About the author

– Chris Anderson was born in 1961, currently living in California, USA

– He has worked for famous magazines such as Nature, Science and The Economist

– 2001: He headed Wired, a magazine that has won many major awards in the United States

– 2006: He is the author of Best Seller “Long Tail” – Long Tail

– 2009: He was included in the list of 50 great thinkers of the world such as Steve Johs, Jack Welch, Bill Gate, Paul Krugman, Joseph Stiglitz, Michael Porter, Daniel Goleman, Thomas Freedman


With a laptop, at a wifi cafe, we can sit and work comfortably. Everything we do on the computer from email to Tweeter, running Firefox, Google... is completely free (Except for coffee)

Yet Google remains one of the most profitable companies in America. They made a lot of money without making others pay. It's free, but still earns enough to basically build an economy the size of a sizable country around the $0.00 price point. How did this happen and where is it going?

How is Free of the 21st century different from the 20th century? free is nothing new, but it is changing, must understand the new style of free to dominate tomorrow's market.


At the end of the 19th century, Pearle Wait extracted gelatin from meat and bones to create a very attractive new food condiment called Jell-o, but he could not sell it because the product was still very foreign to consumers. . He ended up selling the brand to Frank Woodward for $450. But then the situation was bleak, the inventory was increasing, Woodward was discouraged to sell it to Nico for $ 35 but Nico refused. In 1902, Woodward and his assistant tried another way: They first posted an advertisement in Ladie's Home Journal for $336 and then printed thousands of pamphlets introducing Jell-o with food recipes. then give it to someone to give out to housewives for free. By 1904 the sales campaign was very successful, sales reached 1 million USD. Woodward understands that “free is a super powerful word,”Free does not mean non-profit but means that the product has to go on an indirect route to the market.

King Gillette

Around the same time, in Boston, one day, King Gillette was shaving with a folding knife that had become so worn it could no longer be sharpened, he had an idea, what if he made the blade out of a thin metal band? Instead of spending time sharpening knives, people just throw them away when they get dull. The used and discarded razor blade was born.

In the first year of 1903, Gillette sold only a total of 51 knives and 168 blades. In the years that followed, Gillette tried every marketing trick he could think of: He printed his picture on the packaging, sold millions of razors to the military for cheap, sold batches of razors to banks for them to give away to customers, Razors are sold with everything from chewing gum to packets of coffee, tea, and flavorings. Even on the other hand do not give out to customers. Gillette created demand with used and discarded razor blades. Interestingly, the suggestion that the Gillette company gives away razors is almost a baseless rumor. Gillette's business model was to sell razors very cheaply, but Gillette's real profit came from selling blades at relatively high prices.

Later, people applied Gillette's model in all industries: giving away cell phones, collecting monthly usage fees; sell game consoles cheaply but sell games at high prices; install coffee machines in offices at no charge and then sell packaged coffee to office owners.

At the dawn of the 20th century, free reinvigorated the consumer revolution. Free is the call of the modern marketer and is always answered by consumers.

Free of the 21st century

Free of the 21st century is not a trick, a scam to move money from one person's pocket to another. This century's free is all-new, an extraordinary new ability that brings the cost of products and services down to near-zero. The free form is based on the economics of binary rather than atomic numbers. It's a unique quality of the digital age that when something becomes software, it inevitably becomes free.

Atomic economy, over time, everything gets more and more expensive and tends to be inflationary. But the economy of binary numbers is the online world, everything is getting cheaper and cheaper which is a deflationary trend. As Moore's law determines, every two years the price per unit of computing power drops by half.

In the atomic economy, anything that's free is charged through something else. But free in the binary economy has the potential for real free.


Free admission

The original Burmese is a Latin compound consisting of Liber (freedom) and Gratis (thank you). The positive connotation of "free" can sometimes cause ambiguity, so the word Gratis must be used to emphasize really free. But then people end up using a single word free. The word free, free or free comes from Old English freon, freegan (freedom, love). Thus, "free" comes from the social concept of liberation, both from slavery and from cost.

Various forms of costs.

'Free' also has a lot of meanings. Sometimes “free” isn’t really free: buy one get one free, free shipping (meaning delivery charges included in the price), free samples, free trials. - Create a debt mentality, encourage consumers to buy products at full price….

Sometimes free is really free and this is the new model , most of it is online where digital economy dominates the fees go to zero.

All of the freebies mentioned above are just variations of a common pattern: they all move money around from product to product, from person to person, between present and future, or into non-markets. currency and back out. Economists call them “reciprocal support”.

The whole world is supportive.

Mutual support is the spirit of the expression “There's no such thing as a free lunch.” That means one way or another someone will pay for the lunch, the person eating the meal, or someone else in the interest of paying.

Reciprocal support can come in a few different forms:

– The product has a cost to compensate for the free product.

