Why Free Isn’t the Future of Business

Few months ago, I wrote a piece for a W3C meeting (more on the meeting here) . In my piece, I pointed out that Google is the only company making money from ads, and the remaining web 2.0 companies are struggling to find viable business models, and they are not making any profit because they are pursing Starbucks’ business model (full article, excerpt).

Yesterday, Last.fm announced that it will start charging listeners outside the UK, US, and Germany. Before this announcement, The Economist had an article titled “The end of the free lunch – again”. This article shows why Chris Anderson may be proven wrong when he says that “Free Is the Future of Business“, and it does so by learning from the past (dot-com bubble & see “Six years in the Valley“). Very interesting read! Full article here, excerpt follows:

” The idea that you can give things away online, and hope that advertising revenue will somehow materialise later on, undoubtedly appeals to users, who enjoy free services as a result. There is business logic to it, too…. The internet also allows companies to exploit network effects to attract and retain users very quickly and cheaply. … If you worry too much about a revenue model early on, you risk being left behind. Ultimately, though, every business needs revenues—and advertising, it transpires, is not going to provide enough. …”

Update: Also Time Inc. is looking for a business model. Here is what they tried: “On March 18th her company launched Mine, for example, a new concept that allows readers to go online and select articles from eight titles, for delivery in print or online as a free, personalised magazine.” (full article)

2 Responses to “Why Free Isn’t the Future of Business”

  1. Daniel D says:

    Have a look at Chris Anderson’s interview at EconTalk.

    http://www.econtalk.org/archives/2008/05/chris_anderson_1.html

  2. [...] months ago, I wrote a post on “Why Free Isn’t the Future of Business” and concluded that ” Google is the only company making money from ads, and the [...]