FREE

(Or: How I stopped worrying and learned to love $0.00)

Chris Anderson, Wired

What is “free”?

“Liber” = freedom

“Gratis” = zero price(contraction of gratiis "for thanks," hence "without

recompense”)

“Electricity too cheap to meter.”

What happens when things get free?

“Waste is Good”

Alan Kay, Xerox PARC (1972)

“Waste Transistors”

“Waste Storage”

“Waste Bandwidth”

Cost to stream a movie: $0.06

20th Century: “Atoms Economy”

•Things get more expensive• Free = direct subsidy

“No such thing as a free lunch”

21st Century: “Bits Economy”

•Things get cheaper• Free = indirect subsidy“The best things in life are free”

Free #1: A marketing trick

Free #2: Ad supported

Free #3: Freemium

Options:

•Time limited

•Feature limited

•Seat limited

•Customer limited

Free #4: Gift economy

Econ 101(Bertrand)

“In a competitive market price falls to the marginal cost”

Round down!

If the unitary cost of something is

approaching zero, treat it as zero and sell something else.

1) People will pay to save time

2) People will pay to lower risk

3) People will pay for things they

love

4) People will pay for status

5) People will pay if you make them

(once they’re hooked)

Five Free Lessons From Games

Competing with Free: Microsoft

1970s:

Competing with Free

1980s:

Competing with Free

1990s:

Competing with Free

2000s:

If you can’t beat them, join them

Free’s hard: needs an upgrade path

But the trend line is clear

Whatever business you’re in,

sooner or later you’re going to have to

compete with free.

What’s your plan?