Download Scary Things to Do Online (if you dare)

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.
Five Free Lessons From Games
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)
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?