Comments on: Innovation, Disruption and The Economics of Free http://www.centernetworks.com/economics-of-free Web 2 and Social Media News and Reviews Sat, 21 Nov 2009 01:50:56 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: James McCusker http://www.centernetworks.com/economics-of-free/comment-page-#comment-17629 James McCusker Wed, 30 Nov -0001 00:00:00 +0000 #comment-17629 Dear Mr. Marman, I am certain that you meant to write "give away the razors and sell the blades" rather than the other way around. At least that was the standard approach for several firms, especially Gillette, in the shaving equipment business -- and was essentially the idea behind the inexpensive Kodak cameras, as well. I certainly agree with you that while VCs tend to back innovative, and therefore disruptive, firms, they are not generally responsible for the free vs. proprietary rebalancing that has been going on in the information industries -- including the entertainment sector. It is difficult to tell how this will eventually sort itself out, but my guess is that capital investment will flow to the firms that can make that investment grow. That, generally, will not be the firms that are now circling the wagons strategically and finding it difficult to maintain their profit margins based solely on IP rights. Sincerely, James Dear Mr. Marman,
I am certain that you meant to write “give away the razors and sell the blades” rather than the other way around. At least that was the standard approach for several firms, especially Gillette, in the shaving equipment business — and was essentially the idea behind the inexpensive Kodak cameras, as well.

I certainly agree with you that while VCs tend to back innovative, and therefore disruptive, firms, they are not generally responsible for the free vs. proprietary rebalancing that has been going on in the information industries — including the entertainment sector. It is difficult to tell how this will eventually sort itself out, but my guess is that capital investment will flow to the firms that can make that investment grow. That, generally, will not be the firms that are now circling the wagons strategically and finding it difficult to maintain their profit margins based solely on IP rights.

Sincerely,
James

]]> By: Cyndy Aleo-Carreira http://www.centernetworks.com/economics-of-free/comment-page-#comment-17819 Cyndy Aleo-Carreira Wed, 30 Nov -0001 00:00:00 +0000 #comment-17819 There are only three models for supporting free online/software products: ad revenue, support for product, and selling user data. There aren't many Web 2.0 apps that require support people would pay for, so that's out. Ad revenue is on the decline and oversaturated, so that's not really desirable either. So what are companies going to do? It's either go under, charge their users, or sell their users out for the data they generate, which is far more valuable than a click-thru on an ad. So sure, everything will probably continue on this free bandwagon. But you never get something for nothing. There are only three models for supporting free online/software products: ad revenue, support for product, and selling user data. There aren’t many Web 2.0 apps that require support people would pay for, so that’s out. Ad revenue is on the decline and oversaturated, so that’s not really desirable either. So what are companies going to do? It’s either go under, charge their users, or sell their users out for the data they generate, which is far more valuable than a click-thru on an ad. So sure, everything will probably continue on this free bandwagon. But you never get something for nothing.

]]> By: Mitch4579 http://www.centernetworks.com/economics-of-free/comment-page-#comment-18754 Mitch4579 Wed, 30 Nov -0001 00:00:00 +0000 #comment-18754 What do you mean Ad revenue is on the decline? According the the IAB, Internet Ad Revenue increased by 25% to $21b in 2007! Although the rate of growth may be slowing, that is a far cry from declining! My company is currently readying our site for launch, and we are in the midst of deciding which parts will be free, and what paid parts will support it, and believe me, there are more than 3 ways. This isn't an advertising class, this is the real world, we have lots of stuff to sell, and we're not a retail operation! What do you mean Ad revenue is on the decline? According the the IAB, Internet Ad Revenue increased by 25% to $21b in 2007! Although the rate of growth may be slowing, that is a far cry from declining!

My company is currently readying our site for launch, and we are in the midst of deciding which parts will be free, and what paid parts will support it, and believe me, there are more than 3 ways. This isn’t an advertising class, this is the real world, we have lots of stuff to sell, and we’re not a retail operation!

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