FREE: The Future of a Radical Price

Free is a well-written book by Chris Anderson, the editor of my favorite magazine, Wired. The style and tone of the book is much like the long articles in Wired magazine. If you like those long articles and are interested in pricing models of various businesses, you will like this book. If not, it may be too much detail. (Some have quibbled with his use of Wikipedia for research, to me, it fits in with his thesis that information wants to be free, and takes nothing from his work.)Anderson's thesis is that "making money around free will be the future of business." In the digital world, marginal costs are near-zero, in contrast to the world of "atoms." As he states in his book, for many, especially the generation that has grown up with the internet, "the response is usually `And?' It seems self-evident to them." This was exactly my reaction. Nevertheless, the book was worth reading.My favorite key points:"Between 1980 and 1990, the world's population grew by more than 800 million. But by September 1990, without a single exception, the price of (various metals) had fallen, and in some cases had dropped through the floor." Great argument against all the commodity bulls.The same "genius" that predicted commodity prices to go up also predicted famines of "unprecedented proportions." This looks ridiculous now, with the massive obesity epidemic. The author slyly notes this genius still received a MacArthur Foundation Genius Award. Great point about how so-called experts are awful at making accurate predictions."Simon complained that, for some reason he could never comprehend, people were inclined to believe the worst about anything and everything; they were immune to contrary evidence just as if they'd been medically vaccinated against the force of fact." I often wonder about this myself. In a slow economy, we read all the doomsayers saying, "we're in a big hole." Yet we always come out of it in time.More data for the scarcity crowd: "Today basic necessities such as clothing can be made so cheaply as to be essentially disposable." The author explains that in 1900 a man's T-shirt cost about $1 wholesale. Today, that same T-shirt still costs about $1 wholesale, but $1 today is worth about 1/25th of what $1 was worth 100 years ago. Transistors are even more amazing: in 1961, they cost $10, 2 years later $5, and now 0.000015 cents each.The author discusses what I have called "The Encarta Complex:" the decline of the encyclopedia industry by Microsoft CD-ROMs, and subsequent total destruction by Wikipedia. In 1991, the market was a $1.2 billion industry. In 1993, Microsoft launched the Encarta CD, and by 1996, the market had shrunk in half to $600 million. In 2009, the market was effectively zero, as Microsoft stopped selling Encarta altogether, as Wikipedia was free.So is all of industry doomed to failure, as all prices approach zero? How do businesses compete with the inevitable downward pressure on prices? Anderson answers: "But the short form is that it's easy to compete with free: simply offer something better or at least different from the free version. There is a reason why office workers walk past the free coffee in the kitchen to go out and spend $4 for a venti latte at Starbucks - the Starbucks coffee tastes better."Because the dinosaurs like newspapers and telecom companies don't recognize this reality, and don't want to change, Anderson concludes: "Your voice mail inbox is full" is the death rattle of an industry stuck with a scarcity model in a world of capacity abundance.

Chris Anderson's 2006 book The Long Tail will be remembered as one of the most influential tech policy books of the decade. It changed the way we talk about the digital marketplace and it instantly garnered a huge audience outside of the nerdy world of Internet policy. While Free: The Future of a Radical Price will forever live in the shadow of The Long Tail, it too is an important book and in many ways it is a much better one.In The Long Tail, Anderson tried too hard to invent the latest business theory du jour, and in doing so he went much too far in proclaiming that, as the subtitle of the book argued, "the future of the business is selling less of more." That's just not true. While there's certainly a lot more action in the long tail than ever before since it is so much more accessible, that does not mean the entire future of business lies in "selling less of more." To the contrary, the fat head of the tail is just as profitable as ever.Free certainly contains some of the flamboyance on display in The Long Tail, but Anderson has matured as a writer and is now far more willing to point out the limitations of his theories in a business sense. He does a splendid job in Free of creating a taxonomy of free-oriented business models to guide discussions about these issues. And he explains how "free" can be part of many different business models and strategies. His historical treatment of the issues is outstanding and includes many entertaining examples of how these "free" strategies have been used over time to offer innovative new goods and services.The reason his book is important for Internet policy discussions is obvious: "free" is increasingly viewed as a threat to many existing companies, industry sectors, and traditional media business models. For example, battles about the future of journalism and search engine indexing of news sites are obviously tied up with battles over "free." And, it goes without saying that the traditional entertainment industry business models are increasingly challenged by "free" as many struggle to adapt to the new realities of the online world, in which "free" (primarily advertising-supported and "freemium" models) seems to be the only model with any legs.Much like my top pick for 2008 book of the year, Jonathan Zittrain's The Future of the Net and How to Stop It, Chris Anderson's Free is the most important information technology book of the year because it is the one we will still be talking about the most a decade from now. However, unlike Zittrain's book and thesis, which I think will be largely discredited in another ten years, Anderson's book will likely be viewed as an important and lasting contribution to the field.I rated Anderson's "Free" as "The 10 Most Important Info-Tech Policy Book of 2009" over at the Technology Liberation Front blog.

