Free - the business model when marginal cost round

This is not about the traditional model of free, that giving away a free sample luring you to buy bulk, or buy-one-get-one-free free. It's about the modern free, when the marginal cost of transistors or bits round close to zero it stops metering.

Google offered 1G free email space when Yahoo was running a lucrative premium email service charging for 25M storage. Craigslist offered free posting when newspapers were making huge money on classified ads. In both cases, they destory an existing industry and create a new one, and use FREE as the magic trick to gain most users. Once estabilished, the early runner prevents the later ones by network effect, where the winner gets all and losers nothing. They create a huge net-value for all just not charging for everything. Only a fraction of the gain can make them super successful.

In other areas, such as free content market (movie, book, music or any media), 5% willing-to-pay users can subsidize 95% free-riders. Musicians make more on concerts giving away mp3s. Authors sell more books in real stores giving away online free reading. Software companies actually allow piracy to gain bigger market share like what Microsoft does in Asia.

1% contributing users can support a community (wikipedia, open documentation, specialized forum). Open-source contributors are motivated by self-actualization, the top of Maslow's pyramid where dollars are not the real reward. Media transit to ad-support content-free model following a long tradition of radio broadcast.

What happens in customers' minds is a psychological transition when they turn-off the picky switch and become more tolerant to free stuff. Information is abundant now then attentions become the scarce resource. And money can be made from their attentions.

The author explains why this book is free, too (both text and audio are free online). Ideas are valuable but also have 0 marginal cost. Once generated, ideas want to spread. He gives away this book to gain reputation/audiences, and be compensated by high-marginal-cost speeches and consulting-gig.

I'd recommend this book to all that interested in the topics above.