TITLE

Free

AUTHOR(S)
Anderson, Chris
PUB. DATE
April 2010
SOURCE
Free: The Future of a Radical Price - Business Book Summaries;4/22/2010, Vol. 1 Issue 1, p1
SOURCE TYPE
Book Summary
DOC. TYPE
Book Summary
ABSTRACT
The costs associated with technology are rapidly approaching zero at an unprecedented rate, while at the same time the digital world is increasingly moving into the physical realm as people are working, playing, and sometimes even living on the Internet like never before. As costs for online products plummet, traditional economics do not make sense for digital manufacturers any longer. Free is no longer simply just a marketing gimmick or something consumers have to pay for in another way; free is rapidly becoming a way to turn an actual profit, whether monetary or nonmonetary. The general rule in markets with abundant resources is that if the price for a product falls to marginal cost (the price slightly higher than production costs), zero is inevitable. This rule is especially significant in the digital market. There are virtually no limits to the digital market; there is a place for nearly everything. Storage capacity, bandwidth, and speed are advancing, and their cost has become so low that they may as well be free to consumers. When pricing software or another digital commodity, Chris Anderson recommends that a producer "anticipate the cheap" by selling products today based on tomorrow's lower cost. The largest profit margin online comes from advertising. Online ads are cheaper than traditional advertising models like television, radio, and print. Yet, traditional advertising models only reach a small number of potential customers; the Internet gives advertisers a much wider audience because the Internet reaches millions of people. What that means is that it is very easy to make money off of a free product�provided there are millions of users using that product. It is much easier for new companies to compete by giving their product away for free from the very beginning. However, there is always a place in the digital market for a quality, easy-to-use pay product, like Microsoft Office. Many customers will pay a premium for compatibility with other...
ACCESSION #
49499201

 

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