Ms Day38 on 2008-03-25
This was a good idea. The public would get use to his product and want to purchase it on his or her own.
This link has been bookmarked by 145 people . It was first bookmarked on 25 Feb 2008, by Paul May.
Have you embraced the free.
This article is over a year old, and soon to be updated by Chris Anderson's book of the same title, but it's still well worth the read.
The rise of "freeconomics" is being driven by the underlying technologies that power the Web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.
King Gillette's 1895 disposable blades made good freebies to help sell other products. Companies use his business model today to create demand for their goods: Give away the cell phone, sell the monthly plan; make the videogame console cheap and sell expensive games. Now, the underlying technologies that power the web are making "freeconomics" a full-fledged economy.
Free!
For good reason: It's now clear that practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned. Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. Basic economics tells us that in a competitive market, price falls to the marginal cost. There's never been a more competitive market than the Internet, and every day the marginal cost of digital information comes closer to nothing
The Web has become the land of the free.
The result is that we now have not one but two trends driving the spread of free business models across the economy. The first is the extension of King Gillette's cross-subsidy to more and more industries. Technology is giving companies greater flexibility in how broadly they can define their markets, allowing them more freedom to give away products or services to one set of customers while selling to another set.
Zero marginal cost
What's free: things that can be distributed without an appreciable cost to anyone. Free to whom: everyone.
This describes nothing so well as online music. Between digital reproduction and peer-to-peer distribution, the real cost of distributing music has truly hit bottom. This is a case where the product has become free because of sheer economic gravity, with or without a business model.
· Labor exchange
What's free: Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value.
You can get free porn if you solve a few captchas, those scrambled text boxes used to block bots. What you're actually doing is giving answers to a bot used by spammers to gain access to other sites
It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we've always known about but have only recently been able to measure properly. The "attention economy" and "reputation economy" are too fuzzy to merit an academic department, but there's something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.
A good overview of how web-based "free" is changing business dogma.
What Mead understood is that a psychological switch should flip as things head toward zero. Even though they may never become entirely free, as the price drops there is great advantage to be had in treating them as if they were free.
· Gift economy
What's free: the whole enchilada, be it open source software or user-generated content. Free to whom: everyone.
Milton Friedman himself reminded us time and time again that "there's no such thing as a free lunch.
"But Friedman was wrong in two ways. First, a free lunch doesn't necessarily mean the food is being given away or that you'll pay for it later — it could just mean someone else is picking up the tab. Second, in the digital realm, as we've seen, the main feedstocks of the information economy — storage, processing power, and bandwidth — are getting cheaper by the day. Two of the main scarcity functions of traditional economics — the marginal costs of manufacturing and distribution — are rushing headlong to zip. It's as if the restaurant suddenly didn't have to pay any food or labor costs for that lunch.
Surely economics has something to say about that?
From the consumer's perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're in an entirely different business, one of clawing and scratching for every customer. The psychology of "free" is powerful indeed, as any marketer will tell you.
This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all.
From the consumer's perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're in an entirely different business, one of clawing and scratching for every customer. The psychology of "free" is powerful indeed, as any marketer will tell you.
This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all.
On a busy corner in São Paulo, Brazil, street vendors pitch the latest "tecnobrega" CDs, including one by a hot band called Banda Calypso. Like CDs from most street vendors, these did not come from a record label. But neither are they illicit. They came directly from the band. Calypso distributes masters of its CDs and CD liner art to street vendor networks in towns it plans to tour, with full agreement that the vendors will copy the CDs, sell them, and keep all the money. That's OK, because selling discs isn't Calypso's main source of income. The band is really in the performance business — and business is good. Traveling from town to town this way, preceded by a wave of supercheap CDs, Calypso has filled its shows and paid for a private jet.
The vendors generate literal street cred in each town Calypso visits, and its omnipresence in the urban soundscape means that it gets huge crowds to its rave/dj/concert events. Free music is just publicity for a far more lucrative tour business. Nobody thinks of this as piracy.
· Zero marginal cost
What's free: things that can be distributed without an appreciable cost to anyone. Free to whom: everyone.
This describes nothing so well as online music. Between digital reproduction and peer-to-peer distribution, the real cost of distributing music has truly hit bottom.
FREE CHANGES EVERYTHING
Between digital economics and the wholesale embrace of King's Gillette's experiment in price shifting, we are entering an era when free will be seen as the norm, not an anomaly. How big a deal is that? Well, consider this analogy: In 1954, at the dawn of nuclear power, Lewis Strauss, head of the Atomic Energy Commission, promised that we were entering an age when electricity would be "too cheap to meter." Needless to say, that didn't happen, mostly because the risks of nuclear energy hugely increased its costs. But what if he'd been right? What if electricity had in fact become virtually free?The answer is that everything electricity touched — which is to say just about everything — would have been transformed. Rather than balance electricity against other energy sources, we'd use electricity for as many things as we could — we'd waste it, in fact, because it would be too cheap to worry about.
All buildings would be electrically heated, never mind the thermal conversion rate. We'd all be driving electric cars (free electricity would be incentive enough to develop the efficient battery technology to store it). Massive desalination plants would turn seawater into all the freshwater anyone could want, irrigating vast inland swaths and turning deserts into fertile acres, many of them making biofuels as a cheaper store of energy than batteries. Relative to free electrons, fossil fuels would be seen as ludicrously expensive and dirty, and so carbon emissions would plummet. The phrase "global warming" would have never entered the language.
