copyright, patent, or trademark) could be prevented by exempting information gathered, organized, or maintained to address, route, forward, transmit, or store digital online communications or to provide or receive access to connections for digital online communications. As more consumer devices turn digital and consumer electronics manufactures are held responsible for content security a proliferation of copy protection code breaches is to be expected. Infiltrated codes are cracked by hackers and the new ‘utility software’ is paraded on the Net. Appropriate digital security measures are sought by producers, but the chances of keeping their trade secret are meager. It seems inexorable that a bitter pill for the entertainment industry will have to be swallowed: software content protection simply does not work. Manufacturers can distribute encrypted content, but in order for it to be read, viewed, or listened to, it must be turned into plaintext. If it must


23 1

be turned into plaintext, the computer must have a copy of the key and the algorithm to turn it into plaintext. A clever enough hacker with good enough debugging tools will always be able to reverse-engineer the algorithm, get the key, or just capture the plaintext after decryption. And he can write a software program that allows others to do it automatically. This can be stopped only at such a high price to society that few would be prepared to pay it. At the same time, the overwhelming majority of current online attacks are harmless cybergrafitti. Even if we all know that teenagers will break whatever copy protection scheme is major companies in the entertainment business are intent on developing a system of distributing music (not only music by artists without a recording contract, such as MP3.com) on the Net to combat what they see as copyright infringement, that is, piracy. With the emergence of the digital economy, music companies with revenue from digitized entertainment are faced with a new market situation. They are naturally trying to gain control of the new digital music channels. There have always been channels through which free music is made available, such as radio and television. Companies with brands to protect have agreed to coexist with them. The onset of new compression techniques, however, seems to have given them a lot more cause for concern. Especially with the onset of digital radio and television, label companies, the owners of financed, manufactured, stored, shipped, and marketed music, feel threatened by the loss of even the meager competitive edge they have managed to maintain: quality as their added value. But in the digital era, it costs nothing to ship music over the Internet to an online fan. Therefore, the hard-core reason for labels would seem to have vanished. As for marketing, a Web site of the artist-especially an already established one-can do the business and connect him with his fans. For newcomers, giving away music can leverage their quest for publicity. We know that copyright is a permissible monopoly. Jokes, for instance, are fairly unlikely to obtain copyright protection, although they are often original and exert their sweeping effect by pointing at some surprising or innovative angle within a known context. Also, the price of drugs does not always reflect the full utilization of production monopoly rights (cf. ‘A Patent Policy Proposal for Global Diseases’, Jean Lanjouw, Brookings Policy Brief [June 200 I]: http://www.brookings. edu/comm/policybriefs/pb84.htm, and also http://www.brookings.edu/ views/papers/Lanjouw/20010611.htm).

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The Gratis Econoncv

Like other monopolies, copyright monopoly burdens competitors, creators, owners, and the public. To reconcile the different positions, we must ensure that the burdens never outweigh the benefits. So it is desirable for us to examine who is benefited, how much, and at whose expense. This call has traditionally been answered by balancing the countervailing interests under copyright. Copyright law’s long-standing balance of interests between owners and users of information (end consumers, institutional users, and creators) has carved out a considerable and meaninghl informational commons where copyright rules do not plug all IP-leaks and do not mop up all pockets where independent professional publishers in the middle ground between Big Media and amateurism can flourish, and where netizens can find information and valuable content if they x e skillhl and serendipitous enough. This is not to encourage misappropriations of intellectual property; it is not because ownership is theft, but rather the result of trading-off countervailing interests. Luckily enough, copyright is not inimical to free speech. The copyright system constitutes a social bargain with the following public interest exceptions: Facts remain uncommodified and are never copyrightable.22’ Only original works can be subject to copyright. There is a set duration for copyright, abolishing perpetual copyrights. Copyright is still much longer than any industrial patent. ‘First sale’, that is, an imposed responsibility on publishers to deposit copies of their works with national or designated libraries. This is the legal basis for the existence of public libraries and collections’ lending activities. Video rental stores are predicated on this principle, too. Specific exemptions apply for educational, governmental, and other public purposes. The transparency requirement of public administration constitutes an additional component in the public domain. Exemptions aim at the promotion of science, innovation, or freedom of expression. * ‘Fair use’ is customarily interpreted as: instances of photocopying for private or educational use; off-air taping; critical commentary; and parody. Not all uses are controlled, basically only printing and reprinting. The copyright industry often construes this exemption-reflecting an inexorable leakage-as an unfair tax levied on publishers. Currently, it is not easy for a sociologist to clarify the legal scope of Internet contracts on software licensing. Some lawmakers allow com-


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panies to send binding legal notices by e-mail about restrictions on the use of their software. Consumer groups warn that this option could bind customers to unseen licensing agreements, while allowing companies to disable their product if a purchaser misses a payment. US software companies are pushing for legislation that would bind users to an agreement within the framework of which they cannot do any reverse engineering, even if this capability is important for software engineers so they can, for example, design software to read different file formats. Reverse engineering of software is useful for purposes that have nothing to do with copying. The most renowned temptation to reverse engineering is the as yet proprietary file formats of the MS Windows operating system that prevent other developers from creating interfacing software that can read and write MS-Office applications. Prevailing intellectual property protection gives owners the ability to use the force of law to enforce restrictions on what consumers can do with their product. This level of protection is unheard of in other industries and has led to a situation where versions of software compete not exclusively on their merits, but on the basis of how many are already installed and havc captive users or application providers. This is achieved by locking customers into a product and then making money from the upgrade cycles, in which customers are forced to buy expensive updates every year or so to compensate for designed-in incompatibilities.

Box 16. Special Restrictions

011 Intellectual

Property

The software industry sees its dependence on intellectual property as somehow unique. In today’s world, however, almost every industry depends on the protection of its intellectual property for survival. An automobile, for example, contains a tremendous amount of intellectual property. The design of the components, the processes by which they are assembled, and even the algorithms to control fuel injection are all the jealously guarded intellectual property of the automaker. The auto industry has prospered without the legal right to restrict how consumers can use their cars. They cannot forbid you to open the hood. They cannot put restrictions on those to whom you may resell the car. They cannot have you fined or thrown in jail for having your car serviced at a non-approved garage. Only the software industry has these privileges, and they use them regularly. Software companies acquire these

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The Gratis Economy

special privileges via license ‘agreements’. But why shouldn’t auto manufacturers enjoy the same privileges? Perhaps after arranging financing and making the down payment, the consumer would be handed an envelope containing the owner’s manual and the keys. By opening that envelope they would agree to have the car serviced only at the dealer, to hold the dealer and automaker blameless for any defects, that any defects would be fixed at the automaker’s sole discretion and convenience, and that the fixing of defects could involve the purchase of a new automobile. With such an arrangement, the auto industry would also enjoy 40 percent profit margins, but it would be a disaster for the consumer. Imagine the price gouging, the poor service, the dismal product quality, and the nonexistent customer support that would result from such an arrangement. Yet this is exactly the state the software industry is in today. Of course, the auto industry takes a more sane view of intellectual property. If 1 want to design a generic carburetor for Toyotas, I can take apart Toyota engines, measure them, modify them, test my carburetor, and market my product. All without Toyota’s consent. In the software world, I would be heavily fined as soon as I opened the hood, and could be jailed if I tried to bring my innovation to market. Granted, most consumers have no desire to open up and modify their software, just as I have no desire to examine the inner workings of my car’s carburetor-certainly not after what happened last time! However, it is worth looking at the multibillion dollar after-market auto parts industry and asking why the analogous software market is still illegal. Patent law requires patent holders to make their designs public in exchange for legal protection. All members of the public are free and encouraged to study these designs and to develop them, so advancing the state of the art. In all other industries, intellectual property is protected as a way of promoting the long-term public good. In the software industry, however, the protections are given unconditionally, and studying intellectual property to advance the state of the art is considered illegal. Source: Tim Romero, ‘What Gives Them the Right’, online at: http://www.oreilly.com/news/tang~ed~1199.html

I come back to this issue of innovation commons; the issue of what constitutes non-commercial, private and legitimate use of a product, including the public’s right to ‘fair use’ of copyright materials.


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The established system of intellectual property has helped to sustain a ramified non-profit sector of archives, schools, universities, libraries, and research establishments. Under the auspices of peaceful co-existence, this sector represents the cultural infrastructure by means of which the copyright industries keep the distribution of illegal materials at bay. Among the traditional intellectual property areas the Internet has had little effect on trade secrets, patent properties, trademarks, designs, or plant breeders’ rights. Copyright privileges, on the other hand, are heavily impacted. With the onset of the digital era unfolding the information society, publishers perceive the borderline between commercial and private uses as blurring, and the ‘fair uses’ clause as receding in importance. The concept of new exposure to piracy has emphatically been raised by publishers and an outcry is heard for a new dominant business model in information commerce called pay-per-use (as opposed to one-time payments for full access). As a result of clashes with countervailing powers numerous initiatives are in full swing. The principle of micro-payment-as opposed to freeloading of filessupplements these projects. Micro-payment would result in the payment of small amounts on each access or use of intellectual property. This is tantamount to a shift toward rental, turning unlimited-use software into rent-ware. In the section ‘The Design of Gentle Money’ I discuss comparable methods, putting them into historical and logical context. There is, for instance, the Digital Object Identifier (DOI) initiative on the part of publishers. This research seeks persistent identifiers for managing copyrighted materials. ‘Management’ means here (i) a unique, persistent naming of all registered intellectual property and (ii) the development of a mechanism to put that identifier to some useful service. It is feared that this solution will amount to nothing more than the routing of requests to the publisher’s Web site-that is, one assigned DO1 resolving to a single URL. As this practice of single-point routing would restrict even the legal use of copyrighted materials, developers of DO1 foresee a public identifier for use. Such a management system (the most intrusive and sophisticated advertising network is just a toy in this daring perspective) will ping an intellectual property management server each time a registered intellectual property is to be used, such as the insertion of a photo, a request for a software subroutine, or the rendering of a reference to an article in a scholarly journal. The Digital Object Identifier (DOI) is therefore an identification system for intellectual property in the digital environment. Developed by the International DO1 Foundation on behalf of the publishing

23 6

The Gratis Economy

industry, its goals are to provide a general framework for managing intellectual content, link customers with publishers, facilitate electronic commerce, and enable automated copyright management. Anticipated DOIs are perhaps the toughest measure imaginable against unauthorized use of intellectual property. I must also mention a gentler endeavor, however, aimed at creating a new marketplace for copyrighted material. Specialists in intellectual property matters have recently launched an online exchange service allowing subscribers to list or describe intellectual property rights and technology they are interested in buying, selling, licensing, or trading. Forthcoming is the design, development, and deployment of IPmanagement technologies that may one day strike a new balance between the need to control copying and modification and the desire to foster innovative uses of digital works. The stimulus for limiting, even excluding, fair use rights has come from the new-technologiesprompted revelation that the entire edifice of copyright law is likely to crumble in the era of the Internet, which makes it possible for perfect copies of a creative work to be disseminated for free, regardless of whether there is a license to do so or not. Abusing the innovation commons, computing and communications advances have created a favorable environment for experimenting in the new intellectual property management technologies with their common ultimate goal of having consumers pay each time they read, access, view, or listen to intellectual property. The technologies in preparation may soon make it impossible to copy from a page of text on a screen unless we literally write it down by hand. Preparing for the postmodern era of copyright, the new technologies, backed up by new legal doctrines (Jaszi, 1998), hold out the prospect that every single use of every intellectual work available online could be licensed, monitored, and billed by electronic means. Under the name ‘Digital Future Coalition’ a wide array of interested copyright holders, concerned about consolidating the old balance between proprietors’ rights and users’ access privileges, has been formed to deal with issues of copyright in the digital networked information environment. As a result of their activity to prevent the decentring of the conventional notion of copyright, a global coalition of music (SDMI), consumer-electronics, and computer firms published its standard for future players of online music files. Besides blocking the playing of illegal copies of newly released songs, these devices are supposed to understand predetermined digital-usage rights.


23 7

The scheme’s ‘default’ setting is that people should not be able to own more than four copies of a piece of music for personal use without paying extra. Nor should they be able to distribute them over the Internet. SDMI hopes to settle on a standard for a comprehensive digital-rights system. This would let publishers commercialize the network environment and economize with their copyright. They could decide, for example, how often consumers would be allowed to play a song, how many copies they could make of it, and whether they should be able to upload it onto an Internet server. Digital-rights-management systems and digital watermarks are complicated pieces of software that could, if widely deployed, not only establish property rights for intellectual content, but also strengthen the power of publishers. This means protection, control and discrimination for owners of online music, electronic documents, and digital works in general. This is rather a military-intelligence model of security that is to be applied to consumer goods, threatening the flow of fiee samples. This could impinge on the culture and tradition of the public domain that has been so hard won and which has served our economies so well. Aggrieved copyright holders who commission the development of intellectual property management tools are compelled to enter a novel arms’ race. Anarchist-programmers committed to phasing out copyright protection as we know it are working on free sharing of computer data and distributing copyrighted-privatized files without reference to a central database or network server, so making it nearly impossible to track them down. Methods of protecting copyrighted material with scrambling and requiring a key to decode it may wind up being trumped by even stronger encryption covering the tracks of those doing the swapping. The music industry intends to fight technology with technology, employing tools such as the development of a secure digital music standard that makes it feasible to track every Internet download and tag every protected file.223 The copyright ‘industry’ consists of publishers, movie studios, record companies, and some consumer software providers. Owners of these types of ‘content’ are keen on newfangled trusted systems. Besides ensuring that proprietors are paid for their products, the technology would let them exploit their digital wares in entirely new ways under perfect protection leaving no room for unintended private uses. This retailing approachcalled ‘superdistribution’-is meant to allow people to distribute copyright material freely to others. But before those others can actually play or view it, it will automatically ‘phone home’ to a special Internet clearinghouse to arrange for a suitable fee. As an unintended consequence, this might blemish the distinction between ‘fair’ and ‘unfair use’.

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The Gratis Economy

Digital-rights-management systems are built around the concept of ‘trusted systems’. The term refers to computers that can be relied upon to follow rules set by a publisher. If the copying of a digital work is not allowed, for instance, such a device will at least refkse to make a duplicate. As hackers are always around, the best way to do this is to control both the software and the hardware. As to hardware, a copyright chip is foreseen to forestall freeloaders. Machine-readable ‘tags’ in the software are then used to represent particular rights (such as the right to print something, or to transfer it to another device) that the hardware can interpret. When a piece of content is loaded into a trusted device, it checks the associated digital rules and acts accordingly. This can be likened to the Open Profiling Standard that is meant to replace cookies. Instead of having to fill out long and involved forms about themselves on each Web site, users would carry the information with them in a standard format, which could be retrieved by any server. The new Open Profiling Standard (OPS) would supersede cookies as a covert way of storing user information. It also may alleviate users’ suspicions because it requires that they explicitly release part or all of their data to a site. The specification also requires that servers have a digital certificate so that users can verify whether they are dealing with a legitimate party. Most envisaged systems for personal computers require the installation of special software that acts as a sort of electronic notary. It checks an arrived user’s identity, looks up his or her rights, contacts a global or regional financial clearing-house to arrange consecutive payment, and, if everything is in order, decrypts the coveted digital work. In some schemes under construction, would-be users also need an endorsed special viewer or player program that is deemed to be impregnable and secure, implying, for example, that the printing function will be disabled if a particular user’s rights do not include printing. The most ambitious copyright-sheltering scheme so far allows creators, publishers, and distributors not just to attach usage rights to their content, but to design and set marketing rules, such as tailored pricing. With a software tool at their disposal, content creators can thus empower users to get discounts on music downloads if they also buy tickets to a particular concert. All this enabling technology creates plenty of opportunities for new sorts of interactive-service provision. In particular, online clearinghouses will be needed to record data on who is using what, and then to arrange suitable financial transactions. When a publisher uploads its content onto one of the company’s computers, it sets the price and defines, for example, whether the product can also be saved or printed by any user

The Public Iitterest in the Gratis Economy-Gratuities Generated by the Polity

23 9

who wants to buy the right to look at it. The publisher then pops it in an appropriate digital container and publishes it on one of its partner Web sites. Buyers need to register with a financial clearing-house and download the necessary software to open the container and reveal the goodies inside. This scheme-called, ambitiously, ‘copyright sheltering’empowers creators and artists to eschew label companies, and recording and printing houses by putting both dissemination and marketing into their hands. In order to put this challenge into perspective, I should mention that an entire new business model is emerging in the field of copyrighted entertainment and media that poses a genuine threat to legacy structures. I refer to what is called video-, books-, and-most recently-newspaperson-demand. This emerging model eschews rentals, and printers, but opens up significant new horizons, engendering perhaps the greatest adjustment so far as the New Economy encroaches upon the old. The anticipated new intellectual-property management technologies may sound excellent news for brainworkers who wish to sell the fruits of their labors. Whether it will turn out that way, however, depends on two groups: customers, who may have got used to the current, lax regime leaving room for fair, non-commercial uses and techno-anarchists, who think all software code should be open. If rights-management software can tnily be made secure, customers may have no choice but to stump up. Taking the example of pirated music, regardless of what encryption is used, music eventually has to get into the end user’s ear. It has to ‘go analogue’. And at that point ‘hunters’ can ‘recapture’ it, get it into their computer, and redistribute it. Also, anarcho-campaigners love challenges, and hacking into software is just the sort of challenge that many of them like best. And because of their belief in freedom-of-software, their solutions will, no doubt, be made freely available. Actually, that is how hackers contribute to strengthening the often precarious intellectual-property protection measures of cyberspace: by violating the weak links of maturing information society, such as firewall breaks, hackers help to strengthen the very system of cybercapitalism they hate. Even legitimate users, however, have some privacy concerns. Digitalrights management, particularly the sort that refers each transaction to a third party, produces enormous amounts of ‘information exhaust’. Inventors see this as a good thing: tracking products can record such usage data as the time when a customer plays an interactive game, or even invoke specific modules in a game. Many other people, however, will not regard it as such a great idea. They would rather keep their game-playing habits (and other things) well within the confines of their privacy.

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The Gratis Economy

Civil libertarians and cyberpunks alike-in their techie conceit as regards unconstrained autonomy-will not think much of this technology either, because it would create new boundaries in cyberspace by restricting the freewheeling flow of information. After repeatedly strengthening the rights of copyright holders in the face of new technology, therefore, governments may begin to think about protecting the consumers of intellectual property-perhaps by limiting what trusted systems can do. The current-endangered-business model of publishing provides for a great domain of informational commons and the current practice of the tech community provides for a great domain of innovation commons. Pay-per-use models are now endangering this obligation of copyright holders to provide public access. The danger is invoked that “copyright law will get divorced from freedom of expression principles in order to remarry censorship” (Samuelson, 1999). Intellectual property owners and licensees vigorously enforce their copyrights. At the same time, they accept that the best enforcement is the creation of legitimate alternatives in respect of the consumption of their property. While they build their digital distribution platform, they also try to be cooperative in the creation of innovative avenues for consumers to access artistic expression or scientific material. As already stated, the borders of the informational commons are being gradually pushed back by renewed intellectual property holder initiatives, prompted by creative or unforeseeable uses. Copyrighted material’s rightful owners and licensees are entitled to appropriate recompense for the legitimate use of their material. What ‘legitimate use’ encompasses is beginning to be subject to constant litigation. Instead of ongoing case law across countries a regulation (norm setting) is due here. When it comes to revision, it will be undeniable that owners of digitized information enjoy legal privileges just like those in other industries. Other industries cannot restrict how consumers use their products. They cannot put restrictions on those to whom the product can be resold, who can service it, or what parts or patches can be added to it in order to enhance usage. Car manufacturers, for instance, fought a bitter fight to stem the flourishing after-market auto parts industry by trying to win a regulation barring generic parts to the advantage of branded ones, but they lost in both the European Union and the USA. Software companies possess these special privileges via license agreements disarming the analogous software market. A Web site is only software, and very often is a small executable program that is either downloaded to the personal computer or run from a

The Pubiic Interest in ilie GrnfisEconomy-Grafuities Generated by the Polity

24 1

remote server. When visiting Web sites, we download these small programs and documents onto our computer. To modifj them when we download them is to violate common licensing agreements. In several lawsuits, Web sites that ‘frame’ other sites have been shown to be ‘altering’ the framed site’s content and/or code, in violation of common copyright law. If the ‘casual copying’ provision will not apply to ad blocking, in the fbture ad blocking software will be found to be in violation of the same copyright laws and/or of standard software licensing agreements, even if nobody signs them before entering a site. Advertisers alter the appearance of a site with banners. Ad-blocking software alters the appearance of the site by removing these ads and returning more closely to its original, default state. Advertisers make money from positive (that is, adding something) alterations and ad-blocking software companies make money from negative (that is, subtracting something) alterations. At the same time, like other Web filtering programs, it goes to the core of the cyber experience: freedom of choice. The advertising community is on the brink of taking the position that (i) choice has already been exercised when opting for a free Web page with the tacit understanding that commercials are the means by which the publisher turns a profit, and (ii) that ad-blocking software is a legal infringement or violation of copyright, or vandalism. From a copyright perspective, the use of ad-blocking software raises two principal issues. To the extent that a Web site, as a totality, presents ‘work’, blocking out a portion of that artifact constitutes impermissible copying and/or creation of what is termed ‘derivative’ (altered or modified) work. Ad-blocking software, as currently designed, modifies copyrighted code and interferes with the transmission of the content of a Web site. If it was simply turning off images, then there would not be as much of a controversy, because no code modification would occur. Such copying, if unauthorized, is generally considered to constitute copyright infringement. The issue is whether blocking is exempt from industry liability as ‘fair use’. We know, for example, on the basis of the US Supreme Court’s decision in the Sony case, that an individual’s videotaping of, for example, copyrighted broadcasts, constitutes ‘fair use’ when done for the purpose of time-delayed viewing (SONY CORP. v. UNIVERSAL CITY STUDIOS, INC., 464 U.S. 417 [1984]). For many infonauts it appears that a similar analysis may come into play with respect to individual PC users’ attempts to block online advertising at will. The safe harbor afforded by ‘fair use’ would certainly not, however, apply to such blocking and alteration as is done on a wholesale, commercial level.

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The Gratis Economy

What this really comes back to is whether banners should be included in the catch-all ‘permission marketing’ realm. Those whose business it is tend to say ‘yes’; those who have given up on banners say ‘no’. In my view, this underlines the fact that the privileges of intellectual property are now a coveted quarry for the actors and consumers of the digital economy. In Japan, video cassette recorders that eliminate commercials when taping have been around for years. The VCR reads the signal or ‘code’ that accompanies the commercial’s leader and trailer and stops the VCRs recording function during that period. Although this technology was never used outside Japan because the signal in European and US commercials was not the same and could not be picked up by Japanesemarket VCRS;*~ the legal community initially took the view that this technology would be legal, as in Japan. Because, as it says in sports disclaimers, this show can be taped for personal use by the viewing audience, but not for rebroadcast. In other words, as long as you are using it only for personal consumption everything is fine; you have not edited the main show or the commercial, but have simply chosen to record one not the other. Modifjkg the code of proprietary software is hacking if it involves the critical element of ‘trespass’. The copyright would never seamlessly apply to the HTML code that a server delivers to the personal computer. There is no standard way of displaying this HTML code. The browser can change the fonts and the colors in which the page is displayed. It can load the images you suggest, or it can just display what you have in the < A L P tags. It can do any number of things that you cannot control and have not copyrighted. If you want to control the layout of a page, put it in Adobe’s PDF format. What is more, software industry (and label companies, Web site owners, Digital Video Display manufacturers) enjoy these privileges unconditionally. The qualifjdng restriction that protection is meant as a way of promoting the long-term public good (to help to advance the state of the art) does not apply here any longer: special protection no longer encourages the creation of new works. All too often it is abused in order to lock customers into a product. Locking-in is a common practice of drug dealers looking to establish a customer base by providing free samples to ‘hook’ users, at which time the dealer raises his prices for his product. Since people are now dependent, they will naturally pay whatever is necessary to obtain the substance. In the software world, for years Microsoft tolerated software


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piracy (both casual and organized) as its user base expanded and the company became a monopoly on the desktop with millions of ‘hooked’ users and organizations, at which point it raised its prices and plans to force users to pay annual tributes to feed their dependence on Microsoft products and services. Locking in is only part of the sin as perceived from an end-user’s perspective. Locking-in also implies that consumers are driven through the predetermined upgrade cycles where new products are trickled down according to return-on-investment considerations leaving ready-to-use technology often in company safe. I have pointed out that limiting ‘patent width’ for new technologies is good for the purpose of reducing the ability of patents to prevent competitors from further developing enabling technologies. It is very important to preserve the pool of technologies against the current ‘propatent’ trend that can be adopted free of paying a license fee. Moreover, I have interpreted the free software movement as representing one of the few modern cases that does add to the (informational) commons. US companies like Red Hat and VA Linux, rooted in the voluntary tradition, now have the capital to hire hundreds, even thousands, of developers from the technical community, and put them to work creating even more publicly accessible software. Projects that were once considered purely the domain of the proprietary software world, like word processing applications, graphics manipulation programs, and DVD players, are now being added to the public-library arsenal. In the world of free software, money has never been the primary motivation for hackers. Small-time developers carry on even after venture capital has discovered them, and also in the wake of the astonishing stock market ascent of dot-com companies. VA Linux is selling computers with Red Hat installed on them, building its business strategy on open-source software. Free software, however, once the domain of anonymous geeks concerned only with their code, has made decisive steps towards integration into the information society. Some soul-searching has always been characteristic of developers, but the underlying tenets have been pragmatically upheld. The principle of sharing intellectual property with the wider public in order to carry on with innovation has proved feasible and has even managed to successfully relegate the conventional and bureaucratic institutional structure of patented innovation to one option among many other possible business models. A distinguished group among the movers and shakers of the Internet perceive attempts at the preservation-or rather the enhancement-of

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The Gratis Economy

proprietary control as damage and (as the status quo is perceived to have been left behind) routes audaciously around it. In my judgment, this societal process, aimed at the preservation of infonauts’ privilege to borrow from the virtual library called the Gratis Economy, is more philosophical and stronger than a mere spontaneous course of action to preserve the not-for-profit character of cyberspace. There are (global) forces mobilizing to-partially-defeat capitalism as manifest in intellectual property. Although futurologists predict the end of capitalism at the latest within a few decades, yielding to the information society that they assume will be totally different, I doubt whether it will be possible to overthrow a societal order by means of patents and copyright. Copyright holders perceive the emerging new technologies as a threat to the traditional publishing and recording industries. This can be likened to similar outcries when radio was emerging, followed by the mimeograph, television, the photocopier, magnetic tape, the compact disc, the VCR, and many other technologies that made sharing information easier. The new digital technologies of copyright busting programmers do not do anything different from what can already be done with those older technologies, they just do it more efficiently. Artists are kindly requested to start to adapt as early as they can. The US federal government’s Sentencing Commission recently voted to stiffen ‘punishments for various copyright violations. Counterfeiting and piracy on the Internet can now result in a 10- to 16-month prison sentence, regardless of whether the violator was attempting to turn a profit. The punishment for stealing electronic property, such as songs and writing samples, is calculated by multiplying the value of the item stolen by the number of people who download it. The greater the value, the longer the prison sentence, although the maximum penalty for a first-time offender is three years. In the meantime, everyday reality is challenging this doctrine. Programs are being written one after the other that allow users to connect open servers that emulate either a musictrading service, or share files that are under copyright protection. These underground servers are usually operated outside the company that is being sued by copyright holders. This shows how piracy threats will continue even if servers in the forefront are shut down. In my view, this approach is mistaken, as copyright violations are all too widespread to seriously start thinking about their further criminalization. I would like to come up with another paradigm because a new segment of the informal economy-as old as mankind itself-has now come into focus. What is referred to in copyright matters as ‘leakage’


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will be a permanent and perhaps even more significant phenomenon unless some unwelcome Orwellian solution emerges to overturn the current state of affairs.

7. TYPOLOGY OF BUSINESS INTRUSIONS I shall enumerate a number of dazzling examples based on a wide assortment of casuistry that cry out for political remedy. The unfettered free flow of personal data has many vigorous market drivers. As to the inhibitors of this free flow, there are currently three types of possible checks that can provide or prompt political remedies: (i) government regulation paired with international covenants, (ii) prudent corporate governance and voluntary industry-wide self-restraint, and (iii) grassroots influence or cyber-activism. In this exposition I shall look primarily at the latter two options. In the absence of international covenants it is governments which assume the role of protector of the public domain, the non-privatized part of intellectual property. Although lifeworldsupporting system partnerships can help a lot here, there is ample room for regulation to make it possible to stand up to business intrusions. I shall spell out the lessons of business’s ongoing knowledge grab (in the form of unreasonable patents, intolerance of ‘fair use’ or copyright leakage) which is siphoning off voluminous new chunks of the Gratis Economy into use in the context of business models. S O F T W A R E SPYING O N I T S U S E R S

There are overt and covert methods of grabbing personal information. As a salient representative of the overt ones, I refer to a patented survey method by the leading company for audience measurements for interactive media and digital technologies. MMXI Europe is a joint venture between Media Matrix, Ipsos, and G K , all leading public opinion research firms. The ‘opt-in’ method involves monitoring based on a computerized operating system, able to measure the behavior of Internet audience and digital media “site-by-site, click-by-click and second-bysecond”. This monitoring device is installed on the personal computers of people, selected to represent of the mass of users, who voluntarily join the research panel. As far as covert methods are concerned, encroaching on netizens’ privacy, I might mention accusations about secret backdoors that allow soft-

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ware developers to sneak information from a PC’s files when they are connected to an intranet or the Internet. Microsoft and RealNetworks have been accused of this. This is an information collection assault. There is no bigger threat to privacy than companies collecting too much profiling information under the guise of personalization. They do this in exchange for content or for the promise of ‘winning big’, but huge quantities of elicited personal data are floating around. Unfortunately, there is no final or even critical frontier-‘thus far and no fixther’-in issues of business intelligence and privacy-invading software. If companies such as Microsoft and RealNetworks (actually ‘RealBigBrothers’) perpetrate this without the consent of PC users,225that is an important issue and no one can sufficiently vilify it. Not all netizens check in advance a Web site’s privacy policy or good practice pledges, just as they are careless with passwords. At the same time, user tolerance of abuses is falling and awareness is increasing, just as in the case of telemarketing the whole medium was downgraded by numerous interruptive mealtime calls. Government regulations are always one step behind private sector developments in technology. This applies, of course, to mainstream corporations, too. But governments-deeply in hock to special interests and political exigencies-are especially slow to innovate in their regulatory activities. Consensus building also results in their lagging considerably behind both corporate techniques for collecting marketing information, and hackers’ methods for overcoming security barriers. Regulation may give the appearance of solving problems, but allows cuttingedge technology companies to continue unchecked in practice in a slightly different manner. Moreover, regulation is bound to vary between countries, making dumping possible. Privacy breaches in the information society affect more than single individuals or countries, just as much as issues of environment or global finance do. Insulated governments often cannot control the gathering, management, and use of their own data (records gathered for administrative purposes). Besides privacy violations, another problem is the hrtive integration of advertising into content. Ultimately, I think that these new practices, blurring the line between advertising and informing, will give rise to a wave of healthy new positivism in social science provided that after years of company use these behavioral data will reach the scientific community for secondary use. I regard the anticipated return of sociology to empirics healthy, especially as a deep new well of empirical data on cyberbehavior is now in the making. But I presage with certainty only an impending academic upsurge, comparable to the discovery of new drivers of growth

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in a stopgo economy. In parallel with this, another important borderline case must be mentioned. One-to-one targeting and spamming are unfortunately not too distant from one another as far as their inherent logic is concerned. Unsolicited commercial e-mail shifts the costs of advertising from the advertiser to the recipient. There is no need to emphasize the evils of spam, I shall only describe it: between 15 and 30 percent of the email that America Online members receive is spam. Most large Internet service providers have four to six people dedicated to combating the problem; unsolicited commercial e-mail costs these companies roughly USD 1 million each month in lost time, lost money, extra staff hours, damaged equipment, lost productivity, and lost business opportunities, which translates into USD 1-2 per subscriber (Garfinkel, 2000). It is widely held that the ‘spam’ issue diminishes in importance, if it does not entirely go away, provided that e-mail is precision targeted, besides being endowed with an opt-out facility. This approach to rendering spam obsolete is gaining more and more currency, especially within the direct marketing community. For a contacting message to be spam, these marketers say, it must not only be unsolicited,”‘ but irrelevant and off-target. If it is delivered on-target, it is no longer bulk e-mail. If we deduct relevance, what is left is the fact that the mail is unsolicited. As far as the interruptive nature of a mailing is concerned, this brings us back to my main point: precision targeting or the absence of it is a typical and recurring element of the Gratis Economy. I shall adopt a radical stance: anything that is a nuisance to the recipient is spam. Opt-in mailing lists are a potent weapon in the hands of professional marketers, but in the hands of unprofessional and greedy people, they are like a hammer in the hands of a mad gorilla. They hurt others, and can in all probability hurt themselves and their clients in the putative promotional process. I am referring now to the unsolicited nature of spam, to the assumption that targeted spam is somehow no longer spam. If someone has acquired or generated a targeted readership, this does not give him the right to bombard the readers at his whim. I am not convinced, consequently, that it would be wrong to accuse of banner spamming next-generation web-advertisers who deliver one-to-one. Marketers would respond that ads prompted by some clearly identified need (as perceived by the evidence-based method), can only be regarded as good marketing practice. What web advertisers will soon do is to substitute avowed opt-in with perceived (but at the same time necessarily alleged) need. The extent to which this can be permissionbased is questionable. Spam is served in bulk, they would contend, by

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sending the same generic message either to many individuals or to lists. Along these lines, personal one-on-one e-mail communication cannot be spam. As companies are starting to generate more newsletters, order confirmations, marketing brochures, and so on, for their subscribed customers and prospects, a way must be found to distinguish between these two, very different kinds of traffic. Currently, there is no effort to do this, in terms of either the content of an individual message or traffic patterns. The boundaries where information collection can serve practical knowledge management without harming privacy cannot yet be fathomed. If an ad network tracks somebody going to Wine.com and shows her a cheese site banner, there is no privacy violation. I am not supposing that tracking somebody to a cancer site would ever result in letting his or her health insurance company know that something suspicious is going on and that they should re-check for a pre-existing condition or directly raise the premium. I am, however, convinced that the pulling force of an innovative paradigm of gathering valuable demographic, sociological, and personal data, buttressed by an all-encompassing business interest, will certainly not be suppressible in accordance with ethical considerations without a public initiative. Especially if we consider that this practice of evidence-based online marketing is susceptible to rich secondary use and multiple reuse, and can also assume the role of surveys, too. Characteristics gathered about site visitors can be so rich in relevant information for all disciplines of applicable social research that, once there is the technological know-how, no power in the world can thwart its utilization.

