Tuesday, 17 March 2009 at 2:00PM
Participants:
- Chris Anderson - Wired Magazine
- Guy Kawasaki - Alltop
GK: What would you recommend to Twitter for their biz model? CA: The idea is to just make money now and not wait for someone to give you money. One model is to have a free and premium model. If a company wants a social voice. Twitter has chosen the correct route to have others create the clients and value-added interfaces. They should charge the companies? Really? Look for a small percentage of persons to become premium users. How do you create that versoion of the product without crippling the product base. The question is how much loyalty do you have? How much stickiness?
GK: If you could reinvent Wired what would you do differently?
CA: Paper still matter. Some paper adds value to the internet. long articles with brilliant photos falls aprt when put online. Thus Wired exists in multiple forms. The online medium has certain advantages.
GK: IS that to say that free will not be free?
CA: Here is a hypothetical scenario in which a book could be free. Books could be in differents forms: sponsored forms, flash forms, ebooks. Teh digital forms should be free and the physical forms are sponsored and thus free to teh consumer. If you believe that the physical book is the most desireable form for the consumer then they will pay.. GK gives the example of asking his publisher if he could distribute a free veriosn of his book. CA had the advantage of reserving the audio rights to his work.
GK: conceptually monetizing popularity is hard. Which is more difficult: achieving it or then monetizing it?
CA: The latter. How do you convert the value you give people into money? Publishers have a logical problem with an author giving away their dollar even if the author make gobs on the lecture curcuit. Example: the music industry is focused upon discs and their sale while bands can bypass them and make money. The artist is agnostic to how money is made. The POV of the publisher is totally different and focused on one model. Could a publisher do a 360 approach for books in managing it all. They have not proven themselves as good in this area. THAT is where publishing will evolve.
GK: If you follow me then I will give you a gift. Then you will get gobs of followers. What of that? CA: Agreed.
GK: There is an unsung music hero in the audience. James Heega (sp?). He is the dude who negotiated with the six music powerhouses to get itunes music to be 0.99 per song.
GK: Give me the types of things I can monetize. What are the alternate biz models?
CA: Teh word “free” has become the semantic focus of these economic models. This i sa word that carries in it that is both scary and attractive. There is a 20th century free that is equivalent of razors and the blades or “buy one get one free”. 21st century free is a new kind of free were bits replace atoms. Take the quotes from around free because the costs of distribution approach nothing. The extension of the media biz model into the bits has produced the “freemium” model. You give away 95% to sell 5%. One can do this because the give away is truly free. MMRPGs are an example of this. Converting around 5% makes you profitable. Waiting to implement a freemium model until after you popular breaks the social contract you have with your users. Implement freemium from the start. Be clear from teh beginning and differentiatie the committed customers from teh free users..
GK: OK so I was in China and I bought your book for $0.50 so what can we learn from China about free and IP.
CA: China is going reteach us capitolism. Where is price? What determines it? The internet has created the first and most truly competitive market where the marginal cost is close to free. Now, if you go too high above free, piracy will smack you down. Piracy can be used to create celebrity. Publishers do not need to pay the distribution. Then they turn this created celebrity into money.
GK: OK, let’s say Starbucks says regular coffee is free, but you have people buy the other stuff.
CA: This basically Wall Drug where they would give away free water to bring people in and then they upsell. There is nothing new about free coffee becaise this is what your workplace does. Like Zappos gives away shipping. Free has this incredibly meaning. The word Free is a bug in teh English language. In our language it is the same word, but in others it is two words. Zappos take away the risk of experimentation.
GK: Why is free so much more powerful than a very small cost?
CA: It is fascinating Josh Koppelman call this the penny gap. There is a flag in our heads that always asks “is it worth it” The cognitive cost of raising this flag often halts the purchase. In the case of free this flag never comes up. The act of giving a small value to something makes people value it disproportionalite. In the digital world the cost of wasting is so close to zero. In the atoms world, people distrust free. In the digital world we understand the difference. Bertrand competition.
GK: So why do peopl pay for ringtones?
CA: Convenience and utility.
GK: In the digital world, is there an example of free means too cheap that cause negative connotation.
CA: I cannot think of one. In the digital worl there is no excuse for sucking. If it sucks, they lose our attention. The metrics are different online.
GK: So why is the CS of Adobe better?
CA: We proritize utility. If a free option reaches the good enough for me category then payware will suffer.
GK: Are people more afraid of losing something they have or not getting something they could?
CA: Hmmm. loss vs. never gained. Traditional marketing is all about creating that gap. Teh great thing about free just gives what is. You try it and become commited. Free does not offer loss or can’t have.
People “import” their expecations based upon the context of the marketspace. If you compete against something that is established and pay then people may be suspicious.
The freemium model is where things are being driven because of the economy. Throwing advertising at something is not working now.
CA: I am not telling the apple to fall - gravity tells the apple to fall.
EFF is a legal firm with a technological arm and activism arm. Their goal is to create precedence to guide what we feel the law should be. They often view their job as updating what the law applies to in the digital age.