FREE: THE PAST AND FUTURE
OF A RADICAL PRICE
Chris Anderson, Wired
The Future, circa 1954


                                                           Signing ceremony
                     ...
What happens when things get free?
“Waste is Good”
Alan Kay, Xerox PARC
       (1972)
“Waste Transistors”
“Waste Storage”




  (Remember “Your mailbox is full”? What
            was that about?)
“Waste Bandwidth”
For the first time in history, complexity is free
Scarcity

           Abundance
The Three Rules of the Long Tail
1. If you can lower the cost of distribution, you can
   offer more stuff/variety
2. “Mor...
Web mail market

            Hotmail launched.
            2 MB free


                            Gmail launched.
       ...
Econ 101

“In a competitive market
     price falls to the
      marginal cost”
“Round down”
  If the unitary cost of
something is approaching
zero, treat it as zero and
    sell something else.
A taxonomy of “free”
 Cross-subsidy (razors and blades/cellphones)
 Ad-supported (media)
  quot;Freemiumquot; (upselling. ...
The New Scarcities


     Time + Money + …

      Attention
      Reputation
The New Economies

             Currency   Conversion
                        mechanism

Attention    Traffic    Ads

Repu...
Redefine the business you’re in
Redefine the business you’re in
Redefine the business you’re in
Intel: “1+1”?   How about “0+2”?
Mobile Phones
   Cross-subsidy models already in place:
Model                        Effect on consumers

“Give away” the ...
What else could be free?

        Mobile Constraints:
 Storage, processing—less free than the rest of IT
 (networks costs ...
Future: Web model?

 Separation of carriage and services
               (aka “dumb pipe”):
       Carriage: commodity pric...
Blog: longtail.com
Nokia World 2007   Free   The Past And Future Of A Radical Price
Nokia World 2007   Free   The Past And Future Of A Radical Price
Nokia World 2007   Free   The Past And Future Of A Radical Price
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Nokia World 2007 Free The Past And Future Of A Radical Price

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Nokia World 2007 Free The Past And Future Of A Radical Price

  1. 1. FREE: THE PAST AND FUTURE OF A RADICAL PRICE Chris Anderson, Wired
  2. 2. The Future, circa 1954 Signing ceremony of Trojan nuclear plant, Portland, Oregon. “It is not too much to expect that our children will enjoy electrical energy in their homes too cheap to meter.” --Admiral Lewis L. Strauss, then Chairman of the U.S. Atomic Energy Commission
  3. 3. What happens when things get free?
  4. 4. “Waste is Good”
  5. 5. Alan Kay, Xerox PARC (1972)
  6. 6. “Waste Transistors”
  7. 7. “Waste Storage” (Remember “Your mailbox is full”? What was that about?)
  8. 8. “Waste Bandwidth”
  9. 9. For the first time in history, complexity is free
  10. 10. Scarcity Abundance
  11. 11. The Three Rules of the Long Tail 1. If you can lower the cost of distribution, you can offer more stuff/variety 2. “More variety” means the ability to satisfy more minority taste, and address more granular markets 3. There’s a lot of “room at the bottom” and all the most interesting things come from the most unexpected places
  12. 12. Web mail market Hotmail launched. 2 MB free Gmail launched. 1 GB free New Yahoo mail launched. Unlimited storage free
  13. 13. Econ 101 “In a competitive market price falls to the marginal cost”
  14. 14. “Round down” If the unitary cost of something is approaching zero, treat it as zero and sell something else.
  15. 15. A taxonomy of “free” Cross-subsidy (razors and blades/cellphones) Ad-supported (media) quot;Freemiumquot; (upselling. Old model: give away 1% to sell 99%; new model: give away 99% to sell 1%) Digital economics (Underlying cost of manufacturing and distribution dropped near zero, as in music) Marketing (free samples to generate word of mouth, multiplied by web’s viral power) Gift Economy (Wikipedia)
  16. 16. The New Scarcities Time + Money + … Attention Reputation
  17. 17. The New Economies Currency Conversion mechanism Attention Traffic Ads Reputation Links > Traffic > Ads PageRank
  18. 18. Redefine the business you’re in
  19. 19. Redefine the business you’re in
  20. 20. Redefine the business you’re in
  21. 21. Intel: “1+1”? How about “0+2”?
  22. 22. Mobile Phones Cross-subsidy models already in place: Model Effect on consumers “Give away” the phones and Carriers only subsidize technology sell minutes and services. that they can monetize, and limit all other uses. Radically limited innovation and high prices. “Bob” Free long distance Fantastic! Effect on the rest of long distance market: Catastrophic! Free off-peak minutes Mixed. Encourages additional use, but results in pricing confusion.
  23. 23. What else could be free? Mobile Constraints: Storage, processing—less free than the rest of IT (networks costs + small device costs) Bandwidth—much less free than the rest of IT (but WiFi can change the game)
  24. 24. Future: Web model? Separation of carriage and services (aka “dumb pipe”): Carriage: commodity pricing Services: free Google 411 Full-featured browser, web-based apps Local VM management Twitter/other SMS-based services
  25. 25. Blog: longtail.com

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