Den 27 marts deltog jeg i et event på Palo Alto Research Center, hvor Chris Anderson fortalte om sin tidligere bog “The long Tail” og om hans kommende bog “Free”. Jeg har skrevet lidt key points ned, som du kan læse nedenfor. Jeg vedhæfter også et link til et fantastisk interview med Chris Anderson, hvor han fortæller mere om “Free”.
Efter at have læst dette, så tænk over hvordan TDC´s tilbud om gratis musik, passer ind i dette framwork. Har TDC fat i den lange ende, eller skulle de hellere fokusere på at få prisen på deres produkter ned på 0kr og få indtægter på andre måder?
Her er mine noter fra eventet.
Chris Anderson took the stage in a fully packed auditorium at the historic Palo Alto Research Center and gave a thought provoking presentation of the main ideas from his book “The Long Tail” and his upcoming book “Free”.
I won’t go into details on the long tail theory, but basically it describes how the Internet and the notion of unlimited virtual shelf space allow companies to tab into niche markets. Distribution and inventory costs are close to zero on the nternet, which allows the companies to make profit on the huge “back catalog” that only sells a few copies and doesn’t display in the physical store.Chris Anderson added some viewpoints in addition to the long tail theory.
For the first time in history, we are now, through the free choice that the long tail enables, able to measure real human preference.
That people have interest in the close world. Anderson was honest when he said, that he would rather get information about his daughter scraping her knee, than news about another suicide bomb in Iraq. His point is that a minority taste is often the most intense taste.
The market for diversity and niche products is just as big, as the “one size fits all” market.
- We will actually pay more for “one size fits me”
Anderson then addressed some errors that people usually make when discussing The Long Tail theory.The long tail doesn’t mean the end of blockbusters
- That you can get rich from the long tail. He once spoke with a French film-maker that couldn’t understand why wasn’t making much more money from the long tail, and his answer was, that the consumer get rich from the great new experience and the unknown artist might make twice as much money, but two times almost nothing, is still not much. The companies that successfully aggregate the content are the once that might get rich.
That the theory is, as he said, full of crap, because people want good and professional quality, and not homemade, low-cost youtube videos. His answer to this is that people value relevancy more than production quality.
Chris Anderson’s theory of “free” descends from The Long Tail, and slowly caught his attention, as he was examining the concept of expensive shelves space and free shelves space. If you look at web mail today, then Yahoo! offers unlimited storage space for free, but it has not always been like that. As the revenue per signed up user has grown through the years and the cost of servers has dropped, the capacity that web mail providers can offer has increased accordingly, and is now unlimited. It all comes down to economy of scale. If the company can increase their user base, they will be able to spread the costs and enable them to move focus away from the cost of the data centers, to the capabilities of the equipment. If a company’s main expense is IT infrastructure then free is the inevitable destination. “If your price is close to zero, treat it as zero, but get to zero first” Anderson stressed the importance of the psychological barrier between paying a cent or getting it for free. Almost all successful IT companies today offer their services for free, but how do they make at profit then? Actually, there are several business models.
Freemium – You get free access to the basic version of the product or service, but pay a premium for the extended version.
Advertising – All content is free, but ad supported.
- Cross-subsidies – You get one product for free, but it tempts you to buy something else as well.
- Zero marginal cost – Distribution of things at such a low cost, that it is unnoticeable. Peer to peer technology eliminates the distribution cost, making it free thereby forcing companies to change business model.
- Gift economy – User generated content and open source software
As a closing remark, Chris Anderson commented on two audience questions that when put in connection with the concept of free, will have an impact on our future.
The acceleration of the IT sector, boosted by the notion of free, will increase the burden on the environment. Anderson answered acknowledged this, but argued, that there will be a huge incentive to make energy free and utilizing renewable energies.
The ability to self-educate and manage the increased access to free information will have an impact on the future workforce. Teachers will still matter, but their roles must change.
If you haven’t read The Long Tail yet, I would highly encourage you to do so.His upcoming book “Free” will of course be available for free in an ad supported version, and in a premium version without ads.
You can read his article on “Free” in Wired magazine from marts 2008, or through this link