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- What recession means for freeOctober 9
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I get asked this all the time these days, so before I crash after a speaking tour of Latin America (eight cities in four days!), here are my thoughts on what a recession will mean for free-based business models.
First, let's confine this to online, which is where the most interesting free models are. There are three main forms of "real" free: Ad-supported, "Freemium", and the Gift Economy. Here how I think each will be affected:
- Ad-supported: In the offline world, advertising is going to go down. Online, where it's easier to make the case for clear ROIs, I suspect advertising growth will continue to be positive, but will slow considerably. That means that many of the companies that were counting on a rising tide lifting their boats will be disappointed, and more than usual will go bust. Result: Negative
- Freemium: This should become the favored model, since it's connected to direct revenues. But companies that have only worked out the free part but not the premium part are going to have to figure out what they can add to their products to make them compelling enough to pay for. If they don't, they will find their investors' patience with them is very limited, and many will fold. Those that get the freemium balance right should be fine: free is a good price to have when people don't want to spend, and freemium models can work well when just 5% of users convert to pre
- Best advice I've heard all weekOctober 9
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What should you do amidst financial turmoil?
"Put wax in your ears. People are more afraid of flying than driving because the press does not report car accidents. I never watch the news. Only listen to news you get in a social setting, the things people talk about. Our brains cannot deal with the overload of information. Having a lot of data is not good for anyone trying to make a decision."
Nassim Taleb, quoted in an interesting article (sub required) about why we're so bad at putting bad news in context. Found in an old (Aug 30) issue of New Scientist that I was reading on the plane back from Brazil today.
- A tour of free, Safeway versionOctober 4
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Sent to get a gallon of milk at Safeway, I decided to take a picture of every example of "free" that I encountered as I walked through the aisles and into the parking lot. There were lots of repetitions of things like "buy one, get one free", but here's one example of each kind I saw. This being a supermarket, the canonical "atoms economy" example, almost all fall under the Free 1 category.
(Note: the Ultra II Free detergent is actually a different use of free: it's "perfume free")
- The biggest fortunes built on freeOctober 3
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From the Forbes 400 list, the following are the billionaires who made their money on businesses whose products are primarily free to consumers:(Note: I didn't include diversified media tycoons, such as Rupert Murdoch and Barry Diller, even though much of their business is free-to-air broadcast and web media. That's because it's too hard to separate the free bits from their pay-media businesses, or to say which is bigger.)
#13 Sergey Brin $15.9 billion, Google
#14 Larry Page $15.8 billion, Google
#54 Pierre Omidyar $6.3 billion, eBay
#59 Eric Schmidt, $5.9 billion, Google
#155 Oprah Winfrey, $2.7 billion, free-to-air TV
#161 Mark Cuban, $2.6 billion, Broadcast.com
#246 Omid Kordestani, $1.9 billion, Google
#246 Joseph Mansueto, $1.9 billion, Morningstar (freemium investing services)
#281 David Filo, $1.7 billion, Yahoo
#281 Jerry Yang, $1.7 billion, Yahoo
#281 Kavitark Ram Shriram, $1.7 billion, Google
#321 Todd Wagner, $1.5 billion, Broadcast.com
#321 Mark Zuckerberg, $1.5 billion,
- FREE: the cocktail party versionOctober 2
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When you're writing a book you need to have your elevator pitch down or "What's the book about?" will become the most dreaded four words you can hear (followed closely by "how's it going?").
Obviously the one-sentence version of the answer should be something close to the book's subtitle. But I haven't nailed that one down yet, so these days I just say "The economics of zero dollars and zero cents" and hope for the best. Some people glaze over and move on at that point, but for those who stop, intrigued, and ask me to explain, here's what I say:
We all know free--it's a trick that marketers use. But free is changing. When you think about it, there are two economies, one of atoms and one of bits. In the atoms economy, which is to say most of the stuff around us, things tend to get more expensive over time. But in the bits economy, which is the online world, things get cheaper. The atoms economy is inflationary, while the bits economy is deflationary.
The 20th Century was primarily an atoms economy. The 21st Century will be equally a bits economy. This book is about the differences between 20th Century free and 21st Century free--free moving from a marketing trick to a new economic model.
Anything free in the atoms economy must be paid for by something else, which is why so much traditional free feels like bait and switch--it's you paying, one way or another. But free in the bits economy can be really free, with money often taken ou
