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The Almighty Buck

The Economics of Free 119

Wired's editor-in-chief Chris Anderson is working on a new book, to be published next year, about the idea of "free" in the old and new economies. Wired is running a long excerpt from the book and some sidebars about the economics of giving away, e.g., CDs and directory assistance. Techdirt has a few quibbles about Anderson's ideas — mostly areas in which he may be shading the argument to sell more books — but mostly buys that the equations of economics continue to work when zeros are plugged in in judicious places.
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The Economics of Free

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  • Well.. (Score:5, Insightful)

    by Creepy Crawler ( 680178 ) on Tuesday February 26, 2008 @01:34AM (#22555646)
    Free, eh?

    Lets see what he says when his book ends up on Piratebay. He is giving away the book for free, right?

    • Re:Well.. (Score:4, Funny)

      by flyingsquid ( 813711 ) on Tuesday February 26, 2008 @02:14AM (#22555824)
      I don't know about this whole getting stuff for free thing. I figure that if I just wait a while, then maybe the price will come down.
      • Re: (Score:1, Insightful)

        by monxrtr ( 1105563 )
        The price of many things absolutely will come down, to a negative price, as in they will pay you. When millions are competing to be *heard*, paying people to listen makes sense. Old traditional broadcast media delivery channels are an inefficient middle man being paid by advertisers to sell consumer eyeballs. Such things as the Advertising Channel (patent and trademark hereby claimed) will pay the individual consumer to watch. What's the difference if the advertisers pay the cable company middlemen billions
        • by misleb ( 129952 )

          Sites like /., or their peers, will eventually compete and start paying quarterly dividends to the posters who add 99% of the value to the site with their free posts. This model is coming and coming fast.

          WEll, getting paid to provide content via comments, photos, etc is different than being paid just for reading/looking at it. I think the "consumers" will continue to pay either directly or indirectly through advertising. But I agree that there might be some room for contributers to et paid.

          Just may $0.02.

    • Lawrence Lessig has made his Free Culture book available for free [free-culture.cc]. Chris Anderson is not very credible unless he does the same with his book.
      • credible? (Score:5, Insightful)

        by enjahova ( 812395 ) on Tuesday February 26, 2008 @10:32AM (#22558548) Homepage
        If you read the article, or even remotely follow the argument, he isn't saying that people should give things away, he is saying that there are new ways to profit in an environment where distribution is as good as free.

        He also wrote the book The Long Tail, which was a New York Times best seller. He made a lot of money from that, despite the fact that he wrote the book in public view and with public input on his blog thelongtail.com. In fact if you go to that blog right now you will see him discussing the monetary benefits of giving away books.

        I don't think it hurts his credibility that he sells the book, actually I think it helps him. Lawrence Lessig's book has a higher purpose of promoting free culture, while Chris Anderson's book is simply observing the changing state of economy. Mr. Anderson is already using the techniques he outlines by giving a long excerpt, and blogging about the contents of his book.
    • Re:Well.. (Score:5, Insightful)

      by PMBjornerud ( 947233 ) on Tuesday February 26, 2008 @05:01AM (#22556476)

      Lets see what he says when his book ends up on Piratebay. He is giving away the book for free, right?
      Frankly, I don't expect him to care the slightest.

      He's not giving away the book for free, he's making money on a handy paper version that looks nice in a bookshelf and is easy to bring on the train. At the same time, he is strengthening the Chris Anderson brand.

      A good author will manage to get paid no matter how rampant piracy gets. JK Rowling sold a handwritten book for 1.95 million pounds.
      • Re: (Score:3, Informative)

        A good author will manage to get paid no matter how rampant piracy gets. JK Rowling sold a handwritten book for 1.95 million pounds.

        And then gave the money away to charity [bbc.co.uk], 'cause she didn't need it.

      • At the same time, he is strengthening the Chris Anderson brand.
        This works very well in a small world, like that of famous-and-accepted technology commentators. However, the number of people who will be able to rise above the mass yammerings in the next generation, without being selected by somebody with money and an established media presence to give them a pulpit, is likely vanishingly small; and the bootstrapping problem will only get worse with collapsing publisher profit margins. In any event, mass
        • Aiming for the mass market promote comfortable mediocrity.

