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October 02, 2008

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David Armano

Glad you like it Chris. I've already fixed the Typo in the original version and can tweak the 4th version so that it's not just reputation.

great model you are putting together here.

Valeska O'Leary

Suddenly clarity. Just like magic. Great concept, Chris, great visualization, David.

km

Nice. One question about the Freemium. If I as a musician make low-res versions of my music (say 128k encoded mp3s) available to all for free, and charge the high-end consumers for hi-res versions (320k encoded mp3s) is this an example of the "freemium" model?

Essentially a small number of "full" users of the hi-fi mp3 gain all the benefits of listening to a high quality audio file, and subsidize the majority of "limited" users who are perfectly content listening to the lo-fi (but still listenable) mp3.

Thoughts?

Chris Anderson

@km: Yes. Of course most people use some combination of these models, so you'll probably also be using Free 1 in the sense that the free tracks are marketing for your concerts/merch/licensing, etc

Ted Murphy

There are many other free things out there:

- Found on the street free
- Luck of the draw free (ie breathing air, or being born a first world citizen)
- Free gifts for love (gifts for personal reasons)
- Free gifts for charity (gifts for transferred reasons)

The difference is that these other free things are not self-referential -- what Chris has identified as cross-subsidies. The four examples posted above by Chris are self-reinforcing, in that their success begets repeated further free exchanges.

Just something to keep in mind -- its good to focus on these four things, but they are by no means a complete taxonomy of free stuff. Just as invisible dark matter makes up 90% of the universe, 90% of what we get for free is not visible to business analysis or economists.

Sampad Swain

Excellent representation David. I've always felt that 1+1=11 when excellent creative brains come together.

Keep up the great work!

--Sampad

DeadParrot

I think that the arrows of the top half of Free 1 are backwards. It should be:

* Stuff goes from Acme to person.
* No money goes from person to Acme.

The illustration has

* Stuff goes from person to Acme
* No money goes from Acme to person.

which doesn't make much sense.

Bertil Hatt

When something is free, is it A that gives something free to B, or B to A? The issue I have with your graphs is that they seem to know what way is free: is it free newspapers for readers, or free attention for advertisers (who wrote the press release that was copy-pasted in the articles anyway); free bicycles or free advertising for the company who owns both the bikes and the billboards?

I still have a problem with free being zero dollar: free is ‘no transaction’ — no need to have money, or the right currency, or to detail who you are (sometimes); consumers feel (wrongly) that they are free not to make the intellectual effort to estimate whether it's worth it. That's free. Zero dollar is accounting, and accounting is what you are trying to leave out of that equation.

David Phillips

What is not free is the relationship created in all instances. The critical issue is the value of the relationship. ACME is all to often hit 'n run and the value of the relationship destroyed.

So free is very expensive it requires time and commitments, social and cultural.


Then the value goes both ways and sometimes picks up some $$$ on the way to the joy of both parties.

Chris Anderson

@DeadParrot: Yes, you're right. Good catch. I'll bring that to David's attention.

Normann Kalmus

Chris,

I fully agree with your suggested modification for Free 4 model, the Gift Economy.

I wonder that besides more reputation, the model should include an additional player that must pay for services made by someone with an increased reputation.

Anyway, great concept drawing. Crystal clear!

Arthur

What role does Free4 pay in a for-profit venture?
Is it not really the free part of Freemium?

If the compensation/gain is “Reputation”, how does one capitalize/monetize that?
Obviously Reputation=Equity, but only capitalized/monetized Equity pays Bills (and drives a business).

I would also offer a modification of Free3:

Free3 can include not only limited versions of premium, but it can include ancillary stuff that is supportive of and enhances the premium stuff. Thus this free stuff can stand on its own, but it gains utility in the context of the premium good AND it serves to validate the source of the premium good.

Secondly, the free stuff in Free3 can be complete and "hi-res" premium goods but released with a delay. Ex: archived articles published at premium to subscribers and made available at a 3 month delay for free.

Mario Soavi

May I add one slight change of perspective (and sorry for the delay).

Chris, your representation is perfect, if “free” is related to money only.

But, if “free” can be considered as “felt as free” (i.e. the price is so low or is too low if compared to the market perception or standards), then you could need a 4B case: the customer will pay a tip (as her/his valuation of the product/service is extremely higher than its price, this price is more a tip than else) to get something from ACNE.

This last case is a version of the 4th case, as that situation puts together a definite value (the money) and an indefinite value (reputation, …). My suggestion is that those two elements (the definite and the indefinite) could be mixed together and be used or gained indifferently from one or/and the other extremes of this relationship.

Obviously I don’t go on, as speaking of relationship in a commercial transaction could lead to much more complicated scenarios in this “free” vision.

Jm2c

Maurizio Benzi

Thanks for your work Cris!

I have translated some of your concepts in Italian:
http://www.casaleggio.it/2008/10/free_economy.php

Defining a "business model 2.0" is essential for the Internet, and I think yours is the right direction.
The relationship nature of the Internet is very close to the free-models.

From my point of view I believe that the Advertising-supported model will suffer major changes.
The “Advertising Industry” is at it's sunset: the great economic success of the advertising models for generalist media is one of the cornerstones in the progressive depersonalization of producer-consumer relationship.

We will assist to a redefinition of the traditional advertiser>advertising agency>publisher>user cycle.

Ciao,
Maurizio Benzi

Jim Bursch

Ad-supported media is corrupt and corrupting and deserves to die, and it really doesn't belong in the taxonomy of free.

Oh, sure, there is the implied contract of ad-supported media -- we give you "free" content and you look at our advertisers -- but that is just a canard. People are choosing to negotiate their own contract on much better terms, and ad-supported media is suffering as a result. Good riddance.

My Mindshare 10-point Declaration

1. My mindshare is mine.

2. My mindshare has real monetary value.

3. I have a right sell, trade, or keep my mindshare as I choose.

4. Nobody is entitled to take my mindshare without my permission.

5. Unsolicited and intrusive advertising amounts to mindshare theft.

6. Mindshare theft is wrong.

7. I have a right to resist mindshare theft.

8. I demand media that does not deal in stolen mindshare.

9. I support media that respects my mindshare.

10. The world is better when individuals control their mindshare and their media.

Advancing Evolution: The dis-intermediation of Media Version 2
http://mymindshare.com/b/secure/disintermediationV2.php

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

FREE was available in all digital forms--ebook, web book, and audiobook--for free shortly after the hardcover was published on July 7th. The ebook and web book were free for a limited time and limited to certain geographic regions as determined by each national publisher; the unabridged MP3 audiobook (get zip file here) will remain free forever, available in all regions.

Order the hardcover now!