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.