The ‘If It’s Legal, Someone Will D o It’ Assault This is one of the main sources of current ‘information pain’ caused by knowledge grab. The power of Web data collection, tracking, ad presentation, and similar ‘smart’ technologies, combined with the recording of these data, poses a clear-cut threat to public trust in relation to electronic commerce and cyberspace in general. As to online/offline data matching and Web tracking, any eye-catching event will do to illustrate the following (pessimistic) scenario. The owners of our fictitious event, from (i) election candidates through (ii) newly released entertainment movies to (iii) the next Olympics, set up their homepage and conclude an agreement with an uninhibited media firm to target Web users by matching Web browsing

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habits and Web-site signup data with related databases, such as (1) voter registration records, (2) revealed musical tastes, and (3) sports interests. The media firm in question is likely to be of the thriving, growing, profitable kind providing tools for either (a) the influencing of public opinion, (b) the shaping of strategic plans for film distribution, or (c) catering for some amateur sport activity. Their Web site, I assume, can only be viewed if users have JavaScript enabled-without it visitors would simply see a blank page. This is a precondition for tracking visitors’ behavior over the Web, taking consolidation of personal data to a high level, by actually combining the information that has been provided by Web users (for example, for various Web give-aways), with specific and detailed data. Again, these data may include voter location and assumed political-party affiliation, obtained from voter registration rolls or something else, derived from other pre-existing databases. Once the innocent visitor has been pinpointed and targeted by the tracking system, he is presented-to his surprise-with (i) the designated candidates’ political banner ads, (ii) song release announcements, or (iii) tennis racket offers on at least 1,500 networked Web sites, including some major portal and health sites. Some of the ads provided-based on some evidence and meant to be relevant-once clicked, entice the user (now under closer and closer observation) to voluntarily enter additional personal information (some of which the media firm says it does not record). Of course, to the average Web user there is no clue that they have been subjected to this sort of intensive data matching and rifling through their personal data. Most users would probably just assume that the ads popped up at random. This data-mining scenario is just the barest shadow of the sorts of information management services likely to evolve in the near fbture, given the ‘wild west’ attitude which currently prevails regarding personally identifying inf~rmation.~‘~ From selling search engine inputs to ads for ‘offshore gambling’ and mail-order sales pitches the field is unfortunately wide open. With the introduction (in the USA) of the political element directly into the marketing mix and based on Moore’s Law (claiming exponential growth in storage capacity, bandwidth, file transfer, and other sorts of data traffic) the science of marketing has reached a climax, calling into sharp focus the lack of regulations to control the handling and abuse of personally identifLing information. It does seem bizarre that, as this course of events unfolds, it may soon be impossible to visit interesting sites without subjecting ourselves to this sort of information manipulation, with apparently no compromise

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or real opt-out available. I do not think that any insulated cyber citizen could stem this course of events other than at the high price of switching off cookies (which in turn simply subjects one to a constant barrage of cookie requests) and disabling JavaScript. Once the hectic Internet turns really interactive content will be provided and data gathered simultaneously. The optional compromise between business interests and the commercialization of netizens’ privacy put forward in this volume is considered to constitute a reduction of digital privacy among the purist digerati (a term popularized by John Brockman in his book of the same title, which profiles the elite of the technology world)-grassroots’ counterefforts are already in motion. I maintain that the remedy is to be expected from a more flexible regime which will make possible a compromise concerning how much information a netizen may divulge for what content, and with an opt-out door for those who do not wish to be part of this experiment to turn advertising into automatically-targeted information serving or knowledge management. At the same time, I vehemently object to claims by purists that theirs is the only acceptable privacy solution for the online world. In my experience, people are apt to simultaneously overhype and undervalue the threats to cyberspace privacy. In fact, even within the confines of this book, I have led the reader through forced labor and other ugly phenomena, to reach the conclusion that the worst specter lurking in the wings (of cyberspace) is the loss of our innate privacy (that is, the stakes in the privacy issue are: to get spam or not to get spam). In sharp contrast with the transformations of the term ‘voluntary’ in history, a deluge of spam,228representing the ultimate evil in cyberspace, is still a nuisance that can be relatively easily blocked, purged, or filtered with a few mouseclicks. However, the bottom line is that being subjected to spam has become a symbol of forfeiting control over our personal data, and in the accelerated and highly focused world of electronic communication this small amount of wasted time is unambiguously perceived as a serious iniquity, turning many people away from the Internet. The cyber story of the Gratis Economy is the story of reasserting control over the peculiar two-dimensional mix of time and privacy in order to make it possible to utilize this precious asset rationally. In order to put the risks related to knowledge grabs into perspective, it is reasonable to assume that what is currently going on in cyberspace is at least indicative of what is to be expected in the bricks-and-mortar world in the hture. I shall again contrive an Orwellian press release by way of a


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description of a software development slated for companies fearfid of potential whistle-blowing employees. This not so fictitious product is meant to represent the all-time low or nadir of Western privacy. N.N. Corporation today announced the addition of a Notification Banner to its Trekker software to give clear and unequivocal notice to users that by using the system they are expressly consenting to monitoring. Administrators will be able to customize the optional notice to include any additional company computer use policy or other documentation. The banner is displayed whenever the system or Trekker is started and requires an acknowledgement from the user. Trekker invisibly monitors all keyboard and application activity to provide comprehensive and detailed forensic information on computer usage. Trekker covertly monitors and documents when an application started, who ran it, how long it ran, all window titles, and keyboard activity giving a complete picture of PC usage. The program’s ‘Stealth E-mail’ feature silently e-mails usage data to any e-mail address without user awareness. Therefore, N. N can constantly monitor the results after the click. The technology is now such that personnel officers can follow a click-through to an initiation of a software download, completion of that download, installation of the software, registration, and even usage of the software after registration. In stealth mode, Trekker is virtually impossible to detect or remove except by the systems manager. Trekker can also be set up with the user’s full knowledge and awareness. Trekker is tailored for the investigative and security needs of corporate computer systems for discovering computer fraud and misuse in exact detail. Ideal for ‘Authorized User’ investigations, Trekker’s unique ability to invisibly monitor all keyboard and application activity makes it ideally suited to the needs of business, law enforcement, government, and private individuals.

After this fiction I shall now look at a real practice of dubious value. Larger Web-hosting companies sell ‘404 Web page unavailable’ error redirects. This means that when a surfer on one of the company’s thousands of Web sites clicks a dead link on that site, he is redirected to an entirely different site, a site owned by someone who has purchased a number of these redirects. The price of this newfangled online advertising trick is a lot lower than what an advertiser would pay for a conventionally targeted click-through, although it is still beyond the budgets of many small publishers. This custom is working fine for the traffic purchasers, even if the redirects come from totally unrelated sites. This does not affect targeting precision because it is the dead links’ anticipated visitors alone who count and they can be described and defined correctly. The philosophy is that after a few minutes of surfing users get bored, so when-in lieu of an error message-a new, though unrelated site pops up, their curiosity is stirred, causing the new site to be explored thoroughly, resulting in a lot of repeat business. Although all the hosted sites are usually advised that

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any dead links on their sites will be redirected in this manner, this practice nevertheless borders on spamming.

Threatening Free Speech Relative anonymity, decentralized routing, free-to-choose points of access (often open access at that), no locality, cumbersome content control, and developing encryption tools are the protectors of unfettered speech in cyberspace. These freedom-enhancing features are supplemented by the enabling nature of most software and the relative malleability of operating systems and the power to construct one’s own virtual characteristics. Programming instructions are speech. Forbidding their publication because they might be used for illegal ends is a very harsh measure. Also relevant in this regard are the judgments in litigation over encryption which have resulted in banning even Web pointers, called hyperlinks, from one site to another. This threatens speech rights in general, not just a particular site. Limitations on publishing-say, of the source code of some new software-can be imposed for reasons other than those of intellectual property protection. Even if it is meant for inclusion in Linux a mathematician might be constrained as regards the publication of lines of instructions on the Internet. This is the case for instance with encryption technology. Publishing and exporting are identical in the digital economy. Thus many claim that the Web site postings of software programs are constitutionally protected free speech and do not meet the test of trade-secret infringements. As a few export regulations still apply in most countries, free speech and economic or national security interests can converge on a collision course. At the same time, I am not aware of any hurdles hindering the same information being sent on paper anywhere in the world. Not only is free speech being endangered here, but also the principles of an open society. Another typical case when free speech-that is, ‘free hacking’ and ‘distribution of a computer language’-is on a collision course with other software producers’ business interests is the classical case of filtering software. In 2000, a federal judge ordered that the distribution of a computer program that allowed children to bypass software designed to keep them away from Internet pornography be halted. The disputed software was target marketed to children as a means of overriding parental invocation of childproof filtering software on the Internet. Microsystems SoRware Inc. of Framingham, which sells the widely used ‘Cyber


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Patrol’ filtering censorware product, sued two hacking ‘youth rights’ activists who reverse-engineered ‘Cyber Patrol’, wrote an ‘antidote’, and distributed the bypassing software via the Internet. In the wake of the judgment, however, the software may not be distributed by the producing online business, its employees, or mirror sites. The software, called ‘cphack’, also discloses a list of sites that are blocked by the Cyber Patrol program. The practical effect is that children may bypass their parents’ efforts to screen out inappropriate materials on the Internet. Free-speech advocates criticized the company’s move to block distribution of the software. Software that blocks blocking software from blocking Web sites children should not see has been blocked by a court injunction. Comparing this case to the DVD-related DeCSS antidote software, let me call attention to the fact that while there the supposed aim of unraveling was to write a brand new software interfacing with Linux, there was no such motivation in the Cyber Patrol hacking case. Intellectual property rights may have gone too far, and are interfering with free-speech rights traditionally protected by the First Amendment in the USA and constitutionally in Europe. Powerful business interests are dictating that the Gratis Economy-this worldwide, multi-language public library of mankind-be forced into the fold of long-established business processes, with a view to attaining the perfect control of content. Copyright attorneys often refer to the US Digital Millennium Copyright Act of 1998 that contains an ill-fated milestone provision called ‘anti-circumvention’. This provision was meant to forestall information piracy, but it is now the legal vehicle for enforcing perfect control over intellectual property, eliminating even ‘fair use’ limitations. Under the anti-circumvention provision, it is prohibited to dissect and reverse-engineer a copy protection technology or, to cite recent litigation, to redistribute live broadcast television programming on a Web site for an unrestricted audience. Many interpret this prohibition as an attempt by the old media, lumbering into the new era with their obsolete commercial mindset, to knock down civil liberties and open access in a clumsy effort to maintain the old paradigm. THE INTRICACY O F DATA COMMERCE

International agreements can help in shaping sound data-commerce practices. A lingering trade dispute (or rather a divergence of business philosophies) was settled recently between continental Europe and the USA over some European privacy legislation at the customer level that

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prohibited companies in Europe from data collection, data processing, and exchanging information about customers or employees with companies in countries that did not adequately protect the privacy of the data. The law slammed the brakes on US firms’ ability to exchange data with their overseas partners and subsidiaries.229The USA-though by no means denying that consumers deserve notice and choice concerning the use of their personally identifying information-has no similar statutory restrictions on privacy (as yet), and the two sides tried hard to work out a way for US companies to meet European privacy standards, particularly in light of the explosion in the dissemination of personally identifying information through the Internet. The stakes are not merely of legal significance, but concern also the business interests attached to the ability of marketing to target consumers. The European restrictions on advertising and marketing would harm the firther evolution of burgeoning solutions enabling sharper targeting of advertisements. Sweeping away the advances in targeted marketing would be to the detriment of consumer well-being and qualify the directive as a protectionist trade barrier. Looking for parallels, I can point to the long-drawn-out litigation in the 1970s and 1980s between the Federal Trade Commission and the US medical establishment regarding the acceptance of health marketing. The marketing of health care (drugs, therapies, providers) has since obtained ‘ h l l citizenship rights’ worldwide. The recently passed European Directive on the Protection of Personal Data aims to harmonize European data protection laws at a uniformly higher level of protection. It represents a European consensus on a standard for personal privacy and a model for countries without data protection laws. The lengthy process for ratification, however, has produced a position fraught with derogations and ambiguities, reflecting moves towards less unified permanent regulation within the European Union. Of concern to North America is the stipulation that transborder data flows may not be permitted unless the receiving country can demonstrate an ‘adequate’ level of protection. While the process through which this provision will be interpreted and applied has so far been found to be complicated and unclear, nevertheless European authorities will be reluctant to tolerate ‘privacy dumping’, a fact that should concern North American business that still relies on the unimpeded flow of personal data between marketers, wholesalers, and so on. Neither Canada nor the USA can claim ‘adequate’ data protection according to EU standards. However, Canadian efforts through the Canadian Standards Association and the Federal Information Highway Advisory Council


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signal an attempt to fashion a more comprehensive policy framework for privacy than the more incremental and reactive approach of the USA (Bennett and Raab, 1997). The emerging European legislation (heir to the 1995 directive) gives consumers extensive (although not fine-grained) control over their own personal data collected and used for marketing purposes both online and off. The hard core is the so-called ‘access principle’, that is, the right of individuals to access personal data which is being processed by others. At the same time, all secondary uses of data are forbidden without an individual’s informed consent. This provision is important: if consumers specifically grant permission there is no hindrance to collecting and sharing private data. Additionally, the directive blocks data transfers to non-EU countries unless there is adequate privacy protection. At its inception, this clear-cut policy of allowing people to control the use and dissemination of their personal data has generated some heat. The conflict has been above all about principles, although the tendency is to interpret the US position as being articulated by business interests. But what was mere ‘business’ in the mid-1990s has since become ‘megabusiness’. Rapid technological progress, new patents, and ongoing innovative business solutions are now being focused on the targeting of marketing and advertising. At the same time, privacy-enhancing technologies are also developing. In addition to stringent domestic restrictions, the 33-page EU directive requires European states to take the measures necessary to prevent any transfer of consumer information to countries which EU regulators decide do not have “an adequate level of protection”. Particularly onerous are the directive’s restrictions on information about race, religion, health, and sexuality. The regulations allow European countries to restrict businesses from using those data, even if the individual concerned agrees. The USA has no such general privacy laws, because the First Amendment guarantees free expression, and a general mistrust of government intervention exists among both business and consumers. Also, US customer behavior is said to be more self-conscious and perhaps even more aggressive than that of their European counterparts, so US companies envisage crippling database search costs prompted by consumer ‘curiosity’. Some observers hastily claimed at an early stage that the USA was a likely candidate for a European ‘data embargo’. Instead, even the current (prior to an agreement between the partners) legislation foresees data protection officers whoby onerous micro-management-resolve issues case by case so that no blocking of data flow occurs.

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Current practices and enforcement regimes regulating data commerce were established as follows. The lynchpin vehicle that keeps business going (in the absence of an overarching solution) is Articles 25 and 26 that say that the Commission can make determinations that particular countries offer adequate protection. What Article 26 provides is a number of exemptions and derogations and ways of transferring data without such a finding of adequate protection. This does not necessarily mean that the situation in the country concerned constitutes inadequate protection; it just means that there is uncertainty. In these circumstances data controllers should not be arranging transfers outside the EU without looking for additional safeguards or looking to see whether their particular transfer corresponds to one of the derogations available in Article 26. Article 26 is a flexible provision and, in a sense, is keeping data flow moving at the moment. Data protection commissioners as appointed privacy advocates, when they exercise their authority in approving or supervising the transfer of data to third countries, use all the flexibility they can under Article 26 to avoid the ultimate weapon that they have at their disposal, which is to say that a transfer may not take place. The problem with Article 26 is that it engenders cumbersome micromanagement. It is very heavy in terms of its administrative burden both on the data protection commissioners and on companies themselves. It means that an ad hoc solution has to be found for every problem. As such case management is workable but heavy, the European Union is attempting to identify situations in which protection can be deemed adequate ‘without further ado’; why go to all this trouble if broad areas can be identified as safe and companies can transfer data there without going through the full rigmarole of Article 26. The whole point is to avoid international transfers becoming a way of getting round the constraints and obligations of the Directive and so the bar must be set at an appropriate level. However, adequate protection is not, according to the interpretation of the EU, equivalent protection, so data protection commissioners are not trying to use the precise standards of the Directive to establish this standard. In fact, what is happening is that data blockages are being avoided by the proper use of Article 26, although, as already mentioned, the aim is to produce a more general framework in which data transfers can take place wherever one can i d e n t i ~adequate protection. The European Commission is currently consulting the member states on the latest version of the principles and related texts, so that it can take into account their views in its further contacts with the USA and prepare


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the ground for the formal decision under the Directive (Article 25.6), which is needed to approve special principles concerning the provision of “adequate protection”. The formal decision requires the support of a qualified majority. The US Federal Communications Commission has also been persuaded to state clearly that individuals’ control over their own data must be guaranteed in one way or another.230Pressed by vigorous start-up companies which are unsure of how the forthcoming European and pending US regulations will apply to them, the FCC has been obliged by Congress to come up with alternative solutions defming the issues of consumer access and security on Web sites. They are expected to provide guidelines on how commercial sites can set up systems that give people access to their personal information without imposing restrictive costs on companies or compromising the security or tamper-resistance of that information. The regulatory body is also weighing up whether to charge consumers a fee for access to their personally identifiing information, and whether companies should be able to limit the frequency of requests. Concluding that companies on the Internet have not properly protected the privacy of consumers, the Federal Communications Commission has decided to ask Congress for authority to impose tough consumer privacy safeguards. The commission approved a staff recommendation to seek legislation giving the agency such authority. The action comes after the recent completion of a survey by the commission that found that only about 20 percent of major companies on the Internet had adequate standards for protecting the privacy of Internet users. The commission’s decision comes as the agency steps up its investigation of major Internet companies that depend on the use of consumer data. It represents a sharp departure from the agency’s previous policy of relying almost entirely on the industry to police itself. The legislation sought by the commission would permit it to regulate the kinds of notice given to consumers about the use of information regarding them, as well as whether consumers can block that use. A typical case of when data commerce occurs is when an Internet start-up company is going out of business. Some dot-com failures are resorting to selling information their customers may have thought would remain under lock and key as they scramble to find assets that can be sold to appease creditors. Highly sought-after customer data could include information such as phone and credit card numbers, home addresses, and even statistics on shopping habits. in the international battlefield the USA has proposed using a socalled ‘safe harbor’, under which (self-certified or third-party certi-

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industry groups agree to follow a particular set of restrictions as a way of meeting European rules. A ‘safe harbor’, which sanctions compliance:32 offers a pragmatic way of dealing with the complicated issue which threatens to cause a trade war between the two colossi. Under its Safe Harbor initiative, the USA proposed that consumers be granted “reasonable” access to data kept about them, so allowing companies some room for maneuver. The establishment of safe harbors does not apply to the USA as a whole, however: the implementation of safe harbor principles in the USA remains voluntary. In order to make a country a safe harbor it must make it compulsory for its companies to abide by the relevant principles. The European Union and the USA have concluded their discussions and reached agreement over the European intention to prohibit the export of personal data to countries/regimes not doing enough to safeguard consumers’ personally identifLing information. While most European countries have a Data Protection Registrar or commissioner setting standards for what can be done with confidential information, most US companies are left to police themselves. In order for the agreement to be reached, the USA had to agree to a set of ‘safe harbor’ principles that will dictate what companies must do to meet European standards on data protection. Safe harbor principles state that information can only be transferred or sold with the explicit permission of the person identified by that data. This allows the self-regulatory nature of US privacy protection to co-exist with the EU’s regulatory culture. Volunteering US companies-a mere 25 of them had signed up at the time of writing-pledge to follow fair information practices in e-commerce. In return, the EU will not prosecute US firms or cut them off from European data. Companies that do not participate in the Safe Harbor effort and wish to collect personal information from Europeans will have to enter into model contracts that obligate them to observe the terms of EU digital privacy laws. According to the logic of this principle, if registered US companies renege on the safe harbor principles, they are guilty of unfair and deceptive business practices and subject to investigation. Thus, Safe Harbor is definitely stronger than industry-wide self-regulation, especially if the optional labeling standard P3P is also assumed by registering comp a n i e ~ Self-regulation-and .~~~ the ‘invisible hand’ in general-is beginning to lose credibility Stateside: it has been compared with putting security matters (for example, anti-spam policy) in the hands of vigilantes or a race to the bottom in which Internet companies blindly pursue personal data collection policies which are ever more invasive.


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Possible Outcomes of Privacy Regulations I think the fate of the commodified part of the Gratis Economy is predicated heavily on a viable compromise being reached concerning online privacy regulations. Far from convinced by the capabilities of market regulation, I cite here a striking US case which enabled the regulatory authority to stamp out some bad practices. As if from behind a veil, this configuration recalls the placement of target groups of people in a hnctional context without their assent. As we shall see, the companies involved intermittently treat ‘volunteers’ as a passive liturgical targetgroup (pawns). The vigilant US Federal Trade Commission (FTC) rapped a major online auction house on the knuckles for allegedly hijacking personal identifjring information from the popular eBay Web site.234The personal addresses and bits of other personally identifying information were voluntarily revealed by the user in the process of regular registration in return for waiving an entry fee. The precious data-precious when the falsification rate in user-submitted data is low-were utilized to launch a consecutive e-mail campaign. Online auctioneer ReverseAuction.com has grudgingly agreed to settle FTC charges that it violated consumers’ privacy rights by harvesting personally identifying information from the competing site and then sent deceptive spam to those consumers soliciting their business. Settlement of the FTC charges bars ReverseAuction from engaging in such practices in the future and requires it to trash the personally identifying information of consumers who received the spam, but who declined to register with ReverseAuction. The deal, the first of its kind, also requires the campaigning company to notify of the FTC charges those who did register as a result of the spam and give them an opportunity to cancel their registration and have their personally identiQing information deleted from ReverseAuction’s database. According to the FTC’s complaint, ReverseAuction, a Web site that features ‘Declining Price’ and ‘Wanted’ auctions, in the process of marketing and promoting its site registered with eBay, a competitor site, and agreed to comply with eBay’s user agreement and privacy policies. The agreement and policy protect consumers’ privacy by prohibiting users from gathering and using personal identifying information, such as eBay users’ personal e-mail addresses, for unauthorized purposes, including the sending of spam. However, ReverseAuction harvested eBay users’ personally identifjring information and used it to spam eBay members with a message promoting its own online auction site, according to the

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complaint. The message reportedly contained a deceptive subject line informing eBay users that his or her eBay user ID would “expire soon”. According to the complaint, many consumers concluded that the eBay user IDs and other information had been provided to ReverseAuction or authorized by eBay. The FTC maintained, however, that ReverseAuction engaged in deceptive or unfair acts that violate federal law (http://www.bizreportxom, 28 January 2000). Possible outcomes of privacy regulation carried out by a statutory authority include the following. I. Despairing of efforts to protect privacy in the face of the approaching technological deluge, David Brin, an American physicist and science-fiction writer, proposes a radical alternative, its complete abolition. This may sound familiar to the readers of a recent book by Amitai Etzioni (1999) who claims that in the case of recordkeeping, cryptography, and personal identity-but not in health care!-there is too much privacy in contemporary society, and that the rights of the community should prevail over the rights of individuals. Brin recommends that every citizen should be able to tap into any database, corporate or governmental, containing personally identifying information. For instance, images from the video-surveillance cameras on city streets should be accessible to everyone, not just the police.235 Brin argues for a “panopticon-of-the-people”: in his future, everyone records, everyone publishes. Privacy in a public place is made impossible, but not by the spying state or by the prying press, but by ordinary individuals who consider their cam-feeds to be just another aspect of daily life. Trespasses upon personal privacy by the press are nothing new, let alone those committed by government. In both cases something private has entered a kind of ‘public’ domain, but it was simply not possible for privacy to be meaningfully eroded by another private individual not associated with the state or the press until the Web came along. Brin’s recommendation reminds me of the 1947 republican debate in the Hungarian Parliament on the abolition of feudal titles, such as noble, count, and baron. It was mentioned at that time that the genuinely radical solution was not the statutory discontinuance of these obsolete ranks, but their opening up for purchase as in the case of personalized car license plates with distinctive letters and numbers. 11. Unfortunately, listening uncritically to the woes of privacy paran o i a c ~and , ~ ~restricting, ~ perhaps even annihilating evidence-based online profiling and targeting in general would certainly hinder the imaginative development of freebies and gratis solutions in cybersgace. This


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would nullifL an important outlet of business creativity and as a backlash would bring forth an end to experiments in pertinent advertising. Besides the guerrilla creators of new value and new values, marketing talent is the main driving force that spawns the Gratis Economy. As guarantors of privacy, anonymity and pseudonymity should also be supported wherever possible. In particular, the concepts of identification and authentication should be separated; sound authentication of a user and his or her authorized activities within a system can often take place without identifying that user. 111. Self-restraint and self-regulation seem to be the least sensible option in a democratic environment of strong competition between data aggregators and privacy advocates. With each passing day a new business venture emerges with practices that are more aggressive that those of its predecessors. On the Net, someone is always selling personal data for less. In these times of low- to no-margin retail; of no-commission transactions; of free portal services and free access as an underbidding strategy; there is little room for deliberate policymaking in chambers. The consumer, the site hosting the banners, the data collectors, and the advertiser all need to be included in the loop for evidence-based marketing to survive. IV. Another unfavorable outcome, as the parties of the intercontinental privacy struggle dig in, would evoke accusations of ‘social dumping’, as US standards are looser (more business friendly) than the European minimum.237It is far from clear what effect the European law will have. More products or services may have to be offered with the kind of legalistic bumf that is now attached to computer software. The new law may give individuals a valuable tool to fight some of the worst abuses, on the model of consumer-credit laws. Policing the rising tide of data collection and trading is probably beyond the capability of any government without a crackdown so massive that it could stop the new information economy in its tracks.

Casuistry The imposition of compensation for victims of data privacy violations is an unsettled issue. Data protection violations are unfortunately becoming commonplace. For example, in 1997 General Motors exposed the personally identifjdng information of more than 10,000 people who entered a contest on the company’s Web site. A similar calamity at Nissan’s Web site reportedly exposed thousands of e-mail addresses. In

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fact, by talking about the possibility of a trade war we have already defined privacy as a commodity. The problem is that there is an even deeper, perhaps a fundamental difference between the USA and the Europeans. The latter treat privacy as an elemental human right and they want to protect their citizens as much as they can. The US position is based on US business’s stance that privacy is a commodity that should be traded. In order to ensure one of the underlying compromises that constitute the Gratis Economy, I could accept this latter posture provided that minimal guaranties are observed. Back in 1998, the US Federal Trade Commission warned that, unless business could demonstrate that it had developed and implemented broad-based and effective self-regulatory programs, additional government authority in the area would be appropriate and necessary. This siren gives Americans a way of avoiding administrative regulation by trying to ‘self-regulate’ their privacy policies, for instance, by a peer review process to back up their chosen This gives them-in sharp contrast to the all-European method of regulation by decree-a third-way alternative to government-mandated privacy policies and high-cost commercial privacy endorsements. Heeding the FTC caution, the US Advertising Federation (AAF) launched what it called “a sweeping consumer protection initiative” designed to increase the number of small marketing and advertisin& businesses with online privacy policies. They distributed a series of mix-and-match privacy policies to the 42,000 small-business members in its 207 local ad clubs and federations. Also planned were educational workshops for club members in the top 100 media markets, with the goal of completing the first 20 seminars by the end of 1999. Businesses are making progress in adopting privacy policies that create an environment of trust ~ n l i n e . ~This ~ ’ initiative sought to ensure small business compliance and to insure that hture problems do not originate with small businesses that are not aware of the importance of online privacy policies or simply do not have the resources to develop them. Various policies were written for online shopping communications companies, advertising agencies, travel agencies, consumer product firms, retailers, media companies and local ad federations, but they can be applied to businesses that offer similar products and services. The simplified policies are consistent with consumer protection guidelines. The guidelines identify criteria for an effective privacy policy, including provisions for notice and disclosure, choice and consent, data security, and data quality and access. A new privacy seal program


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grants trust marks to Web sites that have posted credible privacy policies and promise to abide by them. The largest advertisers have already decided not to buy ads on Web sites that fail to publish adequate privacy promises to consumers. Microsoft, which has lobbied with other industry groups against privacy legislation, began offering a free digital tool kit that promises to allow consumers to use next-generation software to restrict what personal details Web sites collect about them. Consumers typically must manually find a company’s online privacy statement, if one exists, and read through the legalese to determine what personally identiQing information a Web site might be harvesting, such as their name, e-mail address or even favorite authors or clothing sizes. Another contentious issue is the principle that gives individuals the right to have access to personal data which is being processed by other people. The Europeans regard this as a fundamental principle of data protection, which makes it possible to have erroneous data corrected, especially if it is related to important decisions taken about consumers, for example, regarding credit. The US position talks about reasonablethat is, qualified-access, which the EU would like to have firmed up. The US Department of Commerce’s position on access is very much influenced by business concerns-already mentioned-that US consumers do not behave like European consumers: the experience in Europe is that few people exercise their rights and when they do they tend to behave in a reasonable fashion-they do not seek to use them as a weapon in nuisance-making. The experience of US business, however, is that American consumers behave very differently and that their more conscious pursuit of their rights could be very costly. The other concern is that a lot of marketing databases are not currently organized in such a way that it would be easy to pull out material searched on a name basis: they are often organized on a postal-code basis and restructuring all the databases would be very costly. Euro-bureaucrats have had a number of discussions with representatives of the various sectors involved and they claim they are gradually getting the US side to see that this principle, which is fundamental, must not be approached primarily in the light of possible abuses. The parties must not allow these concerns to undermine the principle itself. There is no evidence-based smart advertising without rich and swift data flow-however, unimpeded data flow is not an essential requirement. With privacy on its way towards being an entitlement, European legislation is trying to re-empower citizens. Re-empowering is necessary to empower us for the ‘slice and dice’ micro-management of our per-

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sonal data as an important factor in our cyber activity. We are qualified to traffick in this personal asset if we are in a position to determine how our personal data is used. This micro-management establishes a continuum along the dimensions of time and privacy, making it possible to quantify and fine-tune their rationing-that is, how much to surrender, how much to sacrifice, and how much to trade for direct advantage. As in the case of the tailored allocation or economizing of time as the other factor resource of the Gratis Economy I can also talk of an economy where resources are measured and priced as input of personal data. The costs are most likely cross-financed and carried over within the framework of a business model-that is why it is gratis. It is by no means a rarity in modem economies for a collective good-such as privacy, public health care, or public schooling-to be transformed from a right to a commodity which must henceforth be purchased. For the first time, however, the trend is being turned towards re-empowering citizens in a consumer protective manner. There are questions (giving rise to the honorable job of permission manager) about who owns the proprietary customer data when it is passed between ecommerce sites, Web publishers, and third-party ad servers. This question should be answered unambiguously as follows: the owners are the customers. For instance, the services of the British National Health Service constitute a right to health for all.241Also, emergency care is an entitlement for everybody in the developed world irrespective of insurance cover. At the same time, competing providers outside the British National Health Service and opting-out citizens alike can attest to the fact that what is currently an entitlement for many (vis-A-vis the state) often transmogrifies into a (higher quality) commodity for many others. As to what entitlements may quali@ for privatization, the best reference is the UN Covenant of Social Rights of 1966. We have already mentioned another case in which the ownership of customer data emerges as an issue: the selling of the customer database in the event of company liquidation. Bankrupt companies sell all their assets, and their customer database is likely to be one of the most valuable. Most dot-com companies are still not making money; their revenue model is predicated on glossy expectations and cross financing. Unfortunately, most of these companies shy away from proffering their prospective customers an honest deal; in their privacy policy they regularly deny commercial use of the personally identifying information of their customers, such as name, address, billing information, shopping preferences, credit card number, and online shopping history. Perhaps per-


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sonal data management companies do not resell them until they go out of business, but in the case of a buyout or liquidation, start-ups have no choice but to sell. Auctioning off e-mail lists for telemarketing purposes has been widespread until recently. The US Federal Trade Commission has already set out to block such sales. After the conclusion of this litigation, if the outcome is favorable to customer privacy, one more valuation bubble of dot-com companies will burst. In the absence of a good money flow customer databases will not serve as a measure of valuation either, provided that the privacy policy has excluded reselling. Perhaps dot-coms will not so light-heartedly undertake the occasionally too onerous pledge not to share information with other companies. The value of privacy policies will thus appreciate with some online commercial companies opting for an open warning of less privacy for their customers who can in such a case draw their own conclusions. At the same time, the worst practices in data selling should most likely be preempted by law, even in the USA. Print publications have traditionally charged advertisers for placing marketing materials in their publication based upon evidence of circulation, that is, the number of subscribers to a particular publication. Often, print publishers will send out surveys to their subscribers seeking meticulous information about their reading habits and interests. Subscribers, of course, are not required to provide that information. Online, however, there is an opportunity for advertisers to obtain much more indepth information without solicitation, the subscriber’s or casual user’s consent, or the ability to opt-out of, or opt-in to, providing that information. In the New Economy, businesses are practically free to collect and use personal data online any way they wish, save for financial and children’s data and medical records. A company only opens itself up to privacy regulation if it voluntarily posts a privacy policy on its Web site. State and federal governments can accuse the company of unfair and deceptive business practices if it violates the terms of the policy. Rules on disclosure can help the market work, and help investors recognize the liabilities companies incur through sloppy practice. Forgoing the fetters of conformant market behavior, companies would be given reasons to compete to improve their security, and offer innovative, intelligible ways of handling consumer data. At any rate, there will be much blood, sweat, and tears before the current limbo of market forces can deliver a palpable filtering out of deception. As an alternative, the regulatory process of information assurance is slow and very much subject to steer-

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age that might be disadvantageous to small firms. The slowness would often mean that regulations would be approved only after an age has gone by in terms of Internet time. Technology and business change much too rapidly for the existing regulatory processes to work. Longevity has a special meaning in cyberspace, where even a day is a long time. Revitalizing investors’ awareness concerning this growing issue should pre-empt the relegitimization of the philosophy of government regulation and lead to more effective corporate governance that could ultimately filter out dubious practices. Shareholders’ control, in turn, will lead to companies’ better adaptation to what consumers require from online marketing. As to checks and balances furnished by professional or financial investors, this alternative solution based on corporate governance (self-regulation) can be expected from the financial markets, which already operate across borders in much the same manner as the Net.242According to normal stock exchange rules, companies are required (a top-down type of co-ordination, that is, regulation) to make disclosures of data practices to their investors and insurers, and not simply to consumers. Individuals may not be sufficiently motivated to consider the security of their own personal data, but investors have good reason to pay attention: proper data giving rise to consumer satisfaction constitute an important part of the preconditions to commercial success. If some marketers might forget that an annoyed prospective buyer can simply switch off, investors will cause them to remember that the best way to advertise has always been to lure your prospect, subtly, unobtrusively, professionally, and with a lot of tact. Business’s self-restraint-a bottom-up and decentralized form of COordination-prevent the sale of databases gathered and proffered for one purpose, but after the sale there is no guarantee that some other business will not use the addresses for unpredictable purposes. This could be an agreeable outcome, provided it can yield results similar to the occasionally heavy-handed and perhaps crippling state regulation on the eastern side of the Atlantic.’43 We know that there are a million ways to breach security, but the market can foster a million and one ways to protect it. The same logic is applicable to managing threats to privacy. As a caveat-and also an indictment of the ‘invisible hand’-let me refer to a recent development. The Direct Marketing Association (DMA) in the USA has announced an opt-out database for electronic mail called the E-Mail Preference Service. The database is supposed to be a list of people who do not wish to receive any marketing information whatso-