          So I'll toss and mix your post a bit and say that organized publishers care about selling to the masses, "promoting comfortable mediocrity". And individual artists/authors operate in "small words", and are more deeply concerned with outputting quality.

          The future is filled with niches. Instead of 1 big thing, you'll have 100 small ones. And since you can easily google the 5 that are amazing for you, it does not matter if 95 are crap. (And really, they
    • Re:Well.. (Score:5, Informative)

      by jalefkowit ( 101585 ) <jasonNO@SPAMjasonlefkowitz.net> on Tuesday February 26, 2008 @07:21AM (#22556954) Homepage

      He is giving away the book for free, right?

      Actually, yes: [mediapost.com]

      I have embarked on this project not just to sell a book but also to try to explore new models for books. We're going to try to make Free free in every way possible. The audiobook is going to be a free mp3 download. I am not going to promise what we will do, but these are things we are talking about. The e-book can be free. Again, the marginal cost of distributing that is zero. Price follows cost. Why should I charge for the book when it costs me nothing? People who do own the e-books tend to be influential early adopters, exactly who you should be giving the book to.

    • yes, lets work on making that happen please, what are we waiting for, you know its coming, lets do it NOW http://roboeco.com/ROBOTIC-WAGELESS-ECONOMY-NOW [roboeco.com]
    • Re: (Score:3, Interesting)

      I run a couple of photo gallery websites (for free) which allow users to upload their pictures (for free) and print them through a partner printing service (for fee) of which I receive a percentage.

      I have yet another site that hosts some 20+ million pages that are all available for free, monetized by Google ads.

      Yet another site that I'm responsible for was built for free, because of their tremendous pagerank and my option to include my backlink in the site template, theoretically raising my pagerank (eventu
  • I've always found them to be the same thing.
  • Too lazy to RTFL (link,) because I've already RTFDTA (dead-tree article.)

    The DTA mentions that you can get the dead-tree edition of the mag for free by going to www.wired.com/free [wired.com]. First 10,000 only, though, so better get crackin'!
  • Public Mindshare (Score:5, Interesting)

    by DTemp ( 1086779 ) on Tuesday February 26, 2008 @02:12AM (#22555816)
    Just like the /. article today about Microsoft saying that several ad impressions work together to persuade a consumer to part with some of his money, this Wired article points to the same phenomena. Someone selling a product will spend money on marketing... he can buy ads on radio or TV or the web, he can get posters and go around stapling them to telephone poles, or he can give out freebies of his product so the potential purchaser can experience the product for himself. All of the above will work together to try to get consumers to buy. Just marketing...

    I really don't see the big statement he is trying to make.
    • tech advances (Score:3, Insightful)

      by Anonymous Coward
      you really don't get it? "I really don't see the big statement he is trying to make.". Tech advances get some good or service down to the ridiculously cheap to free level, so it, in fact, can be given away, quite literally. Our economies and societies are complex now, they change all the time, what used to cost tons can oftentimes be brought down in price in a fast fashion, "freeing" us up to spend money elsewhere, which garners more interest and research there, that in turn tends to drop prices, eventually
      • Re: (Score:2, Insightful)

        by notgm ( 1069012 )
        giving something away does not equal free.

        as long as there is value in society, it will be offset by cost. you may be able to write off some cost, or make it so minimal that it is insignificant, but cost will always coincide with value...it will almost certainly always exist.

        his book should be called "offset value". free is worthless.
      • Re: (Score:3, Insightful)

        by Admiral Ag ( 829695 )
        I don't think that this idea is revolutionary: it's just capitalism. Companies have given away short films of and glossy photos of their products for years. It's called advertising. Nothing revolutionary about that.

        Revolutionary occurs when the authorities cannot enforce the market system at an acceptable cost. This is essentially what is happening with the online sharing of music. Musicians and music publishers can try to make a virtue of necessity, but they can no longer exercise any control over distribu
      • by Bombula ( 670389 )
        Free is the wrong word. The word you (and this author) are looking for is "cheap". That's it. It's not a new even a new application of an existing idea, let alone a genuinely new idea. Stuff gets cheap as technology progresses, and past a certain point, things are so cheap companies can afford to incorporate give-aways - whether their own stuff or someone else's - into their advertising. That's the entirety of this idea. The rest is fluff that reduces right back to the simple concept of 'cheap'.

