Recapping The Free Summit

from the lots-to-discuss dept

On Monday, with the help of the folks at SageScape who came up with the idea and put the whole event together (and did all the hard work), we helped put on the very first Free! Summit -- an attempt to dig into this question of how "free" economics impacts business models. As mentioned, a core component of this was recognizing, as we started, that free doesn't mean no business model, but that you needed to understand how "free" works in order to properly design your own business models.

We had two separate keynote talks (one in the morning and one in the afternoon) from the author of the upcoming book on Free, Chris Anderson, which I think really helped frame the discussion and certainly provided many of the important points around which many of the other discussions revolved. Not surprisingly, Anderson's book is likely to be required reading for many -- and, yes, there will be free versions available. A key takeaway for me during his talks was the idea that when you have abundance, it's not just that waste can occur, but that you almost have a moral obligation to waste, because that waste creates value that expands a market.

The rest of the morning focused on real world examples -- with three quick case studies of companies (Ooma, YouSendIt and Practice Fusion) who are embracing free as a part of their business models in very different ways. What struck me as most interesting was that all three companies have extremely different business models, but all face some similar issues. Ooma sells hardware and then offers service (VoIP) for free. YouSendIt has a variety of business models, most of which fall into the "freemium" mode, whereby you can pay for advanced features. Practice Fusion has stayed away from the freemium model for its totally free high-end e-healthcare records solution, and focused on alternative models, including advertising and revenue sharing deals with partners.

Yet... the one similarity that all three found? Free is sometimes a barrier to adoption. That is, all three often found themselves needing to explain and educate their customers or communities why they were offering things for free, because many people who come from a world of scarcity rather than abundance intrinsically distrust free. They assume there's a catch or that the service is somehow of lesser quality. This is an interesting point that deserves more exploration -- though, a part of me wonders if it's really generational and will fade over time.

After that, we brought back the Techdirt Greenhouse Idea Workshop -- where we had four companies (ISleptThroughClass.com, Justin.TV, Ad-Village and PhoneVite) all do short 5 minute presentations not just about what they do, but about the biggest challenge they face in continuing to grow their free-based business models. From there we broke out into smaller groups and each room discussed the challenge presented by one of the four presenters over lunch. I was able to float between the rooms and heard some really great discussions. As we've seen in previous Techdirt Greenhouse events, this sort of interactivity really gets people involved and thinking and generates some fantastic ideas.

After lunch, we got back together to discuss the results, and what struck me was how many of the discussions went towards traditional marketing issues: customer segmentation and positioning were two things that seemed to come up in every workshop discussion -- which only reinforces the idea that once you get past the "fear" of free and start to understand its benefits, the challenges that come up are ordinary business challenges, rather than some totally new world of upside down economics, as some have implied.

In the afternoon, we heard a somewhat dissenting view from Alex Iskold, who talked about the the "dangers" of free, in how it could be used by companies to drive others out of business, potentially dampening innovation. This kicked off a good and vibrant discussion including (not surprisingly) me challenging Alex on why some of this was actually bad. For example, he stated that if Google started offering free cars, everyone would agree that this would be a bad thing that needed to be stopped. However, I thought exactly the opposite. If a company (Google or not) can come up with a reasonable business model that subsidizes free cars, that could actually be quite valuable in a variety of ways.

We also had two industry specific panels -- both of which sparked a lot of discussion (way more than we had time for). The first, on the music industry involved myself, Gigi Sohn of Public Knowledge and Dave Allen from Nemo and a founding member of the band Gang of Four. Dave provided examples of how bands are embracing free models and doing quite well, while Gigi talked about the lengths to which the incumbent entertainment companies were going to use political and legal maneuvers to limit how effective those upstart business models could be. While the audience raised a good point, noting that the legacy guys were going to die off eventually anyway, so why focus on them, Gigi correctly noted that the fear is that while they die, they can do a tremendous amount of damage to creativity and to consumer rights. She also noted, in passing, the importance of paying attention to the Cablevision remote DVR lawsuit, which is currently being appealed to the Supreme Court. If the Supreme Court reverse the appeals court decision, it would be a massive blow for all sorts of innovative online services that could enable unique business models.