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ever by e-mail. That sounds good at first, but many spam-fighters fear that the DMA will use its database to legitimize e-mail marketing in general. This argument has some merit, since the DMA’s two other databases, the Telephone Preference Service and the Mail Preference Service, have been used to legitimize telemarketing and paper junk mail. In order to illuminate the limits and bias of industry self-restraint I shall cite in full the moaning and late enlightenment of an advertiser: I’ve been on the Net since the very early days. When I started, there were no rules for e-mail, and the term ‘spam’ hadn’t been invented. In my experience utilizing every known form of e-mail marketing I could come up with, I have determined that any time you contact someone without their consent, you are asking for trouble. About a year ago, I spent hours gathering names off the Web for a highly targeted offer. These people were being offered exactly what they had already signed up for elsewhere; only this was for the same service absolutely free. No strings attached. There was no possible way for them to give me any money for this service. Thus, I reasoned, this isn’t a ‘commercial message’. I thought they would be happy to hear from me, as I would be providing them what they wanted anyway. WRONG! While the response rate for the program was over 75 percent (about as good as expected), and many people actually thanked me for making the effort to contact them, the number of complaints, flames, and threats I received was ridiculous. Many people just do not want to hear from you no matter how wonderful the offer is that you have for them if they haven’t given permission. (Professional revenue developer’s contribution to the thread of spamming in IAR discussion forum, 16 May 2000)

Having acknowledged that e-marketers, with their often narrow minds, cannot be fully trusted in matters of privacy, I nevertheless think that the most forceful argument against too much reliance on centrally mandated standards is the European situation itself as illustrated by the data protection commissioners already mentioned. Due to the exigencies of dayto-day business, the overarching solutions and elegant wording of the directive seem to have boiled down to a casuistry of fragmented bylaws and micro-management. As to disclosure and credibility practices, I wonder at the same time how much change any online marketing-based organization can effect without real, outside pressure from either consumers or the law. It seems that the revenue-starved Internet economy is far more willing to risk consumer wrath and rejection than to voluntarily adopt a meaningful code of conduct or to reveal too much about how it conducts its business. This boils down to the somewhat submissive and more reflexive opinion that neither state regulation nor self-regulation of information assurance can be expected to yield an all-encompassing solution to phenomena endangering privacy. It is perhaps not by chance

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therefore that-although exceptions are multiplying-the European legislation has come to the conclusion that authorized experts should deal with each individual case. G R A S S R O O T S INFLUENCING REGULATION

In this section I shall make a brief ethnographic comparison between the technical community (of geekery, of the geeks in the open-source movement; of counterculture technologist challengers of corporate power in intellectual property) and cyber-activism in general. On the subject of the counterculture, those people whose formative years fell during the countercultural movements of 1960s and 1970s now operate the maturing dot-com economy. Notable pioneers of the PC era started out as hippies or campus radicals. The liberating power of computers and cyberspace, the expansion of human connectivity-e-mail, chat rooms, and cellular phones-provide an organization and networking tool for a multitude of civic causes. This empowerment in building social awareness has resulted in new patterns of civil accountability that aim at imposing societal values on the power of global corporations. Global corporations, and occasionally also electronic commerce, are now in the field of vision of cyber-activism, not because smaller ones are more exempt from environmental, privacy, and public health concems,244 but rather because only they have invested in branding their name to the extent that makes them vulnerable to criticism, and credibility and stock prices are interrelated. With thousands of Web sites exchanging information and opinions, soon to be buttressed by tiny digital cameras enabling the transmission and reliable documentation of events, we are witnessing the multiplication of media power at the grassroots level that can bring down tarnished brands, however costly their build-up may have been, or which can increase the public-relations cost of violating environmental and other widely accepted production standards. Hammond and Lash raise the caveat that exactly the professional criticism of traditional reporters and media editors is woefully absent here and that occasionally cyber-activism goes too far, having no sympathy for profit-making (Hammond and Lash, 2000)-the term ‘lynch mob’ has also been mentioned in the same context. This is certainly not the case with the anti-corporatism of-part of-the brainworkers in the technical community. Their disciplined activity is not part of a wide, opinion-shaping and consensus-forming social process; it is rather one-though by no means singular-global community that has set out

The Public Interest in the Gratis EconornpGratuities Generated by the Polity

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to exert novel checks on the power of the new digital economy and attain a new equilibrium in the principles of intellectual property privatization. While voluntary social activism of large coalitions of rapidly operating ‘cyber-vigilantes’ promises civil accountability for a direct democracy, the technical community’s endeavor creates transparency, market restructuring, and opens up a new front of fair competition for property holders. Both streams within the information technology industry may merge in a participatory pattern of governance that can articulate and put into effect widely shared basic values. It is interesting to observe that the influential thesis (Lessig, 1999b) that software code limiting people’s room for maneuver in cyberspace, written by corporations isolated from political discourse, is similar to the complaints that the accountability processes initiated by cyberactivists often lack the principles of objectivity and due process. I think that social science should seek to combine these approaches in a reflection on the technical community, merging them into an understanding of the business power generated by counter-culture information technology. Code written within the chambers of corporations and code developed within a movement is as different as the arspoetica of a Broadway theater and an off-Broadway stage. As to the somewhat blurred distinction between ‘hackers’ and ‘crackers’ I rely on Bruce Sterling’s groundbreaking history of the computer underground. The best description of success of the free software movement uses the image of a cathedral to describe conventional software development. Programmers work on a program in isolation, their work not seeing the light of day until it is released publicly. Free systems, on the other hand, are developed in what Sterling calls a ‘bazaar’, with thousands of independent programmers coming and going, bringing new flavors and improvements to an ever-changing product that is always out in public view. Just as a responsible doctor performs community service work, a responsible lawyer does pro bono work, and a responsible corporation spends money in the expected patterns of corporate citizenship, commercial software developers also give away their work for the same reasons as other professionals. This metaphor of the bazaar also faintly resembles how city planners compare comfortable versus over-planned towns, and metaphor of the bazaar itself can be linked to Wittgenstein’s notion of language games. Hitherto, the guardians at the cathedral door have been intellectual property attorneys, quick to measure out the metes and bounds of protection for the crown jewels of technological innovation enshrined within. But if there is no cathedral, open-source

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aficionados argue, there is no need for anyone to guard the door. By distributing a task across a large group of ‘users’, the project as a whole can move faster than if the project were controlled by a single entity. Most successful free and open-source software projects rely more on distributed testers and debuggers than actual developers, but the result is nonetheless amazing. The loosely affiliated, bottom-up, organic model of open-source is producing business-quality software. Open-source allegiants believe that distributed testing actually leads to more reliable code than could ever be achieved within a single organization. Geeks are by no means the sole players when it comes to participatory democracy. As Ronda Hauben claims, Usenet is also an example of user involvement in the administration and developing architecture of the network itself. As such, Usenet is a working model of grassroots development and of the continuing development of a collaborative technical community. Unfortunately, the inflammatory word ‘piracy’ is used not only for flagrantly commercial, deliberate, and repeated infringements, free riding on others’ accomplishments-this is always an indication of copyright maximalism, denying that a balance should be struck between owners’ interests and innovators’/consumers’ interests. Techno-realistic software developers are encouraging and evolving a pluralistic business model-a gratis economy rather-f their own at the interface of the market and the offensive experimentation called ‘hacker culture’.245 In relation to a patent-protected product, generic ones such as an expired generic pharmaceutical can be interpreted as open and free (for manufacture or continued development). An expired patent, however, renders products free in another sense, too. The business model of generic products is unrestricted and free not only in that anyone can start to produce and turn a profit, but also in the sense that anyone can tackle them and take them further. As to copyright, the situation is somewhat different. Copyright protection against plagiarism is an inherent entitlement: one does not apply for copyright-it exists once somebody puts ideas in a particular This difference does not say anything about the market value of a copyright that may or may not exist. The rapidly maturing e-commerce is setting itself up as a big fat target for rebellion,247 dissent, and possibly even sabotage (Chapman, 2000). It is blamed for the digital divide, for having locked down the Internet. These sentiments are much more violent than the sophisticated salvos exchanged between law professionals and computer professionals over network security and intellectual property. These sentiments are


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contemporary outbursts of a long tradition of anti-capitalist feelings expressing deep dismay over the soaking of cyberspace in mass-market culture and the propping up of corporate logos on nearly every Web page. A fresh sub-culture is now emerging which runs counter to what these now middle-aged people, mostly men, have built. The 1968 generation in Europe and the baby boomers in the USA are now running the New Economy. Actually, it was them who prompted the entire userfriendly trend of technological innovation in computing. On both coasts of the Atlantic, Central Europe notwithstanding, personalities of the PC era started out as ‘non-conformist refhniks’ themselves. This new sensibility, that ranges from criticism to restiveness and agitation, is rooted in anger at something very American: the economic exploitation of ideas by corporate power. There is a lingering libertarian interpretation of the Internet-the middle-class engineers of the tech-world all belong here, often together with brainworkers of the knowledge base of the economy-consistently giving rise to various anti-corporate tendencies. There are signs that what is now a geek sub-culture with the emphasis on non-proprietary technologies may mature into a civilisation of new individualism that This sub-culture has grown up on the defines itself as anti-~orporate.*~* conviction that information monopoly is inimical to free speech and the latter should be given prevalence249.They have not yet shaken hands with other copyright-minimalists such as those intellectuals who create intellectual property, but, as consumers of authorship, are heavily interested in preserving the status quo of the informational commons.2so Computer mavens are loosely allied proponents of open-source software, free expression, an open Internet, and radical individualism. The escalating argument over network security is just the beginning. Arguing and creating intellectual property already reveals the full political charge and professional thrust of this movement. Corporatism is a new phenomenon, and not the same as capitalism or even corporations. It means the flip side of the principle ‘small is beautiful’, evoking market control and above all the so often depressing paraphernalia of mass marketing. Because of the homogenization of mass culture drop-out individuals are now turning to the Internet. That is where young, smart, computer-savvy freethinkers are waging the battle of the current version of romantic anti-establishmentarianism. The critical factor is that a lot of these young people can outwit the technologists of the government and private sector, and build systems that are always one step ahead of powerful interests. They most likely do not want to see ‘their’ Internet ab-

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sorbed into mass-market culture, and they do not want to see a corporate logo on every Web page. They also possess the means perhaps not to thwart this process but permanently to give expression to their resistance (that is, to hack).

8 . T O W A R D S THE D E M I S E OF M A S S CULTURE IN CYBERSPACE In this section I shall present a number of ways of enhancing interactivity (technical creativity enabling the taking of action instead of passive feeding and viewing) in cyberspace. Enhanced interactivity can lead to the customization of online services, to individually tailored advertising solutions, and to marketing tools that attain individual targeting of interested (opting-in) netizens. This may bring about the end of mass culture in cyberspace. One of the definitions of cyberspace, I reiterate, is that the online world is the paragon of the future offline world-no ifs, ands, or buts. The hot-linked clickability of banner advertising is the simplest form of interactivity. At the same time, it is clear that this is fighting a losing battle for the Internet user’s attention. There are new forms of advertising that will hit the Net over the next years which will provide viable alternatives to banner advertshillboards, and give advertisers, marketers, and users an improved way of communicating with one another. Among the latest promises of new interactivity are one-to-one marketing, space shifting, and peer-to-peer sharing. In my interpretation, randomly fed banners amount to a mass culture of propagated advertising. The philosophy behind online banner advertising regards users as ‘surfers’, like people who wander along the streets eager for colorful carriers of information such as billboards. As a decisive step towards feeding relevant advertising-as appropriate to the standards and unfolding technological options of the digital ageinstead of random banners, there are a number of new initiatives in online sponsoring of content under the heading of intensive content provision.*“ This is designed to sweeten the following of associated partners’ links for consumers. Partner companies are usually high-profile offline and technology companies who sponsor and provide related eyecatching content, furnishing a wealth of branding opportunities. The first instances of such intensive content provision within the framework of sponsorship was first experienced at the time of the Sydney Olympics on the Web site of NBCOlympics.com.


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This unfolding practice changes the way in which Intemet users experience a Web site: surfers are considered to be infonauts and are encouraged to follow sponsored links as possible further sources of indepth content, strictly in line with their original interest. Attractive and closely related multimedia content is offered to interested readers behind the links pointing at the sponsors’ Web sites, supplemented by the usual product information and e-commerce. Although sites with intensive content still incorporate banner ads, marketing partners provide much more than product information, such as interactive games, related analyses, and information profiling-ideally combining content and marketing opportunities. Ultimately, these sponsorships could prove fairly lucrative for high traffic Web sites with sponsoring partners as the content proves stickier and generates longer viewing time than banner ads.2s2This method of sponsored content blurs the distinction between content and advertising, but this is done at the price of precision targeting and serving an audience. I appreciate this initiative as a new paradigm of online marketing trying to target an audience and serve it content that can be supposed to be of direct interest in line with the original interest that brought it to the sponsored page. There are a number of other methods of technology-aided targeting offered by the Intemet as the newest commercially exploitable medium. Improvements in marketing could eventually (in fact, in the not too distant future) reach a level when the time spent on seeing ads was not a deduction or distraction but added value for viewers: first of all, as a filtering tool against the deluge of stimuli (Shapiro, 1999), then as relevant information eliminating the enormous waste of message dissemination. The targeting of advertisements could only be fully personalized if Internet service providers and advertisement server owners were allowed in their profiling endeavors to maintain a personalized database of purchasing (and searching) habits, detailed to the level of the individual. What media owners try to do is to build as many subgroups as possible and cluster each incoming call to their server into one or another profile, smoothing out differences in age, habitat, school attainment, occupation, and so on. This adjustment may represent a great step forward in advertising techniques and a relief for prospective customers.253 General targeting criteria such as ‘interests’ (measured by sites most frequently visited and time spent at those sites), psychographic descriptions such as ‘early adopters’ (those who use new technology earliest), and attitudinal descriptors such as ‘Microsoft avoiders’ are proving to be more relevant. With a variety of emerging options much urged by ad-

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vertisers, which now includes attitudinal targeting, advertisers can customize media buys that will have the greatest impact and offer the best return on their investment. While searching in AltaVista, for instance, European surfers are already fed regionally relevant and culturally more fitting information in their own language. And all search engines already feed advertisements that are meant to more or less match the searched item. As targeting is predicated on data management, its development is contained by information privacy risk considerations and as long as the governance of the Net remains as it is (a sort of organically grown freedom), there will be no overall unified and impregnable privacy policy across the stardust of sites. What is more, car advertisements presented to me when I have no intention of renewing my car are very limited in topicality, to say the least. Therefore, marketing information on customers ought to be not only relevant, but also timely. This magnitude of data management by media owners or by anybody else is inconceivable without (self-) regulation. Targeting for marketing purposes is tantamount to dividing the opting-in population up for the benefit of the marketer. We as individuals will be made members of a virtual group by all means. This is no community in real terms-not even a “second stage working virtual community” like a network newspaper or thematic list-as members are not conscious of their belonging. They are ‘others’ in a seriality (Sartre). A bullet in a barrage of fire. When generating groups, information owners manage more or less sensitive, occasionally even intensely personal data (for example, bi~metrical).~~‘ The marketing-driven progress of the online world is advancing within the framework of an economy of scale counted in millions of eyeballs. As technological innovation is centered on the Internet, cyberspace is a ‘happening’ place and it is easy to lose sight of the forest for the trees. It is still safe to say that in case of a Web site, for instance, the ‘evertking’ industry’s threshold of business interest starts at one-million impressions per month. The generation and attraction of mega-traffic has always been the underlying motivation of media owners, similar to the behavior of the owner of a highway. The aim is always to generate traffic like that in a railway station during rush hour. The outcome of such traffic is called ‘portal power’: ‘owners of users’ can use those relationships to extract rent from others who want to reach these users as customers. In this regard, cyberspace-running the gamut between mass consumption of sites, mass customized advertisements earmarked for individually tailored consumption, and the genuine high culture of specialist fora-is mostly still mass culture,


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not high culture, as this concept has been understood since the cultural prophecies of Ortega y Gasset. This dominant course of events is parallel to the commercialization of the Net that is capable of ‘degrading’ the erstwhile unashamedly elitist content of cyberspace into mass culture. Coupling this new mass content with ‘webvertising’ precipitates this trend of popularization. The current situation can be likened to the era after the invention of printing when priests, the former managers of hand-written books as far as their creation and dissemination is concerned, were extremely resentful of the emerging printing guilds.

Box 17. Excerpt from Ortega y Gasset’s ‘The Revolt o f the Masses’ There is one fact which, whether for good or ill, is of the utmost importance in the public life of Europe at its present moment. The fact is the accession of the masses to complete social power. As the masses, by definition, neither should nor can direct their own personal existence, and still less rule society in general, this fact means that actually Europe is suffering from the greatest general crisis that can afflict peoples, nations and civilization. Strictly speaking, the mass, as a psychological fact, can be defined without waiting for individuals to appear in mass formation. In the presence of one individual we can decide whether he is ‘mass’ or not. The mass is all that which sets no value on itself-good or ill-based on specific grounds, but which feels itself ‘just like everybody’, and nevertheless is not concerned about it; is, in fact, quite happy to feel itself as one with everybody else. The mass believes that it has the right to impose and to give the force of law to motions born in the cafe. I doubt whether there have been other periods of history in which the multitude has come to govern more directly than in our own. The characteristic of the hour is that the commonplace mind, knowing itself to be commonplace, has the assurance to proclaim the rights of the commonplace and to impose them wherever it will. As they say in the USA: ‘to be different is to be indecent’. The mass crushes beneath it everything that is different, everything that is excellent, individual, qualified and select.

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Anybody who is not like everybody, who does not think like everybody, runs the risk of being eliminated. To have an idea means believing one is in possession of the reasons for having it, and consequently means believing that there is such a thing as reason, a world of intelligible truths. To have ideas, to form opinions, is identical with appealing to such an authority, submitting oneself to it, accepting its code and its decisions, and therefore believing that the highest form of intercommunication is the dialogue in which the reasons for our ideas are discussed. But the mass-man would feel himself lost if he accepted discussion, and instinctively repudiates the obligation of accepting that supreme authority lying outside himself. Hence the ‘new thing’ in Europe is ‘to have done with discussions’, and detestation is expressed for all forms of intercommunication, which imply acceptance of objective standards, ranging from conversation to Parliament, and taking in science. This means that there is a renunciation of the common life of barbarism. All the normal processes are suppressed in order to arrive directly at the imposition of what is desired, the hermeticism of the soul which, as we have seen before, urges the mass to intervene in the whole of public life. Enhancing the targeting capabilities of business is parallel to its globalization-parallel, but in the opposite, countervailing direction. Even though the Web makes every site global, the need for discrimination becomes stronger. Improving focus is logically tantamount to localization, local recognition. Practically, though it is somewhat different, as localization has the inherent meaning of regionalism, language, and nation, marketing segment and marketing focus can easily cut across these dimensions and lump together people not according to their location but according to their interests or tastes or revealed preferences. Personification creates virtual personalities. Localization mostly creates somewhat adapted translations of similar content. Additionally, whereas globalization is tantamount to being unregulated (by state authorities), localization does not necessarily surrender customers to control. Segmenting the clientele into smaller and smaller groups reaching a satisfactory level of personification is an important counterbalance to a global outreach. Targeting is then among the new localization factors businesses usually seek to strengthen their local ties and citizenship.

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Lumping together an audience for millions of impressions generates and maintains mass culture. Localization alone will hardly change that, but precision targeting promises to make the break. The twentieth century witnessed the unfolding of mass technologies, mass consumption, mass culture, and mass entertainment. At the same time, these millions of people, once ‘acquired’ by a media-tsar, undergo a detailed sociodemographic analysis, resulting in the creation of clusters of groups which are as small as the data-depth allows. This often results in niche marketing, a distinctive feature of the targeting capabilities of online advertising. Thus, there are two prerequisites here: the simultaneous upholding of technological standardization that strives to create a mass audience and the ongoing promotion of diversity that discerns them according to their marketing traits. This mix is the ambiguous development path of the online media from a cultural perspective, portending the dissolution of mass culture as we know it. Mass communication will always generate a greater branding effect than the fragmented pieces of individualized communicative transactions. In order to pave the way for arguments about why your brand is ‘the only solution’, you need to grab consumers’ attention with a simple, relevant, and provoking idea. Not in a one-to-one relationship context, but on the level of mass communication. Why not within the one-to-one context? Well, first of all it is not very efficient, to say the least. Second, it is a basic human instinct that we like to be entertained or spoken to in the personal, one-to-many mode. The best brands are also great storytellers or desire-arousers. Marketers and their agencies look at advertising as the process of gathering consumers around the campfire, enticing people into their storieddesires and letting everybody interpret the message in their own way. If the stirring of desire means something to the individual, then the branding effort may have achieved a bond. The Web may be a great tool for customizing messages, pinpoint targeting of ads to a receptive audience, direct interaction with the consumer, and creating evidence-based data-driven customer relations. Evidence-based advertising, with its emerging tracking technologies, is a substitute for traditional survey methods, interviews and questionnaires. Looking at some of the current major Web sites and looking ahead to the penetration of pertinent advertisement technologies (smart ads), I do not think Web marketing will ever be the primary brand builder, but it will certainly be a strong contender for the most effective kind of marketing support.

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Whatever market share the targeting devices of the online advertising business may attain, profiling and ad-targeting portend the end of mass communication in electronic advertising, but will certainly not bring about the demise of the ‘excise’ character and interruptive nature of commercials. Ads will continue to draw on our and we can only be happy if-though perhaps this will be the exception-ads convey a chunk of relevant information to us. Artificial community-building based on objective criteria is like a mirror held up by an unbiased observer to show our objective ‘positioning’. Such mirrors are neutral and can often yield unexpected results that are difficult to digest subjectively. As mentioned above, the expression ‘seriality’ launched by Jean-Paul Sartre to depict membership of a community that does not generate an identity, leaving everybody to behave as ‘others’ in contrast to ‘us’, is closely relevant here. Confronted in this way by their virtual club-membershiphaving been ranked and classified by a neutral expert system based on our surfing record, search engine lead words, and revealed choices of taste and affiliationfew would be able to accept this sort of experience rating. It is unsettling to most people to have their minds read. All too hastily we are inclined to cast into oblivion the lighthearted inducements of cyberspace, such as reading a horoscope, playing the lottery, or guzzling down the occasional pint of ice cream while watching a soap opera. At the same time, if requested, profiling businesses (such as genetic profiling for health insurance) should not deny consumers access to their ‘virtual personality’, even if its development proceeds in real time and will not be stored in the form of files on particular individuals. Using memory-less machines and Hidden Markov Model techniques, predictive profiling uses inter-session visitor information without keeping a record of users or IP addresses. There must be some sort of log files or cookies, of course, accruing and storing a visitor’s navigation record. To keep track of visitors who return to their Web sites, site operators place digital tags, or cookies, in files on visitors’ computers. Web sites can use cookies to help them track visitors’ movements across their Web sites, but usually do not know who is at the PC at the other end. Many sites also use advertising-service companies that place banner ads on their sites. Those companies, too, send visitors cookies or create session variables so they can keep track of which ads they have seen and which they have not. Since the ad networks want to maximize the effectiveness of the ads they place for their clients, they send Net users ads that correspond as closely as possible to interests they have revealed through visits to other sites on the ad network.

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Profiling and tracking companies should help their clients get a better understanding of their traffic. At any rate, tracking records, confidential profiles based on users’ revealed preferences and consumer behavior, remain personal data even if they are regenerated, refreshed, and updated over and over again. Therefore, privacy sheltering applies and personal access and informational self-determination ought to be observed. Their nature can best be compared to the automated ‘bots’ or agents which report if a Web page has changed or a title has emerged in searchable databases. From a business perspective, I can even imagine that hermit-like users insisting on self-determination might want to furnish advertising providers with self-made profiles, which would enable them to sleep more easily. However, the deployment of artificial intelligence cannot be forgone here:256this is potentially genuine added value that cannot be substituted by asking consumers to submit their preference list or assumed profile to ad servers, even if in that case most privacy problems could be bypassed except for the vicissitudes inherent in handling personal data. For instance, the location of the target audience can provide publishers and advertisers with some modeling through lifestyle segmenting codes that can predict what ‘type’ of people live in the area covered by particular (US) zip codes. This so-called ‘precision grid’ gets down to what kind of beer neighborhood inhabitants statistically like to drink. A ‘lifestyle segmentation system’ defines every neighborhood in terms of demographically and behaviorally distinct clusters. It may be linked to major off-line marketing databases. These links make it possible to use it for a wide variety of marketing applications at the national and local market level, from media planning to database marketing. A significant limitation of one-to-one targeting is that relationships must be essentially reciprocal. This is less important in the case of business relationships, but if only one of the parties is able to speak and the other only able to listen it is unlikely that a stable relationship will be formed. A Web site will never play the role of a friend or of a priest listening to our secrets-not even of a mirror. One can be a devoted fan of a brand, but usually everybody feels somewhat awkward when surprised with, say, a birthday card. In fact, it harms the relationship the brand has with the target person, perhaps a frequent consumer. What business do they have knowing my birthday? In business-to-customer liaison, there must remain an appropriate level of anonymity and personal distance. Few people consider that by watching ads they are extending an open invitation to the company to come into their living

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room for a face-to-face interaction. This is an important caveat which must be taken on board by any one-to-one marketer: whether it is a matter of birthdays, beliefs, or purchasing habits, consumers are not usually happy about companies having such information and acting on it. There is a valid place for accurate targeting in the sense of invalidating the old saying ‘half of advertising works and half does not: if only we knew which half works’. But diplomacy and common sense can still teach us something: if you get on well with me I might think that you are a perceptive friend, but if you get on too well with me I might think you have some agenda. There are simpler and more sophisticated means of making an ad both relevant and less interruptive. The simplest way is to advertise on a site that is squeaky clean, having limited editorial links. The more ‘links’ are offered to people to click on, the more ‘opportunities to click’ are spread out to both advertisers and content. The average site today has over 200 links per page; no wonder the average click rate is only 0.5 percent. O N E - T O - O N E TARGETING

I interpret the evolving cyber technology of 121-targeting as a paradigm of the delivery of the intriguing promise that old-style Net advertising will soon be a thing of the past. A hotel renowned for its service treats all of its customers a little differently. All service staff and employees have note pads, and are required to record every little piece of information they learn about the customer. Mr. A was a business traveler, ordered soft pillows, only wanted martinis in his mini bar, wanted his shirts pressed when he arrived, needed access to a fax machine, and called to have the International Herald Tribune delivered to his room. On his next stay, he will already have soft pillows, a martini awaiting his arrival, the frontdesk clerk will ask him on arrival if he would like his shirts pressed as usual and hand him a copy of the Tribune, and the fax machine will already be installed in his room (Kiss, 1998). This is what we call one-to-one treatment of customers when it comes to accommodating them or providing them with bespoke content. What makes salesmen effective is their personal knowledge of their customers, what they want and need, and what cross-sell and up-sell items might be appealing. At the start of the twentieth century, customers received that kind of service, attention, and knowledgeable help from the sales clerk at the local store. Today,


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the same level of service and salesmanship is being experimented with on the Net. Activity-Based Advanced Targeting Machine (ATM-not to be confused with cash machines), a new network device that recently completed its first installation and test period, can implement unprecedented targeting of Internet content with strict privacy controls, and total anonymity-or at least pseudonymity-is finally available. Such activitybased advertising content is expected to be less intrusive for Web users and will provide higher value for content providers and advertisers. ATM system solutions do not rely on any server or client software or set-up. The ATM can target and direct any content type, including images, animation, and sound, to people as they browse Web pages in their normal fashion. The ATM is typically installable at the Internet service provider level. The system monitors all browsing traffic on the Internet and understands the screen layout and click sequence of anonymous Web users. The ATM is able to add new content to the data stream on the user’s computer. The content can be set to appear anytime and anywhere during the browsing session, and can take any shape or form, but is usually displayed in a pop-up window that appears during the load time of Web pages. This content remains as the screen finishes loading or for a predefined period of time. The device adapts its transmitted content size to the appropriate bandwidth. The ATM has the potential to deliver information to the Web surfer in real time. Additional planned services include an E-commerce Bot, which will track purchases apparently contemplated during user sessions, which will then prompt pop-ups for competitive offers or coupons. Targeting and ad-content selection are performed using state of the art statistical modeling via existing user profile data,257or through the collection of actual usage patterns. The aggregate level estimation is always biased in one way or another. One such example is so-called ‘Web site personalization’ based on log file analysis. Because of the dynamics of Internet access addresses, it is impossible to track with full accuracy each visitor’s surfing behavior on a Web site. Therefore, socalled ‘banner personalization’ is based rather on aggregate level data analysis. As to ad targeting proper, the operational details are never disclosed; what is more they are among the best-protected business secrets of the advertising industry. However, as the owners chose not to shut the design in a safe, but patented it, we know the basics of the targeting mechanism. The first step is to collect evidence of past navigation

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within the network as identified through cookies or IP-addresses. This evidence is then classified into adequate categories such as books, cars, and so on. A mapping mechanism is then invoked to convert accumulated evidence such as all search results into the categorical values. For instance, if a visitor looks up [Sandra] ‘Bullock’, the value ‘entertainment’ is assigned to that search. Aggregating and weighing these assignments of value against empirical search experience results in the development of clearer-cut profiles. Once sufficient data are collected to qualify for a decent confidence interval, the predictive algorithm is launched. A necessary condition of an accurate and productive forecast is frequent return and repeated manifest shopping or surfing behavior. (This clearly shows the limits of this marketing strategy: to be kept on file and to be known personally while being served is an important but not all-encompassing driver of consumer satisfaction.) Prediction is predicated on valid inference as an extrapolation of past behavior. There are currently two archetypes in the advertising industry. One is to create a so-called ‘discriminating’ function for each banner. The other is based on the correlation between banner click-through rates and segments. A segment consists of customers with similar needs and preferences. The segment correlation will tell the decision-making module which business group of visitors-what I have often referred to as a virtual community-represents what likelihood of responding when exposed to advertising. Using each visitor’s behavior information, a prediction (that is, banner selection) is made. In the first type the predicting intelligence calculates the click probability of each available banner and selects the one with the highest probability. In the other segmentation type, segment membership is predicted for each visitor and that banner is selected that yields the highest correlation with that segment of virtual personalities. In sum, the successful result must be simply that the system would choose from a queue of creatives which is as long as possible,’58 come up with ads assumed to be relevant (outcome of evidence-based considerations), would not show visitors the same commercial message twice unless they had seen all the promotions in the queue, and would not show a promotion for a product they had already bought from the site or had already expressed interest. The tracking of all these online actions is a considerable knowledge management task. There is a whole army of data crunching behind an innocent next generation commercial message popping up on our screen. Many advertisers do not even segment their target audience when trying to tailor content to visitors’ profiles. Thus, pertaining one-to-one


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targeting or direct marketing as yet remains a utopia. As to advertising in general, we are still safely rooted in mass culture all over the world. As already indicated, state-of-the-art technologies use the segmentation method in their ad serving to target audiences. They are still not doing one-to-one targeting, but rather segment targeting. As traffic continues to grow, profiles will be enriched by more information and then segments can shrink. Ultimately, we can approach asymptotically single membership cells or segments. Further on, the literature cannot give a clue as to what percentage of navigating visitors can accumulate enough information to make at least statistically sound predictions. And there is no trace of prediction error reports; we can merely infer from the CTR result that, with all the discrimination hnctions and so on, prediction error remains huge.

Box 18. The Link between Advertising and Privacy In order to accentuate the direct link between the ongoing privacy debate and the fate of online advertising I make the following inferences. Profiling of surfing behavior cuts across market standardization. With targeting accuracy reaching yet unattained levels commercials are turning into custom-tailored personal solutions. It is not only that the faceless crowd of consumers is being segmented into affinity groups,2s9but also this segmentation can be narrowed down to a one-person cell of segments, that is, the individual consumer. Just as in military matters, where enhanced air targeting has lowered the threshold for starting a European war and brought about a new, more ‘economical’ form of warfare, as greater sophistication is attained in marketing segmentation devices a sharper focus can be attained in advertising, too. The covert way of storing consumer information is soon to be superseded by standardized solutions. This may alleviate consumers’ suspicions, but some will still not be ready to be confronted by a virtual personality that has been prepared by neutral robots as recommended by the Open Profiling Standard initiative. Nobody will want to look into a psychographic mirror that is relentless as regards our wanton, occasionally eccentric clicks to sites of dubious or even misinterpreted character. Our

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self-perception would suffer a lot from a confrontation that takes place without the protection of our benign habits of mental suppression, sublimation, and natural oblivion. To make things more complicated, marketers prefer empirical behavioral data to self-proclaimed virtual personalities. Marketing research has shown again and again that self-reported preferences such as proffered bookmarks have less to do with sales than navigation path records and manifest behavior. If interactivity and one-to-one relationship targeting were more than a promise, CPM ad models would finally turn into CPC buying models where payment is made according to hit counts and click-through counts, not per impression. With enhanced targeting, advertisers can drop their unending quest for mega-traffic and mega-audiences. With targeting based on a smaller but more efficient marketing base, the same consumer response level and ROI can be expected. This would lower the publicity threshold for many sites. The Internet often prompts us to divulge personal data. This prompt is often posed as a gatekeeper. This is wrong. The ‘velvet choice’ should rather look like this: do you wish in the future to receive discerning ads created personally (or rather groupwise) for you? If yes, please hrnish the necessary data voluntarily. I pledge not to sell your personal data; I shall give no access to third parties; and I will produce your profile based on information on you alone. If you wish to continue to be fed undiscerning information, by all means preserve your full ‘innate’ privacy. When considering technological innovations that are bringing forth the demise of mass culture in cyberspace, we concentrated on secondgeneration online advertising. Besides individually tailored advertising, there is also the evolving paradigm of third-generation mobile communication, portending the phasing-out of mass communication in cyberspace. The billing relationship amounts to portal power: as already mentioned, this can be defined as any company that has a large number of users and can use those relationships to extract rent from others who want to reach those customers. Everyone from cellular carriers, through hardware manufactures, to portals such as America Online and Yahoo, and new mobile portals are counting on attaining this position.

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In the emerging wireless Internet, cellular telephone providers are Internet providers at the same time. Wired telephone carriers that possess the on-ramp have mostly yielded to ISPs and portals to generate important added value. Mobile carriers will certainly not repeat this strategic business blunder and will not let others steal a march on them again, and they are intent on developing the new equivalent of portals for the wireless Internet themselves. Based on the billing relationship, mobile carriers that begin to feed Internet pages on their users’ microbrowsers are not in need of generating data on their customers since they already possess it: names, addresses, phone numbers, billing history, even real-time location. This is more than enough to feed one-toone advertising. Time- and location-specific services will look as follows: for example, while driving we will be guided to the nearest petrol station; and we will be able to schedule and receive personalized messages, such as updates on a share portfolio. Payment for such services will go to the provider, not to the utility that connects it to the customer. In order to recoup their astronomical investment, mobile telecommunications companies will need to earn at least half their revenues from transactions and from data traffic. This commercial inception of the wireless Internet is strikingly different to the state-funded research grants which brought into being the wired Internet. SPACE - SH IFTIN G

In the case of citations and excerpts, it is the responsibility of the author to determine if non-original material and content from another source requires permission for use, or if it comes under the escape clause of ‘fair use’. The burden of proof for ‘fair use’ must always be carried by the defendant if charged with copyright infringement. It is also the author’s duty to obtain such permission from the copyright owner. In determining whether the use made of a work is ‘fair’ the factors to be considered include: the size and substance of the portion used in relation to the copyrighted work as a whole and the effect of the use upon the potential market for or value of the copyrighted work. Unfortunately, things are not that easy. I shall present the most prominent cases in order to arrive at a picture of the independent, disruptive, even illegal forces that have managed to put pressure on no less a force than the existing entertainment paradigm and the music-and-broadcast-entertainment establishment.

