Making The 'Significant Objects' Project... Even More Significant

from the recycling-for-profit dept

Back in July, we commented on the Significant Objects project where 100 authors are writing up 100 stories involving 100 various trinkets -- and then selling those stories along with the associated items on eBay for a tidy profit. (The project originally struck me as an experiment to see if the one red paperclip stunt could be mass produced in some way as a sustainable publishing business.) Now, just a few months later, Slate has teamed up with the Significant Objects folks with a contest for Slate readers to submit their own 500-word stories about a cheap tchotchke -- a BBQ sauce jar bought at a thrift store for $0.75. The contest attracted over 600 stories to be judged by Slate and the Significant Objects founders, and the winner gets the honor of being picked as well as the proceeds from its eBay auction -- which has a current bid (and profit) of about $20.

This contest is brilliant in that it not only highlights the concept that every product is a bundle of scarce and infinite goods, but it also demonstrates that content can be used to engage with an audience as a form of entertaining advertising. For the price of a bauble and some editorial judging, Slate connected with its fans and gathered a bit of demographic information on its readers who sent in a story (submissions had to be accompanied by an email address and location). Imagine if Slate had instead put a banner ad on its website with a form to fill out for personal information, the response rate for that would likely be much much lower. But with this contest, the cost of the BBQ jar was negligible, and Slate editors spent their time reading stories and got a peek into the creative minds of its readership. Okay, the drawback is that the submission judging process is actually not a trivial task, especially when there are more than a handful of entries (and more than a couple judges). Even Google hasn't exactly figured out how to judge its own Project 10¹⁰⁰ contest. However, the search giant opened up the judging to let anyone vote on winners to help narrow down the selection. (And there are other examples of crowdsourced judging processes like Threadless's tshirt designs.) So I envision the next generation of advertising contests reaching out to audiences, calling upon more volunteers, and trying more and more creative campaigns to produce scarce goods out of thin air.

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Using Creative Fiction To Increase Value Of Trinkets On eBay

from the using-infinite-goods... dept

When we talk about understanding how to embrace the economics of infinite goods, one of the key points I've tried to make is that every product is a bundle of scarce and infinite goods. That's a point that some people have a lot of trouble with at times, insisting that some people who create infinite goods have no scarcities to sell... and, conversely, that those who make scarce goods, sometimes have no infinite goods to give away with them. While it may be a bit more complicated to separate out the scarce and infinite goods, it doesn't mean they don't exist.

Parker writes in to point out a fascinating example. Apparently a group of fiction writers are experimenting with selling physical goods on eBay with fictional stories given away "free" in the description. The project is called Significant Objects, and involves a bunch of fiction writers purchasing random trinkets, and then coming up with a neat story to go with them. The post at io9 notes that some stories seem better than others at increasing the auction bids, but points out that: "If Rosenfeld's success is any indication, these authors may actually get paid more for short fiction on eBay than they would at most publications."

Again, some will incorrectly claim that we're saying that fiction writers should start selling crap on eBay, but that's not it at all. This is just one (fun) example of many of content creators smartly using infinite goods (the stories) to make a scarce good (the trinket) more valuable, and putting in place a business model to profit from it. Once again, we learn that creativity knows no bounds, not just in creating content, but in playing around with new business models.

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Software Development Is A Scarce Good

from the development-costs... dept

Whenever we talk about business models and understanding the difference between infinite and scarce goods, someone almost always complains that things like music or software aren't infinite goods, because they "take resources to develop." But, of course, we've pointed out that's exactly the point. The development is a scarce good, and you can come up with plenty of business models to get paid for creating content. But getting paid to create content is different than getting paid over and over again for copies of that content. This seems a little tricky for some to understand, but: creating new content is a scarce good -- that content, once created, becomes an infinite good.

