The Flip Side of Free: Understanding the Economics of the Internet

Why “free” comes at a price: the costs of free Internet services in terms of privacy, cybersecurity, and the growing market power of technology giants.

The upside of the Internet is free Wi-Fi at Starbucks, Facetime over long distances, and nearly unlimited data for downloading or streaming. The downside is that our data goes to companies that use it to make money, our financial information is exposed to hackers, and the market power of technology companies continues to increase. In The Flip Side of Free, Michael Kende shows that free Internet comes at a price. We're beginning to realize this. Our all-purpose techno-caveat is “I love my smart speaker,” but is it really tracking everything I do? listening to everything I say?

Kende explains the unique economics of the Internet and the paradoxes that result. The most valuable companies in the world are now Internet companies, built on data often exchanged for free content and services. Many users know the impact of this trade-off on privacy but continue to use the services anyway. Moreover, although the Internet lowers barriers for companies to enter markets, it is hard to compete with the largest providers. We complain about companies having too much data, but developing countries without widespread Internet usage may suffer from the reverse: not enough data collection for the development of advanced services—which leads to a worsening data divide between developed and developing countries.

What's the future of free? Data is the price of free service, and the new currency of the Internet age. There's nothing necessarily wrong with free, Kende says, as long as we anticipate and try to mitigate what's on the flip side.