Can Hyperbole Generate $50,000 Corporate Speaking Engagements?

Jul 13th

Lots of people are writing about the economic secret that is the free pricepoint:

As Anderson himself says, “I’ve got a lot of kids and college isn’t getting any cheaper.” His own strategy, one outlined by Dyson way back when, is to charge little or nothing for his writing and use it to generate lucrative speaking gigs. “You can read a copy of this book online (abundant, commodity information) for free,” he writes (not noting that the free offer expires shortly after the printed book’s publication), “but if you want me to fly to your city and prepare a custom talk on Free as it applies to your business, I’ll be happy to, but you’re going to have to pay me for my (scarce) time.”

But much of the debate is only on a philosophical level by career journalists trying to make extreme claims to get enough publicity to justify overpriced corporate speech fees. Hey, it worked for Tim!

The problem is that even when you look at the canonical examples for the argument for free, they don't always follow suit.

Is Google "Free"?

Google's free search results? They aren't free of self-serving bias, and that bias is expanding.

During an upgrade test of their Google Apps landing page (attempting to improve conversion rates on the PAID version) Google "accidentally" lost the link to the free version. After that issue got exposure the link came back, but it still shows the limits of free. The free option becomes more obtuse/confusing/obscure to make the paid option more appealing.

Free remains readily accessible if their are great hidden costs. But many services start off free, give people the perception they are transparent, and then start monetizing.

Free Can Be a Dangerous Word

Free is only free when you ignore the hidden costs!

McAfee analyzed the first five search results pages of 2,600 popular keywords across five search engines: Google, Yahoo, Live, AOL, and Ask. They analyzed both organic and paid listings and counted the number of links that led to pages that McAfee’s SiteAdvisor tool flagged as dangerous. The study ultimately reviewed more than 413,000 unique URLs.

McAfee’s study also found that certain categories of keywords were more riskier than others. Searches related to “lyrics” and “free” had both the highest average risk and highest maximum risk.

Tragedy of the Commons

Free is good at gaining awareness & distribution and in commoditizing competing products & services. Free also works if you are creating a platform you want others to build off. But it also sets the barrier to entry really low. Either you want to have meaningful value added relationships with paying customers or you don't. When you mix free and paid too closely the free people provide so much pollution that they destroy value.

  • look at the blog comments on any dofollow internet marketing blogs that do not require registration
  • look at the free SEO forums that have been polluted to bits, some of which where people sell stuff they don't have permission to sell
  • consider how Google ended supporting their free search API in flavor of promoting a useless one.
  • URL shortening services removed a bit of friction and became a huge spam tool

Free often promotes classic cases of the tragedy of the commons.

Copyfraud

Many people point at Wikipedia as a sign of the future. But Wikipedia takes content with significant costs, rewrite and/or directly plagiarizes it, and then wrap it in Wikipedia goodness. Unsurprisingly, the book Free re-wrapped a lot of Wikipedia in a hardcover and sold it for $27 (without attribution, naturally). Copyfraud for the win!!!

It is basic hedonistic economics 101: everything should be free except whatever pays ***my*** income. ;)

The Next Big Thing

Free quickly escalates a business up the user adoption curve, but it also leaves the business vulnerable because it is hard to build deep relationships, continue to add value, remove marketplace friction, stop spam, and do it all for free. As a free company gets bloated it creates opportunity for the next big thing:

There will always be a company that replaces you. At some point your BlackSwan competitor will appear and they will kick your ass. Their product will be better or more interesting or just better marketed than yours, and it also will be free. They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo. You get the point. Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience. Or will be differentiated enough, and important enough to the audience to maybe even charge more. Who knows. But they will kick your ass and you will be in trouble.

Most People are Short Term Focused & Greedy

Not only does free suck as a sustainable business strategy, but donation based systems rarely work well because most people feel entitled and ignore reality until it smacks them in the face. In the grocery store a few weeks ago I gave $5 for colon cancer research and the cashier was floored and wanted to announce it. Something that a huge portion of people will have problems with is not worth giving $5 for unless we can see the immediate return. Meanwhile the crooked US healthcare system charges you 10x normal rates if you don't have health insurance. Pay up, now or later!

Entitlement

Activate the mindset on the free pricepoint and entitlement comes about. And the perception of value is lower.

I remember an email I got about 6 months ago about a blog post I offered 18 months or so ago where I gave people free personalized SEO tips. The person commented in the email that most of the people who got the advice never implemented any of it. And why would they respect it? They got it free so they assumed it was worthless. Basic economics I guess.

