Tuesday, 4 May 2010

There is such a thing as a free lunch (sort of)

Chris Anderson's previous book, The Long Tail was arguably a book about sociology and technology and as such (it's got an ology!) made it onto the Popular Science website. I really couldn't justify reviewing his new title Free (see at Amazon.co.uk or Amazon.com) there, because although at first glance it's a similar sort of title, this is much more a straightforward business book.

That's not a bad thing. Though I found The Long Tail fascinating and gave it 5 stars, it wasn't a book of practical advice for business - it concentrated a lot of its message the way you could make pin money out of selling 5 copies of your ebook on lesser spotted titwarblers to other lesser spotted titwarbler fanciers, rather than giving something a real business could use (unless it was a megabusiness like Amazon that could collect in all the tiny long tail contributions).

Free, on the other hand, is much more practical and although its primary driver is the impact of the internet, it extends beyond this to the whole business interaction with the concept of 'free'. So we see the literal origins of the free lunch (and whether or not there is such a thing), the free giveaways and the first large scale free in free radio, sponsored by advertising (or governments).

Broadly Anderson suggests there are three ways to do business incorporating free. A direct cross-subsidy, such as a free gift, or buy one, get one free. A three way process, like advertising, where a consumer gets the product free because the advertiser pays the broadcaster (or equivalent) for access to the audience. And freemium, where the products and services are available as free versions, plus pay versions with more value - and the pay versions subsidize the free versions.

As he points out, what has changed hugely is that the internet makes it much easier to offer things for free, because the marginal cost of doing so is so low. And this means that many information-only products will tend to drift towards free, using one of the three techniques mentioned above to (hopefully) keep revenue flowing. It's not just a nice to have, with information products it's almost an essential.

Most of what's here is sensible, well thought out and convincing. There are always those who will throw up their hands and moan about the free model (e.g. music producers) - but Anderson cleverly lists all the main objections to free and shows why they are flawed.

The only argument I feel he doesn't really answer properly is the 'we can't all do gigs' one. This basically says, if you're a band, for instance, you should give your downloads away free, and make money on premium CDs, but mostly on live gigs, appearances and the like. The argument says 'But we can't all do this,' if you try to apply this argument wider than pop groups to, say, writers. Anderson's counter to this is really just 'It'll work if you get the right model,' but I'm not sure he is right here.

Even so, this is a book every business that's using the web - and that should be every business - needs to have on the shelf and to study. Interestingly he makes the point that most of us still prefer real books to the electronic version, and Free just wouldn't work for me the same if it weren't on paper. So, despite the enthusiasm I now feel for 'free' - I encourage you to virtually nip over to Amazon and buy a copy. This is free advice. Cherish it. (see at Amazon.co.uk or Amazon.com)

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