Free Gone Wrong... Or Free Done Wrong

from the it-happens dept

One of the session's at today's The Free Summit is going to be by Alex Iskold, talking about the "dangers" of free -- a subject he has written on in the past. While I starkly disagree with his position, it is one worth thinking about, and I'm looking forward to his talk. His position (in that article, at least) is that free has consequences, and those consequences can be quite negative. Personally, I find the whole "good or bad" debate to be meaningless when it comes to economics, because economics tends not to care. It's describing what is happening, and I'd rather focus on how to get the best out of that, rather than complaining about why it's somehow bad. But, that said, Alex has a good point that we should at least understand the consequences. We just disagree on how to view those consequences.

Along those lines, our keynote speaker of the day, Chris Anderson, recently posted a story of "free gone horribly wrong" written by Jon Lund, the head of the Danish Internet Advertising Bureau. It's a fascinating and worthwhile read, all about a sudden influx of "free newspapers" in Denmark that weren't just free on street corners, but were freely delivered to homes. Basically, it created a bubble, with everyone getting overwhelmed with multiple free newspapers delivered to their doors every day. The market was overly saturated and it hurt everyone and the whole thing collapsed.

It's definitely an interesting tale -- and one that I think fits with some of what Alex will say. But, I tend to wonder if this is really a case of free gone wrong or free done wrong. First, I'm always a bit skeptical of "free" business models that rely on a "free" scarcity (such as physical newspapers). While it can work in some cases, it's much more difficult. You're not leveraging an infinite good -- you're putting yourself in a big hole that you have to be able to climb out of. Second, in some ways the model that was set up was a static one where everyone focused on the "free" part, and no one looked at leapfrogging the others by providing additional value where money could be made. The trick with free is you need to leverage the free part to increase the value of something that is scarce and that you control, which is not easily copied. That wasn't the case here. Everyone just copied each other, rather than trying to offer something different and better.

Still, it's an important point that bears repeating. Free, by itself, is meaningless. Free, with a bad business model, isn't helpful either. The real trick is figuring out how to properly combine free with a good business model, and then you can succeed.

Filed Under: business models, dangers of free, economics, free, newspapers