– Pay later, funding for free now, monthly phone usage pay for the original free phone.

– People who pay, sponsor free people, men buy tickets to nightclubs, can bring women without paying. Adults take children to the zoo for free but then adults have to pay for children's games…

The back-and-forth, free models fall into one of four categories:

Free 1: Live Cross Support

Giving away products or services to promote and benefit other products and services (e.g. King Gillette, about toll free phones)

Free 2: Tripartite Market

Radio and television have free coverage, the internet, the target audience uses them for free, but advertisers pay for everything. Consumers have the feeling that the main product they are interested in is free. But consumers will eventually lose money, but only indirectly, through higher product prices due to marketing costs.

Free 3: Free high price

With digital products, 5% of customers will pay for the remaining 95% of customers, which means that for each paying customer using the fully functional high-priced version, nineteen other people get to use the high-priced version. free less functions.

Free 4: Non-Currency Market

This form has several forms:

  • Gift economy

Twelve million Wikipedia articles, millions of used items listed on Freecyete just to give away, you give Google information when you have an open website, you give a homeless person items he wants. we pick it up from your trash… the zero cost distribution method has turned sharing into a business in which you get values ​​like joy, satisfaction, fame and internet provided a platform that allows individual actions to have global impact.

  • Change of work

Every time you search on Google, you help Google improve their ad targeting algorithms. Whether you realize it or not, you paid with your own labor for a free good.

  • Copyright infringement

Online music is represented by converting music to digital form and sharing them online, the cost of music dissemination has really bottomed out, all measures against piracy have fallen. Artists have to accept that fact, for them, music is a means of marketing, a pleasure, building image and reputation.

  • Three prices

We're mostly talking about two levels of value: premium and free - but there's a third lower price than free, which is negative: you get paid to use a product or service instead. for the opposite. In most cases, you'll end up spending money sooner or later. But the interesting thing about these methods is that although they are not really free money . for example, the part of money that is rewarded after paying in full creates a completely different mentality than having to pay a lesser amount in the first place.


Number 0, lunch and the enemy of capitalism. The problem of nothing

Free is confusing that it is not something specific but the absence of something specific. Free is a concept, not something we can count with our fingers. It took our civilization thousands of years to find a number to describe it.

The Romans didn't need Zero in the Roman coefficient, the Greeks opposed zero, their math was based on geometry, numbers had to represent space in some form. However, Indians do not see the shadow of shapes in all numbers. Eastern mysticism embraces both the visible and the invisible. Lord Shiva both creates and destroys the world, in fact one aspect of Shiva is "Nothing Shiva" - emptiness. And when the Indians invented algebra they extended negative numbers and zeros from the 9th century, the word "zero" in the Indian language is Sunya, meaning empty, the Arabs changed it to sifr. The West Latinized it as zephyrus, which is the root of the word zero.

Trouble of free

By 900, there was enough notation and algebraic basis for the concept of "zero" to coexist with the concept of "economics". From Ancient Greek origin, oikos (house) and nomos (customs or laws) hence it means "family law" and free is always the law of the house.

Since the advent of the money-based economy, transactions have been largely independent of price but based on generosity, trust, goodwill among neighbors and social groups: In the 17th century , the concept of progressive taxation was born, the establishment of public institutions created a special kind of free: you may not pay for government services, but you will never know exactly how much My tax money is used to serve you directly.

Capitalism and its enemies

After the 17th century, the money supply was regulated, the currency protected, and economies flourished.

However, there are still some figures who do not accept money as the medium of all exchange: Karl Marx advocated collective ownership and distribution according to needs. Kropotkin believed that private property was one of the causes of oppression and exploitation and called for the abolition of private property in favor of collective ownership. He argues that "primitive societies" operate on a gifting economic model that is closer to the nature of human relations than to market capitalism.

First free lunch

By the end of the 19th century, the market economy was well established, money had proven itself to be a catalyst for growth and a key to prosperity. By the time King Gillette and Pearle Wait made a fortune from free, customers were familiar with the saying "there is no free lunch"

Samples, gifts and trials

In the early 20th century, free became a sales trick. Babbitt Soap became nationally known through advertising and promotional campaigns, including the first large-scale distribution of free trials.

Free as a competitive weapon

Today, we know that the most destructive way to enter a market is to destroy the economics of existing business models. For example, not counting products that are the main source of profits for competitors. The whole world will line up to your doorstep to start selling your other products.

Abundant time

For most of human history, fertilizers have been the determining factor in how much food we can produce. In the early 20th century, the Haber Bosch process eliminated farmers' reliance on natural fertilizers, creating a green revolution that increased world agricultural output by almost a hundredfold. Abundance has been evident in the lives of mankind, especially in food.

Corn on top of corn

In food, we have 3 basic types: rice, wheat and corn. Rice is rich in protein but difficult to grow, wheat is easy to grow but poor in protein, only corn is both easy to grow and rich in protein.

