A lot of (not particularly good) buzz is being made about Chris Anderson's new book, Free. Great concept, great title, but not so good reviews. (Here's another one.) I'm not yet persuaded to buy the book ($17 on Amazon) or read it for free online at his blog The Long Tail, but here's Anderson's Wired piece on the same topic from last year. There are a lot of memes in the book, but the interesting part is twofold: first, behavioral economics tell us that people react to "free" pricing in irrational ways, ways that aren't a linear path from cheap pricing. Second, and more interesting, the business model is moving to free pricing, with recoupment of costs by other means. What is interesting in this to me is how society becomes used to free and then is not willing to pay for things we think are actually free, but actually aren't.
For example, once a week or so, one of my Facebook friends joins some group entitled something like "Keep Facebook Free." Yes, Facebook is "free," (provided you have a computer, interest service, etc.) Facebook adopted the business model of generating revenue through advertising. Except it doesn't really work, which is why the only businesses that advertise on Facebook seem to people con artists selling acai berry diets (also for "free," but that's a different story). So, every so often, a newspaper will run an article that repeats rumors that Facebook will start charging a fee to users, and Facebook will deny the rumours. And Facebook users go up in arms. But imagine 15 years ago, someone telling you about a site where you could create a profile, post pictures, communicate with old friends, link to articles, etc., and I bet you wouldn't have said that no one would pay for that. That's a lot to get for free from strangers! Now, Facebook could adopt another model -- charging a small number of people for a "premium" Facebook, for example. However, Facebook chose not to charge a fee for claiming a "user name," but it could have tried. Facebook is just one example of a site that people spend hours on without paying a fee, and most without even clicking on an ad: Twitter, YouTube, many major newspapers, etc.
Another, less hip, example is Webkinz, which I've blogged about before. Webkinz was one of the first toy companies to sell you a $12 stuffed animal with a code. Take the code to the website, and voila, you open a virtual world of fun and excitement. For "free." Of course, you have to buy the stuffed animal, and presumably, your rights to the site expire 12 months after you've logged on your last animal. Because 12 months never pass between our Webkinz animal purchases, I wouldn't know, but apparently to continue your account, your "renewal" is the purchase of a new Webkinz. At one point, I was asked my a friend to sign some petition to keep Webkinz "advertising free" when it started experimenting with ads. The site is for kids, and advertising is evil for kids, etc. But, advertising would also keep the website "free," or possibly keep the stuffed animals from rising in price. No one seemed to understand that the website wasn't free. So now, there is almost no third-party advertising, and parent scan turn off what little third-party ads there are, and users are offered a "deluxe" fee-based membership.
When I was a kid, I grew up thinking TV content was free, and so was radio content. (Yes, you have to have a TV and a radio, etc.) Then came cable, and then premium cable (without ads). Now we have premium radio even. But I think there is still a segment that believes that TV is free -- notice the outcry over switching to digital television. Now, to young people, it might be a stretch for anyone to think that television broadcasting is free, but it used to be. In 30 years, internet entertainment and content may also develop to a point where most people pay for content, and the days of all content being free in return for advertising attention may seem like a relic of the past as well. Some things have moved in the opposite direction -- phones in the 1970s were rented from Bell at an exorbitant price, then purchased for a reasonable price, and now a lot of cell phones are free. Except that phones are beginning to be more than phones, and now cost more, like the iPhone. Chris Anderson thinks we are all moving to the zero price; I wonder if he's wrong.
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