But it’s the centre of the new book from Chris Anderson, editor of Wired. Given that he’s the man behind the phrase ‘the long tail’, the book’s been getting a fair amount of publicity. Titled Free, it documents the rise of a business model in which companies give their core product away. They do so knowing that they can make money by selling goods and services around that product. The few customers (Anderson talks about 10 to 20 per cent of the total) who take up these services effectively subsidise the rest. For Anderson, free is a magic concept that draws people in and builds customers quickly. It is very different from just cheap.
This is nothing new for media - Anderson points out that free-to-air radio and TV, paid for by advertising, is one of the original ‘free’ business models. But it’s certainly timely, given that Rupert Murdoch is talking about getting people to pay for content again. Many newspapers are suffering precisely because they have given away so much of their content online, a channel where they cannot generate the same ad revenue they did in print. If anything, the talk now is about retreating from a free model.
If there is a hero in the book it is Google, which gives away its core search product and much else besides so that it can sell ads. It is pure coincidence that Anderson’s book launched in the same week that Google announced it was moving into the operating system business. But Chrome OS fits this model perfectly. Google is taking on Microsoft on its home turf with a free product that will ultimately reinforce its search engine.
However, Anderson’s argument has been rather expertly deconstructed by Malcolm Gladwell in the New Yorker. He points to YouTube, a wildly popular free service that can’t monetise itself, as evidence that you can’t always build a business around a free service. You could point to services such as Facebook and Twitter too - they are as guilty of following a ‘give away and pray’ formula as ‘old media’ publishers. (Though given the amount of venture capital money behind them, they can afford to be a bit more relaxed.)
So what can Asian media owners take from all this theorising? Anderson speaks warmly of the sort of micropayments used in gaming, and his model seems to support the kind of system introduced by the Financial Times, which requires a subscription only for heavy users. The key message appears to be don’t give your stuff away unless you have a real idea about where you will make money.
Unfortunately, however, there are more questions than answers. As Gladwell states: “The only iron law here is the one too obvious to write a book about, which is that the digital age has so transformed the ways in which things are made and sold that there are no iron laws.”
Got a view?
Email david.tiltman@media.asia
