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FREE
by Chris Anderson
    HOW TODAY’S SMARTEST BUSINESSES
     PROFIT BY GIVING SOMETHING FOR
                 NOTHING

          REPORT BY IVAN LEE
              TS STRAMA
                 AGSB
Free Things to Think About
 How some companies can give some products away
 in order to increase the market for the products that
 they charge for.

 The book is meant not to preach the gospel of Free!,
 but to help readers find a path through an economic
 reality that has been with us and gathering strength
 for nearly a decade.

 Isn’t “Free” a socialist-communist idea?
Objectives

 What is FREE?
 Brief history of FREE as described by Chris
  Anderson
 The Psychology behind FREE!
 How FREE! is possible
 Introduce Freeconomics.
What is FREE?

 20th Century free versus the 21st Century FREE!
   Atoms versus bits

   Nothing free versus everything [digital] is free

   Inflationary versus deflationary

 Etymology of FREE
   Latin: Liber and Gratis (freedom and thanks)

   Celtic: Freogan (beloved and friend)

   Free = too many meanings
The 4 types of FREE

 Direct Cross Subsidies (Marketing model)
 Three-Party Market (Ad supported free media)
 Freemium (Digital economics)
 Non-Monetary Markets (Gift economy)


*All shifts money from product to product / person to
 person / now to later / monetary to non-monetary
The History of FREE!

 Free is nothing, nothing is Zephirus
 An economic system based on nothing?
    Barter Trade (Close knit groups)
      Collectivism – the “YOUNG” gift economy
      The Dunbar Number is 150 people max!
    Monetary Economy (Goodwill)
      19th Century – the birth of market economy
      Free reduced to a marketing gimmick
    Nation States (Progressive Taxes and Charity)
        20th Century transformative mediums
          Radio
          Corn
          Plastics – Is it really cheap?
The Psychology of FREE!

 Free is relative, never absolute
 Free as having to pay for something, even at minimal
 The Penny Gap = 0 and everything else
 Free as waste
 Free as a Time-Money option
 Pirates of the Digital World
 Free is really free
How Free is Possible

 Moore’s Law (Intel)
    Faster computing power
 Mead’s Law
    Advocated “wasting” computing power
    Technologist's job is to make technology cheap
    The cheapest delivery system possible: As price drops, there’s
     advantage to treat them as if it was free...
 The Real Digital Age
    Everything that bits touch is also touched by its unique economic
     proportion – cheaper, better, faster
 Information wants to be expensive and free at the same
 time
How Free is Possible

 Google and the birth of a 21st Century economic
  model

 Google: Free is the product philosophy
   Miracle of digital economics
   Data centers

 But why go free? The “MAX STRATEGY”
   The best way to reach the biggest possible market and achieve
    critical mass
   Google understood its business well enough: Use free to
    encourage people to spend more time online so that they can
    make more money out of it
How Free is Possible

 If free is free, who makes all the money?
   Craiglist example: erased a $30B industry to generate $40M

   The eventual winners are the end consumers

   Compliments the capitalist idea (as opposed to socialist-
    communist idea) – efficiency leads to better prices
   Redefining the market: from matching two people to a broader
    sense of an ecosystem with many parties
Freeconomics

 The new media models for the digital age: Versioning
    Freemium is versioning where one is free and others are paid
 How big is the Free Economy?
    $300 Billion?
    Definitely hard to calculate...
 The Freeconomics
    Joseph Bertrand: “In a competitive market, price falls to the
     marginal cost” = Free is inevitable
    The new monopoly: Network Effects where “monopolists” like
     facebook do not have pricing power
    Every market is different – making money out of Free is a matter of
     creative thinking and constant experimentation
    Freeconomics – money becomes secondary to attention economy
     and reputation economy
So now you know...
Free ver2

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Free ver2

  • 1. FREE by Chris Anderson HOW TODAY’S SMARTEST BUSINESSES PROFIT BY GIVING SOMETHING FOR NOTHING REPORT BY IVAN LEE TS STRAMA AGSB
  • 2. Free Things to Think About  How some companies can give some products away in order to increase the market for the products that they charge for.  The book is meant not to preach the gospel of Free!, but to help readers find a path through an economic reality that has been with us and gathering strength for nearly a decade.  Isn’t “Free” a socialist-communist idea?
  • 3. Objectives  What is FREE?  Brief history of FREE as described by Chris Anderson  The Psychology behind FREE!  How FREE! is possible  Introduce Freeconomics.
  • 4. What is FREE?  20th Century free versus the 21st Century FREE!  Atoms versus bits  Nothing free versus everything [digital] is free  Inflationary versus deflationary  Etymology of FREE  Latin: Liber and Gratis (freedom and thanks)  Celtic: Freogan (beloved and friend)  Free = too many meanings
  • 5. The 4 types of FREE  Direct Cross Subsidies (Marketing model)  Three-Party Market (Ad supported free media)  Freemium (Digital economics)  Non-Monetary Markets (Gift economy) *All shifts money from product to product / person to person / now to later / monetary to non-monetary
  • 6. The History of FREE!  Free is nothing, nothing is Zephirus  An economic system based on nothing?  Barter Trade (Close knit groups)  Collectivism – the “YOUNG” gift economy  The Dunbar Number is 150 people max!  Monetary Economy (Goodwill)  19th Century – the birth of market economy  Free reduced to a marketing gimmick  Nation States (Progressive Taxes and Charity)  20th Century transformative mediums  Radio  Corn  Plastics – Is it really cheap?
  • 7. The Psychology of FREE!  Free is relative, never absolute  Free as having to pay for something, even at minimal  The Penny Gap = 0 and everything else  Free as waste  Free as a Time-Money option  Pirates of the Digital World  Free is really free
  • 8. How Free is Possible  Moore’s Law (Intel)  Faster computing power  Mead’s Law  Advocated “wasting” computing power  Technologist's job is to make technology cheap  The cheapest delivery system possible: As price drops, there’s advantage to treat them as if it was free...  The Real Digital Age  Everything that bits touch is also touched by its unique economic proportion – cheaper, better, faster  Information wants to be expensive and free at the same time
  • 9. How Free is Possible  Google and the birth of a 21st Century economic model  Google: Free is the product philosophy  Miracle of digital economics  Data centers  But why go free? The “MAX STRATEGY”  The best way to reach the biggest possible market and achieve critical mass  Google understood its business well enough: Use free to encourage people to spend more time online so that they can make more money out of it
  • 10. How Free is Possible  If free is free, who makes all the money?  Craiglist example: erased a $30B industry to generate $40M  The eventual winners are the end consumers  Compliments the capitalist idea (as opposed to socialist- communist idea) – efficiency leads to better prices  Redefining the market: from matching two people to a broader sense of an ecosystem with many parties
  • 11. Freeconomics  The new media models for the digital age: Versioning  Freemium is versioning where one is free and others are paid  How big is the Free Economy?  $300 Billion?  Definitely hard to calculate...  The Freeconomics  Joseph Bertrand: “In a competitive market, price falls to the marginal cost” = Free is inevitable  The new monopoly: Network Effects where “monopolists” like facebook do not have pricing power  Every market is different – making money out of Free is a matter of creative thinking and constant experimentation  Freeconomics – money becomes secondary to attention economy and reputation economy
  • 12. So now you know...