The Register has an interesting article on the underlying economics of big tech. The Amazons and Googles of the world have grown huge by offering “free” products like Alexa and Gmail. As we all know by now, if it’s free, you are the product. Has this model run out of steam at huge scale?

These huge free services are expensive to run. The most recent results from Amazon show how difficult it can be to make money on a free service. But Amazon has been putting Alexa everywhere and subsidising the stuff it’s in. People paid for that stuff and would be upset if Amazon stopped Alexa. It’s a money losing proposition that you can’t quit. That’s a tricky situation to get get out of.

Similarly, the Google Cloud numbers are deeply in the red. Much of that could be the cost of running 1.8 billion email accounts. Sure, they monetize it, but Google has promised not to sell ads based on email content. For example, I skip most of the ads by principally using IMAP to get my mail instead of the browser. I’m sure there are plenty of other people who do the same. Even if you use the web interface, the ads don’t seem particularly effective. Google will probably eventually have to figure out a way to make more money on Gmail but they would create a huge uproar if they cancelled it entirely. It’s not clear what the answer is.

It’s hard to tell from the public financial statements if either Amazon or Google are really running into a wall. The top line numbers are down. The stock prices are down. Those are probably more to do with general economic conditions than running their “free” services. Still, it’s interesting to contemplate the end of free services era. Will it end with a whimper or a bang?