        Nothin

        • by EMeta ( 860558 )
          Not to be too nit-picky, but if by "air" you mean the current 21%ish O2, mostly N2 air we breathe that lacks toxic components it most certainly has a cost. In the US the EPA makes companies pay a lot of money (though not nearly enough) to keep the air in the state that it's in. Once you look at opportunity costs, nothing's free.

          Even your enjoyment of sunshine (if you're not a pure /.er) comes at the cost of someone not using it above you. You might think this silly, but if you look into gardening in
      • the key is that the majority of free "products" don't really exist - FOSS, music, and online services are mainly just that - services, not something concrete. Until I see signs of free computers, speakers, or ISPs - real world objects - I'm not going to start predicting entire paradigm shifts in economies. (The Reprap project is a good example of something to get excited about)
      • Awesome post. Well put. I couldn't have stated it better myself.

        Digital data is to the point where it "can be thought of as free and used like it". I agree with bands giving music away and making money on merch and shows.

        I believe writers should give away their words, and then accept post-transaction donations from customers who enjoyed them. I am a little disappointed, in fact, that the article does not link to a Free version of the book in question... a Wired article of "a significant portion of i

      • I think I'd argue that most "goods" are not free. Nor are they likely to become so, as the marginal cost of distributing, say, a hamburger or a Ford F150, are never going to approach zero. Costs will fall, prices will fall, but physical goods are constrained in ways that bits are not (until we have TNGs replicator technology). Sure advances in technology improve our lives. But the idea that somehow we're approaching a utopia where everything, including physical goods, is "free" is an unproven one at best.

        I
      • by misleb ( 129952 )

        Look at FOSS, look at the huge savings in real work everyone in every sort of business can get with free or dang close to it computer tools now. It was a transition stage, we are at the nearly totally free place now. Look at computer hardware, how tech advances are dropping prices down so much that if you are content enough with just a few years old stuff, it's free, right from the dumpster, still functional and useful, and within a couple of years now you *will* be seeing the proverbial "hundred dollars i

    • Re:Public Mindshare (Score:5, Interesting)

      by TubeSteak ( 669689 ) on Tuesday February 26, 2008 @03:57AM (#22556194) Journal
      I didn't bother reading past the first page.

      But until recently, practically everything "free" was really just the result of what economists would call a cross-subsidy: You'd get one thing free if you bought another, or you'd get a product free only if you paid for a service.

      Over the past decade, however, a different sort of free has emerged. The new model is based not on cross-subsidies -- the shifting of costs from one product to another -- but on the fact that the cost of products themselves is falling fast. It's as if the price of steel had dropped so close to zero that King Gillette could give away both razor and blade, and make his money on something else entirely. (Shaving cream?)
      First, he uses two definitions of a cross subsidy. With the 2nd definition being much broader than the first.
      Second, how the fuck is Gillette making money off shaving cream not a cross-subsidy?

      2 paragraphs later, he has this to say:

      Once a marketing gimmick, free has emerged as a full-fledged economy. Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails, and a swarm of other bands on MySpace that grasped the audience-building merits of zero. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.
      ::Sigh::
      Those are all cross-subsidies.
      Bands* are trying to drive sales of CDs, merchandise & concert tickets.
      Ad-supported gaming... the advertisers are subsidising it. My instincts say "not free"
      free-to-try MMOG. "to try" being the operative words. the "try" is subsidized full cost customers.
      Google... see ad-supported gaming. We pay for it by looking at advertising & hopefully making a purchase.

      If "free to consumers" is TFA's definition of free... I guess I have to disagree. Costs are being lowered & shifted around, but they are still there, someone is still paying and I'm still looking at advertisements.

      *NiN actually is a good example of free, they've literally given away the raw audiomixes for most of their Year Zero album.
      • Re: (Score:2, Interesting)

        ::Sigh:: Those are all cross-subsidies.

        Mod parent up.
        Open Source is another example of (dare I say it) not free. It takes labor to create and maintain. The difference is that, to some extent, the consumer is putting in the labor. The consumer becomes the vendor.

