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When is Free Better – When Not – Brogan 100 #100

Adam — Wed, 14 Oct 2009 12:00:40 +0000

“Information wants to be free.”
-Chris Anderson

The debate about Free rages on…

On the side of Free:

Social Media, and its ridiculous valuations.
Google, and its ridiculous revenue.
Seth Godin, with the “Books are Souvenirs” publishing model
Chris Anderson, the evangelist of Free

On the side of not-Free

Traditional Publishers of Content
37 Signals
Old-school businesses that can’t figure out what the hell to do
Malcolm Gladwell

Whoa.

On both sides of this debate are incredible thinkers, incredibly smart and successful companies, and a lot of profits. Also, on both sides, are some real stinkers. Everyone is convinced that they are right, that history is on their side, that the laws of economics and psychology will win out in the end (vindicating their position).

Here’s the thing about all this…

You people keep forgetting that there is more than one way to make money.

The Case Against Anti-Free

The anti-free people keep pointing out that Twitter is free and doesn’t make any money, so therefore you shouldn’t give stuff away. The problem with Twitter (and all the other money-losing Social Media platforms) isn’t that they give stuff away. The problem is that they never (as far as we know) thought through how to make money.

Google gives away (almost) everything. Free search. Free email. Free maps. Free analytics. Free documents. Free everything. Oh… wait. You want to buy some ads? Awesome. Just pay, like, a nickel. Great.

WordPress, the most awesome blogging and CMS platform ever, is free. Free software, free support forums, free themes, free plugins. Automattic seems to be making a profit. Hmm…..

When I lived in Florida, I got to shop at the world’s most wonderful grocery store, Publix. They gave out a lot free samples, something almost every week. Around the holidays they threw in-store parties. Free food. Not just samples, either. Plates of turkey, ham, ice cream, pie, mashed potatoes, peanut brittle, cheese, sushi. Wine, egg nog, hot cocoa. Live music. All of it free. You didn’t have to buy anything. But you know, as long as you’re here…

The case against pro-Free

The anti-free people lambaste the free people with “shouldn’t you get paid for your time and effort?”

Yeah, yeah. Whatever.

The real problem with the “everything is free” people is that they talk (and think?) like we live in the matrix and everything is digital information. They talk about moving away from atoms and towards bits. They talk about how the cost of delivery approaches zero. They talk and talk.

Um… I can’t eat bits. I can’t fuel my car with bits. I can’t live under bits.

Free only works with media… information and entertainment.
You can give away free samples of food, but only for so long.

Writers, bloggers, Social Media gurus, computer nerds, and all the other people who lead this conversation (on both sides, really) mostly make their money in media, information, entertainment, and other bit-driven industries. That’s fine. Free movies? Great! Free news? Of course!

Free software? Well… maybe.

Free food? Sure… but here’s a coupon for that mustard you’re eating.

Free oil? Not on your life.

The digital economy of consumerist America is great and all, but it’s really just a way to move money around and keep everyone occupied. The essentials (food, shelter, heat) and the near-essentials (communication, transportation) will never- can never- be free. If you’re wondering why China is getting all rich and powerful- it’s because they make things. Actual real things. Things that have mass and displace water.

If China is the future (a lot of people think so), then clearly an economic model based on producing fake things that don’t cost anything to copy is not the way forward.

So, what then…

Macro

(That means the world.)
While the high-level emphasis on value-add, knowledge work seems forward thinking, the only way to reclaim/retain economic dominance is through making things we can export for money.

Make things. Export them for money.

Micro

(That means you.)
Free is, obviously, not a revenue model. Without revenue, you don’t have a business.

So, what does that mean?

Free has to be thought of as a Marketing tool. Like the free samples at Publix, only turbocharged.

