When I lecture, I always ask the question "How does MySpace, Google, or any other "free" online service make money?" The first answer I get is "By selling advertising."

This is the wrong answer, folks, and it highlights a clear and common misunderstanding about the economic drivers of the online world.

In the early days, Internet service companies assumed their revenue would come through subscription services. But this model failed because most consumers simply refused to pay a monthly fee for Internet services and thousands of Internet businesses collapsed for lack of a viable business model.

Then a new model was developed -- Google was the most prominent pioneer -- that allowed companies to offer all their services for "free". Eventually the vast majority of for-pay services switched to the "free" model. Only "free" isn't ever truly free.

The primary way that MySpace, Facebook, mugr, MSN, Google, and other online companies make their money is not by selling advertisements, but by selling you to advertisers -- access to you and information about you.

Online service companies that provide “free” services design their products to generate two key revenue opportunities. First, they make compelling Web sites to keep you on their pages for as long as possible to maximize the revenue they can get from advertisers who want access to you. Second, they collect your information which they sell to advertisers who want to find and understand their target audience(s). YOU and your information are the commodity being bought and sold.

I'm a capitalist. I think companies should be able to make all the money they can -- as long as they do not compromise the safety and privacy of customers. But when corporate responsibility and profit margins clash, responsibility too often comes out the loser.

Selling consumer information is a well-established source of revenue – magazines, for example, have sold their user lists for decades. But the Web takes selling consumer information to a new extreme. Magazines couldn’t tell how long someone spent on an article, what the consumer was doing before they landed on an article, or what the consumer did after they read the article. Magazines could not crawl any content the consumer wrote or gather other information about you.

So when does the pursuit of revenue cross the boundary of responsibility and trample your right to privacy and safety online? Is it when companies hold the right to use your information in any way they choose even if you’ve deleted it as Facebook does? When MySpace chooses to expose significant amounts of consumers’ information even when consumers specified they want their information private? When search engines accept sponsored advertising from sites they know will give consumers malicious software? When Intelius sells your cell phone number without your permission? When companies fail to build features that will detect abuse because that would be expensive and reduce traffic on their sites?

In the scramble for profit and survival and with a lack of standards of accountability to temper their methods, far too many online companies have thrown corporate responsibility and consumer protections out the window.

At this point in time, it’s user beware. Ask yourself whether the company deserves your information and your trust, and read the fine print. (My blog, The Fine Print – Do You Know the Terms You (Or Your Child) Agreed To? offers some insight.)

Linda