“Just because products are free doesn’t mean that someone, somewhere, isn’t making huge gobs of money,” writes Chris Anderson. But who? How? And for what?
The free distribution model is most concerning because there is an imbalance between product, distribution and customer. The concept of ‘free’ only works if all parties are aware of the exchange. In this program, the information grab behind ‘free’ has become clearer. My gmail account, while lovely and of no monetary cost, is actually offering personal, private data that will inform marketing decisions for years to come. My day-to-day life is being monitored, measured and monetized so quietly, I forget its happening. Purchasing razors, video games or even a free lunch with a beer, is an open exchange where the transaction cost is obvious to all parties. Using my Google Analytics results for my web-based business, isn’t as out transparent. I would be interested to know how many users can identify and articulate the nuances of labor exchange and gift economies.
As an entrepreneur, I find it interesting that n0one would expect my crafts and design to be distributed freely, but I am expected to give away my work as a resource for good travel information because it is online. My ‘competitors’ in the crafting community are using traditional and seemingly ‘free’ marketing tactics to drive business to their site: free advice (now, through podcasts, blogs and etsy.com tutorials), free craft fairs, and etsy.com (which some say is a disruptive model as well). But the craft fairs charge an entrance fee and etsy.com charges a percentage of every transaction. Free isn’t free. Where will the start-up costs come from? If a band is distributing their music for free, but making money on the tours, where is the tour money coming from? In a world without venture capitalists, financing endeavors become much more difficult if you aren’t making money on every exchange.
Rick Steves is a good example of making a lucrative business based in ‘free.’ The company is estimated to earn $40 million a year, much of his offerings are of no cost: podcasts, TV shows, radio programs and now even an iPhone app. But unlike Google, the exchange of services are extremely transparent: I’ll give you a TV show, but its really a teaser for a trip.
In a June 2009 interview with Writer’s Digest, he said: “I’m lucky I’ve got a quirky business design where we do make plenty of money from royalties and from taking people on tours and retailing stuff. But information is our publicity stunt. I feel sorry for somebody who has to compete with me who doesn’t have the financial opportunity to make money accidentally through his writing.”
The author of the article notes:
Free—as a rule of thumb—seems to be a key tactic over the course of his career, whether handing out radio programs, newspaper columns or lectures to bolster his overall reach. For new writers looking to break in, Steves says it can be a great plan, and it worked for him; problem is, it’s a rare feat to make money at travel writing unless you’re a paid staffer somewhere. But when confronted with giving his message away for free or not at all, Steves finds it to be an obvious choice.
Steves subsidized the creation of his company by giving piano lessons and travel classes until he had enough capital to found Europe Through the Back Door. His real product are large group tours which range from $1700 – 5,000. A trip for 28 people at $4,695 a person grosses $7,732 per day.
Unless all online organizations can find the third product, ‘free’ is doomed to haunt the economy. (And please note, even Anderson can’t come up ‘freebie’ for his Gillette example: “Shaving cream?” he ponders.) If the original product, say, newspapers, is no longer of perceived value, then they must branch out: maybe sell tickets to dinners, readings and tours with their reporters and interviewees. They could also move toward a non-profit model and sell the idea of community, as public radio and theaters already advocate. If you like it, pay. While I don’t want to subscribe to a paper version of the New York Times, I’d be glad to pay $25 or so a year to ensure I can use their services. But should they have to undercut their value?
Free is a false front, one that requires organizations to make money in a back-channel manner. Just as the tech bubble burst by thinking that sites could sustain while not making a profit, free is not a sustainable model for all information-based industries. Anderson’s assertion, “information wants to be free, in the same way that life wants to spread and water wants to run downhill,” is a made up statement designed in a “technological utopian.” Well, until milk and bread want to be free, there is a disconnect between reality and tech fantasy.
The Full Report 
I had no idea Rick Steves hosted tours, that’s really interesting: I like: “information is our publicity stunt.” That absolutely makes sense. Reporters selling tours related to their stories might be a conflict of interest. Maybe the parent corporation could somehow find a profit model themed on their reporting?