Today, we use corn for more than just food: animal feed, making products from paints, packaging, toothpaste to cosmetics, diapers, detergents, fabrics, glue, auto material in the form of ethanol…….

Chicken nugget (Chicken nugget) is the product of "corn on top of corn": chicken eats corn-based food, which means chicken contains corn, cornmeal is used to make chicken coat, and corn oil is used to fry chicken.

Ehrlich's False Bet

The idea that goods will become cheaper rather than more expensive over time is counter-intuitive. Food is renewable, but minerals are not, the more we mine, the less we have left, which is typical of scarcity while the world's population is increasing. But in September 1980, Paul Ehrlich, a population biologist, and Julian Simon, an economist, made a public bet with $10,000.

“The prices of dry ingredients that are not controlled by the state will not increase in the long run,” says Simon, choosing five metals: copper, chrome, nickel, tin and tungsten. Ten years later, 1990 the prices of those metals have more than halved – Simon won the bet. Why did Simon win the bet? Because he is a brilliant economist, he understands the impact of substitutes: If a good becomes too scarce and expensive, that will be an incentive to find substitutes that are more abundant. Human creativity and the ability to learn from science and technology will tend to create new resources faster than they use them.

Blinded by abundance

Obviously, Simon has a better chance of winning. But the tendency to pay attention to what is scarce rather than abundant emerges. The most prominent example is Plastic: people sell the first generation of plastic plastics not as used and then thrown away, but the second generation of Plastic with Vinyl and Polystyrene is so cheap that people can finish using it and throw it away. Go without worrying at all.

After the 1970s, attitudes towards such superabundance began to change. The environmental costs of a one-time consumption culture have become more apparent. So, a new generation started the recycling business. Our attitude towards superfluous resources shifts away from individualistic psychology (this is free to us).

Abundance reigns

The story of the 20th century is one of tremendous social and economic change driven by abundance. Just as countries always flow downstream, economics flows towards excess. Profit-seeking firms must go upstream in search of new scarcity, what Tim O'Reilly calls "the law of conservation of attractive profits". Today, only 32% of companies make handheld products. The remaining companies switch to providing services, creating intellectual property products, creating markets for other people's products (giant wholesalers and retailers).

A few decades ago, the greatest value was in manufacturing. Then globalization lies in manufacturing. Today the highest levels of profit are often found where gray matter combines with matter. The combination of knowledge, skills and abstract thinking makes an effective knowledge worker. Permanent settlement is to find the best method of division of labor between humans and computers because the work relationship between humans and machines is always fluctuating.


In 1996, the Village Voice, a paid newspaper that became a free newspaper, in this case, New York magazine in 2005 commented: "Voice from the grave: The legendary newspaper has become a shell of itself since becoming a free newspaper less than a decade ago.” In contrast, The Onion, which was a free newspaper from the beginning of 1988, continues to be free and continues to grow.

Free seems to kill one weekly while helping the other grow. In one case, free reduces the value of the product, in the other it leads to dramatic expansion. If something used to cost money to buy, and now it doesn't, we tend to associate that phenomenon with deterioration. But for things that have never cost money, we don't think the same way.

Tiny crevice

For magazines, setting a minimum value clearly works, rather than being free. But in most cases, a single penny—a meaningless bed price—can stop the vast majority of consumers. Because our brains are as if designed to sound the alarm every time we hit a price. The alarm is “Is it worth it?”, we tend to choose the things that require the least thought. From the customer's point of view, there is a huge gap between free and cheap.

Price of free

Most deals have their pros and cons, but when something is offered for free, we forget about its downside. Free gives us a spiritual energy that makes us a spiritual energy that makes us feel much more valuable than it really is. It is because people have a fear of disadvantage by nature. When you get something for free, you don't face any possibility of loss, but when you accept something that isn't free, there is a probability of loss.

No cost, no commitment

Free can encourage gluttony, plunder, mindless consumption, guilt and greed. We take things because they are there, not because we need them. Setting a price, even a very low one, will encourage more responsible behavior. Free is the best way to maximize the number of people who can access your product or service, but that's not the end goal you aim for, it can have a negative effect. Like another powerful tool, free must be used with care or else there is no harm in it.

Equation of time/money

At some point in your life, you may wake up and realize that you have more money than time, and realize that you need to start doing things differently. You pay for something to reduce risk because price comes with a guarantee, while free doesn't.

Free works great when it comes to paying. It has room for the shifting mentality of different customers, from those with more money than time to those with more time than money.

Copyright infringement mind

Piracy is a special form of theft, often seen by infringers as well as by consumers of pirated goods as infringement but without victims.

Their argument is that infringing goods rarely replace legitimate goods. Instead, it allows the product to reach people who can't afford legal goods or have money but refuse to buy legal goods.