So, if you're looking at business models, there are plenty that recognize this and help get people paid for the creation of content, rather than for trying to distribute copies of that content. We've talked, for example, about programs like Jill Sobule's and Marillion's, where they basically get fans to agree to fund the creation of new albums, with additional benefits offered to those who do so. Now, Chris Gruel points us to an example where a community bands together to put up a bounty to get a certain software application developed, with the first person who does receiving the bounty. In many ways, this is similar to our own business model with the Insight Community, where we pay people to develop insightful content. It's great to see more examples of this business model in practice.

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Monty Python's Meaning Of Free: The Holy Grail Of Massively Increased Sales

from the and-that-is-the-speed-of-an-unladen-swallow dept

Last year, we wrote about Monty Python's decision to put all its content online for free hoping that would drive people to buy more of its scarce goods -- such as DVDs. And, as a bunch of you have submitted, it appears to have worked wonders. Monty Pyton's DVD sales jumped an astounding 23,000% and are now the number 2 best selling item in the Movies & TV category on Amazon.com. Who was it that said "you can't compete with free" again?

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Turns Out There's Lottttttttssss Of Money To Be Made In T-Shirts

from the who-knew? dept

We've pointed out in the past that folks who don't want to understand the economics of scarce and infinite goods often falsely claim that the business model we suggest is all about selling lots of t-shirts. Or, more specifically, when they comment in a mocking fashion, it's usually something like "lotttttttttttttttttttttsssssssssssssssssss of t-shirts."

The truth is that the business models we've shown usually have little to nothing to do with t-shirts. There are tons of scarcities that have nothing to do with t-shirts, and often aren't even physical goods (another mistake people make is assuming that scarce means physical). Usually we're talking about things like access and attention as valuable scarce goods. However, perhaps we were being a bit too flip in ignoring t-shirts ourselves.

Clive Thompson has a short article over at Wired looking at "the t-shirt economy," noting that it's actually a pretty big business: on the order of $40 billion in branded or decorated apparel (by comparison, the worldwide market for recorded music was supposedly $31.8 billion in 2006), and some of that definitely comes from content providers who are providing content for free and making money selling t-shirts. I still don't think it's the greatest business model out there (despite what some of my critics like to claim I've said), but I have to admit I'm rather amused by the fact that the "t-shirt economy" is actually getting some attention.

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You Don't Have To Sell Software

from the seriously dept

Reader Philip writes in to ask about our thoughts on a commentary on News.com by Dave Rosenberg concerning Sun's open source strategy. Rosenberg seems very concerned that Sun has decided to forego trying to sell software directly:

Sun's approach--at least the way I'm reading it from Jonathan Schwartz's statements, is about making the software totally free and trying to sell support and hardware. This clearly diminishes the value of the products and doesn't offer a mechanism that encourages people to pay for software.

It's difficult to see what Rosenberg is worked up about here. Sun seems to be following pretty closely an economically sound approach to a market: using infinite goods (software) to make scarce goods (hardware and services) more valuable. That's a lot more reasonable than using infinite goods to try to get people to pay for more infinite goods. There's no reason why Sun needs to encourage people to pay for software, and there are many reasons why they should not try to make people pay for software.

Yet, for some reason, Rosenberg seems to think that this strategy is somehow damaging to the open source movement:

It also puts an unnecessary burden on the notion of open source--such that if Sun is wrong, everyone else will look wrong too.

Why? If, as Rosenberg notes elsewhere in the article, Sun's open source strategy is different than other companies', then such a failure should be seen as a failure of Sun's model, not a strategy of embracing open source. There are plenty of reasons why Sun may (or even is likely to) fail in this endeavor. The Sun brand name has been tarnished. People may not find the hardware or services Sun is selling as providing enough value compared to alternatives (even with the software included). On the whole, it's not clear what's compelling about Sun's offer compared to the alternatives, and that's its biggest challenge. But that hardly reflects poorly on open source software or on the idea of not selling software.

