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4 out of 5
by
Blog on Books
from
Los Angeles, CA | Mar 29, 2010
Three years ago, Chris Anderson set the world on it's ear with his first book, The Long Tail; the book that first addressed the marketing phenomenon brought about by the internet, of selling more of less. As editor-in-chief of Wired magazine, Anderson is rightly seen as one of the top prognosticators when it comes to the convergence of technology and society and it was with that in mind that hopes were running high for his latest undertaking (and one that the world was finally ready for) `Free: The Future of a Radical Price.'
Now many have bemoaned the way in which digitization has worked at cross-purposes to monetiztion with everyone from the music business to print journalism bemoaning the seismic shift in the distribution of their bits and bytes. And while Anderson attempts to explain new models where what was once the product may actually be just the come on for the real product, or what is often described as various forms of `freemium,' the examples (many) and logistics behind them do not always fit perfectly into their round hole. (For example, Anderson takes the bait of those in the music business, arguing that the income shifts from recordings - which can be traded freely - to the revenue capture of concert tickets and merchandising without really acknowledging that there are many who participate in one but not the other.)
All in all, his examples are plentiful (From the TED Conferences to Burger King - quite a range!) and much of what he examines needed the organizing of the light of day. It's just that like many of these models themselves, the paths to sustainable income are not clear nor sometimes is Anderson's analysis. (Athough to his credit, the digital version of the book is widely available for the price in the title.) - Tim Devine
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3 out of 5
by
Julie
from
Canada | Feb 14, 2010
I'm deeply conflicted about this book. Anderson's main argument can be summed up like this: as the price of processing, digital storage, and bandwidth continues to drop, prices -- especially prices online -- will trend downwards as well, towards zero. Free (as in, no price) is not just an option online, it's inevitable. Businesses now have to compete with free on a regular basis, and that competition is increasing. On the other hand, it's possible for companies to build business models that incorporate free, and indeed many already have.
Anderson, an editor at Wired magazine, certainly has seen his fair share of both traditional and online media. And a lot of his arguments make sense. He's especially compelling when talking about "freemium" models, where a minority of paying users (sometimes as small as 5%) subsidize the majority of free users. I'm evidence of this myself: I have paid Livejournal and Skype accounts, while I use free web hosting for my blogs, watch free videos on YouTube, connect with my friends for free on Facebook, and subscribe to countless free podcasts. Anderson lists 50 business models at the end of his book that incorporate free in some way, all of them currently in effect and making money. So I don't want to argue with him on that count.
My problem is with the core assumption of his book, that processing power, storage, and bandwidth will continue to improve forever (and thus become forever cheaper), according to Moore's law. Moore's law has held for the last 40 years, true, which is why your cell phone has more computing power than a room-sized computer from 1970. But just because a trend has continued so far doesn't mean it will always continue, a fact that rings bitterly true to anyone who recently believed "housing values always go up." Sooner or later, computing power is going to reach its zenith and bandwidth will reach some practical maximum. It might not happen for ten years or a hundred years, but it's bound to happen. And when it does, all those businesses built on "free" are going to be in for a rude awakening. While Anderson ably rejects many objections to "free," he doesn't touch this one, and I find it a glaring omission in an otherwise extremely well-research and persuasive book.
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3 out of 5
by
Matt
from
Columbia, MO | Feb 2, 2010
I liked this, and as little as I'm qualified to judge books that talk about economics, I thought it was a really smart.
The basic thesis, as I understand it, is to examine the different kinds of free in economic terms, and also to look at the way the introduction of free changes the marketplace. Both ideas are pretty interesting, as it turns out-- as a reader, I'm more drawn to the wonky stuff about how markets respond to free, but I think the other stuff is key to understanding just which free you're talking about.
The book itself was a little different than my usual reading: there are a fair number of charts and sidebars here, and as a reader, I'm not super-comfortable with that. I never know when in my reading I should be trying to ingest the info presented as a sidebar. But really, that's me.
Also, the tone of breathlessness that I take to be the hallmark of the Wired style is in full effect here. I want to call it hype, but that would suggest it's uncritical, which it's not, at least not entirely. But it is a weird glossing, running momentum that I remember from the magazine that feels a bit like technological darwinism, the sense that you don't need to get with the program, but this train is leaving for the future so you'd better get on board (to mix metaphors). There is, in this book, then, a kind of subject-less force that is almost a dialectic driving things, which I think is maybe obscuring some of what is happening here.... it's interesting because it might be a perfect match, to talk about markets and tech innovation, because both lend themselves to these ideas of invisible causes and etc. In both cases, I find myself a little suspicious and want to know who is doing these things.