Cliff Harris created video games for $20, but his games were immediately pirated. He researched, researched and realized that, users rated his product lower than he thought, he thought all efforts to reverse the problem were futile. Most manufacturers in the digital world will find that they have to compete with free. Harris cuts the price of his games in half, enhances the quality of his games, and makes his online store easier to use to compete with the free.


It's so cheap that it doesn't matter

In 1954, Lewis Strauss predicted great things to come: disease would be conquered, people would travel across oceans, travel through the air at enormous speeds, we would use electricity so cheaply until without having to take the time to measure…will change the world.

And indeed when science and technology boomed after the war, the economy grew at an unprecedented rate, but electricity wasn't so cheap that it could be ignored without measure. Less likely? But today there are three other technologies that matter to the economy to the same extent as electricity: computing power, digital storage, and bandwidth. All three are getting so cheap that people don't even bother.

Cheap pick up

As the cost of the item you produce falls steadily, you can adopt a pricing mechanism that at first glance might seem crazy. Instead of selling it for today's fee, you can sell it for tomorrow's fee. Kevin Kelly calls it "cheap pick up". For example, in the early 1960s Fairchild Semiconductor was selling its first transistors for $100. They understand that cost-increasing output will drop quickly, they use the tactic of staying ahead of the downside, they set a target at $1.05, then 50 cents and still make a profit, they say.” we sell into the future”

Why is Moore's law relevant to reality?

Most industrial processes improve and follow an effect known as the learning curve, but only semiconductor-based processes improve rapidly. more and last longer. Economically, the input of a semiconductor product is almost exclusively intellectual rather than physical. Ideas are the ultimate superfluous commodity that can be distributed at zero marginal cost, the idea itself wanting to spread widely, enriching everything as it reaches. Copyright is set up as an attempt to stop the natural flow of ideas, but then patents also expire, ideas cannot be hidden forever.

Products created from ideas instead of materials, they get cheaper and faster. This is the root of the redundancy that led to free in the digital world what we now call Moore's law for short.

Mead's Law

Gordon Moore: "If computing power at a given price doubles every two years, then the cost per unit of computing power must be halved during the same period", as Moore, Mead found that the doubling of capacity every eighteen months is long-lasting because it is driven by a learning and experience curve that he calls “dual experience”. What Mead realized was that this economic effect carries with it a moral imperative. If the transistor had become too cheap, he told the programmers to waste it.

The rat bellows

Engineer Alan Kay showed them how to waste, instead of saving transistors for core processing functions, he developed a computer model - the Dynabook - that could take advantage of silicon circuits to do fun things on the screen. : drawing statues, navigating the cursor with the mouse… What Kay realized was to make the technology so cheap, easy to use, and universal that anyone could use it, so that it would be available all over the world. Through such waste of transistors, the world has changed.

Iron and glass

The story of the semiconductor that has become the legend of the digital economy, as mentioned, the truth is that two related technologies, storage space and bandwidth have overtaken it in the race to the bottom. . The design of storage media is based on physics other than semiconductors. The storage disk is made of iron material that can hold up strong magnetic fields and the central science here is optics. However, the ratio of gray matter to matter is high, so innovation initiatives often emerge to restart the technical improvement cycle.

The superfluous can create

Bandwidth is so cheap that no need to bother giving us Youtube, it quickly revolutionized the traditional industry. The immeasurable cheap storage has given us Gmail with unlimited mailbox storage, not to mention Tivo, Flicks, Myspace and Ipod. Apple increased the capacity of the hard disk while keeping the same price and faster speed for music storage needs. Toshiba will soon produce a 1.8-inch hard disk that can store 5 gigabytes.

Now that the combination of all three technologies – processing, storage, and bandwidth – has created the web, the redundancy has multiplied.


History of a Digital Age Manifesto Steven Levy lists seven "hacker philosophies":

1. Access to computers – and everything that can teach you something about how

The way the world works – is unrestricted and comprehensive.

2. Always follow the urge to do it yourself!

3. All information should be free

4. Doubting power – promoting decentralization

5. Rate a hacker based on penetration ability such as degree, age,

race or status

6. We can create art and beauty from a computer

7. Computers can make our lives better


March 3, 1975, Microsoft's Bill Gates wrote: "Open letter to software thieves", he warned that if this continued, he would not be able to write new software and everyone would suffer.

