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really liked it
Goodreads says that I’m “finished with Free”, but I disagree. I love Free, and while listening to this audiobook (which was free), I was surprised by how much Free I’d taken advantage of in my life without even giving it a thought.
Chris Anderson says that my generation inherently understands (and to a point, expects) Free, and I’m proof of that. Hotmail, Yahoo!, Google, oh my! The internet is like the Free capital of the universe. I’ve never given a single thought to how these companies could g
it was ok
Disclaimer: I won a free copy of this book from Goodreads First Reads.
Free is a pretty comprehensive overview of the free business model. Anderson first outlines the history of free, the economic and psychological reasons behind free, the reason that free can exist in today’s digital world, and the ways it differs from so-called “20th century free.”
Anderson’s points are well made, complete, and interesting to read. However, I do believe that he ignores and/or understates the full implications o
In Free: The Future of a Radical Price Anderson insists that the way to profit online is to give products away. Of course, the intent of such a proclamation is to startle people unfamiliar with online dynamics — which makes you wonder what tiny portion of his audience is actually startled. Even people from established industries such as newspapers and network television already know that their products only *appeared* to be free or nearly free to the consuming public. Their product certainly di
Anderson acknowledges that “Free” (yes, he capitalizes it throughout the book) isn’t really free and it is not really new, but then says to his reader that he’s still going to call it Free– as well as new and radical — anyway. So, what are the ostensibly new, free business models?
* Direct Cross-Subsidies: buy one can of soup, get one can of soup free; get a free razor, pay for the razor blades; get a free phone with your lifetime phone plan.
* Three-Party Market: Also known as advertising. The 50 ct daily newspaper isn’t completely free, although the alternative weekly or daily often is. The 50 cent cost of the daily, though, never sustained the true costs of producing the paper. So what does? The advertisers. It’s true, a lot of consumers don’t think like that. When they get their Redbook magazine subscription for $15, they’re not really thinking about the advertising. But surely, Redbook’s business stakeholders *are* thinking about advertising — and always have been.
* Freemiums: this is a business-model that is, indeed, more well-known online. A version of it can be seen when you get a weekly paper free at the newstand, but pay for it’s delivery to your doorstep. Another version is free tickets for students, but paid tickets for the employed. It’s an old model, it’s just exploited far more online.
How does free work online? You get a stripped down version for free, but if you want more features, then you pay. The classic example is Flickr. The principle of the longtail pulls in thousands of users who would never pay even $25/yr to upload photos. The more hardcore photographers — remember, a group that has grown manifold with the introduction of digital cameras — are the people will feel constrained by the limitations of a free Flickr account. Hence, they pony up for more features. Flickr is free to cheapskates, comes at a very affordable price to power users.
Anderson exclaims that Flickr “doesn’t even use advertising.” But this isn’t exactly true. Anderson appears to have been blinded by the very circuitous path to payment that is actually part of the psychology of free. It’s not just that power users are paying for premium accounts, subsidizing the cheapskates. Flickr is also supported by advertising. How? When a user uploads a photo, information is pulled out of the EXIF data embedded in digital images. That data is used to create a link to the camera she used to take the photo. That link to, say, a Canon camera goes to a product listing page. When you click another link to find out more details or read reviews, you end up at Yahoo’s shopping pages. Voila! Guess who’s paying? Advertisers. Yahoo owns Flickr, and it owns it in order to drive consumers to its shopping pages where they present millions of eyeballs to advertisers.
Flick is both a Freemium model *and* a Three-Party Marketing model. Flickr *is* supported by advertising, it’s just not an obviously direct path.
Thus, the biggest take-away for business developers and executives is that circuitous is the word of the day. Someone really is paying, and may be paying a great deal; the path to that payment is circuitous. Making money in such an environment requires a lot more creativity and not just a steel constitution, but a titanium one. The titanium constitution would be necessary for managing the psychological stress and risks involved in cooly calculating that such circuitous paths will not only make money, but won’t be a nightmare to manage in terms of being able to monitor whether your gamble is truly paying off.