Today it's digital technologies, not electricity, that have become too cheap to meter. It took decades to shake off the assumption that computing was supposed to be rationed for the few, and we're only now starting to liberate bandwidth and storage from the same poverty of imagination. But a generation raised on the free Web is coming of age, and they will find entirely new ways to embrace waste, transforming the world in the process. Because free is what you
At the age of 40, King Gillette was a frustrated inventor, a bitter anticapitalist, and a salesman of cork-lined bottle caps. It was 1895, and despite ideas, energy, and wealthy parents, he had little to show for his work. He blamed the evils of market competition. Indeed, the previous year he had published a book, The Human Drift, which argued that all industry should be taken over by a single corporation owned by the public and that millions of Americans should live in a giant city called Metropolis powered by Niagara Falls. His boss at the bottle cap company, meanwhile, had just one piece of advice: Invent something people use and throw away.
this is basically 'because effect' model. you don't make money with something (that can be or is free) but because of it. See blogging bring money not via ads but reputation and its application elsewhere. "But free is not quite as simple — or as stupid
becauseeffect freeconomics chrisandersen wired free web business models resources scarcity waste delicious
In a sense, what the Web represents is the extension of the media business model to industries of all sorts. This is not simply the notion that advertising will pay for everything. There are dozens of ways that media companies make money around free content, from selling information about consumers to brand licensing, "value-added" subscriptions, and direct ecommerce
Ms Day38 on 2008-03-25
This was a good idea. The public would get use to his product and want to purchase it on his or her own.
Ms Day38 on 2008-03-25
This is so true. I never looked the business quite like this, but it is true. Give away the main product and sell the "make-it-work" feature for a high price.
For example, cell phones cost almost nothing to make - just like the Swatch - but they sell it for 10x times the price to the "cell junkies" like myself for an arm, leg, and possibly kidney (smile).
kaeanne on 2008-03-29
i can completely relate to that! consumers are willing to pay whatever they have to so they could have state of the art merchandise, when it required a fraction of the cost to produce it!
Ms Day38 on 2008-03-25
I don't know how true this statement is in other product worlds, but it is still very popular with the cell phone companies.
Ms Day38 on 2008-03-25
Okay, all this is Yiddish to me. Are the saying the "free" purpose is to allow the users to see how useful the services are and eventually make them pay in the future?
kaeanne on 2008-03-29
I agree...no matter how many times i re-read this, i fail to comprehend what is going on.
Ms Day38 on 2008-03-25
"free" as far as money is concerned, but we pay in other ways such as viruses, pop ups, spyware, being spyed on by the government, and a source other other "issues" that I am not even aware of.
Ms Day38 on 2008-03-25
I don't understand how we can continue to allow an openly deceiving word such as "free" to entice and seduce us into meaningless crap. NOTHING IS FREE!!
kaeanne on 2008-03-29
nothing may be free, but they do a great job of convincing us it is. by having us believe and buy into their ploys they make more money and their bussiness grows.
Kamil Szot on 2008-04-25
Actually most free software is really free, noone tries to market anything with it. Authors just give it away because they want and can.
eduardo chavez on 2008-05-05
Wikipedia is free. And no adds either!
Milton Friedman himself reminded us time and time again that "there's no such thing as a free lunch.
"But Friedman was wrong in two ways. First, a free lunch doesn't necessarily mean the food is being given away or that you'll pay for it later — it could just mean someone else is picking up the tab. Second, in the digital realm, as we've seen, the main feedstocks of the information economy — storage, processing power, and bandwidth — are getting cheaper by the day. Two of the main scarcity functions of traditional economics — the marginal costs of manufacturing and distribution — are rushing headlong to zip. It's as if the restaurant suddenly didn't have to pay any food or labor costs for that lunch.
Surely economics has something to say about that?
Jim Jee on 2008-03-11
Perhaps the core idea of the article...
Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.
There is, presumably, a limited supply of reputation and attention in the world at any point in time.
King Gillette's 1895 disposable blades made good freebies to help sell other products. Companies use his business model today to create demand for their goods: Give away the cell phone, sell the monthly plan; make the videogame console cheap and sell expe
Hans Wobbe on 2008-03-01
Worth hi-liting...
Hans Wobbe on 2008-03-01
Annotate each of the 6 basic models.
a Wired article written by Chris Anderson
advertising article articles attention book business computing digital ebook economics economy fablog inspiration interesting Internet marketing music network newmedia news opensource publishing research software startup strategy tech to_read toread trend
From the consumer's perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're in an entirely different business, one of clawing and scratching for every customer. The psychology of "free" is powerful indeed, as any marketer will tell you.
This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all.
Labor exchange
What's free: Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value.
You can get free porn if you solve a few captchas, those scrambled text boxes used to block bots. What you're actually doing is giving answers to a bot used by spammers to gain access to other sites — which is worth more to them than the bandwidth you'll consume browsing images. Likewise for rating stories on Digg, voting on Yahoo Answers, or using Google's 411 service (see "How Can Directory Assistance Be Free?"). In each case, the act of using the service creates something of value, either improving the service itself or creating information that can be useful somewhere else.
It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we've always known about but have only recently been able to measure properly. The "attention economy" and "reputation economy" are too fuzzy to merit an academic department, but there's something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.
There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.
Chris Anderson via Wired gives an introduction to freeconomics. From his new book Free!
Give away the razor, sell the blades.
article(type_of_object) wired(source) Chris_Anderson(author) strategy(about) economics(about) marketing(about) trends(about) business(about) for:simile
Public Stiky Notes
For example, cell phones cost almost nothing to make - just like the Swatch - but they sell it for 10x times the price to the "cell junkies" like myself for an arm, leg, and possibly kidney (smile).
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