Book Lovers Blog

July 12, 2009

Free: The Future of a Radical Price: Chris Anderson Explores the Concept of Free

Free, A New Book by Chris Anderson

Free, A New Book by Chris Anderson

Free is the number one attention getting word in marketing.  This is the subject of Chris Anderson’s  new book: Free: The Future of a Radical Price which segues from his previous book: The Long Tail: The Revised and Updated Edition: Why the Future of Business Is Selling Less of More.  It is an interesting read for a non-economist and internet observer such as myself and for newbies and veterans of e-commerce alike.

Anderson reviews the history of free and gives examples from the time of the Babylonians to the story of how Jello became the most popular dessert item when the owner could not sell it for a mere $35.00.  He looks at free and “freemium” as an increasingly popular mode of commerce given that in the digital age, the cost of getting a product to market is what costs and replication can be practically for nothing.  Electronics get cheaper after the first prototype goes to market.  Drugs become markedly cheaper when they go generic.

Companies can make a lot of money by giving away products for free because of what Anderson calls cross-subsidies: the shifting of money around as in person to person (e.g.  kids eat free when adults buy a meal), from now to the future (such as getting a free cell phone for a two year service contract) from product to product (as in loss leaders in retail stores) and from non-monetary markets and back out again.  Google, for instance, gives out free information and other products while maintaining multimillion dollar profits.  Radio and television have traditionally been free to consumers because of advertisers paying to reach the consumer.  Anderson also gives the example of Ryanair who sells plane seats from London to Barcelona for $20.00 though it costs them $70.00 to provide the service.  They recoup the expense by charging for luggage, food and drink, priority seating and other amenities. The internet is full of free information on just about any subject, in exchange for which the consumer provides demographics and becomes a potential buyer of affiliate products.

Anderson proposes that internet companies can be profitable when operating in a freemium culture where the burden is shouldered by five percent of consumers while the rest get a free ride.  By understanding this concept, business can actually thrive, noting the Google example.  Free is actually a misnomer since it is not really giving away something for nothing.  Rather, free is a concept of demonetization.  Philantropists and altruists give away for the return of feeling good and worthwhile for having done the right thing.  The web is replete with shareware from volunteer programmers who continue to give away their work for the challenge of discoveryand the joy of sharing.   .

Anderson is the editor-in chief of Wired Magazine.  His book is getting mixed reviews in the New Yorker Magazine’s Malcolm Gladwell who questions some of his premise and the New York Times, Virginia Postrel.  It is nonetheless and good read for anyone interested in internet economy.

In keeping with the concept ,Free: The Future of a Radical Price was released by Hyperion on July 7, 2009 for $26.99 and in digital form downloadable free at Scrbd.  This enabled me to read the book and write this article.  I guess if anyone buys the book from having read this, Chris Anderson would have proven his point.


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