Comments on: Free Economics

by: David Evans

Fri, 31 Jul 2009 10:10:25 +0000

Well, Tom, you’ve at least encouraged me to finish the book. I think the compilation of different subsidy business models is a basic mistake as is the focus on “free”. The Long Tail was about something and one can debate whether what he said made sense or not. Free is about a particular price that could arise for a multitude of reasons. As a management tool I don’t think we want people to be focused on “free” or $1.95–we want them to focus on the business model (e.g. two-sided, complements, bundling, etc.) that applies in their particular circumstances and then think about what that pricing strategy implies.

by: Tom Eisenmann

Thu, 30 Jul 2009 00:30:54 +0000

Thanks for mentioning the article that Geoff Parker, Marshall Van Alstyne and I published in Harvard Business Review on two-sided markets. I, too, was shocked by Anderson’s remark that research on his topic was limited to “obscure academic discussions.” FWIW, I’m two-thirds of the way through the book. It’s uneven, with lots of logical inconsistencies. Better, on balance, than “Long Tail,” which was a disappointment in book form after following the rich discussion that Anderson moderated on his blog. In “Free,” Anderson presents an encyclopedic compilation of lots of different business models that have a subsidy component — many of which were unfamiliar to me. This rich set of examples pushed me to rethink my own frameworks, so it’s been a worthwhile read.

by: David Evans

Tue, 28 Jul 2009 18:56:11 +0000

Thanks, yes, it is a hodgepodge of examples of free which arise for many different reasons and follow from many different business models. Focusing on “free” is cute–and I guess it sells books–but free is just a special case of pricing below marginal cost which could include a positive but unprofitable price or a negative price. Fortunately, I guess, his timing is so bad given the problems free business models have been facing that hopefully not too many business novices will be mislead by this.

I still haven’t made it through the book since I keep hitting show stoppers!

by: Derek Pilling

Mon, 27 Jul 2009 19:06:39 +0000

David,

Thanks for committing this reaction to words David. I too have struggled to get through the book.

My own two cents are that Anderson was cavalier to use the umbrella of free pricing to describe such a vast array of business models. Two-sided business models and complement/bundled business models are not the same thing. Yes, they share a component of free, but use it to quite different effect. As a result, Anderson’s use of the free umbrella serves only to confuse, not clarify, the underlying economic effects involved with free.

Not all free is created equal.