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Monty Python Puts All Its Content On YouTube To Increase Sales Of Scarce Goods

from the good-for-them dept

As quite a few folks have sent in, it appears that the always funny team of folks who made up Monty Python actually seem to get the concept of giving away infinite goods to increase the value of scarce goods. They've set up a Monty Python channel on YouTube, where they'll be putting up pretty much all of their videos in high quality. The video announcing this is quite amusing, and a good contrast to all those content providers who decided to sue YouTube, rather than learn to embrace it:

First, it points out that plenty of folks have already been posting content to YouTube, and while they could sue, instead, they decided to fight free videos with free videos by putting up their own versions -- in higher quality. There's a funny segment where the Monty Python crew reacts to being told that all of this content will be available for free, and then the video notes that while this content will be free, they're hoping people viewing the videos will go to the Pythonline site and buy DVDs (scarce goods) of their movies as well. What an idea. Instead of suing, give fans what they want, and give them a reason to buy. Ideally, they would provide extra reasons to buy the DVDs, rather than just praying that people will, but this is definitely a much better reaction than so many others.

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Access Is A Scarce Good

from the a-reminder dept

While some of our critics like to falsely claim that the business model we describe for leveraging "free" is simply about selling "t-shirts" since they're the only scarce good that our critics can think of, it's important to point out that scarce goods are not just tangible goods, and "access" is often one of the most valuable scarce goods out there. In fact, we've definitely seen some musicians embrace this as something worth selling, but haven't seen it as much in other contexts. That's why it's interesting to see journalist/blogger Ana Marie Cox trying out a version of that business model herself. Cox, famous initially for being the original editor of the Wonkette political blog has been working for The Radar lately, but apparently it just went out of business. Cox wants to keep covering the election, and has set up a tiered sponsorship rate card:

• Anything: Good karma, knowledge that sometimes merit is rewarded. If not in this particular case.
• Over $10: A personal thank-you email (please include your email in "instructions for seller")
• Over $50: A personal thank-you phone call (please include your phone number in "instructions for seller")
• Over $100: My instant message screen name, regular personal updates via email and/or instant messages on election night
• Over $250: I will ask a senior McCain adviser the question of your choosing and send you the MP3 audio of the exchange
• Over $500: Phone call from McCain headquarters on election night, detailing hilarious antics sure to ensue
• Over $1000: One-on-one post-election dinner debrief

I have no idea if this plan will work, but it is fascinating that it basically works on a system of charging more for greater access. It will be interesting to see if Cox reports back on how well this experiment goes.

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Rock Band Video Game Selling T-Shirts Of Fake Bands

from the lotttttts-of-t-shirts dept

When critics of our analysis of the economics of infinite and scarce goods want to mock our ideas or make fun of us, they often fall back on the false claim that the business model we advocate is "give away everything and make it up by selling t-shirts." Or, rather, if they're really in a mocking mood, they usually write "llllllloooooooooooooooooootttts of t-shirts." It's quite amusing, though, of course, it shows a fundamental misunderstanding of what we mean by scarce goods.

That said, t-shirts can make up one part of the scarce goods that someone sells, though, it will almost always be a small part of it. And, there's no reason to mock the contribution that selling t-shirts can make as part of a larger business model. Reader Aaron de Oliveira points us to the interesting news that the super popular video game Rock Band is now letting players who have uploaded their own fake rock band logo order t-shirts, keychains and other merchandise from their fake band. As de Oliveira correctly notes, not only does this make some money, but it also makes the gaming experience better, connects fans more closely to the game and their own fake rock band in the game:

The company realizes it's not in the music business or in the t-shirt business. Its business model is the custom experience and it uses music (fun & free or cheap) and t-shirts to improve that experience in such a way that people are willing to pay for it.

Bingo. So go buy llllllooooooooottts of t-shirts to make it work.

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Books Are The Souvenir Edition For Your Idea

from the good-quotes dept

We've talked at length about the difference between infinite goods and scarce goods in various areas, and how you should spread the infinite ideas to make the scarce goods more valuable, but here's a great quote that puts that in perspective when it comes to books. Mathew Ingram points us to an interview with entrepreneur and author Seth Godin, where he notes:

"Books are souvenirs that hold ideas. Ideas are free. If no one knows about your idea, you fail. If your idea doesn't spread, you fail. If your idea spreads but no one wants to own the souvenir edition, you fail."

