Free Media: Young people expect high-quality news, music, games, downloads and social networks - and all for free. In this context, can media owners ever make their digital propositions pay?

The uproar that followed Facebook’s decision in February 2009 to change the terms by which it stores ‘users’ content highlighted many of the issues faced by the owners of free media.

While Facebook may have millions of highly engaged users and the ability to profile them by demographic and interest, those users see it as a free service and have so far resisted most attempts to make it a viable advertising medium. Facebook founder Mark Zuckerberg continues to search for a way to make significant money from his property.

He is not alone. While there is no denying the success of media brands based on offering users free services or content, it is still far from clear how advertisers can relate to many of those free media services and how the media owners can make money from them.

Generation Free wants free websites, social networks, mobile applications, mobile downloads and games, and it does not expect to have its experience interrupted by ads.

As brands and media owners wrestle with that challenge, some observers have begun to question whether free digital media has a future. Richard Williamson, director at KPMG’s media practice, says: “The argument that all content is moving to free is fallacious. As the internet becomes more sophisticated, polarisation increases.

“Premium content such as Club Penguin, World of Warcraft and [business network] Xing will go to subscription and the majority of more marginal or undifferentiated content will be forced to go free to gain any sort of audience.”

As we move deeper into a recession, this question becomes more pertinent.

The time is ripe for a look at free content: to see how advertisers are using it, to look at whether and how the media owners are making any money and, crucially, to see if the free digital media model has a future.

Online

Online media consumption is booming. According to the latest European Interactive Advertising
Association Mediascope Study in November 2008, online is the only form of media that has increased in terms of consumption in the past year. Time spent watching TV and consuming print media have both declined, while time spent listening to the radio remains static.

Consequently, major providers of free digital media such as Google, MSN and Yahoo have become as established as ITV, The Sun and Capital FM. They have also become adept at working with brands.

Phil Macauley, head of commercial services at Yahoo, describes a recent campaign: “In February, Yahoo and Nissan ran a campaign in major ski resorts in Europe. This involved designated Nissan ski runs where photos were taken of skiers and uploaded to Flickr, where skiers could see themselves on the slopes. There was also in-resort après-ski activity, promoted online via targeted display advertising on Yahoo.”

Brands are increasingly using the reach of free websites such as Yahoo to connect with their consumers in this way. Most notably, with the growth of broadband, websites are raising revenue from their content through pre-roll advertising around video-on-demand.

Jamie Estrin, managing director of The Web TV Enterprise, offers two examples: “Consider a 25-year-old man who visits Nuts.co.uk to find out about the latest action films being served a trailer for the new Rambo movie before he starts watching a video clip. Or a 20-year-old girl viewing an exclusive interview on the Girls Aloud website being served a 10-second ad for the latest Motorola music phone.”