26 February 2008

Chris Anderson on “freeconomics”

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Free!
Former Economist writer, “Long Tail” author and current Wired editor-in-chief Chris Anderson, is pushing another of his disruptive business ideas and preparing the launch of his next book.

“Thanks to Gillette, the idea that you can make money by giving something away is no longer radical. 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?)”

It remains a dubious assumption though: Google doesn’t provide its advertising space for free, the product and services being advertised are not for free, the marginal costs are not free (like environmental impacts), and “economy” itself implies some kind of value exchange. AdLab calls it Chris Anderson’s communist manifesto.

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