        In fact open source doesn't obliterate economic theory, it exemplifies it. Software exhibits economics of scale, the bigger you are the cheaper it is to produce. Traditional companies have to make significant investments to make a good product. Open source makes considerable invest

      • by Z34107 ( 925136 )

        Very insightful, but Gillette making a profit off of shaving cream alone (and giving away razor/blades for free) doesn't smell like a cross-subsidy because you don't have to buy the shaving cream first to get the free stuff. I guess you could think of the razors as advertising for the shaving cream.

        As for the rest of the stuff... ad-supported MMOGs being the new wave of "free"? NetZero, AT&T, etc. did that crap to my parents with "free" ad-supported dial-up that always crashed full-screen games lik

      • NiN may be giving away the raw audiomixes for Year Zero, but that's in a format that 99% of customers don't want to dork around with. It generates some buzz from those who think it's neat, and is "free" to those very few who actually use it, but most just shell out the $18.99 for the CD anyway. Those who go the literal "free" route with Year Zero "pay" by creating buzz often, to a non-trivial degree, by using the raw tracks to remix into other material that raises more awareness; NiN is buying advertising b
  • by dorpus ( 636554 ) on Tuesday February 26, 2008 @02:35AM (#22555894)
    Silicon Valley has and continues to derive the vast majority of its income from intellectual property protections for its software. I pointed this out on Techdirt, so the commenters there hemmed and hawed with their red herring arguments about how Microsoft does not make money from software written 14 years ago. Regardless, Microsoft (which is no longer a Silicon Valley firm, I know) would make no money today if XP and Vista were free. Intel would make no money if anybody could just copy Intel chips. If they were free, nobody would bother with Linux. Where are the linux billionaires? Nor would biotech companies make any money if anybody could just copy their inventions. Sun, AIX, etc. all made fortunes in their time from selling proprietary flavors of Unix. SAS and SPSS are the industry standards for statistical computing, and they are proprietary, intellectually protected, for-profit firms.
    • by QuantumG ( 50515 )

      Microsoft (which is no longer a Silicon Valley firm, I know) would make no money today if XP and Vista were free.

      They never were, but ok. Would they make money if Windows 3.11 was free?

      Intel would make no money if anybody could just copy Intel chips.

      Which Intel chips? The ones they just finished designing or the 8086?

      If they were free, nobody would bother with Linux. Where are the linux billionaires?

      Now you're just trolling.

      Nor would biotech companies make any money if anybody could just copy their inventions.

      Yes, ok, as you're unable to make the point, I'll make it for you. Companies need time to recoup their investment.

      But after the investment of initial development is paid off, it is pretty hard to argue that they need IP protection to stay in the market.. they can compete like the rest of the players.

    • You have an interesting point, however I have two bones to pick.

      Intel would make no money if anybody could just copy Intel chips.

      Anybody can copy Intel chips. The chip design can be analyzed and reverse-engineered, it wouldn't even take much technology or time. However, the manufacturing process is quite expensive and R&D (i.e. newer, faster chips) plays a large role in profits. The Chinese certainly could just copy Intel chips, with no or few economic reprecussions, but they cannot do it better than Intel.

      Where are the linux billionaires?

      Mark Shuttleworth seems to be doing quite well, as are the

      • by QuantumG ( 50515 )

        The only people I can think of working in a computer industry not strongly supported by open-source software are at Microsoft and the various game companies.
        If they're making games for the Playstation (1, 2 or 3) then they're using gcc.

    • Re: (Score:3, Informative)

      Silicon Valley has and continues to derive the vast majority of its income from intellectual property protections for its software.

      Silicon Valley makes most of its money from hardware. [google.com] That was just a short list off the top of my head. Notice that they're all valued in the billions, 10's of billions, and 100's of billions.
      • And the one of those that jumps out at me is AMD with a market cap 30 times less than intel. 30 times!?11! How has AMD competed with intel with such a shortage of capital? There was a time when they were licensing some part of intel chips (if memory serves) but how can they afford the ongoing R&D costs, and then the sky high costs of new Fabs every few years? Amazing Hertz vs Avis situation there.
      • by maxume ( 22995 )
        IBM sells an awful lot of software.