If it is free people assume it lacks value and that you owe them free support.

At some point after you have enough exposure it makes sense to erect barriers to entry to cleanse the bottom 10% to 20% from your pool of potential customers. Will some of them complain? Absolutely. But in many cases they were not going to have a positive business or social value anyhow. Better to cleanse them out early than waste hours of your life dealing with those types of people.

What is a "User"?

Last week 1 person wrote a blog post about how I lost them as a free user when I required logging in to download our Firefox extensions. This person already had a free user account but did not remember their password and was too lazy to do a password reset. They wrote about "that’s where you lost me as a user" to which Sugarrae responded "And who cares. You’re a USER. Customers are who make him money. Considering you’re too lazy to reset a password and you believe you deserve this free tool as much as you deserve to breathe, you’ll never be worth keeping around from a business standpoint. People like you don’t go places." Harsh, but true.

Structural Change

There has been major structural change which leads to lower distribution costs and increased competition for attention. Both of which are driving down the upfront cost of consuming information.

But with the lower costs come hidden costs.

Hidden Costs

Media relying on free means that it needs a lot of exposure to keeps the lights on. This increases noise, hype, misinformation, and investments in culturally constructed ignorance. The fair price for free knowledge will be lots of hidden costs. Most free news won't be worth the price, but the trend has already been set. And the average person's view of economics and media are short-sighted and simplistic.

Buy tech stocks. This time it's different. Houses always go up in value forever. Follow the crowd. Eye on the buzz. Lemmings off the mountain.

We are creating a media ecosystem that is looking a lot like Idiocracy:

Media businesses based on "free" typically build a brand by offering unique high value content, charge premium ad rates, bloat out their content & water it down to try to goose the ad revenue & appeal to a bigger user-base, and eventually end up creating something that has no lasting value.

Maybe some forms of structured knowledge like college textbooks and science publishing are due for some type of major disruption. But sifting through the garbage online is not getting easier (unless you are quite sophisticated). Especially when you consider that the tools to do so are aligned with advertising interests. Trusting machines that are set up to exploit your personal flaws is a non-trivial cost which you will likely never be able to understand fully or calculate.

Economics to the Rescue

Real relationships still have cost. Once you have an imbalance between supply and demand price is the natural way to sort it out. Make it better than free and charge for it. You can further segment by offering a variety of products & services across the price spectrum and packaging it for different markets.

There are plenty of people out of work with plenty of attention but not enough income to live on. What is holding back many of them is thinking that they have to do everything for free. The web rewards free stuff with recognition, comments, links, emails begging for free personalized consulting, and lots of other noise...but then what?

Maybe rather than debating free there should be a few more articles on how to build small work at home businesses using the web. And maybe a few more on how to transition "free" attention into real profits. That part is just assumed by the career journalists/speakers, but what do they ever sell beyond articles, books, and speeches? Not everyone is going to be able to give $50,000 corporate speaking gigs.

There are lots of legitimate ways to make money using the web, and they rarely get any coverage unless they are hyped or mischaracterized. Tell us how we can make a living shooting videos of our "mean kitty" and debate the philosophy of free. But then again what else should we expect from FREE media?

Published: July 13, 2009

New to the site? Join for Free and get over $300 of free SEO software.

Once you set up your free account you can comment on our blog, and you are eligible to receive our search engine success SEO newsletter.

Already have an account? Login to share your opinions.

Comments

July 13, 2009 - 2:19pm

The problem with "free", if that is what one is going to use to parlay into "paid" is, where does it stop?

Chris Anderson may write for free in order to get paying speaking gigs, but the more of the first you give away, the more difficult it becomes to convince people of the value of what you DO charge for.

And if free is best, why not write for free, speak for free, in hopes of getting a consulting gig. But if free is best, you might as well write for free, speak for free, and consult for free in order to get paid for software you write. But if free is best...

Where does it end?

July 13, 2009 - 5:54pm

Aaron,

Thanks Man, Seriously. I've been reading your "free" posts for months (along w/ Godin's and Cuban's).

After two years I'm doing a major overhaul in my website (#1 real estate blog in Reno) but like what you have experienced, people don't appreciate free as to actually use it!

So I'm charging $250/hour after the overhaul.

--Ian (http://RenoHomeBlog.com)

P.S--(cheesy plug in)I miss the paid community bro'. I'm saving up.

July 13, 2009 - 8:36pm

Hope to see you back in the community soon Ian :)

July 13, 2009 - 6:36pm

Aaron,

A true artist perceives what to frame. By doing so they point out what the rest of us might have missed.