It does offer an interesting rationale for a lot of things, maybe most notably what is happening with file sharing and piracy, and offers what I think is maybe the most thought out projection I've seen of where things are likely to go from here, in a economy that fully integrates "free bits."
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3 out of 5
by
Kelley
from
Norfolk, VA | Dec 6, 2009
In Free: The Future of a Radical Price Anderson insists that the way to profit online is to give products away. Of course, the intent of such a proclamation is to startle people unfamiliar with online dynamics -- which makes you wonder what tiny portion of his audience is actually startled. Even people from established industries such as newspapers and network television already know that their products only *appeared* to be free or nearly free to the consuming public. Their product certainly didn't appear to be free to advertisers. And if they didn't know that or recognize the significance, then they surely know it now.
Anderson acknowledges that "Free" (yes, he capitalizes it throughout the book) isn't really free and it is not really new, but then says to his reader that he's still going to call it Free-- as well as new and radical -- anyway. So, what are the ostensibly new, free business models?
* Direct Cross-Subsidies: buy one can of soup, get one can of soup free; get a free razor, pay for the razor blades; get a free phone with your lifetime phone plan.
* Three-Party Market: Also known as advertising. The 50 ct daily newspaper isn't completely free, although the alternative weekly or daily often is. The 50 cent cost of the daily, though, never sustained the true costs of producing the paper. So what does? The advertisers. It's true, a lot of consumers don't think like that. When they get their Redbook magazine subscription for $15, they're not really thinking about the advertising. But surely, Redbook's business stakeholders *are* thinking about advertising -- and always have been.
* Freemiums: this is a business-model that is, indeed, more well-known online. A version of it can be seen when you get a weekly paper free at the newstand, but pay for it's delivery to your doorstep. Another version is free tickets for students, but paid tickets for the employed. It's an old model, it's just exploited far more online.
How does free work online? You get a stripped down version for free, but if you want more features, then you pay. The classic example is Flickr. The principle of the longtail pulls in thousands of users who would never pay even $25/yr to upload photos. The more hardcore photographers -- remember, a group that has grown manifold with the introduction of digital cameras -- are the people will feel constrained by the limitations of a free Flickr account. Hence, they pony up for more features. Flickr is free to cheapskates, comes at a very affordable price to power users.
Anderson exclaims that Flickr "doesn't even use advertising." But this isn't exactly true. Anderson appears to have been blinded by the very circuitous path to payment that is actually part of the psychology of free. It's not just that power users are paying for premium accounts, subsidizing the cheapskates. Flickr is also supported by advertising. How? When a user uploads a photo, information is pulled out of the EXIF data embedded in digital images. That data is used to create a link to the camera she used to take the photo. That link to, say, a Canon camera goes to a product listing page. When you click another link to find out more details or read reviews, you end up at Yahoo's shopping pages. Voila! Guess who's paying? Advertisers. Yahoo owns Flickr, and it owns it in order to drive consumers to its shopping pages where they present millions of eyeballs to advertisers.
Flick is both a Freemium model *and* a Three-Party Marketing model. Flickr *is* supported by advertising, it's just not an obviously direct path.
Thus, the biggest take-away for business developers and executives is that circuitous is the word of the day. Someone really is paying, and may be paying a great deal; the path to that payment is circuitous. Making money in such an environment requires a lot more creativity and not just a steel constitution, but a titanium one. The titanium constitution would be necessary for managing the psychological stress and risks involved in cooly calculating that such circuitous paths will not only make money, but won't be a nightmare to manage in terms of being able to monitor whether your gamble is truly paying off.
* * NonMonetary Markets: Anderson's favorite example of a nonmonetary market is Wikipedia. The claim is that the nonmonetary economy works according to altruism. He isn't persuasive at all. For instance, Anderson's other examples make it clear that altruism isn't operative. You exchange your labor for access - to get something, not out of the goodness of your heart. Google gives away its 411 service in order to gain access to your labor: you are giving Google data which will help them improve their voice recognition service. It's "free" only because the psychology of free works on you - and quite well on Anderson as well. Google expects to make money *later*. It's using your free labor, so it doesn't have to pay people now, to make money later.
As I mentioned above, anyone making decisions about long-term strategies like this is going to need a titanium constitution.
As you can see, though, there's nothing new or free about these models. Someone is paying, somewhere, somehow. What might be new is that the path to payment is more circuitous. But I don't think that's true either. Have you ever wondered how Reader's Digest Sweepstakes makes money? Well, it certainly isn't just because it's a marketing gimmick to increase subscriptions. That's part of it, but that's a lot of effort to go through, just to get more eyeballs to their pages so those eyeballs can read advertisements.