But you have to have something to market. Whether it’s souvenir books, consulting services, advertisements, or speaking engagments, Free is only viable if there is a sensible monetization plan. You can market Nothing if you want, and market it quite effectively. But it’s impossible to build a business on that. At best, you have a hobby. At worst, you have a multi-billion dollar not-funny joke.

Don’t be scared of Free. Or suspicious.
Or in love.

Free is another tool. You can take out ads in the Yellow pages. You can hire a blimp to fly your logo. You can cold-call people at dinner time. You can sponsor a public radio show. You can make a funny YouTube video. You can get a celebrity to wear your stuff. You can…

There’s an almost infinite number of things you can do to market what you sell. Free is one of them. Use it if it works. Don’t use it if doesn’t.

Stop arguing.

Okay, wait-
Don’t stop arguing.

Please move your arguments to the comment section of this post.

It’s free!

This post is part of the Brogan 100.
Learn more here and here.

Who really profits?

Adam — Mon, 06 Jul 2009 14:35:06 +0000

Chris Anderson’s new book, Free: The Future of a Radical Price, is about to come out. I enjoyed The Long Tail, so I’m sure I’ll buy this one.
Most of you know, Chris Anderson’s basic theory of the universe is: information is getting cheaper and cheaper, so cheap that it’s actually free. Free changes everything.

Most of you probably also know about Malcolm Gladwell’s review of Free. Gladwell’s basic theory of Chris Anderson is: You’re full of crap.

And, of course, they’re both right. Gladwell points out that YouTube is losing money. Famously, Twitter and Facebook are also losing money (with no viable path to profitability), chugging along on investor dollars. Gladwell is right to point out that businesses cannot continue to give stuff away for free forever- it’s too damn expensive.

And Anderson is right in saying that information “wants to be free.” Well- that’s not exactly right- consumers want information to be free. Market pressure brings prices down. If I can get free news one place, and cheap news somewhere else, I’ll read free news.

They both belabor exceptions and special cases. People will pay for better. People will pay for faster. People will pay for more convenient. The problem with all of those models is, of course, that someone, somewhere, is trying to figure out how to give away faster, better, more convenient. They might have their own brilliant monetization plan. They might just think the technology is cool. They might be anti-capitalist hackers. They might be trying to sell a coaching program. They might be idiots assuming they can make money without a solid plan. They might be a non-profit organization. They might be Chinese secret agents plotting to slowly take control of the flow of information.

A bunch of people will continue to figure out how to get stuff for free. A bunch of other people will continue to pay for stuff. A bunch of other people will figure out how to get whatever they want (money, power, influence, love) by giving those other bunches the stuff they want. And bunches more (who can’t figure anything out) will try to figure out how to force all this stuff from happening.

So, who really profits from all this economic upheaval caused by “Free?”

Uber-cool journalists who get paid to talk about it.

What’s a meta for?

Adam — Sat, 27 Jun 2009 15:01:36 +0000

Let’s say you are a small business owner, entrepreneur, salesperson, or professional service provider. And then let’s say you haven’t been up to speed on blogging and social media and all that twittering mumbo-jumbo. But then let’s say that you’d like to start expanding your business and that you’d like to get onto the internet and have a better online presence and all that.

So, you start with a Google search about blogs, blogging, social media, and all the rest. You start to read a few blogs. You read blogs about blogging. People twittering about twitter. People whose entire Social Media presence is devoted to talking about their own Social Media presence. These are meta-bloggers. And then other people are blogging about them- meta-meta. And then there are all these people selling programs designed to help you sell programs about selling programs to help people blog about selling. (Meta-meta-meta… wait… isn’t that a pyramid scheme?)

These are the kind of people you encounter first, because they have the best SEO for all the keywords you might type in when looking about information on blogs and blogging and Social Media.