The final panel, moderated by the always entertaining Kara Swisher, focused on the media industry, and included Dan Gillmor presenting a discussion on new models for news and journalism that were up and coming, which matched up well with MIT/BU professor Marshall Van Alstyne discussing the business models related to these new forms of journalism. Playing more of a skeptic's role was Alan Mutter, who worried about where the journalism world was heading -- though (thankfully) he wasn't about to blame anyone but the folks who run the newspapers themselves.

All in all, there was a lot to talk about -- too much in fact. Due to the massive amount of content, it all too often felt like we were cutting fascinating (and sometimes contentious) discussions short, before we had a real chance to dig into some unique and insightful points. It's always a challenge with events like this, but hopefully some of the discussions will live on in a variety of ways, from the connections made at the event to future posts here on Techdirt and on other sites as well. In the future, though, we'd love to try to create more such gatherings, and will do our best to structure them in a way that allows for even more discussion and participation. Hopefully SageScape agrees and decides to do more such events (and invites us to participate as well). Thanks to everyone who came and to everyone who helped make the event possible.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Gene Cavanaugh, May 13th, 2009 @ 12:17pm

    More on Free

    "Alex Iskold, who talked about the the "dangers" of free, in how it could be used by companies to drive others out of business, potentially dampening innovation. This kicked off a good and vibrant discussion including (not surprisingly) me challenging Alex on why some of this was actually bad."
    Easy - when free is a business model for market development, it is good; when it is used as a weapon to preven market development (and stay with obsolete models), bad.
    Microsoft added "free" to their products to kill Netscape and similar innovation, and for years, saddled us with mediocrity. Luckily, the Europeans used Netscape, etc., technology to give us Firefox, etc.
    On the other hand, I started giving free IP advice to help level the playing field for small inventors versus big business abuse - and it resulted in a business model.

     

    reply to this | link to this | view in thread ]

  2.  
    icon
    Mike (profile), May 13th, 2009 @ 5:42pm

    Re: More on Free

    Easy - when free is a business model for market development, it is good; when it is used as a weapon to preven market development (and stay with obsolete models), bad.
    Microsoft added "free" to their products to kill Netscape and similar innovation, and for years, saddled us with mediocrity. Luckily, the Europeans used Netscape, etc., technology to give us Firefox, etc.


    Yikes. I don't even think that's close to right.

    First, how do you determine what type of competition is designed as a weapon and which is for market development. I'd argue that it's all the same.

    Second, Microsoft didn't kill Netscape by using free as a weapon (it tried, and failed). Netscape killed itself by creating a hugely bloated, buggy piece of crap product that was unusable -- and saddling it with a bad business model.

    Furthermore... um... the Europeans weren't behind Firefox...

     

    reply to this | link to this | view in thread ]

  3.  
    icon
    Nelson Cruz (profile), May 14th, 2009 @ 4:30am

    For example, he stated that if Google started offering free cars, everyone would agree that this would be a bad thing that needed to be stopped. Why would this possibly be? Yes, many that make their living selling cars would loose their businesses and jobs, but so what? Everyone would get free cars! This is just competition at work. Google did it in the webmail market for example. I don't see anybody saying that was bad. I frequently see complaints like this, mostly from salespeople complaining about how their competitors are cutting their margins too much and hurting everybody. I always have to remind them this is the free market at work, and that they themselves have undercut the profit margins of others. If any company can offer a product for a lower price, and do so legally and remain profitable, then more power to it. This is competition. Giving cars, or whatever product, for free, is just an extension of this. What surprises me the most is seeing similar complaints (and calls for "protecting an industry") from economists or other people that are otherwise strong free market defenders. Yes, if a company offers a product significantly cheaper than the others (or even for free) it will disrupt the market. The companies that can't follow them or otherwise adapt to the new reality will go down. Jobs will be lost. But consumers get cheaper products and the surviving companies will hopefully create more jobs to compensate. This has been happening for a long time, and its a good thing. If this wasn't allowed... well... forget google, forget the present, and think about the past. Think about Henry Ford. The people making cars in less efficient and cheap ways would have stopped him. The car market wouldn't even exist as it is today. Here in Portugal we actually have some companies experimenting with selling cheaper Smart cars with advertising on the sides. But I doubt it will ever get to free cars. We will see these complaints about free "killing business" in the music industry first. Right now they are focused on illegal free (aka "piracy"), but soon there will be companies and artists complaining about the legal free; all the artists giving away their music with CC licenses and hurting the market for paid music. Just like some software companies worry and complain just as much about open-source as they do about piracy (if not more). It's the same struggle all over. :)

