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.
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!!
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.
@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.
[…] sparked the conversation, then Dave did a post on Thought Leader : The Business of Free & I did a follow up on the “Freemium” model. We’re fascinated by free at the […]
@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.
[…] the lecture, we discussed how many products and services are becoming “free”, but how our Attention can be monetized. (Also see Chris Anderson’s article, and soon to be […]
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.
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Dave Duarte is an internet and mobile marketing educator and entrepreneur.
He is MD of Huddlemind, an education and research organisation that provides blended learning solutions to numerous multinational corporations.
Dave is also founder and director of two Executive Education programmes at UCT Graduate School of Business: Nomadic Marketing and Mobile Marketing.
He lectures on the Executive MBA programme at UCT GSB, as well as on an undergraduate management studies programme at UCT.
Dave’s non-profit appointments include:
* Dean of the Digital Media Faculty at The Maharishi Institute of Management (a free university founded by Taddy Blecher, and endorsed by international icons such as Bill Clinton, Oprah Winfrey, Richard Branson and the Dalai Lama)
* He is Public Lead for Creative Commons (CC) South Africa (CC is a non-profit that offers a set of free customizable digital licenses that have been applied more than 200 million times globally)
His other projects include:
* Co-founder of the 27dinner (a free monthly event that runs nationally on the 27th of every month)
* Co-owner of Muti.co.za (Africa’s most popular online social bookmarking application)
Dave won the “Best Business Blog†category at the 2009 SA Blog Awards.
He is rated as one of the Top 100 Most Influential Media and Advertising people in South Africa by Jeremy Maggs in “The Annual“.
Dave's links
Huddlemind Huddlemind.net is a business network of people interested in using technology to communicate, collaborate and learn more effectively.
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As the amount of new information produced in the world every day escalates, so I find my attention span decreasing in equal and opposite proportion.
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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/
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