        Check out Microsoft, Google and Oracle for companies that make most of their money from software(and nearly offset the market caps of all the stocks you listed). Any list that doesn't split earnings/revenues/market cap between hardware and software and isn't exhaustive, isn't going to be worth it.
        • IBM sells an awful lot of software.
          More than hardware revenues? Care to back that up with a link?

          Check out Microsoft, Google and Oracle for companies that make most of their money from software
          Google is *NOT* a software company. They're an advertising company. Google *sells* advertising. If you're going to attempt the "use" route, then you'll need something to refute the high costs of all that hardware and cabling in and between their data centers. As for Microsoft, did you know they sell hardware too? Alth
          • by maxume ( 22995 )
            Here is a link to IBM's 2006 annual report, showing where their revenues come from(I didn't find 2007 in my brief search; it doesn't seem to be released/published, but it is likely that it is quite similar to 2005 and 2006):

            http://www.ibm.com/annualreport/2006/md_4segment.shtml [ibm.com]

            Anyway, they make more than 2/3 of their revenue providing software and services, and a little less than 1/3 of their revenue on hardware. Much of their software and services is built for their hardware, but they will work with other
    • by GWBasic ( 900357 ) <slashdot @ a n d r e w r o n deau.com> on Tuesday February 26, 2008 @03:44AM (#22556144) Homepage

      Silicon Valley has and continues to derive the vast majority of its income from intellectual property protections for its software. I pointed this out on Techdirt, so the commenters there hemmed and hawed with their red herring arguments about how Microsoft does not make money from software written 14 years ago. Regardless, Microsoft (which is no longer a Silicon Valley firm, I know) would make no money today if XP and Vista were free. Intel would make no money if anybody could just copy Intel chips. If they were free, nobody would bother with Linux. Where are the linux billionaires? Nor would biotech companies make any money if anybody could just copy their inventions. Sun, AIX, etc. all made fortunes in their time from selling proprietary flavors of Unix. SAS and SPSS are the industry standards for statistical computing, and they are proprietary, intellectually protected, for-profit firms.

      Basically, whoever is rich is someone who's smart enough to figure out how to get other people to perform labor for him. The pyramids were built without money, (as far as we know,) yet we would consider the pharaohs very rich.

      In a free economy, the rich person is whoever can figure out how to get the most people to labor his benefit. One becomes rich by organizing labor so that everyone benefits. The challenge is finding a motivation technique that can satisfy laborers more then money.

      • by Bottlemaster ( 449635 ) on Tuesday February 26, 2008 @04:26AM (#22556324)
        The 18th century called; they want their economic theories back.
      • You're quite a few centuries out of date there. Value (being rich) is created by market values, and market values do not necessarily correspond to value. Quick example: you own something not valuable, and suddenly the value of it shoots up many times. Not a lot of labour has occurred, and you're suddenly a lot richer.
      • Re: (Score:3, Insightful)

        by CommieLib ( 468883 )
        In whatever "free" economy you wish to conjure, there are still going to be goods and services which are scarce (in the economics sense), and hence rationed, and hence have a non-zero price. Here are a few quick examples:
        • real estate
        • medical services (assuming that it's not performed by robots)
        • live artistic performances

        Furthermore, I can imagine a series of fabrication technologies, for example, that make mp3 players so cheap as to be essentially free. There's no imaginable (currently) technology whi

      • In a free economy, the rich person is whoever can figure out how to get the most people to labor his benefit. One becomes rich by organizing labor so that everyone benefits. The challenge is finding a motivation technique that can satisfy laborers more then money.
        Like slashdot mob points?
    • by Znork ( 31774 ) on Tuesday February 26, 2008 @04:19AM (#22556284)
      Where are the linux billionaires?

      Spread all around the economy, ranging from Google to mom'n'pop shops. The linux billionaires are those who _use_ linux and save money. Coincidentally, the very same are often those who invest time back to solve their own problems, as the money they save far, far outweighs the money it'd cost to roll their own from scratch.

      The fact that someone is making money from monopoly protections does not mean that it's good for the economy as a whole. We could hand out monopoly rights for air, and you'd get a huge AirCo, developing amazing technology for measuring how much air each person was using and charging for it. They'd certainly make money, but we'd all be poorer by paying for a resources that would have been produced anyway.

