Chris Anderson, who literally wrote the book on "free," faces off with the tech gurus at 37Signals, who say "free" is the great sham of the digital age.
Free = Free Your Mind
Don't be afraid to give your product away, Chris Anderson says, you'll figure out how to make money later.
The secret to success in the digital age is giving people what they want -- literally, says Chris Anderson, the editor of Wired magazine and author of the controversial new book Free: The Future of a Radical Price. It's a matter of finding ways to make money around what you give away, he says, via a third party such as advertising or premium strategies. "It's the media model," Anderson notes. "Radio's free to air, television's free to air. Consumers get the content free and create a marketplace of attention, then producers sell that attention to advertisers."
"Free lowers the cost of entrepreneurship. Free incredibly lowers the cost of marketing because the products market themselves. And free lowers the barrier to consumer participation." - Chris Anderson
Free is what the Web has been about for a decade. Anderson says he's merely providing an economic model for why free works. He's stunned that his thesis has kicked up such a hornet's nest in the media, where the likes of Malcolm Gladwell in the New Yorker have ripped it (calling it unsupported by the facts and the product of a "technological utopian").
Anderson maintains that free is simply the best form of marketing: Customers sample the actual product, creating word of mouth, which allows companies to charge for premium versions of the product later. In other words, market free for a while, then attach the price tag.
Critics point out that Anderson's top examples -- YouTube, Facebook, and Twitter -- have yet to make a dime. But Anderson cites a report that YouTube could be profitable this year and predicts Facebook could be next year.
He also admits there are limits to free; advertising can't support every business. But he's high on the freemium approach, using products as premiums for themselves (think Radiohead), and the fact that digital delivery costs are now next to nothing really drives the model.
Anderson has started two businesses based on free, and his book is available free in digital form on Kindle, and for a while free on audio, in addition to paid hardcover. He says 200,000 free downloads of the book (which was roundly criticized for plagiarism; a footnote transcription error, Anderson says) in two weeks prove the validity of pricelessness. "That's awareness, sampling, word of mouth." And a lot of non-royalties.
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