Freeconomics
March 11, 2009 by Raj Sheelvant
Chris Anderson, of The Long Tail fame has written another excellent article in the Wired Magazine titled “Free! Why $0.00 Is The Future of Business”. This article is a precursor to his much anticipated new book.
In his usual style, Chris Anderson points out that, once a marketing gimmick, free has emerged as a full-fledged economy. He offers several examples like offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails, and a swarm of other bands on MySpace that grasped the audience-building merits of zero. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.
Thus offering product free is a new viable business model. Based on the Moore’s law, as the processing power halves, bandwidth doubles and storage costs drop every 18 months, we are getting to the point where giving out ‘stuff’ for free is no longer a gimmick but necessary for the survival of the company itself. It needs to become a corner stone of a successful business strategy. The sub $1000 PC was considered the Holy Grail just a few years. No one thought we could get computers that cheap. But today, $200 Net Books is becoming more and more prevalent around the globe. As global PC manufactures race toward MIT Media Labs’ Nicholas Negroponte’s vision of One Laptop Per Child (OLPC) with the price point of $100, they are beginning to realize that a ‘lower’ standard is set by Indian Government’s vision of $10 PC.
This is acceleration of the ract to the bottom is mainly enabled by Internet . The marginal cost of distributing digital data is come down to zero. If everyone gives out the product for free, then how will the companies make profit? Chris Anderson points out the ‘value added service’ is the only way a company will make money. For example, Some of the telecommunication companies are already handing out free netbook in exchange for 2 year contract. ‘Service’ is how companies are going to differentiate themselves.
‘Free’ is a thrilling price point that bends the demand curve. It causes the demand to shoot up exponentially(Look at what Adobe did to Adobe reader when it gave it out for free.) The exponential rise in demand will expand market. I believe, the Netbook category is going to create a large demand in emerging countries in India, China and rest of Africa.
Also read more about the new Free Strategy on Knowledge @ Wharton article titled “How About Free? The Prices Point That Is Turing Industries on their Head”
Popularity: 17% [?]
Related posts:
