In the prologue, Anderson mentions that his research showed two camps: those above thirty who remain skeptical of anything labeled “free” and those under thirty who think anything digital is generally free. This age definition has nothing to do with Tim Leary and everything to do with the timing of the digital revolution. It was my generation that really took the internets from a academic/ government experiment to the information behemoth that we know it as. These are the people that helped to create the new free and they watched and learned as others toyed with the idea. My position of “free is great so long as it pays” makes sense. I became an adult around this notion. My wife and I both have careers now that our users/patients don’t pay for directly but are added on to make our employers of greater value to the customers.
So, it is from this perspective that I can say that many (most, even) of the core points in Free: The Future of a Radical Price by Chris Anderson are absolutely crucial to business. Especially small businesses and artisans, where nimbleness is a advantage to be leveraged. But still yet it is one that must be reckognized by old, large media such as entertainment and news if they are to flourish going forward1.
Free as a Concept
I think that there are many small concepts and examples that make the entire book worthwhile for most anyone. But I want to focus on a couple:
First, the idea of examining what is abundant and scarce to you and leveraging those. It is equally important to realize that what is abundant or scarce changes over time and this is why business of old long since died off. Sometimes a commodity may not be truly free, but so cheap as to not make metering it worth one’s time. Using something like this to draw in customers and then getting money out of them (or even a select few, as I’ll get to momentarily) is a key part of making a business on Free.
Secondly, if we are not going to measure something because it is free or nearly free, we can in fact being to waste this sort of commodity. When there is such and abundance of a commodity that we can afford to throw countless numbers into our business, some entirely new ideas can arise. Anderson provides many examples but suffice it to say that essentially everything we do on a computer these days would have once considered to be a frivolous use of precious resources. Thomas Freidman’s forces that flattened the world indeed have changed the economic landscape as well (ref. The World Is Flat).
And it is important to consider scale. Rather than giving away a free sample to sell most of your product, think about giving away the vast majority of your work in order to scale up to many, many customers. You may only be selling something to a few percent of your total customers; with the vast majority being freeloaders. But if that total base is large and your work costs little to make — or, more likely, costs little to reproduce — the business model becomes solid.
Lastly, make no mistake: free is tough to compete with. So much, it is really an entirely different market all together. From Anderson:
So from the consumer’s perspective, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business, one of clawing and scratching for every customer. The truth is that zero is one market and any other price is another. In many cases, that’s the difference between a great market and none at all.
Certainly, this sort of pricing psychology can be applied either way. But in terms of creating a large, new market almost overnight; nothing compares to free.
Free as a Book
Free is really a sequel to — or, more accurately, the logical conclusion to — Anderson’s first book The Long Tail (which I previously reviewed). I feel confident that Anderson, too, sees it this way. I think he covers the key concepts of that book here as well in order to provide context. Actually, a sizable portion of this book is context: history of free as a price and marketing scheme and how the digital age has revolutionized its application. There is also a number of examples of the application of Free in real-world businesses and culture. What there isn’t much of is speculation on the future of Free. Anderson spares us from telling us how Free will change the world and spends most of his time explaining what effect it has already had.
Furthering the case for Free as the son of The Long Tail, one of key ideas in Anderson’s first book which I pointed out was the importance of filters in making long tail businesses possible. Freeconomics takes the other side of this coin by assuming the long tail as commodity and the filtering as the scarcity; therefore making that again the key to success.
Anderson makes a solid case in other aspects of free, as well. At least as solid as one can to measure something that is inherently unmeasurable. After all, larger numbers times zero are still zero. He uses a few rough calculations to show a sense of scale. Some have wrongly criticized the accuracy of these, but as an engineer I see the value in these “back of the envelope” estimates to determine at least the magnitude of the issue, if not the precise value. Additionally, he uses numerous examples of how individuals and companies apply free to make money and earn reputation and attention (which can, with some creativity, generally be turned into money). He even has an appendix of sorts on applying the concept of “Freemium2;” that is, giving away part of the business but charging for a premium version for a select few (generally 5–10% of the users). Clearly, this is where Anderson sees the greatest opportunity from a business perspective.
Certainly some of Anderson’s examples are more convincing than others. However, no example of flourishing from giving away products is strong than that of Google. Just gawk at the raw scale of a company that gives away essentially every ounce of innovation it generates:
This has worked amazingly well. Today, ten years after its founding, Google is a $20 billion company, making more in profit (more than $4 billion in 2008) than all of America’s airlines and car companies combined (okay, that may not be saying much these days!).
Despite Anderson’s punchline at the expense of some of America’s last-century industries, I think in fact that this does say something quite substantial. Google realized that it had a number of commodities on hand from its search business: storage, bandwidth, computer horsepower; and saw to take advantage of it in anyway possible to extend its reach. Though many of its innovations were, in reality, acquisitions: YouTube, Writely (aka Google Docs), etc.; it has leveraged “cloud computing” to get its advertising cash cow in front of more and more people. And when is the last time you paid a bill to Google3.
Personally, I felt as though much of Free was tangential to the any argument of how to apply free tactics to a modern business. Most the chapters wander about in a very conversational style. The core of the book could certainly be boiled down into something much shorter4. Though some of these historical and economic tangents are interesting, they don’t do much to underscore the argument that free is important to business (not that that is the only purpose of the book, of course, but it is the title after all). Though Anderson attempts to create a taxonomy of free in business, it never really gels as to where various businesses fit in, other than the category of freemium; which, as previously mentioned, Anderson goes into great depth into and even sub-categorizes successful applications there-of.
I also would have liked to see more concrete evidence of Anderson’s argument that free is something of a natural law in economics. I think that this is a key argument in convincing last-century business that free is indeed the price of the future. More accurately, I suppose, that changing their business model to giving away something that used to be a profit source in order to see revenue elsewhere. I suspect there is validity to this “free is like gravity” theory, but this book leaves me wanting some more sound evidence one way or the other.
This book has generated some chatter and even controversy online5. Other than to acknowledge their existence, I don’t want to dwell on that. The book doesn’t exist in a vacuum but I’ll leave that sort of thing to others. Mainly because most of that has long since blown over by the time I was able to get around to finishing the text!
Free: The Future of a Radical Price by Chris Anderson on Hyperion books is available (for pay, in a spiffy bound edition) at most book sellers. True to his word regarding the research project nature of his book, it is also available free in ebook and audio downloads (with updated text).
- I do not believe for one second that entertainment or news are going way. Rather, if the old companies in these areas are to stay around instead of be replaced, they are going have embrace Free. [↩]
- I should note that I believe the word Freemium to imply the opposite of what is intended. It only makes sense in context of labeling a business plan and not anything from the consumer’s perspective. It is intended to represent a solution that includes both a free and a premium (for pay) option. However, from the consumer’s perspective, one would choose either free or premium and not select some hybrid, portmanteau solution. [↩]
- Unless, of course, you buy Google ads. Then you have the benefit of knowing you have some the best targeted ads ever created. Ultimately, perfect advertising is just information; and Google is closest anyone has ever come to delivering paid-for information on a large scale. [↩]
- Which of course Anderson did in a Wired article last year and will even do with a custom tailored message if you hire him for a speaking engagement. [↩]
- See the Wikipedia controversy, Gladwell’s scathing review and responses to it, as well as Anderson’s cranky interview with Speigel. [↩]