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My first case study relates to a Web site. MP3.com is a site that helps unsigned musicians distribute their songs. Its Instant Listening Service is touted as new space-shifting technology that allows consumers to “listen to their music anywhere, anytime”. Music listeners ‘space-shift’ when they copy their legal songs onto more portable media. My.MP3.com is a groundbreaking service that separates music from its physical packaging and allows a consumer to access his music collection anytime, anywhere, including the CDs he currently owns, CDs he buys online, and the music he has amassed at MP3.com. When an MP3.com customer buys a CD online through an MP3.com partner, the CD’s songs can be transferred immediately to his on-site account. This service allows a consumer to put an already-owned CD into a computer’s disk drive and have its songs transferred to his account. Thus it can be listened to anywhere in the world. Not only will music fans be able to listen to their own CD collection on a standard PC, but they will also be able to listen to them through the wide assortment of new Internet appliances that are being developed for the market. To achieve this accomplishment, MP3.com bought 40,000 CDs, ripped each CD’s tracks into MP3 format, and created its database. Five major record labels and the (US) National Music Publishers Association soon filed suit against MP3.com over the company’s My.MP3.com music storage locker, which gave users the ability to unlock songs on MP3.com’s servers and place them in their lockers, provided users could prove ownership of the CDs containing those songs. Users accomplished this by placing the CDs in their CD-ROM drives while ‘unlocking’ the songs. The very ownership of this database was challenged in a copyright-infringement suit. The copies transferred into customers’ accounts are claimed to have actually come from the database on MP3.com’s servers, not from recordings individually owned by consumers. This is what is problematic to copyright advocates. The US Copyright Act of 1971 prohibits anyone but the copyright owner from making a copy of a recording. An exception to that law was created by the US Congress by the Audio Home Recording Act of 1992, which prevented consumers from being sued by record companies for making copies of recordings for their own use. The copyright industry is claiming that distributed passwords-the guarantee of private use-can in fact be given away and circulated. My.MP3.com provides more choices for consumers to do what they want with the music they already own. This technology enables artists to communicate directly with their fan base and could bring it about that musicians no longer need to land a big


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record contract in order to present their product to the public. Where music is today, video entertainment and other ‘information products’ will be tomorrow, and if the Internet one day becomes good enough to deliver HDTV perhaps talent capitalists in Hollywood and elsewhere may also feel threatened that an artist will be able to find money and an audience without a studio intermediary. A federal judge ruled in 2000 that MP3.com Inc. had in fact violated copyright law with the creation of a database in which users can store and access music from any connected computer. MP3 did so without the consent of copyright holding companies. In consecutive litigation and settlement MP3.com consented to pay as much as USD 25,000 for each CD copied to its My.MP3.com music storage locker service. The original suit claimed that MP3.com had illegally copied about 10,000 CDs, putting the damages at an estimated USD 250 million. In the settlement MP3.com admitted responsibility for 4,700 CDs. In the wake of a settlement clearly affirming the right of copyright owners to be compensated for the use of their works on the Internet, MP3 agreed to pay compensation in the amount of many millions of dollars. MP3 interprets this outcome as the consolidation of their business model from a royaltytracking perspective. Copyright owners license them to use their recordings on My.Mp3.com’s software services allowing users to insert numerous new copies of their legally owned CDs into the site’s Music Manager. The five big labels struck a deal to buy “a significant amount” of MP3 warrants. The company also agreed to license its entire music catalogue to MP3.com for use in the music storage locker. Although it is perhaps too early to draw conclusions concerning MP3 .corn’s business model, the settlement clearly preserves their acquired eminence as a brand. Actually, it is the record companies that seem to have asked for admittance into this business. PEER-TO-PEER SHARING

1 interpret the evolving cyber technology of P2P-sharing of information (as opposed to centralized architectures on the clientkerner model) as a novel paradigm that brings a technology and the unfolding case law of the ‘fair use’ of intellectual property into a head-on collision. In this sense, ‘sharing’ allows the copying of intellectual property within the framework of ‘fair use’, but excludes wide redistribution or resale of copyrighted material.260In bringing the decentralized computing archi-

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tecture direct to the end-users (every user can share files without requiring a central server as intermediary), peer-to-peer sharing creates a secondary market for computational resources. Sharing is construed as downloading or contributing to the system. Downloading is the equivalent of economic consumption, contributing by opening up one’s computational resources, and a file is tantamount to production in this new digital paradigm of economics. It is an intriguing question whether distributed computing and the overall P2P landscape represent a sort of renewable horn of plenty, or whether an equilibrium of production and consumption can be created: that is, will freeloaders who do not offer anything themselves but only download from the system be able to get away with it or will some balancing4earing mechanism be constructed (Shirky, 2000)? Bandwidth, storage capacity, and all the like will be scarce resources for the foreseeable future; their abundance is a myth similar to the ‘religious worship’ of traffic as the sole measure of value in the case of pre-bubble-burst dot-coms. As we all know, the Intemet connects together all the computers in the world, bringing mankind to the brink of being a wired supercomputer itself. Cyberspace has usually taken the form of a Web server-client relationship, in which we use browsers on PCs to access large Web sites. The well known ‘disruptive’ technology of the music swapping service known as Napster is different in two significant ways. Economists call a technology ‘disruptive’ when its onslaught forces established companies to alter their business models, while creating lucrative new opportunities for fastmoving start-up companies (Christensen, 1997). First, Napster is a software application that uses the Internet-there is no browser. More interestingly, Napster-and its numerous spin-offs such as Imash, Wrapster, Aimster, Scour, Lightshare, and CuteMX-allow users to ‘share’ information between PCs rather than between a big Web server and a PC. Actually, peer-to-peer (P2P) file sharing by amateurs-as opposed to plants pressing out pirated CDs with a distributing network of trucks and salesmen-is Napster’s big innovation. They understand their activity as a return to the original virtually unbridled information-sharing approach of the Internet.261Napster’s teenage founder and public face is a student who conceived the idea of a directory-service provider and who helped develop the operational code. He owns some 10 percent of Napster’s stock, according to internal company documents, has no senior-management position, and is not even on its board. The larger chunks of Napster are held by investors, some of them ‘angel’ entrepreneurs of ‘successhl’, but not yet profitable Internet companies.


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Napster-ar rather its clones-works as follows: ‘clients’, generally aficionados of a well defined youth culture, tell the directory server where digital information (currently mostly music files in MP3 format) is located on their local hard drives, and Napster opens up this unbridled information to a world-wide audience. The result is that each user of Napster can share music files with any other Napster user for noncommercial purposes. Download the software, type the name of a song you’re looking for, and Napster will show whether the song is available for ‘sharing’ in the form of a double-click causing immediate transfer. This means moving music storage and distribution from production plants to millions of little points-personal computers. This is, to say the least, not favorable to companies that live off capital-intensive centralized facilities. Beyond its impeccable and substantial mission of enabling non-infringing, non-commercial uses,262 Napster obviously facilitates mass copying as The year 2000 was the breakthrough year for the newfangled digital transfer of music. Certainly, Napster is a big part of this, but it is not really the core driver. The technology behind Napster has been possible ever since the Internet became widespread. The real barriers to adoption before 2000 were the technical thresholds relative to storage capacity on PC hard drives and the transfer speed gated by the available bandwidth. New solutions-abandoning the principle of peer-to-peer centralindex technology-are continuously being initiated to make it impossible to control the traffic (and copyright) of any kind of digital information, whether it is music, video, text, or software. This would be tantamount to rewiring the Net in the direction of near-complete anarchy. Electronic communities are emerging with no hierarchy, no transparency or accountability, not even a minimal basis for trust. The number of always-on connections in homes, offices, and schools is on the rise, forming a core of ad hoc, peer-to-peer networks with (i) almost complete anonymity, (ii) no single centralized server or service, and (iii) random distribution and swapping across a huge complex of available storage capacity . Freenet, emerging from bonafide, academically impeccable research, and the intellectual property of a single British programmer, is being developed to make it possible to acquire or exchange materials beyond music anonymously while frustrating any attempt to remove the information from the Internet or at least to determine its source. The emerging program of a decentralized, distributed service makes it possible to find and acquire files without reference to a central database, and thus

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provide no single target for aggrieved copyright holders. The new distribution technology in effect creates vast digital libraries spread across potentially hundreds of thousands of computers large and small. Any file that any user wants to offer to others can be made available through the system. If threatened with lawsuits, invulnerable users can migrate to other commercial online trading services or they can turn to underground programs that do not rely on a central server at all. Another Internet digital distribution program, Gnutella, created by software developers at Nullsoft, a subsidiary of America Online, takes the same distributed approach as Freenet, meaning that there is no central directory of what information the system contains. Gnutella is both a server and a client (servant) in one because it promotes bi-directional information transfer. This means that personal computers that have been consumers and processors of information until now will become providers of content and information themselves, blurring the borderline between consumers and providers of content in cyberspace. Unlike Napster, which is limited to digital music files, Gnutella makes it possible to distribute video, software, and text as well. This unauthorized freelance project made its code freely available to clients registered under the GNU license. Independent programmers have continued to refine Gnutella even though the project was officially cancelled for fear of its potential uses for copyright infringement. With Napster, all the guests tell the host everything they know, and whenever anyone needs information, they turn directly to the host. With Gnutella, there is no centralized host; guests propagate requests for information and hope for the best. If somebody emerges to share the information, everybody at the party can see who is delivering the information. Freenet goes well beyond Gnutella in an effort to disguise the anonymity of those who publish, swap, or copy files electronically. In this private web of nodes when a guest is searching for information, he asks the person adjacent to him, who then passes the request along in an ever-widening network consisting of participating (Freenet-running) personal computers. Eventually, the digital information works its way back to the initiator, but it is virtually impossible to determine the source in this digital commons. It encrypts each file and scrambles the key-a long number-needed to find the file within the system. Recently, files themselves began to be split up, not only because of Internet Protocol’s packaging method but also in order to bypass copyright rules. Freenet incorporates a digital ‘immune system’ that responds to any effort to ascertain the location of a piece of information by spreading the

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information elsewhere in the network of resource exchange. No single node knows everything or is essential to the other nodes’ operation. This is a key difference from Napster, where the company’s servers essentially know who each user is, and what files they have when they log on to the system. Freenet, which is not a company, relies on a system of volunteers who run the program on network computers or their own servers. It would even be difficult for the operators of individual parts of the network to determine which computer holds any particular file. The analogy of the party makes it clear how Freenet is different from other distributed sessions. With Napster, as already mentioned, all the guests tell the host everything they know, and whenever anyone wants information, they go directly to the host, while with Gnutella, there is no centralized host, and guests must shout out requests for information and hope that someone will share it. Freenet, however, operates in virtually complete privacy: when a visitor is in need of some information, he asks the nearest altruistic person, who then passes the request along in an ever-widening network.264Eventually, the information works its way back to the visitor who requested it, but it is very difficult to determine the source. The availability of information will grow in proportion to the demand for it: if many people want something, it will be stored multiple times across the network. As long as storage capacity is cheaper than bandwidth, this rewiring remains good at its job. Another presupposition is flat-rate telecommunication pricing that is a rarity outside America. Digital music swapping-which boasts that it has put the last nail into the coffin of the big record companies-has embarrassed the music industry (which regards all sorts of freeloading as a woehl sign of the prematurity or adolescence of the new digital economy) on at least two counts. First, in addition to exchanging and freely trading music, consumers can also transfer any and all music that can be ‘ripped’ to a digital file. Secondly, Napster, in its heyday, managed to attract millions of users in the space of only six months-AOL needed 12 years to acquire 9 million members. On the Internet, files are easily copied and shared or pirated, whereas physical CDs can only be borrowed, sent, or traded. And with millions of people electronically connected through a centralized directory, sharing represents potentially enormous market losses. The bits required to achieve high-quality audio is finite. Until the past few years, the amount of space on a hard drive, as well as the bandwidth required to transfer an MP3 file, was prohibitive for widespread popular use. This means that within a few years, the amount of drive space and bandwidth needed to trade high-quality classical music

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will be negligible.265E-mailing an entire album of music to a friend will be no different from forwarding a Microsoft Word document today. Faced with a shifting balance between holders and users of copyrighted material, the music industry is trying to firewall these disruptive technologies-technologies that outrun the market’s ability to absorb the improvement-at source, ready to block music swapping at cable companies, phone companies, and Internet service providers. The ensuing litigation, however, has awakened the suspicion that copyright is being used here against the original intentions of the lawmakers. My.MP3.com and Napster claim that the service has appropriate uses and therefore should not be liable just because customers use the product for illegal purposes. For many, the solution is-instead of suing out of existence every Internet-based distribution technology-the implementation of an electronic rights management and clearance system for the Digital Age. Systems are being designed that facilitate secure content registration and handling, thus enabling searching and delivery of multimedia content to a wide audience of interested parties. In the emerging information society there are more and more conflicting interests between rights owners, information providers, and end-users with a particular focus on the multimedia market. It seems that the onerous task of revisiting pertaining law and existing business models in publishing cannot be avoided. Authors may interpret the current status quo as technology offering them an opportunity to bargain from hard-pressed publishers a greater share of the royalty stream and more freedom in publishing. The world in the Digital Age will eventually settle into a new equilibrium some years in the future, and it will look very different from today. The best defense against copyright infringements by file sharing technologies seems the creation of artists’ sites, cross-licensing with each other and then making music available to customers at fees attractive enough to win their business. Artists and authors, partly deprived of their traditional copyright revenue, may thus make more money from appearances, sponsorships, and product licensing than from the sale of their property. Advertising may play a role, as may new business models, such as subscriptions to electronic distributions. We may even find that the original owners of intellectual property can deal directly with consumers via the Internet, bypassing the need for the large label companies. Innovative industry leaders will embrace the new models and increase their chances of survival and success. Others will try to swim against the tide and increase the likelihood of failure. And all through this, only one thing will remain certain-dramatic and fimdamental change.


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Freenet is intended to function without any centralized control point. The architecture of Freenet generates a near-perfect anarchy, letting sites query one another in a chain in order to find material matching a search string. And Freenet and Gnutella have extended the openness of the source code to include content: any material within the reach of distributed information systems becomes nearly impossible to censure, control, or remove. This software extends the freedom of open-source to anything that can be digitized-to anything ‘anarchist technology’ can provide nowadays. Many computer industry executives contend that if the recording industry’s suit against Napster, Gnutella, and company succeeds, it will simply lead digital-music enthusiasts to use alternatives, which are even less open to copyright enforcement.266While US courts struggle over the recording industry’s challenge to digital music swapping and the ability to make personal copies to play on other devices, the next battleground has already emerged with the test-launching of the above described anonymizing programs that will make it impossible to control the swapping traffic in any kind of digital information, whether it is music, video, text or software. Distributed computing with its directory service enables a new generation of super-search engines, as content sleeping on millions of netizens’ hard disks can be included in the search. This goes beyond simple file sharing and allows the distributed processing of search queries and data mining. This renders 10cation irrelevant; the ownership of proffered data on hard disks is renounced, endowing the distributed system with ownership rights rather than the particular server. By rendering location irrelevant the (diskbased) origin of distributed materials cannot be traced and thus content of dubious origin cannot be removed. In any case, the new programs could change the basic terms of the discussion about intellectual property. This newfangled endeavor sets uncommitted programmers again on an outright collision course with the world’s copyright laws. Their hope is that the clash over copyright enforcement in cyberspace will produce a world in which all information is freely shared. Programs now emerging make it possible to find and acquire files without reference to a central database, and thus provide no single target for aggrieved copyright holders. The swapping of copyrighted files over the Internet, through services like Gnutella, Napster, and My.MP3 .corn, are accused of piracy because there is no way to collect royalties on the digital works being exchanged. Anarchist-programmers hold the view that corporations can no longer own information in the same way as conventional assets, such as real es-

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tate. Those holding a more moderate political stance contend that if the data propagation model used by their software lends itself to vicarious copyright infringement, it is the user’s responsibility, not theirs. The extreme attitude is that copyright protection is simply obsolete in the Internet era. That expectation, plus the ingrained experience of millions of users who have got used to open access to digital information, suggests that the issue may quickly outstrip the current debate over copyright infringement between the recording industry and a variety of brave-new-world Internet music distributors. The stakes are whether music companies can continue to market music as a product or will be compelled to market music rather as a service, seeking ways and means of adding value to their product within the framework of a subscription service. While anarchist-programmers categorically believe that software should be free (of charge), they do not necessarily have a problem with fees for music or other forms of entertainment: they would claim that software is to be used and music is to be appreciated. Appreciation also encompasses occasional private redistribution. This redistribution is usually called ‘fair use’ that only a police state could prevent. In the wired world, the concept of ‘fair use’-traditionally of marginal impact-can now palpably affect an author’s revenue as objects can be copied and distributed easily. Currently, corporate holders of multimedia rights have no way of making their material widely available without risking serious infringement of their work. This prompts them to move towards a regime where previously legal uses-fair uses such as making a copy for personal use-become outlawed. At the same time, practices of the ‘status quo ante’ that could fall well within the limits of what is non-profit use of these works are also often attacked as infringements. The development of digital technology, distributed computing, and the increasing demand for multimedia applications call for a new way of looking at intellectual property rights issues, addressing the interests of authors, publishers (nowadays everybody with a PC and Internet account is a potential publisher), and customers alike. Perhaps that is why new rights management agents commissioned by publishing corporations are on the brink of deployment in the field of copyright. If the level of copyright leakage did not exceed corporate tolerance and there was no litigation over new technology I am convinced that the disruptive technology of distributed computing was still not impeccable. If information cannot be free in all aspects and walks of life, then the question of how valuable that information is cannot be posed. However, the question as to the value and reliability of information or software


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coming from anonymous sources is a legitimate question. Unless digitally signed and easily traceable, information will soon have very little value in cyberspace, too. Identification and origin are conventionally the guarantee of quality PEER-TO-PEER IN TERMS OF SOCIOLOGY

Voluntary work done for a community felt to be one’s own seems a constant phenomenon in history, insofar as community ties occur at all and play a role in the organization of societies. As an integral part of the Gratis Economy, volunteering, amateurism, and laymanship are universal and contingent, that is, ubiquitous, but certainly not unconditional phenomena. There are few examples of human action that are as fundamental and conceptually stable as socially important, unremunerated informal work. It is one of the few anthropological constants in social science. Its varieties and organizational patterns reveal a lot about the societies in which they appear. I attempted in the first part of this work to outline the main historical and cultural varieties and to link them to those informal patterns of coordination that keep them alive to this day and prevent them from yielding place to more formalized, globallyoriented structures of m ~ d e r n i z a t i o n In . ~ ~what ~ follows, I set out to show that sociological action theory, and especially that of informal coordination, is surprisingly conducive to an understanding of both the end-to-end architecture of the Internet and the enabling new technology of networked, peer-to-peer configured computers. Informal working-that is, informally coordinated working in the terms of action theory-may be described as follows. The extremely multifarious phenomena related to informal work, from voluntarism, through helping networks, to the shadow economy, are to be considered alongside the informal regulation mechanisms operating-independently of the amount and strength of cohesion-within any identifiable social grouping. This sort of informal coordination of action or social integration is often distinguished from the mechanism coordinating the systemic elements of society, that is, from systemic integration, as recommended by the erstwhile Left critics of Parsons. This dichotomy makes possible a broad social dynamics between forces of the system-such as money, law and power-and the lifeworld, that is, between domains of alternative coordination of social action, such as discourse, argumentation, and solidarity. Formal coordination is observable throughout the economy and state administration within the framework of which the ‘invisible hand’ is the

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mover and shaker of affairs. The systemic integration of action is the realization of instrumental rationality, overriding the individual intentions of actors. Actions in the public arena, whatever behavioral rule they may subjectively follow, will be impersonally fitted into the alienated requirements of the systems concerned. (Although the modern Leviathan of the monetary-administrative-bureaucratic-military complex speaks and requires the language of resilient adaptation and conformity alone, one can occasionally ‘beat the system’.) In contrast, the validity of informal coordination, the very success of communicative actions in general, depends heavily on the actor’s own intentions, motivations, and-oftenmaterial rationality. While analysing mainly the structures of everyday communication, this paradigm concerns the coordination of intended meanings achieved by speech acts in language games, the hitherto best-charted domain of non-systemic or social integration. Speech acts ‘do things with words’. This (the linguistic equivalent of voluntarism) exceeds the level of merely understanding the conveyed message. A low level but stable social bond is generated by virtue of accepting the implicit validity claims of speech. Validity-claims which are in principle criticisable offer the most fundamental terrain for accepting or denying a consensus and making the foundations ready for communication or rendering communication impossible. The person to whom it is addressed can respond positively or negatively, based on good reasons. Communicative actions cannot be reduced to teleological, strategic, purposive, perlocutionary, or other actions: they are a primordial mode of language use (‘just like spontaneous, non-commodified help between neighbors). In the case of an intersubjective relationship, the delicate bond is of a truly intentional and voluntary character, as opposed to, say, purposive actions (an administrative order by a boss) that one cannot refuse, or systemic events (share price fluctuations) that one cannot ignore. As to communicative actions, one can easily question them by declining their (claim to) validity. We usually do this simply by ‘thematising’ them, that is, by starting to argue about their implicit situation definition or about other contextual contents and numerous presuppositions. The informal coordination of action works by either the acceptance of an offered communicative relationship or by its refusal. Thus a communicatively achieved agreement or understanding cannot be imposed by either party. To the systemically operating elements of modern society belong areas, relational structures, and mechanisms which are not of a communi-

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cative nature, that is, which are organized according to impersonal, reified-process governed-rules. Such are all relations involving administration and all formal economic organizations, whether fitted into a market-governed or into a redistributive, command-economy environment, and here belong also mass culture, show business, and publicity generated by the media, professional sports included. Typical of these systemic elements of society is that individual endeavors, through their functional consequences, are subsumed into ever higher systemic connections, eventually into societal systems of administration or the economy (for example, in public administration clerks often can have only a partial understnding of the political implications and ramifications of their actions; in business, relatively low level employees-for instance, purchasing managers - can (if corrupt) effectively shape business policy, resulting in undesired ‘bottom-up’ coordination instead of the strategic variety). Systems coordinate individual or organizational activity through instrumental (in another terminology, purposive) rationality. Rationality itself is expressed and measured in terms of money or power. Social systems can be regarded as the generalized framework of purposive rational action, their single common characteristic being that it is not the actors’ intention to agree but their objective fitting into the requirements of the prevalent system that integrates and stabilizes. This leads to the loss of subjective meaning and perceived freedom. The yardstick of the working of systemic integration is the greatest possible manageability of society and the possibility of preserving its equilibrium. Human labor in this systemic context is interesting only as regards its material-functional performance. The important motivational backdrop, for instance, which is of major concern to research into pro bono working, seems absolutely irrelevant in terms of this formal approach. Let us take as an example of formal coordination the historical emergence from early industrialization and the century-long stabilization of ‘work time’ in conventional employment structures. A plethora of legal prohibitions (for instance, Sunday working in some Christian countries) and collectively bargained agreements (holidays and time-off) have contributed to the shaping (and permanent shrinking) of this basic instrument of modernization, widely understood to be an important factor in entrepreneurial costs and in international industrial competition. Informal coordination or social integration is predicated on the development of the lifeworld. This concept, which comes in a number of different formulations, is an attempt to capture the belief that the roots of agreement, of similarity in thinking and acting, have to be sought

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somewhere in the unarticulated background convictions and the everyday stock of personal knowledge used in the ‘infrastructure’ of interpersonal relations. The behavioral ‘rules’ followed here are seldom reflected upon or thematized, not unlike the grammatical rules of one’s mother tongue. Social relations as developed and maintained in everyday praxis and communication are coordinated by tradition, by intersubjectively ‘accepted’ group norms.268These relationships are often established by means of consensus and uncoerced cooperation. The lifeworld-that is, the structures governing everyday praxis and communication-is never ‘given’ or is never directly accessible to the casual observer. Yet lifeworlds are not self-contained monads; they can reveal themselves completely in the form of the ‘initiatedness’ acquired in the course of s o c i a l i ~ a t i o nThe . ~ ~opulence ~ or depletion of the lifeworld can be assessed in terms of the identity consciousness or the innate culture of a personality which has grown up in it. Human labor in this aspect is no longer judged according to its functional results, but rather as ‘subjective effort’. This approach has many pragmatic consequences, the salient one here being that one cannot distinguish between good charities and bad ones by considering only their mission; there is no room for a substantive judgment, but for only a formal one: there are well-managed and poorly managed organizations. Since the life of any society is not exhausted-even today-by activities coordinated in a formal way by systemic integration, the diminishing lacunae are filled by the social integration of communities. This need not suggest that informal coordination is a subsidiary category. Just as amateur sports are self-contained branches in contrast with professional show business, and professional management is only partly reflected by the dashing corporate image, so informal coordination can also achieve good standards of performance in the social terrain of modern societies. What is called the unilinear or European path of modernization and rationalization is tantamount to the extension of formal coordination in society,270and this has traditionally been the dominant focus of the social sciences. Only in the wake of the crisis of the welfare state and the mounting acceptance by experts of smaller and softer solutions within the new welfare mix-the changing proportion of statutory and informal networks of social security-has the issue of informal action coordination been brought into focus. Neither formal nor informal coordination is exclusive, not even within its proper domain. They mutually relieve each other as if in the manner of dividing functions. Just as at the extremes (legitimacy of the


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death penalty, abortion, and so on) of each formalized legal system procedural legitimation (the cornerstone of positivist legal sociology) alone ceases to be sufficient and the moral judgment of the polity anchored in the lifeworld should and will take over, similarly at the borderline of self-regulating economic systems-where the social-material reproduction of the labor force proceeds-we encounter informal coordination. This field is the informal economy,2’* part of the Gratis Economy. In the domain of everyday life concerned with the transmission of culture, social integration, and the socialization of individuals, what Habermas (1984) calls “communicative the coordination of action through implicitly or argumentatively attained agreement, is indispensable. Habermas claims that the immanent rationality of linguistic intersubjectivity resists submission to the functional imperatives of systems. By contrast, the achievement of systems such as the economy and bureaucratic administration takes place via “steering media”-money, power, and lad73-that undertake the bulk of social coordination. These steering media are impoverished and standardized languages, abstracted from the more context-specific forms of agreement which are required for the appropriate coordination of action within the lifeworld. This distinction also enables us to grasp conceptually such processes as when the uncontrolled growth of an autonomous system undermines its own foundations, as it were, by commodifying, bureaucratizing, and legislatinghegulating (in sum: “colonizing”) diverse lifeworld activities that are intrinsically bound to communicative action. Since the early 1980s, when sociological action theory formulated these concepts, a great deal of “decolonization” has occurred. Whereas in those years we encountered ‘complaints’ about the infiltration of the system into lifeworlds-in fact this course of events has been the major intellectual driving force of Habermas’s work-recently we have witnessed a great deal of empirical work pointing in this and the opposite direction: I mention here the collapse of East European socialism, the principal tenet of which was the elevation of politics (formulated in terms of a ‘proletarian’ world-view) above the economy, or a 1992 charter of the Council of Europe calling for the admission of regional and minority languages into civil administration. This informal mechanism of communicative action, which integrates groups of people into communities, may serve as a basic referential framework. The eternal phenomenon of voluntary work and additionally, all the enumerated modem forms of self-help, seem to offer an as yet uncharted domain of research for a more comprehensive and profound understanding of informal coordination.

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Within the framework of European integration the principle of subsidiarity encapsulates the perceived need to separate spheres of national authority. The higher instance of supranational decision-making should only be invoked if problems cannot be solved at the lower level. According to sociological theory, it is exactly the fostering of rationalcritical ‘counter’ public forums (augmenting what T. Roszak called the ‘counterculture’, such as examples of genuine volunteering, Usenet newsgroups, and so on) that may open a politically feasible path of social innovation. ‘Counter’ public spheres exist where the owner and user of the means of production are not detached (as is the case with modernized production274),and where, instead of professional expertise, one can make do with lay skills. (You need not be a cobbler to use, and judge the quality of, a shoe.) These epicenters of communication necessarily arise out of the micro-domains of everyday practice, such as online chat rooms, and they alone can focus and transmit the impulses of the lifeworld. Further on, the maintaining of ‘counter’ public domains is a guarantee of the ongoing process of modernization: the inherent traits of social disciplining can be reconciled with the liberties and unmedithe coordination-mix of ated simplicity of the l i f e ~ o r l d . ~I ~construe ’ contemporary non-profits in this manner: they experiment with the balance between good works and efficient management, converting gifts into programs; between upholding the voluntary spirit and disciplining their voluntary labor force; between broadening the limits of philanthropy to encompass modern business innovations, such as ‘venture philanthrophy’, and attracting engaged volunteers by virtue of their social advocacy. My thesis is that at the edge and periphery of the economy we encounter activities where exchange and interaction are predominantly guided by a consensus reached by the intentions of the participants themselves.276Human services within an extended household or network, voluntary work in general, and group self-help are always oriented towards the direct shaping of the social environment. They can be reduced neither to the principle of labor nor to interaction. That is why I speak about a coordination-mix here. One cannot deny that unimpaired intersubjectivity and uncoerced agreement-as in the argumentative ideal community of science-in fact exists in volunteering and self-help. I construe also fileswapping in a P2P environment without a server/ client hierarchy as informal coordination. Parallel to an interest in the local and the colloquial as a reaction to overarching globalization I suppose that if economic communication

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between smaller networks-the indigenous language of informal household help-could somehow be accentuated, casual and fragile helping networks would become stable. Complementary trading partnerspreviously unknown to each other-and much needed, pent-up services would find each other, thereby augmenting and completing imperfect links within the organically developed networks. This is, for instance, the philosophy of MoJo Nation, a peer-to-peer file-sharing system set up to combat that constant peril of non-systemically coordinated action known as the ‘tragedy of the This downward spiral is looming even if MoJo understands itself as terminating ‘dotcommunism’ (unrequited neighborly use of idle PC resources) by developing an ambitious business model on this philosophy that will issue a paramonetary device to act as a clearinghouse between contributors and consumers in the neighborly self-help network. MoJo Nation 2000 proposes creating a market for computational resources-disk space, bandwidth, CPU cycles. In its experimental system, if netizens provide computational resources to the system, they earn Mojo, a currency; if netizens consume computational resources, they spend the Mojo they have earned. This system is designed to keep freeloaders from consuming more than they contribute to the system. I shall return critically to this issue in the section ‘The Design of Gentle Money. In my view, distributional computing is the cyber equivalent of neighborly help. Informal neighborly help-peer-to-peer communication-could intensifL to such an extent that it enables the underemployed to find an outlet for their capacities outside the economy proper. It would provide supplementary opportunities for well-to-do families and additional security for those who participate only loosely in formal employment structures. The nurturing of local traditions-regional languages and, perhaps, regional money to be propounded hereafter-in parallel with globalization is appealing because it offers people a sense of identity that is not hostile to others, that is not exclusive. ‘GENTLE MONEY’: COMMUNITY-LEVEL C L E A R I N G H O U S E S A N D MARKETPLACES

It is not only the state administration which can initiate public goods; communities can also generate a virtual marketplace creating economic demand and producing its supply. Having looked around for community-induced or even individually initiated marketplaces I came across many examples. 1 have now derived their archetype, something in be-

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tween (i) the emerging paradigm of peer-to-peer communication for filesharing (P2P)and (ii) labor exchange ‘banks’ (clearinghouses of helping hands) for the purpose of bypassing the market order (catallaxy). The term ‘catallactics’ has a long history in economic thought, with the meaning ‘science of exchange’.278I intend to show the striking similarities between these seemingly unrelated ideas in order to develop my theory of ‘gentle money’ and ‘gentle employment’. How can (i) the exchange of digital resources and (ii) mutually useful informal activities be made valuable and assigned commensurable value? Beyond or rather instead of legal tender, the launch of notional currencies has recurrently been suggested in economic history to promote the exchange of informal labor or to enable the sharing of computational resources (distributed computing), in short, for the exchange of voluntary work. Recently, a similar suggestion emerged (MoJo Nation, 2000) to enable resource-sharing partners in a P2P environment to enhance their ‘economic communication’.279Whereas traditional money commodifies work, notional currencies are supposed to create a virtual market for informal working within autonomous (‘counter’) public spheres-for example, Napster. Such a virtual marketplace will always be the product of an exchanging community (in Greek: catallaxy). I therefore consider them to be gratuities generated not by business but by the polity. Let me start at the beginning. Keynes wrote in his ‘Treatise on Money’ that the era of state defined money arrived only when national states, in addition to their power to enforce the use of a single language, also shaped the other basic element of human communication, money, the language of economic transactions and accounting. State-defined money, then, is the required medium of economic communication within a politically encompassed region. Even if all monies we encounter in circulation nowadays are sanctioned by government, it does not mean that things could not be otherwise. The advantages of globality brought about by convertible national currencies are, of course, immense. Local networks in society and parochialism in general are often associated with narrow access, uneven or inequitable services, and exclusions. However, in Europe, where nation states have systematically repressed regional speech in the past in the name of national unity, minority languages and vernaculars are getting a new lease of life as regions within the globalizing continent take steps to preserve their traditions.’” One day, perhaps, the natural plurality in economic communication will again be permitted, restoring monies with limited circulation.