      Linux, BSD, and all Free Software proves that software would be produced anyway.

      If anyone could just copy chips we'd get the same economy there. There are many 'open chip' projects around.

      The purpose of the economy isn't about 'making money'. The purpose of the free market economy is to maximize the creation of wealth by encouraging competition in overcharging sectors and constantly lowering the costs of production. When the cost of production reaches zero we've all won; we've got infinite wealth.
      • by dorpus ( 636554 )
        Spread all around the economy, ranging from Google to mom'n'pop shops. The linux billionaires are those who _use_ linux and save money. Coincidentally, the very same are often those who invest time back to solve their own problems, as the money they save far, far outweighs the money it'd cost to roll their own from scratch.

        Do they really save billions of dollars? Does every company have to become a Linux specialist to "invest time back to solve their own problems"? Or were you going to argue that "that's
      • by Wildclaw ( 15718 )

        The purpose of the economy isn't about 'making money'. The purpose of the free market economy is to maximize the creation of wealth by encouraging competition in overcharging sectors and constantly lowering the costs of production

        That, and to distribute scarce goods efficently (as in letting the consumer decide which scarce products he wants/needs the most).

        One thing that is often ignored in economics is the fact that in a free market, the price of the product has more to do with the cost to produce it than it has to do with the value of the product itself. As long as there is healthy competition (something needed for a free market to function) and the consumer are informed (another needed thing), the producers will never be able t

      • The purpose of the free market economy is

        to eliminate scarcity.

        Your long-winded version is correct, but mine makes a better slogan. And I am not sure what "infinite wealth" is.

        My aim for the ultimate economy would be where automated machines do all the jobs that humans don't want to do, so that we are freed up to do the ones we enjoy. The way it is now, I think there are a ton of people working jobs that they don't enjoy simply to "earn a living". It would be better for those people to go back to school and further their education. Also,

      • by kz45 ( 175825 )
        "The linux billionaires are those who _use_ linux and save money"

        so, the developers get shafted and the people that use it for free save money. I think the original poster was talking about a company that sells linux as its main product (Not someone that uses it for free).

        "The purpose of the economy isn't about 'making money'. The purpose of the free market economy is to maximize the creation of wealth by encouraging competition in overcharging sectors and constantly lowering the costs of production. When t
      • by maxume ( 22995 )
        The economy doesn't have a purpose. Individuals within it may have a purpose, and its regulating bodies may have a purpose, but the economy itself doesn't have any purpose, beyond the sum of those purposes.
    • Silicon Valley has and continues to derive the vast majority of its income from intellectual property protections for its software.

      It could be true. Do you have numbers backing up that claim, or are you just assuming it must be true because that is how your world looks like?

      Regardless, Microsoft (which is no longer a Silicon Valley firm, I know) would make no money today if XP and Vista were free.

      I believe Microsoft Office would continue to sell well even if XP and Vista were free. I also believe that the vast majority of businesses and many home users would pay for a subscription to "Windows Update", even if the underlying operating system is free.

      Intel would make no money if anybody could just copy Intel chips.

      You mean, if anyone had a billion dollar fab in their backyard? Technically true, as you can interfer any

    • Intel would make no money if anybody could just copy Intel chips.

      The only academic research I know of that has been done into this came to the conclusion that patents made little difference to semiconductor R & D: the main incentive was to get products out before the competition.

      Like a lot of pro-patent arguments, your turns out to be an unfounded assertion.

      Where are the linux billionaires?

      That is a red herring. It does not matter how much money people make, as long as the products are developed. The ex

      • The only academic research I know of that has been done into this came to the conclusion that patents made little difference to semiconductor R & D: the main incentive was to get products out before the competition.

        That sounds interesting; do you have a handy link or other reference?
        • James Besen and Eric Maskin, Sequential Innovation, patents and imitation. It was on the web some years ago as an MIT working paper.

