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The Future of a Radical Price

Hyperion,

15 min read
10 take-aways
Audio & text

What's inside?

Witty, informative treatise on why giving things away for free makes money: understanding the new economic model.

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Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

Economists swear there is no such thing as a free lunch. Someone always pays. That may be true in the “atoms” world of physical things, but Chris Anderson explains why it does not apply in the “bits” world of the Internet, where “free” is the ruling paradigm. If, as Stewart Brand (founder of the Whole Earth Catalogue and the Whole Earth ’Lectronic Link) said, “Information wants to be free,” now it is, at least in many instances, particularly online. While the idea of giving things away as a promotion or loss leader isn’t new, Anderson’s fresh insight is that giveaways are becoming a business imperative that companies are going to have to accept and use. Actually, companies online and off can become immensely profitable when they give products or services away for free to bring customers in and to create the need for future ancillary product sales (in other words, take the printer and buy the ink). Anderson, author of The Long Tail and editor of Wired magazine, tells you how to make money by providing most of your offerings for free and charging for just a few of them. getAbstract recommends this perceptive, innovative, idiosyncratic book to all marketers.

Summary

The Fortune in “Free”

Google, the online search behemoth, became a highly successful company by giving away most of its products and services. Google supplies online visitors with almost 100 products, mostly free, from “photo editing software to word processors and spreadsheets.” To many, particularly those rooted in a traditional business model, giving away products makes no economic sense. But it works for Google. Indeed, it is a $20 billion firm, more profitable than all U.S. car firms and airlines combined.

So how does Google actually make money? Primarily, it earns massive advertising revenues from its core products, most notably its famous search engine. Companies pay Google to place their ads next to relevant search results. The revenue potential is tremendous. Google has become the “flag bearer of Free” among online businesses. Thousands of companies are feverishly attempting to emulate its free-services business model, which it developed in three distinct phases. From 1999 to 2001, it built a better search system. From 2001 to 2003, it offered advertisers an innovative self-service method for aligning their ads with specific “keywords or contents.” Additionally...

About the Author

Chris Anderson is editor-in-chief of Wired magazine. He received the getAbstract International Book Award for his book The Long Tail.

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