But piracy never completely disappeared, and as software moved from hard-to-copy floppy disks to CDs, illegal copying exploded. Microsoft adds security codes on product packages with stamps with holograms, lawsuits, alarming propaganda, diplomacy but the situation is still out of control especially in developing countries. "They'll pay anyway, and as long as they're stealing we want them to steal our software, they'll get addicted, and then we'll figure out a way to collect the money," Gates said. into the next decade”

Free Trial

During the 1990s, competitors to Microsoft such as WordPerfect office and Lotus Smartsuite only required PC manufacturers to pay a very low fee to have their software bundled with new computers. . Gates was worried, he decided to respond. Microsoft develops a reduced-featured version of the office suite, called Microsoft works, and collects only $10 from the computer manufacturer to sell with the new set of computers, which is effectively competitive, because works file format compatibility with the full office suite, this is the way to keep consumers within Microsoft's sphere of influence. The company quickly developed its own free browser, internet explorer, and bundled it with all versions of the company's operating system. This strategy has achieved the desired results.Antitrust officials have accused the company of "tying" a free product to a new paid product. Microsoft has paid for it with decades of monopolistic lawsuits and fines for its anti-competitive behavior.

Penguin attack

Lim Torvalds undertook a humble project to create a simple variant of the Unix operating system that he calls Linux. Thanks to the good code, charismatic personality and organizational skills of the head, and most importantly, the web as a vehicle for global cooperation, Linux took off.

Since the late 1990s, within Microsoft, Linux is just another annoying mosquito, not serious enough to need to adjust the strategy. Why did it take Microsoft so long to recognize the threat? The five stages of pain are described by Elisabeth Kybles-Ross as follows:

Stage 1: Denial

What did Microsoft do in the first decade of Linux? Mainly hoping this free operating system will go away like most freeware up to now. Microsoft is confused as to why a customer would want to use free software and take all the hassle that comes with it? Microsoft executives see open source as just an exaggeration. The complex projects of the future will require large teams and large capital investments that competitors will not be able to match.

Stage 2: Anger

Microsoft decided to take economics as an attack strategy. The real cost of software is not the purchase price but the maintenance cost, Microsoft publishes a document "Five Linux myths" listing technical cons, features, free is not really free, Linux system administrators have to spend a lot of time to understand those technical errors. However, Microsoft's accusations had no effect. Desperate public relations director: “We must respond more effectively to media reports that governments and large organizations are looking at other (open source) options instead of their own products. we…"

Stage 3: Bargain

By the time of Linux world 2002, it was clear within Microsoft that they needed a new strategy. A Microsoft official said: "As a matter of fact in the past, everything we say just digs a grave deeper..." At Linux world, Microsoft representatives wear robes with the words "Let's talk" .

Stage 4: Falling down

In 2003, they hired Bill Hilf, who had run IBM's successful Linux strategy. When talking to the engineers, Hilf realized: "Obviously they don't know anything about open source operating principles, there is a terrible misunderstanding - they just see it as a threat".

Hilf wants to build an open source lab at Microsoft, which is seen as a biohazard facility. Those who work with open source cannot work on any other Microsoft project.

Stage 5: Acceptance

Hilf's lab works. What has changed? That is the reality of the leadership, Gates and Ballmer. It's time for Microsoft to adapt to ensure that their software works with open source and vice versa.

The market has decided that, there is room for all three models: completely free, free software but pay for support and pay for everything.

Yahoo vs Google

Yahoo is the largest web-based email service provider, with approximately 125 million users. It's a lucrative job.

On April 1, 2004, Google announced a new email service on the web called Gmail with 1 Gigabyte of free storage – 100 times more than Yahoo's. Google doesn't have email customers yet, so they offer a service with such a large capacity that just a few servers can take care of the first few thousand customers.

To stay at the top, Yahoo had to come up with an even more compelling offer. By 2007 Yahoo released all the tricks, announcing unlimited free email boxes. In the end, the strategy worked. Yahoo did not lose important market share. But Google hasn't given up yet, they've only just started the race.


Google and the birth of a 21st century economic model

Today, Google has nearly 100 products ranging from photo editing software to word processing and spreadsheet programs, and most are free. Really free, no tricks at all. Google does it the way any modern digital company should: give away a lot of products to monetize a few.

Google makes a lot of money from advertising on a few key products. Google has always questioned quality, not money. Free is not just a stepping stone on the road to a business model but is at the core of the company's product philosophy.

1999-2001: Invented a way to search for better and better results. Enable customers to “self-serve” by creating relevant ads themselves, create a multitude of products served, bring more and more functionality that previously ran on the desktop to the “cloud” . It's Google's data center - a giant building with tens of thousands of technology boards put together - processing, bandwidth, and storage. Today, Google is estimated to have around half a million servers spread across more than 36 data centers.

Maximum strategy

Why does Google consider free as default? Because, that's the best way to reach the largest possible market and be accepted by the masses. Schmidt calls it Google's "maximum strategy".

Every blog post that appears is a Google scraper that will create an index to help Google output better search results. The vast majority of Googlers are struggling to find new products to give away.

Google wants information to be free because when the cost of information goes down they make more money.

Great gutting

This sounds scary, and while technology tends to bring down prices, which is great, it's annoying when one of the factors that lower prices is your salary.

