Here is Chris Anderson’s latest contribution to our debate about his book Free: The Future of a Radical Price. See my earlier post An interactive review of Free by Chris Anderson for details.

Dear John,

You ask three good good questions (and sorry this is turning out to be such a civil dialogue; couldn’t you, for your traffic figures alone, have accused me of being anti-capitalist or just a bad writer?)

First, an aside. The book starts with a taxonomy of Free, which explains the difference between ad-supported free, freemium, cross-subsidies and the “gift economy”. All use the word “free”, but some are more free than others. Calling the book “Freemium” and just focusing on one, would have missed the opportunity to cast the broadest lens on this fascinating word. But when it comes time for the tactical advice in the book, as you’ve noted, Freemium is by far the most interesting.

On your questions:

1. Can Freemium can really spread far beyond the software and internet industries?

By and large, Freemium is a creature of the bits world, where the marginal costs of production and distribution are near zero. If something can be turned into bits, it can adopt a Freemium business model, but if it can’t, it’s hard to see how that same ratio of most-free, some-paid can be sustainable in any real way. (I won’t include trivial examples like how watching the Bellagio fountains in Las Vegas is free but gambling there is not!) That said, the number of things that can be turned into software is growing fast, including services (from travel agents to tax accountants) and it is not impossible to imagine that many of the health services you mention will someday be software. I can see a day when my doctor uses a Freemium model; free for routine consultation (artificial intelligence) and very expensive to see the lady in the white coat for more complicated stuff.

2. Is the point of Freemium marketing or advertising?

The point of Freemium is to use the free version as marketing for the paid version, but a form of marketing that is useful and trust-building, rather than just hyperbolic and annoying. The free form is useful, and if you like it the paid form is more useful yet.

3. Can Freemium make up for lost advertising revenue?

I do think for some in the media industry, Freemium can replace lost advertising. It’s exactly what the Wall Street Journal is doing: the most popular content is free, because it gets the kind of traffic that can generate big ad dollars, while the more niche content on specific industry domains is paid. Maybe a model for the FT?

Regards,

Chris

July 2, 2009 7:57pm in Media, Technology | Comment