Seth is wrong

by Jason Preston on June 30, 2009

I thought I’d keep the headline meme from Seth Godin’s post about Free. Malcolm Gladwell recently wrote an incredible intelligent review of Chris Anderson’s new book (and concept), Free, and Godin thinks he got it all wrong, that Free really is the future of business:

Free is the name of Chris’s new book, and it’s going to be wildly misunderstood and widely argued about.

The first argument that makes no sense is, “should we want free to be the future?”

Who cares if we want it? It is.

The second argument that makes no sense is, “how will this new business model support the world as we know it today?”

Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

Nevermind the fact that Gladwell didn’t raise either of these wishy-washy points. Nevermind the fact that there’s stunningly little evidence that we’re in an inevitable race towards a new business model of free.

The problem with Chris’s new idea is built into the concept itself: that costs will grow close enough to zero that you can round down.

Seth should know better. He runs a whole business based on the idea that you can take the exact same concept, and round up. 900,000 people making pages on Squidoo, handing 50% of their “couple of dollars” of ad revenue over ads up to a good $500,000 or so.

I have to read Chris’s book (Chris, can I have a free copy?) before I’ll feel qualified to really dig into it, but I think that he’s describing a fad. No product, not even an informational product, is free to produce. It is nearly free to copy it, but that is often theft.

Just because it’s easy to do doesn’t make it legal. Or right.

If we are to have a digital based economy (and this, I think, is the inevitable truth), then we need to have more digital goods that cost money, not more digital goods that are free.

Free is, ultimately, an impotent business model, because you cannot make money. Even in these scenarios where you “make money on the surrounding businesses,” those surrounding businesses are not based on Free. They are independent business models in their own right, and if they’re bringing in revenue, that is in fact your primary business. Everything else is marketing.

The truth in this case (however inconvenient) is that if you want to make money, someone has to give you money. And they have to give you more money per item than it cost you to create it. Even if your cost is 0.0000002 cents per article, you’d better make at least 0.0000003 on it, or you’re in trouble long term.

{ 6 comments }

1 rikin 06.30.09 at 6:04 pm

I don’t agree with this but for completely different reasons than Seth’s or Chris’s.

In line with talking about content creation I believe that the new business model is actually paid, it is currently free save for a handful of publications and there are a number of media outlets sitting in board rooms figuring out what a subscription model will look like.

My informed guess is that many outlets will put up these virtual pay-walls but that they won’t last long. My reasoning is based on the fact that I do agree or at least relate to there being a societal movement to continue with “free”.

I’m also going to put myself out there and say that technology will play a huge role in sustaining a free model. As devices like the iPhone and Amazon’s Kindle replace newspapers I believe there will be a pivotal shift in advertising budgets towards these digital formats. Why should a full page in the NY Times print product be more valuable than a full page unit on the Kindle when it has the same reach and audience? With television and video content we’re seeing the same advances in technology with platforms like Hulu and Boxee delivering content through your computer rather than your cable box. The current CPMs on in-video advertisements are extremely poor but when the eyeballs switch the money will follow.

I’ve gone further into these ruminations in my post on The Flawed Online Video Model – would love to hear your feedback!

http://www.rikinontheweb.com/the-flawed-online-video-model-same-as-newspapers-part-2

2 Jason Preston 07.01.09 at 9:34 am

I’ll check out the post…

Why should a full page in the NY Times print product be more valuable than a full page unit on the Kindle when it has the same reach and audience?

Because there’s another metric you’re leaving out: ROI. If a full-page print ad has a higher ROI than an iphone ad or a web-browser ad (and I think so far the data shows it does), then it’s worth more money…

With television and video content we’re seeing the same advances in technology with platforms like Hulu and Boxee delivering content through your computer rather than your cable box. The current CPMs on in-video advertisements are extremely poor but when the eyeballs switch the money will follow.

Again, I think the ROI is more tied to the medium than you do. I think that what will make Hulu work is when the media companies stop trying to fight Boxee and other services that bring Hulu to the television, and start charging cable-ad rates for ads that air on the TV screen.

When I watch Hulu on my laptop, it’s a much different experience than when I watch Hulu on my television via my Media Center. My attitude is different. I’m in a different mode.

Hulu has the ability to determine how their content is being played and what device it is being shown on; just adjust the ad rates based on what device and situation the video is in, and, voila! you get a profitable enterprise…

3 Michael Turro 07.01.09 at 11:36 am

“Free is, ultimately, an impotent business model, because you cannot make money. Even in these scenarios where you “make money on the surrounding businesses,” those surrounding businesses are not based on Free. They are independent business models in their own right, and if they’re bringing in revenue, that is in fact your primary business. Everything else is marketing.”

I think you’re largely arguing semantics here (as is Gladwell). I don’t think you really disagree with Anderson’s argument at all… just his use of the word free. Still, if I can read the New York Times or your blog without paying for it then it’s free to me. We make no transaction and exchange nothing other than ideas. That’s free… to me at least. How you the publisher choose to frame it is up to you. If you don’t want to be in the free content business and would prefer to think of yourself as being in the advertising business, then knock yourself out. I don’t care if you don’t think it’s free or if your advertisers don’t think it’s free, I do… and in the ad business equation I’m the one who really matters.

4 Jason Preston 07.02.09 at 9:27 am

Michael – good points. Like I said, I need to read Chris’s book to make sure I’m not just arguing semantics 😉

5 Michael Turro 07.02.09 at 9:31 am

I’m in the same boat re: reading the book. I’m basing my impression of his argument on the article he did in wired which serves as the basis for the book:

http://www.wired.com/techbiz/it/magazine/16-03/ff_free

6 rikin 07.07.09 at 8:30 pm

I don’t think I’m forgetting ROI. In fact, I hope at one point with advanced ad targeting that a full page ad on an e-reader or on Hulu will potentially have a greater ROI.

Comments on this entry are closed.