I think back in the day Larry Page saw that Altavista was free and he wanted to compete against it so he chose Google to be free and when millions of users started flocking in with millions of data points ads were the next logical step.
The same situation is with Zuckerberg and MySpace. When Zuck saw MySpace and other social networks at the time being free he made his own version of free social network and again when millions of users started flocking in with millions of data points ads were the next logical step and therefore surveillance capitalism emerged.
Tbh idk if Google and Facebook would be so successful if they were subscription based or would some free alternative come and destroy them.
Take Netflix and YouTube as example; they are both modern versions of TV and they both compete for screen time but YouTube being free and being fueled by essentially free user generated content is in much better position business wise than Netflix will ever be. Netflix needs to convince people to subscribe, they need to do movies contracting, they are spending billions to create their own content etc. And I think at this point YouTube is close to surpassing Netflix by revenue.
>I think the key insight from there is that that sort of situation doesn't just discourage use of free alternatives—it discourages development of them.
I agree with you but at the same time look how TikTok rose from the ashes of Vine. And now TikTok is the biggest Facebook and YouTube competitor for digital ad spending in the last decade.
I think if you want to compete against behemoths you need to dive into niches they do not dare to explore. For example imagine search engine which would allow you to search for "ad-free" websites. Google would never think of creating such feature yet implementing it would be unimaginable because they run the ad show on the web.