Free! Why $0.00 Is the Future of Business

[kgun]

I found this provoking article on del.icio.us today.

I have heard that about 5 % make money online. Has that estimate changed, or are we witnessing a more mature business where a few large companies dominate and those smaller companies that play by the rules of some of those bigger companies can make money by collecting fruit that fall from the bigger trees?

[Alan-Hart]

very interesting and very thought provoking indeed.

[kkharrison]

I read the same article. The idea of revenue coming in via a third party makes it clear: the website gives away information or products, the visitor gets free info or products, and the advertiser (third party) pays to be there.

And most people expect to be able to get free things online - I know I do.

The book "Free" is not out yet. I'm sorry I forgot the author's name, but it is the same gentleman who made "long-tail keywords" famous a few years ago.

Kim

[kgun]

Originally Posted by kkharrison

The idea of revenue coming in via a third party makes it clear: the website gives away information or products, the visitor gets free info or products, and the advertiser (third party) pays to be there.

Yes. I noted the following:

"You know this freaky land of free as the Web. A decade and a half into the great online experiment, the last debates over free versus pay online are ending. In 2007 The New York Times went free; this year, so will much of The Wall Street Journal. (The remaining fee-based parts, new owner Rupert Murdoch announced, will be "really special ... and, sorry to tell you, probably more expensive." This calls to mind one version of Stewart Brand's original aphorism from 1984: "Information wants to be free. Information also wants to be expensive ... That tension will not go away.")

......

The rise of "freeconomics" is being driven by the underlying technologies that power the Web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.

......

Basic economics tells us that in a competitive market, price falls to the marginal cost. There's never been a more competitive market than the Internet, and every day the marginal cost of digital information comes closer to nothing.

......

This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all."


As an economist I have always teached my pupils that in the end there is (was?) no free lunch (you had to order at least one beer). Freeconomics is a word strongly related to online information. Is it possible / adviceable to divide information in two?

Interesting concepts:

1. Freeconomics
2. Penny gap

Conclusion:

So, after all there was a free lunch or was it more about quality then price?