Buzzword: Freeconomics

The latest 2008 marketing buzzword, arguably coined by Chris Anderson in his magazine WIRED, is 'freeconomics'. Freeconomics (not to be confused with the 'freakonomics' of Stephen Dubner and Steven Levitt fame) refers to the gradual increase of market abundance and reduced costs that drives prices of products an services down to zero. On the internet especially, as resources are centralized, costs can be shared among the many reducing costs for all. For a better explanation of 'freeconomics' take a look at Chirs Anderson's blog TheLongTail where he discusses five main 'free' business models:

• Freemiums



For instance, the actual product or service is free, but a "pro" version or upgrade is what fuels growth. Chris sites the 1% rule where 1 percent of your customers support the costs of serving the other 99 percent. Give away the product, sell the upgrade.




• Advertising



There is no better example than Google where everything, every product, every service is a leader to sell advertising to a third party. Free offerings build audiences with specialized interests that may be useful to advertisers who will pay to reach them.




• Cross-subsidies



Where giving away a lead products or services in one area encourages spending in another where costs can subsidize the lost. An example is when bands give away their music to entice audiences to buy concert tickets. Or like big media outlets that are starting to give away information online to encourage spending offline. Or even still people who produce e-books that they give away, only to sell themselves as lecturers, experts or consultants.




• Labor Exchanges



The trade-off of labor is another business model of 'freeconomics'. For instance, this social news media site Digg.com operates on this model. Digg simply provides the means for an audience to submit news which then attracts a wider audience that Digg then sells to advertisers. In their case, the 'digging' through billions of webpages for data and filtering it is carried out by the audience. Digg provides the centralized location and algorithms to filter out spam. It's a labor-trade that enriches both sides in someway.




• Gift Economics



Giving away products or information for some other reason. For instance, giving away knowledge simply for the social statuss of being considered an expert (moderators at 'Wikipedia" or bloggers), giving away products to be recognized for your talents an industry innovator ('Mozilla' and 'Wordpress'), or giving away services to be acknowledged as a benefactor deserving of donations or grants (non-profits like "CARE.org").