Monday, December 17, 2007

The power of Free

This video is great - it's a talk by Chris Anderson the editor-in-chief of Wired. He is the author of the much loved 'The Long Tail'. I found it the video on one of Guy Kawasaki's blogs.

His basic premise is this - there is a part of your business now which is a constraint that you have to pay for. What if that constraint wasn't there? What if you treated it as Free? What would that do to your market and your overall proposition?

It's a great talk given at NokiaWorld 2007 very well illustrated with lots of real examples from the Internet and telecommunications world (webmail and mobile in particular) and economics that anyone can understand.

There are a couple of conflicts in what he says (eg artists like Prince giving away music for free to create premium pricing for concerts - Chris hasn't commented on Prince taking legal action against his fans for the use of his likeness on fansites - maybe its another revenue model) and an unfortunate part of his talk where his PC SNAFUs without a graceful recovery.

Those are minor though - the premise is really powerful. Something that you think is a scarce resource, your competitor might be thinking is heading towards free. They act like it's free, you act like its a constraint. When that happens your world is going to get shaken up.

Of course you have to make the right part of your model free - sellmefree for example. There is no constraint for the audience on their primary competitor trademe. Sellmefree have made the wrong part of their model free as Lance and AirNZ have noted. It's free for anyone to browse and buy on trademe so the audience is there, which drives people to sell there. Virtuous cycle - boom.

It would be a bit different if there was no constraint for customers on the amount of a certain product to buy on trademe -and you could buy it at the price it just sold for on auction instantly - no such thing as missing out again. That would make it a meta-retailer (Sam Morgan's words - not mine) as opposed to community marketplace. Maybe the Ferrit model is not so bad after all? Especially when you look at the great deals they have on ipods now.

What would you want to see removed as a constraint now? How would you act if it was free?

Take 45 mins out to watch the video and have a think.

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