Free isn’t the future of business

Few 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 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)

Along similar lines, on the New Yorker this week, Malcol Gladwell critically reviewed Chris Aderson’s book Free:

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

2 Responses to “Free isn’t the future of business”

  1. Ettore says:

    BBC news should have mentioned Malcol Gladwell as well in their article, which is a bit too enthusiastic and “one-sided” in my opinion.

  2. Often discussions of the kind tend to be one-sided. In addition of not making money, there is a second fallacy in Anderson’s thesis:

    This is the kind of error that technological utopians make. They assume that their particular scientific revolution will wipe away all traces of its predecessors … “As the world of chips and glass fibers and wireless waves goes, so goes the rest of the world,” Kevin Kelly, another Wired visionary, proclaimed at the start of his 1998 digital manifesto, “New Rules for the New Economy,” offering up the same non sequitur. And now comes Anderson. “The more products are made of ideas, rather than stuff, the faster they can get cheap,” he writes, and we know what’s coming next: “However, this is not limited to digital products.” Just look at the pharmaceutical industry, he says. Genetic engineering means that drug development is poised to follow the same learning curve of the digital world, to “accelerate in performance while it drops in price.”

    But … he’s forgotten about the plants and the power lines. The expensive part of making drugs has never been what happens in the laboratory. It’s what happens after the laboratory, like the clinical testing, which can take years and cost hundreds of millions of dollars. In the pharmaceutical world, what’s more, companies have … been trying to find a way to serve smaller and smaller markets—to create medicines tailored to very specific subpopulations and strains of diseases—and smaller markets often mean higher prices.