To see this in action, look no further than Craigslist, the free advertising site. In the thirteen years since its founding, its free advertising is said to have dropped $30 billion in the stock market value of American newspaper companies. Meanwhile, Craigslist itself generates barely enough profit to cover server costs and the salaries of a few dozen employees from a few paid customer services.

But being free isn't quite as simple – or devastating, as making it impossible for someone to make a lot of money. But Craigslist users save money, search is simple, there are many opportunities to do their job: buy a home, sell a home, find a job… brings more liquidity to every market. In each case, there were far more winners than losers. The trend will then leave the markets more efficient.


From 1925, the dawn of the commercial radio business. Program entertainment, news and information on the broadest possible topics. That was the beginning of 20th-century pop culture. There was only one problem: no one knew how to pay for that content, either by the radio receiver manufacturers, or the audience. Fakers have to pay annual taxes on the radios and TVs they use. There have been some suggestions that advertising is the solution.

A few decades later, both radio and television offered programs that were free and financed by advertising.

Advertising goes beyond the medium

When creating print pages, we do not place advertisements near editorial content to avoid harmful conflicts between stories or artistic elements, we also have to build trust in readers. Google does exactly the opposite, and its success is due to the fact that it combines advertising with content. It is clear that the nature of advertising is different online.

End of paid content

Broadband is the new “broadcast” and the high-priced cable networks that confine viewers today seem to be dying out, driven by new generation tastes and technology trends. The reasons why businesses move to the free model are:

1. Supply and demand (supply increased many times but demand did not, Facebook's pages increased more than Times's pages and they were created with no intention of collecting money from readers)

2. No more specific form

3. Easy Access

4. The move to ad-paid content

5. The computer industry wants content to be free

6. Free generation

That's why ad-funded models win online and what keeps them winning.

Victory of the media model

We consider “traditional information” to include radio, television, magazines, newspapers and websites, the best way to measure its impact on society is through the time people spend on it. Measured in this way few genres can match online gaming.

The most successful types

1. Sell virtual items 2. Sign up for membership 3. Advertise

4. Virtual real estate

5. Souvenirs

Free books

Just like everything else the free model applies. Free books are not without controversy. But the market for digital books – audiobooks, ebooks and web downloads – is growing rapidly, in large part to satisfy a need that print cannot; from a desire to enjoy while driving to a need for something that you can instantly get anywhere, and digitally is the way to maximize the number of people reading the book. with the expectation that some will buy printed books.

As for books on business topics, free books are often modeled after free music that acts as marketing for a high-cost talk or consultation session.


Free is not money

There are many types of free economy, from the formal business economy to the informal voluntary economy. Real free economies are hard to measure, and fake free ones aren't.

Leaving aside free usage as a marketing tip, free covers the entire economy. Let's go over a few free forms and make a very general estimate of their size. All ad-sponsored online and offline content and services in the United States are estimated at a modest $80 to $100 billion. The type in which some customers pay a free customer subsidy cannot exhaustively list the companies using this model, but is estimated at $800 million in 2008, the occasional game market valued at worth about 3 billion dollars, then the gift economy, can't estimate the exact price. In short, the free of a national economy is not small.


Econ 000

In 1838, Antoine Cournot published research which dealt with production. If a disc factory and another company also want to open a disc factory, the two companies will adjust output simultaneously but independently to keep selling prices as high as possible. His book was not appreciated.

Later, Bertrand said differently, instead of limiting output to increase prices and profits, companies are more likely to reduce prices to increase market share. “In a competitive market, the price will fall to the marginal cost.”

A few decades later, the debate between Cournot and Bertrand was forgotten, and economists later concluded that: for markets with excess, it is easy to raise output, prices are often down to marginal cost.

If the rule is “price falls to marginal cost then free is no longer an option, it is the inevitable end. One factor that determines price, however, is not just marginal cost but "marginal benefit".

Monopoly is no longer what it used to be

Bertrand's model only targets material costs. In the software industry and many other industries, the value of the product is mostly intellectual, and the industry benefits from so-called "incremental profits". The strategy of squeezing out competition is no longer as effective as it used to be, copying has become commonplace. A theoretical economic model coined more than a century ago as a joke. In any market free is always attractive, but making money from free is a matter of thinking and creativity and constant experimentation.

Free is just another version

The basic idea behind creating versions is to sell the same product to different customers at different prices. At prime time, people sell beer cheaply hoping that some customers will sit back and continue drinking when the beer is on sale for the normal price.

The sellers are no longer a concern

If asked, will Wikipedia survive? People will answer: “No way to live, no profit. Everyone wants to enjoy without having to contribute. They will use it if it is there, but no one will create it because of the problem of clinging to it.”

The effort spent reading content can be considered enough to compensate for the effort of producing content to put online. In the online environment, only 1% of participants contribute, the majority of passive consumers, readers follow, it is a reward for contributors, not a problem. People love to contribute to an encyclopedia with a large readership – a huge readership is one of the most compelling things about a person deciding to become an editor for Wikipedia.


