Many of the most popular websites in the world offer a free service, yet are hugely profitable. Free search from Google; free messaging with MXit; free news from Mail & Guardian Online, even free photocopies!
Most people who use them haven’t even considered how these ventures might make money. In fact, if you consider the cost of developing and hosting those services, it might seem altogether altruistic.
Of course, giving something away for free might seem to make no sense if we look at it through the lens of the traditional market economist — high demand for scarce resources should drive cost of use higher in a free market. But things are different in the hyper-connected world in which we’re living. The internet is a world where the product of scarce resources such as time and labour can be scaled to the extent that its cost is so thinly distributed among its users that it becomes free. This is the new market panacea — a perceived escape from the bounds of scarcity.
Unfortunately, we cannot escape fundamental laws of physics — energy cannot be destroyed, it can only change form — and scarcity in a market can’t be eliminated, only transferred. So not only might this new ideal of “free” be flawed, but there is possibly a hidden personal cost to buying into it.
With the huge amounts of “free” information that we’re all being bombarded with on a daily basis, we are collectively experiencing a major attention deficit. This is why businesses are spending more and more money on every form of advertising, and branding every imaginable surface — they have realised that in a world where the products and services are all good enough, the one that wins is the one that has the highest share of our attention.
Going forward, we will see more and more things becoming “free” — phone calls, taxi rides, you name it — but there will be another type of cost involved. There are battles brewing for shares of our attention. If we don’t start to budget our focus, and treat attention spammers as we would thieves, then we might find ourselves saddled with information overload as crippling as a mountain of debt.
Hi Dave …
Great mind think alike! Here is my Thought Leader post on this very subject
http://www.thoughtleader.co.za/evedmochowska/2008/01/15/theres-no-free-lunch-not-even-online/
that is so odd! I did a post for Huddlemind on this http://huddlemind.com/2008/02/08/what-does-the-freemium-model-have-to-do-with-real-business/
(promise there was no collusion!)
It’s a great topic for debate. Clearly we all have quite strident opinion about the business of ‘free’
http://www.tadacopy.com/ links to a Chinese language site. If it offers free photocopies, I’ll have to accept your word on it.
I didn’t realise you spoke Mandarin.
If we don’t start to budget our focus, and treat attention spammers as we would thieves
Say what?
That sounds like nonsense. People demand attention all the time. That is not going to stop until we are all extinct.
Free phone calls, I can see because many countries already enjoy free local calls, but free taxi rides?
How would that work? Even if the vehicles were solar powered, how would the taxi company receive revenue?
Is all (future) revenue to be derived from advertising?
this is so strange… just yesterday (no i did not write a blog on the matter) I was talking to someone at school about exactly this and the costs of these “free” services for which a solely money metric approach cannot fully account!!
thanks for the post(s)
But not everything can be free. The only reason some things can be free is because they’re advertising something else which has a cost, and the expected payment by the average user exceeds the cost of the free service.
Hi all thanks for posting these comments.
@Eve and Max and Lebogang: Brilliant – I wonder what triggered us simultaneously? Great articles, I’ll post my comments there directly.
@Richard Catto: 1. In fact Tada Copy is Japanese, not Chinese.
2. The fact that people demand attention all the time, and now have more and better means to do so is exactly why this is such an important issue – it’s not going away, and it’s getting more problematic.
3. Just because you haven’t thought of a way to make a particular service free, it doesn’t mean that it can’t or won’t happen. I mentioned some services that don’t exist yet in order to stimulate thought around future scenarios. And, yes, in fact I could see a advertising or e-commerce subsidizing transport to some extent.
@South African: You’re right, value needs to be transferred at some point. However, the money spent on retail advertising in the US has been larger than their profits for the last few years. There are people theorizing that the gold standard of currency (which has become meaningless), is being replaced by an attention standard. It’s, of course, more complex than that, but I hope to elaborate on it in subsequent posts.
Dave, very good point you make here, one that is increasingly becoming a major social problem [and creating its own economic problems along with that].
The flip-side is open-source collaboration, where people give [without an alterior profit motive, quite often] their time and resources to create something beneficial to society. As you well know, education is starting to see the benefits of this, as are other public-interest institutions.
It’s quite strange how ‘free’ can potentially be both our worst enemy and our greatest ally. I suppose it’s just how we use it that will decide which one it eventually plays out as.
@Darren: Yes, while I’m all for the open-education and knowledge commons (I support it actively in fact), the university that I teach at doesn’t allow people to reference Wikipedia in research due to the fluctuating state of the information on it. Eish! It’s all these options, not all equal in quality, that are paralysing us! Thanks for your comments and continue to OUTthink:)
Here’s an idea for free (or at least cheaper) taxi and other public transport rides: besides the obvious (and already done, although not as widely as one might expect) branding of the outside of the taxi, how about taxis with blue tooth transmitters rotating through adverts (if not a screen display)? Or even taxis with wi-fi, including a/some (free access) sponsored link(s)?
Out there perhaps, but nearly 40 million cell phones out there, and an increasing proportion are blue tooth and/or internet enabled. Add to that the fact that wireless broadband is expanding and becoming cheaper, and the fact that a lot of people probably don’t have anything productive to do while sitting in a taxi (they’d probably welcome the diversion), and there’s definitely a business model there in the not too distant future.
Hello Guru, what entice you to post an article. This article was extremely interesting, especially since I was searching for thoughts on this subject last Thursday.