Tuesday, January 29, 2008

Freeconomics

Is the saying "there's no such thing as a free lunch" becomming obsolete?

There is a clear trend, especially on the Internet, that more and more services are free of charge. This has become possible mainly because the marginal cost of adding yet another user to the service is essentially zero.

Take some time and watch this video with Chris Anderson, author of The Long Tail. (Sorry, no embedded version available.)
Update May 22nd, 2009 - sorry, the video I linked to above is not available any longer, try this link instead!
He discusses the drivers behind the "free" business model, and especially how the decreasing marginal cost of processing power, storage and bandwidth has transformed the Internet.

This is great for the majority of users. As we say in Sweden - gratis är gott.

I almost wrote "many people will never sign up for a service that would cost them, regardless how small the fee might be". This is not entirely true. There is plenty of examples where people pays for services, and are happy with that.

And in many cases people will continue to pay for high quality content and services. The "free" business model will not take it all.

But I still believe that the trend of free services are here to stay. And many free services are good. Really good. You probably uses a number of free services yourself.

Of course any (or at least most) services or products that are offered for free, without any other revenue stream, are doomed in the long run. If the business is not run by a true philanthropic there is probably a business model that will monetize the business one way or another in the background.

There is a number of business models that might apply. On Chris Anderson's blog you can read this post for some ideas and discussions.

Some of the models that can be identified includes:

  • Ad revenues
    Very common of course. With several sub-types that can be outlined.
  • Get bought
    The dream of many start-ups. Provide a service, get popular and get bought (for big money) by someone. Yes, we have seen this several times. But a truly gamble.
  • Freemium
    This is my personal favourite in terms of attitude change. As opposed to (earlier) models where you could get a demo version or a version with very limited functionality for free, the Freemium model provides a free, fully functional, version for the majority of users. But for a small group of power users some extra features are unlocked for a fee.

Now, what about this blog? Oh yes, I do have ads on it. And for this post I created an Amazon Associates account. So please click on the ads and buy the book from the link above...

I truly doubt that I will make any revenue though. With a bit of luck I might cover the fees for the domain name and web hosting. Maybe.

What do you say? Would you pay to read it? Or pay to get the posts 24 hours before non-paying readers? Probably not (or? - let me know otherwise...).

The value for me to blog here is something else. And as you have read to the end of this (free) post, you hopefully found some value in it.

Now off to a not-that-free lunch.

Labels:

3 Comments:

Blogger Jake said...

Freeconomics is excellent stuff. I wish I could see the slides better. I don't suppose you have them anywhere. I'm a big fan of Anderson's theories; he thinks like I do, i.e. like a converted economist.

Thanks for sharing this.

February 5, 2008 at 1:19 AM  
Blogger Johan Myrberger said...

Jake,

sorry - no.

However I did find a set of slides. Probably an earlier version of a similiar talk.

Look at Chris' post at http://www.longtail.com/the_long_tail/2006/10/the_economics_o.html - you'll find a download link here.

In this version I very much liked slides #21-25. Might merit a separate blog post.

HAve you tried ask directly for the slides?

February 5, 2008 at 9:02 PM  
Blogger Jake said...

Thx, and nah, I haven't asked for the slides. I could look around, but that sounds like work.

Good stuff, but he fell apart a bit toward the end when he hit technical issues. Not that I blame him, I just found myself wishing to hear the content he had in his head.

February 5, 2008 at 9:40 PM  

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home