Free is the future
Posted by katya on Sat, March 01, 2008Chris Anderson of Long Tail fame now has authored a seminal article on increasing shift to business models predicated on giving away the product. It’s a must-read.
The article starts with the example of razors with disposable blades - they were first successfully marketed by being given away. That created demand for blades. The model is alive and well today - you get a free cell phone but pay for the monthly plan. The printer is cheap but the ink or toner is expensive.
This model is also becoming increasingly dramatic, posits Anderson. He says:
It’s now clear that practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned. Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. Basic economics tells us that in a competitive market, price falls to the marginal cost. There’s never been a more competitive market than the Internet, and every day the marginal cost of digital information comes closer to nothing. One of the old jokes from the late-’90s bubble was that there are only two numbers on the Internet: infinity and zero. The first, at least as it applied to stock market valuations, proved false. But the second is alive and well. The Web has become the land of the free.
Accomplished blogger and great friend Jocelyn alerted me to this part of his thesis when she emailed me yesterday about the article:
There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.
I experience this dynamic every day at my nonprofit, Network for Good. We give away every bit of expertise and information we can - we have free training calls, we have free fundraising tips sent via email, we have a completely free online Learning Center. We find people are more likely to choose us for their paid fundraising services as a result. It’s like the “gift economy” that Anderson describes.
I think all nonprofits can make this model work. Are you the American Diabetes Association? Send out lots of free information on managing your diabetes. Are you a conservation group? Provide free tools for making your home or business more green. You’ll end up with more (financial) supporters because more people will know your value.
How else do you think the free economy affects our sector?
You can watch Chris talk about the concept on YouTube, but I could not embed his video here because his magazine Wired disabled the “free” embed feature. He’s brilliant but that’s ironic!
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