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The Paradox of Creating Money With Free Services - Review
Free – The Future Of A Radical Price By Chris Anderson
Annoyed by the piracy of their comedic satirical works, the Monty Python team conducted a real life skit. They created their own YouTube channel and proceeded to usurp the pirates by offering full television quality sketches for FREE! The outcome? An increase in sales of CD’s books etc to the tune of over 23,000%.
The band Radiohead offered their album ‘In Rainbow’ as a free download. They subsequently sold over 3 million copies, surpassing their previous best album sales and a not insignificant financial pay off of 1 million plus concert tickets sold.
Chris Anderson, best known within the Internet Community as the editor of Wired magazine and the author of the best selling book ‘ The Long Tail’ has written an easy to read and quite fascinating book that falls loosely between the categories of Economics, Social Commentary and on the fringes of prophetic philosophy.
Anderson makes some interesting observations that seem paradoxical in the extreme and seem to defy the rules of traditional economics. We live in an age dominated by all things digital. Information has never been more abundant and accessible. Yet, none of us have any additional time to process this tidal wave of sensory bits and bytes. Hence, like a child that’s had too much sugar or an adult drowning in caffeine the attention span and craving for instant gratification borders on the manic.
To compete for the attention of this audience, the purveyors of this content are increasingly embracing Freeconomics. Anderson notes that in 1961 the cost of a transistor was $10, by 1968 the cost had dropped to $1 dollar and today you can purchase 20 000 for that same 1 dollar. As marginal costs of a copy become so low, the price approaches zero. How can this apparent nonsense work?
Storage, processing and bandwidth, the essence of the digital world are increasing in capacity exponentially, so it would appear that the key to monetization is all in the ancillary add-on. The secret to the Freemium business model is simply to attract attention, build relationships, desire, trust and then by default the ever time poor freeloader will upgrade to the Premium service. If that service is Google then the upgrade can be significant. The initial free search and free email account is parlayed into paid Google AdWords clicks, purchases, and any number of monetary transactions.
In summary Anderson states that ‘people are making a lot of money charging nothing.’ Each chapter is written in an engaging and entertaining manner. At time you feel that you’re being teased by the outrageous premise. Yet most of the arguments presented seem to validate his contention that perhaps despite the sage lectures from our elders that there’s no such thing as a free lunch, perhaps there really is!