“Every excess creates a new scarcity.” We tend to value things we don't have very much in. But what would man's desire be if there was a lot of bread and his stomach was always tight? Expressed through the "hierarchy of needs" the answer is "immediately other (higher) needs appear and they dominate the body instead of physiological hunger".

Once the basic thirst for information and entertainment has been satisfied, passive consumers turn into active producers, as we are motivated by the mental reward for information creation.

In the online environment, products are coded into software, offering free use, money is no longer the most important signal in the market. Instead, two non-monetary factors emerged as the “economy of interest” and the “economy of reputation”. What defines an “economy”? The term used today is "the science of choice under conditions of scarcity".

Interest and fame are as measurable as money? Nowadays when you connect with someone through your blog you are actually giving them some of your reputation, this reputation transfer makes both parties richer. There is a real reputation market – that is Google. The currency of online reputation is the number of connections to a website, and what better measure of interest than web traffic?

Gift economy

The gift economy comes to life and becomes measurable when it emerges online in the form of acts we do for others without asking for anything in return. The cause is not necessarily altruistic nature. Egoism is understood as humanity's most powerful motivator. People work for free maybe for their own reasons: for fun, something to show off, wanting to be taken care of, for personal growth, for the community – one feels part of the community. community and want to devote to its existence and development.

13 – (Sometimes) WASTE IS GOOD

The best way to exploit redundancy is to relinquish control

The lesson of accepting waste that Carver Mead preached about wasting Transistors, and Alan Kay responded by wasting them at the prospect of making computers easier to use, thus, today's patent factories Now it's the people who discover new excesses and figure out how to spend them in a good way.

When nature squanders life

Our brains seem to be programmed to resist waste. We care about protecting each of our descendants, we feel guilty about a toy we don't like or food we don't use up.

However, the rest of nature is not like that. A single tuna can shed ten million fertilized eggs during the spawning season, perhaps as few as ten live to adulthood. One million dead, only one live. Nature wastes life to have a better life. The natural cause of such waste is that the slaughter strategy is the best way to do what mathematicians call “exploring the entire potential space.” That is the way to accept waste. Throwing away too much may seem unkind, even weird, but it's the right way to utilize excess.

Cat videos have their place too

People often complain that Youtube is not a threat to television because it is full of "trash". Trash or not is in the eyes of every viewer, this video may seem appealing to one person but uninteresting to another and vice versa. All the random clips on Youtube are dandelion seeds flying through space and looking for a fertile ground to land. In that view, we are "wasting video" to find better video, exploring the hidden space in movies. This leads to the difference between thinking about abundance and scarcity.

Scarcity Management

The Youtube model is completely free – free to watch – but it does not make money. Huhu is free to watch and you have to pay the old-fashioned way to watch commercials whether you like it or not. However, it does generate decent revenue. These two cases illustrate the rivalry between free models that are one hundred percent real, but a little artificial scarcity is the best way to make money. We think very well in terms of scarcity – that is the organizational model of the 20th century. Today, we also have to think well in terms of excess.


China and Brazil are free to roam, what can we learn from them?

China is where the problem of piracy prevails. Over the years, the ferocious raids under Western diplomatic pressure have had no discernible effect on street vendors or certain websites. In China get most of what they want for free.

Instead of fighting piracy, China's new generation of musicians accept it, piracy is a free form of marketing, thanks to it they are famous and how they convert fame into money optional. Piracy products are estimated to account for 95% of consumption in China.

The economy of fake Chanel perfumes

Not stopping at music and movies, Rolex watches, Chanel perfumes, Gucci bags... fake goods and countless fake technology items abound in Chinese shops and streets. Thus, the intellectual property rights are free, the paid version only (very cheaply) for the atoms of matter. The roots and consequences of piracy are deeper than it seems. The fake Gucci bag still performs like a real Gucci bag and it's everywhere. The consequences have two sides: “substitute effect”, negative and positive “stimulant effect”. Consumers understand the difference between the real and the fake and will choose the real thing when they can afford it. One young woman commented: “If you wear a lot of fake goods or have a lot of fake handbags, your friends will know, so you are not fooling anyone. Then it's better to buy the real thing."

Piracy doesn't destroy markets – it stimulates a market boom that serves the emerging wave of middle-class consumers. The two products, real and fake, are simply aimed at different market segments.

Power of Brazilian peddlers

Like in China, on the streets of Brazil, street vendors present CDs that are not official products of a famous record label but products produced by their own group, however, legal.

When the concerts of a famous singer or band come to the locality, the street vendors are the front-end group, marketing, organizing, and promoting that performance. They record and produce CDs and DVDs for sale on the spot. Ninety percent of the bands don't have a recording contract and don't sign up for a label, they don't need it. Giving others your music for free creates such a large business that a fee-based model is unattainable.