And, if you listen to these people at all, you’ll find out something: you are way behind.
Blogging is dead. Myspace is dead. Even Ebay is dead. Nobody is using Internet Explorer. Nobody reads books anymore. Everybody is on twitter. Everybody has an iPhone. No, wait- you should be lifestreaming. No, wait- you’ll be left behind if you don’t implant a chip directly into your brain that syndicates your sensory inputs, thoughts, sexual arousal state, and bladder/bowel contents to a feeder running on Web 3.7 technology.

Hmm…

And all you wanted to do was blog about flower arrangements or tax prep services.

The problem is- all the “experts” are fickle, early adopter types. And so are all their friends. And all their media sources. They buy and sell information about technology- so they have to continually be at the screaming edge of everything in order to have a competitive edge. They don’t really care, or know, about using social media to sell flower arrangements to your neighborhood or tax prep to local small businesses. They think- they really honestly think- that every single one of your potential customers behaves and thinks like they do, and so you should pitch all of your effort at the people who think that carrying a laptop on a business trip is old-fashioned.

But your business might not be like that. Sure, it might- if you are trying to sell smart-phones to 20-somethings, or music to teenagers, or web-apps to the technoratti. If you’re in a forward-looking field, or selling to a wealthy, forward looking market- then, yes, implant the chip and start streaming your bladder contents all over everybody.

For the rest of you- the flower arranger, the tax preparer, the Estate Planning attorney:
Blogging is not dead. Neither are newspaper ads, for that matter.
And Social Media is a fantastic platform… in combination with other marketing efforts… as part of a holistic strategy… that makes sense for your business.

Frontierland

Adam — Tue, 23 Jun 2009 14:34:08 +0000

I was talking to a friend the other night about history- I had finally made it over to the Adams House tour here in Quincy. He’s been as well, and we both loved it. That got us to talking about the Revolution, and other times of change, innovation, and upheaval. I said that I think we’re in one of those times now, and that we would do well to study and learn from some of the periods in our history that are similar, specifically- the American Revolutionary period, and the Old West.

In the course of our conversation, my friend said he just doesn’t feel like the changes that are happening now are as big a deal as all that, that this isn’t as life-altering as, say, the industrial revolution.

That’s when I realized something…

Most people didn’t make it out west.
Most of the world’s population didn’t live in the colonies during the Revolutionary War, AND
- The revolution didn’t significantly change the lives of any black slave in the colonies.
- The revolution didn’t significantly change the lives of most white colonists as it was happening
After the industrial revolution, there were still farmers, herders, hunter gatherers.

A few interesting points from the site Interent World Stats:

Only 23% of the world uses the internet
Over half the world’s population lives in Asia. But in Asia, only 17% of people use the internet.

Yes, yes- here in North America, 74% use the interent. That leaves 26%, or 79 million people NOT using the internet.

What about Social Media…?
According to comScore, 140 Million people used Social Media in April of 2009. Alot? Yes.
Percentage of the world population? 2%

I’m also reminded of a fantastic book I read awhile ago- The Source, by James Michener. The book takes place in the Holy Land, telling the story of one plot of ground from the dawn of time until the present (1960s, when the book was written). At one point in present-time, a local expert-guide takes his American charge around and shows him people living, essentially, in various past eras, including one man living in a cave and using flint tools (Stone-age style).

Where I’m going with all of this, I guess, is…

There is no requirement that anybody be at the forefront of things. Most people, in fact, are not at the forefront of things. While some people (you?) act like the whole world will fall into a black hole if they don’t take advantage of the newest Web 3.7 technology, other people are still happy living in the stone age (literal or figurative).

I’m not suggesting that anyone abandon Social Media, or that it isn’t important (I make my living, partially, by helping people with this stuff)- I’m just suggesting some small amount of perspective. Venture out into the wild frontier because you’re excited, because you’re curious, or even because you’re bored. Go because you’re looking for a new opportunity, because you want to stake a new claim, because yo’re running away from something.
But don’t become a pilgrim just because you feel like you have to. There are still plenty of customers and friends back on the mainland.

