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Not to be confused with Freakonomics which is a popular book by Steven Levitt, this is about Freeconomics. As a followup to my last post, I just read a thoughtfully written article by Chris Anderson (editor-in-chief of Wired, author of The Long Tail) on why free is the future of business.

This is particularly relevant to anyone who uses the Web as a medium to reach their customers.

“You know this freaky land of free as the Web. A decade and a half into the great online experiment, the last debates over free versus pay online are ending. In 2007 The New York Times went free; this year, so will much of The Wall Street Journal. (The remaining fee-based parts, new owner Rupert Murdoch announced, will be “really special … and, sorry to tell you, probably more expensive.” This calls to mind one version of Stewart Brand’s original aphorism from 1984: “Information wants to be free. Information also wants to be expensive … That tension will not go away.”)”

One niche that could profit from this is the self-investing arena. All those subscription sites for stock picks could really benefit from this if they offer their potential customers a taste of what they can get from the paid version for free. They could do this as a forced continuity program, e.g. get 3 months for free and you’ll automatically be charged the subscription fee for the months after that, or to give out a free sampling of their stock picks.

The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.

There is another cost of doing business online that isn’t considered which is becoming a more scarce commodity and is NOT free that’s not mentioned in the article. Sure, web servers, storage and bandwidth are all getting cheaper but quality is not getting cheaper. By quality, I’m referring to content - expert opinions, in-depth stategies, etc.

How can you adapt your business to the “freeconomics” model?

The idea behind giving out free information on the Web is so that you can establish yourself as the authority on the topic and be able to upsell your readers/consumers on your paid products. If you provide top-notch information for free, then in the reader’s mind they rationalize that if your free stuff is that good, how much better your paid stuff will be.

For example, one of the strategies could be to provide free reports where you outline ways to get free traffic to your website. However, if you give out 15 ways, then you can offer for sale the rest of the 35 ways to get free traffic. The key is that the 15 ways has to be really good - stuff that you don’t see floating around the internet all the time.

I believe that you’ll see the trend for offering stuff for free expanding to other industries in the future.

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