This post is art.

It is also NOT new. Seems each

generation/medium/developmental struggle ends up

rediscovering this principle.

Your work is much appreciated.

July 13, 2009 - 6:15pm

I only wanted to add that the emergence of "apps" (iPhone, Twitter, etc...) serve to further solidify the stance of this article.

Sure, there are a lot of free apps, but the ones that stand out and provide the best value are often paid in one form or another (either you pay a one-time fee for the download or you pay a subscription for an online service/product and then download the app for that service/product for free).

There are certainly exceptions (Tweetdeck, Facebook, and the WSJ all offer great free apps) but I think that the "better than free" mold has been set.

July 14, 2009 - 7:25pm

This article is right on point. Nuanced headlines don't sell books or articles. Seems the two most effective strategies are hyperbole and snark. Snark about hyperbole may be the most effective. I gotta try that. :-)

Great and important post deconstructing the Free argument. Thanx!

July 15, 2009 - 2:22pm

The communication industry needs thought leaders to debate ways to improve value. In the past mass media has responded to increased competition for audience by resorting to the lowest common denominator - a significant "hidden cost" of free.

Chris Anderson wrote "Free" because it is what he thinks the industry wants to hear. "Free" worked when the networks had a captive audience, distribution was free (over the air), and the producers took risks to deliver quality content - they aired programming like M.A.S.H. during the Vietnam War and All in the Family during the Civil Rights Movement. Today, consumers pay for distribution (cable, internet, wireless)in order to access more choice. One way to compete in this market is to reduce production costs and use shock, awe, and free to attract audience. The other way is to develop and sell premium products. There are hidden costs to the former and predictable costs to the latter.

The high cost way is delivering a better return today. Subscriptions to premium channels grew to new record highs in 4th quarter 2008 even while consumers were finally informed of the economic collapse that had been threatening for over a year. Consumers will pay for value. They know you get what you pay for.

Anderson says the Free theory is inspired by the Monty Python example in the preface. An alternative implication is that there is an opportunity to drive up the sales of a "Long Tail" brand to #2 sales on Amazon by marketing directly to their fans. The fact that they got a list of fans from those who accessed their content for free on YouTube is a strategy for getting a mailing list. The costs are hidden. Who knows how much the cost them in legal counsel and lost sales to get that list from YouTube. There are many other ways to connect with fans with more predictable costs and outcomes.

Katherine Warman Kern katherine (at) comradity.com

July 16, 2009 - 9:14am

Great comment Katherine. Fascinating to see the growth in offline subscription revenues while some offline media companies are selling for $1 and physical shipping companies are seeing a 10% to 30% decline in shipping volume.

It really speaks volumes for price being the way to sort out the supply & demand issues. If almost everyone is priced at free then perhaps there are lots of opportunities at other price points.

Paid media requires more work, but it is an honest living and you are not forced to use ad networks that promote the latest reverse billing fraud of the day on your website.

July 17, 2009 - 12:04pm

Aaron you wrote that free is dangerous I also believe it's time consuming.
There are lot's of free apps, free CMS, free OS'es but if you want to find a good one you have to spent a lot of time for research. After installing, using them you get to the point where you want to add something, change or find something else. You haven't paid for it - you can't expect to receive any support. You can ask for help on forums or IRC channels but you never know who the "expert" is. You can search for a solution to you problem - it takes time. The implementation take time. I think it applies to most of the free stuff on the Web. Your time is scarce. Free is obsolete but time consuming therefore it's not free.

Thank you for this post. Eye opener.

July 17, 2009 - 5:36pm

And (especially when looking for product comparisons, etc.) free can be especially time consuming giving the economics of online publishing, which promote hype and sales copy but rarely give economic incentive for in depth comparison of products (particularly when they are sold as "free").

New to the site? Join for Free and get over $300 of free SEO software.

Once you set up your free account you can comment on our blog, and you are eligible to receive our search engine success SEO newsletter.

Already have an account? Login to share your opinions.

  • Over 100 training modules, covering topics like: keyword research, link building, site architecture, website monetization, pay per click ads, tracking results, and more.
  • An exclusive interactive community forum
  • Members only videos and tools
  • Additional bonuses - like data spreadsheets, and money saving tips
We love our customers, but more importantly

Our customers love us!






    Email Address
    Pick a Username
    Yes, please send me "7 Days to SEO Success" mini-course (a $57 value) for free.

    Learn More

    We value your privacy. We will not rent or sell your email address.