Free: - courtesy of WSJ
Chris Anderson, editor in chief of Wired and author of the Long Tail has an excellent post on the 'Economics of giving it away' in the Wall Street Journal. There is so much to pull out of the piece but a few nuggets might interrest:
The last decade has seen the extension of this "two-sided market" [one side pays while the other gets for free] model far beyond media, and today it is the revenue engine for all of the biggest Web companies, from Facebook and MySpace to Google itself.
This has extended into the business applications area with 'freemium' where a baseline service is free but if you want more then you pay according to what you want. I'm currently building out the next iteration of AccMan. In the process I've picked up a lot of 'stuff' for free but at the same time, I'm also shelling out plenty for services I hope will enhance the site.
Slewing sideways, this is something Duane Jackson gets excited about. I don't know why because the model is proven as valid. (And no, I'm not going to answer the question he raises.) It's very little different from the cases I handled where I 'grew' the client from paying almost nothing to £10K a year and up. (Remember I'm talking 1981-93 so whatever that represents today) The difference is in how you perceive the model as a way of growing the business. It worked for me 28 years ago when my trick in picking up clients was to onboard NatWest's basket cases on a no-save no-fee basis. And I wasn't THAT picky either.
Chris goes on:
With physical stuff, samples must be doled out sparingly â€" there are real costs to be paid. With bits, the free versions are too cheap to meter and can be spread far and wide. That's why so many people businesses (expensive!) are turning into software businesses (cheap!), which is why your cranky tax accountant has morphed into free TurboTax online
Woooooah tiger! Not so fast...at least not in the UK...yet. I don't think we've quite reached that Nirvana for tax filing but I can see the day a-coming. Think about it. Intuit continues to enjoy a pretty good business by giving away possibly THE most complex piece of software known to professionals. How long before we see such a thing in the UK? And then all those tiddly little £100-150 tax return cases go flying out the window. Now what do you do?
Much of what Anderson is talking about concerns itself with the digital world and you'd be hard pressed to find professionals agreeing with much of what he says. But consider this:
Does this mean that Free will retreat in a down economy? Probably not. The psychological and economic case for it remains as good as ever â€" the marginal cost of anything digital falls by 50% every year, making pricing a race to the bottom, and "Free" has as much power over the consumer psyche as ever. But it does mean that Free is not enough. It also has to be matched with Paid. Just as King Gillette's free razors only made business sense paired with expensive blades, so will today's Web entrepreneurs have to not just invent products that people love, but also those that they will pay for. Not all of the people or even most of them â€" free is still great marketing and bits are still too cheap to meter â€" but enough to pay the bills. Free may be the best price, but it can't be the only one.
If our day-to-day SME software really is in a race to the bottom as Anderson describes then companies that already include that as part of their business model must be in a one heck of a position to benefit. Even in a down economy. So here's the scenario: Your latest client has invested in a netbook or resurrected an old machine, uses a free browser, GMail, Google Apps or Zoho, has a free Freshbooks or Blinksale account and comes in wanting advice.
Go figure...
...and while we're at it, I wonder what Vinnie would say?
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