In my Wednesday roundup entry, I said I was ruminating about the limits of free as a business model, which has bubbled up again due to the release of Chris Anderson’s book Free (full text available free, for a limited time, on Scribd).
I haven’t read it yet, though I think we’re familiar with the basic concepts (many of which are laid out in his Wired article from last year); The emergence of online content and distribution has opened up a lot of products and services that are essentially free to a good chunk of customers.
There’s currently a hubbub going on around the book — as I am not an economist and have no MBA (which I’m sure will become evident), I will just share a few aphorisms that I think are relevant to the free debate:
* It’s not free, it’s free-ish: I think that many folks (including Anderson) are hung up on the word “free,” when we’re simply talking about “subsidized,” either by other parties, or yourself (as in deferred payments on future purchases.)
As Anderson himself states in this blogged response to some criticism, it’s not about a free world, but a freemium one. In his words:
“Freemium is the inversion of the traditional free sample. Rather than giving out few percent of your product away for free as marketing, hoping to sell the rest, you give away most of your product for free as marketing, hoping to sell to a minority.”
In freemium models, the upsold pay the freight for the unsold.
That leads us to…
* The first and guiding principle: TANSTAAFL — There ain’t no such thing as a free lunch. Somebody, somewhere has to pay. It might be advertisers. (Then again, in this climate, it might not.) It might be you, in terms of attention, work or time. And it might be someone far enough removed from you as to be invisible (to you).
Looking at Craigslist, for example, the paid job and real estate listings in select cities subsidize everyone else’s use of the site. Even if you never use the job and real estate listings, you’re part of the dynamic: The free stuff builds the audience for the paid stuff; the paid stuff subsidizes the free stuff.
(Also, we can’t take free for granted. Even online, there are still hard costs for bandwidth and infrastructure — people are still watching the YouTube monetization question very closely.)
* Free for the sake of free is for hobbies and starvation. Clearly, the seller has to benefit from giving stuff away for free: Leaving out psychic benefits (this is business, after all), there’s got to be some sort of payout down the road, whether you’re using free as a loss leader, reputation builder, attention grabber, or audience accumulator.
* Free works. “Free” causes us to do funny things. As Dan Ariely’s Predictably Irrational showed, free breaches psychological barriers, and causes us to do strange, silly, different things.
* Free doesn’t work for everything. Clearly, it doesn’t work with a lot of physical goods (the whole “bits vs. atoms” thing) — not everything fits into the “give away the razor and sell the blades” model. Even looking at bits, in the already pretty free realm of shareware and freeware, we’ve seen software creators who just can’t sustain that model. (Not to say that they would have been able to sustain a paying model, either — just that free isn’t a panacea.)
* Free doesn’t work for everyone. We’ve seen free work for folks like John Scalzi, Cory Doctorow, and Radiohead. However, not everyone is John Scalzi, Cory Doctorow, or Radiohead. I’m not convinced that free scales to infinity, even with low to no marginal costs of online distribution. After all, there’s still a limit to attention, and it’s possible that we’re in a “free” sweet spot right now because of the pendulum shift from aggregation to disaggregation.
Anyway, I suppose I should actually read the book at some point. To anyone still blowing a gasket over this whole thing, I suggest using repeating “TANSTAAFL” as a calming mantra to help put things in perspective.
Got your own thoughts on “Free”? Leave a comment. It’s free!
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