Today, I was visiting tinyurl.com, trying to figure out how the site makes money. I noticed some Yahoo ads. So what happens if they run out of donations? Do people donate? TinyURL is just an example. There are definitely other sites that do give free services with nothing but donations in return.
How many websites get ad spammed or simply close down because the owner can no longer afford to host the material for free? This is when it hit me. Free Internet services needs a tax break.
It would need to encourage giving and have a benefit ceiling to ensure only people that need the protection get it. Here’s an example of how the Internet Commons Tax Deduction could work:
- A site owner receives a tax deductible credit up to the same amount as all donations received that year.
- The total tax deduction granted can never exceed the hosting costs. **
In other words, this acts as a tax deductible item for the owner, making it beneficial for people that have popular hobby projects running off of their personal bandwidth. And, of course, it only kicks in so long as you’re running at a loss. And, it encourages and amplifies giving. It will never counter the losses 100%, but it certainly softens their effect.
The Internet is where it is today thanks largely to much of it being free. While the cost of bandwidth is ever decreasing, it is still expensive to run a popular site. This means that as a person’s contribution to the net grows, their costs due to bandwidth also grows (see orange chart).
There are plenty of very important websites that contain information to help consumers that are entirely non-profit. Even the non-profit Wikipedia had to start somewhere. Then there’s the websites that merely provide value to the web as entertainment. Finally, there are open source projects. These sites have to deal with all the same costs that for-profit websites do, in some cases their costs are even greater.
The current model requires begging for donations while letting companies (leeches) like Paypal take a percentage. Or slapping on a thousand ads. Okay, we can deal with Paypal, and maybe the ads, but what happens if donations and ads don’t cut it? Should a site be subject to destruction simply because its owner can’t afford to spawn a company around it? Can’t the owner get a break for providing stuff for free to the entire world?
No, the person supplying the free goods gets shafted.
Once, long ago, I wrote a dating site engine. For fun. It was my second major project in PHP that I did as a learning experience. After I completed it, I just left it up for anybody to sign up. Did I have intentions of monetizing it? Not in the slightest. The only reason it is still up today is because I could afford the bandwidth costs, but not everybody could have.
Or last year, I wrote a AIM profile tracking service for fun. That too is also sitting around without being monetized. And hopefully, I’ll never have to take it down due to financial short comings.
There are so many cool little projects that turn into amazing things on the net. Many of them become companies, but this is because, currently, monetizing a particular idea is the best and only way to keep it alive. This is also why many companies die on the net – some ideas just can’t float an entire company. Those are the ideas I am targeting here.
Is this essentially a small business tax break? That’s not the direct intention, but it certainly could have that consequence if the revenue cap is set too high. But it also helps many others:
- The government – a lot more concept websites will mature from infancy into profitability (tax generating businesses) without dying a premature death.
- Average Joe – even more free web services will pop up, many of which may have never seen the light of day otherwise.
- Open source – this will help many of the smaller open source projects afford their hosting costs as well as encourage even more donations.
- Code junkies like myself – it gives us a true financial incentive to share (and host) our work with the world.
My real point here is that hosting stuff on the web is not free. It costs somebody, somewhere, a ton of money. The little guy, who often is the innovator on the Internet, is the one who gets screwed when too many people take his/her work for granted. It’d be nice if those innovators got a little break from Uncle Sam.
Hey, I can dream, can’t I?
**Here is some hypothetical fine print that would probably need to exist (for you nitpickers):
- There is a annual cap of $XXXX that can be credited in this way. The credit given plus donations reported must be less than the annual revenue generated from the site.
- Limit of 2 sites are eligible for this deduction per person/company.
- If revenue generated (including donations) from the site exceeds twice the annual cap ($XXXX), this tax deduction no longer applies.