Wednesday, September 09, 2015

Free: The Future of a Radical Price

Is giving away something a valid business model? Chris Anderson attempts to show how "free" business models can work. The book contains a lot of interesting anecdotes, but some of material already seems dated, just six years after the publication. However, the "dated" facts actually serve to help his thesis. Some concerns were echoed about facebook's business model. Wouldn't monetizing cause them to lose the eyeballs they had built up? Apparently not. Facebook has managed to build up an extremely profitable business. Google is still profiting by giving away even more (and selling a little bit.) Freemium models where only a minute percentage of customers pay are working well. Online music streaming services have caught on.

With costs of distribution getting smaller and smaller, it becomes easier to have a distribution model where most people get the digital product for free. Building up a large network of free users can help make a platform viable for paid users. Psychologically, mircropayments have not worked well (since there is a huge cliff between "free" and "pay") However, instead of charging everyone 1 cent, 1 person can be charged a $1 and everyone else can get it free. This allows building a large network or following (which also adds value to those who pay.)

The book is an interesting read, with many ideas that now seem obvious. Free can be a promotional tool as well as a valid business model.

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