When the marginal cost of producing something tends to zero, the smart
thing to do is to treat it as zero and get ahead of the competition:
give it away for free in order to sell something else. You can build
whole businesses around giving stuff away for free. Chris Anderson,
Editor in Chief of Wired magazine and author of “The Long Tail”, puts
his money where his mouth is. He’s giving away the audio version
of his new book, “Free: the Economics of Giving Stuff Away”. In this
talk he shares some ground-breaking ideas about making his next book
almost free.
I highly recommend a listen to Chris Anderson’s session on IT Conversations (awesome resource if you haven’t discovered it yet). It’s 5star rated & well worth a listen if you’re at all interested in gaining strategic advantage in an economy gone wild. Do YOU think business and even macro economies are behaving in the orderly fashion that you were taught to expect in Economics 101?
If it all still makes sense to you, and you can confidently plot your trajectory for the next 5years for your business.. then consider yourself lucky, and don’t concern yourself with all these crazy new ideas. 
BUT if you have been in line for turbulence, finding the actions of the heaving global market impacting locally, finding you’re not getting the ‘bang for your buck’ from advertising that you used to, and frankly a little disturbed by the impact of technology on almost every facet of society. You could choose to ignore it & ride out the storm. Or you do have the opportunity of big wave riding and grabbing the advantages that this time offers.
It’s happening TO you anyway, you may as well have it working FOR you.
I read Jeremy’s take on ‘free’, and thought it was a good opportunity to continue the conversation, because for us as consumers this is WONDERFUL, but what of the business application?
The VC’s love it, some businesses are thriving on it, Freemium what in the world is that?!
Ease and breadth of low.cost distribution online is worth harnessing; but whether you use it as a core business strategy or as a potent marketing application, will define your approach and risk exposure. Without a clear strategy to use ‘free’ to leverage the services and products you can sell (or you have a rolling flood of venture capital) this could be a dangerously exciting way to watch a company crash.
The fundamentals that are taught in Economics 101 do still apply (whew). “Create something of value that people will pay for, and you’re in business”.
Even so, this new.spawned hybrid, freemium, is worth taking seriously, because there are extraordinarily profitable avenues for its application within volatile market conditions. Attention Economics is in play now, and this one of the in.game strategies, but it isn’t for the faint.hearted or for haphazard practice.
If this idea has found some traction with you: research the companies who have applied the freemium model. Experiment with it in a trial, or smaller division of your business perhaps. It may just prove to be the unexpected breakthrough strategy your business has been waiting for!
______________________________________________________________________ Resources: Wikinomics’ take on ‘free’ for business; Why VC’s love Freemium (particularly for the 9 point checklist before diving in) ; the caveat to the limitations with free models; and of course Chris Anderson’s podcast on IT Conversations. It’s worth looking at the entry on attention economics as well, to contextualise much of what we’re seeing happening and may not have seen from a macro level.
For me a great example is the demise of the record labels who fought and are still fighting mp3 downloads. Some of them have finally started to work with distribution partners like Amazon where the music doesn’t have DRM where its only allowed to play on like 3 machines.
Nowadays it’s the norm to give away some initial music and then if people dig it, you record some more stuff that people potentially will pay for - supply and demand.
So by giving stuff away for free you are getting people to try it and if it’s good, creating a demand that didn’t exist before.
Its kind of like those windscreen washers at the traffic lights in joburg - they give you a free windscreen wash to get our attention, and most people cannot help reciprocate with a donation. Except your points are cooler:)
Thanks Uwe - great point. The entertainment industry is being forced to evolve, and picking up the hybrid models is not a luxury but necessary for survival.
Must be fascinating for you being in LA at the heart of the changes now.
Yeah, it’s interesting over here. We handle EMI, so we see what’s happened/ing 1st hand.
EMI?! good gracious Uwe, good luck! We’d love to be able to get a peek on what’s coming out of the strategies that are in play at the moment (if you ever have the time, and obviously when it isn’t sensitive anymore). Have you done any podcasts or clips on this yet that we can tap into?