That's a beautifully succinct way of explaining the entire concept, though I think that the last bit (about getting people to own the souvenir edition) may be changing as well -- and other business models will start to show up.

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Reputation Is A Scarce Good... As Metallica Is Learning

from the oops dept

On Thursday, we wrote about Metallica's latest foray online, where it's attempting to build a community around its latest music. Given Metallica's history of attacking Napster all the way back in 2000, we expected there to be some pushback, but what was really stunning was how many of the comments were from people (many of whom had been big fans of the band) still pissed off about Metallica's actions, and refusing to have anything to do with the band. We weren't the only ones to notice. Wired had a story on Metallica's efforts and discovered exactly the same thing. The vast majority of the comments were vehemently negative. Clearly, Metallica really tarnished its reputation by its actions eight years ago, and it's still paying for it.

This brings up a good point, that we've mentioned in the past in the comments, but not so clearly in a post. A person, organization, band or company's reputation is an important "scarce" good -- and once damaged, it's quite difficult (though not impossible) to rebuild the shattered goodwill. When talking about what would happen in a world without copyright, for example, people often say "but in a world without copyright, couldn't someone just copy your own creation and pretend they were their own." The answer is yes, but they do so at the risk to their own reputation. If the news comes out that the person/organization/band/whatever was taking others' works and not giving credit where it was due, that would harm their reputation. And, as Metallica is learning, a tainted reputation can have serious long-term impact.

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Sometimes Free Really Means Free

from the yes-there-are-free-lunches dept

"Free" seems like a simple enough concept. As we've explained in the past, there's a huge number of successful business models that involve giving away free stuff. But Adam Thierer points out that some people are still horribly confused about the nature of "free" business models. Alex Iskold claims that the "free" stuff given away by Google and other companies is an illusion. He notes that when a company offers us free stuff, it often come with a price attached: you get a free lunch, but you have to listen to an annoying timeshare sales pitch. What Iskold fails to appreciate is the difference between scarce physical goods and non-scarce information goods. It's true that if a company is giving a physical product away for free, they're probably going to try to sell you something as part of the deal. But that's because the physical product costs them money, and they'd go out of business if they gave away too many. Information goods are totally different. Once you've created a new information product, you can give away an unlimited number of copies without affecting your bottom line. And so you can afford to design your business model in a much more generous fashion. MySQL, for example, built a billion-dollar business by giving away millions of copies of its software in order to attract a few thousand companies willing to pay for its service and support offerings. Those millions of free copies of MySQL really are free.

Iskold also seems confused about the difference between monopolies and competition. He claims that Google's decision to give its word processor and spreadsheet application away is "monopolistic" and a "dangerous poker game" that's only possible because Google has a huge pile of cash. This is ridiculous on a couple of different levels. In the first place, it's absurd to think that Google's cash pile gives it an unfair advantage over Microsoft, which has one of the largest cash piles in the history of the world. Second, there are numerous other competitors in the online word processing space, such as Zoho, who don't have Google's large piles of cash, yet still give away online word processors for free. In fact, Google's own word processor actually came from a tiny startup, Writely, who had very little money, but was still giving away the product for free. Third, there's no inherent reason why word processors can't be free. You can make an unlimited number of copies of it just like any other software product. Microsoft has only retained the ability to charge hundreds of dollars for Office because they haven't had enough competition. Now that competition is increasing, the price of office software is likely to fall toward its marginal cost of zero, and companies will need to find more creative ways to turn a profit from it. Cutting prices (including cutting them to zero) in order to increase market share is the opposite of monopolistic. Consumers benefited from Microsoft's decision to give away Internet Explorer in the 1990s, and they benefit from Google's decision to give away Google Docs today.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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