While traveling in China, I was reading Chris Anderson’s new book “Free: The Future of a Radical Price” that accompanied most part of my journey. For most of who you who not know, Chris Anderson (Editor, Wired Magazine) is also the author of another interesting book entitled “The Long Tail“. The main premise of this book is that one can create a huge global economy around a base price of zero. Fast evolving technologies, for example, the Internet have transformed the production and distribution costs which causes the prices to plummet to very low levels close to zero, and that flexibility provided by the online world allows producers to trade ever more creatively. So, here are some of the interesting points that arise from the book.
Basically, the book is broken up into three parts: (1) What is Free – that introduces the concept of free and how it impacts economics and psychology of consumers and the author introduces the four major major models that how free is categorized with two concepts which are old but evolving: (a) direct cross-subsidies and (b) the third party market, and another two that are emerging with the digital economy: (a) Freemium and Non-monetary markets; (2) Digital Free – how the Internet and IT industry are creating an economy around a base price of zero, and details a few case studies: (a) Microsoft vs the Open Source Movement, (b) Yahoo vs Google over Email, and (c) Google’s evolution from inventing a way to do search to adopt a way for advertisers to create ads which match keywords or content of sites and finally, the countless services and products (Google Office, GMail, Google News and many others) that increasing consumer attachment to the company and extending the company’s reach towards more and more users; and (3) Freeconomics and the Free World, where he applies the idea that the every new abundance creates a new scarcity, and drawing lessons from China and Brazil, the developing nations that he coined as the frontiers of free.
If you are interested in looking for new business models around this idea of free, this book offers an excellent guidance, particularly a complete exposition of the freemium model, which is categorized into four different tactics: time limited (offer the product/service for a limited period of time and then get the user to pay), feature limited (give a basic version of the product free but makes the user pay when he or she wants more advanced features of the product), seat limited (can be used up by a limited number of people) and customer type related (small and young companies get it free & bigger and older companies pay). An interesting part is the appendix of examples used by companies which are built on free.
Towards the end of the book, Anderson tries to clarify the doubts of free from critics who do not agree with the concept. Ultimately, can anything be truly be free? Sure, reminds me of an important concept in physics that states that energy cannot be created or destroyed but merely transform from one form to another. Do enjoy the book.