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It was the 1960s which brought about the ongoing ‘tinkering’ with one of the last bulwarks of organic human institutions, the national currency. The so-called ‘Werner plan’, calling for European monetary union not later than 1979, conceived a new man-made monetary device with a clear political aim. Then Professor Hayek came forward with a long-cherished plan to establish a stringent financial regime made up of competing non-national monies. Then, after a long respite, came German reunification with its well planned monetary consequences. Financial history records a number of memorable proposals which point in a similar direction. One is the substitutes for money dreamt up by romantic anti-capitalists. In the first half of the nineteenth century, utopian socialist Robert Owen (CRISIS, 1832) suggested that money should be substituted by direct certificates of performed labor (a sort of MoJo). Everybody who enters the system would be paid in proportion to the man-hours put in and the productivity attained. Owen’s obvious purpose was to eliminate unemployment. Unfortunately, he gave no explanation whatever of what alternative filtering mechanism could assume the role of the market, which would also be eliminated in this way. According to his naive scenario-interpreted, discussed, and discarded by Marx in Capital-all products (manpower included) can be marketized. Scarcity of goods and chronic scarcity of money could be overcome in one fell swoop. In an organically developing market economy, as we know, exchange for money guarantees social necessity and the preservation of macro-equilibria. This filtering mechanism of exchange for money is the ultimate guarantee of economic equilibrium, and these naive initiatives fail to provide this function so they never apply on a macro-level, but only to lifestyle enhancements at the local level where peer review is enough for filtration purposes and the overall impact on macro-stability is negligible. You cannot have an economy with too many gratuities. These initiatives slated for pockets of the economy are by no means sufficient in the commodified national and supranational network of economic exchange dubbed ‘catallaxy ’. Markets operate by standard means and accepted conditions for the realization of profits. The ‘hard’ or convertible nature of a currency exactly expresses this underlying homogeneity in economic terrns, whereas ‘soft’ currencies always engender some sort of political agenda or separation from world commerce (catallaxy). The aim of the naive proposals of Owen and Mojo Nation is to substitute, in a ‘revolutionary’ manner, the equilibrium-necessitated, market-filtered outcomes of markets by having

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their more ‘equitable’ measures of value accepted. Unfortunately, this would lead to the unnecessary doubling of the catallaxy. Modern libertarians (for example, the Cat0 Institute), who regard inflation and the concomitant devaluation of currencies as their principal concern, have adopted Hayek’s analysis and policy recommendations concerning the advantages of denationalizing money (Hayek, 1978). According to this train of thought, democratic states promulgating the ongoing division of societal power (checks and balances) in public administration should also renounce their last and most stubbornly protected monopoly. They should relinquish their monopoly over the money supply or its equivalent, their political control over the central bank. Democracies are the least appropriate tools for achieving financial stability, claims Hayek, because their very nature lies in coalitionbuilding political compromises with their inevitable financial consequences for the permanent redistribution of wealth. As there is no palpable limit, this practice is said to lead to chronic overspending. There are, of course, degrees of political influence over central banks, ranging from the Bank of England’s somewhat subordinate position to the (former) German Bundesbank’ s almost entirely autonomous status. Suspicious Hayek came up with a radical solution to cut the Gordian knot. If private enterprises-commercial banks-took over the issue of various monies simultaneously, and possibly in fierce competition with each other, the deficit-making tendencies of the all-pervasive political class and central bureaucracy could be radically forestalled. The sole mission of these banks should logically be to preserve the value of their own currency issues and to ensure the largest possible market share in circulation, irrespective of national economies and state boundaries.281 Hayek’s proposal of a competitive (hence not segmented) money supply represents a theoretical experiment to render the catallaxy even harder by depriving governments (via central banks) of their chance to soften the conditions of issuing new, deficit-financing money and of their capacity to nationalize individual losses in the form of the inflationary process. The pragmatic tenor of our expositions, however, can be characterized as follows: the political feasibility of a super-hard (global) catallaxy is also conceivable in terms of another, opposite path. Instead of converting regions and nations advancingly into the homogeneous modules of a worldwide Leviathan of economic space, why not cxtract and deduct the inevitable and ever-present sources of ‘gentleness’ (used here as another formulation of the gratis economy) in society into segmented and protected enclosures of the economy-the Gratis

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Economy-which path is also conductive to sustainable growth without inflation. I am convinced that it would be as easy to forge a political consensus concerning the protection needs of the Gratis Economy as it has been, polluting corporations notwithstanding, to win people round to the cause of environmental protection. In what follows I shall collect, reformulate, and express in economic terms, for the sake of generalization, grassroots’ initiatives which point in this direction.

The Design o f ‘Gentle Money’ The ensuing description is derived from historical descriptions of labor ‘banks’ (nineteenth-century centers where people exchanged products and services without money. Since then they have surfaced from time to time, but have always been short-lived) and from the logics of resource usage seen in distributed computing, especially in clients enabling the sharing of files and computational rcsources in a peer-to-peer environment. Both patterns try to emulate an invisible hand for the settlement of claims in the form of multilateral bartering without the rigor of global markets. Let us postulate that a regionally organized ‘money-server’ or chartered non-profit association is experimentally authorized within a local community of registered voluntary workers to issue for a specified purpose something like money. I envision an electronic payment system with a locally acceptable basis of value such as the informal work of participants. As to its charitable mission, let it suffice here to declare that the association operating this money-server intends to help people trying to find an outlet for their underutilized skills (time, untapped talents, and exploitable treasure) outside the-choosy as we know-global labor market. No bonds, no stocks, no checks, or any other money substitutes,282but an asset, so-called ‘producer identified money’ (PIM), the circulation and negotiability of which are guaranteed by the virtual reserves of promised informal work and by the genuine reserves amassed by contributions of voluntary work performed for the association. Provided that this social innovation appears attractive enough to be supported by the state-the granting of tax sheltered status as a the issue of certificates (or simply the electronic entry of credits) can proceed in proportion to thc proffered pledges and voluntary contributions. The acquisition of these certificates proceeds with the provision of ‘priced’ services listed by the Centre. The issued amount of e-money (entitling the bearer to receive proportional pro bono services if no

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matching supply is found) constitutes a liability (in accounting terms) and should be properly accounted for on the debit side of the Centre’s ledger. If a wide assortment of offered skills can be electronically pooled, the voluntary association will immediately be in a position to promise the redemption of the issued certificates. The money sewer-emulating Napster’s central directory that leaves files in their original place on members’ computers-is not a bank that lends money; it is akin to a warehouse that stores ‘petrified toil’ on behalf of its customers. As there is always a gray reserve of underemployed people with underutilized skills, there will probably be great demand for such a paramonetary asset and volunteering investors will then be able to exchange their holdings for a galaxy of alternatively offered services: spare time, services, or goods. Whoever accepts this quasi-money will acquire the right either to tap into the offerings of the association in proportion to his initial program-related investment, or-if not resorting to this ‘timeback guarantee’, as it were-will enter the secondary market of these ecertificates and exchange it multilaterally within the community. This means asking for someone’s time or soliciting informal local services as equivalents in the above-defined regionally closed circle. Once founded on these virtual but sound assets, further lubricating ‘money creation’ may follow in order to further facilitate local auxiliary economic communication. The fine-tuning of money supply, the occasional tightening of screws is a practical issue about which one need not speculate in advance. I can, however, well imagine that a few pragmatic regulatory rules would soon be drawn up for the ‘board of (charity) governors’. This producer-identified money is intended to lubricate channels by means of which peers in a community can pledge and use their mutual time for one another’s benefit. The liquidity of this paramonetary asset will not be high as it represents promises to devote time and to perform work. Such a promise by a skilled unemployed person or a languageversatile, child-rearing housewife may be delivered in due order depending on readiness and mood, but making good on promises may also be postponed. This clearance between spender and recipient is certainly not how high finance operates, but nobody denies the practical negotiability, utility, and liquidity of promises in economics. Immediate settlement or liquidity-the operative match of demand and supply, that is, the success of multilateral bartering-under these circumstances is predicated on participants’ concern for the welfare of their neighborhood. Liquidity is thus to be maintained, promoted, and boosted by mobilizing voluntary

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spirits. This is how enthusiasm to be tapped in exceptional times, as yet, translates into economic communication, into liquidity. Producer-identified money is intended to diversifL the ways in which one can contribute to the well-being of one’s neighborhood and how the laboriously idle, who are ready to supply their labor, but not in soughtafter areas, can find a livelihood with their very ‘individual’ propensity to cornmodify their work (even some of the poor would only go to work occasionally). PIM is not intended for use by money launderers. Electronic payment systems are often abused because they are more privacy protective than the heavily regulated global banking system.284PIM as a currency is as anonymous as cash and much more anonymous than credit cards, but I doubt whether tax evasion or money laundering are to be expected. This is not a borderless commerce with some remote payment mechanism; the bartering proceeds within a locally confined area among people who most likely know each other to a limited degree.

Scenario for ‘Gentle Employment’ I shall risk a thought experiment: participants who can accumulate paramoney that is liquid only regionally can also defer reciprocity, and diversify by reaching agreement with new partners beyond the circle of their acquaintance. Domestically organized household work will then cease to be exclusively self-provisioning and will, as an extension, start to be ‘income generating’. We can speak of supplementary income, of course, only in a qualified sense. This type of enhanced voluntarism remains unpaid in the catallactic sense and informally coordinated, because the assets and liabilities of our clearinghouse are practically detached from the national currency, cannot be converted into it privately, and the liabilities undertaken cannot be rediscounted at banks. Just as a non-profit organization drawing on volunteers’ work will remain a charity if sound management methods are also applied, not just voluntary spirit alone, this clearinghouse would never affect the catallaxy save for our anticipation that a remarkable dynamics based on comparative advantage would be generated involving the strictly limited realm of ‘gentle’ employment and the global world of formal employment. As it is recommended that extended membership be limited to approved target-groups of, say, welfare recipients as online peers, I am not sure that any comparisons, let alone genuine competition between this informal circuit and legal tender could arise. But even in this unexpected case,285the consequences would not be bad: the informal sector’s rein-

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forcement-its capacity to offer an alternative livelihood comparable to the one anticipated by advocates of ‘workfare’-would only be accompanied by the hardening of the somewhat contracted catallaxy. This hardening would be prompted by the degree of freedom made possible as to the directions of welfare spending due to the reinforcement of selfreliance among welfare recipients. The contraction of the catallaxy might occur because some community members with an especially SUCcessfbl ‘portfolio’ of informally convertible skills might decide to sacrifice some of their precarious (but formal) employment altogether to the detriment of their employer but to the advantage of our envisioned informal circuits. Thus, a shift in the demander’s preferences (parallel to preferences for an alternative lifestyle) towards or away from this currency will not so much manifest themselves in exchange rates as in the shift of circulatory share between hard and soft money. I am convinced that even if soft money gained rapid popularity, the usual forms of administrative control would thwart the abuse of what would also amount to a tax shelter. There is no way to tax this supplementary income (that is why I speak of autonomous counter spheres), and therefore it is better to grant tax-exempt status. All that policymaking can do in this off-shore respect is to consider the relief afforded welfare spending in proportion to the gains in gentle employment. A slight modification (along the lines of the sound economic tenet of comparative advantage) in the relative-and as yet unfathomable-weight of the two spheres may ensue, that is, some limited crowding-out of the hard currency by the softer one can safely be anticipated. At the same time, the reserves of our envisaged association (experimenting according to existing practices) have intrinsic value (the amount of accomplished pro bono work) so that this paramonetary device cannot be regarded as money with a zero marginal production cost (paper money). This implies that nobody can open up the tap to issue this soft money. Its paramonetary nature is due to the underlying restraint that the field of circulation is established as broad enough to enable the money in question to serve as a means of counting items and their prices, but contained in size in order to preserve the interpersonal, peer-to-peer character of this ‘informal-choice’ social innovation. Depending on the extent of the tax shelter, that is, the attractiveness of this notion of informal choice, and predicated on the local propensity to perform voluntary work institutionalized in this P2P-setting, the cautious issue of PIM may follow. Money supply must be consonant with one basic rule: the association announces the list of activities which it


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regards as being in demand, but in line with the reconciled interests of the actors in their shared P2P environment and in the local labor submarket, respectively.28GAnother, more pragmatic approach: the participants should be limited, not the activities. There are known abuses of barter,287but I doubt that we should prepare for such undesirable side effects as the abuse of this device for transactions beyond its stated purposes.288 Once this segmented approach to globalising hard-catallactic and ‘gentle’ local media of economic communication gains currency, nobody would logically spend hard money earned in scarce formal employment or from welfare entitlements on informally accessible P2P-services. Gresham’s law, which states that bad money drives out good, predicts that everybody will attempt to express their demand first in the softer, one day perhaps rapidly depreciating, currency.289I must emphasize that any unfortunate outcome of such depreciation due to management irregularities will cause no harm in the broader economic environment. In order to boost the attractiveness and to secure the supply of informal labor, I suggest taking one more step towards the opening up of the demand side of the overall labor market. After deducting the foregone taxes, the welfare savings due to informal activity (if any) could be partly made accessible to (debt-swap-type) informal ventures-that is, PIM income acquired by welfare costs not incurred could exceptionally be made ~onvertible.~~’ Similarly, a tenant of a dilapidated apartment who is ready to help the landlord by carrying out renovation and repairs is often entitled to a rent discount. In order to observe our self-imposed isolation constraint strictly, some form of tax deduction related to the magnitude of the burden shared would perhaps be more adequate, rather than convertibility. The course advocated here is Janus-faced. The catallaxy will at the same time shrink and lose some ground-very little-through the displacement of some small enterprises; perhaps some medium-size ones might also be affected. To make things worse, it is always and everywhere exactly family enterprises which can most easily absorb the unemployed. Unemployment benefit recipients might be interested in adopting a more active role in self-reliance. It would, however, be unfair to expect that they might even cease to be claimants at all because we offer this gentle employment in a P2P environment of workhesource exchange. Anyway, the employment situation in this anticipated new welfare mix will better approach the fiction of voluntary participation in the work

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The Gratis Economy

force, presupposed by every neo-classical economics textbook. Wages will then be the opportunity cost of leisure. Each individual is supposed to supply additional person-hours until the marginal rate of substitution between income and leisure equals the wage rate per hour. In the anticipated welfare mix, reservation wages-that is, the level below which the unemployed choose not to accept work-are expected to increase. Until now it was mainly unemployment benefit-the net cost of seeking better wage offers-which created a floor below which reservation wages, and therefore actual wages, could not fall. Thus in the anticipated new situation more voluntary unemployment is due to emerge because benefit can be complemented, to some extent, by ‘gentle’ (in contrast to ‘off-the-books’) employment revenue. The lower the search costs, the higher the reservation wage is likely to be and, therefore, the longer the spell of unemployment. Search unemployment is, of course, inevitable in an economy with good adaptation flexibility, but somewhat offsetting the high price of reduced job security, the improved allocation of labor should W e r raise (if not real output) productivity in the market economy. The theoretical task of locating the proper place of ‘gentleness’ in society is to make participation in the work force as voluntary as handbooks of economics assume it to be (that is, offering everyone the opportunity to engage in employment that would provide them with at least a subsistence income, discounting the theoretically valid, but practically unreasonable option of starving to death). The factor-cost wage is assumed to be the opportunity cost of leisure. Each individual is supposed to supply additional person-hours until the marginal rate of substitution between goods (income) and leisure in one’s table of preferences equals the wage rate per hour. If wage labor is the sole source of income in a household, participation could hardly be conceived of as voluntary in any sense. With the welfare state, income maintenance programs, and other buffers in cases of motherhood, sickness, and unemployment emerged, rendering the supply side of the labor market more flexible. I think if the third main item in the fill income ‘package’ of many contemporary households-non-marketed working or self-provisioningcould somehow be included among the officially accepted and supported (for instance, with one of our partnership models, such as time allowances) components of welfare policy, participation in the work force according to needs and phases in the family cycle could indeed be made voluntary. Our paramonetary device designed to provide a suitable medium of exchange*” for underutilized local skills is precisely the much sought-after way of ‘honoring’ volunteers without paying them.

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In order to weigh the costs and benefits, and to contemplate eventual containing measures, let us consider the following: the economy would doubtlessly recede a little, but without losing its accumulative capacity. This situation is different from a shrinking, de-industrializing, recessionary process because the net tax balance will not necessarily be negative. Expected tax relief can be attained by rendering some welfare expenditure unnecessary, albeit at the cost of the foregone tax payments from those who will be crowded out of business because of this new, unexpected sort of competition. New sources of tax relief can thus be identified without reducing the current level of benefits. This can be regarded as the unintended or deadweight effect of our envisioned restructured welfare mix, phasing in ‘gentle’ employment and phasing out some welfare expenditure. The currency in focus is a classical commodity money, but without its well known resource-wasting effect because the commodity concerned (the clearinghouse’s listed services or the range of voluntary works that can be requited by vouchers) has a definite use-value in its own right. On the other hand, the basket of goods, the particular yardstick measuring the value of this notional money, is clearly discernible. What we are advocating is a segmented, not a competitive money supply. Of course, people will inevitably make comparisons between the spheres, and even refined strategies of alternating participation may occur.292 However, vying for a larger share of circulation, or, what is the same thing, competition between the catallactic (formal) and P2P (informal) circuits of the economy in the form of a re-allocation of economic activity between paid jobs and bartered, in-kind, de-commodified works can also be taken for granted. If not hampered by inappropriate protection (1 refer to discrimination against subsistence-level informal working, such as levying tax on exchange), this envisaged competitioninduced now intentionally from below-may render the remainder of the labor system more selective. The entire envisaged process can be likened to the (contested as it always is) competition triggered by unrestricted free trade among nations. Import competition is the classical device that can help comparative advantage prevail. To characterize the anticipated scenario in the terminology of this book, such competitionposed by the assumed mobilization of latent skills and workforcealone can help to reveal and, policy-wise, to reset the optimal boundaries between the formal and the gratis domains of the economy. I presume that there is an as yet unknown policy tool in the making here. The

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The Grutis Econom-v

actual divide between the global market and local exchanges is so blurred that such an experiment alone, controlling for the confounding effect of tax evasion, can shed light on the genuine and undistorted extent of informal working in post-industrial societies. I use the term ‘undistorted’ in the old Habermasian sense depicting (and reclaiming) the colonization of the lifeworld by the system. If we were somehow capable of containing the colonization effect, putting it, as it were, in brackets, we would receive a more plausible answer to the ideologically charged problem of whether the ‘androcentric privatization’ of domestic labor (the unpaid housewife) represents a hidden subsidy to the societal costs of reproducing the labor force. If the answer were positive, possible ways of participating in our ‘gentle’ forms of petty commodity production would certainly meet with wide public interest. If catallaxy were in fact biased against vernacular values or gender-specific skills, this supplementary paramonetary neighborly network would certainly not be so. What is more, this provides us with an empowering opportunity to decommodifl, to win back some ground from the catallaxy for elements of an alternative, unalienated livelihood. This paramonetary device may illuminate the as yet undiscovered recesses of the informal economy. I do not foresee any obstacle to these transactions entering the reported economy. Thorough reflection upon the possible praxeology opened up by such an experiment would exceed the limits of this study. At any rate, the unconvertible ‘gentle’-local money supply figures will reveal the badly needed facts and replace rough estimates. The ‘gentle sector’, which is illuminated and accounted in GDP, will be larger than the present one because, with enhanced communication in a subsector of the informal economy, we shall be able to match partners who otherwise could not find each other. The operation of such a paramonetary soft asset as applied in a limited segment, the gray zone of the informal economy, and the tolerance of their commensurability by virtue of the shifting boundaries between them, is by no means tantamount to instituting a dual catallaxy. A special sort of mixed coordination is established here in order to enable informally coordinated transactions to be communicated and made commensurate within a conceptually limited circle. This solution of complementary ‘gentle’ employment-occupying a middle point on the money-nonmoney continuum and thereby not amounting to full-fledged monetization-does not hrnish these work inputs, embedded in a cultural context of a local community, with the commercial features of commodities.

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Spurred by the cash nexus, which enables better accounting of performed services, these personal barter transactions would certainly preserve their cultural richness, contextual embeddedness, and networkbuilding character, lead to a multiplication of usefbl contacts, and, as long as size-related peer-to-peer constraints (as opposed to unfettered mass trafficking) can be observed, will never be anonymous and commercial. By adhering to this rule, the job displacement effect and the arising ‘decolonizing’ competition can be contained. All things considered, it may easily occur that, in contrast to what Gresham’s law predicts for competing currencies, our putative asset will develop difficulties in speedy circulation, but will demonstrate advantages in storing value. As to storing value it is enough to consider that some face-to-face or labor-intensive or care-intensive interactions, such as language practice or child supervision, will be available either through membership and preceding performance in such a neighborhood exchange or at a steep price out in the labor market. We shall now consider this possible objection, based on Gresham’s law, relating to dual or multiple money uses. In our case this law will not apply directly because the two spheres of the economy are of a securely insulated nature. We exclude direct conversions between the global market and regional.work exchange, so the dynamics as represented by Gresham’s law can become manifest only in the commodification/decommodification effects at the interface of the formal and informal spheres. Producer-identified money is not ‘fiat money’-its acceptance cannot be made mandatory. It is only the demander’s revealed preference which can have it accepted. This preference is motivated mainly by the demanders’ impaired ability to realize all their working capacity in the catallaxy, a target group with an interest or stake in the Gratis Economy. I M P L I C A T I O N S FOR BROAD P U B L I C P O L I C Y

In the historical part of this book I presented many levers of social integration. Social integration, from patriotism through legacy models of philanthropy, up to our proposed partnership models, often generates gratuity (at least as a byproduct) and this rich source of community ties (gratuities generate community ties) does not expand automatically (it is rather consumed). The second essay dealt with the key drivers and underlying business models that generate gratuitousness. There are many more drivers which we could look at: for instance, I was unable to elaborate on the widespread practice of locking consumers into a site by

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offering them gratis services-such as freemail-and then suddenly hitting them with a demand for a fee to carry on using the site. This practice is a world in itself. A second important driver of gratis products that had to be overlooked was the emergence of gratis products as byproducts of venture capital investments in net infrastructure (dot-coms that do not turn a profit were long financed by venture capital). This phenomenon is rather like pyramid selling in marketing: as long as there is a constant flow of new entrants more and more fora for gratis services emerge; once the turning point is left behind, however, their parasitical nature becomes obvious. Behind the dazzling marketing tricks dealt with in the second essay I discerned a resistance to the new Gratis Economy, the ‘current edition’ of the traditional non-profit sector. The third essay has shown politicsboth national and local-as occasionally generating gratuities, too. Since the Gratis Economy is eternal, this conclusion is not intended to establish an agenda. The essence of voluntary work, the legislation on philanthropy (tax shelters on donations), and the construction of cyberspace alike are seminal issues-achievements of civilization-that overlap eras and countries. Therefore, no government can ever aspire to regulating them on its own. My only concern here is to articulate the predicament of the gratis part of the world economy, to understand who is being served and who is being exploited, if anyone. The key question is, can the Gratis Economy as we know it continue to permit ‘freeloading’ infonauts to browse electronic information in the same way as they peruse books at their local bookstore, virtually without restriction? Is it in the public interest to strike a balance between the tollfree and the commodified domains of the New Economy, or can we allow this duality to evolve without intervention? What if, with the waning of scarcity in cyberspace, everything digital were to be available virtually free of charge; would we lose anything? What if all the tollfree pockets were mopped up in a copyright-protecting fervor and as a consequence of other commercial motives? My answer is to resist attempts by unimaginative companies to create value solely by restricting the flow of information. Business models that would impede the creation of integrated communities, the flow of public information, or scientific innovation must at the very least have to justify themselves. The ‘conservationist’ stance set out in this book seeks to preserve a convivial duality in the economy. Duality means a protective stance towards the availability of gratuities. The public domain may also include autonomous community submarkets of ‘gentle employ-


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ment’. I contend that there is an inherent value in keeping part of the Net (and of society in general) virtually free or ‘gratis’; in this zone commodification would not be rampant, but confined to the publicitygenerating ability of traffic and content (and of interpersonal relationships in general). With such a ‘sizzling’ and robust toll-free domain in the background, dot-com companies, electronic commerce, and intellectual property utilization should become competitive. The existence of such a relative baseline would serve to ensure that the New Economy remains really innovative without the many qualifying ifs and whens in the case of which power so often prevails and consumer protection is all too often neglected. In sum, some sort of guaranteed presence of the informational commons is in the best interest of consumers as an important facilitator of competition. Cyberspace is the template and in vivo laboratory of the future. The communication paradigm has shifted from one-to-one (telephone) and one-to-many (broadcasting) to many-to-many (the Net). As a consequence, only concerted action can preserve this networking test bed, enabling it to evolve in such a way that liberties will not be infringed, including the availability of free services. Furthermore, gratuities are indeed civil liberties, a constitutive feature of netizenship, not unlike entitlemements to benefit constitute modern citizenship. It would not be unwise to enshrine this mankind-old privilege in some Charter of Social Rights to the advantage and empowerment of networked lay-people now called ‘netizens’. The ‘enclosed’ or expropriated part of the New Economy operating on contextual business models that create virtual gratuity is a trafficgenerated (virtual) economy, within the framework of which attempts are made to convert traffic into cash flow. Throughout this book I have grappled with my hoarded case material in an effort to formulate a principle by means of which expropriations can be dealt with. I propose to trace the outlines of how we might react when business captures a public good. Of course, this is the natural inclination of private business. I have also presented examples of public service advertising and causerelated marketing: in all these offline cases companies link their image to a mission or serve as a vehicle for the dissemination of governmental or public interest messages. I also tried to show in both cases the limits beyond which this public interest might be ‘contaminated’ by a private agenda, and looked at the commercial infiltration of the Olympic movement-perhaps the greatest net loss to the Gratis Economy in recent decades-in order that it might serve as a warning sign. If we are to

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safeguard the current status quo, the lesson to be drawn is that the existence of a ‘thin line’ must always be observed between the state and the business world and the lifeworlds of netizens, which pragmatically differentiates between ‘enclosures’ on the one hand, when the public domain is being depleted, and successful public/private partnerships on the other. Whenever, at a gatekeeper, a password and username is requested fiom us, it is a sure indicator that we are being ushered into one realm of the Gratis Economy, the province where browsing is free. When it is enough to identify and authenticate us, it means that the site makes do with traffic-generation alone. This is what identification is basically intended for, the counting of traffic.293When this decent level-or thin line-is passed and personal data are solicited, this is a positive indication that the site is preparing the ground for ‘making a foray’, such as finding a market for data transactions or building an in-house database for online profiling and pertinent advertising. More and more dot-orgs are behaving in a similar ostentatious manner, utilizing ‘traffic’ generated by them. A good example of this-and one which will never transgress the virtual thin line-is the findraising activities of the New York Philharmonic Orchestra. By means of their yearly telethon, they both raise funds and register ‘users’, that is, test the level of their appeal in preparation for soliciting grants. Therefore, counting traffic or demonstrating the existence of an audience is a natural and laudable quest that cannot generate suspicion. I have reconstructed the rich body ofpro bono work, toll-free content, free browsing, and peer-to-peer file-sharing in its approximate entirety in order to expound a cultural anthropology of the Gratis Economy. This intrinsic cultural lynchpin of social integration that has accompanied Western culture throughout history is now under constant attack, not so much because charities, volunteering, or pro bono work have been challenged by anybody subjecting these elevated institutions to some sort of revenue stream for private gain, but because powerful new technologies in the making are reshuffling the cards of digital privacy with the possible effect that copyright owners will no longer have to concede the privilege of fair use. What is under threat here is, in the first instance, the traditional intellectual-property balance and, later, perhaps everything that belongs to the informational or innovation commons or the public domain in general. Having juxtaposed the toll-free and the commercial parts of cyberspace I have often had cause to raise the alarm concerning an assault, a


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knowledge grab, or enclosure. At the same time, gratis solutions have been mushrooming all over cyberspace. There seems to be, at the end of the day, an equilibrium. Public goods are in every segment of the economy, including the digital economy. The size of the Gratis Economy is always in flux, and I have not yet seen a feasible method of making a thorough real-time estimate or measurement. What belongs to the public domain in one country and at one particular moment may have quite a different status elsewhere or at other times. The essence of policymaking is to preserve duality, always to have an option available for some semi-gratuitous or philanthropic solution or public good provision. Some sort of invisible hand is operative here which maintains the ultimate balance here and prevents gratis solutions from being overdriven. I have attempted to show how voluntarism floats historically between persuasion and in-built duress; how the tricky business context may render the acceptance of a toll-free offer quite expensive; and what in-kind and political measures committed people have to take care of in order to perpetuate public space and the commons. One distinctive public good, the informational commons, has been given particular attention in term of a kind of ‘environmental protection’ in order to endow the reader with the conceptual tools necessary to help prevent the conversion of the relatively few remaining counter-spheres into private precincts. Just as a wetland or grassland habitat that plays host to abundant birdlife is always a sure indicator that agriculture in that location is being pursued in harmony with conservation needs, the abundance and well-being of gratis services-an anthropological constant of cultureindicate a balanced economy. Companies have long been assessed for their compliance with certain measures of environmental, social, and humanitarian behavior, defined through consultation with consultancies, non-governmental organizations, and experts in the expanding field of socially responsible investment. In a new set of ethical indices traded on stock exchanges, companies will perhaps one day also be assessed on whether they contribute to the Gratis Economy. Inclusion in such a new financial product could be attained by participating in one of our ‘drivers’ or partnership models, such as different kinds of worktime allowances; longitudinal worktime credit programmes; inactivization programmes; endorsing specialist online communications as advertising vehicles; cause-related marketing or other forms of corporate citizenship; and ad-supported or otherwise cross-financed gratis services.


NOTES

1 The pre-eminence in Europe of a regulatory approach to cyberspace as opposed to the American practice of allowing more room for business initiative and industrywide self-regulation vaguely resembles the difference between the Russian occupation of Siberia (army first, public administration second, settlers third) in contrast to the conquest of the Wild West in the USA. 2 Cyberspace is the man-made universe of all extant content. It contains all data, information, knowledge, and wisdom that can be recalled and used by people either directly or indirectly through their computer systems or other technology. Examples of cyberspace content include passages from books, film clips, sound bites, text in a word processing file, magazine advertisements, secret military reports, and human memories. Cyberspace should not be confused with the media upon which the content is stored, or with the mechanisms through which cyberspace content is accessed or used. The Internet is not cyberspace, for example, but cyberspace does include all the content that is available and accessible through Internet technology (Omnibus Lexicon). 3 Hermeneutics, the art of interpretation-especially of old forgotten texts-has undergone an odd reinterpretation in recent times: engineers and ‘content managers’ often speak of ‘content pedigrees’. A content pedigree is the documented history of how the content in a network was created and how its meaning evolved. To knowledge workers, the intellectual value of an item of content is enhanced if its meaning can be substantiated by a pedigree. Content management encompasses all business practices and technical processes that are performed for the purpose of capturing, maintaining, sharing, and preserving recorded meaning. 4 Privacy is the right of individuals to control how information about them is shared, distributed, and used by other parties, whether business, governmental, or other. 5 Content is meaning recorded in a medium. 6 It is worth paraphrasing Tocqueville here, who justly noted: In whatever field a new social initiative is launched, it is always headed by the government in France, by an aristocrat in England, and by a voluntary civic association in the United States. The demand for self-reliance and self-help has always been very strong here in political thinking and manifests itself in the policy of decentralisation. By the eighteenth century, Benjamin Franklin had formulated a theory of charity that viewed God as “the sole benefactor” and held that people should express their gratitude for God’s beneficence “by the only means in their power, promoting the happiness of His other children”. Franklin was an early advocate of preventing poverty and initiated many self-help and community improvement schemes to that end. In the nineteenth century, the massive influx of immigrants created a demand for various social services.

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Voluntary social service organizations sprang up all over the country. With the collapse of the American economy during the Great Depression the federal government finally had to assume responsibility for the task of providing relief for economic distress, which until that time had been addressed almost entirely through charitable works; but it did so only after the voluntary organizations and local governments had been nearly destroyed by the collapse of their funding sources. 7 President George Bush Senior’s ‘Points of Light’ program was not discontinued by Clinton under the cognomen of President’s Volunteer Action Award. Due to its lesser media coverage, I draw my examples from the earlier, well-publicized agenda. 8 Hungary ranked very high-second only to Germany-in the 1999 list of overseas countries targeted by American students and researchers in their grant applications. 9 As to mobile telecommunications, the USA is somewhat of a mobile laggard behind Japan and Europe: there is still neither a third-generation spectrum release nor an interoperable instant messaging service. 10 Compare this to the similar absence of individual giving in Japan. The preponderance of corporate structures to the detriment of individual charitable giving or independent grant-making seems to be an underlying characteristic of ‘Asian’ structures. I speak of perpetuated structures rather than of individual propensities: individuals receive almost no tax shelters, whereas corporations can benefit a lot more (Hillis, 1991). Let me remind the reader that the originally modernization-oriented Soviet system was always marred by traditional redistributive patterns, described in Marxian theory as “Asiatic”. The sole exception, to my knowledge, is the Swedish example, where it has been the all-encompassing (and overtaxing) welfare state that has pre-empted individual charity. However, I would not attribute these traditionalist connotations of redistribution to social-policy-making in general. I 1 As to a rule of thumb for distinguishing productive from economically irrelevant although still time-consuming activities, there is the well proven ‘third-person criterion’. A transaction or work done by somebody for somebody else can be regarded as productive if the same performance could also be achieved by a third person, an outsider. This constraint is suitable for allowing the admission of child care and helping to build the family home into the ranks of the informal economy, while successfdly barring all sorts of recreational activities and human capital investments. Let us note that however good this criterion may be, many ‘prosumptive’ activities do not enter GDP because of SNA (System of National Accounts) conventions. 12 I am convinced that the essay is the proper form for dealing with the New Economy rather than economic analysis. Data for empirical analysis are not really available; not because this sector can evade detection-in fact, this sector is a welldocumented, fully traceable domain-but because the pace of change renders quantitative analysis obsolete very quickly. What used to be called the ‘iron tooth of time’ can nowadays simply be dubbed ‘Internet time’. 13 In a general sense, bandwidth describes information-carrying capacity. It can apply to telephone or network wiring, as well as to system buses, radio frequency signals, and monitors. Bandwidth is most accurately measured in cycles per second, or hertz (tlz), which is the difference between the lowest and highest frequencies transmitted. But it is also common to use bits or bytes per second. 14 Personally identifLing information as opposed to proprietary, publicly available, or public-record information.

Notes

32 1

15 As characterized by the onslaught of truly transformational technology, the New Economy has recast notions of work and workplace. A fundamental component of its emergence is the velocity at which information and finance travel around the globe. A further, inexorable precondition for the entrepreneurial spirit displayed by the New Economy is the availability of venture capital encouraged by the right framework conditions and exit strategies, such as properly regulated financial markets and stock exchanges. 16 This is how Karl Rahner (1976) translates it in his Concise Dictionary of Theology. 17 Lytton, Athens ( I 837), vol. 2, p. 461. 18 The Greek translation of the Old Testament. Prepared in Alexandria, Egypt, some 70 scholars were summoned by the renowned library to prepare the translation. Tradition holds that all the preliminary versions turned out to be identical in text and phrasing. 19 Cf. the fixed words and fixed order of deeds and utterances in the mass. Also, the difference between the various Christian liturgies is manifest in the different arrangements and the various meanings attributed to the ritual elements. 20 Osford Classical Dictionmy, ed. N. G. L. I-Iammond and H. H. Scullar (1970). 21 There was a slight distinction among public offices: epimelia was the term for public employees with no authority whatsoever and archk applied to members of the state administration. This distinction has found its way into the modern Code on Public Employees of many countries. 22 One of the two preserved prerogatives of the British peerage is freedom from jury service (Peerage Act, 1963). 23 Cambridge-Packard, Dythiranib (Oxford, 1962), p. 36. Cf. also the entry ‘liturgy’ in numerous other dictionaries of Antiquity. According to Demosthenes XLII, 1 antidusis goes back to Solon’s legislation. 23 I have drawn in this paragraph on a comprehensive volume on the history of the Olympic Games. The author of the chapter on ‘Other Sports and Games’, T. Karagiorga-Stathakopoulou, concludes that, with the waning of the classical era, g?~rnnn.~iarchia ceased to be voluntary and became a regular office of state (Douskou, 1982). 25 Lysias, Or. 2 1. 1,2. Among the primary sources, sections XIX and XXI of the Orutiunes give the most comprehensive account of what the ancient Greeks understood to be liturgies. 26 Demosthenes, Meid. 156. 27 Compare the ‘laboriously idle’ (active but unproductive) with the contemporary socio-psychological ‘anti-productive’ alliances of various alternative groupings. 28 The emerging insecurity was already a modern phenomenon. In view of the notion of citizenship in question, the social response must be regarded as less modern. 29 Let it be noted that some critics of voluntary community service in the USA also designate it ‘national obedience training’. 30 A sum of money, an endowment, raised for a church to provide for priests to give religious services, usually for the soul of the giver. 31 Let me mention a gentler way of pressing people to give: traditional Jewish fundraising techniques are based on (benign?) peer-pressure. The assumption is that people may be more willing to give simply because a friend or colleague has asked them.

