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During our family vacation last month, I was sitting on the beach talking about my blogs with my mother-in-law. (I mean, doesn't everybody do that?) Lily is pretty sophisticated about the world of tech; she was the first person I met who had starting using The Google back in the day. But she was concerned about my blogging.
Specifically, she was worried that I was giving all this (theoretically) valuable information and advice to you fine folks in the blogosphere. How do you make any money when you give away stuff for free?
A fair question, and as it turns out, the central question of Chris Anderson's fantastic new book, Free: The Future of a Radical Price. This from the book's jacket:
Now, in Free, [Anderson] makes the compelling case that in many instances businesses can profit more from giving things away than they can by charging for them. Far more than a promotional gimmick, Free is a business strategy that may well be essential to a company's survival.
Obviously, technology features heavily in the book. Google is the poster child of the Free Economy. Think about all the Google goodies you use in a day: Gmail, Google Docs, Google Maps, Google Reader, and The Google itself. Now think about how much money you spend on these products and services. That's right: nothing.
Yet Google took in $22 billion in 2008, of which $13 billion was profit — a 60 percent profit margin. That's some pretty good cash for a company that gives away so much for free.
But don't think that the whole premise is based on the Google model, which gets its money from all the advertising it sells. (Google is an advertising company, not a search company.) Other examples abound: Anderson talks about free CDs, free silverware, and almost-free air travel (on Ryanair). The secret (hugely oversimplified here) is to give away something for free (bags fly free on Southwest; the Genius Bar at Apple Stores) to increase customer demand, then find a way to charge for the things (plane tickets, iPhones) around the free thing.
And giving things away doesn't necessarily mean making less money on the free thing. Moby released a new album, Wait for me, and decided to give away a track for free. He wrote in an email (not to me):
But here’s something funny: the best selling itunes track is ’shot in the back of the head’. Why is that funny? Because its the track we’ve been giving away for free for the last 2 months and that we’re still giving away for free. Odd.
Not odd if you read this book. And you should.
Lawyers: what can you give away for free to help increase your business?
Buy Free here. Or read some of it for free on (ironically) Google Books.