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Report on the book by Chris Anderson entitled FREE!

Report on the book by Chris Anderson entitled FREE!

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  • 1. FREEby Chris Anderson HOW TODAY’S SMARTEST BUSINESSES PROFIT BY GIVING SOMETHING FOR NOTHING REPORT BY IVAN LEE TS STRAMA AGSB
  • 2. Free Things to Think About How some companies can give some products away in order to increase the market for the products that they charge for. The book is meant not to preach the gospel of Free!, but to help readers find a path through an economic reality that has been with us and gathering strength for nearly a decade. Isn’t “Free” a socialist-communist idea?
  • 3. Objectives What is FREE? Brief history of FREE as described by Chris Anderson The Psychology behind FREE! How FREE! is possible Introduce Freeconomics.
  • 4. What is FREE? 20th Century free versus the 21st Century FREE!  Atoms versus bits  Nothing free versus everything [digital] is free  Inflationary versus deflationary Etymology of FREE  Latin: Liber and Gratis (freedom and thanks)  Celtic: Freogan (beloved and friend)  Free = too many meanings
  • 5. The 4 types of FREE Direct Cross Subsidies (Marketing model) Three-Party Market (Ad supported free media) Freemium (Digital economics) Non-Monetary Markets (Gift economy)*All shifts money from product to product / person to person / now to later / monetary to non-monetary
  • 6. The History of FREE! Free is nothing, nothing is Zephirus An economic system based on nothing?  Barter Trade (Close knit groups)  Collectivism – the “YOUNG” gift economy  The Dunbar Number is 150 people max!  Monetary Economy (Goodwill)  19th Century – the birth of market economy  Free reduced to a marketing gimmick  Nation States (Progressive Taxes and Charity)  20th Century transformative mediums  Radio  Corn  Plastics – Is it really cheap?
  • 7. The Psychology of FREE! Free is relative, never absolute Free as having to pay for something, even at minimal The Penny Gap = 0 and everything else Free as waste Free as a Time-Money option Pirates of the Digital World Free is really free
  • 8. How Free is Possible Moore’s Law (Intel)  Faster computing power Mead’s Law  Advocated “wasting” computing power  Technologists job is to make technology cheap  The cheapest delivery system possible: As price drops, there’s advantage to treat them as if it was free... The Real Digital Age  Everything that bits touch is also touched by its unique economic proportion – cheaper, better, faster Information wants to be expensive and free at the same time
  • 9. How Free is Possible Google and the birth of a 21st Century economic model Google: Free is the product philosophy  Miracle of digital economics  Data centers But why go free? The “MAX STRATEGY”  The best way to reach the biggest possible market and achieve critical mass  Google understood its business well enough: Use free to encourage people to spend more time online so that they can make more money out of it
  • 10. How Free is Possible If free is free, who makes all the money?  Craiglist example: erased a $30B industry to generate $40M  The eventual winners are the end consumers  Compliments the capitalist idea (as opposed to socialist- communist idea) – efficiency leads to better prices  Redefining the market: from matching two people to a broader sense of an ecosystem with many parties
  • 11. Freeconomics The new media models for the digital age: Versioning  Freemium is versioning where one is free and others are paid How big is the Free Economy?  $300 Billion?  Definitely hard to calculate... The Freeconomics  Joseph Bertrand: “In a competitive market, price falls to the marginal cost” = Free is inevitable  The new monopoly: Network Effects where “monopolists” like facebook do not have pricing power  Every market is different – making money out of Free is a matter of creative thinking and constant experimentation  Freeconomics – money becomes secondary to attention economy and reputation economy
  • 12. So now you know...