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32 Philanthropy, like the management of economic demand by state redistribution, is one of the macro-means of intervening in the economic cycle and of helping to ‘create’ additional jobs and render ‘usehl’ services beyond the scope of consumer buying power. The deconstruction of the term ‘productive’ in political economy deserves a separate treatise, and I shall limit myself to registering the fact that philanthropy, as the main employer of liberal-arts-educated intellectuals beyond the universities, re-defines, augments, and creates new demand for a more caring, gentle society. As the world of labor slowly but inevitably shrinks, philanthropy occasionally reaches a critical mass of political attention (see Note 36). 33 Sectarian because the social avant-garde soon lost their constituency and outreach; messianism because they were convinced that by nationalizing the means of production all the miseries of bourgeois society would be automatically terminated. Instead, the Soviet model regressed to Asian state redistribution based on the coercive class rule of bureaucrats. Hence their subsequent ongoing ‘laicization’, that is, the dilution and softening of lofty dogmas by nasty everyday compromises. 34 Many thousands of men were carried away to labor camps and other forms of forced labor by the occupying Russian military administration. Nevertheless, until the Cold War very few ‘believing’ humanists felt the urge to distance themselves from the political avant-garde. 35 Under the name ‘National Aid’, the child-care initiative involving the hungry capital and the better-fed countryside became a genuine mass movement matching malnourished children with host families. The Red Cross also took part in ending famine in the urban areas, taking care of abandoned children, finding the missing, fairly distributing donations, and organizing national fund-raising. Compare this to the mission of the New York-based charity the ‘Fresh Air Fund’ which has provided free summer vacations to underprivileged children from poor neighborhoods with volunteer host families in small towns across America since 1877. 36 In multicultural American society the increasing lack of all-pervasive interfaith and intercommunity norms has led to extremes in respect of the propensity to litigate. The judiciary now has the added function of social co-ordination. At the same time, philanthropy and volunteering-always contentious issues in themselves-have fortunately been spared the feuds arising from intercultural or ethnic interpretations of policy. This again accentuates the non-partisan character of volunteering. In social issues this only occurs when a field such as foreign policy is said to be rather of a ‘technical’ than of a ‘party-political’ character and so subject to bipartisan agreement. In the case of voluntary work I think it is rather its eternal character that enables professional discourse to be more or less contained within the socially harmless framework of tax-related debates. The qualifying remark “more or less” reflects recent USA administration initiatives to give preference to religion-based charities. Furthermore, tax deductions alone can also bring non-profits into the crossfire as we could witness in the Haider-inspired debate in Austria, when some non-profits were accused of having a liberal political stance. 37 Within the framework of the intriguing and exceptional politics of the time important decisions were made in the course of a wide, very open, direct, and not ‘mediamediated’ political discourse. What is more, in sharp contrast to more consolidated times, revolutionary periods also distinguish themselves by the lack of such institutions as money and markets.

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38 Not only have the values undergone transformation but different distributional norms, claims, and new entitlements have been asserted and accepted, and old settled privileges have lost their legitimation in the redistribution of economic opportunities and resources. It was at that hectic time that the ‘right to work’ was codified, together with its counterpart in legislation punishing the ‘evasion of work’. 39 In the first years after liberation, the leftist Hungarian press was still averse to enthusiasm as this had no pre-war social democratic tradition. In Hungary it was exactly the nationalistic Right that made use of developing this sort of political lever: the first student summer camps devoted to voluntary work were invented and initiated by the ‘Turul’ movement. At the risk of misjudging a few members who later joined the ranks of the new regime, this was a loose, not exclusively rightist but certainly nationalistic student organization. At that time in Italy, under the name of Dopo luvoro, and in Germany, under the title Krufl durch Freude, similar movements were in full swing. To sum up: enthusiasm as a political weapon was first used in the sinister political metaphysics of European fascist-oriented nationalism. Stalin only followed suit in the 1930s, and this practice was replanted and applied to uprooted Hungary after the Russian liberation after some hesitation on the part of the left-wing press. 40 They were initiated as a sort of a program of equal opportunity education enabling poor students from the countryside to go to university. 41 At this time it was only a decade since the first youth-oriented labor camps had been organized by the contemporary political right (1936). It is also not by chance that some of the protagonists of the reemerging (in 1989) political (right) extremists in democratic Hungary had received their political upbringing in the movement of People’s Colleges (1945-1948). The category of work camps alone, their volatile fate and known degeneration, clearly epitomizes the scope of our story concerning the volunteering of socialist enthusiasts. 42 Compare this to the other (misbegotten?) child of (French) revolutionary enthusiasm, the coupling of (military) service with the duties of citizenship. According to this view of conscription, an armed citizenry is the natural result of an egalitarian political authority and at the same time the best protection against counterrevolutionary efforts. 43 In communist Czechoslovakia, for instance, the labor structure encompassing the pledges of individuals, families, and brigades was called ‘Z-action’. It extended from honorary work done on national holidays to volunteering in one’s residential area, but also included the organization of writer-reader meetings and neighborhood programs. Nevertheless, they were far from being grassroots initiatives because the pledges were registered in a detailed accounting system, assessed in a competition between neighborhoods and regional administrative levels, and, finally, local authorities terminated ‘Z-action’ once plans were fulfilled. 44 Sprucing up schools, sweeping walkways, and painting fire-hydrants: these are the achievements of the ongoing project ‘A Saturday to Make New York Better’. NYC’s Jones Beach is also being cleaned up by some four hundred volunteers. 45 The National Arbor Day Foundation leads an American grassroots movement to ‘cool off the planet with trees. To motivate people to get out and dig, the NADF gives awards to communities with active urban-forestry programs.

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46 Pledges of work by young people are not exclusively a socialist phenomenon. Compare the recurring debates on voluntary national service in the USA. Changing stage, in the year 2000, for the first time in the nation’s history, 30 Israeli Arab women and one man volunteered to perform national service through the ‘Shlomit’ program. National service is the most popular alternative to mandatory military service in Israel. Details were disclosed at a meeting convened at the national service fair in Jerusalem. The Israeli Arab volunteers, who include Christians, Muslims, and Bedouins, have been placed in educational, health, and welfare institutions in their own communities. 47 As to the militarization of volunteering mention must be made of the Church Army (est. in 1882 by Anglican laymen to perform welfare service, rehabilitation works, and street-corner revivals) in the UK, and of the Salvation Army (1 869) all over the world, including its spin-off, the Volunteers of America. In the 198Os, the latter, classified as a church by the IRS, abandoned their military uniforms, titles, ranks, and trappings, opting for a more corporate-style charity organization. 48 The coupling of volunteering and self-help in homebuilding has found its American counterpart in the ‘Habitat for Humanity’ program. There is, however, a difference in the inclusion or omission of workplace-level moral incentives. The one and only case I encountered in America of workplace-level pressure in the context of volunteering is payroll giving. 49 There is a widespread modern attitude towards volunteering which I cannot leave unmentioned. The measure and extent of volunteering is often monitored, just like the production figures of socialist labor production competitions under early socialism in East Central Europe, for instance in encouraging volunteering by families. However, it is not the volume of volunteer work, but rather the fabric of the polity that enables citizen participation which makes the essential difference. In an already active society the elasticity of highly utilized resources should not be stretched further; the propensity to volunteer is precious and should be preserved. S O To my knowledge harsher methods were avoided in the more consolidated last few decades of Communist rule. Compare this, for instance, with the recently revealed case of agent Stella Goldschlag who, after having been captured, was coerced by the Gestapo into spying on fellow Jews still in hiding. 5 1 One should not forget that unoflicial or voluntary ‘colleagues’ account for only a fraction of the activities of the secret services. For instance, current labor law (in Hungary) still stipulates that the ‘employment’ of professional agents is mandatory in all workplaces where state interest necessitates it. No CEO can reject the classified delegation and employment of such an officer once he is sent to the workplace concerned. Oral tradition calls them ‘built-in bricks’ or ‘decoys’. 52 The famous Have1 case is worth mentioning here. The last Czechoslovak president caused a sensation about two weeks before a crucial election, announcing that he had been positively vetted as a candidate for secret collaboration. In 1965 the police, unknown to him, opened a file on him as a possible collaborator, but thought better of it three months later. This case highlights the fact that the presence of somebody’s name on a file does not mean that they collaborated at all, let alone regularly. Consider the case of Christa Wolf, a persistent theme for connoisseurs of East Central European matters. This East German author’s career and remarkable integrity turned

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out to be based on a compromise with the system, including the sort of volunteering with which we are presently concerned. 53 Once inducted, the use of the soldier’s person by commanding officers is practically unlimited. 54 In addition to the coercive guilds and obshchinas already mentioned I would also mention, from the early nineteenth century, the public procession of street girls at hay-making time. In many European cities every woman of doubtful reputation had to take part and also to mow the meadows belonging to the city. S S In Weberian sociology this is an underlying differentiation: “An organization which claims authority only over voluntary members will be called a voluntary association; an organization which imposes, within a specifiable sphere of operations, its order on all action (with relative success) conforming with certain criteria will be called a compulsory or total organization ... Compulsory organizations are, above all, the state with its subsidiary heterocephalous organizations, and the church insofar as its order is rationally established. The order governing a compulsory organization claims to be binding on all persons to whom the particular relevant criteria applysuch as birth, residence, or the use of certain facilities. It makes no difference whether the individual joined voluntarily; nor does it matter whether he has taken any part in establishing the order. It is thus a case of imposed order in the most definite sense. Compulsory organizations are frequently territorial entities. The distinction between voluntary and total organizations is relative in its empirical application. The rules of a voluntary association may affect the interests of non-members, and recognition of the validity of these rules may be imposed upon them by usurpation and the exercise of naked power, but also by legal regulation, as in the case of law governing corporate securities. It is hardly necessary to emphasize that the concepts of voluntary and compulsory associations are by no means exhaustive of all conceivable types of Organizations. Furthermore, they are to be thought of as polar types, as are sect and church in the religious sphere” (Weber, 1978, 52-53 [italics mine]). 56 Medieval guilds originally had basically religious and charitable functions; only as late as the fourteenth century did their activities begin to assume, to use Karl POlanyi’s term, a ‘disembedded’ (with reference to interest representation bereft of all social policy) economic character (Cambridge Encyclopaedia, Cambridge University Press, 1992). According to my best knowledge, perhaps the last gasp of the historical guild was the ‘Bagel Bakers Local 338’ of New York. This closed shop ‘union’ of the first half of the twentieth century fiercely safeguarded the recipe, perpetuated the time-honored technique, limited membership to sons of members, and maintained a shortage. 57 Some charities have preserved some affinity with this: the Knights of Malta foster diplomatic links with sovereign countries. The Lions Club boasts of being among the founders of the United Nations. 58 I cite from Trevelyan: “a sign of self-respect and self-reliance was the training of the English commonfolk for military service. It was only during the long period of peace and safety after Waterloo that men began to regard it as part of English liberty not to be trained for defense. In all previous ages the opposite and more rational idea had prevailed. In the later Middle Ages the national skill in archery and the obligation to serve in the militia of town and country had fostered the spirit of popular independ-

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ence which Froissart, Fortescue, and other writers had noticed as peculiarly English. And so it still was under Elizabeth, though the long-bow was yielding to the caliver or handgun ... England had no regular army, but she was not defenceless. Each locality had to supply so many men trained and armed for the militia; each man of property had to find one or more men. Partly by volunteering, partly by compulsion, the national duty was fulfilled” (Trevelyan, 1942). 59 The memory of Janissary discipline has remained so deeply engrained in East Central European folk-memory that elite schools in the early years of Communist rule, under heavy Russian influence, were widely dubbed houses of Janissary education. 60 There is much talk in America about a domestic ‘GI Bill’ that would say to both the middle classes and low-income households: We want you to go to college, we will pay for it, it will be the best money we have ever spent, but you have to give something back to your country; see ‘Clinton on Volunteerism’, Chronicle of Philunthropy 4, no. 12 (7 April 1992). 61 Two years are to be served in a civil institution, such as hospitals, and even for the very organization which promotes the issue of ‘rehsniks’. This is nearly double the time an ordinary soldier spends in the army. Volunteers for alternative service receive about half the minimum wage as reimbursement. 62 Due perhaps to their long corporatist traditions, the appeased churches grew to be an integral part of the post-Stalinist one-party-systems of East Central Europe. 63 The case of voluntary national service in the USA: in 1910 William James argued that national service could be the moral equivalent of war, fostering discipline and self-reliance while “inflaming the civic temper”. He proposed to draft gilded American youth into an army “enlisted against nature, mines, and freight trains” to get the childishness knocked out of them, and to come back into society with healthier sympathies and soberer ideas. This virtual solecism was no passing enthusiasm; ever since the days of the Civilian Conservation Corps of the 1930s polls have shown support for national service. 64 They command and assume an apodictic identification on patriotic grounds with the national army. A somewhat subtler argument calls attention to the fact that cash inducements or bounties have filled the American all-volunteer army with too many deprived youths, many with dependents, who view the military in terms of an occupation rather than a calling. 65 Katzburg (1966). Frenchmen were also compelled in the last war to perform labor service for and in Germany. 66 A ‘villein’ was an agricultural worker in the Europe of the Middle Ages who was given a small amount of land of his own in return for working on the land of a large landowner; he was not allowed to quit the land merely of his own volition. 67 This is a contentious issue among historians: perhaps they did not retain privileges but regained them immediately after having lost them. Actually, under the terms of Khmelnytsky’s 1654 treaty (and oath of allegiance) with the Russian tsar the sturshyna of the Cossacks were rewarded with noble status, large estates, and serfs. Cf. Abraham Brumberg, ‘Not So Free At Last’, New York Review of Books (22 October 1992) for more detail. 68 Unpaid agricultural work or artisanal services delivered instead of paying taxes to one’s lord or the government.

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69 One of their atamans, J. P. Habaroff, was condemned to full confiscation of property for slaughtering the native population along the Amur river in 1653. 70 Besides the renowned Alexis de Tocqueville there was another well-spoken and well-versed European literary visitor to the young United States, S. F. Boloni, a SzCkely (Szekler) nobleman of Transylvania, who wrote about his experiences for his contemporary audience in the kingdom of Hungary. This book is an exceptional primary source. His peregrination was made possible only by his being first exempted from his hereditary military duty in the late 1830s. 71 The plight of apprentices is a good parallel to that of volunteers: in science a postdoc fellow can receive a scholarship, while in journalism young professionalsreferred to as volunteers-work for free in order to become initiated, and in the law they pay to be admitted to a practice. 72 An American institution, the Judson Center in Royal Oak, Mich., won the 1991 Peter F. Drucker Award for non-profit innovation. They run a program to train welfare recipients to become foster parents of institutionalized, disabled children. The foster parents receive a salary and leave the welfare rolls. Most children are said to show a dramatic improvement as a result of the personal care provided and many of the foster parents say they have found a profession. 73 FIFA president Sir Stanley Rous (1961-1974) was a school teacher and became a devoted soccer referee in his spare time. He compiled the encyclopedic A History of the Laws of the Game. He was knighted for his voluntary work in staging the London Olympic Games in 1948. His successor at FIFA was primarily a businessman. 74 Nowadays, cities regard the costs incurred in influencing decision-makers as fundraising costs. 75 Had the Olympic movement restricted itself to the Olympics proper, it could have maintained its original gentlemanly intentions. However, it became deeply involved in sport as a whole-like other human pursuits it can be pursued either as a business or as a leisure activity-which seems to have subdued the lofty ideals of the (re)founding fathers. This integration, however, is not fully complete even today: there are separate records for Olympic Games and World Championships (with the Olympics being the more prestigious). National Olympic Committees have usually also preserved a separate institutional identity. 76 That is why the most innocent sports institution resembled an authority rather than a voluntary organization. 77 These full professions appoint their leaders (autocephaly), organize into professional chambers or associations instead of unions, define their clients and decide on internal matters without outside regulation. The same applies, in rough outline, to sports administrators, as well as elevating this newfangled profession to the Olympian superciliousness of the medical and law professions and academia. 78 The Lausanne-based IOC disclosed financial details for the first time in 1993. They claim to have retained less than 7 percent of gross income to fund administration. They distribute the remainder to organizing committees, national Olympic committees, and individual sports federations. The IOC also agreed to establish an independent Olympic Foundation and pledged that the Olympic Museum and other assets worth a total of USD 74 million would be transferred to the foundation. 79 Other observers link the decline of (strict) amateurism with the growing Latin dominance in world sports to the detriment of Anglo-Saxon control.

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80 It happened for the first time during the Pontiff‘s 1993 visit to the USA that the secondary rights (T-shirts, and so on) of this special event were sold to cover the expenses. 81 It is illegal boosterism to accept private support of individual athletes by wealthy benefactors. 82 I cannot agree with this author who categorizes amateurs who, on winning a race, accept a monetary prize, as professionals. If this distinction made any sense todayand this is not the case-I would argue that prizes for winners (not participants) alone do not constitute professionalism. It is rather the collection of gate revenues, the direct payment of athletes, the hiring of professional coaches, the role of sports agents and above all company sponsorship and media revenues that seem to have rendered this distinction between amateurs and professionals antiquated and obsolete. 83 Fair play, for instance, was to be achieved by the elimination of laborers (the use of muscles as part of one’s employment was seen as an unfair competitive advantage) and other professionals, such as coaches. Compare the tennis of small municipal clubs, played in jeans on hard surfaces with the tennis played in all-white kit and pleated skirts which still endures in select clubs. 84 Teams are usually not required to turn the proceeds over to the university. Similarly, proceeds from a good sports team barely leave the sports department; they are at best reinvested into what is called the public relations activity of the university. Mainly, however, athletics departments generate huge financial burdens and cross-financing. 85 The Swiss mode of conscription, relentless as it may seem, verges on what we have called a voluntary draft predicated on a not exaggerated, socially integrative patriotism. At the same time, the Swiss sort of militarism permeates the civilian building code and renders a few mountains movable on tracks to camouflage airfields. 86 The ambiguity of this state of affairs can best be conveyed when considering the recorded fact that in the case of impoverished nobles bank credit had been offered. This prompts the latter day observer to ask what high-ranking office may actually have cost the incumbent in Antiquity-rewards even in a strictly material sense and likely to satis@ a banker could obviously be expected (Broughton, 1951). 87 This support or appreciation can extend from reimbursement of expenses to receiving a USD 240,000 MacArthur Fellowship with no strings attached and no reporting requirement, as was the case in 1993 with Pedro Jose Greer, Jr. who provides food, shelter, and health care for Miami’s poor; or to being elevated to the House of Lords in the UK, as happened to Mrs Winston Churchill, who received this honor in 1965 due to her charity work. 88 In his book Kritik der okonomischen Verntrnfi (1 989), AndrC Gorz’s main thrust is to define the limits of commodification in modernity. Following Karl Polanyi, he claims that certain enclaves of non-wage labor (work-fare or subsistence pay as an entitlement based upon citizenship) should be maintained in order to enhance the legitimization of formal employment. 89 In 1993 the New York City Board of Education elected a president whose education had reached its climax with service on parental associations. Having practiced as a teacher without a license and having seen her own children through the public school system, the new president is said to have maintained a soft personal touch, a penchant for thank-you notes, and a strong commitment to parents’ concerns.

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90 Christadelphians, for instance, a small religious denomination whose members live by Scripture and await the second coming of Christ on earth to establish a theocracy and who have no ordained ministries, do not vote, do not hold public office, and do not volunteer in time of war. 91 The Chiltern Hundreds is the name of the British Crown estate where honorary positions (overtly fictitious ones, at that) are available. Assuming such an ‘opening’ is a usual legal by-pass for those MPs who intend to quit Parliament. 92 As the worst abuse of online programming techniques, I would cite disabling the browser’s ‘Back’ button by means of a sort of ‘trap-door URL’. Designed to measure clicks and other campaign data, this practice is not only offensive to users but ultimately dangerous to the online advertising industry’s well-being. Typically a trap-door URL directs a browser to an initial page that counts the click and then redirects the browser to the destination page. A click on the back button simply reloads the initial page, which, of course, is designed to redirect the user to the destination page. This creates an infinite loop and the only way out is to navigate back through the ‘Go’ menu. Your ‘Back’ button is rendered useless. This practice is very irritating to most surfers: after all, people do not lock the door behind visitors when they enter physical spaces. This is a practice that trades off long-term trust between publishers, advertisers, and consumers for short-term gain. The anti-ad sentiments triggered in this way, as we know, usually result in people not remembering a TV spot after seeing it, zapping or muting commercials, and throwing out direct mail without opening it. 93 The advertising industry, relentless as it may seem to most of us, occasionally exhibits considerable self-restraint. One example is the well-known ‘printer friendly’ versions of electronically published articles that often do not carry ads at all. Printer friendly versions of Web site content ensures high quality eyeballs, as someone who bothers to print out an article presumably wants to read the whole thing. 94 Interstitial ads are Web pages usually with large graphics or rich media that pop up between what the viewer is looking at and what they are expecting to get. More like a TV commercial than anything else on the Web, interstitials hijack control of a user’s browser and force them to watch an advertisement until the ad server feels that he has seen enough. 95 Tracking stock is a class of common stock with a value based on the results of a particular segment of a corporation. Tracking shares differ from common stock because they limit shareholders’ voting powers; they do not represent a claim on the company’s assets either. If a company owns two or more separately traded business units, the dual-stock structure allows the parent company to maintain control of the units while permitting shares of each unit to be valued separately. The creation of tracking stock increases market awareness of the performance and value of business units over time. Additionally, this can also make it possible to meet capital requirements by raising new investment. 96 Tradition holds that the decline of the British Empire started with the first defeat of the British by the Aussies at golf. In a similarly ironic vein, I think the first capitalist encroachments on the academic Web were passwords on registration. Then came the first Web publisher selling ad banners. At HotWired in 1994 they launched this endeavor with 12 paying advertisers: IBM, AT&T, Volvo, Club Med, MCI, Sprint,

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Internet Shopping Network, Xircom, Metricom, JBL Speakers, Zima, and Personal Library Software. Their revenues for 1994 are quoted as being USD 400,000 and total Internet advertising expenditure was far less than USD 1 million for the entire year. The industry has come a long way since then, with 1998 Internet ad spending, according to many estimates, being in excess of USD 2 billion 97 The development and free unfolding of human needs is the all-encompassing general driver of mankind and of free societies, whereas the normative establishment of needs (Heller, 1979) gives rise to redistributive command economies and state socialism. These economies did not listen to consumers’ needs-not even those of ‘lead users’, consumers with greater than average needs and greater means of articulating progressive needs. As this kind of consumer generally gives rise to innovation, command economies lagged far behind in economic competition. 98 Postmodern economic policy avowedly encourages a society-wide opting for time instead of economic growth. Are we prepared to offer sensible, socially valuable occupations to those who would in fact select time rather than money? I think that volunteering could here play a pathbreaking role. 99 For instance, when some politicians encourage the enhanced taxation of environmental pollution and countervailing relief on work-related taxes they make labor relatively cheaper. Thus they either redistribute work in macro-terms to the advantage of entry-level positions or shorten working time across-the-board to the proportional advantage of socially valuable, leisure activities. 100 Beware the difference between small type and fine print! Demonstration software products, for instance-free to the consumer for restricted u s e n f t e n offer the consumer the opportunity to accept or reject the terms of use. The information, however, that might cause somebody to reject the downloading and installation of a product because of questionable data collection practices, or the perceived potential for abuse, is buried, as a rule, in legalese. 10 1 As to the dissemination of commercials, the advertising industry contends that onehalf of their budget is usually wasted due to the lack of precision focus. Unfortunately, no one can tell which half 102 The salient indicators to be measured are return on investment (ROI) and clickthrough rate (indication of greater interest at the prompting of an ad) and conversion rate (purchases resulting from an ad). 103 This is a favorite saying of new-age, New Economy journalists, referring to the expected pace of industrial transformation. At the same time, company success is not sustainable without the creation of infrastructure and enabling technology. These two presuppositions alone can bring about a ready audience for an online business ‘Internet-time’. I04 A certain amount of status discrepancy causes many people to go for freebies even though they could afford to sidestep them. There is another palpable trend that upgrades the importance of freeware. Actually almost everything we do nowadays is either free, discounted, or incentivized. This could not happen if the modern consumer, across all economic strata, were not looking closely at price first instead of pursuing quality and value for money. 105 The tnain reason why Web advertising is continuing to explode is that the emerging demographics of the Web look increasingly like those of the rest of the world. The Web is attracting a significantly higher percentage of women and middle-income users

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than before, opening up opportunities for publishers and advertisers whose products are completely unrelated to computing or the act of surfing the Internet itself. 106 When applied correctly, personalization is the antidote to the outdated concept of undiscriminating, mass marketing, such as that of Henry Ford, who is said to have remarked after introducing the Model T that customers could choose whatever color they liked as long as it was black. 107 The Federal Aviation Administration in America recommends that airlines use computers with profiling software to identifL suspicious passengers instead of relying on airline personnel. The software was developed with a Federal subsidy, and most major airlines have been using it voluntarily since January 1998. The FAA will not reveal most of the criteria used by the software, but one of them is whether the passenger paid cash for a ticket at the last minute. At the prompting of civil liberty groups, the Justice Department, privy to the criteria, ruled that the criteria were not discriminatory and eliminate “the potential perception of personal biases”. Also, the computer can juggle more factors than a ticket agent can, and if the criteria are computerized, they will be easier to keep secret. The airlines have generally accepted predictive profiling, which is integrated into their reservations computers. On domestic flights, the bags of passengers who meet the profile are either scanned for explosives or are ‘matched’, meaning that they will not be carried on a flight unless the passenger boards as well. 108 Counting ‘hits’ on a Web site is the cyber-equivalent of tallying how many people walk past a store window. There is an implied call to action with banner ads along the lines of ‘Click on me to find out more’. Thus counting click-throughs is the equivalent of counting those who stop to study the portal. 109 An animation created by combining multiple GIF images into one file. The result is multiple images, displayed one after another, that give the appearance of movement. Very useful for attracting/distracting Web surfers 110 If we forced filter-user anti-ad people to see the ads, publishers would get more ad impressions (of limited value since publishers are usually not selling out inventory), but most probably, if not certainly, zero click-through rates, thereby reducing the perceived value of the site for many advertisers. Thus, ad blocking does not really harm business interests in online advertising. 1 1 1 With the operation of the root servers in the domain name system, the US government was at one time close to acquiring this dubious title. 1 12 The proposed Open Profiling Standard (OPS) promises to enable personalization of Internet services while protecting users’ privacy. This new proposed standardreplacing cookies as we know them-will provide Internet site developers with a uniform architecture for leveraging Personal Profile information to offer individuals’ tailored content, and goods and services that match their personal preferences, while protecting their privacy. To maximize an individual’s privacy, OPS gives users control over their Personal Profile and the ability to manage which personal information gets disclosed or withheld from a particular Internet site. As a result, individuals can respond to requests from Internet sites for personal information with all, some, or none of the requested data. As part of OPS, users will also be notified what profile information is being requested from a particular site, unless the individual disables notification, As a result, these functions of OPS provide a framework for informed consent. Information stored and exchanged by the user’s Per-

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sonal Profile may also be encrypted to help keep the data safe from unauthorized usage. 113 High-impact or rich media is broadly defined as advertising that incorporates motion, sound, interaction, and, in some cases, electronic commerce capabilities directly into Web banners. A typical arms race is now under way: technological innovation versus the creativity of dissatisfied ad consumers. At the beginning we had text ‘ads’. Banner ads followed, adding color and design. Then animated ads arrived, consuming more time, stimulating our sense of form, and allowing more flexibility and creativity to be put into ads. Rich media ads are now the order of the day, but will soon become passe. Video ads are just around the corner, as are audio/video ads, f M screen-full frame-rate audiohide0 ads, and high-definition ads. This hopefully will never end: consumer fatigue continually requires a new drug to perk up. 114 This platitude of marketing lore is put into critical perspective by the distinction between ‘espoused’ technology (artifacts and the discourse around them) and technology-in-use (revealed usage). As purchased and installed company-wide technologies do not automatically facilitate productivity, their potential is to be unfolded by their success in everyday business practice. Thus there are no band-aid solutions either; users utilize the technology in their hands partially, they may bypass it where the available solutions do not help them achieve their ends, abandon it, work around it, or change it (Orlikowski, 1999). 1 15 Actually, what does ‘taxing the Internet’ mean? The question is too underspecified. It is like asking, ‘Who makes money from the Internet?’ Here, I cite David Isenberg’s analogous response: ‘Who makes money from roads?’, clarifying the fact that the economic benefits of the wired world are inextricable from the overall economy. Furthermore, the question of taxation begs another question: What gets taxed and how? Do you tax the goods sold on the Net? Do you tax bytes transmitted? Connect time? Monetary transactions? Each Internet account at some fixed rate per month? Do you tax business Internet accounts but not home accounts? As to the collection of sales tax, the situation is obscure worldwide due to the often-remote location of commercial sites and the diverse nature of local taxes. Sales taxes cannot be collected in an Internet based economy without Draconian controls over information flows, such as prohibiting encryption. Most countries have not yet asserted their authority. As transactions move from real stores to Internet stores, sales taxes are certainly being lost. I16 The simple defense of hiding an e-mail address as much as possible is becoming less effective every day. More and more spammers are resorting to so-called ‘dictionary attacks’, where they send e-mails to any address likely to be valid. If the message gets through, that is great for the spammer. If the message bounces, the spammer does not care. But the real spam problem in the coming years will not be from fly-by-night operations, but from rank-and-file companies that view unsolicited bulk e-mail as a way of marketing themselves more effectively. Imagine how much e-mail a customer would get if every store where he ever had shopped, or every store where he ever might shop, sent an e-mail once a week telling him about a special offer. The e-mail account would quickly become unusable. 117 This is a group of Web sites which share a common banner server. Networks are typically developed by a sales organization which manages the commerce and re-

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porting. An ad network has the ability to deliver unique combinations of targeted audiences because they serve your banner or ad across multiple sites. 1 18 Perhaps the most distinctive feature of the Internet, this end-to-end architecture in relation to which-in sharp contrast to telephone networks-there is no awareness of content, origin, or destination, is the fact that it enables netizens to determine their own time uses in terms of dial-up, upload, download, or any other mode of online activity. All aspects of the Net have their parallels in telecommunications save for this unique temporal aspect. 119 For example, a New York site offers an extensive database of brokerage research with a powerful search tool. Instead ofjust advertising these facts in the banner ad, they place ads on the search results pages of financial sites and pose the question to the user who just searched on a ticker symbol for say, ‘AOL’, “Interested in brokerage research on AOL?” By offering information to the user on the very ticker symbol he had been looking for information on, they provide him with an ‘offer’ that directly links him to the content he specifically wants. To make this work, they must link the individual who clicks on this ad to the relevant content, not just to the home page. 120 Anonymity is the ability of an individual to interact with others without letting the latter have knowledge of his identity. Identity is any distinguishing attribute that is uniquely linked to an individual. Thus, anonymity is a sufficient but not necessary condition for achieving privacy. 121 By contrast, an example of a search engine with content-neutrality is represented by the intriguing project of Eurogatherer. This will be a personalized information retrieval system that sets out to search (and internally translate) in a multi-language environment, thereby enormously enhancing the visibility of smaller national cultures in Europe. I presume that USGOVSEARCH also omits these practices. 122 This could be the sole consolation for copyright-holders whose intellectual property is increasingly infringed upon by cyberpunks using disruptive innovations such as MP3 music recording technology. Cyberpunks, or romantic anticapitalists, consider copyright to be the usurpation of an inherently collective good. The advantage to be gained from the exclusive utilization of a copyrighted item will transmogrifjl in the cyberworld into gains to be derived from publicity. The spreading phenomenon of sites drawing attention to themselves by offering copyrighted products as freebies, however, cannot be seen as the romantic preaching of decommodification-this is sheer business. There is no clear-cut borderline between the legal domain of copyrighted products and collective goods: there can only be a balance. For instance, value added information created by the state certainly belongs to the informational commons, although the ownership of such a database could generate ample income. 123 Cheapness is achieved (or rather approximated) through advertising in all mass media. Ads definitely slow down the process of consumption. Commercials expend the limited time of TV watchers, too. Prime time is, of course, more valuable than regular time in all electronic media. Thus we can draw the conclusion: the time equivalent of the input in this segment of the economy undergoes as close scrutiny here as any other scarce resource in the economy as a whole. This is only possible because it is a quantifiable continuum. 124 To illustrate what some indicators can achieve, let me cite from a New York Times article explaining the stock market value of hi-tech firms. The more popular the site,

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the higher its ‘ranking’, and the more the company is worth. Web sites with the highest valuations are like football captains or cheerleaders in high school whose popularity ratings give them far greater currency in the social order than, for example, the shy nerds who excel in art or science. Upon such things is our New Economy built. Now take this relatively microcosmic situation-the fact that the Internet stock market in the USA is a popularity contest based on consumer moods and filled with millions of networked investors bluffing the financial markets as in a poker game-and consider what the ripple effect might be on an expanding global economy (Caruso, 2000). 125 There is an arms race here, too. There are ‘unethical’ webmasters out there who all want top rankings in the search engines. One of the techniques they use is to do a search for the keyword phrase they are targeting. They follow the link to the top listings and copy the source code of that page. Then they optimize it a little more, maybe change the company name and copyright info, and upload it to their server. Finally, they submit their new entrance page to the search engine and get top ranking on the search engine (using the stolen code). At least until a certain type of CGI script was invented. A script known as a ‘cloaking script’, ‘food script’, or ‘stealth script’ is a CGI script that resides on Web servers. It can detect whether the requestor (viewer) of the entrance page is a regular person or a search engine. If the requestor is a regular person, the stealth script will serve himher a ‘normal page’ that can either be the home page or a page specifically designed for a particular keyword phrase. If the requestor is a search engine, the stealth script serves up the entrance page. The benefits are this: the original designer gets the top ranking in the search engine, while the unethical webmaster trying to steal the ranking gets only the home page. Also, customers do not have to look at any ugly entrance pages but are directed straight to the true home page. 126 This is the case with wireless Internet where mobile telephone users endowed with WAP can browse Web sites filtered and provided by their mobile carrier. 127 There is a personalized e-mail news service that provides its members with ‘minders’ to provide expert help in the areas of family, entertainment, autos, personal finance, personal events, home, yard, and garden. Because its messages are highly targeted, the company has achieved response rates as high as 45 percent. Untargeted e-mails usually generate 1 to 2 percent click-through. One key element in successful e-mail is content that is useful and informative. Relevance is key because it is more useful and will more likely be read by the recipient. 128 Here is a concise summation of how agencies try to add value for clients as regards keyword positioning. In their view, search engines can be one of the most costeffective channels for a new business if the Web site is positioned properly. Unlike the offline yellow page directories in which listings are very costly, the search engines offer international exposure and cheaper listings. Agencies find that a well positioned and optimized Web site can generate significant ‘qualified’ traffic and sales transactions, given that the Web site offers a product of value to the consumer. For clients they provide a suite of search engine services, consisting of: (1) hand submissions to the top SO+ online directories until the site is listed within the proper categories; (2) development of customized doorway pages that are hand-submitted and optimized within the top 18 search engines; and (3) purchase of the top listings on the ‘Paid For Listing’ search engines such as GoTo.com, Findwhat, and others.