     

    reply to this | link to this | view in thread ]

  4.  
    icon
    Nelson Cruz (profile), May 14th, 2009 @ 4:32am

    Sorry... forgot about line breaks. Please delete previous comment.

    For example, he stated that if Google started offering free cars, everyone would agree that this would be a bad thing that needed to be stopped.

    Why would this possibly be? Yes, many that make their living selling cars would loose their businesses and jobs, but so what? Everyone would get free cars! This is just competition at work. Google did it in the webmail market for example. I don't see anybody saying that was bad.

    I frequently see complaints like this, mostly from salespeople complaining about how their competitors are cutting their margins too much and hurting everybody. I always have to remind them this is the free market at work, and that they themselves have undercut the profit margins of others. If any company can offer a product for a lower price, and do so legally and remain profitable, then more power to it. This is competition. Giving cars, or whatever product, for free, is just an extension of this.

    What surprises me the most is seeing similar complaints (and calls for "protecting an industry") from economists or other people that are otherwise strong free market defenders.

    Yes, if a company offers a product significantly cheaper than the others (or even for free) it will disrupt the market. The companies that can't follow them or otherwise adapt to the new reality will go down. Jobs will be lost. But consumers get cheaper products and the surviving companies will hopefully create more jobs to compensate. This has been happening for a long time, and its a good thing. If this wasn't allowed... well... forget google, forget the present, and think about the past. Think about Henry Ford. The people making cars in less efficient and cheap ways would have stopped him. The car market wouldn't even exist as it is today.

    Here in Portugal we actually have some companies experimenting with selling cheaper Smart cars with advertising on the sides. But I doubt it will ever get to free cars.

    We will see these complaints about free "killing business" in the music industry first. Right now they are focused on illegal free (aka "piracy"), but soon there will be companies and artists complaining about the legal free; all the artists giving away their music with CC licenses and hurting the market for paid music. Just like some software companies worry and complain just as much about open-source as they do about piracy (if not more).

    It's the same struggle all over. :)

     

    reply to this | link to this | view in thread ]

  5.  
    identicon
    Scott Walker, May 19th, 2009 @ 11:46am

    Free is not new, nor is it bad

    First, I enjoyed the summit, Mike, looking forward to the next installment (though I agree, there was just too much material and too much interest in it to squeeze it all into a single day).

    Second, the summit reminded me (again) that 'free' isn't "new," "radical," or a unique outgrowth of the Internet or any other technology. It's a tried and true marketing approach that's been around for years - what's new is the technology that allows free market strategies to explode in ways not previously capable and/or feasible.

    The Greenhouse panel companies, while technical in nature as far as their services/products go, aren't using radically new business models. And the challenges they face when trying to convince potential customers that their free product really is as good as it seems is - at root - a basic marketing one. They're trying to convince people to try (and then use/buy/keep) their products.

    Third, I didn't see much in the way of Creative Commons being used/mentioned, which was disappointing. I'm hoping the next summit shows more companies finding ways to incorporate it into their offerings (I know it's not for everyone, but its use often parallels a lot of the open, content-is-advertising philosophy Techdirt seems to believe in).

    Lastly, I completely agree with Nelson about the critics of "free" music beginning to emerge. I'm seeing lots of posts on sites that slam musicians for giving their music away, polluting the available music with sub-par works, and generally making it harder for the other musicians (gifted? professional? signed?) to "make it." Get real, get competitive, or get out of the way.

     

    reply to this | link to this | view in thread ]


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