Chris Anderson's book "Free: The Future of a Radical Price" was insightful and thought provoking. His basic premise, from a supply and demand point of view is:
- Supply - Costs are going down dramatically. The marginal cost of delivering information is very close to zero.
- Demand - Consumers behave radically differently for a free product than for even a very small price.
- Altruism - This person or company simply wants to help others.
- Trial - Free samples will allow someone to try your product in the hopes they will purchase it later.
- Exposure - Writing blogs and giving away valuable information is typically done simply to build a reputation for the writer. The hope is that when the readers need something related, they know where to go.
- Build a network - Some businesses are more valuable to the customers when there are more users. For example sites like LinkedIn and FaceBook require millions of users for them to be successful. By offering a lot of value for free, they can build their network. They can make money by charging for more services. (They also sell advertising which is addressed below.)
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