Chris Anderson, Editor of Wired magazine, is a major proponent of the value of “free” in today’s digital marketplace. His book Free: the Future of a Radical Price, sets out the basic arguments. In the digital economy, pricing will gravitate toward free in three areas of the web based world, storage, processing power and bandwidth. And, when prices hit zero, extraordinary things begin to happen. He postulates that companies ought to be able to make huge amounts of money “around” the free thing – google gives away search and makes money on advertising, for example.
MALCOLM GLADWELL
In an article for the New Yorker, reviews “Free” and takes issue with Anderson’s use of YouTube as an example of the power of making money around what is free (downloads in this case).
Gladwell’s point – YouTube has never made a profit. He makes additonal points that consumers are flooding YouTube with content, it will never make up in advertising revenue what it has to pay to serve the millions of downloads requested by users every minute. And, that YouTube has to pay for “premium” content from professional producers to attract advertisers. He also makes points about the pharmaceutical industry and power producers and closes with the argument that the New York Times gives away its content for free on its website, but the Wall Street Journal has found that more than a million subscribers are quite happy to pay for the privelege of reading online.
One wonders, has he looked at the advertising on the Times website, or stopped for a minute to consider how much the Times received for selling his contact information or reading habits to their advertisiers?
Gladwell ultimately agrees with one of Anderson’s arguments – the one that seems to run through all four of these authors - that there “IS” money to be made around the stuff you are giving away for free.
“Broadcast television – the original practitioner of free – is struggling. But premium cable, with its stiff monthly charges for specialty content, is doing just fine. Apple may soon make more money selling iPhone downloads (ideas) than it does from the iPhone itelf (stuff)”.
SETH GODIN
The master proponent of tribalism in the marketplace is a bit more pointed in his entry into this debate. His blog post is titled “Malcolm is Wrong”. He is also brief and to the point: People will pay for content so unique they can’t get it anywhere else, so fast they benefit from getting it before anyone else, or so related to their tribe that paying for it brings them closer to other people.
What I glean from this is that there are ways for brands, in what he terms the “attention economy” to embrace Free as a relatively cheap way to get attention. In many ways it is an “attention deficit” economy – if you don’t get attention, you lose. But, brands that get attention, relate to their customers, and provide value can be big winners by thinking more broadly about the opportunities to provide stuff-around-the-stuff.
MARK CUBAN
And then there is Mr. Entrepreneur who picks up on one of Anderson’s claims that the music business is a prime example of the value of free.
“The future of content outside the music industry is exactly what you are now seeing inside the music industry – First they cut the size of their organizations to the bone, then they learn to work with the artists and those willing to pay for music in some form (CD, download, concert, licensing etc).
And they adopt the position – you can have it for free, if that’s how you want it, but you have to come get it where we want you to get it – on our websites. He admonishes marketers to follow the principle “free, but never freely distributed.”
So what is the upshot of all this posturing? It isn’t really an argument. They all agree, at least in part, with Chris Anderson’s point that great opportunities can be created by creating ways to make money around the free stuff that is given away.
Wait a minute! This technique has been practiced in retail for decades! Anderson uses the example of King Gillette, giving away the razor to stimulate sales of disposable blades in 1903 as part of his 2/23/08 post Free! Why $0.00 is the future of business.
Why is there so much attention being paid to the overtures of Microsoft and Google in negotiations with Twitter? Because Twitter has access to huge amounts of information that can be translated into buyer preferences, buying habits and consumer confidence in brands – they have a mountain of valuable information created by a free service.