          Bronwyn H. Hall and Rosemarie Ham Ziedonis, The Patent Paradox Revisited: Determinants of Patenting in the US Semiconductor Industry, 1980-94

          http://papers.ssrn.com/sol3/papers.cfm?abstract_id=158610 [ssrn.com]

          drafts of both that and this:

          Bronwyn H. Hall and Rosemarie Ham Ziedonis, The effects of strengthening patent rights on firms engaged in cumulative innovation: insights from the semic
    • by fabs64 ( 657132 )
      To be asking this on /. is obviously going to be a karma burn, but why would you ever measure the worth of a product by how much money was made from it?
      • Re: (Score:3, Insightful)

        why would you ever measure the worth of a product by how much money was made from it?

        Because, as a rule, people don't mind paying for something they perceive to be worth the expenditure of money. You can use any product you want; cars, movies, books, knives, all are measured both in number of units sold as well as how much money was generated by their puchases. Statistics are kept on the best selling products as well as the most profitable products. One can use those statistics to show that product

  • What would Steve do? (Score:2, Interesting)

    by Justabit ( 651314 )
    I love my iPhone, but it did'nt come for free. In fact it cost alot. iTunes is free but you have to have a computer to run it. To get my phone unlocked so it would work in Australia cost money. But I still prefere it over a free equally as good phone on a big contract. Alot of things that are 'free' actually cost you money in the long run. I think in the near future there will be an anti free backlash of people paying the big sum up front and foregoing all the greif of continuing cost. I can also see certa
  • I tried Google's free 411 directory assistance recently. I asked for a local business and gave the street and cross street. I was given a voice menu of about 7 results. Most of the results seemed either duplicate or redundant since they were all for the business I was looking for. So which one do I pick? And, even if they were different, I have to listen to all of them to see which matches the best. Of course by the time one gets to, say, the 6th result, one's forgotten whether the best-so-far was nu
    • Re: (Score:2, Informative)

      by dethb0y ( 774761 )
      Google SMS is much better, almost as good as having an active internet connection.
  • Free = marketing. Just like you give away free commercials - you pay a million dollar for making a good commercial, another million to air it, but you do not charge your potential costumers any money. They get to enjoy the commercial for free. Wohooo.
    When I come to /. , I get to enjoy content. Because this content is delivered to me assuming a certain CPM value, which makes having a site like /. profitable. But thing is, end of the day, the economics of "free" is just the market of marketing and advertise
    • Re: (Score:3, Funny)

      by AlXtreme ( 223728 )

      To remind you all, advertising is not where the money is at. NewEgg, priceline, travelocity, amazon , each make more than x4 the money facebook/myspace digg/youtube/ or any large advertising space makes.

      Yeah, you're right. GOOG [yahoo.com] isn't worth anything anymore and doesn't make any money.
      • by Shohat ( 959481 )
        GOOG is an advertising platform, not just advertising space. The entire market of internet advertising (70%+ ?) flows through google's pipes. The revenue of the entire internet advertising market is smaller than HP's revenue.
        • Advertising is advertising. If you sell or resell ads, cold hard cash is being made here.

          BTW, HP is worth $125B. Google is worth $149B. Stop pulling numbers out your *** and start backing them up with proper facts.
          • by Shohat ( 959481 )
            You sir, are an idiot. "Worth" is not revenue. A company can be worth 10 billion, and not generate any revenue at all (bubbles ...). I suggest you re-read what I wrote
  • Nothing new (Score:5, Insightful)

    by clarkkent09 ( 1104833 ) on Tuesday February 26, 2008 @02:40AM (#22555928)
    It all boils down to:

    - give some X for free so they buy more X later
    - give X for free and sell supplies for X
    - give X for free and sell advertising on X

    All done for many years by such a diverse group as drug dealers, razor manufacturers and magazine publishers. There is not a single example in the article that doesn't fall into one of those three categories.

    It may be true that the Internet is a making that kind of marketing much easier and more common, and it may be an interesting subject for a book. However his approach is needlessly sensationalist: "$0.00 is the future of business", "free changes everything", "freeconomics" etc. It's worth remembering that the same laws of economics (and laws of nature) still apply as they always have. A business can only survive if it sells its products for more money than they cost to produce. The rest is just marketing tactics.
    • by QuantumG ( 50515 )

      - give X for free and sell supplies for X

      very similar:

      - give X for free and sell support for X
      - give X for free and sell customizations for X

      Or even:

      - give some X for free so they buy more X later

      - give X for free so they buy Y later

      be it just that people now trust the brand or that they have been "locked-in" and now need the other components of the system - for example, Adobe Acrobat Reader is free, the creation tool is not.

