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Answers to Your Top Questions About Free Stuff

Answers to Your Top Questions About 'Free' StuffThis weekend Chris Anderson, author of the bestseller "The Long Tail," was flying around Europe and noticing that sometimes doing so can be nearly free. Yesterday on his blog Anderson endeavored to answer the top five questions of those left scratching their heads over $10 fares on discount European airlines and other mysteries of "free" stuff:

  1. So nobody's going to make any money?
  2. Does any of this go beyond simply paying for things with advertising?
  3. You don't mean actually free, do you?
  4. This is just online, right?
  5. Is this some sort of trick?
His answers are delightfully straight forward, and its worth the time to read them in their entirety, but here are some of the most relevant tidbits for managers. In response to question 2:
Okay, so you get that advertising can make things free. But that's just part of the much bigger opportunity in redefining markets so that you can give away one thing to sell another. Take flying.... RyanAir, EasyJet and, at latest count, nearly 30 other European low-cost carriers lowered the cost of a seat to as little as five pounds. How? By redefining what business they're in. They're not selling seats, they're selling transportation. They sell hotel and rental car reservations to passengers. They sell tourists to the smaller cities the carriers serve (the payment is in the form of the huge discounts they get on landing fees). They sell cargo shipment to the companies that put packages in the hold (which is why the low-cost carriers tend to charge extra for baggage). They even make money off the food and drink they sell on board.
And in response to question 4:
The web's near-zero marginal costs encourage... other industries to turn as many of their jobs as possible into software, so they can benefit from digital efficiencies, which gives them more flexibility over pricing.
So it seems that it's not only Google and media companies that are making money by giving stuff away free. Nor is it only tech heads and music moguls that need to concern themselves with the many ways free stuff is transforming business.

(Image of Ryanair route map by dlisbona, CC 2.0)

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