“Priced and Unpriced Online Markets” by Harvard Business School professor Benjamin Edelman. Discusses tradeoffs in market such as email, IP addresses, search and dial-up Internet. “Reminiscent of the old adage about losing money on every unit but making it up in volume, online markets challenge norms about who should pay, when, and why.” I found this typically academic: dated, dry and pretty unilluminating. But it got published in The Journal of Economic Perspectives.
From Mashable: “Freezly is a lot like Tweetmeme in that it finds link and tweets and shows you their popularity based on retweets. Freezly though only picks up free giveaways and items with its algorithm. You can see the hottest free deals being shared on Twitter, the most recent deals Freezly has found, and an archive of past giveaways.”
From Cellular News. “Android and iPhone users download approximately 10 new apps per month, reports a survey by mobile advertisign agency, AdMob…..Of users who have bought paid applications, the top reason cited for their purchase decision was that they liked the free version of the app, demonstrating that free-to-paid conversions are a key factor in the paid app market.” (via Ken Rutkowski)
From the LA Times: “Industry insiders estimate that since 2007, revenue for most adult production and distribution companies has declined 30% to 50% and the number of new films made has fallen sharply. “It’s the free stuff that’s killing us, and that’s not going away,” said Dion Jurasso, owner of porn production company Combat Zone, which has seen its business fall about 50% in the last three years. Porn is hardly the only segment of the media industry struggling with these issues. But its problems appear to be more severe. Whereas online piracy has forced big changes in the music industry and is starting to affect movies and television, it has upended adult entertainment. At least five of the 100 top websites in the U.S. are portals for free pornography, referred to in the industry as “tube sites,” according to Internet traffic ranking service Alexa .com. Some of their content is amateur work uploaded by users and some is acquired from cheap back catalogs, but much of it is pirated.”
From the AP: “In recent days, the top three Kindle sellers have been free books: Patterson’s, Joseph Finder’s “Paranoia” and Keyes’ “The Briar King.”“There’s always going to be someone who wants free things. What we’re trying to do is link free with paid,” Maja Thomas, senior vice president of digital media at Patterson’s publisher, the Hachette Book Group, said. “It’s like priming the pump.”
“What we like to do is make the first book in a series free, usually a series that has multiple books,” said Scott Shannon, publisher of the Del Rey/Spectra imprint at Random House, Inc., which published Keyes’ fantasy novel.
Shannon said Del Rey has had especially good luck with Naomi Novik’s “Temeraire” fantasy series after offering the first book for free. He said sales for the other Temeraire novels increased by more than 1,000 percent. “It’s been stunning,” he said.”
A few weeks ago, I speculated in a CNN editorial that antitrust authorities could make it illegal for dominant companies (read: Google) on the web to use Free, because it’s effectively offering a product below cost and subsidized by monopoly rent from another product. If that felt a bit far-fetched, consider this: Google is being sued in France for making Google Maps free. A French company wants to charge for a similar product.
Nytimes.com general manager Vivian Schiller, now at NPR, tells Newsweek that “news is a commodity”: “I am a staunch believer that people will not in large numbers pay for news content online. It’s almost like there’s mass delusion going on in the industry-They’re saying we really really need it, that we didn’t put up a pay wall 15 years ago, so let’s do it now. In other words, they think that wanting it so badly will automatically actually change the behavior of the audience. The world doesn’t work that way. Frankly, if all the news organizations locked pinkies, and said we’re all going to put up a big fat pay wall, you know what, more traffic for us. News is a commodity; I’m sorry to say.” (from Gawker)
Reuters columnist Felix Salmon on why his company shouldn’t buy Breakingviews, with its paywall-only model: “The genius of Reuters setting up a commentary team is that we can offer our content at a marginal cost of zero. Once the commentary is available on the wire, for the benefit of subscribers to the terminals, those subscribers want it made available as widely as possible for free — because that way it becomes maximally influential. (That’s my argument, anyway, we’ll see how much traction it gets.) In that sense, commentary is the opposite of news.”
A good roundup of revenue models from Mashable, with examples and interviews with entrepreneurs in each. The five are: Freemium, Affiliate, Subscription, Advertising and Virtual Goods.
Want more Free news than I’m collecting here? You’re in luck—two services have started providing it.
Eqentia, a new semantic news aggregator, has a very good page on “Freeconomics”. You have to sign the first time to read the stories, but after that it’s quick and, yes, free.
Meanwhile, Seth Godin has set up a Squidoo page on “The Free Debate”, which has collected a lot of great articles and opinion.
Last week I wrote a piece for CNN wondering if the Obama adminstration’s tough new line on antitrust could end up limiting Google’s use of Free to gain share in new markets (because it’s subsidizing that entry with monopoly profits from search ads). Dana Wagner, Google’s chief antitrust council, replied on the Google policy blog. Sample: “It is true that if a company has a dominant product, it may run afoul of antitrust laws if it “ties” that product to another — for instance, by requiring customers who buy that product to buy another product as well. When a company provides products for free on a stand-alone basis, however, it’s not requiring anyone to buy anything. It may take business away from other companies trying to charge users for similar products, but that’s hardly an antitrust issue.” eWeek’s Google Watch has a good roundup of the arguments on both sides.
Virginia Postrel, who is smart and both techno- and econo-literate, has a long review of FREE in the the Sunday NY Times Book Review section. She describes it as “stimulating but not uncomfortably challenging,” concluding: ““No man but a blockhead ever wrote except for money,” Samuel Johnson said, and that attitude has had a good two- century run. But the Web is full of blockheads, whether they’re rate-busting amateurs or professionals trawling for speaking gigs. All this free stuff raises the real standard of living, by making it ever easier for people to find entertainment, information and communication that pleases them.vBusiness strategy, however, seeks not only to create but to capture value. Free is about a phenomenon in which almost all the new value goes to consumers, not producers. It is false to assume that no price means no value. But it is equally false to argue that value implies profitability. “
Long and thoughtful review in the WSJ by Jeremy Philips, vice president of News Corp: Sample: “To be sure, businesses with pricing power don’t always exercise it. Millions of people would be willing to pay for their favorite social networks, but the potent network effect that derives from scale has made free an irresistible strategy. In the future, the “freemium” model that Skype and others use today will be increasingly important. It may allow businesses to preserve most of free’s scale benefits and advertising dollars while also building additional revenue streams.”
A Janet Maslin NYT review of FREE and CHEAP (by Ellen Ruppel Shell) makes much of the fact that we describe Dan Ariely experiments differently, proving us to be untrustworthy. Or, perhaps, they were different experiments. A simple Google search would have revealed that it’s the latter.
Moby writes to Bob Lefsetz: “Here’s something funny: the best selling itunes track is ‘shot in the back of the head’. Why is that funny? Because its the track we’ve been giving away for free for the last 2 months and that we’re still givng away for free.” (thanks to Mitch Joel for the link)