FREEby Chris Anderson HOW TODAY’S SMARTEST BUSINESSES PROFIT BY GIVING SOMETHING FOR NOTHING REPORT BY IVAN LEE TS STRAMA AGSB
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?
Objectives What is FREE? Brief history of FREE as described by Chris Anderson The Psychology behind FREE! How FREE! is possible Introduce Freeconomics.
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
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
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?
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
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
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
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
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