    • by jo42 ( 227475 )
      Or, like Google, use revenue from one aspect of your activities to finance giving away all of your other stuff for free.
    • Im not sure that a business needs to make money in order for it to survive anymore, all that is needed is the perception that it will one day be worth something and investors will invest, how many companies do you know of dont make any real money, and yet are worth millions? This could be because, a lot of people werent happy with the size of the piece of their pie, and all decided to make the pie bigger, the thing is that now the pie is 50% mirage.
    • Re: (Score:2, Insightful)

      by stzein ( 738194 )

      A business can only survive if it sells its products for more money than they cost to produce.

      wrong. A business can only survive if it makes more money than their products cost to produce. It is not necessary to make the money selling the products. The point is that it isn't even feasible to sell products if they can be made extremely cheap, because people don't like using their credit card for 1 cent. But since you can reach a huge public with a product that cheap, you can find other way to make money, based on reputation/ mindshare / attention or however you want to call it.

      Is this new? Maybe

    • How about:
      1. Create X that you and some other people need.
      2. Make X freely available.
      3. Watch people helping to make X better do what you and some other people need.
  • LIBRE (Score:1, Troll)

    by gi.net ( 987908 )
    I think you should create a new word for free (as in speech). Free is too ambiguous and may be pejorative (as in no value).
    Why not use the French word "libre". It is already well known.
    • Re: (Score:3, Informative)

      Because then normal people don't know what you're talking about.

      (Yes, contrary to what NERD RAAAAAGE will tell you, this is important. If normal people can't understand you, they'll write you off.)
    • by Wildclaw ( 15718 )

      Free is too ambiguous and may be pejorative (as in no value).
      This is a very big misconception in many people's minds. That the market value of something has something to do with the real value. Although it sounds intuivly correct, it is isn't the case.

      As long as you have competition, market value is far more dependent on the cost of production than it is on the actual value of a thing. Actually having competition and a decently informed market is another matter though.
      • Re: (Score:2, Informative)

        by monxrtr ( 1105563 )
        Actually, market value is 100% subjectively extrinsic for absolutely every single good and service. Cost of production is completely immaterial to value. Example: an original Pablo Picasso painting consisting of canvass and paint costing less than $10 may be 100% subjectively extrinsically valued at ten million dollars while the public works ditch dug by 100 laborers during the day shift and filled back in by 100 laborers during the night shift for 1 year straight may be subjectively extrinsically valued at
        • by Wildclaw ( 15718 )
          Incorrect. Note that I specifically mentioned that you need competition.

          In markets with little competitition, such as your picasso where the value is in owning the original picasso you have a scarcity that the seller can use to set a price far above the production cost of the item.

          Note that competition is a relative term. Unless two items are percieved to be exactly the same, they aren't competiting fully. They can still be competing to a certain degree though. Many successful business make a living by maki
  • Im typing this on a freelaptop, with free internet, eating free food. Aint life grand? and now, how much does the book cost? Hmm.. Yea DTA-Dead Tree article. I read the first four Potter books from a text archive, and would have never bought and read the last 3, had I not gotten the free ones. I have since bought the whole set, and donated it to a library. ( I also found two other sets, 1~4, and sent those off to a library too! ).

    I used to edit wikipedia, until they deleted my article on the 'aerodynamics o
  • Ubiquitous Pinky and the Brain reference: in one episode Brain builds "Papier-mâché Earth" from magazine inserts then lures the population of Earth to Chia-Earth by offering free t-shirts. (The actual earth is then subsequently destroyed by an asteroid.) Never under-estimate the power of the free t-shirt!
  • I heard a story on NPR a week ago about a new book by MIT Professor, Dan Ariely, talking about what happens to our "rationality" when we are offered something for free. From the interview, it sounds like the rules of economics break down when we are offered something free.

    http://www.predictablyirrational.com/ [predictabl...tional.com]
    http://www.npr.org/templates/story/story.php?storyId=19231906&ft=1&f=2 [npr.org]

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