Thinking in “post-scarcity” societies, from science fiction to religion

Every sci-fi writer knows the unwritten rule: you can only break the laws of physics once or twice in each story. Science fiction philosophy is what writer Clive Thompson calls "philosophy's last stand". How will love change if we live to be 500 years old? If we could travel back in time to reverse past decisions, would you? What if you confront talking or killing God? The invention of some kind of machine that makes scarce things superfluous, many novels are not just stories, they are thought experiments with consequences when expensive things become near. like free. When machines do all the work, what motivates us? Khan rarely ends will make us lazy, decadent,stupid and trivial. You don't have to spend too much time online to see examples like that.

After life

Religion is the field with the greatest examples of extremes created by excess or scarcity. Heaven is a wonderful picture of the superfluous: Angels glide over the fluffy clouds, play the harp and disregard material needs, the dead become pure, glorious and perfect; all physical defects are removed…Paradise superfluous, we will quickly imagine how sad we will be there, every day is the same – bored to death!

It is not surprising that the excess in fiction quickly causes people to lose their purpose in life. Is it the inevitable end that when scarcity disappears, motivation also disappears?

Economically, excess is the engine of innovation and growth. But psychologically, scarcity is what we really understand.


And other doubts about free

Fourteen most commonly heard objections to free-based economics:

1. There is no free lunch: This concept asserts that an individual or a society cannot receive something without paying. Economics, at least in its ideal form, obeys the law of conservation of matter: if there is in, there must be out. Free is not really free, however, in many cases, free can also be really free

2. Free always comes with hidden costs/free is a scam. Free is sometimes tied. Advertising images make your website cluttered, they are lured into paying customers. Free in the 21st century is as good as paid, or better: no cheats, no traps, no strings attached (as is the case with open source software)

3. Internet is not really free because you have to pay for access. This is a common mistake. We have to pay a monthly fee to access the internet. But this money actually helps pay for the transmission infrastructure, but it has nothing to do with what's being transmitted over that infrastructure.

4. Free is just advertising game. One of the biggest mistakes about free on the web is that the ad-based model is unique. The market for free trial software and paid to use the full version has been around for decades, not based on advertising.

5. Free means more advertising, which also means less privacy. This is a common concern. It is often assumed that a website with advertising must track visitor behavior and sell that information to the advertiser. Most ad-driven websites have privacy policies that forbid the transfer of information about users to advertisers.

6. No cost = worthless. Money is thought to be the only way to measure value. But people build websites primarily on two non-monetary units, interest and reputation. Both are made possible by free content and services.

7. Free to destroy innovation. People think that free violates intellectual property rights, so people don't want to be creative if they get nothing. The patent protection period lasts 17 years. But when the age of protection is over, that intellectual product becomes something free.

8. Exhausting oceans, disgusting public toilets and global warming are the real price of free. In the world of bits of information, environmental costs are far from important. Waste of processing power, storage, and bandwidth essentially translates into electricity costs. But they ended up placing data centers near solar, wind, and geothermal energy to ensure there were no environmental consequences like wasted atoms of matter.

9. Free will encourage piracy. No, vice versa. Free does not encourage piracy. Key piracy promotes free.

10. Free to nurture a generation that doesn't value anything. The youth of the internet generation are increasingly reluctant to pay for content and other forms of entertainment because they have so many free options. They understand the difference between the economics of the atom of matter and the economics of the binary bits. From this perspective, rummaging in a store is stealing, but exchanging pirated music is a victimless crime. Children can distinguish between reality and fiction, and they behave differently in each situation.

11. Can't fight back for free. We can easily compete with the free, simply come up with a better or at least different product than the free version.

12. I give away my products without making any money. In the case of Paulo Coelho, he put his famous work on a free peer-to-peer file exchange like Bit Torrent. As a result, he sold many books.

13. Free is only great if someone is paying. In the case of high-priced free, someone else pays, but they pay for the premium version more than the one you get for free.

14. Free sacrifice quality. If professional journalists see their work disappear, they must reinvent themselves more strongly, so that more journalists can emerge, not less, because their ability to participate in journalism has decreased. extend outwards. Professional journalism will share the playing field with journalism as a pastime.


In 2001, the stock market crashed. A few years later the market rallied and we look back and we are surprised to find that the impact of that crash was practically impossible to find on the growth of the internet, which is still expanding. same as before. The Web remains as important as the most optimists predict. Only it took longer to get to the size the stock market calculated. From a consumer perspective, free is much more attractive in a declining economy.

Free still has an impact on user psychology. But free is not enough. It needs to be accompanied by “paying”. Similar to King Gillette's free razor only makes economic sense when coupled with expensive blades. Today's web entrepreneurs also have to create not only products people love, but products people will pay to buy as well. Free may be the best price, but it can't be the only price.