I have had this book awhile and, really kick myself for not reading it sooner. It is outstanding. Anderson is able to debunk all the chestnuts out there around free as well as spend the time to give you some history lessons on free. He also experimented with his own ideas on how to place the product out there for free using various methods he put forward. Very insightful stuff . I especially appreciated his 10 Rules of Free on pp 241 and the review of the range of conversion rates one can expect from freemium on pp 247. The key insight for me is his comment ( compressed and paraphrased by me) that:Price will fall to the marginal cost (in the digital bits case, free) unless the provider has a monopoly and/or enjoys the network effect such as Microsoft (Office docs) and Facebook. This supports a winner takes all effect, driving competitors to very low numbers. Facebook can not charge for new members because it has value in the network = linking new people all the time. So they will generate revenue from scale - losing with 99 % of the users and making it from a small % of ad revenue. ( or perhaps - selling stock!)I see that Guy Kawasaki and Tim Ferris both used ideas from Anderson in their recent promotions. Guy generated more "reputation" currency by offering free downloads of the Macintosh Way to people who "liked" his new book facebook page. Tim Ferris drove buys of the new 4 Hour Body , by offering a pdf of the 4 Hour Workweek to those who bought the new book. Tim drove his book to the top of Amazon very quickly = increased sales and reputation.This is the best treatment of free and freemium out there. If you buy this very readible book, read and digest it. It contains numerous money making ideas. Do not treat it lightly! You can get the audiobook still free at Chris' blog (long tail) :

A must read to understand the concept of free. In depth research by the author!

This book has shown me on how free can give a lot of benefit to me. As I am planning to write and publish a book, I would plan to give it for free, I guess. Big thanks to the Author. Cheers!

Das Internet hat die Geschäftsmodelle der Musikindustrie und der Medienwirtschaft auf den Kopf gestellt, die Bücher- und Filmbranche befindet sich noch im Umbruch. Wer mit Journalismus oder Software sein Geld verdient, muss sich umstellen. Chris Anderson beschäftigt sich in diesem Buch mit der Frage, mit welchen Waren und Dienstleistungen in Zukunft Geld verdient wird. Er bringt dazu brillante Einsichten und Vorschläge.Der Autor argumentiert, dass durch den schnellen Informationsaustausch im Internet seit der Jahrtausendwende ein Überfluss an Daten entstanden ist. Der Wettbewerbsvorsprung früherer Zeiten schrumpft auf ein Minimum, alles wird nachgebaut, abgeschrieben, kopiert. Andererseits ergeben sich ganz neue Möglichkeiten zum Großverdiener. Physische Produkte und persönliche Dienstleistungen haben nach wie vor einen Wert, aber nur, wenn sie der weltweiten Konkurrenz standhalten. Wer sich darauf einstellt, kann gewinnen.Anderson bringt als Beispiel Musiker in der Volksrepublik China, deren CDs ohne Erlaubnis von den Kunden vervielfältigt werden. Statt rumzujammern, was sie eh nicht ändern können, nutzen die Stars diesen Effekt, um ihre Popularität zu steigern und leben stattdessen von Live-Konzerten und Fanatikern. Das geht auch. Wie Linux und Wikipedia zeigen, ist es sogar möglich, aus komplett kostenlosen Inhalten ein Geschäft zu machen.Große Konzerne leben auch von der Verbreitung unbezahlter Dienstleistungen. So konnte sich Microsoft etablieren, weil Kunden deren professionelle Office-Software für den privaten Gebrauch kopierten, auch in manchen Ländern waren die unautorisiertem Kopien vorherrschend. Indem so ein Standard geschaffen wurde, konnte Microsoft bei den zahlungsfähigen Kunden abkassieren. Auch Webbrowser und Suchmaschinen werden ohne Bezahlung genutzt. Apple verschenkt neuerdings Betriebssysteme und Office-Software und lebt von Verkauf der Hardware.In seinem eigenen Unternehmen, das Anderson in seinem Nachfolgebuch "Makers" beschreibt, verkauft der Autor sogenannte Open Source Hardware, d.h. Geräte mitsamt Bauplänen, die jeder nachbauen darf. Trotzdem oder gerade deswegen ein gutes Geschäft mit über hundert Mitarbeitern.Fazit: Wer in einer Branche arbeitet, die vom Internet umgewälzt wird, und das sind mittlerweile fast alle, ist gut beraten, mit Hilfe dieses Buchs das Geschäftsmodell in Frage zu stellen und zu aktualisieren.

This book was recommended to me by a mentor, specifically to consider sharing thought leadership material via social media. I found it really interesting and full of great examples

The marketing bullies wont like this book, because it tells them that they have to give things away for free. But, they're missing the point: there is method to the madness. A great, inspirational, easy read. Only catch: he doesn't quite practice what he preaches. The again, I've read his work online (for free) for years. So here is a way for me to repay his efforts. ;-)