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Later, agencies also research competitor links across the Web to identify significant cross-linking opportunities. 129 This also applies to what is called viral marketing, when users tell each other how cool a site or service is. One element of viral marketing is responding to threads in online discussions and newsgroups. Another is ‘seeding’ discussions in such venues. In either case, participants in such venues do not expect the venue to be ‘used’ by merchants. 130 Another thin line being blurred by recent developments came with sophisticated email handling systems. Presidents and CEOs with frequent customer feedback apply artificial intelligence to automatically screen and route incoming e-mail, analyze which product (political decision) is being referenced, weigh the request, categorize the ‘attitude’ of the sending customer or constituent, and select a pre-written, canned response. Before sending off the response a human staffer may supervise relevance. At the end of the month the system generates reports describing the overall political or market situation. 13 1 One management consulting firm believes that ‘infomediary’ services will emerge, firms that become brokers of information between consumers and other companies, giving consumers privacy protection and also earning them some revenue for the information they are willing to release about themselves. If consumers were willing to pay for such brokerage, infomediaries might succeed on the Internet. Such firms would have the strongest possible stake in maintaining their reputation for privacy protection. But it is hard to imagine them thriving unless consumers are willing to fbnnel every transaction they make through a single infomediary. Even if this is possible-which is unclear-many consumers may not want to rely so much on a single firm. Many, for example, already have more than one credit card. I think a more viable way of rewarding consumers for relinquishing personal data is the promise and widening practice of less and less obtrusive advertising due to enhanced targeting. This promise is a cultural innovation opening up the prospect of blurring the boundary between content and adjacent commercials. 132 In response to revelations that federal agencies were using cookies to collect information about visitors to government Web sites, the US Congress prohibited them from collecting, or entering into an agreement with a third party to collect, personally identifiable information regarding an individual’s access to or use of any Federal government Internet site. This provision reminds me of measures to prohibit the popular advertising of prescription drugs. 133 In case of an interesting-looking ad on a Web page one can avoid having one’s surfing habits tracked by right-clicking on the ad and copying the shortcut or link. Then, the advice goes, you paste it into the Address or Location line of the browser and see the real URL at the end of the address. Just delete the address of your current Web page and surf on without leaving any tracks. 134 Characteristically, the foundation was launched in the early 1990s to protect the ftindamental rights of netizens against the Secret Service. Over time, business intrusions have assumed equal importance. 135 An innocent trick to defuse cookies, bits of information that keep track of Net activities. To ensure that pages display correctly, first accept the cookies, then disable them with the following free utility. Step I: Get the Anonymous Cookie utility at www.luckman.com and download SetupAC.exe. Double-click on the file icon and follow the setup instructions. Step 2: The program starts from the last panel in the

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Setup Wizard. Otherwise the Anonymous Cookie program runs whenever we start Windows (a shortcut to the AnCookie.exe file is tucked into the Startup folder). Step 3: Disable cookies by choosing Anonymous from the icon displayed in the tray. To turn cookies back on, right-click on the tray icon and uncheck the Anonymous option. 136 The EU directive (1 995) broadly defines personal data as “any information relating to an identified or identifiable natural person” including phone numbers, e-mail addresses, income, sex, race, or spending habits. Recently, the business-like collection of biometric personal information has also commenced: in exchange for a perfect fitting pair of jeans, Levi Strauss is gathering the most intimate physical details of consenting youngsters. 137 In daily life, some kinds of anonymous communication may be straightforward, such as sending an unsigned letter with no return address, posting unsigned notices secretly at night, or making phone calls from pay phones. 138 E-mail spam is said to have originated in 1994 when local immigration attorneys in Arizona started spamming Usenet. 139 RealNetworks’ popular RealJukebox software for playing CDs on computers, for instance, monitors listening habits and continually reports this information to headquarters. The company does not retain information nor do they distribute it to 0thers-they simply create (quite intrusive) profiles to better serve their clientele and improve services. Unfortunately, this surreptitious goal is based on hidden instructions performing illegal functions. If the company was honest about these practices, an honest offer could be made that could convince some customers to open themselves up for scrutiny in return for enhanced services. I am afraid that the devastating PR-effects caused by privacy violations among the general public will render the feasibility of such deals marginal for a long time. 140 These proprietary technologies are in constant use, deployed for the screening of some 160 million credit card accounts daily to detect possible fraud. As already mentioned, airport security is beginning to rely on such measures, too. As to enhanced click-through rate, the pilot phase of a product demonstrated a rate some 25 percent higher than achieved by conventional purchased keyword targeting. As to relevancy, there are no sources or qualitative data because mistargeted consumers do not complain. 14 1 Branding-aimed (not out for click-through) ads that consolidate a corporate position, build awareness, or spotlight a product feature or benefit accounted in 2000 for 63 percent of all online ads, and about 54 percent of all impressions (http://www.internetnews.com/IAR/article/O,, 12-50667 1,OO.html). 142 Caching Web content on the Internet is a frequent practice. The caching technique, which makes available additional copies of popular Web pages, currently offers some congestion relief. However, the original producer of a page has no control over the cache, and cannot update material or keep track of the number of hits on the replicated page. Service providers like it because they can offer their customers the content more quickly. It takes the load off Internet servers and the upstream bandwidth. Some content providers do not like it because they feel that they are losing control of their content and cannot obtain an accurate hit count of ad-related click-throughs. Most Web caches honor HTTP headers (editors can determine when the page will be purged from the cache so that newer versions can be sought) so end

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users never know that they are being served from a cache-the only difference is a higher quality of service due to improved speed. There is another, newer way of reducing congestion by distributing the contents of a Web site over server computers that are spread out across the Internet. This can be used to ease traffic caused by big Web events. The Los Angeles Times used this to manage demand for the Starr Report (The New York Times, 26 April 1999) 143 ‘Survey Finds Holiday-Related Ads Surged Near Christmas’ [IAR, 4 January]. Web measurement firm NetRatings said holiday advertising online jumped from 20 percent of total Web advertising during the week of 6 December 1998 to 36 percent for the week of 20 December 1998. 144 In health care economics, which also concerns the allocation of limited resources, one school of thought recommends spending our resources on those who would benefit most from them in terms of quality of life or life years. In the course of the politically charged debates, evidence-based medicine unfortunately declined in the USA to the level of health care rationing. By the term evidence-based smart advertising I mean the unique and unrivalled feature of online marketing whereby mediaowners are (prospectively) capable of offering real-time access to accumulated rich customer databases, sharpened by profiling softwares that can allow ad-servers to feed relevant commercial messages. Relevancy is measured in terms of earlier customer behavior. The industry itself likes to speak of precision marketing as if the tools were of laser-like precision, whereas in fact they are still in their infancy. 145 This trickiness originates in the need to experiment and innovate. 146 The FTC’s report-available online at http://www.ftc.gov/opa/2000/07/onlineprofiling.htm-isbefore Congress, which is considering legislation based on the agency’s recommendations. 147 Most third-party ad serving programs that sites use now utilize cookies to target individual users so they do not see the same ad twice or so they see a series of ads in sequence. Ad agencies use third-party ad serving for these reasons and additionally because it provides a single platform, making it possible to compare effectiveness. Some site publishers are now, however, refusing to allow the use of thirdparty (powerful targeting ad servers) fed adverts in an attempt to prevent advertisers from using identifiable customer data to serve ads in other contexts. Publishers are concerned about profile-stealing-re-use of the user’s profile by the advertiser for future campaigns based on other characteristics, or elsewhere in a network or beyond. Publishers intend to make full use of their inventory and have merchants buy again rather than engage in underutilized one-shot campaigns. 148 The records of the former East German political police are available free-of-charge to all interested or concerned applicants. Most erstwhile socialist countries have grudgingly adopted this courageous political practice, even if records can inadvertently uncover citizens who fed reports under the former regime and sometimes kept on reporting even after the transition. 149 DoubleClick works to turn double takes into click-throughs. The online advertising firm offers targeted ad delivery using its patented technology, a dynamic analysis tool that collects information on audience behavior and uses that data to target ad placement. The technology also measures Web traffic and ad effectiveness and provides that data to both Web publishers and advertisers. DoubleClick delivers ads to more than 1,300 sites in its network, including AltaVista.

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150 Imagine a small flying camera following us around the Mall feeding digital information to a back-end database about our shopping habits for the sole purpose of rotating banners across our path of vision on the flat panel TV walls in retail stores and hallways. Who would opt-in to this kind of ‘personalization’? As the default therefore, only committed and motivated consumers should be involved in such a game. For it is in fact a game; a great deal of playhlness is involved when it comes to convincing people to proffer their personal data in return for pertinent advertising. 15 1 Trends bringing together formerly distinct industries are called convergence. This sort of convergence, however, is mostly problematic. Lawsuits were filed against one maverick American company because of synchronized marketing, that is, the merging of online and offline personal data. Due to the conclusion of an FTC investigation, the dust is now settling as regards this issue. There is industry-wide acceptance that consumer data and offline marketing data may only be merged if tracking does not to lead to physical persons; that is, database gatherers can combine anonymous online data derived by whatever sophisticated tracking methods with anonymous catalogue or marketing data accessed by offline methods in order to build more and more detailed and responsive online profiles. It will remain anathema, however, to bind names or street addresses, let alone telephone numbers to these records. 152 The Annenberg Public Policy Center’s ‘The Jnternet and the Family 2000’ survey on kids offering information online for gifts. An independent study has found that many children feel comfortable giving out personal family information on the Internet in exchange for free gifts and participation in sweepstakes. In exchange for a free gift, about two-thirds of children aged 10-17 said they would provide commercial Web site operators with the names of their favorite stores and more than half would give their parents’ favorites. The author claims that parents need to better understand the Web’s ability to track information, and kids need to be engaged in serious discussions with their parents about privacy and sharing information. Web sites have the ability to collect and bring together information and create a profile of kids and, ultimately, their families. Nearly all parents questioned said their children should have parental consent before giving information online. While about three-quarters of the children agreed, their caution disappeared when enticed by a free gift. 153 This contention is somewhat different from what Garfinkel proposes (Garfinkel, 2000b). He would pre-empt technologically advanced smart ads that can reach us individually, taking the icing off the gingerbread. This prudent stance forestalls delivering on the great promise that two simultaneous visitors will not be fed the same advert. 154 Even perhaps the most innocent branch of the economy, charities, also pass on and purchase donors’ addresses with the widely held donor-fatigue-avoiding conviction that at least 10 percent of those who have given to a cause will do so again with another cause. 155 A person who follows another person around repeatedly in a way that is calculated to cause the victim to fear for his safety is guilty of the crime of stalking. Obviously, the law is conceived for a crazed fan who shows up at a movie starlet’s home. But in the Internet age it can be applied to a Web site accused of electronically monitoring the browsing habits of its customers.

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156 A directive is a legal instrument requiring EU member states to amend or adapt national legislation in order to achieve certain objectives. It allows national authorities the choice of form and methods used to attain the objectives. 157 MP3 or perceptual coding is a patent of the University of Erlangen, Germany, originating from as early as 1987. 1 58 Tracy Chapman, Group Director, Internet Strategies. 159 Ultimately, there is nothing in a click-through for the advertiser: (1) it is easy enough to manipulate CTR-CTR is just an indicator, not a result; (2)every advertiser has his or her own objectives once traffic gets to their site. A click-through amounts to window-shopping. The ultimate task is to convert visitors to customers; (3) creating fancy banners that intrigue or amuse the viewer will get higher CTR. If the click-through rate is low this is bad news for those who are trying to make money with the majority of affiliate programs. However, it is not necessarily bad for the banner advertiser. 160 In order to enable them to carry ads, a site with good traffic often needs further refurbishment by consultants. 161 FastWeb.com is the premier source of opt-in e-mail addresses of American college and high school students. Fastweb’s list has over 2.4 million names, and it has the ability to select by cohort. Fastweb gathers names during registration for its free scholarship matching service. 162 More than one-third (36 percent) of Internet users say that their opinion of one or more product brands has changed as a result of using the Internet, according to a report on branding. ‘Online Branding Really Works’ [15 December 19981,online at http://www.internetnews.com/IAR/l998/12/1504-report.html 163 For the first time, Internet advertising exceeded USD 1 billion in a year and may hit USD 2 billion when the 1998 books are finished, the Internet Advertising Bureau reported back in 1999,and the trend has continued. 164 Search engines offer a model where users can receive pennies each time third-party visitors click on the icons to launch searches over the rest of the Web. 165 An explanation is to be found at http://www.internetnews.com/IAR/article/O,, 12-506671 ,OO.html. 166 The interactions between the advertisement and the consumer are often more complicated than measurements such as those that click-through provides. This is because conversion rate incorporates the total user experience, and advertising metrics alone do not. If a run-of-the-mill site is going to convert visitors who click through to it from an ad, they are likely to get the majority of the response in the first half-hour. Nevertheless, taking action is crucial for most business models that are predicated on numbers of visitors. 167 If publishers began selling ad space in, say, books, and cut the price of novels by half as a result, would we buy more? If books were free but ad-supported, would we read more? The first impulse is, ‘Please, Lord, no.’ A book, after all, is a peculiarly private medium. At least leave us that. Until recently, it was feared that placing ads in desktop software applications would provoke much the same reaction. On the air and on the Web, we are inundated with advertising, but in our more private moments we are beyond the marketer’s reach. But having something free or having a steady revenue stream is a great motivator that can prompt many people to put up with ads.

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168 As to the limits of ‘information being relevant’, consider the ensuing platitude: when driving on a highway, we are probably trying to get somewhere and not particularly inclined to look at the billboards, even if they are promoting something within our usual scope of interest. But if one is hungry, one is pretty happy to see a billboard for a diner or a McDonald’s directing us to the next exit. With an empty stomach, the same information suddenly becomes relevant. 169 Sponsoring of science by business-such as a physicians’ workshop by a pharmacompany - is oAen a borderline case where the suspicion of rigging a scientific outcome can never simply be hushed up. I call attention to the fact that evidence-based advertising is not tantamount to sponsoring. Therefore, carrying precision advertising based on the opt-in assent of readers may be deemed condescending, but by no means corrupting for a honorable online publication or forum. 170 Cost per rating point (CPR): the figure indicates the cost of advertising exposure to one percentage point of the target group, audience, or population. Cost per thousand (CPM): a monetary comparison that shows the relative cost of various media or vehicles; the figure indicates the cost of advertising exposure to a thousand households or individuals. Cost per thousand per commercial minute (CPMRCM): the cost per thousand of a minute of broadcast advertising time. 171 When it comes to competing with numbers of registered users we must consider that users register multiple times-for instance, from a home and a work computer. This can frequently lead to the existence of two cookies per consumer. 172 This Maussian concept has been resuscitated recently by Barbrook (1998). Besides French sociologist Marcel Mauss, cultural anthropologist B. Malinowski contributed to this phenomenon in the early 1920s. His seminal writing on ‘kula-trade’ received a late echo in Hungarian social scientist Karl Polanyi’s theorizing on the embedding-disembedding of market forces in the economy. 173 Richard Whately, an Anglican pastor, Aristotle expert, and economist suggested in Introductory Lectures on Political Economy (1 83 1) that political economy as the science of exchange should be called ‘catallactics’. 174 K. E. Boulding (ed.), Beyond Economics (Ann Arbor, 1968); or ‘Economics as a Moral Science’, American Economic Review 59 (1969). See also M. Olson, ‘On Boulding’s Conception of Integrative Systems’, in M. Pfaff (ed.), Frontiers in Social Thought (Amsterdam, 1976). 175 One of the usual ways of promoting an offer of this nature is to contact the many freebie offer lists on the World Wide Web or to post a brief announcement with the ‘alt.consumers.free-stuffnewsgroup. 176 The ‘gold’ level is often sold under a different logo-such as Honda’s ‘Acura’ luxury class-in order to make it possible for first-class consumers to remain at arms’ length from the rank and file. The European Honda aficionados offered the Honda Legend do not receive the same treatment. 177 As Gurley points out (Gurley, 1999) it may be in AOL’s best interests to make sure that Netscape’s browser code is hlly embraced and absorbed by the open-source movement. No single company is likely to challenge Microsoft‘s increasingly dominant browser market share; however, a freely available browser that can be customized by ISPs, software vendors, and portals alike may actually gain momentum. With the rising awareness of the potential for Microsoft to use the client as a control point of access to the Internet, a true open-source browser initiative may be just what the doctor ordered.

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178 As eBay soared into prominence, Yahoo responded by delivering an auction service for free. Why? For three good reasons. First, Yahoo still generates ad revenue. Secondly, it could potentially thwart another powerful Internet player. Thirdly, it can use the auction feature to draw more consumers into the Yahoo fold. Another example of the ‘give it away for free’ strategy is reflected in recent developments in the online auction world. Egghead, a leading retailer of computer hardware and software, has run an auction site for years, which auctions off surplus hardware and software inventory. Onsale, the second most popular auction site after eBay, launched a brand-new site called AtCost, which sells hardware and software at wholesale cost-without auctions. 179 ‘Subscribe to our services and get FREE, unlimited Internet access. No start-up fee, no setup fee and no monthly access fees. A small banner, located on your desktop, runs continuously the entire time you are online bringing you ads about the products that are of interest to you’. 180 In health care so-called ‘frivolous demand’ enables providers to charge COpayments even in the case of full coverage, 181 In ‘corporate venturing’ a larger company takes a direct minority stake in a smaller, unquoted company for strategic, financial, or ‘corporate citizenship’ reasons. 182 The common-law notion of ‘fair use’ as a compromise, pragmatic harmonization of the diverging interests of business and public access is absent from the continental European tradition of intellectual property law. 183 ColIectivism: the term is used to denote a political or economic system in which the means of production and the distribution of goods and services are controlled by ‘the people’. Generally, of course, this means the state. Collectivism is the opposite of capitalism or free enterprise, in which private individuals own the means of production and distribution is determined by free trade and considerations of personal profit. The concept of collectivism is derived from the social theory which holds that the interests and welfare of the collective are of greater importance than the interests and welfare of any individual. As a political-economic theory, collectivism differs little from theoretical socialism. Modern revolutionary communism is a more extreme type of collectivism in which not only capitalistic enterprise but also most private property is abolished, by violent means if necessary. Communalism is a form of collectivism in which ownership of the means of production is vested in a smaller unit, the commune, with a corresponding reduction in the authority of the state. 1 84 Sociology often measures tax consciousness by ascertaining the empirical deviance between real numbers and voiced opinions as to what the state budget spends on various public goods (Mitchell and Carson, 1989) 185 I cannot provide even a brief overview of how and when states first enacted free and compulsory public schooling. From the formation of the US republic, popular education was an idea waiting to happen. As the colonies prepared for statehood, Jefferson was urging his beloved Virginia to provide a few years of schooling ‘gratis’ to ensure an extension of educational opportunity and, at the same time, ‘‘to rake the rubbish” in search of talent for the young republic. The commencement of public schooling in Austria-later on Austria-Hungary-goes back to the reforms of Empress Maria Theresa in 1774. She enacted a six-year period of compulsory education. In the second half of the nineteenth century, in the era of liberalism, leg-

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islation cut off state education from the church and the state opened up the teaching profession without regard to religious denomination. 186 As financed in partnership with local authorities, the Hungarian system has the following options: eligible are the poor (as a result of means testing), the disabled, and those suffering from a chronic illness. There is a list of free drugs limited to some 100 products. Pharmacompanies fight to have their products included on this list as the demand is practically unlimited. This list plays an important role in the health care provisioning of wide strata of the population (5 percent of the population qualifies for this list and 10 percent of drug-related insurance expenditure is appropriated for this alone). The system has been attacked from an equity standpoint. As the list comprises only a very limited number of drugs (some 600 out of the 4,000 drugs available in pharmacies), eligible people can receive only such treatment as this limited number of pharmaceuticals-OTC and prescription drugs alike-allows. 187 Uncle Sam’s balanced budget is slated to bear most of the cost and full utilization of services under the full prescription drug benefit. Federal funding would be available to burden-bearing states to ensure that all poor and near-poor beneficiaries pay no premiums or deductibles for prescription drugs. The new drug benefit would cost, according to optimistic estimates, about USD 1 18 billion over 10 years. In fact, I daresay there is no way to predict the consumption of a totally income-inflexible commodity. 188 DNA fingerprinting is based on the notion that each of us has a DNA genome of about 3 billion letters of DNA. And they are almost, but not quite, identical between any two people. Any two people share 99.9 percent of their DNA. Only about one letter in a thousand varies, but that translates, given the amount of DNA in the average human being, into 3 million separate differences between any two people. According to the last estimate, mankind can be traced back to the starting genetic assets of a ‘founding population’ of some 10,000 people, 7,000 generations ago. Due to variation throughout the generations everyone’s genes, everyone’s genome is unique. No two people, except identical twins, have exactly the same DNA. And so if we find someone’s DNA at a particular location we could in principle find out whose DNA it was by comparing its sequence to the sequence of anyone who might have left it. That is the basis of DNA typing or fingerprinting. 189 I see some similarities here with the development of the Internet. Originally, the Internet evolved as state-sponsored research. Currently, industries are increasing investment in the Internet every year as a matter of survival. Research grants and universities cannot match the corporate world. There is thus little hope that the US Internet 2 project will keep pace. The New Economy is only extending what statesponsored research had already developed in the universities. As long as they maintain open access to the latest development information, this cutting edge may remain within the framework of the Gratis Economy. 190 Personalized medicines4esigned to be fiee of side-effects-could become a reality. This is the promise behind an ambitious, USD 45 million project announced in 1999. The SNP Consortium-a not-for-profit collaboration between the Wellcome Trust, five medical research centers, and ten pharmaceutical companies is building up a database of 300,000 single-nucleotide polymorphisms (SNPs or ‘snips’) within the framework of a few years. By comparing SNPs in patients and controls, it may be possible to find the subtle genetic differences that predispose some people to particular dis-

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eases. Because SNPs could also pinpoint the underlying variability in the way people respond to drugs, a large, high-quality, high-resolution SNP map will fundamentally change the way drugs are researched and developed. When complete, the SNP map will define individuality-the differences, mostly imperceptible, in biochemical makeup that make each person unique. There are indications that this map will identifL functionally important polymorphisms, enabling the discovery of an individual’s genetic make-up that can improve the application of therapeutic interventions. Given the potential of the SNP map to change the way drugs are prescribed, the medical research community will have free and unlimited access to the database of SNP findings. The highly competitive drug industry sees the wisdom of sharing the huge costs and avoiding duplication of effort at this stage-the commercial rewards will come later (The Lancet, 15 May 1995). 191 The Lancet devoted an editorial to this issue of rivalry in human genome research. As an antipode, the journal illustrates the classical model of technology transfer as follows: “The production of antibiotics by the fungus CephaIosporin acremonizirzi had been discovered in the mid 1940s by Professor Guiseppe Brotsu, University of Cagliari, Italy, who obtained in Oxford the support for his work denied by Italian industry. The commercialization of these drugs, still a market leader, had been handled by the National Research Development Council, set up by the UK government in 1949 to transfer British publicly funded research to the market, a response to the experience with penicillin, developed in Oxford but exploited largely by US industry. The cephalosporins were the main earner for the NRDC. The NRDC had issued non-exclusive licenses of limited duration to several companies.” 192 Spectrum scarcity may bring about a revolutionary change in how regulators understand the rights of a spectrum owner. Within the circles of the US FCC, they talk of the ‘spectrum guardian’ rather than proprietorship as the viable future communications ownership model. They are quoted as having investigated historical Scandinavian property laws allowing access to fenced-off property as long as this does no harm or interface. As other application of technology enabled joint ownership, I mention sharing wireless Internet networks in metropolitan areas. As a legally yet untested byproduct, this retransmission means the sharing of ISP fee, too. 193 A directive is a legal instrument requiring member states of the EU to amend or adopt national legislation in order to achieve certain objectives. It allows national authorities the choice of form and methods used to reach its objectives. I94 Provided that computing power and data transfer will be built into cellular phones. However, I can well imagine that 3G wireless Internet will bring about the integration of voice communication into laptop computers, too. In this case, the location component becomes irrelevant. 195 An industry with strong economies of scale is also often called a ‘natural monopoly’, since there is a tendency for one firm to win a concession and dominate the market. In the case of frequencies, this is not the case: a state monopoly is being distributed in order to ensure competition. This is an avowed aim particularly when the license fee is set to zero. 196 The pool of international migration and guest workers blurs the truth of this claim somewhat. 197 The East European communist regimes which did not abolish this institution completely called jury members ‘lay assessors’. The institution of the jury with a real

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influence over the proceedings, however, was largely missing under East European socialism. 198 Under the previous regime the members of distinguished, state privileged watchdog organizations were called ‘people’s inspectors’. Nowadays, trade unions employ some of their activists to monitor prices. 199 The previous regime commanded a party militia called ‘worker’s militiamen’. Nowadays, ‘vigilantes’ or ‘concerned neighbors’ serve as unarmed civilian policemen maintaining order in the neighborhood without any formal authority. They can be likened to a posse without a sheriff. 200 In Israel one receives an small fee (USD 12.50 for a professor in 1992) for what is called ‘guard duty’. This is compulsory but one can ‘sublet’ it by recruiting a ‘mercenary’ to deputize. 201 As, with current technology, economic growth cannot be extended to everybody in the world due to environmental constraints, the consequence to be drawn is that an alternative path of sustainable growth should be sought. Flexibility in converting earning capacity into leisure is one such alternative. 202 Gershuny has shown that there is hardly any difference between active consumption (with the adding of ‘software’ or know-how and other modes of self-servicing), and working proper. For instance, the main business challenge for (bland-productproducing) breweries is not posed by beer-making competitors but rather by selfservicing domestic beer brewing as facilitated by simple commercially available hardware and know-how. This seems to be compatible with recommendations for partitioning time use between earning money, social commitments, and leisure. 203 Green Paper on Public Sector Information in the Information Society, European Commission, 1998. 204 In addition to national security, further justified exceptions are trade secrets, law enforcement investigative files, personal data, and decision-pending documents. 205 In Anglo-US property law, ‘commons’ is an area of land for use by the public. For centuries this right of commons conflicted with the lord’s right to ‘approve’ (that is, appropriate for his own use) any of his waste products, provided he left enough land to support the commoners’ livestock. In the US Colonies, where there was no manorial system, commons took the form of a town square or green devoted to municipal or recreational use. 206 Publisher Tim 0’ Reilly cautions: “I do not think people realize just how close we came to a Microsoft-dominated Web. If Microsoft, having trounced Netscape, hadn’t been surprised by the unexpected strength of Apache, Perl, FreeBSD and Linux, I can easily imagine a squeeze play on Web protocols and standards, which would have allowed Microsoft to dictate terms to the Web developers who are currently inventing the next generation of computer applications.” (O’Reilly, 1999) 207 ‘Enclosure’ was the division or consolidation of communal fields, meadows, pastures, and other arable lands in western Europe into the carefully delineated and individually owned and managed farm plots of modern times. Before enclosure, much farmland existed in the form of numerous, dispersed strips under the control of individual cultivators only during the growing season and until harvesting was completed for a given year. Thereafter, and until the next growing season, the land was at the disposal of the community for grazing by the village livestock and for other purposes. To enclose land was to put a hedge or fence around a portion of this open

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land and thus prevent the exercise of common grazing and other rights over it. In England the movement for enclosure began in the twelfth century and proceeded rapidly in the period 1450-1640, when the purpose was mainly to increase the amount of full-time pasturage available to manorial lords. Much enclosure also occurred in the period from 1750 to 1860, when it was done for the sake of agricultural efficiency. By the end of the nineteenth century the process of the enclosure of common lands in England was virtually complete. In the rest of Europe enclosure made little progress until the nineteenth century. Common rights over arable landwhich constitute the most formidable obstacle to modern farming-have now for the most part been extinguished, but some European land is still cultivated in the scattered strips characteristic of common fields, and common rights continue over large areas of pasture and woodland. In the current Romanian re-privatization process, the arable commons of Transylvanian Szeklers have been acknowledged as an entity and given back in an undivided lump as it was when nationalized by the Communists. 208 As a Central European observer, I can comment on themes elaborated in the form of a cultural controversy. First, corporate interests are at stake and America’s political instincts have hardly ever hesitated, historically, to prioritize corporate interest. Secondly, at least the US culture wars are more interesting than those in East Central Europe where people sometimes argue about trivialities centering around unsolved national issues. 209 In the non-commercial uses, people entering into some form of communication mostly know (of) each other or at least have a low ‘Bacon number’ in the sense of some kind of traceable link. This is derived from the parlor game ‘Six Degrees of Kevin Bacon’. The idea of the game is to try to link any actor or actress, through the movies they have been in, to the actor Kevin Bacon: for example, 0. J. Simpson was in Naked Gun with Priscilla Presley, who was in Ford Fairlane with Gilbert Gottfried, who was in Beverly Hills Cop IT with Paul Reiser, who was in Diner with Kevin Bacon. The idea of expressing in numbers the measurable proximity or distance of two people in the same business-such as the publication of articles-goes back to the Hungarian mathematician Paul Erdos. 210 The literature justifies monopoly rights in terms of the risk of market failure in respect of R&D: research expenditure is indivisible, there is economic risk involved in technological uncertainty, and last but not least there is the public-good character of technological knowledge which permits only temporary excludability (patents eventually elapse). 2 1 I The definition of technological innovation, innovating enterprises, innovation intensity, and measures of innovation are best summarized in the guidelines set out by the European Statistical Office (Eurostat), outlined in Oslo Manual: Guidelinesfor Collecting and Interpreting Technological Innovation Data (OECD, 1997). 212 Observers often point out the absurdity of patenting ideas as similar to filing a patent for a lawyer’s creative new argument in court, a basketball player’s new move, or a swimmer’s efficacious new stroke. The non-pharmaceutical part of medicine, such as surgical techniques, are not patentable either. 213 For instance, US Patent No. 5,797,127 forms the basis for Priceline.com to monopolize its ‘give a price’ reverse auction approach and effectively blocks any competitor.