But, for those adventurous souls- the pioneers, the outlaws, the prospectors…

“Go west, young man- and grow up with the country.”

Start Your Own Business?!

Adam — Mon, 01 Jun 2009 20:26:39 +0000

Some friends of mine (married couple) decided that it’s time to start a business. The idea is brilliant, the economics are sound, and they want to make a go of it in the next couple months. The motivation? Pregnancy. Soon-to-be mom is currently working. They can’t figure out any way for to meet their current bills with her not working, and she can’t really do her job from home.

Another friend of mine has been itching to start a restaurant for as long as I’ve known him. He says that when he was a kid, they played make-believe businesses- his was always a pancake store.

My wife was laid off of work back in January and is slowly, but surely, moving toward becoming a freelance graphic designer. She just can’t figure out a way to do the kind of work she wants to do under the employ of someone else.

I was at a networking event about two weeks ago and I met another dozen people who are in various stages of starting up a company.

At the bookstore I find that the motivation/management/business/investing section is overflowing with books about starting businesses. Meanwhile, meetup.com is flooded with groups devoted to startups, entrepreneurs, and business opportunities.

So… what’s going on? There seems to be a “perfect storm” (ugh, buzzword) of factors that all add up to this phenomenon. From what I can see, all of the following are contributors, and you can’t blame it on one in particular:

The economy, pt. 1 – People have lost their job, and are looking to do anything that might replace their income.

The economy, pt. 2 – People suddenly realize that starting a business is not inherently any riskier that being employed by a firm.

The economy, pt. 3 – People suddenly realize that relying on a lump sum of money in retirement (whatever that is) won’t work, and are looking to create streams of income instead.

The economy, pt. 4 – The greed (real and/or perceived) of large corporations and institutions is driving people to seek meaningful work, which they often have to create themselves.

The Gen Y/Gen X Cohorts – People under 35 are becoming increasingly aware that they simply don’t have the capacity (or the desire) to work for eight hours a day doing something they dislike. Maybe it’s laziness, maybe it’s wisdom- but I know lots of people (myself included) who have plenty of talent, drive, and ambition, but who are almost completely unemployable.

The Changing World – Possibilities are starting to seem limitless. It’s hard to want to work for a company when all the really cool stuff being done in the world is being done somewhere else.

Increased Connections – There have always been pioneering entrepreneurs. It has always been possible to rewrite the rules of the game… but the average person never found out about it. There was no chance to be inspired, no example to follow. Now, we can hear about it every day- they are our modern heroes, and a shining example for all of us.

Changing Ideas of Success and Competition – Let’s say you want to start selling vitamins online. Is your competetion the One-A-Day people? Probably not. Are you only successful if you drive GNC out of the marketplace? You wouldn’t even think of it. Most of these new businesses are trying to do one of two things (and sometimes both):
1) Do something the founder thinks is cool and meaningful 2) Provide enough income so that the founder can spend more time with friends and family
These goals are a lot more attainable then the “Take over the world” goals of large businesses, and people are starting to realize that they could be successful, if they just understand success in this new way.

Infinite Market – If your average customer buys $50 worth of vitamins each month, you only need about 85 customers to make gross over $50,000 a year. What kind of market penetration is required if the potential market is the billions of people who go online everyday? How hard is it to get 85 customers? People are starting to understand the economics of the Long Tail, and that’s spurring them into new businesses.

Lower Barriers to Entry – (This one’s my favorite) Technology has made it possible to start a seroius business very fast and very cheap. You can go from initial conception to launch within a week and with less than $100.

It is a crazy exciting time to be alive, to start a business, to dream big (or small) dreams about life and possibilities. But it’s also a time frought with dangers. This brave new world of ultra-light startups and independent consultants is a magnet for con-artists, pyramid schemers, fools, and plain old bad luck.

This week in the blog, I’m going to highlight some of the inherent dangers, and how to avoid them.
First up tomorrow: Is it really a business?