Posts Tagged: freeconomics

It’s all about “freeconomics” and it’s being driven by the technologies of the digital age as the price of bandwidth and storage continue to drop.  Free started in the twentieth century by companies giving away something that encouraged purchases of other goods.  Now that we have entered the bit economy, free can really be free.  For example: while bloggers don’t post ads on their sites, they hope to enhance their reputation and by doing do get more paying work in return.  In today’s world a reputation’s credits can turn into cash.

But free does not simply apply to the digital world.  Advertisers have been known to pay some or all of the cost of publications.  Free versions of services sell premium versions.  Bands give away music to in return for paying shows.  The idea of free is becoming much more prevalent in today’s economy and industries need to learn to adapt to this growing economic trend.  This is a time period when we will see which companies fail and which companies “get it”.

The most difficult part of this new economy is to get users to pay anything at all.  The enemy of “free” is waste.  You are less likely to waste something you pay for and, in this sense, free can cause more harm than good.  For those of us that have more money than time, we would rather pay to have something done for us than do it ourselves.  It’s a time saver.  A successful example of this is iTunes.  Prices come with guarantees and free typically doesn’t.  Producers in the digital realm will find themselves completing with free.  It is not going away any time soon.

Google is a company that understands the world of “freeconomics”.  They first invented a way to search online that gets better as the web gets bigger.  Their next idea allowed advertisers to create as that matched keywords or content and bid against other advertisers to obtain the most prominent positions.  They then created other online products to extend their reach and only added ads when it made sense.  As a result, Google wants information to be free because as the cost of information falls it makes more money.

But lower prices can be disruptive.  The free classifieds site Craigslist has taken billions of dollars our of America’s newspaper companies since it’s found in 1996.  With technology, the notion of scale can also make a difference.  If only one out of thousands of Wikipedia visitors decides to create an entry on the site, you still benefit with a pile of information from around the world.  Microsoft’s Encarta CD encyclopedia was put out of business and they put traditional physical encyclopedias out of business before them.