It is no secret that free is the name of the Web 2.0 game. The democratization of powerful content creation tools, the widely available platforms for collaboration, and high-speed internet connections have fueled our new need to be social and collaborative on the internet. These things would not have been possible nor would Web2.0 startups be successful if it were not for the accompanying ‘free’ price tag that came with using them.
The ‘free’ business model topic is discussed by Chris Anderson (author of The Long Tail) on the latest edition of the GigaOm Show, where he speaks about certain topics covered in his upcoming book entitled “Free: The past and future of a radical price”.
It has become obvious that in order to have a chance at becoming big on the internet these days, you’ll need to be free in one form or another. There is very little reason not to offer at least one service for free since technology has made startup costs low and maintenance costs such as bandwidth practically free. Taking a glance at Web 2.0 heartthrobs such as Facebook, Digg, YouTube and Flickr, two distinct business models have surfaced and Chris describes them as: Give away the product and sell the audience (ad supported like Digg, Facebook and YouTube) and give away to 99% of the customers to get 1% to pay (premium service such as a pro account on Flickr).
The best part about Chris Anderson’s upcoming book is that it too will be available for… that’s right… free. The book will be available for free as an audio book in MP3 format, in an eBook format as he believes those who own eBooks are influential, in a typical online format, and surprisingly he is working on getting his book ad supported and ideally it too will be free. Personally, I think that last one is going to be a tough sell to the publishers.
Now what would be the reasoning behind a free book? Well, he argues when you give the book away for free, the book becomes a marketing vessel for the author. More people will read the book and become aware of the author Chris Anderson. Chris would essentially be building his personal brand. By doing so, he will see a spike in demand for his other ‘products’ such as speaking engagements, which unlike downloading an MP3 has become more expensive due to travel costs. The economics behind this one is simple, there is only one Chris Anderson, so supply remains the same, but demand will increase significantly, which makes the scarce resource of his time more valuable.
Click the image below to view the short interview with Chris Anderson, taken from The GigaOm Show Episode 10 - TechCrunch40.
There are also other great interviews you can see in the full version of the show that includes interviews with Marc Andreessen, David Sacks and the guys from Engadget. This isn’t the first time I’ve mentioned this show - I’m a big fan of its an awesome look into the business side of Web 2.0.
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While it’s not exactly “news”, it’s well worth mentioning that giving away the product and selling the audience has been a media strategy for a long, long time.
What I (would) find really interesting if the likes of YouTube could someday break that free/ ad saturated model with a micro-payment driven content distribution model.
Comment by Denis Hancock - October 2, 2007 9:54 pm
[...] Resources: Wikinomics’ take on ‘free’ for business; Why VC’s love Freemium (particularly for the 9 point [...]
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