Freemium and Freeconomics

News Type: Opinion — Seeded on Sat Jul 4, 2009 11:44 AM EDT

Article Source: A VC

technology, internet, facebook, revenues, freemium, freeconomics, marginal-cost

This week we saw the release of Chris Anderson's book Free and reviews from the New Yorker (Malcolm Gladwell) and the Financial Times. I'd like to talk a bit about the firestorm that freeconomics (fed by Chris' book) has unleashed but first we need to clarify something.

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1.6

0.7

{"commentId":8023097,"authorDomain":"kokayi"}

Kokayi

"Lambasting file sharers and entrepreneurs who rightly recognize that free is the right way to build market share on the Internet might be fun and make certain people feel good."

I rarely charge for others for my technical support skills for this very same reason. It's easier and much more fun.

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#1 - Sat Jul 4, 2009 12:12 PM EDT

{"commentId":8023152,"authorDomain":"eriqalan"}

eriq samson

There are just soooomany people who won't be able to0 get their arms around freeconomics - free is just another price

{"commentId":8023152,"threadId":"619272","contentId":"2996907","authorDomain":"eriqalan"}

1 vote

#2 - Sat Jul 4, 2009 12:16 PM EDT

{"commentId":8024382,"authorDomain":"Jivatmanx"}

Jivatman

Why do people contribute content, whether it as simple as commenting here, messing with facebook, editing a wikipedia page, or as complex as working on a FOSS content. Without being paid?

For whatever reasons they contribute, personal (facebook) altruism/resume/ego (FOSS software). They derive economic utility from contributing.

But the marginal cost of distributing is 0, or nearly so (Wikipedia has no ads and runs on a meager 6 mil in donations per year)

We have here then, the ultimate reducto-ad-absurdum of economics. A positive utility. The contributor derives benefit. The user derives benefit. The marginal cost is zero.

In fact this model is ultimately far more efficient. There are no, or a very limited number of managers, accountants, marketers, and other assorted faceless suited corporate bureaucrats.

There is no need for copyrights, patents, (although copyleft is currently needed to defend themselves against corporate ones). And obviously, no desire whatsoever for lawsuits.

Again, corporations desire nothing but control. They can't control the collective, democratic, actions of users. I can guarantee you will see an endless number of books, seminars, speeches, lobbyists, advertistments ect coming to attack us. All the while we sit quitely, contributing and enjoying content, and trudge on to our inevitable taking over of the world.

P.S. "From each according to his abilities, to each according to his needs", I.E. redistribution economcs, is obsolete.

Today, other users/the internet betters what you contribute, and delivers far, far, more than you could ever need.

{"commentId":8024382,"threadId":"619272","contentId":"2996907","authorDomain":"Jivatmanx"}

#2.1 - Sat Jul 4, 2009 1:40 PM EDT

{"commentId":8024031,"authorDomain":"Jivatmanx"}

Jivatman

Freeconomics does two things. One you pointed out, another I will.

1. The marginal cost of a product is essentially zero.

While every record produced costs a significant amount of money, producing another mp3 costs nothing.

Because of this, charging each user per item downloaded - is not the most economically efficient model. I.E. it does not offer the most economic utility for the cost.

2. Every user can easily contribute content.

This can be like as newsvine where users submit and comment, Wikipedia where they edit, Facebook, or as complex as as bazaar being used to develop an open source project.

Old models that do not take into account these new economic realities will eventually fail.

{"commentId":8024031,"threadId":"619272","contentId":"2996907","authorDomain":"Jivatmanx"}

#3 - Sat Jul 4, 2009 1:18 PM EDT

{"commentId":8024258,"authorDomain":"smartpup"}

puponguardDeleted

{"commentId":8026283,"authorDomain":"kokayi"}

Kokayi

I haven't read it either, but I understand the concepts. In the simplest terms, it's a highly effective way to break into highly competitive markets. Here's another article, I've seeded on this topic.

Free! Why $0.00 Is the Future of Business

{"commentId":8026283,"threadId":"619272","contentId":"2996907","authorDomain":"kokayi"}

1 vote

#3.2 - Sat Jul 4, 2009 4:02 PM EDT

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