The Economics Of Free
One of the most interesting and unique
economic phenomenon to emerge over the last 10 years is the impact of
technology in creating products that are free to the consumer. The most unique
aspect of this business model is that it generates tremendous profits for those
who know how to use it correctly. However, the
rapid acceleration of technology has enabled a business model centered around
offering products, services, and content that is free to the end consumer. The
cost per unit of computing power effectively drops in half every 18 months.
This means that the cost of providing a product or service to an individual
customer rapidly drops to very near zero. Thus, companies who have already
built out a technology infrastructure can provide products and services at a
very nominal cost. The thing that enables this model is the freedom from
content containers such as books, DVD’s, phones, tablets, or some other device
for holding or storing content. By specializing in software based technology products,
companies can capture all of the cost advantages offered by Moore’s Law without
being constrained by the cost of containers for their content. For example Google
creates free access. This model is very similar to traditional television, but
offers the ability for advertisers to narrow down their customer base much more
finely than is available through the broad-brush of television advertisement. An adjacent business model that has spawned from this
paradigm that is quickly challenging the traditional model of using copyright
protection to restrict content distribution. In this model, you capture value not by marketing to
customers in hopes that they will buy, but by attracting customers to you
because of superior content and capturing value through relationships with
advertisers and affiliates that pay a commission for access to customers who
have been pre-qualified by accessing your content. The opportunity for web marketers comes from creating
outstanding content that is appropriately optimized for search visibility to
draw customers to your website, then sell access to that population of
customers to advertisers and affiliates. In the end, this phenomenon of ‘free’ is continuing to
shape the online marketplace and is expected to produce the infrastructure for
even more new business models to emerge in the future. It represents a new
paradigm that will pose tremendous problems to people and companies entrenched
in the status quo and great opportunities to those who understand and leverage
this new business model.
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