* * NonMonetary Markets: Anderson’s favorite example of a nonmonetary market is Wikipedia. The claim is that the nonmonetary economy works according to altruism. He isn’t persuasive at all. For instance, Anderson’s other examples make it clear that altruism isn’t operative. You exchange your labor for access – to get something, not out of the goodness of your heart. Google gives away its 411 service in order to gain access to your labor: you are giving Google data which will help them improve their voice recognition service. It’s “free” only because the psychology of free works on you – and quite well on Anderson as well. Google expects to make money *later*. It’s using your free labor, so it doesn’t have to pay people now, to make money later.
As I mentioned above, anyone making decisions about long-term strategies like this is going to need a titanium constitution.
As you can see, though, there’s nothing new or free about these models. Someone is paying, somewhere, somehow. What might be new is that the path to payment is more circuitous. But I don’t think that’s true either. Have you ever wondered how Reader’s Digest Sweepstakes makes money? Well, it certainly isn’t just because it’s a marketing gimmick to increase subscriptions. That’s part of it, but that’s a lot of effort to go through, just to get more eyeballs to their pages so those eyeballs can read advertisements.
Reader’s Digest is also collecting data. Sure, there’s the obvious marketing and demographic data. If you buy a Redbook subscription are you also the kind of person who also orders a Sports Illustrated?
That’s always good information if you’re a business product developer, a marekter, etc. But more, Reader’s Digest historically created what was called the ‘Sucker List.’ If you don’t respond to their tempting million dollar sweepstakes, you’re not much of a sucker. Valuable data: you’re not worth the time of companies that need you to be a little bit of a sucker in order to buy their products. If you haphazardly and quickly fill out their sweepstakes form without buying a sub — remember, no sub required! — then you are a bit more of a sucker. They also know you’re quick to make decisions. Perhaps even spontaneous. If you wait on the decision but eventuallyl enter without buying a subscription, you’re not quite as quick and freewheeling as others. If you fill out the sweepstakes and buy a subscription because somehow you imagine this will increase your chances at winning, you’re a bigger suckers than people who don’t buy a sub. If you buy multiple subscriptions, you’re a bigger suckers. If you keep filling out the sweepstakes and keep ordering subscriptions as you go through the sweeps process, you’re yet another level of sucker. And so forth.
All of this is valuable information. Your name goes on the sucker list and those lists are sold depending on the suckers a company wants to target. Spammers do something similar when they track who opens the mail, who opens and clicks a link, who tries to use a link in the email to unsubscribe, and so forth. People who are responsive to spam by opening it to begin with are more valuable than people who never open it at all. The list of those kinds of email addresses is more valuable to spammers.
Is there anything new about what Anderson describes in his book? Well, Anderson wants you to think so, but I don’t think he’s persuasive. Anyone with a little bit of business acumen and time to reflect on their business models, already knows about freemiums and three-party marketing models. It’s a useful book if FUD — Fear, Uncertainty, and Doubt — has infected your C-level execs. That is, you can use it to help you walk your FUD-infected execs through the various models, identify them with some useful keywords, and assure them that there’s no new and scary here at all.
The book is also useful to put you in touch with a brief overview of the psychology of free. This is probably the most important thing business developers need to understand today: why does (not really) free work, why do people think they’re getting something for free or at a bargain when they’re not, and how can we exploit that to create products and services that make profits? How can we get people to do work for us (exchange their labor for something we give them for free) without them realizing or caring that they are giving away their labor-time and we are making a profit? It worked before the Web, too: gas stations and fastfood restaurants do it when you pump your own gas and draw your own soft drinks.
As I said a couple of years ago: Web 2.0 is really just Tupperware 2.0. The longtail was in effect with models such as Tupperware and Avon. Those business models are still around, and they only fell out of favor as the companies struggled to deal with the loss of their nearly “free” labor: housewives. Why? Because the labor they used to exploit the longtail, homemakers, went away as women entered the labor market in droves. Avon floundered for awhile as it figured out how to take advantage of working women instead of relying on homemakers who wanted to make extra money. Now, it targets working women who need to supplement their incomes.
The longtail was never new. What was possibly new was that the capital costs required to launch such a venture has dropped significantly. Similarly, Free isn’t new either.
In sum: Free? Nothing is free. It really isn’t. In a capitalist market economy, someone is paying. Even so, I’d recommend you check this book from the library. It’ll be free. Naw. The books are paid for by taxes. So, read this book to understand the rhetoric and psychology of free. Once you understand how we are tricked into thinking things are free, you too will be able to exploit that psychology for fun and profit!