On Free

I recently finished reading Free – How Today’s Smartest Businesses Profit By Giving Something For Nothing – by Chris Anderson.

Below are key excerpts from the book that I found particularly insightful:

1- “The “free” part of freemium is simple, but the “premium” part is tricky. Every company and industry is different, and each business must figure out what its customers will pay for even as it uses Free to attract them in the first place. Although the book includes hundreds of examples of how successful firms found premiums to go with their frees, there are countless others. There is no silver bullet, no universal freemium model that can offer salvation to all. Making Free work is hard, which is why it’s sometimes so scary.”

2- “Those who understand the new Free will command tomorrow’s markets and disrupt today’s—indeed, they’re already doing it. This book is about them and what they’re teaching us. It is about the past and future of a radical price.”

3- “Today the most interesting business models are in finding ways to make money around Free. Sooner or later every company is going to have to figure out how to use Free or compete with Free, one way or another. This book is about how to do that.”

4- “Cross-subsidies can work in several different ways: Paid products subsidizing free products…Paying later subsidizing free now…Paying people subsidizing free people.”

5- “Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered a as immensely more valuable than it really is. Why? I think it’s because humans are intrinsically afraid of loss. The real allure of FREE! is tied to this fear. There’s no visible possibility of loss when we choose a FREE! item (it’s free). But suppose we choose the item that’s not free. Uh-oh, now there’s a risk of having made a poor decision—^the possibility of loss. And so, given the choice, we for what is free.”

6- “The lesson from Harris’s experience is that in a digital marketplace, Free is almost always a choice. If you don’t offer it explicitly, others will typically find a way to introduce it themselves. When the marginal cost of reproduction is zero, the barriers to Free are mostly psychological fear of breaking the law, a sense of fairness, an individual’s calculation on the value of his or her time, perhaps a habit of paying or ignorance that a free version can be obtained. Sooner or later, most producers in the digital realm will find themselves competing with Free. Harris understood that and figured out how to do it better. With his survey, he looked into the mind of the of the pirate and saw a paying customer looking for a reason to come out.”

7- “Commodity information (everybody gets the same version)  /ants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive.”

8- “It’s easy to see e why this is scary for the industries that are losing their pricing power. “De-monetization” is traumatic for those affected. But pull back and you can see that the value is not so much lost as redistributed in ways that aren’t always measured in dollars and cents.”

9- “In 1971, at the dawning of the Information Age, the social scientist Herbert Simon wrote: In an information-rich world, the wealth of information meat a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.”

10- “There is nothing new about this—people have always been creating and contributing for free. We didn’t call what they did “work” because it wasn’t paid, but every time you give someone free advice or volunteer for something, you’re doing something that in a different context could be somebody’s job. Now the professionals and amateurs are suddenly in the same marketplace of attention, and these parallel worlds are now in competition. And there are a lot more amateurs than professionals.”

11- “The idea that knockoffs can actually help the originals, especially ir the fashion business, isn’t new. In economics, it’s called the “piracy paradox,” a term coined by law professors Kal Raustiala and Christopher Sprigman. The paradox stems from the basic dilemma that underpins the economics of fashion: Consumers have to like this year’s designs, but also quickly become dissatisfied with them so they’ll buy next year’s design. Unlike technology, say, apparel companies can’t argue that next year’s models are functionally functionally better—they just look different. So they need some other reason  to get consumers to lose their infatuation with this year’s model. The solution: widespread copying that turns an exclusive design into a mass-market commodity. The designer mystique is destroyed by cheap ubiquity, and discriminating consumers have to go in search of something exclusive and new.”

12- “The lesson from fiction is that we can’t really imagine plenty properly. Our brains are wired for scarcity; we are focused on the things we have enough of, from time to money. That’s what gives us our drive. If we get what we’re seeking, we tend to quickly discount it and find a new scarcity to pursue. We are motivated by what we don’t have. not what we do have.”

Regards,

Omar Halabieh

Free

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