You see most of these services either have advertisements to bring home the much needed money to progress (see YouTube, Flickr) or are simply owned/backed by in

You see most of these services either have advertisements to bring home the much needed money to progress (see YouTube, Flickr) or are simply owned/backed by internet big shots which provide them visibility in the economy with these free services (Picasa, Delicious (until a while back)). With still others, they have a business model based on paid and free services (see Skype and Grooveshark). The gaming sites, like Zynga, sell speed, better products; again some revenue model. This is exactly the point the author wants to bring home. If somebody plans on providing a free web-service, you clone it, think of a business model (ads or user registration) and wait until you're the only one in business.