Reader's Digest is also collecting data. Sure, there's the obvious marketing and demographic data. If you buy a Redbook subscription are you also the kind of person who also orders a Sports Illustrated?
That's always good information if you're a business product developer, a marekter, etc. But more, Reader's Digest historically created what was called the 'Sucker List.' If you don't respond to their tempting million dollar sweepstakes, you're not much of a sucker. Valuable data: you're not worth the time of companies that need you to be a little bit of a sucker in order to buy their products. If you haphazardly and quickly fill out their sweepstakes form without buying a sub -- remember, no sub required! -- then you are a bit more of a sucker. They also know you're quick to make decisions. Perhaps even spontaneous. If you wait on the decision but eventuallyl enter without buying a subscription, you're not quite as quick and freewheeling as others. If you fill out the sweepstakes and buy a subscription because somehow you imagine this will increase your chances at winning, you're a bigger suckers than people who don't buy a sub. If you buy multiple subscriptions, you're a bigger suckers. If you keep filling out the sweepstakes and keep ordering subscriptions as you go through the sweeps process, you're yet another level of sucker. And so forth.
All of this is valuable information. Your name goes on the sucker list and those lists are sold depending on the suckers a company wants to target. Spammers do something similar when they track who opens the mail, who opens and clicks a link, who tries to use a link in the email to unsubscribe, and so forth. People who are responsive to spam by opening it to begin with are more valuable than people who never open it at all. The list of those kinds of email addresses is more valuable to spammers.
Is there anything new about what Anderson describes in his book? Well, Anderson wants you to think so, but I don't think he's persuasive. Anyone with a little bit of business acumen and time to reflect on their business models, already knows about freemiums and three-party marketing models. It's a useful book if FUD -- Fear, Uncertainty, and Doubt -- has infected your C-level execs. That is, you can use it to help you walk your FUD-infected execs through the various models, identify them with some useful keywords, and assure them that there's no new and scary here at all.
The book is also useful to put you in touch with a brief overview of the psychology of free. This is probably the most important thing business developers need to understand today: why does (not really) free work, why do people think they're getting something for free or at a bargain when they're not, and how can we exploit that to create products and services that make profits? How can we get people to do work for us (exchange their labor for something we give them for free) without them realizing or caring that they are giving away their labor-time and we are making a profit? It worked before the Web, too: gas stations and fastfood restaurants do it when you pump your own gas and draw your own soft drinks.
As I said a couple of years ago: Web 2.0 is really just Tupperware 2.0. The longtail was in effect with models such as Tupperware and Avon. Those business models are still around, and they only fell out of favor as the companies struggled to deal with the loss of their nearly "free" labor: housewives. Why? Because the labor they used to exploit the longtail, homemakers, went away as women entered the labor market in droves. Avon floundered for awhile as it figured out how to take advantage of working women instead of relying on homemakers who wanted to make extra money. Now, it targets working women who need to supplement their incomes.
The longtail was never new. What was possibly new was that the capital costs required to launch such a venture has dropped significantly. Similarly, Free isn't new either.
In sum: Free? Isn't. Which is why you should read the book so you understand why it isn't and how you can make money anyway.
1 people found this review helpful
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5 out of 5
by
Billy
from
Herriman, UT | Nov 6, 2009
Chris Anderson did a wonderful job with this book. It is fascinating to see the economic trends of today's digital age. What I find interesting with Chris as well is the fact that he is editor-in-chief of WIRED magazine, periodicals being one of the most damaged industries by "free". Chris, however, is embracing free and incorporating it into Wired's business model. He identifies many forms of free in the marketplace and how business models have and are being developed around it. A few reviews and criticisms I've read about the book make me wonder if these critics have even read it! The idea is not some interesting version of radical social reform where we ought to give everything away and frolic in the meadows holding hands. It is a very productive economic innovation that is naturally occuring as the marginal costs of digital information fall to near zero. The trick is simply to identify and accept it, thus opening the creative capacity to find unique and new innovations to traditional business modeling. We simply have to turn the ol' brain back on and think a bit! What happens is a universal win/win. Innovation is more rapid, consumers have more affordable (free) choices for services, and business continues to expand in new ways. There definitely exists an element of creative destruction as some industries are dismantled by new technologies, making way for new businesses or simply requiring old businesses to adapt more readily (some have, some haven't and are toast). I highly recommend this book.