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214 Just like professors who never delay publishing their new study in a scholarly journal in order to ensure that citations will accrue to them. Citations are an acknowledgement of originality and a way of generating fame. Scientometrics is a timehonored system of rewarding innovators without ownership. 2 IS Historically, the Internet has been an environment in which to experiment. There have been few basic rules. The most important are the standards for the Internet Protocol (IP) and the Transmission Control Protocol (TCP). There are other important standards for promulgating routing information and the like, but the real power of the Internet idea is that there are no mandated standards for what can run on the Net. Anyone who adheres to the TCP/IP standards can create new applications and run them without getting anyone’s permission. No Internet service provider even has to know who is experimenting or playing. New industries can be created almost overnight and existing industries severely impacted. That is why netizens think that virtual reality (theaters notwithstanding) is now setting the standard for future society in general. 216 The fact that it is a moral issue means that the debates are as bitter within the ranks of the free-software movement as they were, say, among diverging schools of psychoanalysis. 217 In order to justify putting this term between quotation marks, I shall show what pirates usually do. A pirate does not have to know how to decode DVDs to make bit-for-bit copies of a disk by the thousand. Pirate labs had a number of ways of duplicating DVD-Video well before this case erupted, including taking an original disk apart and making a master from which to stamp new ones from the pits and lands of the actual source disk; this ‘copy’ would contain identical information, down to the hidden keys, and hence be perfectly playable. There are ways to do this digitally (find the right hidden sectors, and replicate the entire bit-for-bit disc image) as well. In case of large-scale pirating legal enforcement mechanisms are available. While these may be somewhat slow, watchdog organizations and individual publishing companies can pursue wrongdoing and reduce illegal copying to inconsequential levels. 2 18 Software, CDs, magazine articles, news broadcasts, stocks, airline tickets, and insurance policies are all intangible goods whose value does not rely on a physical form. Much of today’s intellectual property is produced, packaged, and stored somewhere and then physically delivered to its final destination. The technology will soon exist to transfer the content of all these products in digital form over the Internet. 219 The US pharmaceutical and chemical giant Monsanto has pledged to put one of its discoveries-the genetic map of rice, the smallest cereals genome-into the public domain. Monsanto’s data were made available to the International Rice Genome Sequencing Project, a ten-member consortium of rice genome sequencing projects around the world. Monsanto also made its data available to researchers outside the international rice-sequencing program, facilitating and encouraging basic research to improve rice and other crops. No fees are charged at all to scientists for the use of their discovery. 220 Americans-always ready to experiment in legal matters and litigation-can obtain what is known as a ‘poor man’s copyright’ by sending a copy of the program code home by registered mail. This way the Post Office will ask the sender, or someone

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else, to sign for the package. It is also dated. This has been tested in both the USA and Canada and upheld as a form of legal copyright. 221 One of the most recent copy protecting inventions works as follows. Secure music distribution demands that the encryption and decryption functions be kept in a secure area. Secure MMC, an encrypted flash-card format for playing music, boasts of satisfying those requirements. The encryption and decryption functions and the license key are kept in the card’s Tamper Resistant Module, which physically and logically impedes the examination or alteration of the semiconductor or the software. Unlike conventional flash cards, security information is stored in a secureperimeter, tamper-resistant area and (illegal) alteration becomes impossible. And as the key is kept in the tamper-resistant area, the card has high security. When a user-such as a portable phone subscriber-requests a music title, the content distribution server will send back an encrypted version, and the data will be stored in the Secure MMC data area. A license key for playback is sent under separate cover from a key distribution server and stored in the card’s tamper-resistant module. A decoder chip uses the key to decode the music. The data and the key are independently handled and only the decoder chip can play this music. Even if the data is hacked halfway, it cannot be played beyond the ‘fair use’ which now seems to be accepted by the music industry. 222 There is a legal dispute in California between auction giant eBay and a smaller rival, Bidder’s Edge, that raises important questions about property rights in the digital age. In May 2000 a judge issued a preliminary injunction barring Bidder’s Edge from using a software robot to crawl though eBay’s computer servers without authorization. An aggregator of auction information from many sites, Bidder’s Edge had used its robot, or ‘spider’, to extract information about eBay’s auction listings. Bidder’s Edge then placed the information-which is not protected by copyright because it is considered a set of facts-in its own database so that its customers could search eBay’s listings, and others, rapidly (http://www.nytimes.com/library/tech/yr/mo/cyber/cyber~aw/2Slaw.html). 223 Researchers at Xerox PARC, Princeton, and Rice University claim they have conquered the digital watermarks created by the Secure Digital Music Initiative to curb online music piracy. SDMI challenged hackers and researchers to try to crack the code in September 2000, offering a reward to anyone who explained how they defeated the technology. The researchers say they removed the watermark without damaging sound quality and estimate that any moderately skilled hacker could do the same, casting doubt on the music industry’s ability to use technology to protect copyright on the Internet. Beyond this contest, there is always the so-called bruteforce approach of hacking. A brute-force attack plays the music and re-records it. By doing this multiple times and using technology to combine the recordings and eliminate noise, a copy is generated. 224 There are, at the same time, commercial products that will digitally record television programs and make it possible to remove the commercials from them, http://www.replaytv.com/ being one of them. 225 RealNetworks’ popular RealJukebox software for playing CDs on computers surreptitiously assigned a personal identification number to each customer, monitored the listening habits and certain other activities of the-potentially-1 2 million people who used it, and continually reported this information, along with the user’s

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identity, to RealNetworks. I quote from the company’s privacy statement: “At RealNetworks, it is our intent to give you as much control as possible over your privacy in regard to your personal information and the use we make of it in the course of our business. In general, you can visit RealNetworks on the Web without telling us who you are or revealing any information about yourself.” The Web site also boasted the imprimatur of TRUSTe, a non-profit organization dedicated to promoting principles of disclosure and informed consent. 226 Under Bill s.1618 TITLE I11 passed by the 105th US Congress a letter basically cannot be considered spam as long as the sender includes contact information and a method of ‘removal’. 227 There is also a ‘wild east’ phenomenon as regards lack of respect for privacy. Until the mid 1990s, in Poland, Hungary, and the Czech Republic, where the onslaught of the information society is vigorous due to latecomers’ luck, austere European Union legislation on the secondary and commercial use of personal data did not apply. This state of affairs, supplemented with a blissful ignorance that cannot last long as regards privacy, renders this region a favorite experimental terrain for electronic business and the underlying evidence-based marketing. 228 Originally, posting an ad to multiple newsgroups, now used to describe unsolicited e-mail advertising. Named after a skit by Monty Python, spam is one marketing and advertising technique to avoid at all costs. 229 US Airlines has already run foul of European regulators. The US-based company can no longer transfer customer information from Sweden to its SABRE reservation system in the USA. A person’s frequent-flyer miles accumulated in Europe might not be transferable back to the USA and favorite meals might not be offered without asking travelers for their preferences over and over again. The Swedish Data Act requires detailed customer consent before information such as name, itinerary, meal preferences, and method of payment could cross the border. Not only did US Airlines lose the first round of its lawsuit challenging the law, but the court ruled that the USA did not have adequate privacy protection, a decision the EU is also likely to make. 230 The FCC is the key agency when it comes to the regulation of significant parts of the New Economy. In addition to its regulatory oversight of the telephone, broadcast, cable, and wireless industries, the agency also has the authority to review large-scale mergers. 23 1 As regards self-certification versus third-party certification, the USA points out that any company that signs up to a policy, and then does not observe it, lays itself open to action by the Federal Trade Commission for deceptive practices. In a sense there is an enforcement safety net, but it is a very broad one, because the Federal Trade Commission is not obliged to follow up every case, in contrast to European data protection commissioners, and so it is more likely to take exemplary actions. It is clear that a lot of companies will opt for programs like BBB online. Third-party mechanisms are extremely useful and are becoming widespread. The Department of Commerce says for the moment that it would like to leave that as an option and not make it compulsory, especially for smaller companies. 232 For instance, the US Private Securities Litigation Reform Act of 1995 provides a ‘safe harbor’ for forward-looking statements based on the expectations of listed companies, which include such terms as ‘planned’, ‘anticipate’, ‘potential’, and so on. Special rules apply to their usage in public statements which might influence

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investors’ decisions. Additionally, the US Digital Millennium Copyright Act gives safe harbor to Internet Service Providers so that they cannot be held accountable for their users’ activities. 233 Privacy Preferences Project (P3P) is a system for translating human-readable privacy policies into a block of data that can be understood and classified by users’ computers. This may help consumers to rate and screen the Web sites that provide less privacy protection. 234 The FTC enforces a variety of antitrust and consumer-protection laws to make sure the nation’s markets are competitive and business practices are fair and honest. 235 In The Transparent Society he argues that in future the rich and powerful-and most ominously of all, governments-will derive the greatest benefit from privacy protection rather than ordinary people. Instead, Brin cautions, a clear, simple rule should be adopted: everyone should have access to all information. The idea sounds disconcerting, he admits, but privacy is doomed in any case. Transparency would enable people to know who knows what about them, and the ruled to keep an eye on their rulers. Video cameras would record not only criminals, but also abusive policemen. Corporate chiefs would know that information about themselves is as freely available as it is about their customers or workers. Simple deterrence would then encourage restraint in information gathering-and perhaps even more courtesy. Yet he does not explain what would happen to transparency violators or whether there would be any limits. What about national-security data or trade secrets? Police or medical files? Criminals might find these of great interest. What is more, transparency would be just as difficult to enforce legally as privacy protection is now. Indeed, the very idea of making privacy into a crime seems outlandish. 236 Samsung and Rutgers University researchers are developing a microwave oven that will read the directions on food labels with a swipe of the package bar code across a sensor. Then the oven will contact the manufacturer’s Web site to download relevant alternative recipes, read supplementary directions according to its own type and vintage, and cook the meal, taking care of all necessary turning, time setting, and power adjusting. From our point of view this initiative means that as yet unavailable data will be generated revealing what we eat at home. 237 The EU Data Protection directive, I reiterate, aims to give people control over their data, requiring consent before a company or agency can process it, and barring the use of the data for any purpose other than that for which it was originally collected. Each EU country is pledged to appoint a privacy commissioner to act on behalf of citizens whose rights have been violated. 238 1 quote from such an initiative: “By requesting to become a Privacy Matters! member, you agree that you will abide by the Privacy Pledge at all times. You agree that your visitors may contact the Privacy Matters! administrator with complaints about your site, and you further agree that the Privacy Matters! administrator and other Privacy Matters! members may review your site for potential violations of the Privacy Pledge. You agree that ... its officers, agents, shareholders, and associates, collectively known as the Administrator, as well as other Privacy Matters! members, collectively known as the Members, explicitly disclaim responsibility for the content of your site and for any and all damages, tangible or otherwise, that may accrue to you and/or your site visitors, and that you will protect, indemnify, and hold harmless the Administrator and the Members for any such damages. You agree

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that becoming a member of Privacy Matters! does not form any type of business entity or relationship between or among the Members and the Administrator. Finally, you agree that the right to display the Privacy Matters! link button is granted by the Administrator and may be revoked if the Privacy Pledge is repeatedly and/or wantonly violated, at which time the offending member must remove all link buttons from the member’s page(s).” 239 An industry-financed 1999 study showed businesses had made dramatic improvements since the previous year in warning people how companies use personal information collected about them. The study found that nearly two-thirds of commercial Internet sites displayed at least some warning that businesses were collecting personal details from visitors, such as names, postal and e-mail addresses, and even shopping tastes. But less than 10 percent of those sites had what experts consider comprehensive privacy policies. A similar study in 1998 commissioned by the Federal Trade Commission found that 85 percent of Web sites collect some personal information from visitors whereas only 14 percent had posted privacy policies (The Georgetown University Study of 1998; AP Press Release, 22 June 1999.) 240 I describe a typical business model: an ad-backed provider of free Internet access enables sign-ups for relevant or topical opt-in e-mail lists. In this process the e-mail addresses are made available to marketers who send out offers for products and services specifically requested by subscribers when they register to join the site’s targeted e-mail lists. Subscribers can ‘opt out’ or remove themselves from these lists at any time. A partner site is a destination offering free subscriptions to e-mail newsletters. 241 The same applies to the former socialist countries of Central Europe where social rights encompassed a legitimate claim to an apartment, work, and holidays to be spent in company-owned facilities. 242 International financial markets, together with the Internet, are the spearhead of globalization. There is a definite similarity and congruence between the two institutions. One striking difference: while the grassroots do influence the democratic control and shaping of communication policies, high finance has been able to preserve its aloofness until very recently. As state regulation is out of the question for both institutions, this check seems to be of paramount importance. 243 So far, self-regulation has failed abysmally. In 1998 a Federal Trade Commission survey of 1,400 US Internet sites found that only 2 percent had posted a privacy policy in line with that advocated by the commission, although more have probably done so since, not least in response to increased concern over privacy. Studies of members of America’s Direct Marketing Association by independent researchers have found that more than half did not abide even by the association’s modest guidelines. A recent Georgetown University study on commercial Web sites’ privacy policies found that two-thirds of the top 300-plus sites had a privacy policy posted. That compares to the paltry 14 percent that had policies posted last year when the FTC did a similar study, sparking debate between an online industry that wants to regulate itself and privacy groups that are pushing for legislation. 244 Cyber-activism is not to be mixed up with instances of ‘cyber-extortion’. Cyberextortion involves hackers blackmailing companies by threatening to turn over purloined strategic data to their competitors. These cases are growing due to an increase in the number of hackers, particularly in underdeveloped countries. Most in-

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cidents involve relatively small amounts of money, USD 50,000 to USD 100,000, which many companies would rather pay than take the chance of losing competitive advantage. 245 Beside techno-realists, I can also detect ‘Luddites’, intellectuals propagating the ‘precautionary principle’, which states that mankind should never try anything new unless certain that it is absolutely safe. 246 Actually, a few hundred years ago ‘plagiarism’ was viewed rather differently. Shakespeare borrowed plots willy nilly. According to Fitzmaurice-Kelly ’s History of Spanish Literature, the fifteen hundred plays of Lope de Vega served as an open cookie jar for virtually every later playwright in the world in search of themes or characters. 247 Of course, rising oil prices and unchanging government fuel tax regimes are sparking off much more direct action Europe-wide than the scattered sentiments against the new digital economy. 248 Pauline Borsook (2000), at the same time, observes the intermingling of MBA culture with the collective subconscious of geek techno-libertarianism. 249 I quote from a telling article: “Throughout history, people and institutions have been able to gain power by having exclusive access to information. Nations call it sovereign rights or state secrets. Capitalists call it market advantage. For example, in the first millennium, the Catholic Church gained considerable advantage by encrypting almost all of the world’s knowledge-for example, the Bible-and allowing only its high-level adherents access to the means to decrypt it, namely, literacy in the Latin tongue ... Microsoft’s key advantage is the APIs-application programming interfaces-and the source code for the Windows operating system. Microsoft’s applications are better, mainly because their developers get a head start in knowing what those APIs look like ... Rome’s influence began to wane once the printing press made knowledge widely available in tongues other than Latin. People who were unhappy with Catholicism went out and created their own religions and attracted their own following. Which is precisely what movements like Open-source and Linux are doing. The Catholic Church once banned secular versions of the Bible as a way of regaining control lost to the printing press, but it was too late. Microsoft recently tried to silence Slashdot and readers complained about Microsoft’s use of a law that it had lobbied heavily for, called the Digital Millennium Copyright Act (Gulker, 2000). 250 The underlying question is whether spontaneous developments in user rights have already caused a shift in the status quo, or whether legal modifications alone can bring about such changes. 251 This is a new genre in Web advertising: content-intensive sponsorship. A Web site with considerable traffic does not solicit banners, but offers sponsorship agreements. Associated sites seeking sponsorship must provide related eye-catching content (analyses, interactive games, downloads, behind-the-scenes gossip, and so on) in return for directing traffic to them. If the sponsor-provided content in fact deepens knowledge or offers additional related material then this advertising model may prove stickier than banner ads, generating longer viewing time. I deem this advertising model as one further step towards blurring the line between content and advertising, while no one can deny that surfers fare better by being fed contextually relevant, often in-depth information.

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252 ‘Stickiness’ is the online equivalent of brand loyalty. Retaining customers in the New Economy is short-lived as choice is a higher preference than brand. And to be online is to exercise choice. 253 Educated consumers may like ads, we are told. But even educated and choosy consumers may want to draw from independent sources, too, when preparing to make a more important purchase. For average consumers, not to mention those with an anti-consumerist stance, advertising is a necessary burden tapping their precious time. And, as the wise Hungarian saying holds, time is always too precious to squander it on cheap wine. 254 As an illustration of the force of targeting, I cite the marketing research results attained by a personification consultant invited to pinpoint the best buying visitors of an affinity site. “They’re impulse buyers. They aren’t big fans. They do research and collect information but they already have strong retail relationships established in the off-line world. They love their sport or hobby enough that they like going to their favorite store and discussing their gear with their favorite dealer. They have no reason to switch to online buying. This tells us a few things about selling on the Web that site designers, retailers, and direct sellers need to pay attention to. Conventional wisdom says that the more targeted the ad, the better. If you know your audience has an interest in golf, give them a banner about golf gear, and they are more likely to click on it. The question is, are they actually going to buy? Instead, the trick is to find people who have just the right amount of interest in the products. They want to buy, but they are not experts. They are probably so ignorant about the products that they do not want to go to the store and look stupid by asking basic questions of the experts. They are afraid they’ll get taken advantage of. They want to go to the Web and get basic information without embarrassment, and then buy as soon as they have enough info because they have no loyalty to existing retailers. People should not design them for the experts. They should design them for the amateurs” (Brandt, 1999). 255 I quote from the narrowband ad guidelines of the US advertising industry. Ads ought to be “consumer-centric; technology should play a supporting role; the goal is :05-:06 second ad unit download based on site’s predominate consumer connection speed.” What advertisers basically expect from ads is of course positive sales results. Agencies translate this expectation to (1) brand imagery and recall, (2) interaction within the ad, (3) comprehension and liability, (4) provision of effective branding experiences, (5) engaging viewers for a longer period of time, (6) offering lower cost-per-branding impression (CPB). 256 Another widespread example of the deployment of artificial intelligence in media: a typical added value that distinguishes mere TV coverage from an edited program is the use of digital imaging in the backdrop. This has long been a widespread practice when covering sports events in an attempt to show different decipherable ads in the background. Recently, news programs have experimented with digitally inserted images, but this cannot be accepted as good media practice because it adversely affects credibility. 257 A good example: when you become a Hotmail account holder you have to answer a complete profile of your habits, likes, and dislikes. There are no banners at the site, and no consecutive mail from Hotmail ‘showing’ products. What is Hotmail doing with profile data?

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258 Creatives are the concept, design, and artwork that go into a given ad. 259 A group of people with common interests. A special interest group identified for purposes of targeting specific ads. 260 P2P is an unfolding new technology, but another developing technology threatens to disrupt it before it even reaches maturity: hardware-level copyright protection built into a computer’s hard disk. 26 I Napster sings a different tune when its own assets are involved. The company has tried several times to stifle software developers working on Napster-compatible software and Web sites. While this code comes in handy for the music fans that Napster claims are its main constituency, they might certainly diminish the commercial potential of Napster itself. The company refuses to divulge technical information about its software code, has made corrective improvements to its code that prevent other plug-in programs from working with Napster’s own, and has blocked computers from outside music sites from accessing Napster’s database of songs. While Napster and the music industry disagree about the rights music owners have when putting digital music files on the Internet, the company avowedly respects copyright laws and is looking for a way to compensate artists for use of their work. Thus there is clear hypocrisy in the Napster business plan: ‘‘I can help other people swap copyrighted material with you, but you cannot swap copyrighted material from me”. 262 I think the decisive evidence must come from the evidence on the peer-to-peer nature of Napster’s service. Peer-to-peer-that is, one-to-one sharing-is only tenable if it is proven that the average Napster user does not share with a lot of people. As there are a lot of Napster users, the total amount of sharing might be large. But the number of copiers of any individual song and so the scale of sharing is probably not so large. The accusations of piracy would stick only if a fair assessment could prove that the average user puts up a file and millions share it. 263 Napster’s formidable advocate in the ongoing litigation has dug out the 1984 court decision in Sony versus Universal Studios, where the entertainment industry tried to eradicate video cassette recorders as we know them. The Supreme Court, however, acknowledged that although videos may be used-even perhaps predominantly-to copy intellectual property, there are undeniable uses of that technology that do not infringe copyright, either because the distributed material is not copyrighted or the aim is sampling or the copyright holders do not object. This exonerated Sony of the guilt of contributory or vicarious infringement. When cable television came along, copyright owners were similarly fearful that shows would be broadcast without payment. In fact, the explosion in the demand for content only enriched intellectual property holders. These arguments are now all being re-enacted in the Napster-case. 264 An ideal volunteer in the decentralized computing environment has a large hard drive and a broadband connection. While he sleeps, coveted songs can fly off his hard drive. When he is at his PC, there are a number of ways for him to reassert control of his local resources when he does not want to share them. He can cancel individual uploads unilaterally, disconnect from the server, or even shut the distributed computing client off completely. 265 There are four rationed things in the world that are very much alike: money and sex on the one hand, storage and bandwidth on the other. In all four cases only too much is enough.

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266 Here is Ian Clarke's (the man behind Free Network Project Initiative) credo which clearly depicts the pragmatic situation around these litigations. "I was in the pub last night, and a guy asked me for a light for his cigarette. I suddenly realized that there was a demand here and money to be made, and so I agreed to light his cigarette for 10 pence, but I didn't actually give him a light, I sold him a license to burn his cigarette. My fire-license restricted him from giving the light to anybody else, after all, that fire was my property. He was drunk, and dismissed me as a loony, but accepted my fire (and by implication the license which governed its use) anyway. Of course in a matter of minutes I noticed a friend of his asking him for a light and to my outrage he gave his cigarette to his friend and pirated my fire! I was furious, I started to make my way over to that side of the bar but to my added horror his friend then started to light other people's cigarettes left, right, and center! Before long that whole side of the bar was enjoying MY fire without paying me anything. Enraged I went from person to person grabbing their cigarettes from their hands, throwing them to the ground, and stamping on them. Strangely the door staff exhibited no respect for my property rights as they threw me out the door". 267 Modernized societies, where community is not a fate but a commitment, pose daunting challenges to the traditional values of collectivity, such as volunteering. The freedom of liberal society, while it inevitably loosens the power of communal ties, such as ecclesiastical or other forms of spiritual authority, does not by itself undermine the seriousness of the altruistic choices its members make. On the contrary, liberalism endows choice with dignity, and those who accept spiritual discipline and communal responsibility under modernity's bemused agnosticism may be all the more impressive. Anyway, the era of modernity has brought about the nadir of voluntary action. Before industrialization and in post-modernity respectively the voluntary spirit was, and may be again, more influential. 268 In a multicultural society the lack of universally shared group norms is one cause of what is called 'litigation explosion'. 269 This is partly because there is nothing like 'self-differentiation' in the case of the lifeworld: the disembedded value-spheres (of scientific truth, moral validity, aesthetic beauty, and so on) all belong to the system. Lifeworlds can nevertheless undergo rationalization, just as non-profit organizations can adopt sound management practices. 270 This insight brought Weber to his theory of the "iron cage". Non-commodified values and voluntary work in general help to overcome alienation caused by the senseless and value-neutral functioning of social systems. 271 A preliminary definition of the informal economy: just as in theology atheism is construed as the critical response of the individual to the shortcomings of Christianity and deism in general, the growth of (the 'white' segment of) the informal econotny is also prompted by the overregulation of the formal one. In overregulation I see an operationalized version of the overuse of law in respect of codification rather than litigation, as well as commodification. 272 A rational action aimed at reaching an understanding instead of the attainment of a purpose. 273 In the welfare state, in which social integration is promoted by the overuse of law in respect of codification rather than litigation, law may also assume the role of a steering medium which, through its encroachment upon the lifeworld, robs modern life of its consensual component (Rasmussen, 1990).

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274 The erstwhile Soviet bloc can be construed as a grandiose ‘counter’ sphere, in this respect. Its grandiose failure indicates that it is perhaps not advisable to make a system out of only a segment of the lifeworld. I cannot resist mentioning that the demise of East European communism can partly be attributed to the too great success of the proletarian lifeworld in conquering the ‘societal system’. 275 A mini case study for social discipline: it may be ‘a matter of life or death’ for charities in their quest for donor support to show that they are well managed. The usual method is to maximize the amount they spend on programs and minimize overheads (fund-raising, administrative, and wage costs). By increasing their program-to-overhead ratio US non-profits may gain a satisfactory rating (25 percent ceiling) from independent watchdog groups and entry to a Combined Federal Campaign or other (non-federal employee) on-the-job fund-raising drives. The problem of maintaining a balance between overhead costs and mission is as old as charitable institutions themselves. Note the ancient example of the ‘Trinitary order’ whose aim was the redemption (freeing) of (Christian) captives at the time of the Crusades. They raised money for their charitable mission all over Europe. As a last resort, monks vowed to offer themselves in the place of prisoners of war. From the statute of dissolution of (Hapsburg) Joseph I1 (who commanded the demise of the order in his empire) we know that one-third of the raised revenue went to the upkeep of the order, two-thirds to the mission. By complying with such self-imposed rules, nonprofits acknowledge that it is better to set their own standards before state regulators do so. According to Etzioni, successful self-governance is a privilege of the highest professions. 276 There are three lines of thought in the scientific literature relating to the necessary supplementary component of self-help for the purpose of turning commercial commodities into usable goods or utilities. First place should go to I. Illich who coined the term ‘shadow work’ for this phenomenon (1986): “I coined the term to designate the consumer’s unpaid toil that adds to a commodity an incremental value that is necessary to make this commodity useful to the consuming unit itself I called it ‘shadow’ work to indicate that this toil is associated with (and preparatory to) the act of consumption.” The influential Gershuny also developed an exiting theory based on the distinction between software and hardware (Gershuny, 1983). Finally, I also have experimented in these fields, reconstructing notions of economic history (Kelen, 1985). 277 A ‘tragedy of the commons’ arises when a common resource is degraded by overuse, for example, ocean fisheries, urban roads, air, and water. Whenever a public good (or ‘bad’ as in the case of road congestion) does not have an owner to manage the resource through usage restrictions and/or fees, there are inadequate incentives for individual users to restrict usage in excess of capacity. 278 ‘Catallactics’, The New Palgrave: A Dictionary of Economics, Vol. 1, ed. J. Eatwell, M. Milgate, and P. Newman (New York: The Stockton Press, 1987)’pp. 377-378. 279 Mojo Nation is two businesses in one. The more visible consumer side of the business will allow Internet surfers to download and swap computer files, much like the music site Napster, which has upset the music industry by allegedly flouting copyright laws. Contrary to the spirit of copyright evasion preached by Napster, however, Mojo Nation will allow users to download only what they ‘pay’ for. They claim this will put an end to Internet ‘leeches’, those who suck up other people’s

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files without making their own available. ‘Payment’ in this sense means observing the reciprocity constraint (that is, you can download files to the extent that you upload them). The other side of the business is aimed at corporate customers, particularly those of the global variety, which will be able to license Mojo Nation software for use on their own intranets. 280 Those clamoring for the establishment of Padania in the northern regions of Italy, for example, in their political fervor to secede are also demanding the abolition of Italian as an artificial lingua franca and would prefer instead to use regional vernaculars. 281 This recommendation was made in the 1970s. Developments in Europe have since taken the course of transgressing national economies monetarily, but not along the Hayekian path. 282 Some clearinghouses or electric payment networks assign them, in their ‘accounting’, credit points which can be accumulated by entering a network of reciprocity. In this essay I am trying to generalize the logic of these credits. (he notion of ‘credits’ conveys a gentler constraint on realization, that is, for finding an outlet for one’s work. By applying financial rules to this gentler mode of labor exchange I hope to move one step forward from confined barter towards a wider, multilaterally circulating network of exchange without coming up against the need for conventional money. I speak of ‘gentleness’ because of the otherwise unrealizable inputs. 283 In the mission statement of this not-for-profit or mutual organization I recommend the assumption of goals related to promoting ‘employment’ for members. I shall discuss the pros and cons of restricting membership to welfare recipients or opening up the ranks to anybody with excess labor energies. 284 In most countries banking regulations require banks and credit unions to inform the authorities of all transactions above a particular level (USD 5,000 in the USA) and have no apparent lawful purpose or are not the sort in which the particular customer would normally be expected to engage. 285 Concentration and labor camps have taught Central Europeans the lesson that barter is practically unconstrainable and whenever coupons, vouchers, and so on, emerge, commensurability an exchange rate will always follow. The same applies to all sorts of soft, putatively unconvertible monies where exchange of the certificates at a discount mirroring the supply behind them cannot be excluded. 286 At this point the political consequences begin to unfold: crafts will decry the competition posed by ‘non-guild’ members. In the ensuing collective bargaining I recommend the reconciliation of two diverging interests: (i) the amount of work lost to informal competition, and (ii) the countervailing relief as regards local welfare spending. In case of bitter opposition, I recommend the following: if unemployment exceeds a certain level in a region, excise duty is to be levied on all employers. This harsh measure-in imitation of the logic and recommendation of the ill-fated Clinton health reform plan-might achieve acquiescence because ‘gentle’ employment will partly disqualifL welfare recipients from public support. 287 Often listings of offered services or goods are accompanied by the statement “make an offer”, clearly revealing that the underlying intent here is to find an outlet for otherwise non-marketable assets. 288 Tax dodging is excluded by our assumption that within this limited circle barter is supposed to serve charitable goals (to assist in the self-help of the unemployed) and

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enabling goals (to enhance alternative lifestyles). At the same time, I can well imagine that counterfeit credits will be sought as a way of free-riding or in order to boost one’s balance. Limiting the organization to community level is an appropriate check here. 289 A great advantage of this soft, alternative money lies in its excellent value-storing capacity due to the strict rules of its issue. In case of eventual losses or defaults there is absolutely no chance of a catallactic bailing-out of incurred losses or a carry-over of costs. In this respect even the strictest monetarist constraints can be satisfied. 290 Let me recall the National Service scheme within the framework of which education costs can be converted into informal working. This is also a link established between the formal and informal (but by no means off-the-books) circuits of the economy by virtue of experimental conversion channels. 291 Exchange rather than the market because only the clearing function is present but without satisfactory filtering. 292 Instead of barter, I feel entitled to speak of commodity swaps, too. While the aim of barter is limited to a matching of needs, the motivation for a commodity swap might be broader: two parties may exchange something with differing views as to its value. The very possibility of differing views is launched here by the phasing-in of PIM with its indecisive relationship to legal tender. 293 Microsoft’s latest anti-piracy measure is forced registration. The company is inserting a new feature into an upcoming release of its word processing software that will cause the product to malfunction if a person does not register after launching it 50 times. Users of volume licenses, such as those working at big companies, will not have to register. The so-called Registration Wizard does not require users to give any more information than their country of origin, and they can register anonymously by fax, phone, e-mail, or snail mail. This minimal but forced registration undeniably serves a commercial interest.


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BIBLIOGRAPHY AND BASIC READINGS

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INDEX

action directe 2 1 ad inventory 154, 160, 192 ad-supported publishing 69, 84,95, 103, 157,333 ad-suppressors 79 affiliate program 155,2 13 a fter-market industry 234 Alexander, the Great 13 Allen, Ch. 115 alternative filtering mechanism 303 alternative lifestyle 308 amateurism 4 1,43,45,48 androcentric privatization 3 12 Aquinas, Th. 13 archP 10, 55 Aristotle 166 attention 70 attention-generated prestige 70 attentive time 93 attitudinal descriptors 273 baby farming 38 Bacon, K. 345 Baran, P. 227 Barbrook, R. 340 Barre, R. 56 Bennett, C. J. 255 Bennett, J. M. 16 Bergmann, Th. 26 Boeckh A. 54 Boloni, F. S. 327 Borsook, P. 351 Boulding, K. 166 Bourdieu, P. 48, 51 Braham, R. 34 Brandt, R. 352 Brin, D. 260 Broughton, R. S. 328 Brundage, A. 46 Burroughs, W. 74

Campbell, C. 61 Carson R. T. 341 Carter, J. 45 Caruso, D. 333 Castells, M. 167 catallaxy 302, 303 cause-related marketing 15 1, 157 Chapman, T. 270,339 chiliasm 2 Christensen, C. M. 288 Christian hndamentalists 46 circus 51 clearinghouse 356 click-through 69, 103, 109, 127, 149,251 Clinton, W. J. 182 Coase, R. 187 commercial exposure 58 commercial invasion of privacy 1 12 commodity money 3 1 1 communal work 9 Cook, Ph. 94 cookies 79, 101, 110, 129,278,335 copy control 222 copyright leakage 2 17,232,244,295 c o d e 38 cosmpolitanization 44 Cossacks 36,326 ‘counter’ public domain 300, 302 counterculture 268 court-dancing 5 1 Craig Venter, J. 185 cross-licensing 292 Culnan, M. 112, 141 cybercapitalism 239 data propagation model 292 data-mining 103,208,249 Demosthenes 9,32 1 deserving poor 14 devshirme 3 1

368

Index

digital object identifier 235 digital watermark 237 disruptive technology 177,288 distributed computing 295 Douskou, I. 321 byson, E. 152 early adopters 273 e-certificates I 16 elasticity 183 electronic frontier 107 elite British athletic system 45, 48, SO Ellis, S. J. 33 e-money 100,116,305, 356 endorsement fee 47 end-to-end architecture 68,333 enthusiasm connected to voluntary work 307 Epicurus 93 Erdos, P. 345 escapism 140 Etzioni, A. 260, 355 evidence-based advertising 3, 76,91, 102, 122, 150,263 excise duty 356 extracurricular income 160 fair use 2 17,224, 227, 232,234,24 1,285, 287,294 ‘fiat money’ 3 13 Finley, M. 1. 33 formal coordination 295 Franck, G. 93 Frank, R. G. 94 Franklin, B. 132 frankpledge 37 Garfinkel, S. L. 338 Gershuny, J. 355 gift economy 1 globalization 276 Gmeiner, H. 40 Gorz, A. 328 Gramov, M. 45 grants economy 1, 165 gratuity 4, 5 , 6, 3 13 gray reserve of the unemployed 306 Gresham’s rule 309,3 13 guilds 356 Gulker, Ch. 351

Gunther, M. 162 Gurley J. W. 340 Habermas, J. 299,3 12 Haider, J. 323 Hammond, A. J. 268 Hammond, N. G. L. 321 Hansen, E. 2 14 Harnad, S. 187 Hauben, R. 270 Havel, V. 324 Hayek, A. F. 303 Heinze, G. 45 Heller, A. 330 Hine, Ch. 141 IIlich, I. 355 imitation by replication 95 implicit debt 180 inactivization 27, 7 1, 193 incentivization 138 indenture 38 individual targeting 3 infomediary 110, 335 informal choice 308 informal coordination 295,301,307 information exhaust 239 information piracy 223 informational commons 70, 3 16 innate privacy 69 innovation commons 234,236,3 16 instrumental rationality 296 intensive content provision 272 Internet governance 1 ‘iron curtain’ 38 Isenberg, D. 2 18 James, W. 326 Jaszi, P. 236 Jobs, S. 152 Jones, A. H. M. 9 Juliet E. 141 Kannan, P. K. 89 Kaplan, C. S. 122 Karagiorga-Stathakopoulou,T. 32 1 Karsai, E. 34 Katz, J. E. 141. keyword advertising 98

Index

Khmelnytsky B. 36 kibbutz 26 Kiss, S. 280 Kling, R. 118 Knight, F. H. 28 Knox, R.A. 18 Kolakowski, L. 93 kolkhoz 26 labor camp 356 laboriously idle 14, 307 laity 8,48, 53 language games 269,296 Lash, J. 268 lead user 330 Leonard, E. M. 15 Lessig, L. 100,269 Lewis, C. 47 libertarian interpretation of the Internet 27 1 literacy 108 liturgy 7 localization 276 locking-in 242 longitudinal fine-tuning of careers 194 Love, C. 175 Malinowski, B. 344 Mandeville, B. de 17 Mann, M. 150 Mannheim, K. 22 Marx, K. 17 mass attention 93 mass culture 50, 51,67 mass customization 127,276 material rationality 296 Mauss, M. 340 Mazepa, I. 36 McCain, R. 180 micro payment 235 minority languages 302 Mises, L. von 166 Mitchell, M. 168 Mitchell, R. C. 341 money server 305 Montanism 8 Nagel, P. 54 niche-sites 147, 152

369

notional currency 302 Noyes, K. H. 33 Oestreich, G. 15 one-to-one advertising 103,272 one-to-one targeting 123,247,277,280 open-source software 2 18 opportunity cost of leisure 3 10 opt-in 140, 154,245,265 opt-out 137,247,250,265 O'Reilly, T. 344 Ortega y Gasset, F. 275 Owen, R. 303 paramonetary device 301,306, 3 10 parochiality 182,302 passive liturgical associations 259 patent mill 2 14 patent width 243 pay-per-use models 235 peer-to-peer 272 permission manager 264 permission marketing 126,242 persona 114 personalization 76,246,33 I personally identifLing information 3, 1 12, 117 PfafT, M. 166 Pigou, A. C. 2 17 playfulness 4 1 Pleket, H. W. 33 Plutarch 11 Polanyi, K. 340 political gift 2 politically constituted collective goods 2 precision targeting 9 1, 102, 103, 122,247, 25 1 predictive intelligence 278,281 private system of social obligation 1 , 3 7 private vices 17 privileged empowerment 58 pro bono work 55,172,269,3 16 procedural legitimization 299 producer identified money 305 profiling 76, 92, 107, 122, 133 program-related investment 306 public sector information 204,2 16 public service advertising 6 1 Pugachoff, Y . 36

370 Raab, Ch. D. 255 Rahner, K. 8 Rasmussen, D. M. 355 rationing 70 Razin, S. 36 relief in welfare spending 309 reservation wage 3 10 reverse engineering 2 17,233,253 Riordan, J. 44 romantic anti-capitalists 303 Rous, S . 327 Salomon, N.206 Samuelson, P. 240 Savage, H. 46 Scullard, H. H. 321 segmented versus competitive money supply 3 11 self reliance 3 10 Shapiro, A. 273 Shaw, B. 61 Sherman, W. T. 33 Shirky, C. 288 Shropshire, K. 48 slave trade 17 Smith, A. 34 social disciplining 15,55, 300, 355 social dumping 114 Solon 32 1 space shifting 272 spam 120,247 speech-act 296 sponsored links 99 Stallman, R. 220 status-enhancing public service 181 status-honor 8 status-motivated volunteering 1 8 1 Sterling, B. 269 Stolpe, M. 25 ‘subbotm’kwork’ 22

Index

subsidiarity principle 182,300 Suetonius 54 systemAifeworId partnership 4, 5 I , 55,69, 196,245 Szent-Gyorgyi, A. 227 techno-anarchists 239 Theodosius, the Great 46 Theophrastos 9 Thumm, N. 228 time allowance 2 ,69, 193, 197 time-back guarantee 306 time-budget 74,200 time-use 3,76,90, 102,333,344 traceability 136, 345 tracking stock 69 Trevelyan, G. M. 15 Trotsky, L. 22 Trueman, F. 45 trusted systems 237 underwriting 59 validity-claim 296 Van Diilmen, R. 15 vernaculars 302 vigilantes 196,209,268,344 virtual gratuity 180 voluntary participation in the labor market 310 Wallace, J. 117 Weber, M. 4,7,15,28, 53, 354 Whately, Richard 166 Witt, Katharina 45 Wittgentstein, L. 269 Wolf, Ch. 324 working time credit 71, 193 Young, D. C. 46

Coming Winter 200 1

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