1) I'm not mean to be an economist
2) If it happens, there's a reason for it
3) There's no such thing as a free lunch
I'll focus on the last two, but because of #1, take what I say with a grain of salt. :) In the article "Free: Why $0.00 is the New Future" the author explains how the internet has to an extent defied the laws of economics by making content "free". From data storage (Yahoo) to flights (Ryan Air), many companies are "giving away" their goods to consumers, generating revenue through other means.
In this context - Prof. H's rule of "if it happens, there's a reason for it" certainly applies - the reason why companies do this, as the article points out, is that they are able to recoup their cost via another way. In fact, in some cases, they are able to make more than if they had actually charged for it from the beginning. The Daily News's association with Prince is priceless - ok, not really priceless, but you know what I mean. And of course, the reason why Google is free to us is because they are making bucket loads from advertisers and companies that want to be associated with Google. I found the statistic that 1% of paid subscribers pay for 99% of regular users absolutely fascinating.
So the next rule, "There's no such thing as a free lunch", is perhaps less evident but also certainly applies as well. In essence, we give up privacy, our information, and in many cases our rights, to get things for free. Facebook is "free" - but we give up owning the right to our content and regardless of what you think, we definitely give up privacy. And that's the case for any site - the currency isn't dollars and cents but rather names and emails and addresses and demographic information. Instead of entering a credit card number, you enter that you were born in XXXX year and that you are a M/F. More valuable to them than $1.99.
I'm not one to cheer for economics, but its nice to see that in the "free" age where "scarcity doesn't exist", economic principles still apply.
And with that, I apologize for the excess of " "'s in this blog posting, thank you for all of your comments throughout the year, and wish you a very happy and wonderful holiday season!
Adios amigos!
You can push the concept even further with the example of Opentable which blurs the lines between consumer/supplier. Restaurants pay Opentable, customers get paid by opentable. Best business model ever - pay your customer to use your service.
ReplyDeleteI thought this was a fascinating article, I especially liked that there are only two numbers on the internet, zero and infinity. The most successful method of free service on the internet is definitely the free service in exchange for involuntary data submission, some day it will be worth a bundle. I also like these website that allow a user to buy one hundred pennies for a dollar, and you bid a penny at a time for flat screen tvs and ipads, and the highest bidder at closing wins.
ReplyDeleteOn a side note there is such thing as a free lunch. Consider a business and its production possibilities curve. If that business is operating inside its production possibilities curve, and then moves to operating at a point on the curve they have gained without cost. Therefore getting a free lunch.
I really enjoyed this article as well, Maria. Though, I didn't take Prof. H's class I was still really intrigued by the underlying economics discussed in the article. It'll be interesting to see what other products and services become free under the business model addressed in this article. Also, nice work on getting into the Wake Forest Marketing Summit Competition!
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