"Free: The Future of a Radical Price" by Chris Anderson

Chris Anderson, editor-and-chief of Wired magazine and author of The Long Tail, released his latest book, Free: The Future of a Radical Price, in several different free digital formats including Google Books, Scribd.com, and Wired.com. Anderson argues that in the digital marketplace the best way to make money is to give your products away for free. Countless online companies provide their information, products, and/or services for free in the hopes of selling something else. Some sites, like Craigslist and Wikipedia, even provide their services with no expectation of being paid at all.

Anderson explains that older critics, who grew up in the twentieth-century, are suspicious of "free" and believe that we will all pay sooner or later, while younger critics, the Google Generation, have grown up with everything digital being free. Anderson explains that Free is now a global economy that is essential for digital marketers to understand and embrace.

The book begins by introducing the reader to a couple of key product examples that utilized Free to build a successful brand. The inventor of Jell-O was not having success selling his product until he came up with the idea to give away free Jell-O recipe books. This built demand for the Jell-O product and the rest is history. The other example describes King Gillette's invention of the disposable razor. Just like the Jell-O product consumers were not interested in purchasing the razor product until Gillette decided to give away part of the product for free. Consumers could not use the free product unless they purchased the rest of the razor, but by giving away a part of the disposable razor, Gillette created demand for his product.

These two examples explain the power of Free. Today, marketers do this every day by giving away samples, offering buy one get one free, or providing a free gift with the purchase of the product. Marketers hope that by enticing consumers with free incentives consumers will buy their products.

Anderson explains that the digital marketplace follows four different free model categories. These are:

FREE 1: Direct Cross-Subsides: Any product that entices a consumer to buy another product. For example, a mobile phone company may not make money off the user's unlimited minutes, but it will make money off the text message and voice mail fees.

FREE 2: The Three-Party Market: The content, service, software, etc. are provided to the consumer for free. The advertiser pays the publisher for ad space, so the publisher can provide the content to the user for free.

FREE 3: Freemium: A product or service that is provided for free, but can be upgraded to a premium paid service. For example, Flickr offers its standard service for free, but a consumer can upgrade to Flickr Pro for $25 per month.

FREE 4: Nonmonetary Markets: Anything individuals decide to giveaway with no expectation of a payment. This is also known as the "Gift Economy." For example, Wikipedia provides millions of articles to build their reputation and page rank.

The author provides examples of various new media models that have created successful businesses. The Obama campaign advertised on billboards in Xbox games. Second Life has built a revenue model behind the purchasing of real estate in the virtual world. Radiohead's name-your-own-price digital downloads of their most recent album gave consumers the power to decide on the pricing of the music. All of these examples have a free component build into the product, but there is added paid incentives with each product.

Another interesting point that Anderson asserts is China's widely accepted practice of piracy. 95% of the music downloads are pirated, and the artists are happy to receive the free exposure in the hopes to build a fan base that will buy their merchandise and attend their concerts.

There are many other aspects of "free" that Anderson discusses including the Linux free platform versus the Microsoft paid platform, and the Yahoo Mail storage space versus the Gmail storage space. Companies like Microsoft and Yahoo have had to come up with ways to continue to be viable when new companies offer similar products for free.

Anderson concludes his book by explaining that Free cannot be the only source of a successful business. It must be paired with paid in order to be successful. He reminds the reader of King Gillette's successful business model of providing a free product that was paired with a purchased product. In today's market, entrepreneurs have to invent products that consumers love and are also willing to purchase. He closes by saying, "Free may be the best price, but it can't be the only one."

Work Cited
Anderson, Chris. Free: The Future of a Radical Price. New York: Hyperion Books, 2009.