WIRED’s Chris Anderson on Internet Economics

WIRED’s editor-in-chief, Chris Anderson, spoke to a small crowd today at Google’s Washington, D.C., office while promoting his new book, “Free“, which explores why giving away valuable content for—well—free, is sound model for web-based businesses. The web- and audio-based versions of the book are free.

FREE (full book) by Chris Anderson

I sat in on the discussion and noted some of the finer points here. The main take-away?: Web businesses can profit more by giving things away. Anderson coined the phrase “the long tail.” It’s a freemium business model that would have businesses give away 90% of their product, and sale the remaining 10%. In short, give away the head, sale the tail.

On the acceptance of the free model:

If you’re under thirty, it’s a “duh.” [The internet] should be free. If you’re over thirty, you think this is philosphically wrong.

On free-market economics:

The internet is the world’s most competitive marketplace.

On open-source software:

When you give things away, people will give back more in return.

On micro-payments:

The difference between a penny and nothing is—well—nothing monetarily, but everything psychologically.

On iPhone app sales:

Developers are creating two apps out the box: one free, one premium. Free is bait, free is marketing. The free version is the hook, to convert prospects into consumers of the premium version.

On how to save journalism:

The internet broke journalism’s monopoly on consumer attention. The internet spawned a number of low-quality outlets, but each laser-focused was  to fill a niche. For the first time, the media is learning that you have to earn your audience on the merits of what you do….

…and advertising is now quantifiable. Who cares about impressions when I can report the click-thru rates and shopping cart activity resulting from  each banner ad?

…Craigslist is as big a problem as Google News is.

On the Wall Street Journal‘s model:

The Wall Street Journal gives away not only its most popular features, it also gives away its exclusives. That might seem counter intuitive, economically speaking, the market should award WSJ for the scarcity of its product. But WSJ found that reporters and bloggers reporting on the findings of the article were receiving the traffic the WSJ pay wall denied.

For some more background, check out this Februry 2008 WIRED video and article called “Free! Why $0.00 Is the Future of Business“, Anderson lays the groundwork for the theme of his book: